Prospective first homebuyers have been thrown a lifeline in a surprise announcement featured in the federal budget.
Treasurer Jim Chalmers, in his budget speech on Tuesday night, said the government had struck a new National Housing Accord between the three levels of government, investors and industry.
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The agreement aims to see 1 million new, well-located homes built over five years, beginning in 2024.
Many of these would be built regardless, due to population growth and other factors.
But the budget commits an initial $350 million in additional funding for another 10,000 affordable homes, on top of existing commitments, to get the accord started.
“This will be delivered through an ongoing funding stream to help cover the gap between market rents and subsidised rents – making more projects commercially viable.”
State and territory governments would build on the agreement by matching the 10,000 home pledge.
Despite a recent fall in property prices, Australia’s housing market is still among the most expensive in the world.
The median house prices in Sydney, Canberra and Melbourne are all above $900,000.
Meanwhile, for renters, the recent rise in interest rates has pushed up mortgage repayments while the rental vacancy rate is at an all-time low of 1.1 per cent.
All of this spells higher rent and fewer available properties.
The first budget under Prime Minister Anthony Albanese, who famously grew up in commission housing, aims to address some of these issues.
“Most of this supply needs to come from the market, not the government,” Chalmers said.
“But there’s a role for government, and we intend to play a leading role – by coordinating and kick-starting the investment we know needs to happen.”
Investors, including superannuation funds, endorsed the Accord, Chalmers said, and will work to “leverage more investment”.
Peak construction industry bodies support the building of the homes, the treasurer said, and would be working with a high-energy efficiency rating in mind.
The scheme will also allow more apprentices to be trained under the government’s extended Skills Guarantee.
“We don’t pretend that this accord solves every issue, nor do we pretend we can solve this problem overnight,” Chalmers said.
“But this is a serious start – a serious agenda that will lead to more Australians knowing the security of a good job and decent housing.”
He said, in advance of the budget being handed down, that one of the priorities was building homes in areas where there was employment available.
“As I move around Australia consulting with local communities, workers and employers, one of the big challenges we have in our country and economy is that it’s harder and harder for people to grab the opportunities of low unemployment if they can’t live near where the opportunities are.”
Additionally, older Australians will also be given a new enticement to downsize their homes, expanding the eligibility of people who can contribute to their superannuation fund from a sold home.
Previously, only those aged 60 or older were able to make a $300,000 one-off post-tax contribution to their super fund.
Tuesday’s budget lowers that age to 55.
“This measure provides greater flexibility to contribute to superannuation and aims to encourage older Australians to downsize sooner to a home that better suits their needs, thereby increasing the availability of suitable housing for Australian families,” the budget papers state.
The announcement is timely, after it was revealed the average cost of renting in Australia had reached a new record high.
Property marketplace Domain released its quarterly rental market update, revealing Australian unit and house rent had increased by $70 and $60 respectively in the 12 months to September.
Domain chief of research and economics Dr Nicola Powell said a disparity in supply and demand was driving increased rental prices.
“Demand pressures have been caused by a combination of factors, including the lack of affordable homeownership, changing household formation and the return of skilled migrants and international students,” she said.
“On the supply side, we have seen delays in building completions due to supply chain issues, weaker investment activity and the conversion to short-term rentals as tourists return.”
The national vacancy rate, a measure of the proportion of available properties, was at a record-low 1.1 per cent in September.
“The consecutive run of interest rate hikes may have also pushed some landlords to pass on additional home loan costs, while successive falls in the vacancy rate and record-low rental listings is worsening pressure on tenants,” Powell said.
Sydney continues to power the rise in national rental prices, with house prices increasing by 4.8 per cent in the September quarter to $650 a week. The 14 per cent annual increase from $570 a week – an $80 jump – is the steepest since 2009.
Unit prices are back at the pre-pandemic record-high of $550 a week, an increase of $25 per week in the three months to September or $70 over the year.
Melbourne is also experiencing a post-pandemic turnaround, with house rents rising on average to $470 per week and unit rents to $425. These are annual increases of $40 a week for houses and $55 a week for units.
Perhaps surprisingly, Adelaide experienced the sharpest quarterly rise in unit rents, increasing by 5.3 per cent.
Powell attributed this to a supply issue.
“Unfortunately, there is no quick fix to alleviating conditions, but there are solutions,” she said.
“If investor activity is encouraged, advance the build-to-rent sector and help tenants transition to homeowners, if we encourage investors away from the short-term rental market and promote participation in social and affordable government housing programs through financial incentives, we will see some pressure ease in the rental market.”
She also said the government could be doing more to help low-income families.
“We also need to see greater participation from the government through an increase in rent assistance for low-income households, as this hasn’t risen in line with rents, and a stronger commitment to building more social housing,” she said.
“Although the government has committed to building more housing, we need to see further progress and a change in land use and planning rules to allow for more homes to be built in middle-ring suburbs.”
The accord isn’t the only measure in the budget that addresses the issue of affordable housing.
Chalmers said the budget included the Housing Australia Future Fund – announced on the election campaign trail – that would build 30,000 new social and affordable homes in its first five years.
The National Housing Infrastructure Facility would support an additional 5500 new homes.
The government’s Help to Buy Scheme, open to 40,000 people, enables eligible Australians to buy their first home with a lower deposit and smaller mortgage.
A Regional First Home Buyer Guarantee supports another 10,000 new homeowners outside of the capital cities each year.
“Supply hasn’t kept up with demand, which means too many struggle to live close to where they work,” Chalmers said.
“Too many are stuck on waiting lists for social housing.
“And for too many, the great Australian dream of home ownership seems completely out of reach. Our country can do better than that – and our government will.”
A national campaign for solving the housing crisis says the Accord could be a “gamechanger” in getting more people into affordable housing.
Everybody’s Home national spokesperson Kate Colvin welcomed the package as being “desperately needed”
“The Accord has the potential to be a game changer for housing affordability, which has spiralled out of control with devastating consequences for so many Australians,” she said.
“Bringing the states and federal government together with local government and super funds unlocks enormous potential. We hope this new collaboration will lead to continued growth in social housing alongside growth in affordable housing, to meet the enormous need from people on the lowest incomes.”
The Master Builders Association lauded the announcement, saying it brought all stakeholders in housing development together.
“Struggles around housing affordability have persisted over many decades. These difficulties have arisen because the supply of homes has not been able to fully keep up with growth in housing demand,” Master Builders CEO Denita Wawn said.
“Over the next three years, Master Builders Australia forecasts that new home building starts will fall significantly short of 200,000 per year, the volume of output that will be needed to meet demand. Our forecasts indicate this threshold will not be exceeded until 2026.
“As a signatory to the accord, Master Builders Australia will work constructively with governments and industry to deliver the joint housing target of 1 million new, well-located homes over five years from 2024.
“Master Builders has long advocated for the obstacles faced by the building and construction industry that prevent many of the homes we need from getting built to be addressed. This includes lengthy delays in approvals for land title, development and building applications, occupation certificates, shortage of land in the right places, high developer charges, and inflexible planning laws.
“The RBA has recently identified the capacity constraints limiting the rate of housing growth and the level of dwelling investment with increases in labour and materials costs expected to compress margins and increase the risk of insolvencies, as such, this accord is timely.
“We thank the federal government for taking the first step in bringing all parties together to start tackling this crisis and look forward to working with all levels of government to ensure this is achieved in a consistent way.”
Hayley Taylor / Crime Sydney
Alex Chapman / Finance
Alex Chapman / Sunrise
Alex Chapman / Budget
AAP / Politics
Hayley Taylor / Crime Sydney
Alex Chapman / Finance
Alex Chapman / Sunrise
Alex Chapman / Budget
AAP / Politics