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The federal Treasurer Jim Chalmers delivered his first Budget Tuesday evening (25 October) and outlined a housing plan that will see one million more affordable homes on the market, by providing incentives for the super industry to invest in residential housing, alongside a focus on health, education, aged care, and defence.
The Treasurer had been painting a fairly grim picture for the economy, in the lead up to the budget, pointing out Australia’s rising inflation, the costs of the flood damage and global uncertainty.
In delivering the Budget Mr Chalmers said it would begin the “hard yards” of Budget repair signaling the deficit for 2022–23 is now forecast to be $36.9 billion, which was an improvement of $41.1 billion.
The big item on housing agenda was the National Housing Accord, that sets an “aspirational target” of one million new, "well-located" homes to be delivered over five years from mid‑2024.
The Accord brings together Federal, state and territory governments, as well as the property industry and institutional investors, to boost housing supply and create more affordable and social housing.
Welcoming the Budget's boost to housing supply, the Master Builders CEO Denita Wawn said the construction industry had been “crying out for action” to address housing affordability barriers and supply constraints.
“As a signatory to the Accord, Master Builders Australia will work constructively with governments and industry to deliver the joint housing target of one million new, well-located homes over five years from 2024,” Ms Wawn said.
The Budget also pledged to remove some red tape to help expedite approvals for social and affordable housing.
Ms Wawn said lengthy delays in approvals for land title, development and building applications, occupation certificates, shortage of land in the right places, high developer charges, and inflexible planning laws, had been a major inhibiting factor in building start delays.
The Australian Bureau of Statistics latest building activity data found that while the number of dwellings under construction bumped up (0.7 per cent) in the June quarter (compared to the previous), this was outweighed by the decrease in building commencements, which fell 2.7 per cent.
Ms Wawn said: “Over the next three years, Master Builders Australia forecasts that new home building starts will fall significantly short of 200,000 per year, the volume of output that will be needed to meet demand. Our forecasts indicate this threshold will not be exceeded until 2026.”
The government's ambitious target of one million homes will build on pre-budget announcements, such as the $10 billion Housing Australia Future Fund (to be managed by the Future Fund Management Agency), which seeks to build 30,000 social and affordable homes over five years.
Weighing in, the Housing Industry Association’s managing director Graham Wolfe said the one million housing target provides a “necessary indicator” to governments at all levels, that priority action is needed “should housing supply fall below 200,000 new homes each year”.
HIA’s forecasts show that this situation is "playing out right now" – with around 196,000 new homes predicted to start in 2022 and 2023, falling to around 185,000 in 2024 and 2025.
“Year on year housing supply shortfalls, as we’ve seen for most of the last two decades, inevitably add pressure to Australia’s housing challenges," Mr Wolfe said.
“For every year that Australia doesn’t deliver enough new homes to meet demand across the housing continuum, we will see a negative impact on both housing affordability and rental affordability.”
Super industry to unlock housing constraints
As the Budget seeks to bring the nation’s biggest superannuation funds, the federal, state and local governments, builders and the community housing sector together to unlock affordable and social housing, Industry Super Australia said it was “excited” to create projects with “good risk adjusted returns”.
Discussions on unlocking institutional investment in affordable and social housing have already begun and Industry SuperFunds can now begin to work with the National Housing Supply and Affordability Council on removing systemic barriers.
Chief executive Bernie Dean said Industry SuperFunds can play a “role in developing housing as an asset class by using their tremendous capacity and long-term approach to investing, diversifying member’s savings”.
“Investment in affordable housing is one of those issues where the financial interests of super fund members and addressing a pressing economic and social need can both be achieved.”
Build-to-rent barriers
Property Council of Australia Chief Executive Ken Morrison commended the Government for its commitment to review the barriers to institutional investment in housing, including Build-To-Rent housing, to be conducted by the soon-to-be-established Housing Supply and Affordability Council.
“If we are serious about providing greater housing choice and affordable options, it is important we have fair tax settings that encourage investment in all types of housing,” Property Council's Mr Morrison said.
“Right now, current tax settings around Build-To-Rent housing are a barrier to investment, and a levelling of the playing field will bring more rental stock online, as noted by the Productivity Commission last month.
“Build-To-Rent housing offers renters greater security in their tenancy, superior facilities and services, and an additional form of housing which Australia sorely needs,” he said.
Rental market misses out
Real Estate Institute of Australia (REIA) President, Hayden Groves, welcomed the “ambitious target” but added “the devil will be in the detail”.
Mr Groves said while the National Accord was a step in the right direction, far more could be done to address affordability.
“Much more detail will be needed especially in relation to the intent to provide opportunities to superannuation funds and build-to-rent developers ahead of Australia’s mum-and-dad investors.
“It is an opportunity lost once and for all to deal with the wicked problem of stamp duty by State and Federal Governments which has been entirely and disappointingly omitted within the National Accord."
Mr Groves added that the Budget would have “no immediate impact on housing and rental affordability”.
Rental prices across the country have skyrocketed on the back of high property prices and supply constraints.
“Since May, repayments on a $500,000 mortgage have increased by almost $700 each month and household saving is forecast to slump below pre-pandemic levels.
“Higher mortgage payments are expected through higher interest rates because of this persistent inflation will impact on both housing and rental affordability.
“Constraints on housing supply, including a backlog of new builds from supply chain pressures, all mean affordability pressures for home buyers and renters are unfortunately likely to continue.”
"Drop in the Ocean": Property Investment Professionals of Australia
The Property Investment Professionals of Australia (PIPA) Chair Nicola McDougall added the one million target was a “drop in the ocean” and said more was needed for investors.
“While the aspirational target of one million new affordable dwellings in the five years from 2024 is to be applauded, it must be noted that the Federal Government’s plan only includes its own commitment to actually construct 40,000 social and affordable houses across the nation – a drop in the ocean compared to what is needed.”
According to the Australian Bureau of Statistics, nearly one million dwellings were reportedly constructed in the five years to March this year.
The 2022 PIPA Annual Investor Sentiment survey found that if the 19 per cent of investors who are considering selling in the next 12 months did so, then another 200,000 rental properties could disappear from the rental market around the nation.
Ms McDougall warned this could fuel more rental stress for tenants.
“It is vital that all stakeholders – including private “mum and dad” investors who provide the vast majority of rental accommodation in this country – are considered in any plan to improve the supply of rental housing in this country.
“That’s because 16.7 per cent have sold at least one dwelling in the past two years, which potentially depleted the supply of rental stock nationally by nearly 270,000 or 10 per cent.
[Related: Budget 2022/23: What you need to know]
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