State slashes build-to-rent tax

By Gerv Tacadena | 30 Jul 2020

The state government of New South Wales has rolled out legislation that would provide a 50% discount for build-to-rent developments over the next 20 years.

NSW Treasurer Dominic Perrottet said this legislation will not only boost the construction sector and secure jobs amid the COVID-19 pandemic but will also provide more housing options for Australians.

"Build-to-rent is popular overseas, but still in its infancy in Australia, and we want to remove barriers and allow this segment of the market to grow," Perrottet said.

Eligible build-to-rent development should have at least 50 units for metropolitan areas. Projects in regional areas will be subject to different thresholds. The commencements of the projects should be on after 1 July.

Ben Martin-Henry, CBRE's head of build-to-rent research, said the decision of the state government to slash the land tax will be able to cut 15% to 25% of overall operating expenses of build-to-rent projects.

"This will be a real boost for the fledgling sector at a time when more Australians will have to consider the prospect of long-term renting," he said.

Ken Morrison, chief executive of the Property Council of Australia, said the tax cut will help attract institutional investment into new housing, which, in turn, will give one in three renting households more choice.

"Build-to-rent improves the resident experience, can offer longer-term tenure, provides professional lease and facility management while adding to the spectrum of rental housing options," he said.

Morrison said build-to-rent has been successful in other countries and the recent move by the NSW government to alleviate tax disincentives will encourage investors.

"With this package of investment incentives and the right planning framework, NSW is poised to lead the nation in the development of this new type of housing to deliver better outcomes for people who rent as well as support new housing construction," he said.

Aside from providing the much-needed boost to the construction industry, this will also be a crucial step in the tax reform, said Puian Mollaian, associate director of structured transactions & advisory services at CBRE.

"We also see this as an important catalyst to further tax reform particularly relating to foreign managed investment trusts, as the combination of overseas and local capital will be critical to providing adequate housing options and affordability for different tenant cohorts," he said.

Earlier this week, the NSW government also decided to temporarily increase the price cap of newly constructed homes that will be exempt from stamp duty.

Under the changes, first-home buyers will not be required to pay any stamp duty for newly-built homes worth up to $800,000. This translates to a savings of up to $31,335.

NSW Premier Gladys Berejiklian said the change to stamp duty thresholds would also support new-home construction and create jobs as part of the government's COVID-19 Recovery Plan.

"Thousands of people will see their bank balances benefit from this change — it will help get more keys into more front doors of more new homes," she said.

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