ed60e427-7896-4319-90e6-b826c4065f77

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Three major housing-related measures were highlighted in Treasurer Frydenberg’s budget address on 6 October: an extension of the First Home Loan Deposit Scheme, additional low-cost financing for affordable housing through National Housing Finance and Investment Corporation and additional funding for the Indigenous Home Ownership Program.</p><p>Other measures detailed in the budget papers included a proposed capital gains exemption for granny flats for eligible persons from July next year, and a continuation of funding for state social housing services. </p><p>The papers also note that the expansion of the first home loan deposit scheme will be complemented by announced changes to ease credit regulations, which would boost credit availability.</p><h2><strong>Funnelling new demand into new property</strong></h2><p>First home owners have previously been a target of demand-side housing stimulus during economic downturns. Currently, Australia may be in a demographic “sweet spot” for first home buyer demand. </p><p>The relatively large millennial generation is now estimated to be aged around 26 to 37 years old, and according to ABS data, this puts millennials into the most common first home buyer age groups.  </p><p>Alongside the typical barriers to entry for hopeful first home buyers, this may be one of the reasons the first home loan deposit scheme has been so well-subscribed since its introduction in January this year.</p><p>The extension to the First Home Loan Deposit Scheme will see an additional 10,000 places available between 6 October and 30 June 2021, adding to the 20,000 places made available since the scheme started in January 2020.</p><p>However, these additional places are for construction or purchase of newly-built homes, and the price thresholds have also been increased for newly built homes, which would potentially further incentivise a pivot away from the established housing market. </p><p>The change in purchasing thresholds by region are summarised below.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/8382ddbd-1462-4d3b-b200-9af0295f2216.jpg" width="1032"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>It will be interesting to see if these conditions create as rapid an uptake as the places for established housing. </p><p>In 2008, the temporary boost to the first home owner grant provided added incentives for new builds, yet 85 per cent of its uptake was directed at established housing.</p><p>However, incentives limited to new home builds could still help soften the blow to dwelling construction through Covid-19. </p><p>Since the introduction of the HomeBuilder scheme, new home sales have been boosted across Western Australia, South Australia and Queensland. </p><p>CoreLogic data shows valuations ordered for the purpose of construction loans have seen a boost above pre-Covid levels since the introduction of the HomeBuilder scheme.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>Valuations ordered for construction loans: 7-day rolling count</strong></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/cb350b4c-3c30-4855-b501-4f53b22f1ad3.jpg" width="1002"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>In terms of the impact these schemes would have on the established market, the increased incentive for new home builds could reduce established home prices if demand is diverted from this sector. </p><p>However, the price of newly built homes may rise up to the threshold cut-off.</p><p>It is worth noting that despite the rhetoric employed around the extension of the scheme supporting the construction sector, the budget papers highlight that this will not be enough to offset a decline in new dwelling investment. </p><p>At August, dwelling approvals for units had fallen -18.4 per cent year-on-year. The budget papers forecast an 11 per cent decline in dwelling investment over 2020-21, before rising 7 per cent in 2021-22.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Indirect Impacts on Housing</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>With much of this year’s budget focused on the labour market, infrastructure construction and tax cuts, one could be forgiven for</p><p>thinking housing reform and stimulus took a back seat in this year’s budget.</p><p>However, some of the budget highlights will also have implications for housing. These include:</p><p><strong>The JobMaker hiring credit and JobTrainer fund</strong></p><p>These initiatives may help re-absorption of young people into the labour force following the initial pandemic-induced shock.</p><p>This reflects the disproportionate job loss of young people throughout Covid-19, where around 40 per cent of job losses between March and August were among those aged 24 and under.</p><p>Job loss among younger Australians may present less direct risk to the housing market due to their lower likelihood of holding mortgage debt. However, support for youth employment may create more buoyancy in the rental market, where inner-city markets in particular have seen rental income declines since the onset of Covid-19.</p><p><strong>A boost to infrastructure spending </strong></p><p>Depending on the nature of infrastructure projects, surrounding housing markets could see a rise or fall in demand. </p><p>Much of this year’s infrastructure allocation is in roadworks, which can have positive impacts on nearby housing by increasing accessibility to an area, but devalue properties with exposure to high traffic intensity, construction and noise pollution.</p><p><strong>Support for regional Australia </strong></p><p>The budget outlines $350 million in support for regional tourism to attract domestic visitation, and seeks to strengthen regional industry through concessional loans to farmers and access for exporters to global supply chains. </p><p>This may further generate interest in regional dwelling markets, beyond what has resulted from Covid-19 and the normalisation of remote work. </p><p>However, it worth noting this budget allocated little to fossil fuel alternatives, with climate</p><p>change presenting on ongoing challenge to the liveability of some regional markets.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Beyond the Budget</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Further to the budget, there have been many institutional interventions which have likely played a role in stabilising housing market conditions since Covid-19. These include, but are not limited to:</p><ul> <li><p>A comprehensive monetary easing package from the RBA, which saw a reduction of the cash rate to 0.25 per cent, bond yield targeting and the establishment of a term funding facility which has been extended to June next year;</p></li><li><p>Early access to $10,000 of superannuation in 2019/20 and 2020/21;</p></li><li><p>The Australian Prudential Regulation Authority (APRA) changed capital ratio expectations for the banking sector in March, facilitated home loan deferrals and later extended the availability of deferrals to March 2021;</p></li><li><p>The availability of JobKeeper and a boost to JobSeeker, which were made available from March, and extended to March 2021, albeit in a tapered form; and</p></li><li><p>A mix of state-based incentives for home buyers, such as the Building Bonus grant in WA, the Home Improvement Scheme in the NT, and temporary stamp duty discounts in NSW.</p></li></ul><p>These events remind us that housing does not operate in a vacuum. Many different factors are currently supporting housing demand. </p><p>This has created a turn in housing market sentiment, which is seeing prices rise across the small capital cities, and a softening of price declines across Sydney and Melbourne.</p><p>Looking forward, there may still be more tailwinds to come. </p><p>The RBA left the cash rate on hold in October ahead of the budget, but hinted in the final sentence of the statement on the decision that “additional monetary easing” was possible, and a recent address by Deputy Governor Guy Debelle carried the same messaging. </p><p>Lower interest rates, together with easier access to housing credit could create further housing market demand, given prices have historically increased against a lower cost of debt and greater availability of housing finance options.</p></div></div></div></div></div>

Three major housing-related measures were highlighted in Treasurer Frydenberg’s budget address on 6 October... 

 First Home Loan Deposit Scheme Extended, Caps Increased

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>The federal government will allow an additional 10,000 first home buyers to obtain a loan to build or purchase a newly-built home with a deposit of as little as 5 per cent, via an extension of the First Home Loan Deposit Scheme.</p><p>The scheme, which has already assisted 20,000 first home buyers in purchasing a home this year, will also see caps on the prices of new homes increased from $750,000 to $950,000.</p><p>Treasurer Josh Frydenberg said that the residential construction industry, which currently contributes around 5 per cent to the nation’s overall gross domestic product, remains essential in boosting the Australian economy as it recovers from the coronavirus pandemic.</p><p>“Helping another 10,000 first home buyers to buy a new home through our First Home Loan Deposit Scheme will help to support all our tradies right through the supply chain including painters, builders, plumbers and electricians,” Frydenberg said.</p><p>“Combined, the First Home Loan Deposit Scheme, HomeBuilder and First Home Super Saver Scheme represent an unprecedented level of government support for home buyers and the construction industry alike.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>Price caps for extended scheme</strong></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><table><thead><tr><th>State</th><th>Capital city/regional centre</th><th>Rest of state</th></tr></thead><tbody><tr><th>NSW</th><th>$950,000</th><th>$600,000</th></tr><tr><th>VIC</th><th>$850,000</th><th>$550,000</th></tr><tr><th>QLD</th><th>$650,000</th><th>$500,000</th></tr><tr><th>WA</th><th>$550,000</th><th>$400,000</th></tr><tr><th>SA</th><th>$550,000</th><th>$400,000</th></tr><tr><th>TAS</th><th>$550,000</th><th>$400,000</th></tr><tr><th>ACT</th><th>$550,000</th><th>N/A</th></tr><tr><th>NT</th><th>$550,000</th><th>N/A</th></tr></tbody></table></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><sup><sub>^ Source: Federal Treasury. Note: The scheme applies only to newly-built homes and runs from 6 October 2020 to 30 June, 2021.</sub></sup></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>An additional 10,000 places will now be provided from 6 October 2020 to support the purchase of a new home or a newly-built home and will be available until 30 June 2021.</p><p>Successful applicants will be able to buy homes worth up to $950,000 in Sydney, $850,000 in Melbourne, $650,000 in Brisbane, and $550,000 in Perth.</p><p>“Australia is in a bit of a demographic ‘sweet spot’ for first home buyer demand, given the relatively large millennial generation are now at a typical first home buyer age,” Corelogic research analyst Eliza Owen told <em>The Urban Developer.</em></p><p>“Over the past 10 years, first home buyers have on average accounted for 23 per cent of owner occupier finance for the purchase of housing, and this has now climbed to 30 per cent.</p><p>“The impact on dwelling values depends on how much of demand-side stimulus is funnelled into new stock.</p><p>“Theoretically the establishment of new housing may not increase dwelling values in the established market, though new builds may become more expensive up to the threshold as demand increases.”</p><p>Related: <a href="https://theurbandeveloper.com/articles/largest-rise-in-home-loans">Record Rise in New Home Lending</a></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/0ef5eaab-96e1-4386-ac1e-83da890f2002.jpg" width="800"/></picture><div><span style="align-content:center;opacity:0.8">▲ According to recent Australian Bureau of Statistics figures the value of loans to first home buyers rose by 10.6 per cent in July, 26.6 per cent higher for the year.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>The revitalised scheme will now look to boost construction jobs comes as the Home Builder scheme, available to buyers who enter into a building contract by December 31—if construction commences within three months. winds down.</p><p>Record-low lending rates and strong levels of federal and state grants to encourage new home construction looks also set to push demand for housing credit in states where the virus is seen to come under control and movement and other restrictions lift.</p><p>“The risk is more debt, higher than otherwise prices, and a potential oversupply in the face of the hit to immigration,” AMP Capital chief economist Shane Oliver said.</p><p>“Like Home Builder, it does distract buying from established property and could boost new home prices at expense of established homes.”  </p><p>The extension follows recent findings from the National Housing Finance and Investment Commission, the scheme administrator, which predicts housing demand could fall by up to 230,000 dwellings over the next three years, due to boarder restrictions.</p><p>Unemployment hit 6.8 per cent nationally in August, with the three hardest-hit states being SA, Queensland and Victoria, and youth unemployment sitting at 14.3 per cent.</p><p>The Australian economy contracted by 7 per cent in the June quarter, confirming the nation was in recession following the 0.3 per cent decline in the March quarter.</p></div></div></div></div></div>

The federal government is adding an extra 10,000 places to its first home loan deposit scheme for newly-constructed homes...

 New Home Sales Remain Elevated

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Ultra-low interest rates, the relaxation of responsible lending, state government hand-outs and the successful $670 million Home Builder package, have driven a dramatic recovery in new home sales.</p><p>The latest monthly figures from the Housing Industry Association, based on surveying its membership of large volume builders, shows sales are now 11.8 per cent higher, in the seven months since restrictions came into effect, than at the same time last year.</p><p>While no announcement on <a href="https://theurbandeveloper.com/articles/home-builder-residential-housing-stimulus-package">Home Builder</a> was made in the budget, it did include an <a href="https://theurbandeveloper.com/articles/first-home-loan-deposit-scheme-extension">extension</a> of the First Home Loan Deposit Scheme, with another 10,000 packages specifically for new homes, and with higher price caps.</p><p>First home buyers remain a key driver of plans to revive the property market as Covid-19 restrictions are eased, particularly in Melbourne and Sydney, the nation’s largest cities and traditionally the most active markets.</p><p>“The [Home Builder] program has brought buyers into the market that would otherwise not been able to purchase their first home for a number of years,” HIA chief economist Tim Reardon said.</p><p>“[However], the positive impact of HomeBuilder has varied across the states.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>Private new house sales</strong></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/17da21cc-51be-4a62-b0f7-0fea38ff0061.png" width="1694"/></picture><div><span style="align-content:center;opacity:0.8">^Source: Australian Bureau of Statistics, HIA</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>Across the country, new home sales increased by 29.7 per cent in South Australia in September compared to August 2020, followed by Victoria, the state hardest-hit by the pandemic and where movement remains restricted, which saw an increase of 16.7 per cent.</p><p>New South Wales new home sales increased by 6.1 per cent across the month and 9.7 per cent over the September quarter, leaving  sales levels consistent with 2019.</p><p>Sales in Queensland and Western Australia both declined during the month by 4.2 per cent and 11.5 per cent respectively.</p><p>Despite the monthly decline in Western Australia, over the seven months to September, sales have increased in by 95.7 per cent compared to the same time last year—bolstered by a combination of state and federal government programs and as well as pent-up demand for housing.</p><p>“With the [Home Builder] program ending on 31 December for eligible sales, there is a very limited window of opportunity for prospective customers to purchase a new home, Reardon said.</p><p>“Delays in the processing of new home loan applications is the most significant constraint to getting these new building projects under construction with processing times for new home loans at around 2 months.</p><p>“Access to finance for new home construction has become exceptionally tight following new regulations introduced in recent years.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/1c8269ab-bd4b-42b8-990a-3f50b1eb3819.jpg" width="800"/></picture><div><span style="align-content:center;opacity:0.8">▲ Treasury, which is forecasting a 7 per cent rise in housing investment in 2021-22, recently reported that Home Builder, along with other housing policies and low interest rates, is “pulling forward demand”.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>Renewed consumer sentiment has been trending higher as the virus curve flattens and restrictions are eased or lifted.</p><p>The Westpac-Melbourne Institute Index of Consumer Sentiment surged by 11.9 per cent to a three-month high of 105 points in October, from 98 points in September.</p><p>The index is now well above pre-Covid levels and solidly in optimistic territory—with a reading of 100 on the index indicates optimists and pessimists are evenly balanced.</p><p>“Buying or selling a home is an extremely high commitment decision, so unsurprisingly, a positive consumer mindset has a direct bearing on housing market activity,” Corelogic research director Tim Lawless said.</p><p>“The latest sentiment reading provides another sign of improving housing market activity despite the headwinds of JobKeeper winding-down, expiring mortgage deferrals, stalled migration and slack in the labour market.”</p><p>According to August figures from the Australian Bureau of Statistics, new home buyers secured $16.3 billion in owner occupier loans for 12,000 properties, a 13.6 per cent surge, the largest increase since records were established 18 years ago.</p><p>Overall loan commitments were up 12.6 per cent, according to the seasonally adjusted data, but they were held back by the underwhelming performance of investor and personal loans.</p></div></div></div></div></div>

    New house sales sales are now 11.8 per cent higher in the seven months since restrictions came into effect at the same time last year.

FEDERAL BUDGET 2020