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First-time home buyers and single parents are the focus of budget housing relief.
Finance Minister Josh Frydenberg has provided much-needed help to first-time home buyers and single parents so that they can buy houses as soon as possible, but there were few major stimulus measures in Tuesday’s budget to encourage much-needed housing supply.
As the severe housing shortage has to some extent led to the increase in real estate prices in most capitals (especially Sydney), the industry has been hoping to replace or expand the expired HomeBuilder program.
On the contrary, no new changes were announced other than a promise to allow those who have already applied for the program to start their project for another 18 months.
Although the treasurer labelled HomeBuilder in his budget speech to provide those home builders with a cash back of $15,000, it was “a huge success.”
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The Australian Bureau of Statistics also reported that since the launch of HomeBuilder last year, housing approvals have increased by 70%.
Otherwise, the budget will not be surprising in terms of housing. Before the release of the budget document on Tuesday, many of Mr. Friedenberg’s budget buyback incentives had been announced.
This includes family housing guarantees that will allow 10,000 single parents with annual incomes of less than $125,000 to purchase properties with deposits as low as 2% (from July 1).
The existing “First Home Loan Deposit” program (renamed “New Housing Guarantee”) will be temporarily expanded by issuing another 10,000 positions.
The program allows first-time buyers of new or under-construction houses to pay only a 5% deposit without the need for expensive mortgage insurance. Limited to 10,000 buyers per year.
The government is also revising the “First Family Super Saver Program” to increase the maximum amount of eligible voluntary contributions from US$30,000 to US$50,000.
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The housing shortage has been one of the reasons why Sydney has attracted as many as 50 bidders this year. Image: Sam Ruttyn
Given that observers are increasingly concerned about the prospect of further stimulus to fuel an already hot market, the budget that prioritizes targeted buyer relief over comprehensive purchase incentives may be welcomed by the real estate industry.
SQM Research director Louis Christopher said that comprehensive purchase incentives (such as unrestricted first-home buyer subsidies) have been pushing up prices, rendering the stimulus ineffective.
He said: “Historically, grants have stimulated the market and caused price increases, offsetting the positive effects quite quickly.”
Christopher said that another large-scale incentive plan currently launched on the market was originally a big risk. He said: “This will bring new dangers to the market, and may form a bubble.”
Some industry observers had hoped to take stimulus measures to stimulate housing supply rather than demand, which they believed would control prices more.
Cate Bakos, chairman of the Australian Association of Real Estate Buyers Agents, said the lack of major buyer incentives would be “a good thing” given the good record of grants raising prices.
She said: “Incentives may hurt the people they want to help.” “If the federal government introduces any larger incentives, it will be a crazy moment.”
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Ms. Backos said that the tailor-made approach to family housing guarantees and the upper limit of available places meant that the plan might not have much impact on raising prices.
Ms. Backos said that the plan, combined with other incentives to waive the state stamp duty, will remove to a certain extent one of the biggest obstacles for home buyers: usually high upfront costs.
Now, the price of a typical Sydney house is about $1.1 million.
She added that compared with previous incentives, the government’s policy of guaranteeing deposits rather than providing direct cash payments seems to be better considered. Ms. Backos said: “I don’t see this kind of artificially exaggerated demand, which has always been a problem with incentives in the past.”
Before the release of the budget document, Tim McKibbin, chief executive of the Real Estate Association of New South Wales, stated that the government’s first priority should be to stimulate housing supply.
He said: “Creating more housing for people should be the top priority.”
The increase in housing supply remains a particularly important issue for the Sydney real estate market-until recently, the number of available houses in Harbour City was still less than in Brisbane, despite the doubling of the population.
According to data from CoreLogic, this is one of the factors that caused real estate prices to rise at the fastest rate in 32 years from March.
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