AU Property overlooked in Budget
Property Here - Wednesday, May 15, 2013
TREASURER Wayne Swan delivered the 2013-14 Federal Budget last night, with the property sector virtually overlooked.
Expectedly, the Budget focused on addressing the current deficit and returning the Australian economy to surplus.
It announced positive outcomes for superannuation, employment, infrastructure and support for aging Australians, but failed to directly address the issue of the undersupply of affordable housing in our major cities.
While no direct stimulus was provided for the property sector, the Budget announcement comes as a relief for many property pundits concerned about the possibility of changes to negative gearing and capital gains taxes, which have remained unchanged.
There there are some indirect benefits for the industry.
InfrastructureThe Budget announced $24 billion in funding for roads, including highways and rail, to improve liveability and relieve congestion in our expanding cities. New infrastructure projects that improve access to our cities have benefits for property markets, improving demand in outer lying areas and often with associated improvements in property values.
The Budget included provisions for the government’s National Rental Affordability Scheme (NRAS), which supports investment in affordable rental housing, favouring projects supporting independent living for elderly and disabled Australians. Although a welcome initiative to assist disadvantaged members of the community, the scheme fails to provide adequate affordable housing support to other Australians.
Further, while the scheme may appear attractive due to taxation and rental incentives, many investors acknowledge the limitations of this kind of property investment, that typically being a lower rate of capital growth.
Eligible aged pensioners will benefit form the federal government’s proposed $112.4 billion pilot programme to assist them to downsize their family home without impact to their Age Pension. However, the programme’s requirements that senior homeowners must have owned their family home for at least 25 years excludes many seniors from receiving the benefit and fails to meet the requirements of the aged community.
Superannuation reforms were announced, including the gradual increase of employer contributions from 9 to 12 per cent between 1 July 2013 and 1 July 2019. Of the 19 superannuation asset categories, residential property ranks in the top seven and is an increasingly popular investment option with those aged 45 to 64 with $200,000 or more in their SMSF. The change to superannuation requirements is likely to see an increasing number of Australian’s utilise their superannuation to invest in property.
The current interest rate environment is a positive for the public purse as reduced funding differentials for negatively geared property investors means lower tax rebates and hence more in government coffers. However, poorer performance in the property sector in recent years has resulted in falls in values and fewer transactions, affecting the level of federal taxes collected under capital gains rules.
According to the Australian Bureau of Statistics the property industry is one of Australia’s largest industries and for many states, such as Victoria, is the largest contributor to Gross State Product.
The property industry is also among the largest employers in the country providing jobs ranging from development and construction to estate agency, property management and valuations. Failure to implement a long-term strategy that adequately supports the sector will have negative implications for long-term economic performance.
Greville Pabst is CEO of WBP Property Group
Read more: http://www.news.com.au/realestate/news/property-overlooked-in-budget/story-fndba8uq-1226642971156#ixzz2TSasKXxE