If you have even a fleeting industry in the property market, in fact in the economy as a whole, you’ll know that we have a housing crisis in Australia. Overseas migration resulted in a net annual gain of 518,000 people last year, and building approvals are at record lows (Only 2436 dwellings were approved for the whole of Queensland in March 2024).
The result is there aren’t enough houses to go around. This has contributed to a nationwide rental crisis, which has pushed more people into the property-purchasing market. The excess demand has led to solid market growth, which of course has come with its housing affordability critics.
All-in-all, it paved the way for housing to be a hot topic in this year’s Federal Budget, which has just been released.
So, what measures did the budget implement to try and overcome the housing challenges it’s facing? Let’s take a look at some of them.
Build More Houses
To counter the supply deficit, the government is committing to building more houses and creating a more favourable environment for construction. A total of $ 6.2 billion was allocated to new housing in the budget, with the goal being to build 1.2 million homes over the next five years. The aim here is to unlock more affordable housing and help first homeowners and low-income earners to get into the property market.
Boost Housing Infrastructure
For new houses to be built, there needs to be the infrastructure in place to service them. We’re talking about roads, power, water, sewerage and so on. The government has catered for this in the 2024 budget by providing an additional $1-billion, on top of $500-million already pledged, to states and territories through the Housing Support Program. This allocation is purely for housing infrastructure development.
Addressing Skills Shortages
The construction sector has been going through a difficult time, with raw material costs skyrocketing and building approvals way down. Whether as a direct or indirect result, there’s also been a massive skills shortage in the industry. The government is hoping to address that by providing $88.8 million to fund 20,000 fee-free TAFE places. They’re also fast-tracking 1,900 skilled visas to help construction professionals migrate here and give the home building increase a kickstart. We’ll touch on this again further down.
Improve Borrowing Power
Inflation has become a massive concern for people all across Australia, with prices going up alongside mortgage interest rates. Wages haven’t kept pace, which has resulted in less borrowing power for potential homeowners or investors.
Tax cuts in the 2024 budget should improve the borrowing power of the typical homebuyer by tens of thousands of dollars. Designed to improve the cost of living, the tax cuts should shave thousands off our tax bills every year. When it comes to borrowing power, let’s put it into context: a homebuyer who earns $100,000 per annum should see their borrowing power increase by $25,000. This is more likely to assist those buying homes at the more affordable end of the market.
Our Thoughts?
Our main concern with the above proposals is the construction industry has currently come to a bottleneck with approvals, material costs and labour. It’s all fine and dandy to commit to building 1.2 million homes over the next five years, but given how the sector is currently stretched it seems like a big ask. We’ll wait and see to how this will pan out.
The nation will no doubt be grateful for the tax cuts, which will positively affect borrowing power, particularly for low-to-mid-income earners trying for their first home. If the houses aren’t there to buy then this could possibly just increase demand on what is available, thereby driving prices up.
The housing issue in Australia can’t be solved overnight, and the budget isn’t some sort of silver bullet that will fix everything. There are some positive signs in the measures we’ve mentioned above, but we can’t expect wholesale shifts in the market as a result.
If you have any questions or would like to chat, Henry is always available. Get in touch now on 0412 471 588 for a chat.
