Industry leaders give the low-down on Tuesday’s ‘Goldilocks Budget’

And, while the budget lacked the housing focus of the October mini-budget, which proposed the National Housing Accord among other supply-related schemes, it still contained several initiatives aimed at supporting the Australian housing market. 

Hayden Groves, president of the Real Estate Institute of Australia (REIA) — who labelled it a “goldilocks budget” — Mike Zorbas, chief executive at the Property Council of Australia (PCA), and Eleanor Creagh, senior economist at PropTrack, were unanimous in their support of the government’s decision to lift the rate of Commonwealth Rent Assistance (CRA) by 15 per cent.

Mr Groves applauded the decision, which he believes will assist Australians who “need it most to navigate this cost-of-living crisis, which will help alleviate the pressures on a touted 1.1 million Australians.” 

Amounting to $31 a fortnight for private market and community renters, the CRA increase is the largest in 30 years, though Ms Creagh noted this lift is exacerbated by the fact that “rent assistance payments have long fallen behind soaring rental prices.”

As a result, CoreLogic Australia head of research, Eliza Owen, believes “low-income households in the private rental market will be disappointed.”

“Even for those who qualify for CRA, the increase in payments is modest relative to the broader increase in rents across the market,” Ms Owen said.

Adding to this, Ms Creagh noted advertised rents in Australia’s capital cities have climbed 13 per cent in the 12 months to May, a statement ratified recently by CoreLogic, which explained this surge has been driven by increasing international migration and a shortfall of rental listings. 

“Pegging payments to adjust in line with subsequent market rental price increases in the future, or a regular review schedule to ensure that assistance payments keep pace with surging rents, could have been a welcome step further,” Ms Creagh explained. 

Building on this, Ms Owen stated further review of the CRA would be “worthwhile to understand how it could be better expanded and targeted.” 

Ms Creagh stressed more needed to be done to increase supply to ensure enough property exists to match rental demand, otherwise weekly rents will continue surging. 

She explained that the “only sustainable solution to the rental crisis is increasing rental supply.”

On the supply front, many stakeholders were underwhelmed by the budget’s lack of supply-boosting schemes, even though Mr Chalmers acknowledged that “an essential part of the solution to the pressures in the housing market is more homes.”

Ms Creagh stated the best long-term solution for the rental market, and wider housing sector, is to “provide more dwellings,” though she conceded that “this takes time.” 

With this in mind, the Albanese government announced several schemes targeted at boosting the nation’s build-to-rent (BTR) sector, notably halving the managed trust withholding tax from 30 per cent to 15 per cent. 

This initiative aims to build on the October mini-budget’s National Housing Accord, which promised one million new, well-located homes in the five years from 2024 by incentivising the increase of rental housing through the reduction of barriers to entry and tax disincentives for large scale investment via the BTR sector.

At a time when property supply shortfalls have been further illuminated, notably by the National Housing Finance and Investment Corporation (NHFIC), which identified a housing shortfall of more than 100,000 homes over the next five years, this targeted action has been welcomed.

Despite noting that “encouraging increased investment and construction of BTR projects won’t help with the current pressures and low supply of rentals,” Ms Creagh explained advancing the sector could “help increase rental supply in the long term.”

Mr Zorbas believes that with the budget forecasting net overseas migration over the next five years could amount to nearly 1.5 million people, the government’s decision to “level the tax playing field for BTR projects is a significant one, unlocking up to 150,000 new homes.” 

BTR projects, he believes, “provide tenants with long-term security of tenure, superior amenities, and professionally managed properties,” making them an integral part of the national housing equation.

And yet, for Ms Creagh, the government’s budget BTR announcements failed to completely move the needle, especially when considering 150,000 additional rental properties would amount to an approximately 6 per cent increase to Australia’s current rental stock over the next decade.

Add to this an ever-increasing population, with an influx of 650,000 migrants over the course of the current financial year and 2024–25, and Ms Creagh explained “150,000 new rentals will cover just 9.6 per cent of the forecast increase in the number of households.”

Mr Groves added the changes tax rule changes to the “niche” BTR sector, alongside the Home Guarantee Scheme rule changes, recommitment to the Housing Accord, and an extra $2 billion for the NHFIC mandate, are all welcome, but insisted they “will not in themselves address the elephant in the room which is building more homes for Australians.” 

He confirmed the REIA’s hopes for the “long-awaited” National Plan for Housing and Homelessness “puts all options on the table to truly unlock housing supply.”

The budget contained an additional $67.5 million in funding through the 2023–24 financial year for the National Housing and Homelessness Agreement Transitional Funding, with the aim of boosting homeless funding to states and territories. 

Ms Owen believes the expansion of the National Home Guarantee Scheme, previously reported on by REB, will make these policies fairer, without increasing their effectiveness, and while Ms Creagh added that the increased funding will provide stability and security for those who need it, she conceded “it is an expensive solution.”

“The additional billions are expected to support around 7,000 more new social and affordable dwellings, a step in the right direction, but the impending increases the rental assistance will be a better targeted measure,” Ms Creagh added.

Other housing-related initiatives included in the federal budget include up to $3 billion in direct energy bill relief for eligible households and small businesses, which will be co-funded by the states, while a $1 billion investment to help provide “low-cost loans for double-glazing, solar panels, and other improvements that will make homes easier — and cheaper — to keep cool and warm” were also stipulated in the budget. 

Mr Groves welcomed these actions but noted that expansion of the Nationwide Housing Energy Rating Scheme to existing homes requires “far more legwork than $36.7 million is likely to deliver in our collective quest to achieve sustainable real estate.” 

“Reviewing the budget: growing our national skills base to keep the economy flirting, tick; BTR housing, tick; city policy, tick; energy efficiency incentives, tick. Investment in housing, question mark,” Mr Zorbas concluded.

For more on REB’s coverage of the budget, click here.