Will the Federal Budget Help Alleviate the Housing Crisis?

Housing has always been a big issue for all Australians, but in recent years, the state of the market has started to reach crisis levels. We are currently experiencing a rental crisis while the overall affordability of homes for everyday Australians continues to decline.

The recent Federal Budget was put together when Australians were crying out for more to be done to help ease the pain many people feel. And while some initiatives have been put in place to help those struggling the most, is it really going to make any difference to the majority of people out there who are simply trying to keep a roof over their heads?

Looking at some of the measures outlined in the budget, we can see that there is a focus on helping those on lower incomes. The government will be raising rent assistance by 15%, but when we look at the fact that rents have also surged by around 10 per cent in the past 12 months alone in Perth, Adelaide, Brisbane, Sydney and Melbourne, according to Corelogic, is that going to make a big difference?

The next key focus was building more homes for those who couldn’t afford one. The NHFIC’s total liability cap will rise by $2 billion, allowing 7,000 new social and affordable dwellings to be built over the next four years. But again, this equates to only 1750 new homes nationwide every year.

The other significant change was the reduction in withholding tax rate and depreciation changes, which will encourage more development from build-to-rent (BTR). While this might help over the long term, BTR will only ever represent a tiny pool of supply compared to the private rental market, which is effectively just your mum and dad investors.

There were also some changes to the First Home Buyer Guarantee (FHBG), where the government extended the eligibility criteria to include any two joint borrowers from a range of household and family members, as well as all permanent residents and former home-owners who have not owned a home for ten years or more. These measures do help first-home buyers and are especially important at a time when the rental market is incredibly tight.

So while all these measures might have a place, they ignore that Australia’s growing population will quickly evaporate many of these short-term measures.

Within the budget, documents showed that net overseas migration (NOM) would be 235,000 every year from 2022-23 onwards. Because of this substantial projected immigration, Australia’s population is tipped to grow by 357,000 (1.4%) in 2022-23 and by 369,000 (1.4%) in 2023-24.

In context, 7000 new affordable homes pale compared to more than 700,000 new arrivals over two years. This will also put increased pressure on rental markets, as when people initially come to Australia, they typically rent. So it’s likely that we are going to see more pressure for renters ahead.

So, what else can be done if the budget can’t help change the housing crisis’s state?

Of course, there are no quick fixes regarding housing, but it is worth looking at options that might help. In terms of the rental crisis, encouraging more private #investment could help. While the media often portrays #landlords versus #tenants, the reality is that it doesn’t need to be that way. Encouraging investors can be done by reducing taxes like stamp duty and even the higher costs that fall on overseas investors. This would help bring investors back into the market and increase the supply of rental properties.

Lowering taxes throughout the building process also helps increase the supply of new home homes. Builders and developers pay a large portion of the cost of the house in the form of direct taxes such as GST as well as other taxes that make the cost of building new homes very high. Reducing some of these costs could make homes more affordable when borrowers are struggling to get the borrowing capacity to get a loan.

The current situation is a good opportunity for property investors to continue expanding their property portfolio. Rents will likely keep increasing, so the yield should rise, while interest rates will be nearing the top in the next six months.

With the ever-growing population, we will continue to see upward pressure on house prices across the country. Given that most Australian’s cities now have a finite supply of well-located land, more demand and fixed supply will continue to put upward pressure on prices. Investors can position themselves by purchasing well as prices continue rising.

Overall, the budget has attempted to address some of the current housing issues, but in reality, it will make minimal impact on most people. Upward pressure on rents and prices will continue. Until extensive overhauls of the policies around housing, taxation and immigration, the situation is unlikely to change in the short term.