Andrew Bell’s Market Update: The Budget 2017 Overview
Issue 11 | May 25th, 2017 | The Budget 2017 Overview
Can budget 2017 fix housing affordability?
On the supply side there were, for the first time, incentives for downsizes, where proceeds from a seller’s family home can be contributed into their Superannuation Fund, but capped at $300,000. New rules apply to the National Affordable Housing Agreement which is already in place and pleasingly will continue. This should, in theory, add to the supply of properties nationally, although this is too difficult to measure in advance.
Funding for community housing has seen a substantial boost with the establishment of the National Housing Finance and Investment Corporation. This has been designed to source funds for lending to the Community Housing Organisation at lower rates on longer terms. There is not a lot that Federal Governments can do to add to housing supply as it is more a State and Local Government issue.
On the other side of the coin, there have been some changes that buyers should take note of. Most importantly, first home buyers have been given the leg up to assist with their savings for a deposit via a new first home super saver scheme, whereby first home buyers can salary sacrifice their income directly into the same account as their Superannuation. This is capped at $15,000 per annum and with a $30,000 total. We are seeing significantly increased activity amongst first home buyers at present which is great to see.
A major relief to many investors with negligible changes to negative gearing. There were slight changes, such as investors are no longer able to include travel associated with their investment property as a deduction and some changes to depreciation, which excludes items such as dishwashers, ovens and hot water systems. Other than that, there were basically no changes.
Further measures in relation to foreign buyers and not so much to prevent them, but rather to profit from them, where the Government announced a new $5,000 levy on foreign owned properties that are left vacant for at least 6 months over a year period, as well as ensuring foreign buyers are exempt from any Capital gains tax concessions. Developers of new properties can only sell 50% of their development to foreign buyers.
Many Benefits from Federal Budget 2017
I don’t think there has ever been a budget in the history of Government that has resulted in everyone being happy. If you think of all the massive array of interest groups, such as every single tax payer in Australia, companies paying tax, charities, medical research groups, schools, pensioners, the military, sporting groups, first home buyers, hospitals and so the list goes on, how could it be that every single individual and group would be happy for one budget. The reality is, if you were to give more money to any one of those groups, it means others would get less and so it is one mighty juggling act. However, it does appear that this budget has gone through without any major uproar and is considered as a fairly balanced budget.
Great timing as well. It dovetails into forecasts by the Reserve Bank of Australia, Treasury, and the Federal Government themselves, and even the International Monetary Fund who are all forecasting good growth ahead for Australia. The forecast is we could be getting into 3+ percent bracket. That means we can really look forward to a significantly better budget next year off the back of higher tax receipts, which of course will stimulate even more activity in the economy. It was only 6 or so months ago that we were talking about the possibility of a recession. We seem to be well past that and we are now really starting to see some momentum in our economy.
From a real estate perspective, both the budget and these forecasts would suggest that there is no reason to see a significant downturn in the economy affecting our market and so we will keep an eye on interest rates, more restrictions by APRA on lending, and perhaps just buyer fatigue as the only things to take further momentum out of the real estate market.
You’re Invited – The Ray White Muscular Dystrophy Ball
I will also take this opportunity to give you the heads up on our annual Ray White Surfers Paradise Muscular Dystrophy Ball. Dates are locked in for the 9th of September. We recently announced the dates on our Facebook page and we already have had nearly a third of the tables booked out. Over half the platinum tables were booked the following day. I guess this is a big endorsement of the ball and the fun night it is for all. For all of our wonderful regular attendees, and to all our great clients, please let us know ASAP whether you would like to book a table. Click here to view the website.
That is it for this week. As always, stay safe and I look forward to being with you in a fortnights time.
Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group