NSW Gov. Quietly Buys Up Housing Stock | The Shocking Truth Behind the 2025 Budget [APS086]

On Tuesday, the New South Wales Government released its 2025–26 state budget. I downloaded the entire thing—over 1,000 pages—and spent several hours reading it cover to cover. I pulled out the key highlights related to NSW’s economy, infrastructure, housing, subsidies, and the government’s forecasts for the property market. I’ve done the deep dive, so you don’t have to—because, let’s face it, it’s better for one person to spend a few hours than for everyone to spend the same time.

This year’s NSW budget is about more than just heavy investment in Western Sydney infrastructure, the new airport, Sydney Metro lines, or the Parramatta Light Rail. What really shocked me was a new policy to subsidise property developers, which will result in a surge of apartment completions in the next few years. Even more eye-opening: the government plans to buy up large volumes of off-the-plan apartments, meaning its balance sheet will be increasingly filled with real estate assets. That’s right. The government will be purchasing these residential properties directly from private developers and using them as rental stock. It’s starting to look like the government is not only providing a financial safety net for developers but is also moving toward a form of public property ownership.

On top of that, this budget unusually includes a five-year forecast for NSW’s housing supply and demand, providing critical clues for where the property market might be headed. Where exactly is government capital being deployed? Which suburbs will benefit most from infrastructure projects? How should property investors shift their strategies to align with these policy changes and maximise their returns?

Let's start with the financial position of the New South Wales government, then go through the key items in the budget one by one—specifically those that matter most to property investors in Australia. No rush—we'll take it step by step.

NSW Government's Financial Position

We've talked about budget deficits many times on this channel. And whenever the topic comes up, people usually think of Victoria first—how its financial health keeps deteriorating, forcing the state to raise taxes on property investors just to fill the gap, and yet the deficit continues to grow. Now, Queensland's newly released budget suggests their financial health isn't looking great either. But we'll dedicate a separate video just to Queensland's budget issues, back to New South Wales.

When I looked closely at this year's NSW budget—especially the financial statements—I was genuinely shocked. It actually looks like the state's financial situation is improving. I wasn't prepared for that. The current Labor government in NSW came to power in March 2023. The budget deficit for the 2023–24 financial year ended up being almost identical to the previous year—it didn't get worse. And for 2024–25 (July 1, 2024 to June 30, 2025), the projected deficit will shrink by nearly half. According to the forecasts in this budget, the deficit will continue to narrow over the next two years and NSW is expected to return to surplus by 2027–28. Even though I've often been critical of Labor, I have to say—when it comes to financial management and budgeting, they've done a great job. I'll give them that.

An improvement in finances usually means one of two things: Either the government is collecting more taxes, Or it's spending less, Or both at the same time. In NSW, property-related taxes—including stamp duty and land tax—account for 43% of total tax revenue. And that doesn't even include other taxes related to the real estate industry. So, honestly, it's not an exaggeration to say the NSW government runs on real estate. It's not quite as extreme as Victoria, but it's still a significant portion. Over the next few years, NSW will likely collect more land-related taxes, either from more frequent transactions or from rising land values.

There is one thing we must be clear about—otherwise, we risk misunderstanding the true financial picture: Yes, the deficit is shrinking, but total state debt is still rising. This means over the next few years, interest payments will increase. The good news is that the state debt-to-GSP ratio is projected to decline after 2027. Only then will I feel that NSW's finances are really getting better.

NSW Infrastructure – Western Sydney 

Let's now take a look at one of Sydney's key development zones—Western Sydney. "Western Sydney" is more of a geographical term. It covers both the northwest and southwest growth corridors, as well as some established suburbs. The northwest growth corridor is centred around Rouse Hill, and the Southwest is focused on the new airport and Leppington.

As of June this year, the Western Sydney Airport terminal building has finally been completed. It's roughly the same size as Adelaide Airport, which is honestly not that big—especially when you consider that Western Sydney is home to 2.8 million people. But apart from its size, there's not much to complain about. The airport is expected to begin operations by the end of this year, but passenger flights won't start until late 2026. The Aerotropolis economic zone around the airport is forecast to create 120,000 new jobs, becoming a major centre for manufacturing, research, training, logistics, and education.

This year's budget continues to provide strong financial support for the airport and surrounding infrastructure. It also introduces direct bus services connecting residents in Penrith, Liverpool, and Campbelltown to the new airport. And, of course, the high-capacity Sydney Metro line connecting to the airport has also received a large funding injection.

NSW Infrastructure – Sydney Metro

The Sydney Metro is arguably just as significant as the airport—it's one of the biggest infrastructure projects in the state. In recent years, the Northwest to Chatswood line and the extension to Sydenham have already been completed. There are three major lines in total: Western Sydney Airport Line, running from St Marys to the new airport, with six stations; West Line, running from Sydney CBD to Westmead, with nine stations; City & Southwest Line, running from Sydenham to Bankstown, with ten stations. All three lines have received huge investments. It's clear the government is determined to get the Metro completed as fast as possible. However, there's a major issue with the airport line. It's reportedly facing construction delays and major cost blowouts, with some estimates suggesting the line may be delayed until late 2027.

So, judging by the emphasis on the airport and the Metro, this budget is still heavily focused on Southwest Sydney. If you've invested in property in the Southwest, this is good news—you can feel confident that home prices will remain stable and trend upward over the coming years. As for properties located near other Sydney Metro lines, the government plans to increase high-density housing along those corridors to address housing shortages. That means the capital growth potential for high-density apartments along the West Line and City & Southwest Line might be more limited.

One more thing that I was personally glad to see in this budget—The government has decided to continue funding the Parramatta Light Rail project.

NSW Infrastructure – Parramatta Light Rail Stage 2

In this year's budget, the government has allocated more funding to continue Stage 2 of the Parramatta Light Rail, including route planning, property acquisitions, and construction work along the corridor. It looks like the government has not abandoned this much-anticipated infrastructure project. Stage 2 of the Parramatta Light Rail will start in Parramatta, pass through Camellia, Ermington, Melrose Park, Wentworth Point, and eventually reach Sydney Olympic Park.

A while ago, there were rumors that Stage 2 might be delayed indefinitely. But from what we're seeing now, construction is still moving forward—so everyone can breathe a little easier.

That said, the real concern is the completion date. Current estimates suggest the full line won't be operational until 2033. So, if you're buying property along this line in hopes of capital growth because of the light rail, don't be overly optimistic. Let's hope we all live to see the day this long-awaited project finally opens.

First Home Buyers & Renters

Now, let's talk about first-home buyers and renters. In this budget, the subsidies for first-home buyers remain unchanged. For properties under $800,000 or vacant land under $350,000, buyers are exempt from stamp duty. There's also a $10,000 grant for new homes under $600,000 or for house-and-land packages under $750,000. Based on these price caps, first-home buyer grants in NSW basically only apply to apartments in Greater Sydney. They might be okay to live in—but if you're hoping to make a profit, think again.

In the 2023–24 financial year, 70% of buyers who used these first home grants bought within Greater Sydney. What does that tell us? It means that even if all they can afford is an apartment, and even if they know it won't generate much return, First-home buyers are still going for it. The rational ones have likely crunched the numbers and decided that buying is cheaper than renting. The emotional ones? They probably just really want a place to call their own—whether it's good or not. Profitable or not isn't the first concern. It also shows that young people still deeply want to stay in Greater Sydney.

This budget also strengthens renter protections. For example, Landlords must provide a free way to pay rent; Tenants can't be charged before the lease begins; Rent can only be increased once per year; Bond transfers are now allowed, so tenants can roll over their bond to the next rental without needing a refund first; No-grounds evictions are banned; It's easier to rent with pets; And most importantly, the notice period for ending a lease is now longer—for 12-month leases, landlords must give 90 days' notice. So, if you're planning to sell a property, make sure you plan ahead. These changes are great for renters, but they do reduce the rights of landlords.

Now, all of this reflects broader economic fundamentals and policy direction, which only influence the property market indirectly. But hidden in this budget are several fragmented policy details and one key reform that, when pieced together, reveal a major shift coming to NSW's housing market over the next 5 to 10 years. As investors, we need to adjust accordingly—to make sure our portfolios are positioned for stability and long-term growth.

No More Boom for the NSW Property Market

New South Wales has a population of 8.5 million, with 5.2 million of those living in metropolitan areas. According to projections in this state budget, NSW's population growth over the next four years will remain flat—just 1.1% per year, well below the national average of 1.7%. In fact, for all of 2024, the growth rate is expected to be just 1.3%, which is consistent with data from the Australian Bureau of Statistics. On the other hand, the number of building approvals in NSW hasn't seen any significant increase. So, if both population growth is slowing and new supply is limited, what does that mean for the underlying dynamics of the property market?

Well, it gets interesting here: This time around, the NSW government has launched a rather unusual policy tool—one that could dramatically increase housing supply and shift large amounts of real estate into public ownership.

This policy is called the Pre-sale Finance Guarantee, and just from the name, you can already sense something's not quite right. So, what's going on?

In New South Wales, when a developer wants to build—whether it's a high-rise apartment, a mid-rise block under five stories, or a townhouse—they must have the funds ready before construction can begin. Typically, that money comes from a bank loan. But before approving the loan, banks require developers to pre-sell a certain percentage of the project—usually around 60%.

Here's the issue: these types of properties aren't selling well in NSW right now. That means a lot of developers, even though they've secured planning approvals, are stuck. They can't move forward with construction. And of course, if nothing gets built, the government's goal of increasing housing supply falls flat.

So what's the NSW government's solution? They're stepping in with a $1 billion backing plan—to guarantee pre-sales on behalf of developers so that banks will release the loans and construction can finally begin. 

Let's look at how this guarantee works. For developers who pass the government's screening, the NSW government promises to buy up to 50% of the project's total housing stock—at a minimum 10% discount to market price. They'll first sign a purchase agreement so the developer can start building. During construction, the developer can still try to on-sell these homes on the open market. But if they don't manage to sell them by completion, the government will step in to buy, and later resell or rent them out.

Does this feel familiar? That's what happened in the apartment market between 2012 and 2016. Back then, one buyer could sign contracts on 10 discounted off-the-plan apartments, pay just the deposits, and sell them before settlement to pocket the profit. Now the structure is different, but the idea is the same. The buyer is no longer a buyer—it's the government. And they could end up owning up to $1 billion worth of apartments.

But here's the twist: back then, apartment prices were surging. Today? The apartments aren't selling. Developers can't even break ground. The government is stepping in, offering a safety net, essentially buying up the leftovers. They're betting that in two years, these homes will become hot commodities again. But chances are this will turn into government housing ownership on a massive scale.

Where's the money coming from? From every single NSW taxpayer. Whether or not you believe in property investment, whether or not you're bullish on housing, you're now indirectly investing in real estate—like it or not.

And that's not all. The NSW budget also estimates that as public sector demand eases, more labour and raw materials will shift to the private sector. That means housing completions could rise over the next few years.

Meanwhile, population growth and changes in household structure are expected to flatten out, making demand more stable. But supply is heading up. Put all these puzzle pieces together, and you get a clear signal: the era of explosive property price growth in NSW is likely over.

Of course, this is just the government's prediction. Whether it comes true is another matter. But did you notice something? The entire budget encourages mid- and high-density apartment development. Not a single word about low-density detached housing. Which, in my opinion, confirms what I've been saying for the past two years: supply and demand are heading toward balance, but detached houses are becoming increasingly scarce. Supply is shrinking, which makes them a rare asset. Their prices are more likely to rise.

Apartments, on the other hand, are being mass-produced like photocopies. Supply is surging, but demand isn't keeping up. If prices manage to hold steady, that's already an achievement. But even if they rise, it's unlikely they'll ever catch up with detached houses.

So, after all this, what should we, the investors, do to build a better-balanced property portfolio?

Property Investment In NSW

First, I honestly think for first-home buyers, NSW is not the best choice. You're better off going to Queensland. The market is going up, and the first-home buyer grants there are way more generous than in NSW. And the job market? Not necessarily any worse than here.

Second, for property investors, detached houses should still be your first choice. If you can avoid apartments, then avoid them—unless you're talking about those rare, premium ones with 180-degree views of the Sydney Harbour Bridge and Opera House. Otherwise, skip them. 

Townhouses should come second. In fact, if you're looking at a townhouse in Sydney, I'd say you'd get much better value buying a detached house in another state for the same money.

Third, I still hold a long-term bullish view on Sydney's property market. Over the past two years, Sydney hasn't performed as well as Brisbane, Perth or Adelaide. But that might just mean it's time for Sydney to play catch-up in this next upward cycle.

Fourth, if you're buying through a trust structure, pay very close attention to land tax. In NSW, the threshold is zero, meaning you start paying from the first dollar of land value. But in other states, the rules can be very different.

Watch the video version of the blog on YouTube.