How Will the 2021/22 Federal Budget Impact Real Estate
The premise of the 2021/22 Federal Budget is about getting more people back into work and strengthening the Australian economy in response to the global challenges caused by Covid.
There is more money for businesses, households and infrastructure. However, the success of the government’s economic recovery plan hinges on how effectively and quickly the new budget measures can create new jobs and assist industries that are reliant on having our international borders open.
The 2021/22 Federal Budget seeks to achieve the government’s economic recovery goal by gifting low and middle-income earners with a tax cut, extending tax incentives for businesses, adding additional training and apprenticeship places and providing additional spending on infrastructure, aged care and the COVID vaccination program.
• The budget deficit of -$106.6 billion expected in 2021/22, down from -$161 billion in 2020/21.
• Family Home Guarantee to help single parents purchase a property.
• Extension of the New Home Guarantee
• The increased contribution amount for the First Home Saver Scheme
• An additional $15.2 billion in infrastructure spending
• $7.8 billion in tax cuts with the extension of the Low and Middle Income Tax Offset
What does it mean for Australia's property markets?
Property markets across Australia have performed strongly over the start of 2021. A combination of record-low interest rates and a limited number of properties on the market for sale and government stimulus measures have seen home values grow considerably since the start of the year. The 2021/22 Federal budget contains several measures which will directly assist, and positively support, property markets across the country.
First home buyers and single parents are the big winners again in this year’s Federal Budget. The New Home Guarantee and First Home Super Saver Scheme provide a more accessible pathway for first home buyers to save for a deposit to purchase a home. While a new scheme, the Family Home Guarantee, which focuses on single parents with dependents, is a welcome measure. This will provide the assistance required for the challenges faced by single-income households to save for a deposit to re-enter the property market or purchase their first home.
The supply of suitable, well located, and high-quality new homes remains the most significant constraint of property markets right around the country. While measures in the 2021/22 Federal Budget will assist with growing stock, being the HomeBuilder Extension and the New Home Guarantee, these measures will be limited due to the eligibility criteria and the number of allocated places.
Additional infrastructure spending will also grow and support regional property markets with significant new road and rail projects helping make regional towns more accessible and support local economies. One such project is the $66 million commitment to upgrade the Newcastle Airport runway to facilitate international flights. This will be a significant boost for local economies in the Newcastle and Hunter regions.
Federal Budget measures that will directly impact property markets
Family Home Guarantee
This new measure enables single parents with dependents to purchase an existing home or build a new home with a deposit of as little as 2%. The scheme will be open to 10,000 places over four years, with applicants needing to be Australian citizens over 18 years of age and have an annual taxable income of no more than $125,000 to be eligible.
Despite the limited number of places, this is a welcome policy as it can be challenging for single parents to save for a deposit to re-enter the market after separation or to purchase their first home.
New Home Guarantee
The New Home Guarantee will be expanded for a second year and provide an additional 10,000 place for 2021/22. This policy enables first home buyers to build a new home or purchase a newly built home with a deposit of as little as 5%. The primary benefit for eligible first home buyers is that this scheme may be used in conjunction with other government measures and state-based grants.
This measure is a welcome move by the federal government given the success of the Homebuilder scheme and the first year of the First Home Loan Deposit Scheme. It assists first home buyers in getting into the market and creates jobs within the construction, building and property industry.
First Home Super Saver Scheme
The Australian government introduced the first home super saver (FHSS) scheme in the 2017/18 Federal Budget to assist first home buyers in buying a home. It allows participants to save money for their first home inside a superannuation fund, enabling them to save faster due to the concessional tax treatment of superannuation. The 2021/22 Federal Budget increases the maximum amount of voluntary contributions that can be released under the scheme from $30,000 to $50,000.
Another measure introduced in the 2017/18 Federal Budget was a scheme that allows people aged 65 and over who sell their family home to make a one-off $300,000 ($600,000 for couples) contribution to their superannuation. The 2021/22 Federal Budget changes the eligibility age for this scheme reducing it from 65 to 60 years.
The successful HomeBuilder program will have the construction commencement period extended from six months to 18 months for all existing applications. This is a positive measure that will grow the new home construction pipeline and support jobs in the sector.
Infrastructure is vital to ensure our cities work efficiently and that all Australians are provided with basic services. Well-funded and planned infrastructure helps reduce commute times, increases productivity, boosts local employment opportunities and makes outer-ring suburbs more accessible and attractive. It also plays an important economic role by creating jobs and supporting businesses.
The 2021/22 Federal Budget allocates an additional $15.2 billion to the previously announced 10-year infrastructure plan. Some of the major projects for each state are detailed below.
The government will provide $3.2 billion from 2021-22 for priority road and rail projects in South Australia. This funding includes:
• $2.6 billion for the North-South Corridor — Darlington to Anzac Highway
• $161.6 million for the Truro Bypass
• $148.0 million for the Augusta Highway Duplication — Stage 2
• $64.0 million for the Strzelecki Track Update — Sealing
• $60.0 million for the Gawler Rail Line Electrification
• $48.0 million for the Heysen Tunnel Refit and Upgrade — Stage 2
• $32.0 million for the Kangaroo Island Road Safety and Bushfire Resilience Package
• $27.6 million for the Overpass at Port Wakefield and Township Duplication
• $22.5 million for the Marion Road and Sir Donald Bradman Drive Intersection Upgrade
• $40.0 million over two years to continue supplementary local roads funding.
New South Wales
The government has allocated $3.3 billion from 2022-22 for priority road projects in New South Wales. The funding includes:
• $2.0 billion for the Great Western Highway Upgrade — Katoomba to Lithgow.
• $500.0 million for the Princes Highway Corridor - including Jervis Bay to Sussex Inlet Stage 1.
• $240.0 million for the Mount Ousley Interchange.
• $229.4 million for the M12 Motorway.
• $87.5 million for the M5 Motorway — Moorebank Ave & Hume Highway Intersection Upgrade.
• $52.8 million for the Manns Road — Intersection Upgrades at Narara Creek Road and Stockyard Place.
• $48.0 million for the Pacific Highway — Harrington Road Intersection Upgrade.
• $32.0 million for the Toowoomba to Seymour — Upgrades to Hargraves Lane and Federation Street;
• $25.0 million for Stacey Street, Bankstown — Planning
• $19.0 million for the Far North Collector Road Network, Nowra
• $18.0 million for Appin Road.
The budget also contains $66.1 million to upgrade the Newcastle Airport runway to accommodate long-range aircraft and facilitate international flights, which will be a major boost for local economies in the Newcastle and Hunter regions.
The government has allocated $1.6 billion from 2022-22 for priority regional and urban road and rail infrastructure projects in Queensland. The funding includes:
• $400.0 million for Bruce Highway Additional Funding
• $400.0 million for the Inland Freight Route (Mungindi to Charters Towers) Upgrades
• $240.0 million for the Cairns Western Arterial Road Duplication
• $178.1 million for the Gold Coast Rail Line Capacity Improvement
• $160.0 million for the Mooloolah River Interchange Upgrade
• $126.6 million for Gold Coast Light Rail — Stage 3
• $35.3 million for the Maryborough-Hervey Bay Road and Pialba-Burrum Heads Road Intersection
• $10.0 million for the Caboolture — Bribie Island Road upgrade
The government has allocated $3.0 billion from 2021-22 for priority road and rail projects in Victoria. The funding includes:
• Up to $2.0 billion for the Melbourne Intermodal Terminal.
• $380.0 million for the Pakenham Roads Upgrade
• $250.0 million for the Monash Roads Upgrade
• $92.8 million for the Commuter Car Park Upgrades
• $56.8 million for the Hall Road Upgrade
• $51.1 million for the Princes Highway East, between Rosedale and the NSW border
• $30.4 million for the Western Port Highway Upgrade
• $20.7 million for the Princes Highway West between Colac and the SA border
• $17.5 million for the Dairy Supply Chain Road Upgrades
• $15.0 million for Melbourne to Mildura — Future Priorities
• $10.0 million for the Outer Metropolitan Ring/E6 Corridor Detailed Business Case
• $10.0 million for the Mallacoota-Genoa Road Upgrade.
The government has allocated $1.3 billion from 2021-22 for priority road and rail projects in Western Australia. The funding includes:
• $237.5 million for the METRONET: Hamilton Street/Wharf Street Grade Separations and Elevation of Associated Stations
• $200.0 million for the Great Eastern Highway Upgrades — Coates Gully, Walgoolan to Southern Cross and Ghooli to Benari
• $160.0 million for the WA Agricultural Supply Chain Improvements — Package 1
• $112.5 million for the Reid Highway — Altone Road and Daviot Road/Drumpellier Drive — Grade Separated Intersections
• $110.0 million for the METRONET: Byford Extension
• $85.0 million for the Perth Airport Precinct — Northern Access
• $64.0 million for the Toodyay Road Upgrade — Dryandra to Toodyay
• $55.0 million for the Mandurah Estuary Bridge Duplication
• $48.0 million for the Great Northern Highway — Broome to Kununurra (Nellie Springs to Sally Downs Way and Arthur Creek)
• $48.0 million for the Marble Bar Road Upgrade
• $44.0 million for the Indian Ocean Drive — Jurien Bay to Brand Highway
• $31.5 million for METRONET: High Capacity Signalling
• $21.5 million for the Leach Highway (Welshpool Road Interchange)
• $16.0 million for the Regional State Road Safety Improvement Program
Australian Capital Territory
The government will allocate $167.3 million from 2020-21 for priority road and rail projects in the Australian Capital Territory. This funding includes:
• $132.5 million for Canberra Light Rail — Stage 2A
• $26.5 million for the William Hovell Drive Duplication
• $5.0 million for the Gundaroo Drive Duplication (formerly William Slim Drive Duplication)
• $2.5 million for Beltana Road Improvements.
The government has allocated $322.6 million from 2021-22 for priority road projects in Tasmania. This funding includes:
• $113.4 million for the Midland Highway Upgrades.
• $80.0 million for the Tasmanian Roads Package.
• $48.0 million for the Algona Road Grade Separated Interchange and Duplication of the Kingston Bypass
• $44.0 million for the Rokeby Road — South Arm Road Upgrades
• $24.0 million for the Tasmanian Freight Rail Revitalisation
• $13.2 million for Huon Link Road.
The government has allocated $323.9 million from 2021-22 for priority road and rail projects in the Northern Territory. This funding includes:
• $173.6 million for the NT Gas Industry Roads Upgrades
• $150.0 million for the NT National Network Highway Upgrades (Phase 2).
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Original Blog Post: Mathew Tiller ljhooker.com.au 12 May 2021