Property sees (mostly) positives from Federal Budget

By Terry Ryder, 26th May 2011

The Federal Budget delivered little that impacts directly on real estate. But indirectly, there’s considerable impact across the industry and in specific areas with potential for investors.

If there’s one central conclusion I draw from the totality of Budget measures, it’s that regional Australia is the place to be.

There has been a mixture of reactions to the Budget from the property industry. It goes without saying that the sector’s most depressed people, the boffins who run the Housing Industry Association, were unhappy. It’s a terminal condition with those people.

The HIA leadership should realise that their campaign of negativity about the real estate industry has failed to elicit the desired responses (such as direct measures to improve affordability) from the Federal Government. The drive to convince everyone there’s a chronic housing shortage, the greatest myth in Australian real estate, has not impressed anyone in government either.

Try a new tactic, guys, you’ve become boring.

But much of the industry response was optimistic. Master Builders Australia says the Budget delivers a number of positive measures for building and construction.

MBA CEO Wilhelm Harnisch says the plan to return the Budget to surplus by 2012-13 is welcome, as are the savings announced as part of the Government's fiscal strategy. He says this should help stem future interest rate rises, thereby helping the industry to recover and ensure home ownership remains affordable.

"Master Builders strongly supports the substantial investment in skills and employment initiatives, and the projected expansion of the skilled migration program,” Harnisch says.  

Specific Budget measures welcomed by MBA include a $558 million National Workforce Development Fund, $201 million in increased support for apprenticeships and $1.7 billion for a new training partnership with the states.

"Building and construction is the third largest employer and the largest employer of skilled tradespeople,” he says. “A reinvigorated industry-led training system is a vital concern and the measures introduced in the Budget represent an important down payment on tackling the quality and size of the future workforce. An increase in the skilled migrant intake is also a welcome measure."

Harnisch says the plan to improve deductibility provisions for some privately-funded infrastructure projects will promote investment to lift Australia's productivity. The number of major road investments and other infrastructure initiatives are also welcome.

This kind of outcome is particularly relevant to real estate because new infrastructure, especially transport infrastructure, is one of the big kickers that generate market out-performance.

However, MBA says more substantial tax, economic and productivity reforms are needed to ensure Australia maximises the benefits of the resources boom and a sustainablee conomic recovery.

"The reality for many in the building and construction industry is that it will be a bumpy road,” Harnisch says.

The Green Building Council of Australia says $160 million for projects that support sustainable urban development is the first step towards an integrated strategy for Australian communities.

“The Budget announcement establishes the first step on what is a long journey towards the integrated strategy necessary to enable our buildings, cities and communities to adapt to climate change,” says council chief executive Romilly Madew.

"We are particularly pleased to see the $29 million earmarked to support the development of sustainable plans for regional and coastal high growth areas."

This is particularly relevant at a time when regional areas are emerging as key economies and real estate markets – boosted by increased Federal Government funding for infrastructure (thanks to Julia Gillard’s deal with the independents), greater focus on the regions from state governments, the influence of the resources boom and evidence of population drift to major regional centres.

"The $100 million allocation to boost employment opportunities in suburban areas reflects one of the five principles underpinning the Green Star Communities project - the need to create prosperous communities,” Madew says. “Job opportunities will not only increase economic prosperity, but decrease greenhouse gas emissions and improve liveability by reducing the need for people to commute long distances.”

One of the key Budget measures, in terms of impact on real estate, is the decision to increase the intake of skilled migrants.

The Federal Government is lifting the permanent migrant intake from 169,000 to185,000, with the majority aimed at regional areas. This addresses the shortage of skilled labour in the mining sector and will boost demand for housing in key regional areas.

Some of the plans revealed in the Budget will lead to direct impact on specific markets. The $55 million allocated to the re-development of Wagga Wagga Base Hospital is an example. This, combined with state funds (in February, during the State Election campaign, the Liberal Party promised an extra $125 million for the hospital), will allow the next stage of the $400 million rebuild to proceed.

Wagga Wagga is a regional centre of growing importance with its strong medical, education and military economies. The hospital project is seen as a key driver of prosperity.

ENDS 

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