Negative gearing safe, but Budget gets mixed reaction

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The Federal Budget didn’t turn out to be the horror story that many professionals in the real estate industry had feared, says Real Estate Institute of Australia (REIA) president David Airey, but it is something of a mixed bag.

First and foremost, fears that negative gearing tax benefits would be slashed were not realised, which will allow the majority of the nation’s property investors to sleep better at night.

But Airey believes that the Government missed a trick in not offering any new incentives for first homebuyers to get a foot on the property ladder.

“This is a market segment that desperately needs assistance to fund home purchase. REIA recommended in its pre-Budget submission that the Government conduct a review of the FirstHome Owner Grant and consider providing first home buyers access to superannuation for thepurchase of a home,” he said.

Noting that first homebuyers now only make up around 15% of purchases in the housing market – compared to 30% back in October 2009 – Airey stated that the latest Budget “will do little to stave off expected increases in interest rates, a concern given thecritical state of affordability.”

“It is disappointing that the Government has not realised the value of implementing long-termsolutions to address housing affordability. We need to look at practical measures to give first homebuyers the opportunity to realise the dream of owning their own home,” he concluded.

The Housing Industry Association (HIA) too bemoaned the Government’s lack of action on increasing housing affordability and improving the supply situation.

“Unfortunately, the Budget fails to deliver any dedicated policies to alleviate Australia’s chronic housing shortage, which at around 200,000 dwellings and growing, continues to place pressure on the household budgets of home buyers and renters,” said HIA senior economist Andrew Harvey.

“Until the high taxation of new housing is reduced, and supply side obstacles removed, Australian families will remain locked out of home ownership and will continue to face high rental costs. There is only one way to make serious inroads into the housing affordability crisis – and that is by substantially increasing housing supply.”

He noted however that new measuresto improve the number of skilled workers through training and immigration are most welcome.

“In tonight’s Budget the Federal Government has placed an emphasis on skills, training and skilled immigration, as well as improvements to allow more private investment in large public infrastructure. While these are positive and necessary measures, the inadequate funding of housing infrastructure has not been addressed,” he said.

Harvey concluded with a stark warning that, while the Budget expects to see Australia’s economic and fiscal outlook improve thanks to China’s expected future success, the housing industry “ looks to be headed into a deep and sustained downturn”.

Will you be better or worse off thanks to the Budget? Will negative gearing be hit next time around? Join the debate at

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