Budget Boost For Property Buyers, Owners And Investors

17 October 2020

Tax cuts, employer incentives and a myriad of other measures in the Federal Budget are great news for first-time buyers, homeowners and investors.

While the property market has been pleasingly stable during the Covid crisis, the Government has positioned several policies to use real estate as a driver of economic growth and employment.

The two headline promises – tax cuts and the JobMaker incentive for employers – will give positive jolts to the rental market and property investors, and provide more cash for those seeking loans to buy a home.

The Government left negative gearing and capital gains tax untouched. There was discussion within Opposition ranks at the last election of ending or paring back both incentives. However, abandoning negative gearing would be a disaster for the rental market, creating a glut of properties for sale while increasing rents because of short supply – outcomes this budget has sought to avoid.

The Federal Government will invest in bolstering immigration, which has long been a significant influence on property values. The nation’s diminishing birth rate is regarded as a long-term threat to property values, so homeowners should welcome this move.

Another big play is the creation of an extra 10,000 places in the First Home Loan Deposit Scheme on condition that only new homes are purchased.

This is a boost for first-time buyers who already benefit from record-low interest rates, state government grants and stamp duty discounts.

The latest changes mean new buyers will need only a 5% deposit instead of the 20% that had been required to avoid lenders’ mortgage insurance. The Federal Government will guarantee up to 15% of the loan. These measures alone will contribute $800 million in economic activity, according to the budget papers. It’s important to remember that encouraging first-time buyers fortifies all property values – all boats rise on a high, as they say.

There’s no extension to the $680 million HomeBuilder scheme, which was created earlier this year and promoted as a tradie-led recovery. Budget papers say it’s done its job but will support construction activity into next year.

The $5.5 billion small business package – one of the pillars of the budget – will undoubtedly help construction firms and those companies supplying services to the property sector.

There’s also good news for homeowners who provide accommodation to elderly family members or those who are disabled. No capital gains tax will now be applied to accommodation extensions such as a granny flat if the tax office accepts a formal written notice.

Here are some of the other highlights that serve to support the property market.

  • No change to taxes relating to investment properties. Capital gains tax and negative gearing have been untouched – great news for homeowners and property investors.
  • An additional $1 billion through the National Housing Finance and Investment Corporation to support the construction of affordable housing.
  • Indigenous Business Australia to receive an additional $150 million for the Indigenous Home Ownership Program that will issue 360 construction loans in regional Australia.
  • Additional funding for the Australian Bureau of Statistics, whose contribution to property data and the decision we all make based on its figures should not be underestimated.
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