Budget proposals broadly supportive for the property market

The Budget and forthcoming election look set to throw out a friendlier set of policies for property this time around.

Budget property market sweeteners

The 2022-3 Federal Budget and opposition reply were both broadly supportive of the Australian property market.

The Coalition government has proposed a significant expansion of the previously available First Home Loan Deposit Scheme. Under the new guise the Government’s Home Guarantee Scheme will make up to 50,000 places will be available per annum, across three categories, including 10,000 places allocated specifically for regional first homebuyers. The take-up for such a package is likely to be robust.

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Although there will be first homebuyer affordability challenges, we expect the ‘bank of Mum and Dad’ to step in and help with any borrowing shortfalls over the year ahead.

Unlike in 2019, the opposition is not proposing wholesale changes to tax legislation this time around as it relates to property, so the macro environment will be more important than the election result for the housing market outlook.

Regional Australia boost

Regional Australia will get a timely boost from the proposed Budget measures.

Aside from the measures to support regional first homebuyers from both sides of politics, a number of road, rail, energy, and other infrastructure proposals will also serve to benefit Australia’s regional cities.

Notably with international students returning and immigration beginning to ramp up again the detailed Budget papers forecast a return to net overseas migration of 235,000 by 2025. With the natural growth in the population, this would equate to a very strong total population growth figure of around 400,000 per annum, which is likely to put pressure on housing supply.

Inflation will be in focus over the year ahead, although the Budget does assume that supply pressures will have eased or be largely resolved by 2023.

Population growth of around 400,000 per annum, is likely to put pressure on housing supply.

Lending standards in focus

Lending standards may come back into focus in the second half of 2022. There has been some discussion around whether high debt-to-income lending might be further restricted. But there’s another challenge looming, and that’s the chronic shortage of rental properties available for lease in many of Australia’s cities and housing markets.

Weekly rental listings figures point to yet another tightening this week, and the rental vacancy rate is falling to around the lowest levels in around two decades. In some areas, rental vacancies are as close to zero as we might ever see.

Lending standards for investors have been very tight over the past half-decade, but banks and regulators may need to look at allowing prospective landlords to access credit more easily later in the year.

New arrivals to Australia are typically renters initially. If landlords can’t borrow, where is everyone going to live as the borders reopen?

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