Australia's Budget 2020 paid special attention to the residential building industry and how it can help in the country's economic recovery in the wake of the COVID-19 pandemic, experts say.
Adrian Kelly, president of the Real Estate Institute of Australia, said the Budget 2020 was able to provide an "encouraging outlook" for all the stakeholders in the property market.
"The Australian government's focus on creating employment and generating re-employment through various budget measures is good news for tenants, investors, homeowners and those wishing to sell," he said.
Graham Wolfe, managing director of the Housing Industry Institute, said the incentives announced by the government, including the expansion of the First Home Loan Deposit Scheme (FHLDS), will help boost homeownership.
"Homeownership is one of the top three issues Australians care most about – improving home ownership rates with sensible and targeted measures can make a real difference for first-home buyers and help deliver on the nation’s economic recovery from our current COVID recession," he said.
Furthermore, Wolfe said the expansion of the scheme will open up the residential building industry, creating more job opportunities.
"Combined with the confidence-boosting business investment incentives, these measures will go a good way to helping Australians during these unprecedented times to secure a job and achieve their dream of homeownership," he said.
According to Urban Development Institute of Australia (UDIA), housing and construction sectors contribute around 750,000 direct and indirect jobs across the country.
However, Kelly pointed out a potential concern with the expansion of the scheme, saying it was a missed opportunity for the government to truly encourage more would-be buyers. Kelly said first-home buyers are more likely to purchase established dwellings due to affordability.
"It would have been far better to not limit the additional places to new builds in terms of the economic impacts and first home buyer preferences." he said. "The scheme should be extended to all eligible buyers of all homes, not just new builds."
Tax cuts
Still, Kelly recognised the potential impacts of the planned income tax cuts on housing affordability.
"Bringing forward and backdating the stage two tax cuts will improve borrowing capacity and housing affordability. This comes at a time when the outlook for interest rates will remain low until at least 2023," he said.
Jane Rennie, general manager for external affairs at CPA Australia, said these tax cuts will help get money back into the economy through individual spending and business investment.
“Many small businesses operate as sole traders and these tax cuts will help them with cash flow and put money back into their business. Of course, tax cuts only provide effective stimulus to the extent that they translate to increased consumer spending," she said.
Regional infrastructure
Another highlight from the budget was the investment in regional infrastructure. Kelly believes this will help spur job creation and local economic recovery.
"Economic activity is forecast to pick up strongly from late 2020 and into early 2021, driven by a further easing of COVID-19 containment measures and improving business and consumer confidence," he said.
Rennie shared similar insights, adding that the planned spending towards regional Australia is one of the biggest budgets in history.
"Infrastructure spending plays an important role in driving job creation. It is important that provision is made for projects in each state and territory which provide a short-term economic boost, such as repairs and maintenance to existing public assets, as well as long-term large-scale projects," she said.
Population growth
Ken Morrison, chief executive of Property Council, said while the budget laid out measures that would help guide Australia to economic recovery, it also put into light concerns on population growth. Morrison said the expected delay in population restart could potentially be a drag on the overall economic recovery.
"The closure of our international borders means net overseas migration which previously accounted for around 60% of population growth will actually go into reverse next year for the first time since 1946, with an outflow of 72,000 people," Morrison said.
This is crucial, given the dependence of residential construction on population growth. A study by the UDIA shows that a fall in net overseas migration will likely result in an annual reduction of 50,000 homes per year for the next five years.
"Efforts to tap domestic demand and keep jobs flowing across the housing construction sector will be essential to maintaining economic momentum until net overseas migration returns to more sustainable levels," said Simon Basheer, president of the UDIA.
