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What’s good and what’s not in the 2022 Federal Budget

Tuesday’s Federal Budget had an overarching theme of reducing the cost of living and come Wednesday morning the real estate sector weighed in on what it liked and didn’t like about Treasurer Josh Frydenberg’s balance sheet.

While the Home Guarantee Scheme and infrastructure spending were welcomed, the consensus was there was not enough in the Budget to tackle long-term housing affordability and supply.

We’ve collated the industry reaction below.

Real Estate Institute of Australia

The Real Estate Institute of Australia has largely welcomed the Federal Budget despite still holding concerns not enough is being done to tackle housing affordability and supply issues for the future.

REIA President Hayden Groves said the Budget was one “for the times” with many good measures that would assist the economy.

He said the 50,000 new places coming online through the Home Guarantee Scheme was a “most welcome measure”.

“This is a $24 billion commitment in guarantees that could generate up to $30 billion in sales activity which will directly assist first home buyers into the market sooner as well as stimulating the economy,” Mr Groves said.

“We also welcome the additional allocation of $2 billion to the National Finance Investment Corporation’s mandate to help enable much needed supply of social and affordable housing.”

But Mr Groves said the inflation forecasts, of 4.25 per cent for 2022 and then 3 per cent and 2.75 per cent over 2023, were “very conservative”.

“Even on these forecasts wages growth is very modest over 2022 to 2023, which doesn’t augur well for interest rates and housing affordability,” he said.

Mr Groves said the future of housing supply also needed to be tackled.

“One of the major areas governments can address housing affordability is to take a leadership role to unlock supply through national cabinet,” he said.

“This is obviously something that needs to be tackled in future Budget cycles with all three tiers of governments as, until this is addressed, the right supply mix within our existing housing stock and new homes affordability is unlikely to improve in the near term.” 

Mr Groves said the Budget painted an optimistic picture for the nation’s immediate future with unemployment tipped to hit a record low 3.75 per cent in the next 12 months.

“Dwelling investment too is forecast to peak at 5 per cent in 2021-22 and grow at 3.5 per cent in 2022-23 as the HomeBuilder program is phased out and supply chain crunches come into play.

“With a lower deficit than anticipated, and real GDP figure forecast to grow at 3.5 per cent in 2022-23 this is a strong budget for the times as we emerge from the COVID-19 pandemic.”

But Mr Groves said Australia needed a strategy for long-term, sustained economic growth, including a sizeable skills package to underpin the people of real estate and set the industry up for the future.

“The 27 per cent of Australians living in private rentals remain frustrated by our 4500-property manager shortage, as do Australia’s real estate agencies,” he said.

“While we were disappointed to see the final intake of the very successful Boosting Apprenticeships continued only until the end of June 2022, we hope the additional $2.8 billion for the five-year Australian Apprenticeships Incentives Program will be extended to all those who need it in the post-COVID-19 world.”

Mr Groves said heading into the election in mid May, vendors should feel confident to list and sell their home with strong market conditions still present.

Real Estate Institute of Queensland

Real Estate Institute of Queensland (REIQ) Chief Executive Officer Antonia Mercorella also welcomed the expansion of the Home Guarantee Scheme but expressed concerns over whether the measures went far enough to have a meaningful impact.

“This Federal Budget gets a tick of approval from us for its support for single parent families and first home buyers, and its objective to encourage people to move the regions,” Ms Mercorella said.

“However, while expanding the Home Guarantee Scheme is a good start and definitely a step in the right direction, it must be acknowledged that 50,000 places is not nearly enough to meet national demand.”

First home guarantee 

“The REIQ welcomes support for first home buyers with 35,000 places announced as part of the extended First Home Guarantee allowing them to purchase a home with a 5 per cent deposit without having to pay mortgage insurance because the government guarantees the loan,” Ms Mercorella said.

“Any budgetary measures that support first home buyers to manage the challenge of saving a significant deposit and realising their dream of home ownership sooner is to be applauded.

“However, considering there were nearly 17,000 first home buyer loans in Queensland alone in the year to January 2022, and 36,000 first home buyer loans in Queensland alone last financial year (boosted by the HomeBuilder Grant), you can see how 35,000 places nationally is not going to make much of a dent on demand.”

Family home guarantee

Ms Mercorella said the REIQ was pleased 5000 places had been included for single parents, earning up to $125,000 a year, under the Family Home Guarantee, which will allow them to buy their first home or re-enter the market with only a 2 per cent deposit.

“Extending the support to assist single parent families is commendable,” she said.

“Particularly considering when this initiative was first introduced, it was restricted to 10,000 places over four years (2500 yearly caps).

“We recognise it’s increasingly challenging to come up with the 10 per cent deposit needed to achieve the dream of home ownership, and we’d like to see the government getting more innovative and creative with solutions to address this.”

Regional home guarantee

The REIQ also welcomed the Regional Home Guarantee, which offers 10,000 places per year for migrants or those who have not owned a property for five years, but said it was disappointing it only applied to building or buying a newly built home.

“By doing so, it fails to recognise the entry barriers for many first home buyers, particularly for young families for whom new construction isn’t an affordable or practical option over established housing options,” Ms Mercorella said.

“To have the desired impact, this initiative needs to be extended to established housing.

“Further, when it comes accessing the Regional Home Guarantee, Queensland is at a disadvantage due to our larger decentralised population.

“With a significant portion of our population living outside of our capital city, and high interstate migration to Queensland’s regions, 10,000 places is simply too low for Queensland.”

Housing affordability

Ms Mercorella said the three programs under the Home Guarantee Scheme had been introduced to address housing affordability but more needed to be done to tackle the issue.

“We acknowledge that we can’t just rely on the Federal Government to tackle housing affordability, and that’s why the REIQ would support all levels of government working together to develop a bi-partisan plan to address housing affordability and better planning for our future housing needs,” she said.

Downsizing

Ms Mercorella also said the Budget had also missed an opportunity to support older Australians to downsize.

“There are thousands of under-utilised properties in Queensland and throughout Australia due to people living in their homes years longer than is suitable for their stage in life,” she said.

“High transactional costs are a key deterrent for this prolonged property hold – such as stamp duty alongside other costs associated with buying and selling, and more can be done to make downsizing a much easier financial decision for older Queenslanders, to significantly free up much-needed housing stock.”

Real Estate Institute of South Australia

The Real Estate Institute of South Australia (REISA) welcomed the added funding to the Home Guarantee Scheme.

“REISA has long been an advocate for extending and opening up both federal and state first home buyer schemes to help more people get into their own homes,” REISA Chief Executive Officer Barry Money said.

REISA is keen for South Australians to consider these new initiatives.

“It is a good time for South Australians to jump on board with the offer,” Mr Money said.

“South Australia outranks all other major capitals for liveability and remains affordable compared to the eastern states.

“The ‘Great Australian dream’ is one step closer for younger generations. It’s also great to see support for the South Australian regions.”

Mr Money also welcomed the fact single parents would be among the first to benefit from the scheme and would require only a historically low 2 per cent deposit.

“This could help single parents break into the Adelaide market, which to date continues to boom unlike the dampening of similar markets in the eastern states,” he said.

REISA urged homebuyers to seek independent financial advice before applying for the scheme.

“Always do your research first, get sound financial advice and then talk to one of REISA’s member
agents,” Mr Money said.

Ray White

Ray White Chief Economist Nerida Conisbee said the Home Guarantee Scheme could help create market competition at certain price points.

“While the housing market is cooling, which is good news for first home buyers, it does in some ways come at a more competitive time compared to 2020, when there was last a surge in first home buyer activity,” she said.

“While price growth is calming, investor activity has skyrocketed – investors and first home buyers typically compete for the same sorts of properties at similar price points. 

“Even though it is unlikely that the scheme will lead to a rebound in pricing overall, it is possible that competition for properties at the price points at which the scheme is available will become more intense.”

But Ms Conisbee said rising construction costs would pose a challenge.

“Even with a generous scheme available to get into the market, first home buyers in regional areas will need to pay a lot more to build new homes than they did in 2020,” she said.

“And with construction industry insolvencies up significantly since the end of last year, finding a builder is likely to be an additional challenge.”

But Ms Conisbee welcomed the government’s commitment to infrastructure, particularly in regional Australia.

“Over the past two years we saw record movement of people to regional areas, driven primarily by changes in the way we work, as well as a search for space,” she said.

“With things going back to normal, living in regional Australia won’t be so easy, unless there is significant improvement in transport infrastructure. 

“It is therefore good news that infrastructure is set to receive a $17.9 billion boost, bringing the government’s 10-year infrastructure investment pipeline from $110 billion to over $120 billion.

“New spending items include $1 billion for the Sydney to Newcastle fast rail upgrade, $1.6 billion for the Brisbane to the Sunshine Coast rail extension and $1.12 billion for the Brisbane to the Gold Coast Faster Rail Upgrade. 

“All of these will help in making regional areas even more accessible to capital cities.

Knight Frank

Knight Frank Australia Chief Economist Ben Burston said the Budget was a mixed bag for the real estate sector.

“With overseas migration and population growth now returning, the dwindling supply of rental properties and rising rents are a key concern right across the country and so the decision to raise the liability cap of the National Housing Finance and Investment Corporation is a welcome step that will help to facilitate the expansion of affordable and social housing supply,” he said.

“At the same time, the Budget is a missed opportunity to review the taxation treatment of the nascent build-to-rent sector to ensure that policy settings do not impede the flow of institutional capital ready to be deployed to help alleviate supply pressures in coming years.”

LJ Hooker

LJ Hooker Head of Research Mathew Tiller said the overarching theme for the 2022-23 Federal Budget was about combatting the rising cost of living but did not extend far enough.

“The housing policies contained in the 2022-23 Federal Budget are welcome and positive measures to help support those struggling to save for a deposit to purchase a home,” he said.

“They’ll greatly assist first home buyers, single parent households, and help stimulate new home building and regional areas.

“However, this year’s Federal Budget fails to provide any real housing affordability relief.

“There are no additional policies or incentives that will significantly boost housing supply, tackle the rising cost of rents, or address the need for social and affordable housing.”

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