Federal Budget and Inner City and Inner West Property

The Albanese government’s first Budget is in, and it’s homing in on housing.

We take a look at what was announced in the Budget and what it means for the Sydney inner city and inner west property market.

National Housing Accord: the government’s new plan to address housing pressures

Housing challenges, in the form of low affordability and availability, are being felt across the nation. In Zetland, for example, the vacancy rate for rental homes is just 0.9%, while median unit rents have jumped 16.7% in the past year. It’s a similar story in Alexandria, where unit rents have climbed 9.1% in the last twelve months while the vacancy rate has dropped to 1.1%. House prices are no different with the median sales price in Alexandria rising half a million dollars over the past three years. Acknowledging that these issues are affecting homebuyers and renters across the country, the Budget includes a raft of measures designed to address housing affordability and supply.

Front and centre is the new national Housing Accord. The accord’s ambition is to build one million new homes by 2030. All levels of government, from federal to local, have signed up to the new agreement, along with institutional investors (such as superannuation funds) and the residential development, construction and building sectors.

The idea is that the market will supply the housing, with institutional investors incentivised to invest in social and affordable housing by federal government funding covering the gap between market and subsidised rents. This $350 million of funding is intended to deliver 10,000 homes over five years from 2024. State and territory governments have also agreed to supply another 10,000 homes, making 20,000 new affordable homes in total.

The accord pledges that the new homes will be built close to jobs, transport and services, and, like all new houses and high-rise towers in NSW, they will have to meet an energy efficiency rating of at least seven stars, if not more.

Also outlined in the accord are additional actions designed to relieve housing supply issues, including state governments speeding up planning and land release for affordable housing and local governments working on planning reforms and freeing up landholdings.

What other funding for housing is included in the Budget?

As well as announcing the Housing Accord, the Budget also confirms the Commonwealth government’s commitment to its previously announced housing schemes. These include:

Housing Australia Future Fund. The Budget includes $10 billion to establish this Fund to provide a sustainable funding source to boost housing supply. The Fund will supply 20,000 new social housing homes, including 4,000 for older women at risk of homelessness and women and children affected by family and domestic violence. It will also fund 10,000 new affordable homes, with some earmarked for frontline workers.
National Housing and Homelessness Plan. In addition to the Housing Accord, the government has pledged to develop a plan to put a roof over the heads of more homeless Australians.
National Housing Supply and Affordability Council. The Budget included funding to establish an independent council to advise the Australian government on housing policy, including options for improving affordability and supply.
Help to Buy. Help to Buy is the federal government’s shared equity scheme, where the government buys and owns up to 30 or 40 per cent of a property, which means home buyers can get into the market with a smaller deposit and a smaller home loan. The NSW government announced a similar program in the state budget back in June.
Freeing up housing stock. The government is encouraging older Australians to downsize (and thus return larger homes to the market) by extending the exemption of home sale proceeds from pension asset testing from one to two years. Access to downsizer super contributions will also be opened up to people aged 55 to 59.
Boosting homeownership. Programs designed to make buying a home easier, like the Regional First Home Buyer Guarantee and the Defence Home Ownership Assistance Scheme, also received funding in the Budget.

What’s not changing?

The Budget made no mention of housing tax settings, including stamp duty and negative gearing and capital gains tax for investment properties. (The state government announced changes to stamp duty for eligible first home buyers in the NSW Budget earlier this year.)

What does the Budget mean for the inner west and inner city property markets?

There’s no doubt that housing affordability and supply is a nationwide challenge that requires government attention, and the new Housing Accord is a welcome step towards addressing these issues. However, work on the new homes promised under the accord isn’t due to start until 2024, which means that rental prices are likely to remain high and vacancy rates squeezed in the meantime. It’s also not yet clear where the new homes will be built – only time will tell if Sydney’s inner city and inner west will receive new housing under the accord.

It’s hoped that the government’s existing housing policies, like Help to Buy and incentives for downsizers, will benefit inner west and inner city homebuyers and sellers, and they may help to ease housing affordability at a broader level in the longer term.

Interestingly, the Budget Papers note that housing affordability in Australia is actually at or better than the OECD average, and it’s stable and improving. A balanced property market, where prices are steady and within reach, is good news for buyers, sellers and investors alike.

Looking to buy, sell or invest in Sydney’s inner city or inner west? We can help. Get in touch with my team today.