Andrew Cocks is the Managing Director at Richardson & Wrench, Australia’s oldest real estate agency. Andrew has years of experience in business, marketing and project and development management.
There’s plenty for the property industry to like in the Federal Budget handed down last night, not because of any specific measure but in the myriad provisions to keep cash and confidence flowing in our pandemic-constrained economy.
Treasurer Josh Frydenberg declared “jobs are coming back, the economy is coming back and Australia is coming back”. And he was not afraid to throw money into sustaining the comeback, never mind the $161 billion deficit we’ll clock up this year.
Jobs and training took centre stage in the Frydenberg 2021 Budget and that is where the focus needs to be.
In a red hot real estate market in which buyers have taken on high levels of debt, the greatest risk to individuals, the sector, and the economy is a loss of income. The government has put some ballast into the jobs market by pumping even more billions into industries that will support jobs, this time without the blinkered high viz vision of its last effort.
For anybody who’s been hibernating over the past few months, the government was facing a gender revolt over its failure to recognise the female 50 per cent of the population in its previous Budget and given the ensuing fury I suspect there were was a flurry of late-night revisions in preparation for this effort.
Most significant is the additional investment in early childhood education and care, not a welfare payment but an economic stimulus to encourage more women to increase their hours of work without the tax penalty that makes it barely worthwhile.
While it falls short of the hopes of many it’s a step that will increase household incomes and we all know that it takes two incomes to support a mortgage in most regions of Australia. So whatever is good for the family budget is good for real estate. Given the beneficiaries are families with two children in care, there’s a hint too that this might be an incentive to make up the migration deficit with some home grown population growth.
Looking at measures that directly impact the housing market, one of the more welcome announcements sits under the heading of superannuation. The age limit for the existing downsizer scheme will be lowered from 65 to 60 meaning more people will be able to sell the family home and put $300,000 into their super without a high tax penalty.
This measure encourages older people planning for a less mobile future to “right size” sooner, liberating housing stock better suited to families than a couple or single person rattling around a large high maintenance home.
Helping single parents buy a home with a 2 per cent deposit displays a sentiment in the right place but the devil will be in the detail. Starting over after divorce is tough on both parties and the ability to establish a new home will make a significant contribution to the economic security of the custodial parent. At this particular moment, with low interest rates making a mortgage cheaper than rent in some areas, this measure might put a small dent in the number of women over 55 who make up the fastest growing group of homeless people in Australia.
Extension of the New Home Guarantee is a positive move though it has its share of detractors who argue that such measures only push up the price of homes. With cheap money in ample supply, home prices are going up no matter and I’d rather see young Australians get help with the high deposit hurdle and own their home sooner rather than later.
Likewise, lifting the cap on the First Home Super Saver Scheme from $30,000 to $50,000 is a self help measure to break into the housing market. Those who argue that it will erode retirement savings ignore the fact that it applies to voluntary contributions and merely encourages saving in a more tax effective way. Anybody hoping for a comfortable retirement knows that housing security is key.
The government still likes its high viz photo opps and the $15 billion allocated to major infrastructure investment will ensure they have hard hat moments for a few years to come and of course these projects come with a big jobs benefit.
But this Budget has taken note of the need for social infrastructure and the services sector, which already employs thousands and has potential to employ many more, will be the beneficiary.
Think aged care and child care, education and training. There is some serious money being directed to the aged care sector and that is another area where the real estate sector stands to gain. The Royal Commission Into Aged Care delivered five weighty volumes of reasons to avoid aged care, and therefore remain in a home not suited to age or health status.
Fix up the system and more might be willing to sell up and use the proceeds to live in a managed care facility.
There’s a welcome $1 billion extra to expand the JobTrainer scheme and apprenticeships and traineeships.
It wouldn’t be a Budget as we know it without a bit of a tax sweetener. Lower and middle-income earners will receive tax relief of up to $2,745 for singles, and up to $5,490 for dual-income families by lifting the income thresholds.
There are not a lot of losers in this “something for everyone” budget. You could argue that the debt to keep us afloat today will be a millstone around the necks of future generations but as we are reminded, we are not out of this pandemic yet.
The economy is bouncing back and last night Frydenberg gave it all the room it needs to keep on growing. The rest is up to us.
This article first appeared on Elite Agent
