Residential housing construction could moderate due to falling prices: Treasury

Residential housing construction could moderate due to falling prices: Treasury
Residential housing construction could moderate due to falling prices: Treasury

Overall the Budget will boost confidence in the building and construction industry, according to Denita Wawn, CEO of Master Builders Australia. 

“The Government’s infrastructure Budget will play a key role in setting the nation up for future prosperity.

The additional $24 billion investment in infrastructure across the country will boost the productivity and liveability of our cities,” she said. 

“Small businesses will benefit from the extension of the $20,000 immediate tax write-off scheme until 2019. There are more SMEs in buiding and construction than any other industry and this great news for mum and dad building business and tradies,” Denita Wawn said. 

“The uncorporated small business tax discount rate will increase from 5 per cent to 8 per cent allowing SME builders to write-off their assets faster,” Denita Wawn said.

But lower house prices could hit the residential construction boom harder than expected, according to the Federal Government's Treasury department.

Dwelling investment is forecast to rise slightly by 1.5 per cent next year before slowing further and remaining "largely flat" in 2019-20, Treasury estimates.

Residential construction is easing after reaching a peak of near 6 per cent of gross domestic product in the financial year ended June 2017.

Approvals are likely to keep dwelling investment "elevated by historical standards", according to Treasury, especially in New South Wales and Victoria.

Treasury also noted a "reasonable pipeline of work" in commercial buildings, especially for offices in Victoria and New South Wales.

The 2018 Budget had no measures that specifically address housing supply and affordability, according to the Real Estate Institute of Australia (REIA).

“Whereas housing affordability was a centre piece of the 2017 Budget there was nothing in this year’s Budget that directly addressed this,” REIA President Malcolm Gunning said.

“It was however pleasing to see that the Government recognises the important role that the current taxation arrangements for negative gearing and Capital Gains Tax play in increasing supply, keeping rents affordable and easing the burden on social housing by leaving these unchanged,” he said. 

Mr Gunning said the Budget’s approach recognises the state of the property market and the impact that APRA’s measures have had in cooling the marking particularly in Melbourne and Sydney and the Treasurer has seen no reason to make any further adjustments. 

“A boost to infrastructure spending, modest improvements in housing income for lower income earners, continued tax write offs for small to medium business and growth in employment can be expected to be mildly expansionary, particularly for regional economies.

“The good news for home buyers is that the Budget is not expected to put pressure on interest rates as inflation is expected to remain within the RBA’s target zone.

“This expected interest rate stability comes at a time when housing prices in some of our major cities are showing signs of easing leading to improved affordability for first home buyers,” Mr Gunning.



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