The Federal Budget was announced last week with significant proposals to uplift the economic recovery to drive Australia out of crisis and build for the solid future.
Federal Budget 2021 is deemed to be the most significant budget since World War II and proposes to add $507 billion in overall Government support, including $257 billion in direct financial aid.
While most of the measures were focused on jobs creation, below are the measures that will potentially impact the Australian Property Market.
Extended First Home Loan Deposit Scheme (FHLDS)
Under FHLDS scheme, 10,000 extra places have been added to support more first home buyers to enter the market sooner. This scheme allows the eligible First Home Buyer to enter the market with as low as 5% deposit and be able to borrow 95% from the selected borrowers without having the need to pay Lenders Mortgage Insurance (LMI).
There are two key changes to the scheme:
The extra places are however limited to brand new properties only
The cap for property prices has been increased across the country
In Melbourne, the price cap has been increased from $600,000 to $850,000 to purchase a new property under FHLDS.
FHLDS is expected to fuel the demand for new houses and create more construction jobs and also driving growth in real estate transactions to further stimulate the economy.
Individual Income Tax Relief delivering Pay Rise for All
The already approved tax cuts will benefit more than 11 million Australian taxpayers and the benefits will be backdated to 1st July 2020.
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 as compared with 2017-18.
Tax savings means Australians will keep more of what they earn into their own pockets.
This measure will see people with an increase in take home salaries, which in turn will boost their disposable income allowing them to spend or invest more. It will also improve the borrowing capacities that can be utilised to purchase a property.
Infrastructure Investments to boost Property Prices
“Rebuilding economy includes building more roads, rails and bridges” – Josh Frydenberg.
The Budget 2020-21 brings $14 billion in new and accelerated infrastructure projects to support additional 40,000 jobs.
Increased infrastructure spending will stimulate economic growth, create jobs, increase standard of living and improve accessibility.
Infrastructure plays a major role to drive capital growth in property. These measures are expected to impact property prices positively.
Business Support to keep more people in work
Business with turnover up to $5 billion will be able to write off the full value of any eligible asset until June 2022.
Business owners can offset the losses incurred to June 2022 against prior profits made in or after the 2018-19 financial year.
The combination of the immediate expensing and loss carry-back measures will create an additional 50,000 jobs across the country and keep the Australian workforce safe.
Job Creation for younger generation to boost Property demand
JobMaker credit is expected to create additional 450,000 jobs for young people by providing business owners with $200 per week for those aged under 30, and $100 per week for those aged between 30-35.
With the additional $1billion Job Trainer Fund, the Australian Government expects to create 100,000 new apprenticeships and traineeships, with a 50% wage subsidy for employers.
According to the research from fiver.com, the wave of unemployment caused by the COVID-19 crisis led around 331,000 young Australians, to return to their parents' home. Young Australians are also the most vulnerable group for housing stress, with 44% struggling to pay rent or afford mortgage repayments.
These two initiatives to create Jobs for younger generation will create more independence and drive demand in property market be it rental property or home ownership.
Boost On-Shore migration to balance off stranded international students
With 200,000 students stranded overseas and no confirmation on when international travelling will resume, the Australian Government has committed to enhancing the responsiveness of the Australian Migration program.
According to the Federal Budget, the Government will increase the cap for Family Stream, allocating 77,300 places from the total 160,000 per year as a “one-off basis”.
According to SBS news, there are currently 100,000 partners waiting for receiving an Australian residence visa.
Prioritizing onshore migration can help population growth, which can positively affect the property market.
Beyond Budget - Impact on Australian Property Market
Interest Rates are the lowest in history and are expected to stay low for a long time. RBA may reduce it further in the coming months, making home ownership a lot more affordable.
Responsible Lending laws to be axed. Simpler lending rules to come into effect next year. The most significant reforms to credit rules will increase the flow of credit to households driving the demand upwards.
Australia has retained AAA Credit Rating from all the three major credit rating agencies. Australia is one of the only nine countries around the world to hold its AAA credit rating despite once in a century Pandemic.
Consumer Confidence increased 11.9 percent in October, the largest increase in budget month on record since 1974.
House Prices have been resilient and all predictions we saw earlier this year of 30 percent drop in property prices have now been revised as we saw a limited impact on the property prices. House price resilience has brought the confidence back in the consumers and the property market.
In Summary
Residential Property underpins Australia’s wealth, which is worth 7.1 Trillion dollars. State and Federal Governments have taken measures since the beginning of Pandemic to ensure there is roof over the head of Australians, protect the values of their properties and implement programs to support the livelihood of millions.
The future of Australian property looks promising with the announcement from Federal Budget and will only get better once the International Borders are open.
At SONI, we simplify property investment with our experience and knowledge. Whether you are looking to buy your First Home, your First Investment Property or to build on to your existing Portfolio, our team of experts are here to help.
Reach out to us today if you are looking for the right partner that is going to be there with you every step of the way.
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