2023 Federal Budget Update

Labor's 2023-24 Federal Budget introduces housing initiatives to tackle challenges faced by renters, first-home buyers and property investors. Cornus explores how these initiatives, such as the Commonwealth Rent Assistance (CRA) increase and changes to the Home Guarantee incentives, benefit investors and purchasers interested in purchasing a Cornus apartment. Let’s have a look at the pros and cons of these measures while highlighting the impact of these new 

Expanding Eligibility of Recipients for Low-Deposit Home Loan Schemes

The Federal Government has expanded and adjusted the eligibility criteria of the types of  low-deposit home loan schemes it offers.

1. The First Home Guarantee: Allows eligible first home buyers to access a home loan with a 5% deposit without paying lenders mortgage insurance (LMI). It has an annual allocation of 35,000 places.
2. The Regional Home Guarantee: Designed for eligible first home buyers in regional Australia, this scheme enables them to access a home loan with a 5% deposit without paying LMI. It has an annual allocation of 10,000 places.
3. The Family Home Guarantee: This scheme allows eligible single parents to access a home loan with a 2% deposit without paying LMI. It has an annual allocation of 5,000 places.

Each scheme has specific criteria related to the property being purchased, income levels and participating lenders. To find more detailed information, refer to the National Housing Finance and Investment Corporation (NHFIC) website, which is managed by the Government.

The recent Budget outlined an expansion of the eligibility criteria for these home guarantee schemes:

• The schemes now extend beyond spouses and de facto couples, allowing any two applicants, such as parents and children, siblings or even friends, to apply together.
• Non-first home buyers who haven't owned a home for at least 10 years may now be eligible for the First Home Guarantee and the Regional Home Guarantee (if they already qualify for the Family Home Guarantee).
• Single legal guardians of dependents can now qualify for the Family Home Guarantee.
• Permanent residents are also eligible for the Home Guarantee Schemes.

Increase in Commonwealth Rent Assistance (CRA)

The government has announced a 15% increase to the maximum rate of CRA, benefiting around 1.35 million households in the private rental market. While modest compared to rising rents, the increase, coupled with support measures like JobSeeker payment boosts, provides some relief to low-income renters.

The CRA increase acknowledges renters' challenges, potentially improving rental affordability for tenants in Cornus Apartments. However, it may not fully offset rising rental costs, impacting investment returns.

Impact of the CRA Increase on Investors

The CRA increase could lead to higher rental demand and increased rents. This can benefit investors by contributing to rental income growth and increasing the overall value of their investment. On the flip side, higher rental demand and increased rents may create affordability challenges for tenants, potentially impacting tenant retention rates and vacancy levels.

Build-to-Rent (BTR) Development Incentives

Labor's budget includes tax reform measures aimed at promoting Build-to-Rent (BTR) developments. In an aim to make BTR investments more attractive, the government has reduced the withholding tax rate from 30% to 15%. Additionally, the depreciation rate for BTR properties would increase from 2.5% to 4%, boosting after-tax returns for investors. These measures could potentially lead to the construction of 150,000 apartments over the next 10 years. While BTR is not necessarily affordable housing, it offers a more secure alternative for some households and contributes to increasing rental supply, benefiting the broader rental market.

Labor's 2023-24 Federal Budget introduces several housing initiatives aimed at addressing challenges faced by renters, first-home buyers and property investors. The expansion of eligibility criteria for low-deposit home loan schemes, such as the First Home Guarantee, Regional Home Guarantee, and Family Home Guarantee, opens up opportunities for a wider range of applicants, including non-first home buyers and single legal guardians. This expansion, along with the increase in Commonwealth Rent Assistance (CRA), acknowledges the difficulties faced by renters and provides some relief to low-income households. However, while the CRA increase may improve rental affordability for tenants, it may not fully offset rising rental costs. On the other hand, the incentives for Build-to-Rent (BTR) projects, such as reduced withholding tax rates and increased depreciation rates, aim to attract more corporate and institutional investors, potentially leading to a significant increase in rental apartments over the next decade. It is important to consider the pros and cons of these measures to understand their overall impact on the housing market.

For more comprehensive information about Cornus Apartments available in Carnegie, Oakleigh and Glen Iris, contact Marcus on 0488 845 332 or fill in the form below.

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