Issue 10 | Thursday 18 May 2023 | Breaking Down the Budget: Missed Opportunities and Urgent Solutions for the Housing Crisis
We have recently received the announcement of our Federal Budget, and there was great anticipation for various aspects, particularly a solution to the multiple crises we currently face. These include issues in healthcare, skilled labor shortage, aged care, and especially the housing crisis. We see numerous individuals displaced, resorting to living in their cars, in caravan parks, or moving in with friends or relatives due to a severe shortage of housing. This problem is not exclusive to Australia, but we are seeking Australian solutions through the budget.
It is important to note that this budget was prepared with the knowledge that our housing problem not only exists currently but will worsen in the coming years. Recent information indicates an estimated 1.5 million people will migrate to Australia within the next five years to address the significant shortage of unskilled labor and to stimulate our economy. Consequently, both short-term and medium-term actions are required. In the next few months, we expect an increased supply of properties for rent or purchase, while in the next two to three years, there should be a continuous supply of homes. It is crucial to recognize that the current volume of homes being built is declining, resulting in a shortfall even when keeping up with population growth.
With this news constantly featured on our screens and governments acknowledging the problem, we hoped for significant announcements in the Federal Budget. However, disappointingly, nothing of significance emerged.
Although there was a 15% budget increase in the Commonwealth Rent Assistance already available to Australians on pensions and benefits, it only aids those already receiving rental assistance. The focus was not on expanding the program to provide more assistance to a broader range of people. This rent assistance grant is limited to pensioners and those on programs such as Job Seeker, leaving the majority of people without any benefit. It is encouraging to see some measures introduced to support the build-to-rent sector, but these are modest adjustments that fall short of significantly boosting the availability of rental properties. To make this sector successful in Australia, substantial policy changes are necessary, as they have been in many other countries worldwide. The right tax policies can ensure a substantial increase in housing supply within the next three years or more. More should have been done to incentivize this sector.
It is positive to witness an increase in social and affordable housing, with an additional $2 billion allocated to construct around 7,000 new dwellings. While this is a welcome move for the approximately 20,000 eligible individuals, it falls far short of what is needed. The budget missed the urgent need for both federal and state governments to incentivize investors and builders of affordable housing. It is important to remember that the supply of available rentals has decreased by 18.3% year on year. As existing investors sell their properties, the number of new investors entering the market is insufficient to compensate, resulting in a continual decline in the number of rental properties available. Over 90% of rental properties are owned by individuals who own just one property, such as firefighters, nurses, and public servants. However, recent developments have made these individuals less confident about purchasing properties. Rising interest rates and discussions of rent freezes without corresponding freezes on other property-related costs, such as council and water rates, insurance premiums, and interest rates, have discouraged investments. To increase the number of rental properties on the market, we must incentivize this sector through tax incentives implemented by the federal government. State governments should also play their part by reducing stamp duty and avoiding excessive impositions on state tenancy legislation. The current timing for such measures is unfavorable.
For the medium and long term, substantial incentives must be implemented to support the build-to-rent sector, and major construction companies and developers need to be incentivized to build in price brackets that reflect the strongest demand from first-home buyers. Unfortunately, the budget failed to address all of these crucial aspects, leaving us destined to continue experiencing a housing crisis, one that will worsen over time.
On a positive note, I am pleased to share that the Real Estate Institute of Australia will convene on the Gold Coast later this month, bringing together housing market experts to discuss policy recommendations for the government. It is important to recognize that the Gold Coast is among the areas facing the most severe shortage of both available properties for purchase and rent, due to a surge in migration from other states. We trust that this gathering will produce clear recommendations that we hope both federal and state governments will adopt. These recommendations can provide immediate relief to the numerous distressed households who are struggling to find a way forward and meet their urgent housing needs.
From the perspective of addressing our current crisis, it is unfortunate that the budget fell far short of our expectations. We acknowledge the multitude of demands faced by the government across various sectors whenever a budget is prepared. However, it is hard to imagine any sector more critical for a government to address than housing its population. As a board member of the Real Estate Institute of Australia, we are committed to working closely with the government to advocate for the necessary changes.
As we approach the winter season, the Gold Coast once again shines as one of the best places to live in the country during these months. We are delighted to share that we recently achieved a record-breaking sale at an auction, with a property sold for $10.8 million, marking the highest price sale in the country for that week. This remarkable achievement demonstrates the continued strength of the Gold Coast property market. Our success rate at auctions currently stands at an impressive 90%, a result typically associated with real estate booms. These are indeed fascinating times.
Lastly, I would like to extend my best wishes to the hundreds of thousands of individuals receiving this eNews, not only in Australia but across the globe. It reaffirms the immense interest people from all corners of the Earth have in the city of the Gold Coast.
Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group