Federal Budget 2022: What It Means For Real Estate

With a federal election soon upon us, Federal Budget 2022 loomed as an important one.

After all, this was the opportunity for the Morrison government to state its economic case for re-election.

Much of the budget was aimed fairly and squarely at inflation and the rising cost of living, with a temporary reduction to the fuel excise stealing many of the headlines. But there were also several measures aimed at the property market.

We take a look at what these were, how they’re likely to shape the local Perth real estate sector, and how Budget 2022 is likely to impact property investors, tenants and homebuyers.

More relief for first home buyers, regional Australians and single parents

As the Prime Minister made clear earlier this week, one of his key priorities is to get more people into their first homes. This was reflected in the Budget, with the announcement that the New Home Guarantee scheme would be expanded to 35,000 places – up from 20,000 places this year.

The scheme was developed in recognition of the fact the biggest impediment to buying a first home is saving a deposit – especially with rising national property values. So it guarantees up to 15% of the purchase price of a property, allowing a first home buyer to take their first step on the property ladder with as little as five per cent of the purchase price. That means they won’t need to take out expensive lenders’ mortgage insurance (LMI).

The Federal Government will also extend the Regional Home Guarantee to 10,000 places, allowing many regional buyers to purchase property with a five per cent deposit, regardless of whether or not it is their first home.

Finally, the government announced the expansion of the Family Home Guarantee, which allows single parents looking to enter or re-enter the property market to buy with just a two per cent deposit.

Each of these schemes should provide welcome news to a lot of Western Australians, especially with rents rising so rapidly over the past year. However, it’s worth noting that income and property thresholds apply.

Still, when combined with State-based schemes, such as the First Home Owner Grant and Stamp Duty Concession – as well as low-interest rates – buying a first home has become an attractive proposition for many of us. We think it will result in many more Perth residents entering the market for the first time.

New social housing measures

Another welcome Budget 2022 announcement was that the federal government would be setting aside $2 billion for the National Housing Finance and Investment Corporation (NHFIC). The NFIC provides loans to community housing providers so they can build, acquire and maintain social housing. The government says this boost in funding will allow for community groups to provide 27,000 more low-cost dwellings.

We believe this is vital right now in Perth, given acute shortages in rental stock. Demand is far outstripping supply and often properties are rented out the very moment they hit the market. This isn’t just driving up prices, it’s also making it difficult for a whole generation of would-be renters who simply don’t have the stability or finances to enter the rental market.

Again, we believe this is a positive development and one that should provide for more housing without impacting property prices or rents.

Interest rates and inflation

As we mentioned at the start, much of the budget was aimed at curbing inflation. And, while not classed as a specific property-related measure, inflation is central to the way our property market operates on a number of fronts. When the price of day-to-day living goes up, people have less money to spend on housing – unless of course wages go up too.

Inflation is on track to rise to 4.25% this financial year and is then forecast to be 3% next year. Meanwhile, wages are set to grow by 2.75% this financial year and then 3.25% over 2022-23. This means, in short, that people are likely to have less money to devote to their mortgages or rent.

On top of this, rising inflation is also usually accompanied by rising interest rates which could put further pressure on people’s wallets.

On the other hand, while rents are rising, it pays to remember that property here in Perth remains relatively affordable compared to the rest of the country. Western Australia has the highest median income of any state and yet Perth’s median property value of $535,335 is the lowest of any state capital and less than half of Sydney’s.

That means the kind of mortgage stress seen in Melbourne and Sydney isn’t the same issue here. There is still potential for real price growth. For investors, that makes Perth one of the standout markets for the coming year.

Want more?

Our award-winning team can help you make the most of your investment property. If you’d like to find out more, contact our friendly team today.

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