2023 Budget wrap: Any help for buyers, owners or investors?
Treasurer Jim Chalmers delivered the federal budget for the 2023-2024 fiscal year on 9 May.
The headline, aside from a budget surplus courtesy of resource prices, is a $14.6 billion cost of living relief package designed to support vulnerable Australians. Among the measures introduced are a 15% increase in award wages for aged-care workers, subsidised energy bills, strengthened Medicare, and an additional $40 per fortnight for JobSeeker recipients.
The budget made no changes to the current housing system. Negative gearing arrangements for property investments, as well as capital gains tax on property investments and the family home remain unchanged.
So was there anything at all in the budget to help buyers, owners or investors? Yes and no …
All eyes were on cost of living. Loan repayments are up. Rents are up. The supermarket spend is up. There was a strong sense that the government had a responsibility to ensure that this budget reduced the financial pressure on Australians, especially the less well-off among us and those with mortgages who are paying thousands more per year.
The RBA didn’t prepare borrowers for interest rates; COVID didn’t prepare the world for a massive disruption to economies and societies; and Russia didn’t prepare the world for the illegal invasion of Ukraine, and the mess that’s made to lives as well as world commodity markets.
So in this uncertain time what did the budget deliver?
The First Homebuyer Guarantee (FHBG) rules have changed. Along with married and de-facto couples, the grant can now be accessed by friends, siblings, and other family members. The scheme has also been expanded to include non-first home buyers who haven’t owned a property in Australia in the past ten years, supporting those who have lost their homeownership status.
Since the scheme was first introduced, the proportion of first-time buyers has plummeted; in May 2009, 31.4% of all purchasers were first-time buyers, while in March of this year, the proportion was 14.2%. The Real Estate Institute of Australia (REIA) expects the proportion of new residential loans going to first-time buyers to fall even further.
There were no additional initiatives to address housing affordability or assist first-time homebuyers.
Rents in capital cities are 18% higher than they were before the pandemic, while rents in regional areas are 23% higher. Rental markets are significantly undersupplied. As a result, prices are increasing rapidly while vacancy rates are near zero.
Two measures address this issue:
- The budget announced an increase of up to 15% in Commonwealth Rent Assistance payments, and
- Incentives are increased for the private sector to undertake build-to-rent projects.
Will this help? Perhaps a bit.
Cost of living
Despite being the centrepiece of this second Chalmers budget, cost-of-living initiatives – while significant – are largely incremental in nature. They will certainly help many less-affluent Australians, however their impact on homeowners and would-be home buyers are indirect, and widely viewed as insufficient to address immediate supply-related issues.
Senior home owners
The pilot program to incentivise senior homeowners to downsize is a step in the right direction for freeing up family homes. Small in scope, the initiative will not have a significant impact unless it is expanded. Plus, where will the seller live?
SUPPLY – THE ELEPHANT IN THE ROOM
As hinted at already, the 2023–4 budget outlook confirms the long-term nature of Australia’s housing availability and affordability crisis, with supply unable to meet demand and set to fall further behind. While the housing policy measures announced provide some relief, they are unlikely to keep pace with the scale of the problem facing Australians who are increasingly priced out of purchasing and even renting.
With argy-bargy continuing in the Senate over the Government’s proposed “housing future fund”, it’s impossible to say how this will be resolved. The only thing that certain: a fix is years away.
The theory goes that when you give people more money, they spend it, and it drives up inflation. The Reserve Bank is obsessively focused on reducing inflation and use the blunt weapon of interest rates to take money out of the hands of spenders.
So is easing the cost of living just adding pressure to the RBA?
The theory falls apart when people are not even keeping up with day-to-day expenses. They still pay their bills, but their health, access to work and social connections fall. We’ll see very soon if this budget puts any pressure on the RBA to keep lifting rates.
People looking for their first home, current mortgage holders facing hikes in repayments, and investors looking at an uncertain future all face different situations. As market experts, Mortgage Broker Melbourne can help unpack the budget, assess your personal situation, and provide options for ensuring your real-estate ambitions are achieved.
At no cost or obligation, contact us for an independent look at your personal circumstances.
Marc has been a professional lender for 28 years. After beginning his career in 1990 with a UK Building Society, he moved to Australia where he held several different retail banking roles. In 1999 it became clear to him that a mortgage broker would eventually become an obvious choice for someone looking for a home loan so he took the plunge and became an independent broker. He hasn’t looked back since!