The Australian Government’s Federal Budget 2023/24 has recently been announced, and it contains several measures that are expected to have a significant impact on the property market.
The budget is designed to support first-home buyers, increase the supply of property, and stimulate residential construction.
Here are the top five points from the budget that are likely to affect the property market.
Table of Contents
1. Expansion of the First Home Guarantee Scheme
The eligibility criteria for all elements of the scheme, including the First Home Guarantee, the Regional First Home Buyer Guarantee, and the Family Home Guarantee, will be expanded from 1 July 2023 with the following new updates:
- Australian Permanent Residents will also be able to access all three guarantees.
- The Home Guarantee Schemes currently cater exclusively to first-time buyers; however, from 1st July 2023, the eligibility criteria will expand to include people who have previously owned a property, provided their last ownership was a minimum of 10 years ago.
- The Home Guarantee Schemes will also allow joint applications from friends, siblings, and other family members.
In total, 35,000 first homebuyer spots are available each year, with 10,000 for the regional first homebuyer guarantee and 5,000 for the family home guarantee.
This expansion will be positively welcomed by the market, as it seems its the only home ownership incentive on offer in this Budget. Although there are price caps on eligibility in these Schemes, there are still opportunities in the market to make the most of what’s on offer.
2. New tax breaks for the built-to-rent sector
The government will introduce tax incentive changes to help increase the supply of property. These incentives include an increase in the depreciation rate for capital works purposes from 2.5% to 4% per year for eligible new build-to-rent projects where construction commences after 9 May 2023.
There will also be a reduction in the rate of withholding tax for eligible fund payments from managed investment trusts (MITs) to foreign residents on income from newly constructed residential build-to-rent properties after 1 July 2024 from 30% to 15%, subject to further consultation on eligibility criteria.
Although this will be a welcomed measure to assist the rental market, we will see an increase of around 150,000 renal properties over the next 10 years. With an influx of 715,000 migrants entering the country in this financial year and next, will this be enough to provide relief to the rental market? Many experts are saying the ‘missing ingredient’ to provide immediate relief is the lack of smaller investors entering the market.
3. Commonwealth Rent Assistance to rise 15%
The Australian Government has decided to increase the maximum rates of Commonwealth rent assistance by 15%, which is the largest increase in 30 years.
The move will provide between $15.73 and $31.76 extra per fortnight for people renting in the private market and community housing. This increase will benefit around 1.1 million households receiving Commonwealth Rent Assistance.
This increase in rental assistance could allow those struggling to get out of the rental market, catch up with the cost of living and plan their journey to property home ownership.
4. Boost social and affordable rental homes
To improve the supply of rental homes, the federal government has committed to supporting more social and affordable housing.
The government has allocated an additional $ 2 billion in funding for the social rental housing segment and increased the National Housing Finance and Investment Corporation (NHFIC)’s liability cap from $5.5 billion to $7.5 billion from 1 July 2023.
With the additional financing, NHFIC will be able to further support the segment by providing lower cost and longer-term finance to community home providers.
5. Other Investments in infrastructure
The Australian Government has announced several measures to boost the country’s infrastructure. These include:
- Conducting an independent strategic review of its $120bn pipeline of projects over the next 10 years
- Additional investments to improve productivity, safety, and resilience, including developing business cases for significant projects
- The Urban Precincts and Partnerships Program, a $159.7m initiative, aims to transform cities and suburbs in partnership with state and local governments.
- The Thriving Suburbs Program, a $211.7m project, will focus on enhancing liveability and prosperity in suburban communities through community and economic infrastructure investment.
- Funding has been allocated to unlock the potential of the Macquarie Point precinct in Hobart ($240m) and a stadium redevelopment in Launceston ($65m)
All in all, the Federal Budget 2023/24 contains a range of measures that are likely to have a significant impact on the property market. These measures are designed to support Australia’s property market and ensure that all Australians have access to a suitable home, whether through homeownership or renting.
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