The NSW government should use today's state budget as the platform to kick start residential construction and boost economic activity across the state through a temporary stamp duty stimulus, says the Property Council of Australia.

In a paper released on June 14, the Property Council has recommended a temporary stamp duty exemption on all newly constructed dwellings valued under $1 million for the 2009/10 financial year.

"The modelling prepared by BIS Shrapnel indicates that this stimulus measure could deliver significant and broad ranging benefits," said the Property Council's NSW executive director, Angus Nardi.

"Major benefits include pulling forward the construction of 8,000 additional new dwellings, supporting the creation of 16,000 direct jobs in the construction sector, easing the growing pressure on rents and encouraging investors back into the residential market."

However, the NSW Government is not considering removing stamp duty on new homes, despite the fact that it is estimated that this stimulus would generate $1.77 billion in additional building activity across NSW.

"The measures we are proposing would only cost $54 million. This is a cost effective stimulus at a time where residential construction is falling and rents are continuing to rise with falling vacancy rates," says Nardi.

In the lead-up to the budget, the Property Council called on the NSW government to:

• commit to no new property taxes or increases to existing taxes
• work with councils and force the expendicture of $880 million of local council infrastructure contributions stockpiled throughout Sydney, Illawarra and the Hunter
• enforce the $20,000 per lot cap in local council infrastructure contributions announced in December 2008