The 2021 federal budget: affordability, tax reform, foreign investment as the top real estate agenda

For first-time home buyers, abolishing stamp duty and attracting foreign investors to return to Australia, mortgage loans should be taxed.

The powerful real estate lobby in the United States released an unusual wish list ahead of this year’s federal budget.

But they believe that bold moves may solve the housing affordability problem and exacerbate the country’s economy.

Finance Minister Josh Frydenberg will distribute the government’s future fiscal plan at 7.30 pm on May 11 as the country will take further steps to recover from COVID-19.

Due to the pandemic, Victoria’s home prices fell for six consecutive months before last year’s budget, which was presented in October instead of May.

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Melbourne was the hardest hit in all capital cities. One month before the budget was released, Melbourne’s house prices fell by 0.9%.

But in March, Tim Lawless, head of research at CoreLogic Tell the Herald Sun The city’s market has recovered from the 5.6% decline in housing prices it suffered during the pandemic.

According to CoreLogic’s Hedonic House Value Index, the median price of houses and apartments in Melbourne is currently $744,679, compared to $457,194 in Victoria.

Mr. Lawless said there are now concerns that the country’s rapidly rising real estate prices have made affordability an issue.

The Housing Industry Association stated in a document submitted before the budget that the federal government’s stimulus measures (such as the $2.5 billion HomeBuilder program) have supported the industry by ensuring that projects are still ongoing.

But it said that more action is needed to solve the housing affordability problem.

HIA advocates the expansion of the first-time home loan deposit scheme, the Real Estate Council called for a solution to the social housing shortage, and the Real Estate Association of Australia called for “fairer” tax incentives to help first-time home buyers.

This is why each should be part of this year’s budget:

First Home Loan Deposit Plan (FHLD)

It was first announced before the federal government’s 2019 budget that according to the FHLD program, the government guarantees up to 15% of housing loans, so first-time home buyers only need a 5% deposit.

The pilot program was originally designed to benefit the planned 10,000 Australians every year, who plan to build new homes or purchase existing homes, and set a value cap of A$600,000 for property purchases in Victoria.

An additional 10,000 places were added in July last year, but only for people who build new houses-although the price ceiling has been raised to $850,000.

HIA wants to ensure that the temporary plan is made permanent, and hopes to completely cancel or “significantly” increase the annual limit of 10,000.

Both they and REIA called for the program to be expanded again this year, providing access to the program for “any number” of more than 10,000 people.

It also said that buyers should be allowed to purchase already built homes, because usually only 10% of first-time home buyers choose to build new homes.

Public housing

Industry organizations say that in addition to providing much-needed housing support for low-income disadvantaged Australians, the promotion of social housing construction will also support employment and help the economy.

Anglicare Australia’s rental affordability report released last month showed the number of low-cost housing suitable for people with tight budgets in the past year.

The data shows that out of 74,000 rental houses in Australia, only 386 houses were surveyed, which is affordable for a pensioner.

Disabled supporters can afford only £236, JobSeekers pay only three prices, and youth subsidies have no ability to pay.

The Real Estate Council pointed out that Australia’s real estate industry, at A$234.7 billion, is “Australia’s largest industry, accounting for 12.8% of Australia’s economic activity”.

It paid a total of $106.1 billion in taxes to governments at all levels, and it is believed that a quarter of the people get their salaries from the industry.

The Property Council recommends bringing together community housing providers, development agencies, investors, state governments, and the Federal Ministry of Finance to find a way to incentivize the private sector to build affordable housing.

HIA hopes that the government will develop a funding plan to provide long-term social security housing to increase the stock.

It suggested that a “land rent” scheme could also be adopted to make surplus government land available for social and community housing projects.

Immigration and population growth

According to HIA, the interruption of immigration and the decline in population growth will severely affect housing demand.

The agency predicts that residential activity will drop significantly next year, but because it is uncertain when the immigrants will return, it is uncertain how long this will last.

Therefore, the HIA requires the government to outline ways to resume immigration and recommends that the current limit of 160,000 immigration per year be lifted.

It stated that priority should be given to skilled workers and students in the short term.

The Property Commission believes that COVID safe immigration can “accelerate Australia’s economic recovery.”

It said: “One of the country’s most important policy challenges in the next six months is to expand our COVID-safe international borders and isolation arrangements to support economic growth.”

“(It is becoming increasingly clear that Australia may still need to strengthen border arrangements until 2022 and beyond… As students and high-value workers choose other countries, Australia may also lose out among competitors.”

Australians stranded overseas will remain a priority, but it also hopes to build more tourism bubbles with COVID-protected countries, prioritizing the migration of skilled workers, expanding state and territorial quarantine procedures, and rapid pre-approval test.

The government should also work with universities to enable international students to return to Australia in the second semester of this year.

Tax Reform

REIA Chairman Adrian Kelly said in his budget report that the virus was “discovered and managed” in Australia, and it’s time to examine key issues that are vital to the country’s 10-year plan.

He said: “Since the beginning of the pandemic, housing prices and affordability have been absolute flashpoint issues.”

“Due to the fierce competition in the housing market, it is time to increase our efforts.”

These measures include making property tax incentives more equitable and allowing first-time home buyers’ interest rates to be tax-deductible up to a certain limit.

REIA estimates that this will save first-time home buyers about $4,000 per year.

It also said that first-time home buyers should be able to receive voluntary pension contributions and income.

HIA hopes to completely abolish stamp duty.

It said in the budget that the tax “falls in a small group of households” that move for various reasons, thereby generating revenue for the government.

People move for employment, education, health or economic reasons, and taxation may become an obstacle to people wishing to move because it adds additional costs.

It stated: “HIA supports broad-based taxation that collects sufficient revenue to provide necessary government services from the community, rather than just targeting minority groups.”

Foreign investment

Funds are needed to build houses, shopping centers, offices, hotels and retirement villages.

Given that Australia is “very dependent” on domestic and overseas wholesale capital to build this infrastructure, the Real Estate Council stated that regulatory changes need to be made at the state and federal levels to make it easier for local and foreign companies to invest.

It also hopes to make changes to the rules of the Foreign Investment Review Board, which say these rules create stricter thresholds, higher transaction costs and longer approval times.

It said: “Considered, these drawbacks have affected the relative attractiveness of investing in Australia by creating uncertainty, increasing costs and red tape.”

It also called for no new taxation or investment regulatory barriers, to ensure that Australia will have a competitive foreign investment framework, increase the speed and efficiency of FIRB processing time, and reduce FIRB’s “inhibitory” fees.

HIA hopes to exempt the federal government from the federal vacancy fee. If the house is unoccupied or leased for more than six months, the owner of the foreign resident’s Australian residence should pay the fee while the border is still closed.

It also hopes that the government will exempt foreign investors from surcharges for purchasing residential properties.

—With Nathan Mawby

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