The 2023 Federal Budget – How Will it Affect Real Estate?
Weekly Real Estate Market Update with Leigh Martinuzzi MPG
Whenever there is a federal budget coming things in the property sector seem to go a little quiet as people wait to see what is announced and how it’s going to affect them. On Tuesday night, the budget was announced, with a focus on the rental sector and incentive schemes for first homebuyers.
Due to a huge increase in rental fees, 11% nationally year on year, and record low vacancy rates, the rental crisis we face certainly needs to be addressed. An increase of 15% for rental assistance for low-income earners is one aspect to help offset rising fees. The housing shortage is the next issue to tackle.
Last year the government made a pledge to build 1 million new “well-located” homes over five years from 2024. Building approvals are at decade lows and have dropped by 46% alone for private-sector apartments. Greater tax incentives, therefore, have been outlined to help encourage larger build-to-rent projects from starting. Will this be enough? As I’ve reported in past newsletters, the population growth alone over the five years from 2024 will require more housing than the 1 million targets. Based on the ABS population projections, as reported by REA, such tax incentives, if effective, may only help alleviate 9.6% of the total housing requirements we will need.
The government has also added an extra $2 billion towards social and affordable housing. This will help give those in need more housing options, with 7000 new dwellings forecast from this incentive. I’m not sure that’s enough but I suppose it all helps.
Home buying incentives have been expanded by changing what’s required for the First Home Guarantee, and the Regional First Home Buyer Guarantee. In essence, the scheme allows first-home buyers to reduce the amount of deposit they are required to pay from 20% to 5%, which hopefully allows them to save the deposit and enter the property market quicker. The other issue is that to be eligible for this grant the housing price must fall within a certain price cap (see chart below), which will reduce purchasing opportunities.
I’m not sure the scheme will currently have much of an impact on getting more first homebuyers into the market. Mainly because housing affordability hasn’t become any better and borrowing costs are higher. First-home buyers will continue to struggle to enter the market unless they are willing to relocate to regional areas further out. Nice in theory, however, employment and lifestyle options are less available in these regional areas. More info on home-buying schemes can be found here.
On a final note, and probably the one I think most will be disappointed about, is the missed opportunity to reform the stamp duty. The former NSW Treasury reported that by eliminating stamp duty we could tap into $10 billion in economic value. Rising housing costs create higher transition costs and therefore disincentivise housing mobility. The other issue is that it may help to increase housing prices longer-term due to a greater supply and demand imbalance. Most believe an annual land tax would be a good replacement for stamp duty. Well, not this time around. Further reading on the 2023 Federal Budget can be found here.
AUCTION CLEARANCE RATES
- Queensland – 50% (233/1147)
- NSW – 66% (824/1685)
- Victoria – 66% (785/1331)
- ACT – 65% (92/103)
- South Australia – 73% (116/375)
- Tasmania – NA (1/171)
- Western Australia – 8% (12/753)
- Northern Territory – 50% (6/20)
*(Auctions/Private Sales)
REVIEW(S) OF THE WEEK
Leigh Martinuzzi – “a Pleasure to work with!”
Leigh was a pleasure to work with, he was honest with the market price & with the help of his staff, sold our property in an unexpectedly short time. He was easy to deal with & kept us updated on progress constantly. We would recommend him if you are selling a property. – Seller
