PEXA today welcomed the Federal Budget housing policy measures to stimulate housing supply and tackle the ongoing rental housing crisis but noted more needed to be done to address the nation’s long-term housing shortage.
PEXA’s Chief Economist, Julie Toth, said “While each housing affordability measure makes a welcome difference to the individuals receiving this assistance, the scale, complexity and longevity of our national housing crises requires a bolder response”.
“The Budget outlook confirms the long-term nature of Australia’s housing availability and affordability crisis, with housing supply unable to meet demand and set to fall further behind,” she said.
“While the housing policy measures announced in this Federal Budget provide some relief, they are unlikely to keep pace with the scale of the problem facing vulnerable Australians.
“The Budget estimates that population growth is expected to reach 2% in 2022–23 and 1.7% in 2023–24 (up from 1.4% in last October’s Budget), driven by net overseas migration, while further demand pressure is coming from our underlying trend toward smaller households.
“On the supply side, Treasury expects national dwelling investment spending will fall in every year to 2024-25. This will see the existing housing supply gap grow by an additional 106,400 homes by 2027. In the context of population growth, what this means is the Housing Accord’s target of 1 million new homes will be too small to fill the gap, even if it can be built within the expected timeframe.
“The magnitude, duration and complexity of this national housing supply gap and our subsequent affordability challenge requires a bold multi-faceted response. As recognised by the Government’s Housing Accord, all levels of government, industry and community groups will need to lean in to help solve this problem,” she said.
Ms Toth acknowledged the Budget measures announced last night complemented the housing supply initiatives announced in 2022 as part of the National Housing Accord and Housing Affordability Future Fund which are yet to pass the Senate.
“We urge the Senate to pass this Bill so that this urgently needed federal funding can begin to flow into affordable housing as soon as possible, as the supply gap continues to widen,” Ms Toth added.
PEXA will unpack the complex outlook for Australia’s housing markets at its second annual Federal Budget debrief breakfast in Melbourne this week, bringing together key government, commercial, academic and not-for-profit stakeholders and panellists NAB Chief Economist Alan Oster and Grattan Institute Chief Executive Officer Danielle Wood.
In addition, PEXA, together with LongView, will examine solutions following the release of its third and final housing affordability Whitepaper next week. Visit PEXA’s first Whitepaper release and second Whitepaper release for more information.
Key housing policy measures announced in this years’ Budget, included:
Over 1 million Commonwealth Rent Assistance recipients to benefit from a 15% increase in the maximum rental assistance payable, lifting their maximum payment by around $31 per fortnight. “While this is the largest Rent Assistance increase in 30 years, according to the Domain Rent Report it will not cover advertised rent increases that have averaged 13% nationally for capital city houses and 22% for capital city units over the year to March 2023,” Ms Toth said.
Changes to the eligibility criteria for the First Home Buyer Guarantee (FHBG) will mean up to 50,000 home buyers can now be supported by the FHBG program annually, which has been extended to include a greater range of household and family members, as well as all permanent residents and former homeowners who have not owned a home for at least 10 years.
Ms Toth said, “While this broadens the diversity of participation and possibly improve the uptake rate, which has been relatively low in previous years. This program provides a guarantee rather than a grant. It assists low-deposit buyers by avoiding the additional cost of mortgage insurance, but it does not reduce their total loan liability or their total home purchase price.”
Around 7,000 new social and community housing project dwellings will be enabled by lifting the NHFIC’s liability cap by $2 billion, from $5.5 billion to $7.5 billion, from 1 July 2023.
An additional $67.5 million to boost homelessness services through the National Housing and Homelessness Agreement in 2023-24. Ms Toth said, “Given the current Agreement provides over $1.6 billion annually to states and territories, this single-year boost amounts to a nominal increase of 4.2%, against a background inflation rate of around 7%,” she said.
Up to 150,000 rental dwellings to be added over the next decade as a result of tax tweaks to support build-to-rent (BTR) projects, according to the Property Council of Australia. “For eligible BTR projects, the annual depreciation rate will be increased from 2.5% to 4% per year and the withholding tax rate for foreign investors in managed investment trusts will drop from 30% to 15%. These two tax changes are estimated to be worth a total of $30m, suggesting the government is not expecting a large take-up given the relatively low implementation cost,” Ms Toth said.
PEXA (Property Exchange Australia) is Australia’s online property exchange network. It assists members – such as lawyers, conveyancers and financial institutions – to lodge documents with Land Registries and complete financial settlements electronically. Since 2014, more than 13 million transactions have occurred via PEXA, and today, more than 85% per cent of all property transfer settlements in Australia are processed on the PEXA platform. As of June 2022, 98% of Australian housing loan refinances nationally were completed via PEXA Exchange.
For more information, please read our federal budget breakdown or contact:
Danielle Tricarico – Senior Corporate Affairs Manager, PEXA
M: 0403 688 980