WEALTH HUB JOURNAL

Housing Accord — What Does It Mean for Home Buyers?

The recent federal budget includes a commitment to build 1 million new homes in Australia, starting in 2024. This “Housing Accord” is a national partnership that will see investors, industry, and the government collaborate to build affordable, “well-located” homes in response to the current housing crisis.

The supply of homes is not keeping up with our growing population. As buyers compete for homes, it will drive prices up. House prices in Australia are already among the highest globally. Sydney is the second most expensive city in the world to buy a home, and Melbourne is the fifth.

Even with high property prices, loan rates soaring around 4-5%, and inflation at 7.3%, homes are selling faster than they are being built. The return of immigration after relaxed COVID restrictions and millions of Australians looking for new accommodations has further tightened the options for home buyers.

What’s Missing in the Federal Budget

Announced by Federal Treasurer Jim Chalmers, the Housing Accord will not begin until mid-2024 due to ongoing supply chain problems and labour shortages. Dr Chalmers said while the government will kick-start the investment, the supply must come from the market.

Julie Collins, Housing Minister, will work with institutional capital and superannuation funds to speed up the housing supply.

However, the announcement doesn’t include incentives for investors to add properties to their portfolios. Demand for rentals is higher than ever, and more rental properties would give more options to Australians who are looking for affordable housing. And the mid-2024 start date for the commitment doesn’t provide immediate help for Australians who need affordable properties today.

While the federal budget does provide economic help through reducing costs of childcare, prescriptions, and housing, as well as some improvements to wage growth, not every sector saw relief. New home buyer schemes, cash handouts, stamp duty relief, and more robust rental assistance were not included.

Current State of Housing in Australia

These housing statistics show where the need is greatest:

• 116,000 people are experiencing homelessness (50 people for every 10,000 people surveyed) according to the latest data from the Australian Bureau of Statistics Census. (source)
• 163,508 households are on the public housing waiting list, up from 155,141 last year. (source)
• While home prices have fallen this year (7% in Sydney and 5% in Melbourne), they soared nearly 30% nationally during pandemic recovery. (source)
• Rents rose 9.8% year over year in July, while national property values dropped 2%. (source)

How the Federal Government Plans to Help

Here are some ways the Australian government is addressing the housing crisis:

• Creation of a sustainable funding source through the $10 billion Housing Australia Future Fund.
• The fund will help build 30,000 social and affordable dwellings.
• On top of this, the Labor Government is committed to an additional $350 million to build 10,000 affordable dwellings over the next 5 years. These dwellings will have an energy efficiency rating of 7 stars or greater (or the minimum standard for the state or territory).
• A “shared equity” scheme will open 10,000 spots for Australians to co-purchase property, with the government paying 30-40%. The scheme is for individuals earning under $90,000 or couples earning under $120,000. The buyer can eventually buy or pay out the government’s share.
• State and territory governments also pledged to build 10,000 affordable homes and facilitate changes to zoning policies to accelerate construction.

Conclusion

While these steps will bring some Australian home buyers eventual relief from the housing affordability crisis, there’s a long way to go — and the immediate need is great. Shadow Treasurer Angus Taylor expressed doubt in these initiatives, saying: “There’s a role that the federal governments can play … [but] what we don’t want to see is people’s superannuation being used for pet projects.”

He said instead of tapping super funds to build or invest in affordable housing, removing tax barriers to create a “rent to build” scheme could provide more holistic support for Australians.

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