Budget 2022: What does it mean for property in Australia?

A $2 billion boost for affordable housing and extra support for first-home buyers feature in a federal budget that delivers temporary relief from rising cost of living pressures for millions of Australians.

While the pre-election budget’s key focus is on the cost of living, Treasurer Josh Frydenberg noted the government is helping more Australians get into the housing market.

“Home ownership is fundamental to the Coalition,” Mr Frydenberg said in Tuesday night’s budget speech. “Helping more Australians to own a home is part of our plan for a stronger future.”

The budget’s major housing initiatives were the additional $2 billion to help community housing providers deliver about 8000 more social and affordable dwellings, and a significant expansion of schemes helping first-home buyers struggling to save a deposit as property prices surge.

PropTrack economist Angus Moore said the budget was focused on affordability.

“The theme for the budget really is around affordability, both in terms of helping first-home buyers and also helping people with the cost of living,” Mr Moore said. “That’s particularly in light of the fact that we’ll probably see interest rates rise later this year, which will – for some households – increase their mortgage repayments.”

Like industry groups and a federal parliamentary inquiry into housing affordability and supply that handed down its recommendations last week, Mr Moore argued more needed to be done to address housing supply.

“What we’d be looking for as a long-term solution to affordability is building more homes, and building more homes where people want to live,” Mr Moore said.

“Schemes like the Home Guarantee Scheme are good as short-term ways to help first-home buyers, but if we’re serious about solving affordability, the only long-term solution is building more homes.”

The pre-election budget handed down by Treasurer Josh Frydenberg includes big money for housing initiatives. Picture: Getty

The Property Council of Australia and the Urban Development Institute of Australia welcomed the expansion of the Home Guarantee Scheme but both said they wanted measures to boost housing supply to help address affordability problems.

“Unless we boost supply immediately, the looming affordability crisis will be overwhelming – particularly for first homeowners, but also affordable rentals and vulnerable Australians relying on subsidised housing,” UDIA national president Max Shifman said.

Additional $2 billion for affordable housing

The budget lifts the government-guaranteed liability cap of the National Housing Finance and Investment Corporation by $2 billion, to $5.5 billion, increasing the low-cost financing it provides to community housing providers for affordable housing. The funding came on top of a $500 million boost supporting 2500 dwellings announced in December. A budget document focused on women noted that since it was established in 2018, the NHFIC has supported more than 15,000 new and existing affordable dwellings through the provision of low-cost loans to community housing providers.

Mr Moore said affordable and social housing are important parts of the broader property market.

“It’s good that we are doing more but we’d be supportive of going further,” he said. 

A major missing piece of the puzzle is the supply of new dwellings to assist housing affordability. Picture: Getty

The women’s budget statement also noted the government provides about $1.6 billion a year to states and territories through the National Housing and Homelessness Agreement, as well as $5 billion for Commonwealth Rent Assistance, to support 1.4 million eligible households. Housing and homelessness organisations had called for increased investment in social housing, with national campaign group Everybody’s Home arguing at least 25,000 new social housing dwellings were needed in the budget. Advocacy groups like the Australian Council of Social Service had called for a 50% increase to Commonwealth Rent Assistance.

Home Guarantee scheme for first-home buyers expanded

The Home Guarantee Scheme will double to 50,000 places a year, including a new regional program that is also open to people trying to get back into home ownership.

The budget papers noted there will be 50,000 guarantees per year for three years from 2022/23, and then 35,000 a year as an ongoing measure.

Mr Moore said the expansion will help more first-time buyers access the market with a lower deposit but noted the number of places still falls well short of the more than 150,000 first-home purchasers in 2021.

“Of course, not every first-home buyer needs government assistance” he said, “but given how in demand the scheme has been in the past, and the fact that the deposit burden has only gotten harder in the past couple of years as prices have surged, I think we’ll see a lot of demand for the scheme.”

The First Home Guarantee, which helps first-home buyers buy a new or existing home with a deposit as low as 5%, will provide 35,000 guarantees a year from 1 July.

The Family Home Guarantee, introduced in the 2021 budget to help single parents with children buy their first home or re-enter the market with a deposit as low as 2%, will also increase to 5000 places per year until 30 June 2025.

The Regional Home Guarantee will provide 10,000 places per year for first-home buyers and people who have not owned a home for five years. That scheme, which runs from 1 October 2022 until 30 June 2025, will help them buy a new home in a regional location with a minimum 5% deposit. 

“Given prices in regional areas have outpaced capital cities over the past couple of years, affordability for regional buyers is likely to have become stretched,” Mr Moore said.

“Given that run up in prices, building new homes in these areas will be important, and the Regional Home Guarantee will help with that.”

Mr Moore said the property price caps for the schemes should be reviewed.

The scheme’s price caps remain unchanged and should be reviewed. Picture: Getty

The caps were lifted in July 2021, but he noted prices had risen by more than 10% since then.

“That means many homes that used to be eligible for the scheme no longer are, and this is particularly acute for buyers in Sydney where the median price is more than $100,000 above the scheme’s cap.”

The price cap for Sydney is $800,000, where PropTrack data puts the median price for all dwellings at $1.029 million. Melbourne’s cap is $700,000, while its median dwelling sale price is $780,000; Brisbane’s $600,000 cap sits just above its $580,000 median; and Canberra’s $500,000 cap is well below its $780,000 median.

The New Home Guarantee, a temporary two-year extension of the scheme that provided an additional 10,000 places a year specifically for first-home buyers building or purchasing new homes, will end as planned on 30 June 2022.

As announced in last year’s budget, the maximum amount of voluntary contributions that can be released under the First Home Super Saver Scheme will increase to $50,000 from $30,000 from 1 July 2022.

Temporary relief from rising cost of living

Mr Frydenberg said higher fuel, food and shipping costs are pushing up inflation and stretching household expenses, and the budget delivered immediate cost of living relief.

More than 10 million low- and middle-income earners will get a one-off $420 cost of living tax offset.  That means individuals already receiving the low and middle income tax offset (LMITO) will receive up to $1500 when they lodge their 2021/22 tax returns after 1 July. But the LMITO itself will not be extended again, meaning low- and middle-income earners effectively face a tax rise next financial year.

Mr Frydenberg said six million people – including pensioners, carers, job seekers, and concession card holders – will receive a one-off $250 cost of living payment within weeks.

The budget includes a raft of measures to ease cost of living pressures. Picture: Getty

As widely tipped, the government also announced a temporary halving of the fuel excise, with Mr Frydenberg confirming the cut will flow through to the bowser over the next fortnight.

“For the next six months, Australians will save 22 cents a litre every time they fill up their car,” he said.

A family with two cars who fill up once a week will save about $30 a week or $700 over the next six months.

The budget also delivers another $17.9 billion for new infrastructure projects, taking the government’s 10-year infrastructure investment pipeline to a record $120 billion. Mr Frydenberg noted the deficit for 2022/23 is expected to be $78 billion.

It is hoped that the combination of reduced cost of living and more readily available jobs, will help to support a number of households when interest rates rise and increase their relative cost of living. Whether this will actually occur is yet to be seen.

Written: 1 April 2022, Updated: 7 April 2022

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