The property industry has largely welcomed the Federal Government’s housing funding, announced ahead of Tuesday’s Budget, but there are still calls for more to be done.
The Real Estate Institute of Australia (REIA) welcomed the $11.3 billion Homes for Australia package but said it needed to be considered in context of the entire Budget and the commitment to delivery by all three levels of government.
REIA President Leanne Pilkington said it was unlikely that the package would shift the dial and bring more homes to market more quickly.
“This is particularly the case with the treasurer dialling down expectations around the 1.2 million homes target in the week leading up to Federal Budget 2024.”
Ms Pilkington said it would be the inflation assumptions and interest rates outlook that would be the biggest factor for housing supply and affordability in the budget papers.
“You can repackage and reallocate all the funding in the world but the reality is this: a decline in interest rates of 50-basis points would boost net housing supply by 54,000 dwellings and a rise of 50-basis points would decrease net supply by 45,000 dwellings,” she said.
“With housing affordability declining even below Global Financial Crisis lows to 47.7 per cent income to loan repayment nationally and a more even 23.9 per cent income to rent and it is this indicator that will be the one that counts for everyday Australians.”
Ms Pilkington also highlighted that stamp duty reform also had the power to unlock housing supply.
The Housing Industry Association (HIA) said the package would deliver more critical housing to those who need it most.
“The $11.3 billion package includes $9.3 billion for a new five year National Agreement on social housing and homelessness, $1 billion towards crisis and transitional accommodation, and a further $1 billion in infrastructure funding for states and territories to get these homes built sooner,” HIA Managing Director, Jocelyn Martin, said.
“The announcement provides an additional boost to the Housing Australia Future Fund (HAFF) to build more housing under that scheme.
“It is something HIA has been calling for as part of this year’s federal Budget.”
But Ms Martin said more still needed to be done to solve the nation’s housing crisis.
“A key part of the ‘Homes for Australia’ plan to build more housing is the $1 billion in funding for states and territories to build the roads, sewers, energy supply and water infrastructure, that is needed to get homes shovel ready faster,” she said.
“Today’s announcement is not the full answer to addressing Australia’s significant housing shortages, but it is an important step forward.
“It will bring more supported housing options into the market over the next few years targeted to those who need it most and reducing demand from these home seekers on other parts of the housing market.”
Raine & Horne
Raine & Horne Executive Chairman Angus Raine has called on theAlbanese Government to reassess annual caps on non-concessional superannuation contributions and balance transfer caps.
Mr Raine said this could mitigate the housing shortage by freeing up additional housing stock currently held by empty nesters.
“Australia is in the grip of a housing crisis,” he said.
“The Commonwealth and state/territory governments have agreed that 1.2 million new, well‑located homes are required over 5 years from mid‑2024.
“However, there are few incentives for retirees to sell their existing investment properties and transfer the sale proceeds into the lightly-taxed superannuation environment.”
At the moment, the annual caps for non-concessional contributions stand at $110,000, rising to $120,000 from July 1.
“This means that a couple who own a property in joint names can use the sale proceeds of a rental property to add just an extra $240,000 to their super assuming a sale post-1 July 2024.,” Mr Raine explained.
“This appears insufficient when you consider that the median house prices are $1.421 million in Sydney, $972,000 in Canberra, $942,000 in Melbourne, and $920,000 in Brisbane.”
But he said the even bigger issue was balance transfer caps, which refers to the total amount of superannuation that can be transferred from the accumulation phase into the retirement phase after age 60 by purchasing a retirement income stream.
At present, the transfer balance cap stands at $1.9 million – a figure that will remain unchanged.
“In cities such as Sydney and Melbourne long term property investors are likely to have made a substantial capital gain from their rental property,” he said.
“This could see many investors breach the balance transfer caps if they want to transfer sale proceeds of a property investment into super.
“Disregarding the impact of capital gains tax (CGT), the caps that apply to non-concessional contributions together with the balance transfer cap of $1.9 million, act as a real disincentive for retirees to sell a rental property and deposit the proceeds into super.
“The value of the property in many capital cities could see retirees breach the balance transfer caps, so the government needs to consider increasing this cap significantly in next week’s budget as a way of flushing out assets held by older investors to help address housing shortfalls.”
Mr Raine said many retirees could be ready to leave the property market in favour of a super-based income stream.
“I am calling on the Albanese Government to review both the non-concessional super caps as well as the balance transfer limit as a means of encouraging Australians in, and approaching, retirement to sell investment properties,” he said.
“This could add to the pool of housing stock available to first home buyers and upgraders, and ease some of the gridlock we currently see in the property market.”
Raine & Horne Head of Property Management Maria Milillo said the Federal Budget was also an opportunity to enact policies that alleviate the burden on renters.
“With vacancy rates reaching historic lows, many Australians are struggling to afford rental accommodation,” she said.
Mrs Milillo underlined the significance of the Commonwealth Rent Assistance (CRA) program, which provides support to tenants receiving specific social security payments such as Newstart Allowance, Disability Support Pension, or Age Pension, and those who are not residing in public housing.
“The CRA program is vital in effectively mitigating rental cost increases,” she said.
To further support vulnerable renters, CRA should be pegged to market rentals rather than the CPI, ensuring it keeps pace with the evolving rental market landscape.
“CPI is increasing by 3.5 per cent in the 12 months to March 2024, yet aggregate rental prices are up 7.7 per cent.”
Master Builders Australia
Master Builders Australia (MBA) Chief Executive Officer, Denita Wawn, said the funding boost was much needed.
“The key to solving the housing crisis: supply, supply, supply,” she said.
“We know whether it’s social and community housing, rentals or owner-occupiers, there is not enough supply to house all Australians.
“Targeted measures in social housing, student accommodation and critical infrastructure all go towards relieving some of the more acute supply pinch points.
“Increased funding for critical infrastructure to support new home building reinforces the important role of commercial and civil construction in building sustainable communities.
“Requiring universities to increase their supply of student accommodation is an excellent example of how Ministerial portfolios should be working together.
“With a strong funding stream now locked in, Governments need to turn their minds to reducing the other barriers to housing supply like reducing the cost of building and time it takes to build.
“Workforce shortages, low productivity, industrial relations and planning reforms all continue to drag down our capacity to deliver the 1.2 million homes over the next five years.”
Retirement Living Council
The Retirement Living Council (RLC) has repeated its calls for improved conditions to unlock more age-friendly housing supply ahead of the Budget.
“Australian Governments past and present have known about our nation’s rapidly changing demographic landscape for years, alongside the associated challenges with accommodation and care,” RLC Executive Director, Daniel Gannon, said.
The RLC made five key recommendations to the government in its pre-budget submission earlier this year, including making retirement units part of the target to build 1.2 million new homes by 2029.
“Every day that passes without seniors’ housing accommodation being recognised in these targets is a big ‘swing and miss’ for the Australian Government when they should be looking for a home run,” Mr Gannon said.
“Targets are an important way out of this supply mess – but only if they’re complete.”
Recently, the National Housing Supply and Affordability Council (NHSAC) forecast that the government will fall short of its target by nearly 300,000 homes.
“If the Australian Government is looking for inspiration, look no further than the State of the Housing System report released by the National Housing Supply and Affordability Council recently,” Mr Gannon said.
“It sings the virtues of rightsizing, highlights the housing risks associated with an ageing population, outlines the benefits of retirement communities, and flags that an older population will require more in-home care and support services – typically found in retirement villages.
“As it stands, units in retirement communities aren’t recognised in these housing targets, but the group tasked with delivering them is spruiking their many and varied benefits.
“In order to maintain existing market demand, the retirement living industry requires 67,000 units to be built by 2030.
“This would represent 22 per cent of the gap identified by the NHSAC, meaning retirement communities – containing units that are 48 per cent more affordable than comparable homes – can help the government solve Australia’s housing supply problem.”
