Treasurer Jim Chalmers’ ambitious goal—to build 1.2 million homes over the next five years—sets the stage for the 2024-25 federal budget.
With a strong focus on housing affordability, the Australian Federal government aims to support homebuyers, especially first-time purchasers, in a challenging real estate market.
Let’s explore the key measures and their impact.
Help to Buy Scheme
The 2024-25 federal budget allocates an additional $5.5 billion to the Help to Buy Scheme, a significant investment aimed at assisting homebuyers. Here’s how it works:
Equity Contribution:
For new homes: The government provides an equity contribution of up to 40% of the purchase price.
For existing homes: The equity contribution is up to 30%.
Eligibility Criteria:
Buyers must earn below specified income thresholds (currently $90,000 for singles and $120,000 for couples).
These income thresholds will adjust in line with broader wage growth, ensuring accessibility for low and middle-income earners.
Housing Australia Future Fund (HAFF)
The government commits to disbursing the first $500 million from the $10 billion HAFF this financial year.
The HAFF aims to support the construction of 1.2 million homes over the next five years, although industry groups caution that achieving this target may require additional measures.
To bolster the HAFF, the budget increases the liability cap for Housing Australia (formerly the National Housing & Finance Investment Corporation) by $2.5 billion, bringing the total to $10 billion.
This boost enables Housing Australia to provide low-cost financing to community housing providers, facilitating the delivery of more social and affordable housing units nationwide.
Social Housing Units:
The budget allocates $6.2 billion specifically for constructing additional social housing units.
An extra $1 billion is directed to states and territories to fund essential services connections (water, sewage, power, roads) for these new social housing projects.
Homelessness Support
The new $9.3 billion National Agreement on Social Housing and Homelessness doubles funding for homelessness services.
States and territories are expected to match this commitment.
Safe Accommodation for Vulnerable Groups
Repurposing $1 billion from the National Housing Infrastructure Facility, the budget provides crisis and transitional accommodation for women, children, and youth escaping domestic violence situations.
Ensuring safe and secure housing options for these vulnerable groups is a priority.
Rent Assistance and Student Housing
The Commonwealth Rent Assistance (CRA) program receives a 10% boost in the 2024-25 budget, building upon last year’s 15% increase.
Nearly one million households across Australia benefit from this relief, especially renters facing rising housing costs.
The maximum CRA rate has risen by over 40% since May 2022.
Student Accommodation Sector
The budget targets the student accommodation sector by requiring universities to increase purpose-built student housing.
Growing international student enrolments have strained housing demand, particularly in urban areas.
Mandating additional student housing aims to reduce competition for private rentals and ease pressure on the rental market.
Infrastructure Investment
Recognising infrastructure’s role in housing development and growth, the budget allocates $16.5 billion for new and existing infrastructure projects across Australia over the next decade
Here are the key highlights:
1. New Infrastructure Projects:
A significant portion of the budget—$4.6 billion—has been earmarked for 69 new infrastructure projects.
Notably, $1.9 billion will be directed toward road and rail initiatives in Western Sydney, a region poised for substantial residential and commercial expansion due to the upcoming Western Sydney Airport.
2. Other Notable Investments:
Western Australia’s Metronet projects receive $300 million in funding.
Queensland’s Warrego Highway will see $177 million for bridge and intersection upgrades.
The Australian Capital Territory benefits from $100 million allocated for cycling and walking trails.
3. Support for Existing Infrastructure:
The budget allocates $10.1 billion to sustain ongoing infrastructure initiatives.
Projects like the East West Link in Melbourne, Metronet expansions in Western Australia, and the Sunshine Coast rail link in Queensland will continue to receive support.
Impact on the Housing Market
These infrastructure investments are expected to drive growth in targeted development areas.
Improved transportation links and utilities will unlock new land for housing construction.
Existing residential areas will become more accessible and desirable, potentially boosting property values.
Additional Housing Measures
The budget allocates $88.8 million for 20,000 fee-free TAFE places in construction-related courses, addressing the skilled labor shortage.
Streamlined skills assessments for migrants entering Australia’s housing construction industry receive $1.8 million.
Incentives for institutional investment in the build-to-rent sector include reduced withholding tax rates and increased capital works deductions.
Federal minimum rental standards will provide a unified approach to eviction grounds and limit rent increases to once per year.
Property Investors
The recent federal budget has sparked discussions across various sectors, but one area that received limited attention is property investment and retirement planning.
Middle-class Australians continue to face barriers in the property market due to rising interest rates and reduced loan servicing capacity. As a result, many find themselves unable to secure additional loans for property purchases or home upgrades.
Interest Rates and Affordability
Middle-class Australians grapple with the impact of rising interest rates. As borrowing costs increase, affordability becomes a significant concern.
Reduced Loan Servicing Ability
Stricter lending criteria have reduced the capacity for potential home loans. Middle-income earners face limitations when trying to secure financing for property purchases. The ability to borrow more funds for new properties or home upgrades has become increasingly challenging.
The SMSF Solution for Property Investors
For property investors, there exists a tested strategy to overcome these limitations: leveraging their own Self-Managed Super Fund (SMSF).
Let’s explore how this approach can make a difference:
1. Understanding SMSFs
An SMSF is a private superannuation fund that allows individuals to manage their retirement savings. Unlike traditional super funds, SMSFs provide greater control and flexibility.
Property investment within an SMSF can be a powerful wealth-building tool.
2. Investment Properties via SMSFs
Property investors can use their SMSFs to purchase investment properties. This approach allows them to diversify their portfolio beyond traditional assets like shares and bonds.
The SMSF becomes the legal owner of the property, and rental income contributes to the fund’s growth.
3. Borrowing within SMSFs
SMSFs can borrow funds to acquire property through Limited Recourse Borrowing Arrangements (LRBAs).
LRBAs allow SMSFs to take out loans specifically for property investment. The property itself serves as collateral, limiting the lender’s recourse to that asset only.
4. Benefits of SMSF Property Investment:
Tax Efficiency: SMSFs benefit from concessional tax rates, making property investment tax-efficient.
Retirement Wealth: Property appreciation and rental income contribute to long-term retirement wealth.
Control: Investors have direct control over property decisions within their SMSF.
Key Takeouts
The 2024-25 federal budget prioritises social and affordable housing initiatives with a focus on the Housing Australia Future Fund (HAFF) and investments in social housing projects. With a strong focus on housing affordability, the government aims to support homebuyers, especially first-time purchasers, in a challenging real estate market.
While this year’s budget lacks specific assistance for aspiring property investors, they find themselves navigating higher interest rates, mortgage affordability, and lender approvals independently. However, a lesser-known solution lies within their superannuation—specifically, their Self-Managed Super Fund (SMSF).
Our team provides personalised guidance for SMSF property acquisition. Speak with our team today on how your SMSF can become a powerful tool for securing your property.
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