Budget 2021: ‘Not optional’: property groups fret population growth

The property industry has welcomed the Budget’s housing incentives but is worried by its population growth projections.

Property Council of Australia CEO Ken Morrison. Picture: Supplied

The property industry has welcomed the housing incentives in the federal budget but industry concerns have been sparked by low home deposit incentives and population projections.

Property Council of Australia chief executive Ken Morrison said the “glass is certainly half full’’ for the industry in the scheme of the greater economic outlook.

“The budget provides a new range of measures to reinforce our recovery, including new home ownership support, tax cuts, additional infrastructure investment, and new incentives to attract global talent,” Mr Morrison said.

“These new initiatives build off a year of support and stimulus measures which have enabled the property industry to lead Australia’s recovery from the global pandemic.”

But he called for international borders to be opened up to spark economic growth.

“The budget has revealed that our restricted border is the biggest constraint on our economy. “Population growth is not an optional extra for Australia’s economy. Without it we cannot sustain our economic success over the long term,” he said.

Real Estate Institute of Australia president Adrian Kelly said that budget measures bolstered the outlook for market players and small business.

“Overall, Budget 2021 is a strong budget should job creation promises be a reality where we expect property to continue to be a driver of economic activity throughout the pandemic for the near future on the back of incentives announced and the backlog of HomeBuilder commitments,” Mr Kelly said.

Following annualised price rises of 6.6 per cent in the residential space, CoreLogic’s head of Research Eliza Owen said the expansion of low-deposit initiatives for first home buyers to build their own home, with 5 per cent deposit and the 2 per cent single parent deposit scheme, both of which would see the loans guaranteed by the federal government, demonstrated the hurdle of saving for a deposit.

“Diverting new demand into new property can also insulate the established market from additional price increases, by providing a new unit of supply for each new unit of demand,” Ms Owen said.

However, demand-side policy for new housing can put upward pressure on the cost of construction, with anecdotes of increased supply chain costs and labour shortages becoming increasingly common.

The data firm warned that, particularly for single parents, the schemes may leave them short changed in the long term, paying significantly more in interest over the life of the loan.

“Taking on more debt may still be worthwhile if the borrower is otherwise spending tens of thousands of dollars on each year on rent,” Ms Owen said.

“Even more beneficial could be the long term gains in real assets that come from accessing ownership earlier with a lower deposit, which could outweigh the additional interest paid.

Increasing affordability pressure needs to be further addressed by the federal government, said Nicholas Proud, chief executive of affordable housing body PowerHousing Australia. The budget dedicated an additional $124m to the $124.7m states and territories have put into bolstering public housing stock.

The combination of surging house prices, shrinking vacancies and wage stagnation are creating fertile ground for a rental crisis in the near future, he said.

“Federal budget housing measures have provided a market led approach to drive jobs, and secure economic activity, but there will be a time soon when further affordable housing levers will need to be pulled to address rising affordability challenges and underpin activity drops forecast by Treasury,” Mr Proud said.

Macquarie analysts Stuart McLean, Caleb Wheatley and Melissa Lourens said the budget provided incremental support for the residential sector, mainly by boosting access for first home buyers.

They said other beneficiaries include stocks exposed to digitisation and childcare. But it warned that the focus on aged home care was a headwind to retirement sector.

“While no package in isolation is material for the residential developers, the announcements continue to show government support for housing (particularly FHBs). While we remain positive on the sector, given the accommodative lending environment, we view incremental growth in Mirvac over Stockland,” the Macquarie analysts said.

State bodies have welcomed budget measures to address property prices rising at the fastest month-on-month rate in 33 years and interstate migration adding unprecedented pressure on housing stock.

The Real Estate Institute of Queensland noted the commitments aimed at assisting single parent families, first home buyers and retirees to downsize as well as providing taxation benefits for the small business sector.

However, the peak body says a number of budgetary measures need to go much further if they’re to have any meaningful impact upon the economic recovery.

“With property sales in Queensland outpacing new listings, buyers continue to be out in force and ready to purchase property. However, sellers are still yet to match that burgeoning demand,” REIQ chief executive Antonia Mercorella said.

“We’ve done remarkably well to maintain relatively stable property market conditions across Queensland throughout this pandemic, but these conditions won’t last if we don’t have more sellers back in the market and one way to do this is via downsizing,” she said.