Rightsizing incentives top real estate brands’ budget wishlists

The brand’s head of research, Matthew Tiller, noted the fact that property prices have continued to rise over the 15 months of interest rate increases, showing that demand among buyers is still trumping inflationary pressures.

“The upcoming federal budget presents an opportunity to tackle the imbalance of demand and supply that is behind the surge in dwelling prices and rents. The turnover of the existing housing stock has continued to decline over the past 12 months as individuals carefully weigh the costs associated with moving versus remaining in their home,” Tiller said.

According to CoreLogic, the overall number of listings has fallen by around 5 per cent compared to last year. In certain particularly tight markets like Adelaide, Perth, and Darwin, total listings are more than 20 per cent lower year-over-year.

LJ Hooker is advocating for two policy levers to be pulled to make it easier for Australians at or nearing retirement age to make a move, if they wish, without financial factors serving as a deterrent.

The network is calling for an extension of the exemption of home sale proceeds from pension asset testing from 12 months to 24 months to provide pensioners with more time to transition into their next home without affecting their pension.

Furthermore, LJ Hooker would like to see the eligibility downsizer contributions to superannuation broadened. The minimum age requirement that allows individuals to make a one-time, post-tax super contribution of up to $300,000 per person from the proceeds of selling their home currently stands at 60. The firm is pushing for an additional five years, lowering the threshold to 55.

“By expanding these measures, the government can encourage more home owners to downsize, thereby freeing up housing stock and promoting better housing outcomes for all,” the firm stressed.

Meanwhile, Angus Raine, executive chairman of Raine & Horne, is also asking the government to review its policies related to retirees and property ahead of the budget, but the executive feels that incentivising the sale of investment properties should also be in focus.

Raine has called for raising the annual maximum on non-concessional superannuation contributions as well as balance transfer caps.

“Australia is in the grip of a housing crisis. The Commonwealth and state/territory governments have agreed that 1.2 million new, well‑located homes are required over five years from mid‑2024. However, there are few incentives for retirees to sell their existing investment properties and transfer the sale proceeds into the lightly-taxed superannuation environment,” Raine said.

Drawing parallels with the Howard government’s superannuation changes in 2007, Raine explained how this policy can have a significant impact on the property market.

Under the changes introduced in the 2007 budget, investors were limited to making after-tax super contributions of $150,000 a year, or $450,000 averaged over three years. Transitional rules, however, allowed contributions of up to $1 million between 10 May 2006 and 30 June 2007.

“Property listings skyrocketed as investors cashed in their property assets and pumped the funds into superannuation to take advantage of the tax changes,” Raine said.

Currently, the annual caps for non-concessional contributions stand at $110,000 and will rise to $120,000 from 1 July 2024.

Together, a couple would be able to add an extra $240,000 to their super if they sold an investment property in July or beyond, a sum that Raine described as “insufficient when you consider that the median house prices are $1.421 million in Sydney, $972,000 in Canberra, $942,000 in Melbourne, and $920,000 in Brisbane”.

Moreover, he called the balance transfer caps a “bigger issue”.

Currently, the total amount of superannuation that can be transferred from the accumulation phase into the retirement phase after age 60 from a purchased retirement income stream stands at $1.9 million.

“In cities such as Sydney and Melbourne, long-term property investors are likely to have made a substantial capital gain from their rental property. This could see many investors breach the balance transfer caps if they want to transfer sale proceeds of a property investment into super,” Raine said.

He said that taken with the non-concessional contribution limit, these transfer caps act as a “real disincentive for retirees to sell a rental property and deposit the proceeds into super”.

“The government needs to consider increasing this cap significantly in next week’s budget as a way of flushing out assets held by older investors to help address housing shortfalls,” Raine said.