Budget Blues

When Jim Chalmers delivered his first budget this week, he used the word “sensible” often. Keen to establish his credentials as a responsible manager of tax-payers’ money, the Treasurer delivered a budget that focused on Labor’s pre-election promises.

Housing supply was also a major centerpiece of the budget. The ambitious target of building one million more affordable homes over five years from 2024 through a new National Accord is particularly ambitious.

The real estate sector has long called for a plan to increase housing supply in a real way with proper targets that holds State and Territories accountable and deals with the key barriers in land release, planning and that is pro-investment for the private property markets.

If done right, this approach can give Australia’s housing stock the generational injection it so badly needs in the same way policy programs in the 1970s did.

Obviously, the devil will be in the detail and much more information will be needed especially in relation to the intent to provide opportunities to superannuation funds and build-to-rent developers ahead of Australia’s mum-and-dad investors. Industry will be looking out for any attempted inequities in this space.

The Australian real estate industry manages a combined property management portfolio worth $3 trillion and manages $78 billion in rents each year on behalf of family investors and it would be fool hardy to mess with this essential cohort of housing providers.

The budget has missed the chance of dealing with the wicked problem of stamp duty by State and Federal Governments which has been entirely and disappointingly omitted within the National Accord. However, one million new affordable homes are a supply ambition to be applauded. The challenge has now been thrown down to get these homes built and Australians housed in a very short period.

The task will not be easy. Since May, repayments on a $500,000 mortgage have increased by almost $700 each month and household saving is forecast to slump below pre-pandemic levels. Constraints on housing supply, including a backlog of new builds from supply chain pressures, all mean affordability pressures for home buyers and renters are unfortunately likely to continue in the near term.

Whilst this Budget was appropriate for the current circumstances both internationally and domestically the 2023 Budget needs to address how to support delivery of housing supply across all markets in Australia. A serious conversation on tax reform with intent to implement needs to happen.