Federal Budget 2017: is this a circuit-breaker on housing?

9th May, 2017

The government is trying to make housing more affordable with a raft of measures.

But, as the Treasurer admitted on the night, “there are no silver bullets to make housing more affordable”.

Instead, the government is bringing in a patchwork of different measures it hopes will alleviate the housing-affordability crisis in Australia.

The National Affordability Housing Agreement is being replaced with a new set of agreements with state governments to help “reform their planning systems” – but the funding is exactly the same.

Key Budget measures include:

  • Encouraging older Australians to ‘downsize’ by allowing them to make a non-concessional contribution of up to $300,000 into their superannuation fund from the sale of their principal home.
  • First home buyers are able to contribute up to $30,000 in salary sacrifice into their superannuation fund, to be taxed at just 15 percent instead of the normal 30 percent. Importantly, this won’t involve opening up another superannuation account. (Don’t forget that there will be some further taxation on removing the funds!)
  • An annual foreign investment levy of $5000 on all future foreign investors who leave the property they’ve bought empty.
  • Restoring a requirement for land developers to keep more than 50 percent of any given development aside for Australian buyers.

In addition, there’s another $1 billion going into a ‘micro city’ fund, based on a similar UK model, which will reduce approvals red tape for micro city developments.

It’s also seeking to make more surplus Defence land available for new homes – pointing to 6000 new homes which could be constructed at Maribyrnong in Melbourne.

Whether this will have a big impact on the small-business sector largely depends on how much new construction activity these measures support.

In any case, it’s a good time to be in construction.

READ: Federal Budget 2017: How the budget affects your business

Why is the government doing this?

All over the country a perfect storm of factors has come together to all but lock an entire generation out of the property game.


This chart from the RBA [PDF] shows that the price of housing across Australia is growing at a faster rate than inflation, the value of dwellings, and the rise in construction costs.

Since about 2000, things like an increasing population and a rise of affluence caused by the mining boom means that there have been a lot more buyers of houses than sellers.

When demand outstrips supply, prices rise.

The cost of housing has been a white-hot issue for the government, and one it wants to nip in the bud.