There is no doubt that the Federal Budget handed down by Dr Jim Chalmers last month is a budget for the times we are living in. Carefully calibrated to avoid the risk of further inflation, which has resulted in interest rate rises that bring mortgage stress to Mum and Dad homeowners across the country, there has been an effort to address housing affordability. Here at Walkom Real Estate, we’ve tried our best to summarise what the budget holds for the property market and how it affects our customers.
The good news for property investors is that although property prices are cooling slightly, they still remain 30% higher than pre-pandemic levels, according to PropTrak. In fact, median property prices in regional Australia, have increased 47% since March 2020 and rents are off the charts with a 10% increase over last year alone.
The federal government are keen to address housing affordability through increasing supply as well as encouraging institutional investment by removing tax barriers to residential development projects. In addition, a number of schemes that pre-dated the budget are continuing or have been expanded.
1. The Housing Accord
The Housing Accord promises one million new, well located, energy efficient, affordable homes over the next five years from 2024. The accord has been signed by federal, state and local governments as well as institutional investors, residential developers, and the building and construction sector. It includes an additional $350m in federal funding for the construction of 10,000 homes as well as a commitment by the state and territory governments to build a further 10,000.
The major push of the housing accord is to increase the investment in residential property development of the country’s superannuation and investment funds and the big four banks. Currently 90% of residential property investment is from Mum and Dad investors. Removing tax barriers to encourage institutional investment is seen as a significant opportunity to unlock the capital of funds that are seeking ongoing stable returns over the long term.
In addition, the accord seeks to address zoning and planning regulations that slow up supply and the release of Commonwealth owned land.
2. The Housing Australia Future Fund
Announced before the election, the Housing Australia Future Fund promises $10bn to build 30,000 new social and affordable housing properties over the next five years. Of these 30,000, 20,000 will be new social housing with 4,000 of those being allocated to women and children affected by domestic violence. 10,000 will be new affordable dwellings that will be aimed at frontline workers.
3. The Help to Buy Shared Equity Scheme
Open to 10,000 Australians each year, the scheme enables buyers who earn less than $90,000 or $120,000 as a couple, to co-purchase property with the government. Under the scheme, the government will fund up to 40% of a new property or 30% of an existing dwelling with buyers paying back the government over time or when the property is sold.
4. The Home Guarantee Scheme & Regional First Home Buyer Guarantee
Also announced in the lead up to the federal election, the Home Guarantee Scheme will continue as will the Regional First Home Buyer Guarantee which helps 10,000 eligible buyers per year to purchase a home with a deposit as small as 5% with the government guaranteeing up to 15% of the purchase price.
5. The Downsizer Super Scheme
The eligibility age for downsizer superannuation contributions has been lowered from 60 to 55 years to encourage more older Australians to sell their homes, freeing up family sized homes for younger families. This scheme allows up to $300,000 per person to be contributed from the sale of their home to their superannuation fund. In addition, for retirees, they are extending the exemption of home sale proceeds from pension asset testing from 12 months to 24 months to give pensioners more time to purchase, build or renovate a new home before their pension is affected.
So, there you have it – the budget rundown on property. In the short term, despite a slight downturn in prices, the market is still strong, and returns are still up on pre-pandemic times. The rental market is still providing record returns to investors. There may well be changes to zoning and releases of land in the medium term and that, coupled with the various schemes to improve affordability and encourage home ownership, will add buoyancy to the market for some time to come.
Get in touch
If you are looking at buying or selling, downsizing or investing, get in touch with our expert property professionals today.