Real estate and housing industry experts have said the Federal Budget looks good on the surface but lacks the depth to address the nation’s long-term housing shortage.
The Budget increased the maximum rate of Commonwealth Rent Assistance 15 per cent, expanded the Home Guarantee Scheme, included a $2 billion boost for more social and affordable housing, changed the build-to-rent sector tax rates and provided funding for household energy upgrades.
PEXA
PEXA Chief Economist Julie Toth said while each affordability measure would make a welcome difference to those receiving the assistance, solving the national housing crisis 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,” she 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.
“The Budget estimates that population growth is expected to reach 2 per cent in 2022–23 and 1.7 per cent in 2023–24 (up from 1.4 per cent in last October’s Budget), driven by net overseas migration, while further demand pressure is coming from our underlying trend toward smaller households.”
Ms Toth said the Treasury expects national dwelling investment spending to fall every year to 2024-25.
“This will see the existing housing supply gap grow by an additional 106,400 homes by 2027.
“In the context of population growth, what this means is the Housing Accord’s target of one million new homes will be too small to fill the gap, even if it can be built within the expected timeframe.
“The magnitude, duration and complexity of this national housing supply gap and our subsequent affordability challenge requires a bold multi-faceted response. As recognised by the Government’s Housing Accord, all levels of government, industry and community groups will need to lean in to help solve this problem.”
Ms Toth acknowledged the Budget measures announced last night complemented the housing supply initiatives announced in 2022 as part of the National Housing Accord and Housing Affordability Future Fund which are yet to pass the Senate.
“We urge the Senate to pass this Bill so that this urgently needed federal funding can begin to flow into affordable housing as soon as possible, as the supply gap continues to widen,” Ms Toth said
PropTrack
PropTrack Senior Economist Eleanor Creagh said measures to address the housing shortage and worsening affordability featured prominently in the Budget.
“Increased assistance payments for low-income renters, measures to boost rental supply and measures to increase construction of social and affordable rental housing are the big-ticket items,” she said.
“Given the one in three households that rent are more likely to be younger Australians, on lower incomes, with less wealth than owner-occupiers, and typically lower savings buffers, the measures will come as some relief.”
But Ms Creagh said advertised rents had soared 11 per cent nationally, year-on-year, vacancy rates were at historic lows and the affordability and availability equation would only worsen without increased supply.
“The persistent undersupply of properties available to rent is pushing vacancy rates lower,” she said.
“And with rental demand outstripping supply, weekly rents are increasing strongly.
“And without a meaningful increase in rental supply on the horizon rental prices will continue to grow in the coming months.”
Ms Creagh welcomed the cutting of the withholding tax rates from 30 per cent to 15 per cent and a lift in the depreciation rate to 4 per cent on eligible new build-to-rent projects as a way to increase long-term rental supply.
But she said with 650,000 migrants expected to come to Australia over the course of this financial year and next, build-to-rent would provide a mere handful of the total number of rental properties needed.
She said one of the “missing ingredients” in the budget was incentivisation for smaller investors in the rental market.
“Although advancing the build-to-rent sector is a welcome measure, policy that aims to incentivise small scale investment via “mum and dad” into the housing market thus adding to rental supply appears to be missing,” she said.
Ms Creagh said the homebuying initiatives in the Budget were welcome but had certain limitations, including price and allocation caps, which meant many people would still miss out.
For example, in Sydney the First Home Guarantee threshold is $900,000 but the median estimated dwelling value in the city was $1.063 million and just 39 per cent of dwellings were valued under that price cap.
“These price caps will remain a constraint for some first-home buyers because they rule out more than half of homes in some capitals,” Ms Creagh said.
Similarly, while the criteria for all categories of the Home Guarantee Scheme have been expanded, and will increase demand, there has been no increase in the total number of places available.
“The allocation caps will limit the effectiveness of the scheme, but it is also increasing or bringing forward demand for housing without increasing supply to match,” Ms Creagh said.
“The end result is many who are finding it both hard to buy and increasingly hard to rent will miss out, meaning the benefits of the scheme are a drop in the ocean in resolving housing affordability.
“The only long-term solution to housing affordability is to build more of the right homes in the places where people want to live.”
Ms Creagh also highlighted the government had missed an opportunity to address the imposition of stamp duty.
“Deteriorating housing affordability was a key focus of the Federal Budget, seeking to alleviate some of the pressures both those looking to buy or rent currently face,” she said.
“But stamp duty reform was not one of them.
“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.
“Stamp duty reform is needed to allow the property market to function more efficiently in all states.”
Real Estate Institute of Australia
The Real Estate Institute of Australia (REIA) congratulated the Treasurer on the Budget and said the government had attempted to deliver a Budget that fights off inflation and helps Australians struggling in the context of global economic conditions.
“This Budget 2023-24 anticipates that inflation will return to RBAs target band by 2024-25 with inflation to reduce to 3.25 per cent next year,” REIA President Hayden Groves said.
“We especially applaud the budgeted increase of Commonwealth Rent Assistance (CRA) of 15 per cent to Australians that need it the most to help them navigate this cost-of-living crisis which will help alleviate the pressures on a touted 1.1 million Australians.”
But Mr Groves said that while rent assistance was a much-needed measure, housing supply at scale still needed to be addressed.
“The widely previewed commitments of the Home Guarantee Scheme rule changes, recommitment to the Housing Accord, an extra $2 billion for the NHFIC mandate and taxation rule changes for the niche build-to-rent sector are welcome but will not, in themselves, address the elephant in the room, which is building more homes for Australians.
“We hope the long-awaited National Plan for Housing and Homelessness puts all options on the table to truly unlock housing supply and the hotly debated Housing Australia Future Fund finally gets off the ground.”
Property Council of Australia
Property Council of Australia Chief Executive Officer Mike Zorbas said the “real story” of the Budget was the five-year net overseas migration (NOM) total of almost 1.5 million people to 2027.
He said it was the largest five-year NOM total in the past 30 years given skilled migrants are essential across most areas of the economy.
But he said there needed to be enough homes to house them.
“At the same time, these are large numbers of new people we need to accommodate,” Mr Zorbas said.
“Without proper state housing targets, improved planning systems and well-located housing choices for students, retirees and renters we will see the national housing deficit blow out further.
“We need a redoubling of national and state commitments to better planning and housing delivery starting now.”
Mr Zorbas welcomed the changes to build-to-rent project taxation.
“This will allow a welcome new asset class to grow into its full potential across Australia, unlocking up to 150,000 new homes and relieving pressure in the rental market over the next decade,” he said.
“A powerful win for good public policy after our many patient years of advocacy.”
Master Builders Australia
Master Builders Australia CEO Denita Wawn expressed disappointment that the budget did not do enough to address the housing crisis and increase housing supply.
“The pain of higher interest rates and high inflation is real and if we do not get it under control we could be in for a lengthy period of pain and depressed construction activity,” she said.
“With rental inflation at record highs, rental relief will assist those who are doing it tough in some areas of the market. However, mum and dad investors and business are being left to absorb a lot of the economic shocks.
“Master Builders supports the expansion of the first-home buyer guarantee and the regional first-home buyer guarantee which is good news for people finding it difficult to enter the housing market.
“The additional $2 billion for more social and affordable housing through the National Housing Finance and Investment Corporation, a reduction in investment taxes for Build-to-Rent, and funding for household energy upgrades is welcome.”
Ms Wawn said the Housing Accord announced in the last budget had set out immediate actions for Commonwealth and state governments, but more action was needed.
“The commitment to identify suitable Commonwealth land for delivering social and affordable housing and the extension of the Australian Skills Guarantee to include apprentices on Government-funded housing projects is yet to be seen,” she said.
“If we want shovels in the ground to meet the one million homes target from 2024, more action is needed now.
“We hope the infrastructure review provides an opportunity for the Government to continue community, city and regional-focused infrastructure funding programs through genuine partnerships across levels of government and with industry.”
