We summarise the responses from seven industry leaders, including: REIA President Hayden Groves, Ray White Group Chief Economist Nerida Conisbee, PropTrack Senior Economist Eleanor Creagh, SCA National President Chris Duggan, CBRE’s Pacific Head of Research Sameer Chopra, Regional Director of CBRE Living Sectors – Capital Markets business Andrew Purdon and CoreLogic Australia Head of Research Eliza Owen.

Nerida Conisbee, Ray White Group, Chief Economist:

This year’s budget is focussed on the rising cost of living. High inflation and rising mortgage rates are putting a lot of pressure on people’s budgets. And although tax revenue has been pretty decent over the last 12 months thanks to strong mining conditions, the Government now has record high debt as a result of the pandemic. 

While Government debt repayments are a challenge, so too is housing. International migration levels are expected to hit an all time high of 400,000 people this financial year. At the same time, the number of residential building approvals has been falling and there are fewer homes being completed. Property investors have withdrawn from the market, primarily as a result of higher interest rates. There is a shortage of properties to rent, as well as buy. Unfortunately the measures to fix housing supply were limited, and there was nothing to fix the challenges in the construction sector.

What could have been offered: There are two major challenges at the moment. There is a shortage of rental properties and there are problems with the pipeline of new supply. A third problem is also emerging - house price growth has started up again. Despite eleven interest rate rises, the shortage of homes is moving from a rental problem to a pricing problem. 

Change to build to rent will go some way to addressing the rental supply shortage but it is still an emerging source of rental properties. The majority of rental properties (well over 80 per cent) are supplied by mum and dad investors. An incentive similar to Home Builder but available only to investors would be a quick way to address rental shortages. 

Budget means to address construction industry challenges are more difficult. Although construction material prices are coming down, labour shortages are still apparent. Ideally the lift to the international migration cap will address this. Once we start to see construction prices stabilise, it will mean more normal levels of housing supply. If the Housing Australia Future Fund is approved, this will provide an additional push. 

REIA President, Mr Hayden Groves:

Treasurer delivers Goldilocks Budget says REIA.

REIA President, Mr Hayden Groves, said that the Treasurer has attempted to deliver a Budget that fights off inflation and help Australians that are struggling in the context of global economic conditions. 

“This Budget 2023-24 anticipates that inflation will return to RBAs target band by 2024-25 with inflation to reduce to 3¼ per cent next year. 

“We especially applaud the budgeted increase of Commonwealth Rent Assistance (CRA) of 15% to Australians that need it the most to help them navigate this cost-of-living crisis which will help alleviate the pressures on a touted 1.1 million Australians.”  

Mr Groves said that whilst CRA was a much-needed measure, housing supply at scale still needs to be addressed.  

“The widely previewed commitments of the Home Guarantee Scheme rule changes, recommitment to the Housing Accord, an extra $2 billion for the NHFIC mandate and taxation rule changes for the niche Build-to-Rent sector are welcome but will not in themselves address the elephant in the room which is building more homes for Australians. 

“We hope the long-awaited National Plan for Housing and Homelessness puts all options on the table to truly unlock housing supply and the hotly debated Housing Australia Future Fund finally gets off the ground.” 

PropTrack Senior Economist Eleanor Creagh:

Amid a national rental crisis, fast recovering population growth, and constrained housing supply, measures to address the housing shortage and worsening affordability featured prominently in this year’s budget. 

While renting is a vital part of Australia’s housing market, it has been failing many.

Nationally, advertised rents have soared 11% year-on-year, and vacancy rates are at historic lows. With the outlook remaining challenged, the budget's new housing line items honed in on this area.

Increased assistance payments for low-income renters, measures to boost rental supply and measures to increase construction of social and affordable rental housing are the big-ticket items.  

Given the one in three households that rent are more likely to be younger Australians, on lower incomes, with less wealth than owner-occupiers, and typically lower savings buffers, the measures will come as some relief. 

The only sustainable solution to the rental crisis is increasing rental supply. 

Building approvals have fallen sharply over the past year are now sitting at decade lows, led by a significant 46% year-on-year drop in approvals for private sector apartments, especially larger builds.  

Industry challenges, higher construction costs and labour shortages are set to see growth in the supply of new rentals remain limited, at a time when there is already a severe shortage of available rentals.  

This is a problem; the supply side of the housing market should be better able to adjust when needed. 

An increase to the available pool of long-term rentals could come from increased activity from both small and large-scale investment.  

Last year’s budget announcement, the Housing Accord aims to build one million, new, well-located homes over 5 years from 2024. 

SCA National President Chris Duggan:

Significant advocacy victories for the strata sector amid increased federal government engagement have shown in the 2023-24 Budget that strata is key to the federal government’s agenda.

SCA National President Chris Duggan said “we are pleased to see the Federal Government has implemented supportive measures to ease the cost-of-living pressures impacting households across Australia, especially those focused on easing housing price pressures and incentivising first-home buyers.

“There’s some really great indications through the NEVS and electric vehicles in strata schemes, as well as through $1 billion set aside for energy upgrades to dwellings.

“There are several funding initiatives in the resilience and preparedness space, as well as in urban policy and housing and homelessness that provide a great opportunity to launch strata-living onto a federal agenda, and we’re engaging proactively across each of these strategies,” he said.

SCA’s National Priorities are:

1 Creating Smarter, Greener and More Efficient Strata Communities

2 Making Insurance Affordable and Accessible for Strata

3 Eradicating the High Prevalence of Building Defects in Strata Complexes

“SCA has advocated strongly for these measures to be considered as part of our Pre-Budget Submission, and we will continue to push for each of the major parties to adopt measures that will help achieve these goals through our proactive engagement with multiple government agencies and ministers,” said Mr Duggan.

Sameer Chopra, CBRE’s Pacific Head of Research:

“Post budget, we will need to bump-up our demand curves by 115,000 apartments, by 1.2 million square metres of warehouse space and by 500,000 square metres of office in light of the government’s revised figures on net overseas migration. Let’s hope the private sector can get some respite from construction costs to meet this demand.”

Andrew Purdon, the Regional Director of CBRE Living Sectors – Capital Markets business:

“The reduction to 15% MIT withholding tax for eligible BTR projects is a very positive move from Federal Government and will undoubtedly unlock global institutional investment in the sector.

Since the Prime Minister’s initial announcement of the tax change on 28 April, CBRE has received a notable increase in enquiries from investors across APAC, Europe and North America requesting market intelligence and guidance on how they can access the Australian BTR market. However, some of the finer details of the new BTR policies need to carefully considered but quickly resolved by Government to provide clarity to investors and enable them to commit to new projects ASAP.

“The headline of 1.5m net migration during the next five years is a huge number of people to accommodate. Data shows us that the majority of new migrants start their lives in Australia in inner cities and approximately 70% are renters.

These rental markets are trending below 1.0% vacancy rate, which is a record low in Australia and some of the tightest vacancy rates in the world. The new apartment supply outlook is severely impacted by construction cost increases since Covid plus general lack of capacity in the marketplace due to recent insolvencies and labour shortages. We can see a major problem with new supply across all state capitals at the same time as net overseas migration is increased to a 30 year high. 

“The Government should continue to liaise with the investment community and the construction industry to identify solutions that accelerate new apartment supply as a matter of urgency. The creation of new rental accommodation should be considered as critical infrastructure and essential to Australia’s future success.“

CoreLogic Australia Head of Research Eliza Owen:

Labor’s 2023-24 Budget offers some reprieve from the housing initiatives of past budgets. For around a decade, federal government approaches to housing have been focused on home ownership, often through demand-side policies, and always in the face of a growing cohort of private renters.

This budget reiterated commitments to provide more supply from 2024 and the continuation of ‘Home Guarantee Schemes’, but new initiatives were also announced around an adjustment to Commonwealth Rent Assistance (CRA), Build-to-Rent (BTR) development incentives, a further increase to funding of community housing, and increased funding to the states to tackle homelessness.

While this budget gave renters some level of recognition, low income households in the private rental market will be disappointed. Even for those who qualify for CRA, the increase in payments is modest relative to the broader increase in rents across the market.

Further review of CRA would be worthwhile to understand how it could be better expanded and targeted. For some in the private rental market, the expansion of home guarantee schemes may help them get into home ownership faster, but low-deposit home loans should be carefully considered in the context of a higher interest rate environment.

The Government faces some constraints in providing stimulus to build new housing. With a high inflationary environment, constrained construction sector and high net government debt levels, it is understandable that the private sector is being incentivised to provide more housing development. However, this provides little clarity around how much the boost to build-to-rent will deliver in the way of affordable housing. Direct investment into social housing or the passing of the help-to-buy scheme through parliament would be a step in the right direction for having a more material impact.