Property market sets groundwork for growth

What-does-the-federal-budget-have-in-store-for-the-property-market_157_6012208_0_14100806_300The real estate industry has been abuzz with news of late. With the Reserve Bank of Australia’s recent rate cut still fresh in the minds of commentators and homebuyers alike, the federal government’s 2015-2016 budget has also generated a lot of discussion. Conversation has stretched from foreign investment, to tax and skilled labour – and at its heart, the property market appears to be a solid pillar on which to build economic growth.

In a May 12 speech, federal Treasurer Joe Hockey pointed out some of the challenges and opportunities that the Australian economy will face in the coming months and years. In particular, the government’s economic outlook forecasts that investment in the mining sector is expected to fall by around 25 per cent in 2015‑16 and by 30 per cent in 2016‑17.

This leaves a large hole to fill, which the Property Council of Australia says the residential real estate industry is more than ready to fill. In a May 12 statement, Chief Executive of the Property Council Ken Morrison said property remains a star performer in the economy, but the government needs to ensure that building work isn’t bogged down by restrictive red tape, such as stamp duties.

“If property and construction are to step up even further and fill the mining investment gap, governments must remove the inefficient taxes that act as a handbrake on growth,” Mr Morrison said.

Boosting construction work

While tax reform has remained a hot topic, the budget contained some promising measures for the building industry going forward. It has promised a significant $5.5 billion boost for small businesses across the country, and the building and construction sector is set to reap the rewards.

Master Builders Australia pointed out that this would go a long way towards improving confidence, creating jobs and stimulating activity in new home building, all of which are positive for the Australian property market and the affordability of new homes.

“Master Builders called for short term tax measures to boost building activity and maintain the momentum of the housing upturn and these measures have exceeded builders’ expectations,” CEO Wilhelm Harnisch said in a May 12 statement.

Foreign investment

Another driver behind Australia’s housing supply has been foreign investment, with the budget outlining that foreign investors will continue to play their part in keeping the economy moving. The government has introduced tighter rules and stricter penalties for those buyers that break the rules, and a new system of application fees to take the burden from taxpayers.

Similarly, the Victorian government has announced its own measures to regulate overseas buyers, including higher stamp and land duties on investment purchases – but the Real Estate Institute of New South Wales (REINSW) has urged the NSW state government not to take the same route.

In a May 11 release, REINSW President Malcolm Gunning said foreign investment in NSW helps to create jobs and build new homes, which is a positive step forward for housing affordability. However, he noted that the Victorian government’s decision could undermine this kind of activity across the border.

“It would really hurt the economy, because foreign investors would simply decide to invest somewhere else and we don’t want that to happen,” Mr Gunning said.

“As a state we may actually benefit from this increased taxation in Victoria as foreign investors will choose to put their money somewhere that is more welcoming and viable than our southern neighbours.”

With the property market and construction set to play a large role in Australia’s economic future, investors, vendors and homebuyers alike will no doubt be eagerly waiting to see what consequences this latest budget holds for residential real estate.

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