Current Market Insights
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Current Market Insights
Episode 81: Federal Budget and Housing Policy Shifts
Hosts Ciaran O'Brien and Peter O'Malley break down the Federal Government’s Budget and its ambitious housing plan, which aims to address Australia’s housing crisis by increasing supply beyond what the private sector can deliver alone. With targets for 1.2 million new homes, increased social housing investment, and changes to planning and infrastructure, we explore what this means for buyers, renters, and investors.
We also discuss the latest market trends, including declining auction clearance rates, tightening rental supply, and the impact of upcoming NSW tenancy law reforms. With inflation easing, will we see further rate cuts to support the market?
As mentioned on the show, listen to our previous podcast on No Grounds Evictions in NSW.
As always if there is a specific topic you would like for us to cover, please reach out and let us know!
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Speaker 2:Welcome to the Current Market Insights podcast brought to you by Harris Partners Real Estate. Each episode we chat with real estate author and industry leader, peter O'Malley, to discuss the current property market conditions and provide insights to assist you on your property journey.
Speaker 3:Hello and welcome to another edition of Current Market Insights. I'm your host, kieran O'Brien, and with me, as always, is my co-host and good friend, mr Peter O'Malley.
Speaker 3:Peter hello, Kieran great to see you. Great to see you, peter. It's been a pretty big week in Australia, really, but a big week in housing as well. There's quite a few things we really need to talk about tonight.
Speaker 3:I wanted to start off the episode, though, and just get some thoughts from you and for our listeners on what is Budget Week for the federal government. As people know, we're heading towards an election in the very, very near future, and the Treasurer, jim Chalmers, put down a budget a couple of days ago which outlined a whole bunch of things, which are, you know, some popular, some unpopular, but he did name a couple of things in the housing space, some of which are extensions of existing programs and some new. But I just wanted to have a quick chat through what the budget has talked about in terms of housing and really get your sense of whether or not you think there's going to be any real impact or implications for home buyers, renters, sellers out there, and whether it really will make much of a difference, or whether it's just kind of smoke and mirrors in, you know, as part of the election campaign.
Speaker 1:G'day Kieran, look, I don't think it is smoke and mirrors. I've just read the budget papers, as it does relate to housing and it's pretty significant actually, now that I've had a look at it in close detail because you capture things through the media and you hear the opposition being critical of the government's plans, et cetera I think you'll find that even if there was a change of government at the federal election this year, that the liberal party will work with something very similar to this. Maybe in theory they would put their own tweak on it, but no, uh, it's. It's fairly significant program that the government are gearing up to to implement and remains to be seen whether the people will give them a second chance to implement this plan. I think it's looking increasingly likely that they will. So if I can just read some of the key captions from this budget papers for those that haven't had a look at it, it says Building more homes for Australians.
Speaker 1:The National Housing Accord is bringing together all levels of government, industry and investors to unlock supply. The government is supporting a pipeline of 55 000 social and affordable homes through initiatives like the housing australia future fund and the social housing accelerator. They plan, as we know, to build 1.2 million new well-located homes over the next five years across the country. I don't think they'll achieve that being realistic, but the government has committed 1.5 million through the housing support program to state territory and local governments to fund projects to improve planning capability, deliver and enabling in infrastructure such as roads, water and power, build more social housing, as we've discussed, and with the government also offering $3 billion in incentive payments under the new home bonus and up to $4.5 billion in funding is committed for states and territories to address infrastructure backlogs and deliver new housing.
Speaker 1:So this is, you know, this is full-on. This is, this is not a policy. This is not just, uh, you know, having a um, a popular press conference and then putting it on the never, never. Some people are rightly critical that it hasn't happened quicker, but when you're talking about national projects of that scale, you can't really rush them. There is a process that needs to be had as well, and whether the electorate give the government time to implement this remains to be seen. But even if Labor were removed from office, as I say, I think the Liberal Party would end up picking up large chunks of this because to get treasury and get everyone aligned, as they've done or doing.
Speaker 3:In this process you wouldn't go back to scratch and come up with a brand new plan, because it is fairly comprehensive just just before we move on, I think you you raise one very important point from their statement, which is something we have talked about and other commentators in the property space have talked about, which is one of the issues to supply, not necessarily just being the gridlock but being hold-ups in places like council and planning authorities and, you know, actually getting that through. And I think for the first time really, the Albanese government has put on paper and outlined their position that that is something they've identified. They've listened to consumer groups, they've listened to the housing fund, et cetera, and they are allocating money to try and speed up that process, which I mean we've talked about a lot, is a real issue, even in local council levels, and if they have got this kind of multi-governmental tier support system in place, it really is quite a substantial project.
Speaker 1:Indeed, I think the role of local government in planning will change pretty quickly based on all of this it has to, because the federal government's coming down on state governments and the state governments are coming down on local governments.
Speaker 1:That's how our constitution works and I think we'll see completely different attitudes from local councils looking to you know fit in with this program. So some of the subheadings, sort of without going into greater detail in these papers immediately sort of tell you where it's all going. Expanding the help to buy they give an example there of where the government take equity in a young couple's home who can't quite afford to get into the housing market but they are wanting to get on the property ladder and their careers and their incomes are only likely to increase as they get older. So the government help to buy program will suit them. Banning foreign buyers of established homes that will go down really well. We've discussed that one in the past and that's a way of killing the demand, the excess demand that's coming into the country at a time of a low Australian dollar where foreign buyers are pumping and taking advantage of the low dollar and pumping too much money into the market and inflating prices on the locals, Improving access to housing and homelessness services.
Speaker 1:The government is providing $9.3 billion to states and territories to help combat homelessness, provide crisis support and maintain and repair social housing. I was in Brisbane earlier this week here and I was surprised at the amount of homeless people on the street in Brisbane. I really was. I think the homelessness in Brisbane felt more acute than it would be if I was walking through Pitt Street Mall. I don't know if I noticed that, for example, because I was, you know, travelling outside my normal, you know normal day-to-day activities, that I was more aware of the environment I was in, but the homelessness in the middle of Brisbane was really obvious. Yeah, Supporting renters continuing the government's commitment to responsible cost of living relief, the government has increased maximum rates of Commonwealth rent assistance by 45% for around one million households.
Speaker 1:Boosting the construction workforce from the 1st of July 2025, eligible apprentices in housing construction occupations will receive up to $10,000 in financial incentives over the course of their apprenticeshipships. Encouraging more people into housing construction trades and providing apprentices with cost of living support. Like who's going to be critical of that measure, for example?
Speaker 3:oh, and, as I mentioned to you off air earlier, off the back of uh, the government also announcing, uh, in perpetuity, a hundred thousand free TAFE places every year as part of their you know commitment to TAFE vocational education and their legacy as the People's Party or the Union's Party kind of thing.
Speaker 3:I really do think that the government, for the first time or I certainly think, in this government cycle is listening to genuine feedback from consumer groups, from the general public, from advisors, and actually saying, okay, these are the issues that are important. Maybe some people will say they're not going far enough, some will say they're going way too far and it's too expensive, but I think there's certainly. I feel buoyed in the sense that there is some direction in this that hopefully will have an impact on the housing crisis which, as we have said, extends from those who can't purchase and are stuck in the ever dwindling rent cycle and then those at the other end of the spectrum that are now facing homelessness and uncertainty and, you know, lack of security and shelter in Brisbane, sydney or wherever else. So I think, certainly from where I sit, it's all looking pretty positive at this stage.
Speaker 1:Look, it's an acknowledgement that the private sector would not be able to fix the housing crisis, naturally and in and of itself, in a timeframe that works for major political parties.
Speaker 2:Yeah.
Speaker 1:And some people will rightly say that the government now needs to step in at all three levels of government and do this to support the private sector getting these houses to market, or these new dwellings to market, because they've been so obstructionist for such a long time to developers who just wanted to build more homes for the country at a time that we needed them.
Speaker 3:Yeah, look, certainly. And I guess, before we change topic, my question for you and probably the you know 1.3 million dollar question giving the, given the, the help to buy scheme caps. What do you think is likely to happen? Because the usual commentary around schemes like this or the superannuation excess scheme to get housing, you know, there's always rhetoric and discussion around. Well, it's just going to push house prices up because all of a sudden there's this cash boost. Do you think that there is going to actually be a flow on negative effect for home buyers? Because, yes, they'll get access to the shared equity but by natural kind of progression the prices will increase to in some ways accommodate that and they'll still be priced out of the market.
Speaker 1:History shows us that any government incentive that is packaged as an incentive towards home buyers ends up benefiting the home sellers.
Speaker 2:Yeah.
Speaker 1:Where you can even that out is if you are genuinely bringing the supply to market that they're promising which, as I've already said, I think they're going to struggle to meet. But you won't get a price bubble or a seller's bonus that they're promising which, as I've already said, I think they're going to struggle to meet. But you won't get a price bubble or a seller's bonus if the available supply is there. So, yes, that part of the plan has to work in totality. It won't work in isolation because it'll just create a price bubble at that end of the market. I think we've discussed before on the podcast. The most classic and memorable example for us as real estate agents is Kevin Rudd waived stamp duty I think it was for first-home buyers up to $500,000 as part of his package during the GFC and it just set a boom off where people who couldn't get $420,000 just priced their property overnight at $499,000 and sold it yeah.
Speaker 1:And there was just a remarkable difference how the market at that time was behaving above $500,000, where there was no incentive as opposed to below $500,000.
Speaker 1:I think from memory at that time the incentive phased out between $500,000 and $600,000, but to get the full incentive it had to out between $500,000 and $600,000, but to get the full incentive it had to be under $500,000. So it created a price bubble at that end of the market. But at that stage there was no chance that a massive surge of supply would come to market to even out the incentive, whereas what the federal government are hoping here and forecasting is that they'll be throwing massive amounts of extra supply at the market so their help to buy scheme won't end up being a seller's bonus well, let's certainly hope so, peter.
Speaker 3:As we move on, then I I know there's there's been some movement with uh, inflationary figures, as we, you know, one of the things we certainly talk about around the rba's rates decisions, and we do often recap CPI numbers and where they're looking and where they're heading. I know that some new figures have come out today which potentially may alter some of our timelines or may give some guidance perhaps of where the RBA is likely to go in the coming weeks. Any chance you can run us through what's come out today. The RBA is likely to go in the coming weeks.
Speaker 1:Any chance you can run us through what's come out today. So yeah, headline inflation has fallen to 2.4%. So it's below the halfway point of the RBA's target band of 2% to 3%. And underlying inflation, or trimmed mean, as they call it, has fallen from 2.8% unexpectedly to 2.7%. So this goes back to the RBA statement last month that they deemed that the current cash rate, even after the February rate cut, would still be restrictive. And that's what's coming through. Inflation is actively falling.
Speaker 1:A lot of people are reassessing their timelines for when a rate cut will occur. Mine hasn't changed because I always said that it's going to be in April or May and you're seeing market consensus now really firm around a May rate cut. But an April rate cut, whilst it's unlikely, can't be ruled out. There are some good commentators in the market that think the RBA could and should and will cut next Tuesday. I think it's a one in three chance that they cut next Tuesday and on the current trajectory that all the numbers and everything's pointing toward, it's almost certain that they'll cut in May if they don't cut next Tuesday.
Speaker 3:Yeah, I certainly read some commentary today that aligns with what you say. You know you have held firm for a little while now that the rate cut is imminent before the election, or you believe there will be another one. I must admit I'm a little bit surprised. I know we talked about last time with the rate cut.
Speaker 3:We had discussed some of the early days of the new US administration, discussed some of the early days of the new US administration. We had talked about some of the potential flow-on effects of just the rhetoric and the commentary that was coming out of the United States. And I must admit, personally I'm a little bit surprised that there hasn't been a greater flow-on in terms of just declining confidence in the money markets or any, I guess, pricing in or factoring of likely tariffs. Do you think that? Obviously the RBA is considering all these factors, but do you think there's any risk, if they do cut, let's say in April or May, that then we have this kind of massive correction in the money markets due to foreign policy, which then actually has a negative impact on our CPI?
Speaker 1:I think what people are starting to work out at the moment. The tariffs are off one day, they're on the next with Trump. He's not smashing markets with a blunt instrument, he's grandstanding and he's negotiating. And if you've read any of Trump's books, this is just typical Trump.
Speaker 3:Yeah just playing his own game.
Speaker 1:Well he's. You know in his mind he's got his true north. He's got his dot points where he wants to get to. But you'll never work it out because on the surface level he's so wildly erratic. But if you believe that's who Donald Trump is, well fool on you, not him. He knows exactly where he wants to go and how he wants to get there. Is it highly unconventional? Have we seen anything like it before in the political space? No, we haven't. But Trump is only doing what Trump said he would do during the election. He was democratically elected. This is what the American people voted for. The rest of the world don't like it, but he got in with a thumping majority. So there you go he's doing what he said he do. I haven't seen trump do too much. If anything that was unscheduled during the election campaign. People are shocked because a politician is doing what he said he'd do during the election campaign yeah, I must admit, we haven't seen that for a while, certainly not in australian politics.
Speaker 3:Uh well, it will be interesting to see and I certainly, well I won't be alone in hoping the RBA do make rate cuts in the next, you know, six to eight weeks, that's for sure. But we will have to keep a close eye on what is happening with inflation and certainly with what happens with the RBA next week. Off the back of that, you've got, obviously, some budget announcements. We've got the inflationary figures today, but we've also got some stats we need to talk through, which is our auction clearance rates and how the market has been over the last week since we last had a chat. Any sort of talking points or hot points, peter?
Speaker 1:Look, the auction clearance rate has resumed that trend that it had in the back half of 2024. It's stuck below 50% for the last couple of weeks. So the auction clearance rate last weekend in Sydney was 48.1%. 285 properties sold prior to the auction and 276 sold at auction. A lot 373 were re-advertised for private treaty.
Speaker 1:You know Tom Panos is an auctioneer in the inner city of Sydney and I heard on Monday when he put his market wrap out that last Saturday he felt a curling in the market and a shift. So the relief rally from the February rate cut is already wearing off and stock levels have tightened. So I think what that does is it ties into that point from the RBA not that they're only talking about housing or necessarily housing when they said we deem the current interest rate setting to still be restrictive. Yes, there was a relief rally, there was a sugar hit after the rate cut, but fundamentally we're still at a restrictive level. That's, you know, not just tightening the noose on the housing market but all sectors of the economy. And there does need to be more rate relief because it's very, very clear that the economy is, you know, inflation's coming down, it's pulling back, it needs support now. It's been strangled enough.
Speaker 3:Yeah, which ties in really perfectly, I think, with what you said. Last time we spoke about the clearance rate and I asked you specifically, you know, and the rate cut, do you think that it's likely to have any real impact on homeowners in terms of, you know, rate relief and actual mortgage stress? And you said, look, no, it's not going to do anything at this point, rate relief and actual mortgage stress. And you said, look, no, it's not going to do anything at this point. And I think that really highlights that, because the the media uh commentary around the current housing situation in sydney is that, hey, all of a sudden it's a buyer's market and you've got control and you've got power and you've got all this ability to purchase.
Speaker 3:But, as you're sort of suggesting, stock is low. Uh, buyers do have a choice because you know there are some people now that can borrow a little bit more than they could have potentially earlier. Uh, but, as you say, you know, houses, households are still struggling. There's still not enough relief to actually have a profound impact and you know we really do uh need to sort of wait and see over the next few weeks as to whether or not there's going to be enough interjection from the RBA to really have an impact on people's, I guess confidence that they can go out and spend and you know, resume some semblance of what their life might have been like two years ago.
Speaker 1:That's right. Look, the other point we made about the rate cut. You know, in conjunction with everything else you've just pointed out, is the rate cut stimulated or made existing active buyers in the marketplace more determined and more confident to make a purchase? Yeah, but we didn't see the rate cut stimulate fresh buying into the market and we haven't seen vendors who are under duress, in a position to withstand market forces where they need to go, so that one rate cut doesn't turn the whole equation around. So maybe there's a, there's tightening stock because that seasonally occurs late March, early April, and you won't see you know high stock levels now until until the spring. So maybe that's just seasonal. But maybe part part of the tightening stock levels at the moment is less vendors feel like they need to go to market here and now because they've copped some interest rate relief.
Speaker 1:The other big shift in the market I think it's a big shift from the trend, or a breaking trend if you like is we are seeing unusually strong inspection numbers at rental opens for this time of year.
Speaker 1:It's about this time of year the rental market's cooling as the weather starts to change, et cetera. We're leasing I think we touched on this a few weeks ago. We're leasing the properties midweek, as you would have seen. I'm noticing across the marketplace with other agents that on-market rental stock is really low. Like I know of agents that have got 500 properties on the books and they've got three for rent at the moment and those properties are turning over really quickly. So I think in Sydney inner city, sydney, in the inner west, I think you're going to see some more pain for tenants as the rental market looks like it's set to kick again. And it should be also pointed out in this very, very busy news week that the New South Wales State Government have announced that the no-purpose evictions will take hold in May. We've discussed that in the past for anyone that wants to listen to the ins and outs of that, but coming from May, a landlord, in blunt terms, can't move the tenants out because they don't like them.
Speaker 3:Yeah, I must admit, in everything that's happened, I did forget about that announcement, you know, only a few days ago, and for our listeners I will provide a link to that episode in the text with this podcast, because they also, I believe, with that announcement, enshrined the pet protections into the Act as well, so that you know, as a landlord, you can't deny someone a pet, etc. You know, within reasonable grounds, which really is changing the landscape. I do have to wonder, though, Peter. We are, you know, coming to the end of March.
Speaker 3:The university cycle is only a few weeks old for the vast majority of students. We would have, and have certainly seen an influx of international students coming back in. So it may be a bit of a perfect storm of not enough rental supply combined with a sudden influx of students all over again, and I have to wonder, you know, what is going to happen to those students if they can't find a place? You know, are we just going to end up seeing more and more of these, you know 20 to a terrorist kind of weird share accommodation kind of scenarios that just conflate the prices even further? Well, that's what would have happened in the past.
Speaker 1:But I think companies like Scape, who specialise in student accommodation, are going to pick up the slack and be the beneficiaries of all the international students that are coming in. I must say that the tenants that we're seeing out and about at the moment are not the profile of university students. That's a real January thing seeing the kids coming from China, primarily looking for housing between sort of Newtown, camperdown, glebe in that triangle. But that's not the profile of tenant that I'm referring to at the moment. It's locals that, for whatever reason, need to find a property. And can I say that, whilst I think the federal government has got a really decent housing plan here, if they can execute it, which in some facets they'll succeed at, in other facets there's going to be more roadblocks that they've got to work their way through, but the plan is decent enough in and of its own right.
Speaker 1:This thing about the tenants and no pets and telling landlords who can rent their property and what animals can and can't live there. Look, I understand the intent protect tenants, um, etc. But what you must realize is that when a tenant leases a private landlord's property, it is. It is not a government transaction. It's two people that should be, two people that are coming to arrangement in the private sector. And when you legislate to the degree that the New South Wales government are doing and they've done in Victoria and they're doing in Queensland, you will have the trend.
Speaker 3:You'll cause the trend that is occurring, which landlords are bailing on mass yeah, pulling out because they don't want to risk their property for whatever reason, right?
Speaker 1:They're just taking their equity. They're sitting on good gains. You can't tell me that a dog can live in my investment properties, where I've just polished the floorboards and scratched them up. You can't tell me that if I want to change over tenants, that I must stick with the existing tenants. If that's what the game has become, that's fine, but count me out. And landlords are selling out en masse and the rental pool is shrinking and with this federal government housing plan, there's going to be no new stock in 2025. So the issue is going to get worse before it gets better, and we do not need policy that drives landlords out of the market at the moment, which is what these rules in May are going to do.
Speaker 3:Yeah, look, certainly, and we're not the first to raise that point. We certainly won't be the last, that's for sure. Peter, Look really really great chat today, some pretty important points, as I mentioned to our listeners. I will give a link back to our previous podcast discussing the no-cause evictions or the no-cause evictions, sorry and I will provide, as always, a link there. If you do want to request a specific topic from us or something you'd like a little bit more info on, we're certainly happy to help. Peter, look, really great chat. Thank you very much for speaking with us today. Thanks, kieran, all the best, thank you, and thanks to everyone for listening to Current Market Insights. We look forward to speaking with you next time.
Speaker 2:Thanks for joining us on the Current Market Insights podcast brought to you by Harris Partners Real Estate, the podcast providing real estate insights you won't find anywhere else.
