The 2021/22 Federal Budget aims to get more people back to work. The main goal of the budget is to support the economy so that Australia is better equipped to face the global challenges brought about by the pandemic. The government has given households and businesses more money and it also plans to spend more on infrastructure. The economic recovery plan depends heavily on how quickly the employment rate grows and whether industries that rely the free flow of international traffic are able to recover. The economic recovery plan has sought to stimulate growth by reducing income tax for low to middle-income earners. Businesses have also received additional incentives. The government has also increased spending on training, increased apprenticeship positions and has provided additional funds for expenditure on aged care, infrastructure and Covid vaccinations.
The budget in a nutshell
- The budget deficit will drop to -$106.6 billion in 2021/22 from the -$161 billion recorded in 2020/21
- An additional $15.2 billion will be spent on infrastructure
- The New Home Guarantee has been extended
- Single parents buying properties can benefit from the Family Home Guarantee
- The contribution for the First Home Saver Scheme has increased
- Income tax cuts of $7.8 billion have come about as the Low- and Middle-Income Tax Offset has been extended.
How does this affect property markets in Australia?
Australian property markets have been soaring for some time now. This is a result of several factors;
- Limited housing stock
- Record low interest rates
- Government stimulus packages.
Property values have benefited from these factors and the 2021/22 Federal budget contains measures which will have further positive impacts on the markets for property across Australia. Measures to assist first time buyers and single parents will make it easier for these groups to get into the property market. The First Home Super Saver Scheme and the New Home Guarantee will help people new to the property market to save for a home deposit. The Family Home Guarantee is a new concept. It aims to help single parents with dependents. The scheme’s objective is to help households with single incomes to accumulate a deposit so they can buy a home. One of the biggest problems on the property market across the country is the short supply of stock. The Federal Budget has sought to put in place measures to increase inventory, but the measures may fall short of requirements. The New Home Builder Guarantee and Homebuilder extension may not go far enough in increasing stock. This is because of the number of allocations and the eligibility measures in place. Increased spending on infrastructure, including road and rail projects will help to support regional economies through improved accessibility to smaller towns. This should bolster local property markets. An example of such an investment is the $66 million planned upgrade at the Newcastle airport where the enhanced runway will allow international flights to take off and land. Access to more international visitors should significantly improve the Newcastle and Hunter economies.
Federal budget changes that will have a direct effect on property markets
New Home Guarantee
The government is expanding the New Home Guarantee again this year and will provide another 10,000 positions over the period. The scheme allows people buying a home for the first time to pay a deposit from as little as 5%. To qualify for this, the first home buyer must buy a newly built home or build their own. People who qualify, can use the New Home Guarantee along with the other state grants and government incentives. The expansion of the scheme is to be welcomed as it will help first home buyers to get into the property market. It will also have a positive impact on the construction industry creating much-needed employment.
Family Home Guarantee
This is a new incentive that aims at assisting single parents with dependents to buy or build a home. All the single parent needs, is a deposit of as little as 2%. Ten thousand positions will open over the next four years. Australians who are 18 years of age or older can apply for the scheme. They must have a taxable income of $125,000 per annum or less to qualify. Single parents will welcome this scheme. It will allow many of them to buy a home where previously they may have been unable to afford the deposit.
First Home Super Saver Scheme
The 2017/18 Federal Budget saw the introduction of the first home super saver, the goal of which was to support first home buyers to buy their first home. The scheme enabled participants to save for a deposit for their first home in a superannuation fund. The fund received tax concessions that made it possible for participants to save faster. The 2021/22 budget has increased the upper limit of voluntary contributions to $50,000 from $30,000.
Homebuilder extension
The construction start in Homebuilder program has been extended to 18 months from the original six months. This will help to expand the pipeline for construction of new homes with positive results for the construction employment sector.
Downsizers
With the 2017/18 budget, government introduced a scheme which allowed people of 65 and over to make a one-off contribution to their superannuation of $300,000 (contribution for a couple is twice that) on the sale of their home. This year the Federal Budget reduces the age for eligibility to 60 years.