With mainstream credit getting tougher every day, brokers are finding it difficult to help their "out of the box" clients
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The budget delivered on Tuesday evening was “not the federal budget for homeowners or the property sector”, instead the winners were low and middle income earning Australians who could see personal tax cuts.
According to Mortgage Choice CEO Susan Mitchell, the government’s final budget before the election did not provide any initiatives that would provide direct stimulus to the property market. She noted however, policy measures which improve infrastructure can have a positive long-term impact on housing affordability.
Treasurer Josh Frydenberg announced, “record infrastructure investment of $100billion over the next decade”; including $2b for the fast rail from Geelong to Melbourne, an increase of $3b for the Urban Congestion Fund (taking it to $4b), a $2.2b Road Safety Package and an additional $1b for the next phase of the Roads of Strategic Importance initiative.
“With the current softening in property prices this investment may have a positive double whammy effect for working families who can achieve a better work life balance and increase their chances at achieving the Australian dream of owning a house on a quarter acre block,” said Mitchell.
CoreLogic’s Tim Lawless also pointed at the “very little” focused on the housing sector in Frydenberg’s budget. “With the performance of the housing and household sector so critical to the Government achieving their forecasts and planned surplus, there is certainly an argument that more could have been provided in the budget to support these sectors,” he said.
Lawless added that the income tax cuts were a positive, helping homeowners with household income and consumption, but also noted the Treasurer’s passive approach to housing affordability.
“The Treasurer reiterated that housing affordability was a key priority for the government, but it looks like the government is content to see housing affordability improve ‘organically’ via lower housing prices that could act as a contagion to weaker household consumption and a sharper than expected fall in residential construction,” he said.
“While this may seem a bit passive, it’s clear that housing affordability has improved substantially since the last budget due to lower housing values in the most expensive cities as well as the lowest mortgage rates since the 1960’s and a subtle rise in incomes.”
But aside from housing, the budget was praised by an industry body for its commitment to enable ASIC and APRA to respond appropriately to the recommendations of the royal commission.
FBAA managing director Peter White said it’s clear that a significant portion of the $404 million promised for ASIC over four years is for enforcement post the royal commission recommendations.
“Indications are little or none of this additional enforcement funding will be spent on actions against brokers, rather additional action to reign in the banks,” he said.
He said that moves by ASIC to reduce the cost to act as a credit representative was a result of decreased enforcement. “The total cost of legal enforcements against mortgage brokers has reduced to a third of the original cost in a little over 12 months, and now further again and that’s because brokers are doing the right thing by clients,” he explained.
White also welcomed the move to provide the Australian Financial Complaints Authority with additional funding to assist those with historical eligible financial complaints, but he agreed more could have been done in the budget to assist struggling homebuyers, particularly given the declining home values in some areas.
“The government, and all major political parties, must examine what they can do to stimulate the housing market, not suppress it and that includes any change to negative gearing and capital gains tax,” White said.
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