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  • 04 May 2016


It's been a big week for Australia's property market, with not only a cash rate cut announced by the RBA, but also the delivery of Treasurer Scott Morrison's first budget.

Mr Morrison described his budget as "a growth friendly, ten year enterprise tax plan to boost new investment, create and support jobs and increase real wages, starting with tax cuts and incentives for small and medium-sized enterprises".

And it's a budget that has been welcomed by major property organisations, including the Real Estate Institute of Australia.

REIA President Neville Sanders said the 2016 Budget had recognised that the housing and construction sector have a role to play as the Australian economy transitions away from a decade long reliance on mining for growth.


Boost to infrastructure spending

“Investment in dwellings is forecast to grow at 8% in 2016-17 and peak in 2017-18 with a record number of completions”, he said.

“The boost to infrastructure spending, the extension of small business concessions, modest tax cuts and the retention of the current arrangements for taxation of property investments will help ensure that the property sector remains an important driver of economic growth.”

The fact that changes to negative gearing were taken off the table was welcome news, especially to residential developers and investors.

Even Mr Sanders had something to say on the matter: “We are pleased that the Treasurer in his Budget Speech reiterated that the Government will not remove or limit negative gearing or change the capital gains tax as this would increase the tax burden on Australians trying to provide a future for their families.


Keep rents affordable

“This recognises that the current arrangements increase the supply of housing for our growing population, keep rents affordable and eases the burden on social housing.”

However, the decision could spark an election battle with Labor, the latter keen to restrict negative gearing and halve capital gains tax discount to 25%.

While the Budget had little direct impact on the real estate industry or market, clearly there are elements that will boost confidence in the country generally, and this will be reflected in property sales and purchase.

For example, Morrison's tax cuts and incentives for SMEs will see renewed interest from those keen to buy their own business - which is clearly good news for those selling a business. Many prospective buyers may have been holding off until after the Budget announcements, so we should see more movement in the market now.


Promise of more jobs

The opening up of more export opportunities for Australian businesses, the promise of more jobs and the lowering of the small business tax rate are all very positive moves, too.

An increase in the upper limit for the middle income tax bracket, from $80,000 to $87,000 per year, will allow average full-time wage earners to earn more without being taxed more. And the benefits of this is sure to be reflected in both the number and type of properties being bought.

Mr Sanders concluded that with "forecasts of moderate growth, an improvement in the unemployment rate, inflation well within the RBA’s target zone, and the interest rate cut the Budget is good news for home owners and prospective buyers.”

And we would tend to agree.