Australians have faced unprecedented challenges throughout 2020 – first enduring the bushfire crisis, before having to adapt to the outbreak of COVID-19.
The later has significantly changed the way we live our lives – and is the driving factor behind our arguably the world’s worst economic downturn since the Great Depression.
With Australia readying itself to rebuild, all eyes were on Treasurer Josh Frydenberg this month, as he delivered the Federal Budget for 2020-21.
It’s not an understatement to suggest that this was one of the most important budgets ever produced in our nation’s history.
Market holding firm
The property industry, like most sectors, has been hampered by movement restrictions introduced to combat the spread of the virus. This has affected inspections, auctions and understandably, shaken consumer confidence.
Despite these limitations, the residential property market has proven resilient – this month’s inaugural PEXA Property Mortgage Insights report revealed that after an early dip, property settlements have recovered to be up 8% in 20201.
Victoria’s second wave is approaching its tail end and the remainder of the country edges closer to a COVID-normal. As the rebuild continues, what support is on offer to industry within the budget?
Assistance for first homeowners
In positive news, the First Home Loan Deposit Scheme, a Government initiative introduced in January 2020 to help Australians purchase their first home sooner, has been bolstered as part of the budget.
Under the scheme, eligible first-home buyers are only required to place a 5% deposit on a home loan – removing the 20% hurdle needed to avoid lenders’ mortgage insurance (LMI). Up to 15% of the loan is also guaranteed by the government.
The popular incentive has had 10,000 new spaces made available for newly constructed homes, complementing the initial 20,000 released earlier this year.
In a further boost, pricing thresholds on newly established homes determining eligibility for the offer have been increased.
|State/Territory||Capital City / Regional Centre purchasing limit (new)||Capital City / Regional Centre (previous)||Rest of state purchasing limit (new)||Rest of state purchasing limit (previous)|
Homebuilder grants retained
Deployed in June 2020 to stimulate the market at the height of the pandemic, HomeBuilder provides eligible owner-occupiers (including first home buyers) with a grant of $25,000 to build a new residence or substantially renovate an existing dwelling.
Despite previous fears demand was exceeding supply of resources and finance, particularly in Queensland, Western Australia and South Australia, this remains uncapped and within the Federal Budget for 2020-21.
Low cash rate continues and taxes slashed
The Reserve Bank of Australia’s (RBA) maintenance of a record low 0.25% cash rate appears set to remain in place for the foreseeable future.
And in presenting the budget to the House of Representatives, Treasurer Frydenberg shared that more than 11 million Australians will receive a tax cut, backdated to 1 July this year, as part of the Morrison Government’s COVID-19 Economic Recovery Plan.
To facilitate this, Stage Two of the Personal Income Tax Plan, slated to begin in 2022, has been fast-tracked by two years and backdated to 1 July 2020.
These measures should provide sources of confidence for prospective homebuyers and citizens.
The months ahead
The biggest threat to both property and our broader economy is the delayed progression to social and economic status quo, or in a worst-case scenario, a widespread outbreak of coronavirus on par with those seen Europe and the United States.
It remains to be seen how this will progress, particularly in Victoria which has suffered dearly in recent months.
But the federal government’s commitment to property, and encouragingly positive market trends, offers hope for a bright financial year ahead.