The Federal Budget’s Biggest Wins for the Property Market

Behind the Budget: What does it mean for property investors?

The unveiling of the Federal Budget is the time where the expertise of our property research analysts really comes into play, especially when it comes to issues of impacts to the property market, affordability and supply.

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The one-million-home promise

The government’s commitment to build one million new homes close to amenities including train stations and TAFE campuses, is a bold move, but much needed in an economy where successive governments (both Stxate and Federal) have been dealing with a critical housing shortage for a number of years.

However, under the scheme, the Commonwealth would only support 10,000 affordable dwellings, with the states and territories expected to deliver the same number of homes (10,000), with private investors and the construction sector making up the significant 980,000 balance.

With a shortage of labor and developable land, plus high construction costs continuing to impact the new housing market, the government is not immune to these constraints and we believe it will be a difficult promise to make meaningful progress over the next few years. There is an acute shortage of new property that is a hard problem to fix in the short term and is one of the reasons why experienced investors are very active right now with rents continuing to rise.”

While Ironfish welcomes the collaboration of a new national Housing Accord to address national housing supply and create more affordable and social housing, it does need to be a genuine approach to tackling the critical issues of housing affordability and supply.

And importantly, it needs a dedicated plan of action.

– Grant Ryan, Director of Property at Ironfish

On the surface the new national Housing Accord commitment looks like good news if you’ve been struggling to get into the market, but there is a catch.

Due to the current challenges of labour shortages, construction won’t actually begin until 2024. On the bright side, this does give some time for first time property investors to save for a deposit, or current investors to build more equity, but what happens in the meantime?

Let’s take a closer look at what the budget means for you and the property market.

Increased Housing Supply

The migration BOOM is on its way, with up to 235,000 migrants p.a. expected through to 2031, all needing a place to live. Housing Minister Julie Collins said not only would the government deliver tens of thousands of new social and affordable homes, but also work with investors to tap into institutional capital and accelerate housing supply.

Help for first time buyers

The government’s Help to Buy Scheme, open to 40,000 people, enables eligible Australians to buy their first home with a lower deposit and smaller mortgage.

First-home buyers, single parents and regional Australians will be able to get into the property market sooner with the government expanding a scheme that enables them to purchase with a smaller deposit.

Tens of thousands more aspiring homeowners will be able to buy a property without having to save a 20% deposit or take out lenders mortgage insurance, with the Home Guarantee Scheme expanded to 50,000 places per year for three years.

First-home buyers and regional Australians can purchase with as little as a 5% deposit, with the government providing a guarantee for up to 15% of the purchase price.

Single parents looking to enter or re-enter the property market will be able to buy with a deposit of just 2 per cent, via the Family Home Guarantee, which has been expanded from 10,000 places over four years to 5000 places each year.

The Budget’s Upside for Downsizers

More time

The budget extends the exemption of home sale proceeds from pension asset testing from 12 to 24 months, giving pensioners more time to move into their next home before their pension is affected.

More contributions

The Government will allow more people to make downsizer contributions to their superannuation, by reducing the minimum eligibility age from 60 to 55 years of age. The downsizer contribution allows people to make a one-off post-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home. Both members of a couple can contribute, and contributions do not count towards non-concessional contribution caps.

More homes on the market

The financial incentives to encourage older Australians to downsize sooner to a home that better suits their needs is a positive step to increasing the availability of more housing supply, and more immediate investment opportunities. This is good news at a time when demand is outstripping supply.

Key Takeaways

While no single measure contained in this year’s budget is expected to have an immediate direct or substantial effect on property markets, the national accord and focus on the property market is promising benefits over the long term.
The new National Housing Accord between Federal, State and Local Governments, as well as institutional investors and the construction industry, will help boost housing supply and have a positive impact in delivering additional social and affordable housing over the medium to long term.
The incentives to help older homeowners downsize and first home buyers in regional areas is good news.
Indirectly, the combination of infrastructure commitments, policies to address cost of living pressures and improve wage growth are expected to boost spending, confidence, and investment which should feed through to local economies and suburban property markets.

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