The Federal Budget has delivered promises to support the housing market, but experts think more needs to be done to solve the severe crisis Australia is in — stamp duty reforms may be the biggest missed opportunity.
To recap, here are some of the housing policies included in this year’s Budget:
- Expansion of eligibility criteria for the Home Guarantee Scheme
- 15% increase in Commonwealth Rent Assistance (CRA)
- Around 7,000 new social and community housing project dwellings
- $67.5m additional funding to boost homelessness services
- Tax tweaks for build-to-rent project that will see up to 150,000 more dwellings
Check out the detailed breakdown of these policies for homebuyers and homeowners, and property investors to learn more.
PEXA chief economist Julie Toth said while each housing affordability measure in this year’s Budget makes a welcome difference, the scale, complexity, and longevity of the current national housing crises requires a bolder response.
“The Budget outlook confirms the long-term nature of Australia’s housing availability and affordability crisis, with housing supply unable to meet demand and set to fall further behind,” she said.
The magnitude, duration and complexity of this national housing supply gap and our subsequent affordability challenge requires a bold multi-faceted response — as recognised by the Government’s Housing Accord, all levels of government, industry and community groups will need to lean in to help solve this problem.”
Ms Toth said the National Housing Accord and Housing Affordability Future Fund must be passed by the Senate urgently to ensure that the federal funding begins to flow into affordable housing as soon as possible.
Missed opportunity for stamp duty reforms
PropTrack senior economist Eleanor Creagh said one of the biggest missed opportunities in this year’s budget is the reform on stamp duty, which is needed to allow for property market to function more efficiently across the country.
“Support for the states to transition from stamp duty to a broad-based land tax must be seriously explored if we hope to create a strong structural foundation for an efficient and equitable property market,” she said.
“Some of the issues identified with stamp duties are that they increase the cost of housing, increase the deposit burden and disincentivise household mobility.”
Ms Creagh said eliminating stamp duty could potentially unlock $10bn in economic value based on the previous estimates of the NSW Treasury.
“Stamp duty is an inefficient tax that acts to slow the property market, reduces economic growth and makes housing less affordable.”
For many first-home buyers, stamp duty makes saving for a deposit harder, as it is an additional upfront cost, they had to make budget for when buying a home.
“Stamp duty for a relatively affordable home adds around an extra year of saving in most cities,” she said.
“Reducing up front purchase costs for first-home buyers by replacing stamp duty with an annual land tax, would reduce the deposit hurdle for first timers and allow many to purchase sooner.”
The First Home Buyer Choice in New South Wales currently allows first-home buyers the option to pay for an annual land tax instead of stamp duty. However, this will soon be abolished, with the new government reinstating stamp duty concessions with higher price caps.
“Reforming stamp duty could not only help younger households and improve housing affordability, but also better utilise Australia’s existing dwelling stock. A clear win in the face of a growing population and existing housing shortage,” Ms Owen said.
CRA increase not enough?
CoreLogic head of research Eliza Owen said while there’s recognition given to renters, the changes to CRA, even being the biggest increase in more than three decades, would not make any material change for many low-income households.
“Further review of CRA would be worthwhile to understand how it could be better expanded and targeted,” she said.
“While this at least recognises challenges faced by renters, $31 per fortnight is a modest increase relative to the rise in private rent values.”
CoreLogic imputed rent values suggest the national median rent has increased the equivalent of $113 per fortnight in the year to April alone.
“Under the Budget proposals, some households receiving CRA will also see a boost from the $40 increase for JobSeeker payments from September, continued indexation of support payments, and relief on energy bills,” she said.
“However, with housing supply initiatives not scheduled until 2024, and no ceiling on rent increases for private landlords, there is a greater risk of these income supplements simply putting further upward pressure on rent values.”
Ms Owen said in an ideal scenario, CRA increases would be complemented by better targeting of the scheme to households at higher risk of rental stress. Furthermore, CRA eligibility would be expanded to those in the private rental market who do not receive other government support payments.
Will changes to Home Guarantee Scheme make a significant impact?
The Budget outlined changes to the eligibility criteria for each program under the Home Guarantee Scheme, but Ms Owen said the changes may not really make them more effective.
“The relatively high-income thresholds around the First Home Guarantee, in particular, may help people into housing faster, who would have achieved home ownership anyway, limiting more equitable home ownership across income distributions,” she said.
“If interest rates decline, these schemes will make more sense for hopeful homeowners comparing the cost of taking on more mortgage debt with the ongoing costs of renting, and they will likely see more take up in the years ahead.”
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