An Australian economist has described the country’s federal housing budget as “depressing.”
Handed down by Treasurer Jim Chalmers on May 14 evening, the 2024 budget promises big spending on housing, with the treasurer touting an “ambitious” plan for 1.2 million new home builds in five years.
But Matt Grudnoff, a senior economist with the Australia Institute, told The Epoch Times this week’s budget is like any other handed down by governments “tinkering around the edges.”
Changes to the nation’s housing situation, he says, are likely to remain the same, or with only very small levels of improvement.
Of the $32 billion (US$21 billion) promised for housing in the budget, just $1.4 billion is fresh funding, according to Mr. Grudnoff.
Concerns have centred around housing in the past few years due to high levels of migration into Australia as well as domestic movement between states leading to house prices skyrocketing in previously affordable areas.
Queensland, which has typically offered cheaper housing than the southern states, is tipped to receive more than 100,000 new residents over five years.
Many of the new arrivals will be fleeing high housing costs in Sydney.
Treasurer Spruiks Housing Policy
Mr. Chalmers touted his budget as a win for renters and prospective home buyers, promising to build more new homes and boost rent assistance for those on low incomes.“More homes are more affordable homes and a better deal for buyers, builders and renters alike,” he said in his budget speech.
Mr. Chalmers said his government would focus on getting more people learning trades, clearing infrastructure bottlenecks that could get in the way of building homes, and funding more social housing.
Universities would also have to start building their own accommodation for students, while extra funding would be dedicated to addressing homelessness.
But Mr. Grudnoff said the only two ways to provide true relief would be to increase supply or decrease demand.
“Governments on both sides haven’t seemed to solve the problem, they want to look like they’re solving the problem,” he said.
The economist said successive governments had been reluctant to upset investors by talking about lowering property values.
“We use housing affordability as a proxy because we don’t like to say what it is,” he said. “Politicians don’t want to say they want house prices to fall.”
Mr. Grudnoff said lowering property values was predominantly an investor concern because those who sold a house to buy a new home to live in, may receive less in a sale, but would also have to output less when buying again.
Concerns Budget May Push Up Prices, Increase Demand
Mr. Grudnoff said some measures in the budget could actually make the housing situation more dire, such as the $5.5 billion shared equity plan which enables first home buyers to buy a home with the government.The move would mean prospective buyers could do so with a lower deposit, with the government taking on an equity stake of 30 to 40 percent of the property’s value.
That equity stake would eventually be paid off by the buyer or returned upon sale of the home.
The government will effectively make money from the plan, because it will receive the percentage back if the home is sold, as well as capital gains tax.
But “the equity stake would ultimately make it dearer,” Mr. Grudnoff said.
He explained that unlike many other items for sale, soaring prices often increased demand with housing because buyers would feel an urge to get in quick before they got even higher.
No Relief in Sight, but 1 of 2 Situations Likely to Happen
Mr. Grudnoff said it had taken 20 years and many billions of dollars for governments to “really stuff up the housing market,” and the future would likely take one of two directions.The electoral calculus is bound to shift.
“Those who don’t have houses will grow to a point where you can’t ignore them,” Mr. Grudnoff said.
Either more homes will need to become available with the help of proactive government policy, or the attitude on renting in Australia would have to evolve from assuming renting is just a phase.
Mr. Grudnoff cited Germany as an example of a nation with “world-class” rental laws that Australia might want to look to in the future.
Many Germans rent, benefit from long leases, and have more control over their rental home as if it were their own.
“One of the two will eventually happen, presumably, hopefully,” Mr. Grudnoff said.
Industry Stakeholders’ Mixed Reaction to Housing Budget
The budget received a mixed response from stakeholders in the housing sector, with the Property Council of Australia welcoming a focus on housing in what it termed a “silver-medal budget.”“The government’s continued focus on housing is welcome,” he said.
“This budget contains solid investment in housing—particularly for the most vulnerable—and the better planning of our cities.”
“To hit 1.2 million homes by 2029, we need to improve investment settings, incentivise housing approvals, further boost gold medal housing options including retirement living, purpose-built student accommodation and build-to-rent housing and bring more tradies in from overseas to complement domestic capacity.”
Mr. Zorbas praised the treasurer for drawing a focus on student accommodation and for increasing rent assistance.
He did suggest, however, that it would be ideal to see the move extended to those living in retirement villages.
The Real Estate Institute of Queensland (REIQ) however, was slightly more sceptical, saying it seemed many promises in the budget were there for short-term relief rather than long-term planning.
REIQ Chief Operating Officer Dean Milton said mortgage holders would be hit hard, with medium to long-term inflation a concern.
“The budget contains welcome cost-of-living assistance with increased rental subsidies for the more vulnerable members of our society, helping to take pressure off strained household budgets and keep roofs over heads,” he said.
“However, the supply side initiatives which included commitments to states and territories to deliver long-term infrastructure to support new residential development, are a step in the right direction, but still a marathon away from equating to homes.”
Mr. Milton said the government’s surplus would have been a good opportunity for new initiatives.
“With a surplus, this could have been a real opportunity for the federal government to start the conversation to reform the tax base for the states away from stamp duty and land tax, which in turn would improve the chances of people being able to buy a home,” he said.
Meanwhile, Master Builders released a statement saying they welcomed the government’s approach to solving the housing crisis, but warned it must now commit.
“As it walks an economic tightrope, the federal budget has made positive steps towards boosting housing supply, but it can’t falter mid-way.
“To ensure the industry can build the 1.2 million new homes under the housing accord, government ministers must sing from the same hymn sheet and focus all efforts on boosting housing supply,” CEO Denita Wawn said.
