South Australian Treasurer handed down his second budget on Thursday 31 May, and despite grim debt and defecit figures, the property sector came out relatively unscathed.
The Budget delivered no additional tax burden for the property sector, and added a stimulatory bonus by way of stamp duty reforms and the extension of the the First Home Owners Grant.
The stamp duty reform eliminated an inherent disadvantage faced by apartments: stamp duty on a house and land package is applied to the land only, whereas in the case of an off-the-plan apartment, stamp duty applies to both the apartment and the land component. This disadvantage has been eliminated by the Government's abolition of stamp duty on off-the-plan apartments in the CBD, which will unleash demand for inner-city living. While the concession would ideally have been applied across the metropolitan area, tight economic times clearly made that impossible. However, combined with the FHOG, the construction industry has received a stimulus boost.
One significant negative in the Budget was the suspension of major public transport infrastructure projects in the forward estimates. The electrification of the Gawler and Outer Harbour rail lines have been suspended indefinitely; this risks further dampening enthusiasm for urban renewal outside the CBD. The Property Council has always considered the Government’s commitment to public transport as going hand-in-glove with the land use component of the 30-Year Plan for Greater Adelaide, so having electrification and other projects on the never-never is a concern.
We will use this disappointing news to advocate to the Government the need for the South Australian Government to instigate at alternative financing models for infrastructure investment. Growth Area Bonds and similar approaches to infrastructure funding allow governments to fund projects off the balance sheet, recouping expenditure from the taxable value of development catalysed by the investment. The Premier has placed this matter on the CoAG Agenda so we look forward to seeing it implemented in the near future.
Key figures and outcomes from Budget 2012/13:
Gross State Product (GSP) growth: 2.75% (2012/13 forecast) up from 1.5% in 11-12 (estimated). Predicted to grow again to 3% by 2013/14.
Debt: up at $5.329 billion (was $4.282 billion in 2011/12) and predicted to grow over the forward estimates, peaking at a net debt to revenue ratio of 49.1%.
GST revenue: down by $2.84 billion.
Surplus: achieved by 2015/16.
Labour market: employment growth is currently 0.5%; predicted to increase to 0.75% in 2012/13 and to 1.75% in 2013/14.
Infrastructure spending: $10.8 billion over forward estimates.
Total property tax revenue increased by $16 million.
Land tax rates and thresholds remain unchanged.
Land tax revenue decreased by $8 million to $590 million on the back of declining valuations, but is expected rise to $582 million by 2012/13. It is expected to increase to $632 million over the forward estimates, up $50 million on the 2011/12 budget.
Stamp duty projected to increase by $21 million by 2012/13. Stamp duty collections are projected to be $1.1 billion by 2015/16
Abolition of Stamp Duty for off-the-plan CBD apartments:
The Property Council has welcomed this initiative which is designed to stimulate construction activity and increase inner-city residential population. It has the effect of potentially saving purchasers of CBD apartments more than $21,000. The measure applies to off-the-plan apartments up to $500,000 and will cost the Government $5.1 million between now and 2015-16 with a full stamp duty concession for two years, followed by a partial stamp duty concession for the two years after that. Commences: 31 May 2012. Cost to budget: $5.1 million to 2015-16.
$500,000 for the National Electronic Conveyancing System: NECS will enable electronic settlement of property transactions, lodgements with land registries and completion of associated duty and tax obligations. This investment is part of a national agreement.
Bus Fleet: 17 buses brought forward at a cost of $14,944,000 in 12/13
Suspension of electrification of Gawler & Outer Harbor lines saving $372.9 million over the forward estimates.
Deferred redevelopment of Queen Elizabeth Hospital & Modbury Hospital, saving $77 million.
Major new project spending:
Parks Community Centre Redevelopment: $11,888,000
Northern Riverbank Works: $6,000,000
Her Majesty's Theatre urgent works: $2, 680,000
Entertainment Centre Park and Ride: $18,957,000
Mining and Engineering Industry Training Centre: $11,692,000
Evanston Land Release Infrastructure: $13,200,000
Murray Bridge Police Station: $4,816,000
Click here for the State Budget 2012/13 Snapshot