Locked Out Homebuyers Get Little Relief From Australian BudgetBy
Measures include tax breaks for first-home buyers, downsizers
Foreign investors hit with A$5,000 tax on empty properties
While he announced a suite of measures in the budget in Canberra on Tuesday, ranging from tax breaks for people saving for their first house to fines on foreign investors who leave properties unoccupied, analysts are skeptical they will do much to boost housing affordability.
“On housing they’re doing about nine different new things, but I still don’t think in net terms it adds up to much in terms of boosting affordability greatly or slowing down foreign demand,” said Andrew Ticehurst, an interest-rate strategist at Nomura Holdings Inc.
Surging home prices in Sydney and Melbourne have made housing affordability a hot-button political issue. While prices in Sydney were unchanged in April from March, they were still up 16 percent from a year earlier, pushing the city’s median house price to just under A$1 million ($736,000), according to data from CoreLogic Inc. Home prices in Melbourne have surged 15 percent in the past year.
“The measures may have an impact on home prices over time if they incentivize states to ramp up supply, but it’s likely to be marginal in the short term,” Shane Oliver, head of investment strategy at AMP Capital Investors in Sydney, wrote in a report.
Even Morrison admitted there was little the government can do. “There are no silver bullets to make housing more affordable,” he said in his budget speech.
The government measures include:
- Tax breaks for people saving for a down-payment on their first home
- Encouraging elderly people to downsize by allowing them to put up to A$300,000 of proceeds from the sale of their home into pension savings
- Tax discounts for investments in affordable housing
- Release of defense land in Melbourne to build up to 6,000 homes
- Giving the banking regulator powers over non-bank lenders and allowing it to impose region-specific lending curbs
- Restricting sales to foreign investors to 50% of new developments
- A$5,000 levy on overseas investors who leave properties empty for more than six months a year
Missing from the package was any substantive action on so-called negative gearing -- tax breaks for property investors that some analysts blame for pushing up prices and locking first-time buyers out of the market.
“We will continue to prefer the scalpel to the chainsaw, to avoid a housing shock,” Morrison said. “Mum and dad investors will continue to be able to use negative gearing, supporting the supply of rental housing and placing downward pressure on rents.”
The increased regulatory powers “could make it harder for investors, foreign buyers and businesses who are being turned away from the major banks to fund property purchases,” Tim Lawless, CoreLogic’s head of research, said in a note.
While the steps may reduce demand by targeting foreign investors, the main issue is still a lack of supply of new housing, according to Peter Jolly, head of market research at National Australia Bank Ltd.
The “fundamental issue is we don’t have enough dwellings, we’re not building enough relative to the population,” Jolly told a post-budget breakfast in Sydney. Australia is adding about 350,000 people a year “that we need to house,” he said.
— With assistance by Benjamin Purvis, and Ruth Liew