- 25 Mar 2025
- By API Magazine
Treasurer Jim Chalmers will give every worker a tax cut but for those looking to buy a home and overcome the impact of the housing crisis there were only modest policy adjustments in the 2025-26 Federal Budget.
Asked by API Magazine if this budget would fix the housing crisis, RSM Australia National Property & Construction Leader, Adam Crowley, replied, “In a nutshell, no.”
He said the government’s policy platform shows an attempt to address the looming shortfall of National Housing Accord targets, but the fact is they remain 426,000 homes behind target.
“The government initiatives lack the immediate, large-scale supply boost needed to address the shortfall.
“With housing demand outpacing construction, the budget’s response is too slow and insufficiently ambitious.
“While the government touts the Help to Buy Scheme, allocating $800 million for lower deposits and mortgage relief, this only assists a limited number of buyers rather than expanding supply.”
Mr Crowley said there was an urgent need to support calls by the Property Council for bolder initiatives, including a refinement of the New Homes Bonus by bringing forward payments and extending its duration to seven years to allow for longer-term reforms, along with a Cabinet-level Housing Sub-Committee that can work across government to pull the levers required to boost housing supply.
“Firm and fast action to address the shortfall would contribute $128 billion in economic activity across the five years of the National Housing Accord, Mandala analysis of Australian Bureau of Statistics data indicates,” he said.
“While the government’s budget announcements to support innovation in construction are welcomed, it remains a small-scale fix rather than a transformative solution.”
Julie Toth, PEXA’s Chief Economist, also said the budget faced an difficult challenge in meeting that 1.2 million homes target.
“The government needs to build 240,000 new homes every year, or 60,000 per quarter and the budget confirms we are a long way from meeting this target, at just 45,000 homes built in the latest quarter of available data.
“Australia has only achieved home building numbers approaching 60,000 per quarter once – for one quarter only in 2015 – during the height of the apartment building boom in inner Melbourne and Sydney.
“While the single cash rate cut from the RBA this year has provided some encouragement, recent building approval trends and extended completion times suggest that supply is still well short of the volume and speed required to reach 60,000 new homes per quarter.
“Adding to these challenges, ex-cyclone Alfred has further reduced national housing stocks, with Treasury estimating its impact could lower GDP growth by 0.25 percentage points in 2025. More money has been made available to assist with cyclone recovery, but regardless of who pays, tradies and materials will need to be diverted to repair and rebuild a long waiting list of damaged homes.
“This budget does not introduce any significant new measures to help achieve this ambitious target.”
A two-year pause on foreign investors purchasing existing homes (effective from 1 April 2025) had already been revealed. It can be expected to have limited impact, as most foreign investment is in new apartments, which are not included in this measure.
The tax cuts cuts for those earning more than $45,000 per year only amount to around $5 per week. When factoring in the existing stage three tax cuts brought in by Labor last year, the changes will deliver the average worker a total tax cut of $2548 a year or about $50 a week.
Tepid reaction to housing policy measures
The broad reaction within the property sector to the Federal Budget’s housing measures was generally lukewarm but short of being overtly critical.
The nation’s peak real estate body, the Real Estate Institute of Australia (REIA), was among the chorus of industry responses best summarised as “not bad but not enough.”
REIA President Ms Leanne Pilkington acknowledged the government’s commitments to housing supply and affordability but stressed that further measures are necessary to tackle ongoing market challenges.
The budget projects a $27.6 billion deficit for 2024-25, with GDP growth expected to reach 1.5 per cent in 2024-25 and 2.25 per cent in 2025-26. Inflation is anticipated to ease to 2.5 per cent by mid-2025, within the Reserve Bank’s target range.
“Although these economic indicators suggest stability, the path to sustained improvements in (housing) affordability requires ongoing government intervention and collaboration with the industry,” Ms Pilkington said.
She said dwelling investment is projected to grow by 1.5 per cent in 2024-25, with stronger growth expected in the years following. The Government’s $33 billion housing investment is seen as a positive step. However, Ms Pilkington said that challenges remain, particularly with labour shortages and regulatory barriers that continue to delay construction.
“Key initiatives supported by REIA include the expansion of the Help to Buy scheme, increased funding for social and affordable housing, and backing for prefabricated and modular home construction.
“Renters will also benefit from the retention of a 45 per cent increase in the maximum Commonwealth Rent Assistance, alongside the introduction of the A Better Deal for Renters policy.”
‘Business as Usual’ won’t cut it, yet this Federal Budget again delivered a same-same response to addressing the issues.’
– Jocelyn Martin, Housing Industry Association
Ms Pilkington called for long-term structural reforms to improve rental supply. She urged the government to streamline planning approvals, reduce red tape, and incentivise private sector investment in build-to-rent projects to ensure the long-term sustainability of housing supply.
The Property Council welcomed the previously announced inclusion in the Federal Budget of $54 million for advanced manufacturing of prefabricated and modular home construction and an expansion of the Help to Buy scheme but said neither side of politics had provided any grand vision.
Bigger population requires big vision
Property Council Chief Executive Mike Zorbas said future Federal Budget deficits and matching state financial shortfalls are the strongest argument yet for more overseas investment and a comprehensive rebase of our tax and regulatory systems.
“As Australia has grown, overseas investment has always helped grow our cities for the better,” Mr Zorbas said.
“Now we have maxed out the national credit card, and with big state deficits, we are going to need other peoples’ money to build the best parts of our cities.
“Industrial hubs, commercial buildings and new housing communities, which Australians need to create opportunities and to support their daily lives, will need increasing institutional investment from overseas.
“We repel overseas investment through overly complex foreign investment review board and ACCC merger frameworks. These compound with daft state taxes on overseas institutions that seek to partner with Australian businesses to create city assets.
“Our next national debate has to start with lifting the productivity handbrake on institutional investment and eventually tackle root and branch tax reform.
“Parliamentarians also have to grapple with the inconvenient truth that we need a higher proportion of skilled migration to support our economy and sustain our tax base.
“That vision is missing from this budget and the pre-election pitches of both sides,” Mr Zorbas said.
Jocelyn Martin, Managing Director, Housing Industry Association, said the budgetary response to the housing crisis was largely underwhelming.
“The Albanese government’s fourth Federal Budget provided a critical juncture to double down and pull out all stops to address the nation’s crippling housing crisis, but, yet again it was a case of focusing on small target solutions,” Ms Martin said.
“It was pleasing to see boosting housing supply as one of the key policy areas for this budget, but the polices announced have missed the mark on addressing the key structural reforms needed.
“Australia needs to be delivering a quarter of million new homes year on year to meet our growing population and put downwards pressure on housing and rental affordability.
“Instead, we are facing a shortfall of new home delivery in excess of 70,000 year on year due to government induced roadblocks, chronic skills shortages and the outrageous level of taxes and regulatory barriers being imposed on home building and new home buyers.
“All levels of government have been warned extensively on these key issues and that ‘Business as Usual’ won’t cut it, yet this Federal Budget again delivered a same, same response to addressing the issues.”
