Thrive Property NT

How the federal budget affects property price

If there’s one thing that can’t be denied, it’s that 2022 (already) has been a big year of change for the Australian property market. From the recent Federal Election, to rising inflation and the ongoing conflict in Eastern Europe, there’s been a lot of uncertainty that doesn’t appear to be settling any time soon.

While the Liberal party unveiled their 2022-23 Federal Budget plans in March, with the switch in Government post-election, many may be wondering how this change will affect real estate. Right now, it’s more important than ever that homeowners, buyers and sellers understand what factors are expected to impact the housing market in the coming year.

Following the federal election results on the 21st May, that saw the Australian Labor Party win government, here’s a recap on the housing policies we can expect to see this year.

Financial Aid for First Home Buyers

Under the election promise policy, coined as the ‘Help to Buy’ scheme, the Labor government intends to pay an equity contribution of up to 40% of the purchase price for a new home, and up to 30% for an existing home.

The scheme will be eligible to 10, 000 households per financial year, and will not require borrowers to pay lenders mortgage insurance (LMI).

Under the new scheme, home buyers will be required to have a minimum deposit of just 2% in order to qualify for a standard home loan with participating lenders. During the loan period, the homebuyer can buy additional stakes (minimum at any one time being 5%) in the home when they are able to do so.

If the homebuyer’s income exceeds the Help to Buy gross annual income threshold for two consecutive years, they will be required to repay Labor’s financial contribution in part or whole.

Regional Home Guarantee for Regional First Home Buyers

The covid-19 pandemic has seen a rise in demand for housing in Australia’s regions, which has conversely, pushed up the prices for regional housing.

The Labor government has responded to this by introducing the proposed ‘Regional First Home Buyer Support Scheme’, which will provide a government guarantee of up to 15% for eligible first home buyers, so that locals with a 5% deposit can avoid paying LMI.

As part of the proposed scheme, there would be 10, 000 places per financial year for families in regional areas. The places will also be reserved for residents who have lived in their region for more than 12 months.

According to the Labor government, this would triple the number of places that regional residents received last year under the current ‘First Home Loan Deposit Scheme’.

Boost to National Housing Finance

In the earlier released Budget Reply, the Labor government outlined that, should they be elected into power, they would look to focus on five key areas, including social housing. Included in the outline was a $10 billion off-budget ‘Housing Australia Future Fund’, which will build new social and affordable housing properties in the next five years; thus creating jobs and building homes.

Over the five years, the fund is expected to:

  • Build 20, 000 new social housing properties, which includes 4, 000 homes for women and children fleeing domestic and family violence, and older women on low incomes who are at risk of homelessness.
  • Build 10, 000 ‘affordable homes for the heroes of the pandemic’, such as frontline workers, police, nurses and cleaners.
  • Support 21, 500 full time jobs across the construction industry and broader economy, per year, over five years nationwide.
  • Provide $200 million for the repair, maintenance and improvements of housing in remote Indigenous communities
  • Invest $100 million in crisis and transitional housing for women and children fleeing domestic and family violence, and older women on low incomes who are at risk of homelessness
  • Invest $30 million to build housing and fund specialist services for veterans who are experiencing homelessness or at-risk of homelessness.

Other policies being introduced

In addition to the housing policies outlined above, the Labor government have also pledged to:

  • Commit $100 million to start work on urgent housing and essential infrastructure on the Northern Territory homeland and negotiate a new remote housing agreement with the NT that includes homelands, when the current agreement expires in mid-2023.
  • Provide $200 million from the Housing Australia Future Fund for repair, maintenance and improvements of remote housing in Western Australia, South Australia, Queensland and the Northern Territory.
  • Establish a National Housing Supply and Affordability Council that will set targets for land supply and advise on ways to improve land use planning and supply for housing.

Concluding Thoughts

Whether you tend to lean left or right, the budget (and budget reply) this year can definitely be described as an election budget; with a very close gap between the two, it was reflective of a Government looking to increase election chances and work through challenges with an immediate impact on many Australians.

Relating this to the property market, any initiative that helps first home buyers onto the property ladder is always very welcomed – the policies expected to roll out in the coming months are likely to influence local housing markets, as consumer confidence and economic stability is bolstered.

At current, we know that a percentage of the population is hoping to relocate to rural and regional areas. We know now that regional Australians will benefit from the expansion and implementation of the guarantee schemes, while more vulnerable Australians may benefit from the increased support to National Housing.

The proposed investments in infrastructure are likely to have an indirect impact on residential and commercial properties, which will strengthen in certain areas as transport and amenities improve to meet demands.

However, while the temporary cost of living measures will offer relief to households in the short term, the looming increases in tax liabilities and interest rates means that they may not have a significant impact on property marketing long-term.