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Head of RE/MAX Australia says "Confidence is missing"

The man at the helm of one leading real estate group is expecting this month’s federal budget announcement to deliver very little to the home buyer, investor or seller other than the possibility of another interest rate reduction.

“I don’t think this budget is going to be a pretty one,” said RE/MAX Australia’s Michael Davoren.

The budget to be handed down by the Federal Government on 14 May potentially can impact on the property market if it includes announcements of infrastructure spending such as major highway upgrades and new transport links, for example, which can lead to increased demand for property ownership and boost rental markets in affected locations.

Davoren feels the 2013/14 budget is unlikely in the medium term to bring about a massive increase in employment, which he says is one of the greatest drivers in the property market.

“The real estate market is absolutely geared for a positive phase – almost all the ingredients are there,” he said, “The only thing missing is confidence, and the greatest factor stifling confidence is lack of employment opportunity and security.

“If a potential buyer has any doubt whatsoever about their employment prospects, they are not going to borrow regardless of how low interest rates are. Even low we are still experiencing record lows, employment remains the big issue, and I don’t think this budget will help.”

Davoren suggests targeting a top 12 per cent of the population does nothing to help employment growth.

“Everyone knows there is a huge deficit to rectify but the responsibility should not lie solely on the shoulders of the top income earners who are, in fact, a significant group in employment creation.”

He said neither this nor the next government can afford to threaten property rental supply by tinkering with negative gearing, which has been tried before with disastrous effects.

“Furthermore, unless the government steps up its role in providing affordable housing, incentive needs to be given to individuals and Self Managed Super Funders to stay active in the investment market and help meet rental demand.”

He sees some silver lining in that Australian households may be more resilient having saved more and reduced loans in recent years.

“This good practice has put some households in a better position to weather any detrimental changes this budget may bring about,” said Davoren.

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