What does the Federal Budget mean for property?

Federal Treasurer Scott Morrison handed down his first, and the Government’s third, Budget on Tuesday, but there wasn’t much joy for homeowners or first home buyers.

In a Budget of few, if any surprises, there are no measures to combat the rising housing affordability problems.

REA Group Chief Economist Nerida Conisbee says overall the Budget will have little impact on the residential property market.

“It was great news that the Turnbull Government continues to see the importance of providing negative gearing to allow for affordable rental housing. However other than that, there was little relief for first home buyers.

“Commercial property markets were however more adequately provided for, with many measures to encourage employment growth in office and industrial markets”

So what does Budget 2016 mean for the property market?

What happens with negative gearing?

As expected there was no changes to negative gearing with the Treasurer saying the government didn’t want to “increase the tax burden on Australians who are just trying to invest”.

“Those earning less than $80,000 a year in taxable income make up two thirds of those who use negative gearing,” Morrison says.

“We do not consider that taxing these Australians more on their investments, including increasing their capital gains tax, and undermining the value of their own home and investment is a plan for jobs and growth.”

But don’t expect this to be the last you hear on the issue, with the controversial tax looming as an election issue.

What’s outlined for infrastructure?

The budget outlined nearly $3 billion in infrastructure spending across the states, with roads a major focus.

The package includes:

  • $115m for a second Sydney airport at Badgerys Creek
  • $594m for inland rail between Melbourne Brisbane
  • $1.7b from asset recycling program for Sydney Metro rail project
  • $857m from asset recycling program for Melbourne Metro rail project
  • $200m for upgrade to Ipswich Motorway

“The infrastructure spending is good, but the impacts on the property market will be more long term,” REA Group Chief Economist Nerida Conisbee says.

“It’s great for owners near the Melbourne and Sydney metro links, as well as for property around the Badgerys Creek airport site.

“It could also be good for country areas – if the rail link between Brisbane and Melbourne goes through your town and actually stops there, accessibility will improve.”

Will I have more money after tax to save?

The budget included measures to combat “bracket creep” – where workers creep into a higher tax bracket.

The threshold for the middle-income tax bracket has increase from $80,000 to $87,000, with the Treasurer saying “whenever possible we prefer to leave a dollar in Australians’ pockets than take it for the Government’s pocket.”

The Treasurer says this will prevent 500,000 people avoiding the higher 37% tax rate – the second highest rate of tax.

The savings amount to an average $6 per person, or about $315 a year.

First published in realestate.com.au by Sarah Millar