There’s little in budget 2018 that directly affects property, but the massive infrastructure spend that was announced will impact rates down the line. With $75 b budgeted over the next 10 years on transport infrastructure, including $5 b for a Melbourne airport to CBD rail link, ­there’ll be plenty of money pumped into the national economy.

In classic Keynesian style, this should awaken wages and inflation from their extended torpor. Wage growth is currently at 2% and the government, somewhat optimistically, is predicting a rise to 3.25% by 2020. If this materialises, a rate rise by the RBA is a certainty to ensure the inflation genie remains firmly in its bottle.

That said, let’s wind back the clock and check on how the key property-related measures of budget 2017 have played out …

 

Measures to curb foreign investors

Budget 2017 removed a number of key incentives for foreign investors. The main residence/capital gains tax exemption on residential property owned by foreigners went, and new developments were restricted to a maximum of 50 per cent of sales to foreign investors. Added to that was an annual $5000 ‘ghost tax’ slapped on all foreign citizens who don’t live in their property or lease it for less than six months a year. Overall the market has pulled back a tad with the international appetite for Australian property seemingly sated. But while the heat has come out of the broader foreign investor demand market, we’re still seeing particularly strong demand at the high end.

 

The First Home Super Saver Scheme

From July 1 2017 first home savers could make contributions into super – up to $15,000 annually or $30,000 in total – specifically for a home loan deposit. This and other related changes were aimed at levelling the playing field to help first home buyers (FHBs) get into the market, which seems to be working. As we reported in a recent newsletter, FHBs are flooding back into the market.

  

Incentives for seniors to downsize

To free up stock for younger buyers and FHBs, seniors downsizing by selling their family home could put $300 k into super (effectively $600 k for couples) as a non-concessional contribution, above and beyond existing caps. While it seems like a very attractive carrot, it hasn’t made much impact, particularly in the more affluent suburbs where people’s decisions are directed more by lifestyle than finance.

With an election on the horizon there’s sure to be plenty more to write about as parties jostle for attention around the hot button issue of housing affordability. We will keep you well informed.

 

Image source : Parliamentary Education Office.

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