No doubt homeowners and real estate commentators are still unpacking the Federal Budget announcements handed down late last month, with cost-of-living pressures still biting and housing supply in the spotlight.
The Government’s initiatives have direct implications for home buyers, renters, and investors with housing continuing to be a top tier issue for voters leading into the May 3 election.
Budget Announcements
First Home Buyers
The government will invest a further $800 million into its Help to Buy shared equity scheme to expand the program, now set to cost $6.3 billion.
The extra funding will increase the income caps from $90,000 to $100,000 for individuals and from $120,000 to $160,000 for joint applicants and single parents.
It will also boost the property price caps to give first-home buyers more choice.
The scheme has been designed to help first-home buyers save for a home deposit faster and get onto the property ladder sooner.
Homeowners and Renters
Homeowners and renters may have missed out on direct housing funds in this budget, but many households are set to benefit from the broad cost-of-living measures.
The cost-of-living measures will be relatively small but helpful to renters and homeowners who have seen mortgage and rental costs soar in recent years.
Every taxpayer will get two small tax cuts over the next two years, potentially pocketing hundreds of dollars each year.
The 16% tax rate for income between $18,201 and $45,000 will be cut to 15% from 1 July 2026, and then cut to 14% from 1 July 2027 – at a cost to the budget of $17.1 billion over the forward estimates.
It means every taxpayer earning above $45,000 will get an extra tax cut of $268 next year and $536 in the following year.
Homeowners and renters will also receive energy bill relief, saving households $150 on their power bills through to the end of 2025, as part of a $1.8 billion energy rebate pledge.
Home Building
This year’s budget also had $54 million for the prefabricated and modular housing industry in a bid to boost home building.
The treasurer has allocated $49.3 million for state and territory governments to grow the prefabricated and modular housing industry, as well as $4.7 million for a voluntary national certification process to streamline offsite construction approvals.
Cash Rate On Hold After Last February Cut
As expected, the RBA is taking a cautious approach, holding the cash rate firm at 4.1% in April, despite inflationary pressures easing into the target range and labour markets showing a softer outcome in February.
The monthly CPI update for February shows core inflation has been tracking inside the RBA’s 2-3% target since December.
At the same time, jobs growth suffered the largest month-on-month fall since December 2023, taking the annual jobs growth back to 1.9% – the lowest annual change since October 2021.
With inflation looking like it has been tamed and some early signs of a loosening in labour force indicators, two of the RBA’s pain points have seen some relief.
However, the RBA is still wary about low productivity domestically as well as the uncertain outlook amid global trade and geopolitical tensions.
Although rates have been kept on hold, as most predicted, the February rate cut has already influenced housing markets, sending home values 0.3% higher in February before rising 0.4% in March.
National home prices rose 0.27% in March, pushing values to a record high. Prices are now 3.91% higher than a year ago and up 48% over the past five years.
Capital city markets led the monthly gains, with prices rising 0.31%, while regional markets saw a 0.18% increase. Both markets hit new peaks in March.
The Rental Market
According to CoreLogic, national rents rose by 0.6% in February, the strongest monthly gain since May last year, but well below the 0.9% rise recorded in February last year or the 1.2% gain seen in February 2021 at the height of the rental boom.
Nationally, rents rose by 4.1% over the 12 months to February, the slowest annual gain since the 12 months ending March 2021.
Despite the slowdown, the annual change in rents is tracking about double the pre-pandemic decade average of 2.0%.
The Outlook
The outlook for interest rates remains positive, with the cash rate likely to reduce further in 2025, but only gradually.
The quarterly inflation outcome, which will be released on April 30th ahead of the RBA’s next board meeting, will be a key factor influencing the RBA’s decision in May.
Financial markets have two more rate cuts priced in this year and economists from the Big 4 banks are forecasting between one and three more cuts this calendar year.
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