May 13 2021, by Fleetwood Urban
Federal Budget in Focus
In his 2021-22 Budget speech, Treasurer Josh Frydenberg explained the Federal Government’s HomeBuilder stimulus program had been hugely successful, “…but in this budget, our housing measures go even further”. Here are our five main take-outs…
1. A much-needed deadline extension.
As early as last September, it was clear the HomeBuilder program was exceeding all expectations. With demand so high (Budget Papers show more than 120,000 HomeBuilder grants applications have been received – 4 times original forecasts!) many builders were struggling to meet the tight construction commencement deadlines, leading to cancelled sales or the need to close their books to new customers. To ease this pressure, many in the industry were calling for a 6-month extension to the HomeBuilder construction commencement period. The recent Federal Budget went even further, providing an additional 12-months. Whilst great news for everyone in the industry, it’s worth bearing in mind the extension is for existing HomeBuilder applicants only. New applications closed on 14 April 2021.
2. Strong outlook, with an asterisk.
Despite the wave of construction work being driven by the HomeBuilder program, the 2021-22 Budget Papers also suggest current activity levels will be difficult to sustain without introducing additional measures. The encouraging news here is the Government has shown an appetite to do precisely that, with a raft of additional initiatives on the way (some of which we cover in points 3, 4 and 5). Canberra’s continued focus on a strong, affordable and sustainable housing market is something that gives us confidence moving towards 2022 and beyond.
“The near-term outlook for housing activity has strengthened considerably, supported by an elevated pipeline of construction work and rising house prices. However, the policy-driven strength in demand for detached house construction partly reflects a bring-forward in demand from future years and activity is expected to moderate as the current pipeline of work is completed.”
SOURCE: 2021-22 Budget Strategy & Economic Outlook
3. Deposit relief for first-time home buyers.
The challenge of large deposits continues to be one of the biggest obstacles facing first-time home buyers. To address this, the Government’s existing First Home Loan Deposit Scheme (FHLDS) was bolstered in the Budget with an additional 10,000 places for the 2020-21 financial year, reducing the deposit required for eligible first home builders and buyers of new homes to just 5%. At the same time, a new program was also announced called the Family Home Guarantee. This will allow eligible single parents with dependants to build a new home or purchase an existing home with a deposit of just 2%. 10,000 Family Home Guarantees will be made available over the next four years.
4. Super-charging affordability.
Early access to superannuation is another lever being used by the Government to enhance housing affordability. The First Home Super Saver (FHDSS) Scheme was first introduced in 2017, allowing eligible first home buyers to release voluntary super contributions to put towards their house deposit. The recent Budget announced a much-welcomed increase in the maximum amount of super that can be released under the scheme, from $30,000 to $50,000.
5. Encouraging downsizers, helping upsizers.
On the subject of superannuation, another Budget measure that caught our eye was the lowering of the eligibility age for the existing Downsizer Superannuation Contribution from 65 to 60 years old. Used by over 22,000 people since it was originally launched in July 2018, the scheme allows younger retirees, or people nearing retirement, to make an after-tax super contribution of up to $300,000 each ($600,000 per couple) when selling their family home. It’s an attractive concession, with the aim of freeing up the supply of larger homes for growing Australian families, as older Australians with adult children transition into smaller dwellings. It remains to be seen how effective the changes will be, however some forecasts suggest the incentive could trigger up to $10 billion in additional home sales over the next 12 months.
How do you interpret the housing measures announced in last week’s Federal Budget?
Do they give you more or less confidence? Or is the jury still out?