[+] Federal Budget 2023: The Verdict

“Reviewing the budget ... growing our national skills base to keep the economy firing, tick ... build-to-rent housing, tick ... cities policy, tick ... energy efficiency incentives, tick ... investment in housing, question mark. ” Federal treasurer Jim Chalmers has delivered Australia’s first budget in surplus—$4.2 billion—in 15 years, buoyed by high employment and rising global commodity prices. But how does it sit with the property sector? Property Council Australia chief executive Mike Zorbas spoke for many when he said he wanted to see more to address the housing affordability issues and the current construction crisis. It is a Budget with much to interest our sector. Here, The Urban Developer has compiled a list of the key policies and funding initiatives in it, and expert opinions what’s been announced. Cost of living and the environment The Budget took on two bird with one stone, announcing $1.3 billion in energy efficiency upgrades plus $3 billion in energy bill relief for households as it aims to alleviate the cost of living and slow climate change. “Billions in direct energy bill relief will ease the cost-of-living crisis in the short-term,” Green Building Council Australia chief executive Davina Rooney says. Keen on becoming a green energy superpower, the Australian government has allocated more than $4 billion to fund green industries, manufacturing and renewable energy projects. A Net Zero Authority will also be established with $83.2 million to help workers transition into less emissions-intensive industries but also to support investors to make net zero changes . ▲ The GPT Group is one of many looking to achieve net zero carbon emissions across its office portfolio. Green bonds were also announced as an initiative to help people invest in public projects with positive environmental outcomes. “Demand for green finance is growing rapidly,” Rooney says. “These measures will help to establish a common language for sustainable finance and make it easier for investors to back climate-ready buildings.” A Clean Energy Finance Corporation will have $1 billion to provide low-cost financing and mortgages for homeowners upgrading to cleaner energy and $300 million will cover clean energy upgrades to social housing. “We have spent 20 years championing a greener, healthier, more resilient built environment—and this is the response we have been waiting for,” Rooney says. Also in the Budget is an increase in Jobseeker payments and in support for single parents, changes to Medicare, and $2 billion for the hydrogen energy industry. AMP chief economist Shane Oliver and deputy chief economist Diana Mousina agree some measures were useful. “The Budget has a lot to commend it: the cost-of-living measures will help ease pressure on the most vulnerable and some will lower measured inflation,” the pair said in a statement. “The budget is now back in surplus for this financial year [and] by “saving” the bulk of the revenue upgrade, budget deficits are lower and this cuts interest costs. “The government has slowed structural spending growth and raised extra revenue, and there is still scope for revenue surprise with commodity price assumptions.” Skilled workers A new program will invest $8.6 million over four years to ensure that every 10th worker on major Australian government projects will be an apprentice, trainee or cadet. Projects will need more than $10 million in funding to qualify for the program that begins on July 1, 2024. ▲ Federal Treasurer Jim Chalmers has delivered a Budget in surplus. A National Construction Industry Forum will also be set up at a cost of $4.4 million over four years so that industry stakeholders can access and advise the government. New non-financial support for apprentices from July 1, 2024 is also on the cards with $54.3 million in funding. RSM Australia’s national property leader Adam Crowley says more could have been included. “An RSM Australia survey of 40 leading property builders, developers and investors last month identified a range of measures the industry wanted included in the Budget,” Crowley says. “Measures suggested included government contracts incorporating rise and fall mechanisms as well as more reasonable risk allocations. “Also suggested was banks working with developers to help improve housing supply, continued investment in rural infrastructure, and skilled migration visas specific to construction for both blue collar and white collar roles. “These issues all could have been better addressed in the Budget.” Housing Housing affordability and supply are, naturally, key concerns for the property industry. As announced before the Budget was handed down Tuesday, Homebuyer Grant Schemes have been extended to friends, siblings or family members and permanent residents, meaning prospective buyers can pool their resources in the quest to own their own home. As well, state affordable housing services will access $187.5 million through a National Partnerships Program while Commonwealth rent assistance was boosted and $67.5 million was provided to the states to assist with homelessness. Amber Property Group chief operations officer Jevan Clay says fixing the housing supply is key. “I think we’ve had the fastest growing rents in the history of Australia over the last year,” Clay says. “So to me that just screams a need for more supply.” The National Housing Finance and Investment Corporation will use $2 billion to deliver social and affordable rental housing. Each state will need a minimum of 1200 new homes within the next five years. HIA’s deputy managing director for industry Jocelyn Martin says more housing was needed. “Social and affordable housing has suffered from prolonged under-investment,” Martin says. Zorbas and Martin both want the Future Fund Bill passed. “The Senate should strongly consider passing the government’s Housing Australia Future Fund this week to end current delays in delivering 40,000 new social and affordable homes across the nation,” Zorbas says. Slashing the MIT withholding tax rate for build-to-rent projects is also expected to deliver more homes. ▲ A render of the Hines build-to-rent project at North Melbourne. “Build-to-rent housing, like purpose-built student accommodation and retirement living, is an important part of the national housing equation and provides tenants with long-term security of tenure, superior amenities, and professionally managed properties,” Zorbas says. Oliver and Mousina say the outlook for house prices remained the same . “The housing measures are unlikely to alter the property price outlook which is dominated by supply shortages and surging immigration versus the impact of rate hikes,” they say. “We see roughly flat home prices this year.” “Housing affordability challenges facing Australian households can only be addressed if the supply of housing can align with demand,” Martin says. “Australia needs 1.66 million additional houses by 2030, just to keep up with the demand from population growth.” Migration Zorbas says the Budget should have addressed migration more rigorously. “Skilled migrants have been central to Australia’s economic success story for generations, filling critical job vacancies in important sectors, and making valuable contributions both economically and socially,” Zorbas says. Net overseas migration is forecast to be 1.5 million people over the next four years. Infrastructure The Budget confirmed a raft of infrastructure funding for the states and territories. Among the measures is the Major Projects Business Case Fund of $200 million to help analyse feasibility for strategically significant projects. The National Urban Policy will use $159.7 million to upgrade existing suburbs through precinct level projects to help with housing affordability. “We are particularly pleased to see nearly $160 million over four years to establish the Urban Precincts and Partnerships Program,” the Green Building Council’s Rooney says. “This collaborative approach will help communities identify and respond to place-based priorities.” A new Cities and Suburbs Unit will will be funded to the tune of $211.7 million to create new community and economic infrastructure in suburbs. Meanwhile, $3.4 billion will be set aside for venue infrastructure for the Brisbane 2032 Olympics over 10 years. Queensland will also get $230 million for the Central Queensland University campus in Cairns’ CBD and the Cairns Marine Precinct expansion. ▲ A render of Amber Property Group’s Cunningham Place project in Geelong. Still in Queensland, the South-East Queensland City Deal will invest $390.7 million in the Kangaroo Point Green Bridge construction and other initiatives. Hinkler will get $7.5 million in a Regional Deal with $7.7 million more for the Port of Bundaberg. Townsville’s City Deal will get $192.5 million in a Port of Townsville channel upgrade. Tasmania will get $305 million, including $204 million for Hobart’s Macquarie Point precinct and $65 million for Launceston’s stadium works. The Apple Isle also gets a $39.1-million Launceston City Deal to improve liveability and the Tamar River’s health. Western Sydney is another winner with a City Deal for transport infrastructure ($1.03 billion) and $23.1 million for community facilities and amenities. Projects for the borderlands of Albury-Wodonga get $58 million for New South Wales-based and $23.1 million for Victoria-based projects. In Victoria, Geelong is in focus with a $156-million City Deal covering the Shipwreck Coast masterplan, the Great Ocean Road project and city centre projects. Adelaide will get $133.2 million for projects including a new innovation and cultural precinct. And in the west, the $244.5-million Perth City Deal includes the Edith Cowan University CBD campus and other projects. ▲ A render of the Edith Cowan University vertical campus in the CBD. The Northern Territory’s $21.7-million Barkley Regional Deal includes a Tennant Creek boarding facility. A National Reconstruction Fund Corporation costing $61.4 million over four years will partner with the private sector to provide loans and financing through a $15-billion fund. This will fund projects in several sectors including transport, renewables and low emission technology, value adding projects in resources, agriculture, fishing and forestry, medical science and defence. Key concerns However, many we spoke to wanted the Budget to go further. Zorbas zeroed in on the Thin Capitalisation Legislation. “The unintended consequences of changes to the ‘thin capitalisation’ investment rules risk undoing the good work that the Treasurer and Housing Minister are seeking to deliver on housing,” Zorbas says. “That includes hampering the emerging build-to-rent asset class, which is necessarily reliant on capital partnering and third-party construction financing.” Zorbas also wants the build-to-rent tax rate concession extended beyond data centres and warehouses as announced to other alternative real estate asset classes that are becoming more institutionalised and widely held. Oliver and Mousina, however, are concerned that productivity is decreasing. “There is not much new here to turn around Australia’s deteriorating productivity performance,” AMP’s Oliver and Mousina say in their report. “This is the key to growth in living standards but needs urgent reform in terms of tax reform, competition, the non-market services sector, industrial relations, education and training and energy generation.” Clay says though not a budgetary concern, planning reform was now important. “It’s more just looking at how we can make that process faster so that we can get more projects finished quicker and then bring more supply into the market to help the housing crisis,” he said. You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

[+] Federal Budget 2023: The Verdict

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