Housing, childcare and infrastructure funding are the major property-related takeaways from Jim Chalmer's 2022 Budget.
The 2022 Federal Budget was delivered by the Treasurer last week, and with it came a number of key announcements that concern the commercial property and development markets. Here, we’ll take a quick look at some of the measures Mr. Jim Chalmers made official last Tuesday.
Major investment in affordable housing
Given supply issues evident in the construction industry, it will be difficult to follow up on the commitments made by the budget for the residential sector. Still, the federal government’s willingness to provide financial backing that relieves the stress on the affordable housing stock should be considered a good move.
The new Housing Accord has set an “aspirational target” of one million newly constructed homes over 5 years, from 2024 onwards. The national government is looking to work alongside individual states and territories to undertake “expedited zoning, planning and land release to deliver on a joint commitment to improve the availability of social and affordable housing in well-located areas,” according to budget documents.
The government is looking to deliver 10,000 affordable dwellings at an energy efficiency rating of 7 stars or greater; this comes in addition to the 30,000 new social and affordable dwellings that will be delivered through the Housing Australia Future Fund.
Ready Capital's Amir Bani works alongside some of the preeminent names in the construction industry, and he believes that whilst it's a sign of good will, the initiative may take some time be enacted.
"This strategy is set to help renters with an increase in supply of homes, including homes in well established suburbs," explained Bani. "While the industry has welcomed the plan, some are highlighting the further impact on capacity within the construction industry and material costs. Hopefully this will be less of an issue by the time the initiatives are implemented."
Government follows through on childcare funding
One of the key tenets of the Labor party’s set of proposals leading up to the 2022 federal election was that they were intending to overhaul the childcare sector, to allow more parents to actively participate in the economy. They are carrying through with that promise, by announcing intentions to invest $4.7 billion into the sector, over 4 years from 2022-2023.
Changes in Childcare Subsidy Rates - Graphic courtesy of "Cheaper Child Care" fact sheet
According to the “Cheaper Child Care” fact sheet that the government has produced, childcare subsidy rates “will lift from 85% to 90% for families earning less than $80,000.” As we addressed in June when discussing the growth of the industry, second earners in a family unit are being provided what is effectively a 33% pay rise for their fourth day of work, and a 75% pay rise on their fifth.
The childcare sector has been flourishing recently within the commercial property space, as investors have started to recognise the significant value eminent in the asset class. Early Learning Centre’s (ELC’s) are a sensational source of secure, consistent holding income, and are a necessity in the modern economy. As such, demand is already high. With the government having now formalised their funding for the sector, expect investors and developers to pay even more attention to these facilities.
A variety of national infrastructure projects planned
The government have allocated funds to a number of notable developments with this budget announcement.
ACT property moguls will be interested in learning about the new National Security Office Precinct that is set to be constructed in Barton. Whilst financials are currently unavailable due to “commercial and national security insensitivities,” the budget does earmark the project as one of priority.
According to the Budget Paper No. 2 document, “the Precinct and associated infrastructure will have a number of public and private tenants, and is expected to be utilised by a range of Commonwealth entities, including the Office of National Intelligence and the Department of Foreign Affairs and Trade.” A multi-level car park is also to be constructed adjacent to the John Gorton Building, to “support visitor and worker amenities in the Parliamentary Triangle.”
The John Gorton Building, Parkes ACT 2600
Barton has been the focus of a number of significant office transactions in the last twelve months, including Doma and Kenyon Investments’ divestment of 15 Sydney Avenue to Charter Hall, and Quintessential Equity’s sale of 39 Brisbane Avenue to IOOF Investment Services Limited. As such, investors engaged with the ACT’s office market are sure to keep their finger on the pulse of this developing project.
Trade and tourism are being bolstered by a bevy of new federal initiatives, including a $48 million commitment to both supporting recruitment and marketing in the tourism and travel sectors, and for infrastructure upgrades for caravan parks. For those invested in short-term accommodation, opportunities are presenting.
Already announced was the Albanese government’s intention to develop a new Bentley Hospital Surgicentre in Perth. The budget has formalised this promise, with the federal government pledging $75 million over five years to the development. This comes in addition to a pair of cancer centres that will be constructed in Queensland and Adelaide.
For investors engaged in the childcare and residential housing markets, the budget offers some promising signs that indicate that these respective asset classes are due for further growth. With a stated intent to engage with institutional and private capital, the commercial and development spaces are soon to see changes.
