Well it didn’t take long, the Federal Budget has only just been released (it’s 9.00pm Tuesday as I write this post), and already the Housing Industry Association (HIA) is complaining that the Government didn’t offer incentives aimed at reinvigorating Australia’s ailing home building market:
The Housing Industry Association, the voice of the residential building industry, is disappointed that tonight’s Federal Budget represents a missed opportunity to reinvigorate new home building activity and alleviate the nation’s housing affordability pressures.
HIA’s Senior Economist, Andrew Harvey, said that while the Federal Budget provides a handful of useful measures more broadly, it contains nothing to address the ongoing weakness in residential building, nor anything to help the nation’s chronic housing shortage and poor levels of housing affordability.
“At a time when new home building is in decline in virtually every state and territory, the Budget has failed to deliver any new measure to reinvigorate the home building sector, despite the sector’s health being absolutely crucial to a healthy domestic economy,” said Andrew Harvey.
“Despite this tight budget it is sensible that the Government has retained its existing commitments to the Housing Affordability Fund and the National Rental Assistance Scheme, and has also continued to invest in training and skills, which are essential ingredients to the delivery of affordable new housing.”
“However, the Budget was an opportunity to introduce measures to progress housing supply-side reforms with the states and territories, reduce the excessive tax burden on new housing, and expand and extend existing measures aimed at boosting housing supply,” said Mr Harvey.
The Federal Government has now been working with the states and territories on housing supply and affordability reform, through COAG, for two and a half years. After such a protracted period it is reasonable to have expected the Federal Budget to include sensible measures to boost housing supply, for example arrangements to help the states and territories remove residential stamp duties on new housing.
“Without dedicated housing policy measures and housing supply-side reforms the residential building sector will continue to act as a drag on the macro-economy and the nation’s growing housing shortage will continue to place undue pressure on the household budgets of home buyers and renters,” added Andrew Harvey.
While it’s probably a bit much to expect such an austere budget to offer further incentives to the housing market, the HIA’s concerns are, in my view, valid. The supply-side blockages that prevent new homes from being built quickly and efficiently, and in the process help to make housing unaffordable and more prone to boom/bust price cycles, clearly need to be fixed. And while the states have primary responsibility for urban planning and land supply, the Federal Government should provide leadership in this area and encourage reform financially through the tax and transfer system.
I have less sympathy, however, in the Real Estate Institute of Australia’s (REIA) failed bid to have the first home owner’s grant (FHOG) increased from $7,000 currently, or the other items on the REIA’s wish list, including:
- No Capital Gains Taxes (CGT) on the family home.
- No increase in CGT on property investments.
- Removal of stamp duty on property transactions.
- Retention of current arrangements for negative gearing of property investments.
- The implementation of a scheme to allow first home buyers access to their superannuation for the purchase of a home.
While the Budget predictably (but unfortunately) failed to reform negative gearing and CGT rules, it thankfully also did not attempt to stoke demand by raising the FHOG (widely viewed as a failed policy), or allowing first home buyers to access their super to purchase a home (effectively a FHOG in disguise).
My number one wish with any Budget is that it does no harm. So, at least in regards to housing, this Budget passes the test.
