Perhaps the most intriguing announcements in last week’s Federal Budget weren’t tax changes or new economic policies, but the initiatives aimed at the property industry, particularly those regarding housing.
Property and construction remain two of Australia’s largest industries and biggest employers yet have gone largely unmentioned in recent federal budgets. The new Albanese Labor Government would appear to be sharpening its focus in this area, particularly in regard to the challenge of integrating local, state and territory, and federal government legislation. Budget initiatives also suggest the government has an appetite to reform the approach to home occupancy for both owners and renters.
What are the key initiatives aimed at housing affordability and the property industry?
The Public and Private Sector Housing Accord
This accord sets out the ambitious target of creating one million new homes in the five years from 2024 primarily to address Australia’s growing housing affordability crisis. The Budget also commits an initial $350 million in additional funding for an extra 10,000 affordable homes to be built, to get the accord started. Under the accord, state and territory governments would then match the 10,000-home pledge.
The accord also seeks to facilitate cost-effective superannuation and institutional investment in affordable housing.
The Housing Australia Future Fund
This $10 billion fund will provide for the build of 30,000 homes in its first five years – 20,000 of which will be new social housing dwellings and 10,000 of which will be homes for frontline workers. Some of these will also be allocated to women and children impacted by family and domestic violence and older women at risk of homelessness.
A ‘Help to Buy’ shared equity scheme
This scheme will help homebuyers to purchase a new or existing home with an equity contribution from the Federal Government. Eligible buyers will need a minimum deposit of 2%, with an equity contribution from the Federal Government of up to a maximum of 40% of the purchase of a new home, and up to a maximum of 30% of the purchase price for an existing home.
A Regional First Home Buyer Guarantee will be introduced to expand home ownership in region areas. From 1 October 2022, 10,000 places will be available each financial year to support regional first homebuyers to purchase new or existing homes with a deposit from 5%.
National Housing and Homelessness Plan
This plan will be developed in close consultation with states and territories and will set out key reforms to facilitate home ownership, rental and housing for the homeless.
How will these schemes impact on the property and construction industries?
In the short term, the most beneficial announcement for the residential space was the Help-to-Buy scheme, which will support Australians to achieve home ownership. This is likely to help first home buyers with purchasing power that’s been diminished by rising interest rates and the increase in mortgage loan serviceability thresholds which has recently impacted the sales rate and home loan approval numbers in the first home buyer market.
In the longer term, the time is coming (with the Federal Government’s prompting) for the large institutional property investors to make their mark in the build-to-rent residential market and if this were to happen, it will create a significant structural shift to the Australian property landscape.
The traditional ‘safe’ investment in commercial properties, particularly for the large superannuation funds, is still yet to see the full impact of the move to hybrid and remote working off the back of COVID. It would be foolish to think however, that the transition to more flexible working arrangements won’t have an ongoing impact on commercial leasing, not only in required floor space but also the length of tenancies.
We are seeing more residential tenants now seeking the certainty of a long-term lease (traditionally the domain of the commercial tenant) while institutional investors are being encouraged to deploy their capital into the longer term sustainable residential property with a rental yield that will not be dissimilar to what they can receive from a commercial property.
For those involved in the sector, the mix of commercial, residential and industrial may change as a result of these shifts, but it would appear the economic contribution via construction will continue to expand and its role as a central point of the Australian economy is being both acknowledged and heighted by the current government.
If you’d like more information on how to make these schemes work for you, contact your local William Buck property specialist.