Federal budget 2018: What will it mean for the Canberra property market?

Individual tax cuts, small business tax concessions and highway upgrades will boost Canberra’s property market, but the budget remained relatively silent on housing affordability – that’s the takeaway for Canberra’s property industry from this year’s federal budget.

One of the budget’s measures, which will have the biggest effect on the greater population, is an individual tax cut of $530 per annum applied to those on an annual income between $47,000 to $90,000.

“For Canberrans, the individual tax cuts are going to be great, it means we will have higher disposable incomes and those could help buffer concerns about mortgage stress, bills and household budgets,” Domain chief data scientist Dr Nicola Powell said.

This comes after the Domain March Quarter 2018 Rental Price Report, released last month, showed that Canberra’s median weekly asking rent for houses is $530 – the second highest in the nation.

“When you look at it from a dollar perspective it looks like a very marginal rate, but any help to the family budget is welcomed,” said Dr Powell.

Master Builders ACT CEO Michael Hopkins said: “Reducing the tax burden on households and small business is good for the ACT economy and good for builders and tradies.

“With secure jobs and extra cash in their pocket, Canberrans may decide to renovate their kitchen sooner or buy their first home faster.”

The $20,000 instant asset write-off for small businesses has been extended by one year to June 30, 2019. This means businesses with a turnover of less than $10 million can write-off assets costing less than $20,000 in their tax return.

“Overall the budget looks to encourage business growth and employment, obviously that has ongoing positive effects on the economy. Canberra is built largely off small business,” added Dr Powell.

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There were only a handful of measures in the entire budget specific to the ACT. One of those being the upgrades of the Barton and Monaro highways – with both receiving $100 million in federal government funding. This has been widely accepted as a positive for Canberra and the surrounding region.

Colliers International ACT state chief executive Paul Powderly said the upgrades will create a stronger region.

“Canberra is starting to be seen as a large region, encompassing Goulburn and Yass. The upgrades are certainly needed and it’s going to strengthen Canberra as the core of a million-person region, which it’s set to become in the future,” he said.

Dr Powell said improvements will make commuting easier and will unlock more affordable housing to the Canberra market.

In terms of housing, the budget did not have any new measures that explicitly addressed housing affordability or supply, the only acknowledgement was a confirmation that measures announced in last year’s budget are set to commence next financial year.

“The National Finance and Investment Corporation, which comprises the $1 billion National Housing Infrastructure Facility and Affordable Housing Bond Aggregator, is on track to commence on July 1, 2018,” said Mr Hopkins.

“The new National Housing and Homelessness Agreement will also commence on July 1, 2018. This agreement will provide $7 billion in housing funding and an additional $620 million for homelessness services over the next five years.”

This federal budget has been widely labelled as a pre-election budget, with Mr Powderly cautioning against an election this year.

“An election will see a downturn in terms of spending by government once it goes into caretaker mode,” he said

“If there’s a change of government you have a period of three to six months where they restructure everything.

“No matter what, there is always a down period when there is an election, so we have to try to get this year under our belts and then deal with the election.”

If the Labor party is elected at the next election it is expected it would reform negative gearing – something Dr Powell said would have “a severe impact on the rental market in Canberra”.

“There’s a very tight rental market in Canberra – prices are rising, vacancy rates are low and advertised stock has dwindled,” she said.

“I think if any government started to change negative gearing it could impact that and investors could leave the market.”