Measures in the Federal Budget to ease housing and rental affordability and boost housing supply have been welcomed, though the industry believes they may not be enough to solve the crisis.
Tuesday night’s Federal Budget delivered a number of measures aimed at easing the growing crisis in housing affordability, rental affordability and housing supply in markets across Australia.
These included changes to eligibility criteria for the First Home Buyer Guarantee (FHBG), boosting Commonwealth Rent Assistance payments, and more incentives for build-to-rent projects.
However, the property and mortgage industry has argued that the combination of measures may not be enough to ensure the future growth of housing supply amidst other trends like increased migration.
Mortgage Choice CEO Anthony Waldron (pictured above top left) said he was pleased to see initiatives designed to help alleviate cost of living pressures, with the expansion of the home guarantee scheme having the potential to help more Australians purchase their first property.
The Budget changed the FHBG eligibility criteria to include couples made up of friends, siblings and other family members, and was expanded to include non-first home buyers who haven’t owned a property in Australia in 10 years, supporting those who have fallen out of homeownership.
“Having the option to buy with a friend or family member could help those who would struggle to buy on their own, but buying property is a big decision and both parties should be on the same page,” Waldron said. “I encourage buyers to speak to their mortgage broker and seek legal advice before proceeding.”
Federal Budget measures will mean more than one million Commonwealth Rent Assistance recipients benefit from a 15% increase in the maximum rental assistance payable – lifting their maximum payment by around $31 per fortnight – while up to 150,000 rental dwellings will be added over the next decade as a result of tax tweaks to support build-to-rent projects.
Waldron said he would have liked more substantial initiatives to increase housing supply.
“The increase to rent assistance is welcome and timely but more needs to be done to help alleviate the rental crisis as rental demand continues to outstrip supply. The incentives encouraging investment in build-to-rent property are a positive step, but high construction costs may affect developers’ confidence to build,” he said.
Waldron said the Budget’s cost-of-living initiatives were largely incremental in nature, and while they would support some Australians, the impact on housing affordability would do little to address immediate supply-related issues. “Some Australians may not be able to access these schemes, potentially leaving them further behind.”
PEXA chief economist Julie Toth (pictured above top right) said while each housing affordability measure made a welcome difference to the individuals receiving this assistance, the scale, complexity and longevity of our national housing crises required a “bolder response”.
“The Budget outlook confirms the long-term nature of Australia’s housing availability and affordability crisis, with housing supply unable to meet demand and set to fall further behind,” Toth said. “While the housing policy measures announced in this Federal Budget provide some relief, they are unlikely to keep pace with the scale of the problem facing vulnerable Australians.”
Toth said changes to the FHBG broadened the diversity of participation and would possibly improve the uptake rate – which has been relatively low in previous year – but the program provided a guarantee, not a grant.
“It assists low-deposit buyers by avoiding the additional cost of mortgage insurance, but it does not reduce their total loan liability or their total home purchase price,” Toth said.
She added that for eligible build-to-rent projects, the annual depreciation rate would increase from 2.5% to 4% per year and the withholding tax rate for foreign investors in managed investment trusts would drop from 30% to 15%.
“These two tax changes are estimated to be worth a total of $30m, suggesting the government is not expecting a large take-up given the relatively low implementation cost,” Toth said.
Property Council of Australia chief executive Mike Zorbas (pictured above bottom left) said the Budget highlighted the strength of net overseas migration over the next five years – which will amount to almost 1.5 million people – but also the extent of the housing supply crisis, with dwelling investment levels predicted to drop significantly, revised down to minus 3.5% in 2023/24.
Zorbas said the government must match its targeted approach to migration with the same focus on housing investment and better planning across the country.
“Skilled migrants have been central to Australia’s economic success story for generations, filling critical job vacancies in important sectors, and making valuable contributions both economically and socially,” Zorbas said.
“The population growth outlined in this budget highlights the need for faster and better housing delivery and planning across our cities. The Senate should strongly consider passing the government’s Housing Australia Future Fund this week to end current delays in delivering 40,000 new social and affordable homes across the nation.”
PropTrack senior economist Eleanor Creagh (pictured above bottom right) noted the rental assistance boost was unlikely to keep pace with increases in rents.
“This increase to Commonwealth Rent Assistance is the largest in more than 30 years, but rent assistance payments have long fallen behind soaring rental prices,” Creagh said.
“In the capital cities, rental prices are up 18% on pre-pandemic levels, while in regional areas rents are up 23%. Capital city rental markets are significantly undersupplied. As a result, prices are rising briskly and vacancy rates trending lower.”
Creagh said there were also risks associated with the expansion of the FHBG scheme.
“The key feature of the scheme is that borrowers are taking out higher loan-to-valuation ratio mortgages. That means price falls of as little as 5% would take the borrower underwater – owing more on their mortgage than their home is worth,” she said.
Creagh added that reforms to stamp duty were a potential missed opportunity in the Budget.
“Support for the states to transition from stamp duty to a broad-based land tax must be seriously explored if we hope to create a strong structural foundation for an efficient and equitable property market,” she said.
