In October the Federal Government released what many have described as its most significant Budget, with incentives targeted at Australia’s economic recovery from the COVID19 crisis. When announcing the Budget, Treasurer Josh Frydenberg summed up the hardships faced in 2020, saying, “Australian’s through no fault of their own, are doing it tough”.
Mr Frydenberg emphasised the importance of employment on the Australian economy when he said: “there is no Budget recovery without jobs recovery. This Budget is all about jobs”. The various incentives and measures followed suit with a strong emphasis on job growth, business support, investment encouragement and tax cuts.
The Budget only included a handful of new measures that would directly influence the property market, due to existing economic strategies like HomeBuilder and the First Home Buyer’s Grant. However, there were several plans whose roll-on effects will have indirect impacts on the property market.
First homebuyers’ incentives
The government recognised the massive impact COVID19 has had on young people, giving them a much-needed boost in the 2020/2021 Budget. Ten thousand places were added to the First Home Loan Deposit Scheme, and the cap on eligible house prices was increased by almost $250,000. Other aspects of the scheme went unchanged, meaning eligible first homebuyers only need a 5% deposit, with the government guaranteeing the remaining 15%. This measure will boost demand within the property market, whilst helping to get young people into their first homes. The construction industry will also get a boost through this initiative, as the extra 10,000 places are reserved for new builds only.
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Finance for affordable housing
Although affordable housing organisations were disappointed with the level of contribution, the Budget allocated $1 billion to fund affordable housing construction. The funds will be delivered through the National Housing Finance and Investment Corporation, who encourage investment in affordable housing through loans, investments and grants. The construction of better-located affordable housing options will help create a more resilient market by providing a safety net to low-income households, whilst boosting the economy through improved access to employment. Affordable housing also provides a jumping-off point for low-income households to enter the mainstream property market.
Help for Indigenous homebuyers
The Budget provided another boost to the housing market through the $150 million extensions of the Indigenous Homeowner program. The incentive will provide 360 construction loans to Indigenous Australians, which will help both the construction and property industry.
A rise in employment means more people can buy property, driving demand and competition in the housing market. As Mr Frydenberg Mentioned, the 2021 Budget was all about jobs, and jobs it delivered. The Budget included several items that would help create more jobs, both directly and indirectly.
JobTrainer includes the apprenticeship wage subsidy, which will encourage more young people to start apprentices, solidifying their financial future and increasing the likelihood of purchasing a property down the track. The program gives employers a 50% wage subsidy for new or apprentices, which will also mean more money in business owner’s pockets. JobTrainer will also offer 340,000 free or low-cost courses to help younger generations into jobs.
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Job-Ready Graduates Package to create more places at Australian universities for domestic students
Similar to the apprenticeship strategy, the Job-ready Graduates Package will help young people secure their futures. The package will include 30,000 extra University places and 50,000 additional short-course places, to the sum of $20 billion. This strategy will also tackle waning university employment that resulted from the global pandemic, and fill the hole in the system left by the lack of international students.
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Modern Manufacturing Strategy including funding to create and maintain jobs and upskill workers
The $1.5 billion Modern Manufacturing Strategy aims to help scale up existing Australian businesses so they can compete on the world stage. A $58.2 million piece of the pie will be dedicated to creating and maintaining jobs, and up-skilling their employees. Ultimately the strategy will create more jobs and more people who are able to enter the property market.
New and fast-tracked infrastructure projects
A whopping $14 billion was allocated to Australian infrastructure in the 2020/2021 Budget. Prime Minister Scott Morrison said that the investment in infrastructure was a crucial part of the government’s JobMaker plan. “This investment through the Budget will boost the national economy and is part of our plan to support an estimated 30,000 direct and indirect jobs across the nation”, he said.
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Support for regional tourism may increase demand for regional properties
Regional and international tourism has felt the brunt of the economic impacts of COVID19. With international borders remaining closed for the foreseeable future, the 2020/2021 Budget aimed to increase domestic tourism by directing funds into regional areas. $350 million was allocated to the initiative, with $50 million going directly to hard-hit businesses, and $200 million to boost local infrastructure, with $100 million of those funds to aid tourism related-infrastructure. The incentive has been speculated to further increase the demand for property in regional areas, prolonging the regional boom of 2020.
Migration has halted in the face of COVID19, which could potentially have huge impacts on the economy and the housing market. Migration helps to increase our population and economy and drives up demand in the property sector. The Budget outlined an increase on migration caps in 2020/2021, with a particular focus on boosting business by including skilled and essential workers on the Priority Migration Skilled Occupation List. Unfortunately, the Budget also detailed a 71,000 suspected drop in migration due to border restrictions.
The Budget announced the bringing forward of stage two of their tax cuts, which will mean more disposable income for taxpayers by the end of this year. CBRE Head of Research Bradley Spears explained that providing households with more money to spend through tax cuts would help boost the property market. “Most of the Budget’s benefits to the real estate sector come indirectly through support to the broader economy”, he said. Tax cuts will help first-time buyers and would-be investor move closer toward their goals, with the ability to save more of their income.
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Investment in liveability
The government allocated $7.5 billion for infrastructure development to improve transport around the country, increasing the liveability of Australia’s cities and suburbs. Investment in increasing liveability will have a two-prong effect on the property market – boosting house prices and stimulating future investment as areas become more attractive, and creating more jobs due to the increase in construction.
A steady rental market is vital to a healthy property market. Our unstable COVID-19 economy, and skyrocketing rental vacancies, has seen investor demand dwindle over 2020. Younger people have been moving back into their family homes in droves due to job losses and uncertain financial futures. In addition to the many other employment boosting initiatives, the Budget included JobMaker, which is targeted at people aged 16-35. Depending on eligibility, the government will grant businesses up to $200 a week for hiring someone in this age bracket. The Budget’s focus on youth employment will hopefully see more young people returning to work and renting again, which will subsequently kick start investment activity.
Words by Nell Matzen
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