[+] Property Sector’s Nervous Wait for Federal Budget

Next week’s Federal Budget has the potential to make a difference to the nation’s housing crisis—but if it will, and how, has the sector eyeing Tuesday’s announcement nervously. Treasurer Jim Chalmers is due on May 14 to hand down his third Federal Budget. Australia had a $13.4 billion surplus for 2023-2024 and has saved 95 per cent of that higher-than-expected revenue. Chalmers has also forecasted a $25-billion tax gain over the next five years. Australia’s total debt in 2023-2024 was $904 billion, $152 billion lower than the forecast made before the 2022 election. Meanwhile, Victoria, the state with the most debt, has delivered a Budget that cuts back on infrastructure and does little to ease pressure on the property sector. During the past few weeks, several key policy positions contained in the Federal Budget have been revealed. With a housing-supply crisis and cost-of-living increases, Chalmers has warned that the main focus will be fighting inflation. Here is what we can expect to see when the Budget is unveiled on May 14—and what it will mean for the sector. ▲ Federal Treasurer Jim Chalmers says the Budget will focus on inflation. Infrastructure There is no doubt Australia as a country needs investment in key transport and other infrastructure . As well, greenfield corridors, peri-urban and regional areas need more trunk infrastructure investment before residential development can get under way. Major road and rail projects at state and federal level are also sorely needed to ensure traffic and freight can move around at the speeds necessary in the current economy. Chalmers has already said that there will be funding for growth areas in Western Sydney with about $1.9 billion allocated in the Budget for infrastructure and key freight and traffic routes to the new Western Sydney Airport . The money will spread across 14 projects. “This investment will provide a much-needed boost to jobs and housing supply for Western Sydney,” Urban Taskforce chief executive Tom Forrest says. “It is recognition that the new airport, by itself, is not enough to build a city.” Property Council of Australia Western Sydney regional director Ross Grove agrees. “After three years of industry advocacy, this federal funding changes the narrative for our industry,” Grove says. “For too long, turnkey investors would meet with development-ready landowners with great intentions, only to be put off by a lack of certainty around when the enabling roads would be delivered.” ▲ A render of the first stage of the Western Sydney Airport Development project. There will also be $100 million for an active transport fund to create bike and walking paths throughout the Australian Capital Territory. Canberra’s light rail project will get a $50-million boost on top of the $343.9 million already committed to it. “Light rail has been a transformative project for the ACT and soon Canberrans on the southside will be able to reap its benefits,” federal finance minister Katy Gallagher said. Perth will get $33.5 million for the Westport project to shift the bulk of port and freight work from Fremantle to Kwinana. “Western Australia is the economic engine room of Australia, and this port will be a critical hub,” Prime Minister Anthony Albanese said. Federal infrastructure minister Catherine King said the funding built on the work done to assess and review Australia’s laundry list of infrastructure projects . Housing As part of an effort to boost supply, $90.6 million will be allocated to increase the housing and construction workforce. Around $88.8 million of that is for 20,000 additional fee-free TAFE training places. The Government has also recognised that migrants are a good source of much-needed skilled labour. About $1.8 million will be spent to streamline the skills assessments process for 1900 potential migrants with comparable qualifications. ▲ More will spent on increasing the number of tradespeople in Australia. The money will also help process 2600 Trades Recognition Australia skills assessments in specific occupations. “More homes mean more affordable options for everyone—whether they’re buying, renting or needing a safe space for the night,” federal housing minister Julie Collins said. “But to build more homes we need more tradies and that is what this announcement will deliver.” Australian Constructors Association chief executive Jon Davies agrees, saying funds should be allocated for investment in modern methods of construction. “Long-term solutions are needed, and the Government’s Future Made policy presents a chance to make significant productivity gains through modern methods of construction,” Davies said. In the real estate industry, $166 million will be spent to improve anti-money laundering reporting obligations for the sector. Chalmers also wants to revamp the rules for foreign investors. This will include screening foreign investment in critical projects, enhancing the compliance team, aligning the framework with other regulatory measures and ensuring foreign investors pay tax. Speeding up approval times for known investors in non-sensitive sectors is also on the table with paperwork reduced for repeat investors. There will be a target to process 50 per cent of cases within a month from January 1, 2025, incentives for early applications and fee refunds for unsuccessful applications. ▲ Foreign investor regulations will be overhauled. Foreign investors will be allowed to buy existing build-to-rent properties to increase demand. Institutional investors will also benefit from changes to make it easier for them to manage their portfolios. “To make our economy even more prosperous and productive, to safeguard our national security and to make the most of the defining decade ahead, we need to get our investment settings right,” a statement from Treasury said. Senators David Pocock and Jacqui Lambie suggested to the Parliamentary Budget Office that the Government could gain $60 billion over a decade by limiting the capital gains tax discount to new properties built after July 1, 2024 and getting rid of negative gearing. But planning approval numbers have fallen , bringing into question how the National Housing Accord goals will be achieved. “Construction costs have gone through the roof and, with no sign of interest rate relief on the near horizon, the first 12 months of the National Housing Accord is looking very grim in terms of approvals, commencements and completions,” Forrest said. “There can be no commencements nor completions of new housing without first having planning approval. “The fact that new dwelling approvals are flatlining, weeks before the start of the National Housing Accord, is a wake-up call to all levels of government—they cannot take a business-as-usual approach.” King in an interview with economic development think tank CEDA this year noted that Melbourne’s lord mayor Sally Capp had told her that many projects within the city with planning permission were not progressing. “She said that ... she had planning approvals already for around 22,000 dwellings in the City of Melbourne that were basically not progressing because ... the environment had changed for that investment about what return you were going to get,” King said. ▲ CEDA chief economist Cassandra Winzar. “So people were waiting for better market conditions or really banking those planning approvals until the capital was available and you were going to get that return on investment.” CEDA chief economist Cassandra Winzar wants to see federal incentive payments introduced for states and territories shifting from stamp duties to land taxes as well as an increase to the Commonwealth Rent Assistance supplement and the reintroduction of the National Rental Affordability Scheme. “Housing affordability has continued to worsen,” Winzar said. “Meaningful progress is needed on the reforms, particularly to planning and zoning regulations, and more investment needs to be made to increase the social housing stock over time.” Sectors to watch Savvy investors will be watching the Budget for a push for the Government’s Future Made in Australia policy—an attempt to bring manufacturing, technology development, research in various goods, renewable energy, defence and space sectors back into Australia. As well, substantial funding will be provided to big energy companies to move away from fossil fuel to renewable energy options, and for major mining projects. That means work for those able to develop these larger projects, upgrade existing facilities or build new ones for new industries. The Government is also in negotiations with states and territories on investment to help fund schools and hospitals, with billions in federal funding that may not be included in next week’s Budget as those talks continue. Defence spending will include upgrades to existing facilities as part of the Government’s overall defence strategy in preparation for any escalation of tensions in the region. “This Budget will be responsible, it will be restrained and it will make our economy more resilient in uncertain times,” Chalmers told the media this week. On Tuesday, the nation and indeed the property sector will find out just how resilient. 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[+] Property Sector’s Nervous Wait for Federal Budget

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