Budget to rein in property prices
FEARS this year’s Federal Budget would include changes to negative gearing or capital gains tax on homes sales have proved unfounded and Treasurer Scott Morrison has instead taken a largely hands-off approach to the housing market.
The Budget offered little in the way of major announcements for homeowners, investors or prospective buyers, with much of the real estate focus on measures to better increase housing supply.
The lack of major property tax changes suggested the Government felt confident last year’s Budget measures to crack down on investment activity and foreign spending had the desired effect of calming home prices, particularly in Sydney and Melbourne.
First homebuyer participation in the housing market, meanwhile, has reached a five-year high nationally.
The Budget included measures to help increase housing supply.
By leaving the current property taxing system largely untouched, Mr Morrison would have calmed the concerns of much of the real estate and development industry, who had feared the government might cave in to strong pressure to overhaul negative gearing.
Mr Morrison also offered another surprise by leaving capital gains charges for sellers untouched.
There had been earlier speculation the Budget might modify the capital gains system as a way to encourage more downsizers to sell up their homes and unlock valuable housing supply.
Mr Morrison has instead offered other measures to boost housing supply — a key determinant of prices.
This included a commitment to establish the $1 billion National Housing Finance and Investment Corporation and release more land suitable for housing.
The Budget’s allocation of billions of dollars in transport infrastructure upgrades would also help unlock cheaper housing in further-flung regional areas by making them more accessible, according to realestate.com.au chief economist Nerida Conisbee.
She said the Budget commitment to spend $1 billion on an Urban Congestion Fund to reduce traffic, along with a $3.5 billion Roads of Strategic Importance initiative, would be key measures in boosting demand for cheaper regional housing.
"Traffic traditionally influences liveability and discourages people from living in further out areas, so this may have an eventual impact on affordability," she said.
Transport upgrades in regions such as the Gold Coast may help buyers get easier access to cheaper housing in further flung areas. Among one of the only real estate cuts was a drop in funding to state affordable housing services. The Commonwealth committed $1.6 billion this year to support the services, a roughly $295 million drop from last year’s Budget.
Real Estate Institute of Australia president Malcolm Gunning said the Government is doing nothing to change negative gearing represented an "ideal" outcome for the housing market, considering the stringent changes introduced last year to quell investor demand.
"The Government already has its hands around the golden goose. It needs to be careful not to strangle it," he said.