Federal Budget 2021 - From the investment property perspective
- Posted By David Brown
The landmark 2021 federal budget is all about business productivity and jobs to drive the post-pandemic economic recovery in Australia.
The federal treasurer Josh Frydenberg announced a budget deficit of $106.6 billion for 2021-22, which was little changed from the $108.5 billion deficit the federal government forecast at the December 2020 mid-year economic and fiscal outlook.
A huge emphasis on infrastructure spending is set to buy property development while funds allocated to the aged sector are likely to spearhead investment in aged care homes as well as the child care sector.
Stimulus measures prompted by the Covid-19 pandemic have seen the national debt approach $1 trillion, although budget papers reveal the coalition now expects the JobKeeper wage subsidy will cost $12.5 billion less than expected, given the economic recovery has been stronger and faster than anticipated.
Incentives will apply an additional stimulus to the housing market
Two budget measures are likely to change the dynamic in the residential property market.
The federal government has extended the First Home Super Saver Scheme so Australians can contribute up to $50,000 to their super fund to be used for a deposit, up from $30,000 when the scheme was introduced in the 2017-2018 budget.
An extra 10,000 places will also be added to the First Home Loan Deposit Scheme so first home buyers who are approved for the scheme can buy or build a new home with a deposit of just 5 per cent. Single parents will be backed to buy their own home with a 2 per cent deposit. The federal government is also continuing its incentive to underwrite lenders’ mortgage insurance for this group of borrowers. These measures are designed to give first-home buyers a leg up into the booming property market. Treasurer Josh Frydenberg has also indicated he’s open to the idea in the future of people using their super to buy a home.
At the other end of the spectrum, the age at which retirees can access the downsizer scheme has been lowered from 65 to 60. The measure allows people older than 60 and are in retirement who sell the family home to contribute $300,000 from the sale proceeds to their super fund over and above other contribution rules
The government will spend $780 million on additional stimulus to the housing market through an extension to the HomeBuilder scheme.
Infrastructure, roads and rail get $15.2bn boost
Infrastructure spending is a huge focus of this year’s budget, with the federal government adding an extra $10 billion to its $100 billion, 10-year infrastructure plan. Key initiatives include $2 billion each for a new Melbourne intermodal terminal and upgrades to sections of the Great Western Highway in NSW.
Western Australian infrastructure will receive a $1.3 billion injection for road and rail projects and northern Australia will receive $190 million in the next five years for development funding.
The Building Better Regions Fund is also getting an extra $250 million for infrastructure projects in rural and regional areas.
Plus, there’s $600 million for a National Recovery and Resilience Agency, which will also help to rebuild areas affected by recent natural disasters
Property in popular holiday spots is likely to get a boost thanks to a range of measures designed to support a tourist sector battered by border closures and frequent lockdowns during holiday periods.
This spending bonanza can be a huge boon for property development, not only for the projects themselves but also for related building and construction.
Migration, international students slow to return to pre-pandemic levels
While the government made a commitment to restoring the permanent migrant intake to 160,000 annually, it is unlikely to happen before 2024. International students are expected to start trickling in later this year, and increase from 2022.
Australian Industry Group's Innex Willox said a greater effort should be made on returning migration to pre-pandemic levels. “The government [should] stick to a more ambitious plan to reopen our borders to migration and trade in services to drive our economic recovery,” he said.
Federal government responds to the aged care royal commission
The federal government has set aside $10 billion for aged care, with the centrepiece of this initiative spending on home care packages. This could play out in property in a number of ways. The intention is to keep people in their homes rather than aged care facilities. But that’s not to say the property sector won’t be involved in retrofitting residential properties so they are suitable for senior Australians. Watch this space.
The National Disability Insurance Scheme is also getting a $26-billion injection next year and an extra $13.2 billion over three years, some of which will also go into residential facilities. Working families are also a priority this year, with a $1.7-billion childcare package to support women to re-enter the workforce after having children. This is likely to drive the construction of new childcare centres
Overall, while the budget bottom line is vastly better than expected, we’re not going to see a surplus for some time.
However, the economy and community will be the winners of the cash splash.