Construction boost, but little else for property in 2020 budget

Developers, builders and property investors will likely lean on state governments for support, after Treasurer Josh Frydenberg’s 2020-21 budget provided a boost for housing construction, but little other specific stimulus for the property sector.

Mr Frydenberg said the 2020-21 budget was “all about jobs”, unveiling a range of measures to help guide the nation’s economy out of its COVID-induced recession.

To help maintain employment in housing construction, the Treasurer confirmed an extension to the government’s First Home Loan Deposit Scheme, a move that was roundly welcomed by property industry stakeholders.

As widely reported in the weeks leading up to the budget, the federal government will provide an additional 10,000 places in the FHLDS, which is designed to smooth first home buyers' entry to the property market.

The scheme allows people to buy homes with a deposit of just 5 per cent, with the government guaranteeing the loans up to certain price thresholds depending on the city or state in which the property is located.

Initially limited to 10,000 participants in each financial year, the extension adds a further 10,000 places from October 6, with the places are restricted to owner-occupier borrowers who build new dwellings.

Ray White Group managing director Dan White said increased price caps under the amended FHLDS would help boost apartment sales as well as detached housing.

“Unlike the established market, apartment sales have been difficult this year, so this is a very welcome boost for this sector,” Mr White said.

“It will give first home owners a much better opportunity to get into new property which often focuses on inner city areas at affordable prices, appealing to a younger demographic.”

The $680 million HomeBuilder scheme, which provided $25,000 grants to people who build a new home or undertake a substantial renovation, was not extended. 

Property Investment Professionals of Australia chairman Peter Koulizos said it would have been helpful if the HomeBuilder program was extended past its December expiration date.

“The HomeBuilder scheme did a lot of the heavy lifting for the property and construction sectors this year, so it would have been great to see the program run for longer than just six months to further underpin employment,” Mr Koulizos said.

CBRE head of research Bradley Speers said the goal of the housing stimulus was to support the return of first home buyers to property markets across Australia. 

“First home buyers have returned to the market in droves this year,” Mr Speers said.

“Further support will provide demand that will support dwelling prices and contribute to averting a price crash.”

The construction sector was also supported by a $1.2 billion boost to the Supporting Apprentices and Trainees wage subsidy, prompting applause from the Housing Industry Association,

“Tonight’s budget has given both first home buyers and more than one million workers in the residential building industry the incentive and confidence needed to continue to navigate through these challenging times,” HIA managing director Graham Wolfe said.

“The measures announced will deliver a pipeline of building work and most importantly help more people access a home of their own,” HIA managing director Graham Wolfe said.

However, outside of tax cuts that will potentially benefit all sectors of the economy, there was little else for real estate agents or property investors to cheer about in the pandemic- affected budget.

In total, the budget will deliver an additional $17.8 billion in personal income tax relief, with $12.5 billion to come over the next 12 months as the government brings forward its planned tax reforms by two years.

Tax thresholds have been lifted, with the biggest cuts going to low and middle income earners.

The government estimates that 11.6 million individuals will pay less tax in 2020-21 as compared to 2017-18.

Real Estate Institute of Australia president Adrian Kelly described the tax cuts as solid support for both real estate agencies and property buyers.

"Bringing forward and backdating the Stage 2 tax cuts will improve borrowing capacity and housing affordability,” Mr Kelly said.

"This comes at a time when the outlook for interest rates will remain low until at least 2023."

But Mr Kelly also described the budget as an lost opportunity to help more Australians buy property.

"The First Home Buyer Deposit Scheme should be extended to all eligible buyers of all homes, not just new builds,” he said.

“This will be a priority for REIA moving into 2021." 

The Australian Institute of Architects also raised concern over the dwindling pipeline of new construction projects, with the stimulus measures unlikely to move the needle significantly for property developers.

AIA chief executive Julia Cambage said analysis of the impacts of the pandemic on future construction projects indicated a dramatic and widespread stalling and slowdown of work.

In July, a survey of the institute’s members revealed nearly 65 per cent had projects stalled as a result of COVID-19, with projects valued between $1 million and $5 million the most acutely affected. 

“The 2020 Federal Budget is very much one of housing hits and misses,” Ms Cambage said.

“While we welcome a number of measures such as more funding for Indigenous Home Ownership, an extension of support for first home owners and an increase in the debt ceiling for the Affordable Housing Bond Aggregator, they are not enough to stave off the looming downturn in construction activity.

“Only $0.6 million over four years from 2020-21 has been allocated to boost housing demand and support the residential construction industry in the face of plummeting activity levels.

“If this Budget is all about jobs, it is hard to fathom why major stimulus opportunities such as more significant direct social housing investment and support for social infrastructure projects were overlooked, especially when they have such wide-ranging support from a majority of leading economists to community organisations.”