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2022 Federal Budget and the property market

We’ve seen the soaring prices of fuel in the past months ever since the war Russia waged on Ukraine began. Naturally, all other industries have been suffering from high production costs because of this. With the 2022 Federal Budget is set, could things be looking up, especially for the financial services and property sector?

Boost for affordable housing and homeownership

Great news for upcoming new homebuyers! The National Housing Finance and Investment Corporation (NHFIC) will receive additional funding of $2 billion to $5.5 billion for the year 2022.

This will boost community housing providers to be able to support higher levels of loans. New homebuyers will also enjoy low deposits with additional guarantees to the Home Guarantee Scheme. NHFIC will increase the number of guarantees to 50,000 per year from 2022 to 2023. 

These boosts for the housing and property sector will hopefully make housing more accessible with an additional target of 8000 more social housing units. However, actions beyond these announcements are a must, especially with the losses in the housing sector due to the flooding. 

Comments on the budget raise

Australia still faces a housing problem

Economist Angus Moore further drilled on this and said that the budget raise focuses on affordability. However, he said, these are all short-term solutions. And if the government is serious about solving the housing crisis, building more homes is the key.

He also stressed that with the rising interest rates we are expecting this year, these additional guarantees for first homebuyers can only do so much. Even with the additional guarantees that the scheme promises, it falls short of the numbers because in 2021, there 

Were around 150,000 first home buyers in Australia. 

He noted that while not all homebuyers will need financial assistance from the government. Data from the previous years suggest that there will be more demand for the scheme in the coming years. 

Prices have already gone up regardless of where a property is. And so the property price cap set by the NHFIC for the home guarantee requires review. For 2021, the highest price cap is $950,000 in the capital city and regional centres of Sydney. The lowest is $400,000 for Christmas Island and Cocos Islands. As well as the non-capital areas of Tasmania, South Australia, and Western Australia. 

In July 2021, the government lifted the price cap to the current numbers. But look at the median prices in Sydney alone. Moore observed that properties are priced at least $100,000 more than the eligible properties based on the cap. Sydney properties are now in the millions. 

The budget addresses other issues related to the rising inflation including a one-off $420 dollar living tax offset for low- and middle-income families. This means that when families belonging to the low- and middle-income brackets turn in their tax returns application for 2021 to 2022, they will receive up to $1500. Fuel excise taxes will also be halved temporarily. 

Given this shift in economic conditions, it’s best for everybody to sit down and assess their current financial health. For those who have ongoing mortgages or are planning to take one, consult your broker for your next steps.