Government hangs its hat on immigration to revive property

author-avatar By on October 08, 2020
Government hangs its hat on immigration to revive property

Photo by Maximillian Conacher on Unsplash

Figures from the Budget reveal the Government expects a 14.3% decline in property tax receipts this financial year, and a rebound of 13.5% in the next year.

These figures also represent a 20% decline and an 8.8% rise, respectively, since the Government's Mid-Year Economic and Fiscal Outlook (MYEFO) gleaned from the 2019-2020 Budget.

Similarly, dwelling investment declined 8.8% last financial year and is forecast to decline 11% this year, before recovering 7% in 2021-2022.

Why the moderate 'V' shaped outlook? Coincidentally, the Government is also going to ramp up its Migration Program in the coming years.

This financial year it's costing $70 million; 2021-22, $85 million; 2022-23, $115 million; and in 2023-24, $117 million.

That's money spent on processing and promoting both skilled migration and family migration, of which the Government allocated 160,000 spots last financial year.

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.

Property prices predictions have been up and down, however most recently, CoreLogic reported the fifth straight month of residential property price declines, dragged down by Sydney and Melbourne.

However, these Government tax receipts also take into account any rents, dividends, and interest the Government receives from property classes other than residential property.

It includes Government buildings, defence housing, affordable housing, and social housing, although there was little in the Budget in the way of social housing.

Immigration is still needed as it has a "multiplier effect" on the Federal Government's property income, according to PRD Real Estate chief economist Dr Diaswati Mardiasmo. 

"Their projected property income at present is more based on national and local demand, and has been adjusted for and revised down substantially to reflect the impact of COVID-19 pandemic and health restrictions," she said.

The Government forecasts a loss of 72,000 people this financial year, with levels not returning positive until 2022-23. 

In July, the Australian Bureau of Statistics reported short term visitor arrivals were down 99.6% compared to July 2019.

Dr Mardiasmo also pointed to the Government's simpler immigration process as potentially inducing housing demand.

"By streamlining the immigration progress those non-residents could potentially be residents, and thus have equivalent 'rights' to products as an Australian citizen - for example to purchase established dwellings to live," she said.

"This may 'tide us over' until borders are open again."

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Prevailing headwinds

The Government and the Reserve Bank can also pull other levers to induce housing demand, according to Westpac's economics team, but that headwinds will prevail.

"It does appear that low interest rates and housing policies have pulled forward demand providing support into 2021 with dwelling investment forecast to rise 7% in 2021-22," Westpac economists said.

"Westpac gives greater prominence to potential headwinds: the fragilities pre-Covid (weak wages growth) and the legacies from the pandemic and the severe recession (high unemployment and fragile confidence)."

CommSec's chief economist Craig James also pointed to ongoing uncertainty.

"If foreign tourists, workers and students are blocked from entering Australia, recovery will be constrained for some sections of housing markets, airlines, overseas travel firms, casinos, education and labour-hire sectors," he said.

On Tuesday night, Treasurer Josh Frydenberg forecast a COVID-19 vaccine being available by the end of 2021, with the Government spending nearly $1.2 billion this financial year in gaining access to COVID-19 vaccine research and development.


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2019. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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author-avatar
Harrison joined Savings in 2020. He is a journalist with more than four years of experience, with previous stints at News Corp and financial comparison site Canstar. With a keen interest in personal finance, Harrison is passionate about helping consumers make more informed financial decisions.

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