Budget 2016: What it will mean for housing

Adam Smith 4 May 2016

Fall in capital city median house price REIALast night’s budget has been touted as a “steady path” for housing.

The Federal Budget was largely a case of “no news is good news” for housing. The government followed through on its vow not to touch negative gearing. The Housing Industry Association said the decision would help maintain confidence in the housing market.

“The Government’s commitment to maintaining the current tax regime for rental investors is also a welcome move that will deliver certainty to the market, maintain a steady supply of residential rental properties and avoid panic decisions by investors that could disrupt the rental market as occurred in the 1980s,” HIA chief executive for industry policy Graham Wolfe said.

While there was little in the Budget directly aimed at housing, the HIA praised measures that could have a flow-on effect for the housing market. One such measure was the Budget’s allocation toward infrastructure. The Budget included around 180 major infrastructure projects in construction or pre-construction, as well as an additional $594 million in equity to the Australian Rail Track Corporation for the development of a rail link connecting Brisbane and Melbourne.

“The Budget measures to support new approaches to funding the essential infrastructure that our cities need to grow have the potential to unlock fresh opportunities for home buyers and improve housing affordability. Coordinated approaches to infrastructure delivery among all levels of government can only be to the benefit of our cities and towns,” Wolfe said.

The Budget also included a cut to the small business tax rate to 27.5%, and an increase in the turnover threshold for small businesses from $2 million to $10 million. This threshold will increase from $10 million to $25 million in 2017-18, to $50 million in 2018-19 and $100 million in 2019-20. Wolfe said this would help small businesses in the residential construction industry.

“The reduction in the company tax rate, its immediate extension to businesses with turnovers up to $10 million and the continuation of the $20,000 asset write-off program will also help the small businesses that dominate the residential construction industry, to grow their employment and investment,” Wolfe said.

The Budget came on the heels of a cut to the cash rate from the Reserve Bank of Australia, and Wolfe said the two in tandem would help to bolster confidence.

“When combined with the decision taken today to lower the Official Cash Rate, which have already started to flow through to housing interest rates, the Budget will help maintain the residential building industry’s capacity to make a significant contribution to employment and economic activity.”

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