With the Australian government having unveiled its 2024 budget, Australians are asking whether they will be better placed to rent or buy a home.
For those amongst us hoping to buy their first home it’s a tough call, because while the government has promised to build 1.2 million homes over the next five years to address the supply shortages putting upward pressure on prices, the bulk of the money goes to infrastructure, and it is also cutting migration. So you may well ask where the construction workers needed to build those homes will be coming from, when current projections already see the nation falling short.
The cost of building a new house has risen $20,000 in the past year and Australian Bureau of Statistics data reveals just a little over 161,000 homes were approved for construction in the year to March, well short of the 240,000 needed to reach the government’s target of 1.2 million homes. Plus, there’s no additional assistance for first homebuyers in this budget.
For those of us who are renting there is short-term help in the form of 10 per cent increase to rent assistance for nearly 1 million low-income households. However, there will be no quick solutions to the limited supply of vacancies, so pain still lies ahead for people trying to find available and affordable rentals, and for our property managers who are genuinely trying to help them.
One thing that’s certain is that the government is focused on the housing sector, with a substantial $11.3 billion package aimed at addressing the overall housing crisis. If the government’s forecast is correct and inflation returns to within the Reserve Bank’s target range by the end of 2024, the great news is that hope will be restored for first homebuyers trying to budget for their first purchase with greater certainty. For renters not eligible for rent assistance, relief remains potentially some years into the future.
Here’s how the latest budget could affect you.
A new national housing agreement – ‘Homes for Australia’
Central to the budget is a five-year national housing agreement with state governments called Homes for Australia, which amounts to $9.3 billion. This infusion is earmarked to enhance the housing stock across the country, promising to broaden the availability of homes. For renters, this could translate into more affordable rental options as supply pressure eases over time. Home buyers might find themselves better positioned as increased housing construction could dampen the steep property price escalations witnessed in recent years.
Infrastructure investments to support housing
An additional $1 billion is allocated towards enabling state governments to build essential infrastructure, such as sewers and roads. This investment is strategically important as it directly supports the fast-tracking of housing construction projects. Improved infrastructure can lead to the development of new communities and, by extension, more housing opportunities for Australians. For those looking to buy their first home, this could mean more choices in emerging neighbourhoods with modern amenities.
More rent assistance
For nearly 1 million low-income households receiving the Commonwealth Rent Assistance payment, the maximum rate is set to increase by 10 per cent from September 20 this year. This will be added to the 15 per cent increase in last year’s budget. This assistance is available to people who receive government support payments and rent their home.
For single parents or couples with at least one child, the maximum support benefit will increase by $70 per fortnight.
Critics point out though that this increase falls well short rental market cost increases in Sydney, Melbourne and Perth, where rents have risen from 10.8 per cent to more than 15 per cent.
Incentives for ‘build-to-rent’ foreign investors
As previously announced, tenants should eventually benefit from tax incentives offered to foreign investors backing build-to-rent developments, however this housing sector remains very much in its infancy in Australia.
More concessional loans for community housing
The budget will also deliver $1.9 billion in concessional loans to help community housing providers construct 40,000 social and affordable homes. Meanwhile, the $2 billion Social Housing Accelerant Payment will fund 4,000 new or refurbished social houses.
Supporting vulnerable populations
Recognising the specific needs of vulnerable groups, the budget also dedicates $1 billion to assist women, children and young people fleeing domestic violence. This commitment not only addresses an urgent social need but indirectly supports the rental market by providing targeted housing support, which could alleviate some pressure on the overall market.
More roles for women in housing
$55.6 million has been earmarked for investment in the Building Women’s Careers Program which seeks to increase participation across traditionally male-dominated industries like construction.
The controversy surrounding funding
While the headline numbers are promising, the revelation that some of the funds may be repurposed from existing allocations has sparked controversy. This has led to mixed perceptions about the newness and actual increase in funding dedicated to housing. Potential renters and buyers should stay informed about how these funds are being distributed and managed, ensuring that the promised expansion in housing actually materialises.
The impact of foreign student policy changes
Interestingly, the budget announcement coincided with changes to policies affecting foreign students, which may also impact the housing market. The government's decision to allow education providers to exceed caps on student numbers if they invest in new student accommodation could lead to an increase in the construction of such facilities. This move could indirectly benefit the wider housing market by reducing competition for rental housing among local residents.
Increasing the pipeline of construction workers
The government has allocated $90.6 million to expand the construction workforce, with the bulk of this funding ($88.8 million) going towards 20,000 fee-free TAFE training places for workers in construction and housing from 1 January 2025.
$26.4 million has been pledged to create approximately 5,000 places in pre-apprenticeship programs, and the government will lift payments for apprentices in priority occupations from $3,000 to $5,000, and hiring incentives for priority occupation employers from $4,000 to $5,000 for 12 months from 1 July 2024.
The government also says it will simplify skills assessments for approximately 1,800 potential migrants from countries with comparable qualifications who want to work in housing construction.
Long-term market considerations
The government's strategy appears to be aimed at tackling high immigration and its impact on housing demand. By allowing a more flexible approach to student accommodation, the policy may alleviate some immediate pressures on housing availability. However, the long-term effects of these policies will need to be closely watched, particularly in major cities like Sydney, where the influx of international students has significantly affected local housing markets.
For Australians struggling to find affordable rental properties or aiming to purchase their first home, Budget 2024 brings both hopeful prospects and areas requiring healthy scepticism. The government’s significant financial commitment towards housing should, in theory, increase supply and help stabilise the market. However, the effectiveness of these measures will depend largely on the execution and a real increase in housing stock. As we move forward, it will be essential for the government’s inflation forecasts to be correct, and for its initiatives to successfully improve the speed at which our nation can construct new homes.