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Strong fundamentals supported by budget

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1 minute read

Strong fundamentals supported by budget

by Cameron Micallef 07 October 2020 1 minute read

The budget announcement along with already favourable market conditions is likely to continue to support the Australian property market, a researcher has explained. 

Strong fundamentals supported by budget
October 07, 2020

In a conversation with Smart Property Investment, Binnari Property’s head of research and acquisition, Dominic Cavagnino, pointed out the friendly environment investors face. 

“The reduction in population is a short-term problem,” Mr Cavagnino said. 

“When we get through this COVID problem and get back to normality, Australia is likely to remain a very desirable place for people to live, especially with how we dealt with the situation.

“I think we will see strong population growth, and that is the foundation for strong property price growth in Australia, especially on the eastern seaboard.”

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Mr Cavagnino explained how investors who follow property fundamentals are likely to have strong gains in this market.

“It’s just about investors identifying the right pockets where you have lots of owner-occupier demand and low supply and you’ll continue to do well,” Mr Cavagnino said.

The researcher noted the additional tax breaks will see more money go to consumers, which should help support the economy as a whole as well as support house prices.

The Treasurer said it will bring forward stage 2 of its Personal Income Tax Plan by two years.

From 1 July 2020 (backdated):

  • The low-income tax offset will increase from $445 to $700,
  • The top threshold of the 19 per cent tax bracket will increase from $37,000 to $45,000,
  • The top threshold of the 32.5 per cent tax bracket will increase from $90,000 to $120,000.

Additional targeted support will also provide support to low- and middle-income Australians, who will receive a one-off additional benefit of up to $1,080.

More than 11 million Australians are expected to benefit from the tax cut, the Treasury has outlined, with more than 7 million individuals expected to receive $2,000 or more in tax relief for the 2020-21 income year, compared with previous years.

“The budget is really focused on tax cuts, job creation and infrastructure funding. From a property investors side of things we are going to see investors with more money in their pockets, we are going to see an increase in infrastructure spending creating jobs as well as incentives to employ younger Australians,” Mr Cavagnino said.

He also believes first home buyers could be the major winners out of the budget announcement with the extension of the first home buyers scheme, job support for workers under 35 and the potential of lower taxes.

“Ultimately, first home buyers are the big winners. The younger population are most likely to benefit from the budget,” Mr Cavagnino said.

Finally, Mr Cavagnino points out that new infrastructure projects are likely to provide a tailwind for areas that are already benefiting from consumer preference changes.

“I think what we’ve seen as a result of people working from home is regional markets for example the SunshineSunshine, NSW Sunshine, VIC Coast and Newcastle are really benefiting because people are able to have a coastal lifestyle and get that affordability.”

“Some of the regional markets performance over the last six months has been really strong and I think these infrastructure projects are going to improve connectivity, improve rail, improve roads which will likely further benefit these areas.”

“Infrastructure projects are key for driving job growth but they are also key for driving demand for certain property markets.

“If we start to see infrastructure projects brought forward then we will probably see demand for certain areas increase and in turn price growth,” Mr Cavagnino concluded.  

Strong fundamentals supported by budget
Strong fundamentals supported by budget
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About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your... Read more

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