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Budget 2021: What It Means for Property

2021 federal budget

The landmark 2021 federal budget is all about business productivity and jobs to drive the post-pandemic economic recovery.

In terms of the headline numbers, federal treasurer Josh Frydenberg announced a budget deficit of $106.6 billion for 2021-22, which was little changed from the $108.5 billion deficit the federal government forecast at the December 2020 mid-year economic and fiscal outlook.

A huge emphasis on infrastructure spending is set to buoy property development while funds allocated to the aged sector are likely to spearhead investment in aged care homes.

It’s a similar story with child care, with new subsidies poised to encourage property investment in this sector.

Stimulus measures prompted by the Covid-19 pandemic have seen the national debt approach $1 trillion, although budget papers reveal the coalition now expects the JobKeeper wage subsidy will cost $12.5 billion less than expected, given the economic recovery has been stronger and faster than anticipated.

Treasury is also expecting an extra $5.1 billion from income tax versus its 2020 estimates.

The strong iron ore price is also helping to boost government earnings in the current financial year.

Incentives will apply additional stimulus to housing market

Two budget measures are likely to change the dynamic in the residential property market.

The federal government has extended the First Home Super Saver Scheme so Australians can contribute up to $50,000 to their super fund to be used for a deposit, up from $30,000 when the scheme was introduced in the 2017-2018 budget.

An extra 10,000 places will also be added to the First Home Loan Deposit Scheme so first home buyers who are approved for the scheme can buy or build a new home with a deposit of just 5 per cent.

Single parents will be backed to buy their own home with a 2 per cent deposit.

The federal government is also continuing it’s incentive to underwrite lenders’ mortgage insurance for this group of borrowers.

These measures are designed to give first-home buyers a leg up into the booming property market.

Treasurer Josh Frydenberg has also indicated he’s open to the idea in the future of people using their super to buy a home.

2021 federal budget

▲ Ten thousands places will be added to the First Home Loan Deposit Scheme (rebranded as the New Home Guarantee).

At the other end of the spectrum, the age at which retirees can access the downsizer scheme has been lowered from 65 to 60.

The measure allows people older than 60 and are in retirement who sell the family home to contribute $300,000 from the sale proceeds to their super fund over and above other contribution rules.

Couples are able to add $600,000 to their super savings from this scheme.

The government will spend $780 million on additional stimulus to the housing market through an extension to the HomeBuilder scheme.

Infrastructure, roads and rail get $15.2bn boost

Infrastructure spending is a huge focus of this year’s budget, with the federal government adding an extra $10 billion to its $100 billion, 10-year infrastructure plan.

Key initiatives include $2 billion each for a new Melbourne intermodal terminal and upgrades to sections of the Great Western Highway in NSW.

Western Australian infrastructure will receive a $1.3 billion injection for road and rail projects and northern Australia will receive $190 million in the next five years for development funding.

The Building Better Regions Fund is also getting an extra $250 million for infrastructure projects in rural and regional areas.

2021 federal budget

▲ Nationally $10 billion will be spent on roads and rail.

Plus, there’s $600 million for a National Recovery and Resilience Agency, which will also help to re-build areas affected by recent natural disasters.

Property in popular holiday spots is likely to get a boost thanks to a range of measures designed to support a tourist sector battered by border closures and frequent lockdowns during holiday periods.

This spending bonanza can be a huge boon for property development, not only for the projects themselves, but also for related building and construction.

Migration, international students slow to return to pre-pandemic levels

While the government made a commitment to restoring the permanent migrant intake to 160,000 annually, it is unlikely to happen before 2024. International students are expected to start trickling in later this year, and increase from 2022.

2021 federal budget

▲Net overseas migration won’t return to pre-pandemic levels until 2024, according to budget papers.

“Inbound and outbound international travel is expected to remain low through to mid-2022, after which a gradual recovery in international tourism is assumed to occur,” the budget papers said.

Australian Industry Group’s Innex Willox said greater effort should be made on returning migration to pre-pandemic levels.

“The government [should] stick to a more ambitious plan to reopen our borders to migration and trade in services to drive our economic recovery,” he said.

Federal government responds to the aged care royal commission

The federal government has set aside $10 billion for aged care, with the centrepiece of this initiative spending on home care packages. This could play out in property in a number of ways.

The intention is to keep people in their homes rather than aged care facilities.

But that’s not to say the property sector won’t be involved in retrofitting residential properties so they are suitable for senior Australians. Watch this space.

The National Disability Insurance Scheme is also getting a $26-billion injection next year and an extra $13.2 billion over three years, some of which will also go into residential facilities.

Working families are also a priority this year, with a $1.7-billion childcare package to support women to re-enter the workforce after having children. This is likely to drive construction of new childcare centres

Overall, while the budget bottom line is vastly better than expected, we’re not going to see a surplus for some time.

However, the economy and community will be the winners from the cash splash.

 

 

Article Source: www.theurbandeveloper.com

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Gold Coast

“2021 saw an insatiable appetite for off the plan projects in premium locations.” Five Minutes with Paul Geduon from S&S Projects

SS Projects

It was a stellar 2021 for the Gold Coast apartment developer, S&S Projects.

They sold out Awaken, their Rainbow Bay project of just nine apartments, with a top sale of $8.15 million secured for the penthouse, which was bought by a US couple.

Their nearby project, Esprit, is over 80 per cent sold, and there are plans already on the desk of the Gold Coast City Council for their next project, a rare mixed-use apartment and hotel development in Palm Beach.

Urban recently caught up with S&S Projects director Paul Geddoun to discuss the Gold Coast apartment market.

JC: How did you view the performance of the off the plan market in 2021, and what are the strongest positive and negative factors that will influence outcomes in 2022 and 2023?

PG: 2021 saw an insatiable appetite for off the plan projects in premium locations.

Although the less premium project markets has been strong, the price growth has not been at the same level as premium projects. Sales volumes at record pricing in premium projects is unlike anything we have seen previously.

Esprit

Esprit 217-227 Boundary Street, Coolangatta QLD 4225 

We expect the market to remain strong in 2022 and 2023 however the growth will not be at the same level as there was a little bit of catch up along with more limited stock which has driven these markets at these levels where there is no more projects available and increased competition which will slow the growth.

The negatives are that there has been a shortage in materials and labour due to border restrictions along with globally driven stimulus which has put excess funding into the market with international infrastructure upgrades for job creation to stem any recession fears as a result of Covid which has forced up the cost of construction which may cause some project issues.

JC: What trend (short term or long term) has prompted your greatest enthusiasm for the apartment market, and what is the issue of most concern to you and or your clients?

PG: In general, real estate has seen great growth which has provided many with increased equity which has driven decisions for holiday homes and downsizing into apartments. The greatest concern in the near future is interest rates and people being overextended.

JC: Has urbanisation stalled amid the rush to the regions and what will it look like over the decade ahead? 

PG: I think urbanisation is strong with price growth and competition allowing developers to create better built form outcomes and develop sites in areas where the feasibilities once didn’t allow it.

I think the future looks strong for many new areas that have been the recipients of this higher-grade development creating better urban areas.

JC: How important do you view the push for sustainability practices in the apartment market, and what initiative has seized your interest or focus? 

PG: There is a strong focus on sustainability, and this is being most represented in the fixtures and fittings being installed which are more efficient and it is also common practice to place as much solar on the roof of project to assist in the ongoing sustainability and costs of the operating buildings.

 

Article Source: www.urban.com.au

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Opinion

How home loan mortgages rose in 2021 to record levels

home loan

Lender records were broken in every state and territory except WA, according to the ABS data

Purchases by NSW owner occupiers came with mortgages sat at around $770,000, according to the latest lending data.

The national average mortgage size for owner-occupiers has reached a record high of $595,568 according to ABS data.

Records were broken in every state and territory except WA.

The national mortgage was up $92,404, an 18% hike over the year.

The November ABS Lending Indicators, released 14 January, advised the loans were for the purchase of new and existing dwellings.

The national average mortgage size for owner-occupiers has reached a record high of $595,568 according to new ABS data out today.

Records were broken in every state and territory except WA, according to the ABS data in original terms.

Victorian home buyers saw the biggest jump in their mortgages, up 24% or $120,000 to $618,602.

Average new owner-occupier mortgage size, November 2021

Amount Year-on-year change
National
$595,568 $92,404 18.4%
NSW
$769,459 $125,112 19.4%
Vic
$618,602 $120,032 24.1%
Qld
$513,649 $73,604 16.7%
WA
$439,578 $22,868 5.5%
SA
$421,801 $38,016 9.9%
ACT
$585,859 $58,434 11.1%
TAS
$445,915 $73,175 19.6%
NT
$433,333 $53,271 14%

“Demand for Aussie housing remains firm, but affordability has decreased because home prices have surged more than wages,” Ryan Felsman, senior economist at CommSec noted.

“In November housing stock was high and the country’s two largest states were freshly out of lockdown, so it’s no surprise to see a rise in new lending,” RateCity.com.au research director, Sally Tindall, said.

“Growth in property prices is starting to slow on the back of fixed rate rises and a crackdown by the regulator, but the opening up of borders this year will increase demand, keeping prices moving north,” she forecast.

The data did not include refinancing, nor renovation loans.

Renovation loans surged by 18 per cent in November to a record $569 million. The value of lending for renovations is up by a massive 115 per cent on a year ago.

Canstar analysis showed Australian mortgage holders refinanced $15.72 billion worth of loans to a new lender in November 2021, down 2.3% from October.

 

Article Source: www.urban.com.au

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Opinion

Should you buy that investment property this year?

investment property 1

Property investors are set to snap up homes and apartments across Australia in 2022, as interest rates remain low and rental vacancy rates continue to tighten.

But experts are forecasting it won’t all be smooth sailing, as future landlords face the uncertainty of both federal and state elections, with housing policies that are yet to be defined. They also face possible interest rate hikes, which are looming on the back of inflationary pressures.

While interest rates may not rise immediately, tighter lending rules introduced in 2021 have already made it tougher for investors to get a mortgage, Loan Market Mortgage Broker Daniel Koutsamanis said. But that hadn’t yet had a major impact on the number of people looking to invest.

Changes to loan rules, including the calculation of debt to income ratios, (the amount someone can borrow depending on their earnings), and of interest rate buffers that determine if a borrower can afford a mortgage if interest rates rise by 3 per cent, had seen the amount that could be borrowed fall by between 5 and 10 per cent.

“Budgets are coming down a little bit, but there hasn’t been a drastic change,” Mr Koutsamanis said. “There’s still a fairly decent amount of confidence, with clients wanting to invest. The sentiment is still pretty decent, pretty strong.”

That confidence follows a stellar year for investors, with the number of new loan commitments jumping by 89.6 per cent across the year to October 2021, Australian Bureau of Statistics figures showed.

There was $9.73 billion of new loan commitments for investment properties in October alone, the data showed, despite the hit to rental markets in both Sydney and Melbourne over the year.

Rents in Melbourne dropped significantly over 2021, making it one of the cheapest capital cities to find a rental property. Apartment rents dropped by 7.5 per cent across the year to September and house rents fell by 2.3 per cent, Domain figures show.

Sydney apartment rents fell by 2 per cent over the same period, while house rents rose as people looked for bigger properties during lockdown.

investment property

Tenants have flocked to Queensland to escape lockdowns. Photo: Domain 

Both markets rely on overseas migration to help fill rentals, including international students who were kept out of the market because of the COVID-19 pandemic.

Unlike Sydney and Melbourne, Queensland saw an influx of new tenants and new buyers, moving away from lockdowns in both cities.

Mr Koutsamanis said some investors were still looking at buying in Queensland, where the vacancy rate has dropped below 1 per cent and is just 0.5 per cent on the Sunshine Coast, according to SQM Research.

A rise in tenant numbers is now predicted in Sydney and Melbourne as international borders reopen to overseas students, workers and tourists, providing opportunities for investors across the country, Sydney-based Aus Property managing director Lloyd Edge said.

“With the international borders reopening, there is opportunity for more growth, with students returning at the moment. I think the properties in the city might start to come back,” Mr Edge said.

Demand for Airbnbs could also return, offering investors a way back into the short-stay rental market, Mr Edge added.

While rents may improve slightly with borders reopening, they would stay lower until migration returns to normal levels and investors would need to think about the long term, keeping properties for at least 10 years, said Melbourne-based buyers agent Wendy Chamberlain.

“Over time, real estate is a forgiving investment, so investors do need to look to the long term. They need to buy assets that can weather the storm rather than be hard hit, like student accommodation.”

Ms Chamberlain said looking further out of the city, and in regional areas, where investors could buy a bigger property with their money would help attract tenants looking for more space.

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