Federal Budget 2024-25: $6.2 Billion Boost for Housing

Click here for the full detail of the Budget

Also, in the latest budget, the federal government pledged a $6.2 billion investment in housing to help Australians struggling with finding homes. With record-low vacancy rates and an ambitious target of building 1.2 million new homes, this initiative is designed to make housing more affordable, ease infrastructure bottlenecks, and improve student housing—all without pushing up inflation. Here’s what you need to know.

Key Highlights

• 1.2 Million New Homes: The government aims to build 1.2 million new homes over the next five years.
• $32 Billion "Home for Australia" Plan: The $6.2 billion investment is part of this larger plan, which also aims to improve local infrastructure, increase student housing, and enhance transport links to suburbs, cities, and regions.

Breakdown of the Housing Budget

Rent Assistance

• Nearly one million households will see a 10% increase in Commonwealth Rent Assistance, costing $1.9 billion over five years. This follows a previous 15% boost, making the total increase over 40% since May 2022.

Housing Infrastructure

• An additional $1 billion will be allocated to states and territories for new housing infrastructure, including roads and essential services. This builds on the $500 million already committed through the Housing Support Program.

Social and Affordable Housing

• The government will provide $1.9 billion in concessional loans to community housing providers and charities to support the delivery of new homes. This is part of the Housing Australia Future Fund (HAFF) and Housing Accord initiatives, targeting 40,000 new social and affordable homes.

Boost to the Construction Industry

• Fee-Free TAFE Places: The government will invest $88.8 million to create 20,000 additional fee-free TAFE places for construction-related courses.
• Skills Assessments for Migrants: An additional $1.8 million will go towards streamlining skills assessments for around 1,900 migrants from comparable countries who want to work in Australia’s housing construction industry.

How will the budget impact housing affordability and availability in the coming years? Let's dive deeper.

Impact on Housing Affordability

1. Increased Housing Supply: The government’s ambitious target to build 1.2 million new homes over five years is the centrepiece of its strategy to improve housing affordability. By significantly increasing the supply of housing, particularly in areas with high demand, the government aims to alleviate pressure on house prices and rental rates. As more homes become available, it is expected that the rapid price growth seen in recent years will slow, making homes more affordable for a broader segment of the population.

2. Rent Assistance and Support for Low-Income Households:

• The budget’s provision for a 10% increase in Commonwealth Rent Assistance, along with previous increases, aims to provide immediate relief to nearly one million low-income households. This measure is intended to help renters manage the rising cost of living while the broader housing supply initiatives take effect. Although this assistance will provide short-term relief, its impact on overall housing affordability may be limited unless matched by significant increases in housing supply.

3. Social and Affordable Housing Initiatives:

• The $1.9 billion allocation for concessional loans to community housing providers and charities under the Housing Australia Future Fund (HAFF) is designed to support the construction of 40,000 new social and affordable homes. This initiative directly targets those most affected by the housing affordability crisis, including low-income families and vulnerable individuals. By increasing the availability of affordable housing, this measure is expected to provide longer-term stability for those struggling to find suitable accommodation in the private market.

4. Infrastructure and Development Support:

• The additional $1 billion for housing infrastructure, including roads and essential services, will facilitate the development of new residential areas. Improved infrastructure will make it easier and more attractive to develop housing in previously underutilised or inaccessible areas, helping to disperse housing demand more evenly across the country. This could lead to more balanced house price growth, with less pressure on housing markets in major cities.

Impact on Housing Availability

1. Expansion of Housing Stock:

• The construction of 1.2 million new homes is expected to significantly boost the availability of housing across Australia. This increase in housing stock should help reduce the current record-low vacancy rates, making it easier for individuals and families to find homes. The focus on building in both urban and regional areas will help address availability issues in various parts of the country, potentially easing congestion in overcrowded cities.

2. Focus on Regional and Suburban Development:

• By enhancing infrastructure and transport links, the budget aims to encourage development in suburban and regional areas, which could help to decentralise population growth. As new housing becomes available in these areas, it will likely lead to a more even distribution of housing availability, reducing the strain on inner-city markets where demand has traditionally outstripped supply.

3. Temporary Disruption During Construction Phase:

• While the long-term impact of increased housing supply will be positive for availability, there may be short-term disruptions during the construction phase. The building of 1.2 million homes will require significant resources and labour, which could temporarily exacerbate shortages and delays in the housing market, particularly if supply chains or the construction workforce are stretched thin.

4. Impact of Migrant Skills Assessment Streamlining:

• The budget’s investment in streamlining skills assessments for migrants in the construction industry is expected to mitigate potential labour shortages, ensuring that the ambitious housing targets can be met. By increasing the labour force available for housing construction, this measure should help accelerate the delivery of new homes, positively impacting housing availability in the coming years.

In summary, the 2024-25 Federal Budget’s housing initiatives are likely to significantly improve housing affordability and availability in Australia over the coming years. The planned increase in housing supply, support for low-income households, and infrastructure improvements will help address the underlying causes of the current housing crisis. While some challenges may arise during the implementation phase, particularly in terms of construction logistics and workforce availability, the overall trajectory points towards a more balanced and accessible housing market.

Impact on Investors

1. Increased Demand for Commercial Properties:

• Retail Properties: The construction of 1.2 million new homes over five years will likely spur demand for retail spaces as new residential areas develop. Investors in retail properties could see increased foot traffic and business opportunities, particularly in suburban and regional areas where new housing developments are concentrated.
• Office Properties: The budget’s focus on infrastructure and transport links will make suburban and regional office locations more attractive, potentially shifting some demand away from traditional city centres. Investors might find opportunities in emerging business hubs, especially as more companies embrace flexible work arrangements.
• Industrial Properties: With the government’s commitment to improving local infrastructure, industrial properties near new housing developments could see a rise in value. Better roads and essential services will make these areas more accessible, attracting logistics and manufacturing businesses, which could result in higher rental yields and capital appreciation for industrial property investors.

2. Enhanced Appeal of Community Housing Investments:

• The allocation of $1.9 billion in concessional loans for community housing providers under the Housing Australia Future Fund (HAFF) offers a low-risk investment avenue for those looking to diversify their portfolios. Investors in this sector could benefit from stable returns supported by government funding while also contributing to social and affordable housing.

3. Construction Industry Opportunities:

• The budget’s boost to the construction industry, including fee-free TAFE places and streamlined skills assessments for migrants, will help mitigate labour shortages. Investors in construction-related commercial properties, such as industrial units and suppliers, might see increased demand as the industry gears up to meet the ambitious housing targets.

Impact on Property Owners

1. Potential for Property Value Appreciation:

• Property owners in areas slated for new housing developments and infrastructure improvements are likely to experience an appreciation in property values. Retail and office properties near new transport links and suburban developments could become more attractive to businesses, leading to higher demand and rental income.

2. Infrastructure Enhancements:

• The additional $1 billion allocated for housing infrastructure, including roads and essential services, will directly benefit property owners by making their properties more accessible and desirable. This could result in lower vacancy rates and increased property values, especially in underdeveloped areas that will see significant infrastructure upgrades.

3. Increased Competition in Some Markets:

• The significant expansion of housing and infrastructure could lead to increased competition in certain markets, particularly in retail and office spaces. Property owners in established areas may need to innovate or reposition their offerings to maintain their competitive edge as new developments emerge in other locations.

Impact on Tenants

1. Potential for Stabilised Rents:

• The government’s focus on increasing housing supply and improving infrastructure may lead to more stable or even reduced rental costs in the long term. Tenants in commercial properties and small businesses could benefit from a more balanced supply-demand dynamic, reducing the upward pressure on rents.

2. Improved Accessibility and Infrastructure:

• Retail, office, and industrial property tenants will benefit from the enhanced infrastructure, such as improved roads and transport links. This could increase customer access to retail locations, ease employee commutes to office spaces, and enhance logistics operations for industrial tenants, ultimately boosting their business performance.

3. Opportunities for Expansion:

• With the budget’s support for the construction industry and the expansion of fee-free TAFE places, businesses in the construction sector might find opportunities to expand, leading to increased demand for industrial and office spaces. Tenants in these sectors could leverage the improved labour supply to scale their operations.

The 2024-25 Federal Budget’s $6.2 billion investment in housing is poised to create significant ripple effects across the commercial property market. Investors will likely find new opportunities in emerging areas, property owners could see value appreciation driven by infrastructure improvements, and tenants might benefit from stabilised rents and better accessibility. While the full impact of this budget will unfold over time, it is clear that it will play a pivotal role in shaping Australia’s future commercial property landscape.

Disclaimer: The information provided in this blog is for general informational purposes only and does not constitute legal, financial, or professional advice. While we strive for accuracy, we make no guarantees regarding the completeness or timeliness of the content. Always seek independent advice before making any financial or real estate decisions. We are not liable for any loss or damages arising from your reliance on the information provided.

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