Housing remains in the too hard basket at budget time

Once again, some of the key issues affecting virtually every Australian have not been addressed in the Federal Budget. Housing supply, and associated with that, housing affordability has again flown under the budget radar.  Is it simply that politicians don’t know how to deal with the issues of land undersupply or is that they don’t have the ability?

The housing market is broadly addressed in Budget Paper 1 on page 2.20:

Dwelling investment

Households also remain cautious with respect to their dwelling investment decisions, with tighter credit conditions further weighing on activity in this sector. In the short term, forward indicators are pointing to continued weakness, with housing finance for new dwellings and dwelling approvals falling in recent months. In the medium term, demand for housing is expected to be supported by low unemployment, solid growth in household incomes and past strength in population growth. However, ongoing supply constraints associated with planning and approval processes and land release restrictions are expected to continue to weigh on dwelling investment growth.

So, it’s clear they acknowledge the problem but there is little action.

The key points relating to the property market in the budget were:

  • Migration set for an upswing – new target is 185,000, up from 168,700 the year before
    • Mostly focused on regional areas where workers are desperately required
    • Higher population growth means higher demand for housing – the flip side is that the Government continues to ignore the fact that as a country we are not building enough homes to accommodate current rates of population growth, nor are we delivering these homes at affordable price points and with sufficient local infrastructure and amenities.
  • $6 billion allocated to a regional infrastructure fund – most of this will be directed towards projects in Queensland and Western Australia to support the resources sector
  • The ‘Housing and Community Amenities’ provision in the budget has been cut by $1.1b reflecting the conclusion of the housing initiatives introduced as part of the Government’s response to the global financial crisis..  This is primarily related to a reduction in social housing initiatives that were part of the Nation Building and Jobs Plan

  • Payments to support state affordable housing services will be reduced by $1.4b mostly due to the reduction in the Nation Building and Jobs Plan – social housing second stage construction
  • No mention of changes to tax implications for property investors, specifically negative gearing.

Let’s hope we see more action from the state budgets when they are released next week, but we won’t hold our breath.

 

About Tim Lawless

Tim heads up the RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia

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2 Responses to Housing remains in the too hard basket at budget time

  1. Rob Fisher May 12, 2011 at 7:55 am #

    The budget should have removed much of the government interference in the housing market such as negative gearing, grants, CGT concessions etc. Level the playing field. Housing provides very little benefit to Australia’s economy apart from the initial construction activity. Conversely, investment in commerce, technology and education drives employment and offers permanent benefits to the economy. The huge outflows of capital directed to trading existing houses should be directed far more productively to more appropriate areas of our economy. Australia’s skyrocketing housing related debt has provided little of benefit to most Australians. Although this exponential rise in credit may might add to GDP, it doesn’t create productivity gains. Rather, it is an indication of excess consumption, because the bulk of housing credit is plowed into transferring existing housed between each other, instead of building new dwellings.

    Rob Fisher
    AustralianPropertyForum

  2. Jeff May 19, 2011 at 5:58 pm #

    Good write-up Tim. Thanks.

    That last sentence in the excerpt from the budget implies the Fed Govt is passing the buck but, as you said, we won’t hold our breath waiting for any real solutions to the housing supply problem, especially from the NSW Govt.

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