On May 9, 2023, Treasurer Jim Chalmers presented the federal budget for the fiscal year 2023-2024. It revealed a surplus driven by the luck of rising commodity prices, and the tax the government earns from that.
But the main headline was a $14.6 billion cost of living relief package intended to assist vulnerable Australians. Included in the introduced measures are a 15 per cent increase in award wages for aged-care workers, some strengthening of Medicare, subsidised energy bills, and an additional $20 a week for JobSeeker recipients.
No changes were made to the current housing system in the budget. Negative gearing, as well as capital gains tax on investments and the primary residence, remain unchanged.
Was there anything in the budget to assist buyers, owners, or investors in Sydney’s suburbs? Maybe…
What we wanted
The focus was on the cost of living. Rents are up. Loans need repaying, constantly. The amount we spend on groceries has increased. There was a strong feeling that the government had a responsibility to ensure that this budget reduced the financial pressure on Australians, particularly on those with mortgages who are paying thousands more per year.
The Reserve Bank of Australia did not adequately prepare borrowers for 11 interest rate rises in 12 months; COVID did not adequately prepare the world for a staggering disruption to global trade and local economies; and Russia certainly did not adequately prepare the world for the invasion of Ukraine and the havoc it’s caused to lives as well as world commodity markets.
In this uncertain time, what did the budget offer to residents of New South Wales?
What we got
The rules for the First Homebuyer Guarantee (FHBG) have changed. In addition to married and cohabiting couples, the grant is now open to friends, siblings, and other family members. Supporting those who have lost their homeownership status, the program has been expanded to include non-first-time buyers who haven’t owned a home in Australia in the past ten years.
In May 2009, 31.4% of all purchasers were first-time buyers, compared to just 14.2% in March of this year. The Real Estate Institute of Australia (REIA) anticipates a further decline in the proportion of new residential loans going to first-time buyers.
Will this new measure motivate more first homebuyers into the market? What housing stock will they purchase? And do people really want to take out a 30-year loan with their sister or BFF? We’ll see…
Capital city rents are 18 per cent higher than they were before the pandemic, while regional rents are 23 per cent higher. The average rent for a unit in Sydney is up a staggering 25%, while houses are up 10%. The rental market is severely undersupplied. As a result, prices are rising rapidly, while vacancy rates are nearly nonexistent.
This issue is addressed in the Chalmers budget by two measures:
- An increase in incentives for the private sector to undertake build-to-rent projects.
- An increase of up to 15% in Commonwealth Rent Assistance payments.
These measures aren’t keeping up with the market demand, but it might make paying rent on the house in Padstow or the unit in Stanmore slightly more affordable.
Despite being the centrepiece of the second budget for Chalmers, the cost-of-living initiatives are largely incremental in nature. Their impact on homeowners and prospective homebuyers is largely indirect and widely regarded as insufficient to address immediate supply-related problems. Still, many measures will certainly help people who are barely scraping by.
Let’s talk about housing supply
The budget outlook for 2023–4 confirms the long-term nature of Australia’s housing affordability and availability crisis, with supply failing to meet demand and projected to fall even further behind. While the announced housing policy measures provide some relief, they are unlikely to keep pace with the magnitude of the problem confronting Australians, who are increasingly priced out of buying and even renting.
As the Senate continues to argue over the not-especially-ambitious proposed Housing Australia Future Fund, it is impossible to predict how this lack of available housing will be resolved. The only certainty is that any solution is years away.
Get in touch
First-time homebuyers priced out of the market, mortgage holders facing increases in monthly payments, and investors contemplating an uncertain future all face challenges. As market experts, Mortgage Broker Sydney can assist in evaluating your personal situation, and provide options for achieving your real estate goals.
Contact us for an impartial assessment of your personal situation. There’s no obligation, and never any cost to you.
Michael began his career in the finance industry over 35 years ago. He progressed through the ranks at the CBA in both retail and corporate lending, culminating in a senior position as a Corporate Relationship Executive. His decision to leave the bank in 2003 to become an independent mortgage broker was driven by his desire to assist everyday customers break through the jargon of the banking world and access the best loan products in the market. His experience is wide-ranging from helping first time buyers to large commercial enterprises. What Michael doesn’t know about home loans, simply isn’t worth knowing!