Federal budget may bring little joy for the commercial property sector

The federal budget will likely target housing rather than the commercial property industry, which experts predict may miss out on direct support measures.

The Australian government has made it clear there will be more infrastructure spending in its budget on 6 October as part of the economic recovery from the coronavirus recession, with road, rail and water supply projects expected to be key.

REA Group’s executive manager of economic research Cameron Kusher expected any budget measures aimed at property to be focused on housing rather than the commercial sector.

The federal government’s big-spending budget may not deliver anything specific for the commercial property sector. Picture: Getty

“We’ve already seen some of the states do some stimulus to try and get more ‘build to rent’ up and running, and we’ve seen the eviction moratorium,” Mr Kusher said.

“I don’t think that there’ll be anything specific for commercial property but I could be surprised.”

Economists expect the budget will boost funding for the states for infrastructure, with Treasurer Josh Frydenberg saying the government wants any money provided to the states spent as quickly as possible to create jobs.

AMP Capital chief economist Shane Oliver said the budget was expected to include more support for home building and an extra $10 billion in infrastructure spending.

“I think the bulk of the construction boom will be infrastructure focused and they want to keep housing construction going,” Dr Oliver said.

Dr Oliver also did not expect specific measures aimed at commercial property activity.

“It’s hard to see them doing anything there, beyond some sort of investment allowance.”

Business investment allowance tipped

The budget is widely tipped to include a business investment allowance.

The Business Council of Australia called for a 20 per cent investment allowance, which it said would cost about $10 billion a year.

Its pre-budget submission noted preliminary analysis suggested a 20 per cent investment allowance applied to all businesses could lift business investment by about $200 billion and help create 500,000 jobs over a decade.

The federal budget is tipped to include a business investment allowance. Picture: realcommercial.com.au

Dr Oliver said the government may provide a tax-based investment incentive, to be used in the current financial year.

“I think it will be available for all companies and therefore it’s possible that some of that money may be used to stimulate commercial construction, but it more likely goes down the path of factories or warehouses as opposed to retail or office, which are in short-term over supply as a result of online and work from home trends.”

Building industry wants a ‘CommunityBuilder’

The budget may include an extension to the HomeBuilder scheme, which provides a $25,000 grant to build a new home or substantially renovate an existing home.

Property groups argued the $680 million program, due to end on 31 December, should be extended.

In its pre-budget submission, Master Builders Australia called on the federal government to adapt its HomeBuilder scheme model for the commercial construction sector.

Master Builders CEO Denita Wawn said CommunityBuilder would involve the federal government providing applicants from the not-for-profit and community sectors with grants to fund 25% of construction, up to a capped amount, for example $5 million.

It would help fund the construction of new facilities or the substantial renovation of existing ones, such as community centres, libraries and training centres, she said when releasing the submission.

“Our modelling shows that an investment of $3.8 billion in CommunityBuilder would return a $6.8 billion boost to GDP and create 13,000 new jobs,” Ms Wawn said.

She said Master Builders forecasts pointed to a 27% decline in home building activity and 17% fall in commercial construction in 2020/21.

The group also called for the construction of pre-approved civil and social infrastructure to be fast-tracked.

Other efforts to boost construction

Community and housing organisations as well as economists advocated for significant new investment in social housing to reduce homelessness and create construction jobs, although the federal government argued that was the responsibility of the states and territories.

The Housing Industry Association called on the federal, state and territory governments to introduce ‘land rent’ schemes, to allow the construction of social and affordable housing on suitable surplus Crown land.

The Property Council of Australia and Master Builders also want improvements to planning and regulation.

Property Council group executive, policy, Mike Zorbas said the federal government should help drive reforms to planning systems across the country.

Mr Zorbas said other measures to stimulate the economy included leveraging institutional investment for ‘build to rent’ by levelling the playing field on taxation, and incentivising the private sector to provide more affordable housing in conjunction with the community housing sector.

He also argued National Cabinet should focus on reactivating central business districts, saying it was of equal importance to a strong budget.

The Property Council said reactivating CBDs was as important as a strong federal budget. Picture: Getty

“We are making it safer and more attractive for people to return to the office and retail environments in our CBDs and to bring our city centres back to life,” Mr Zorbas said.

“We’d like to see a national roadmap for the reactivation of CBD economies, some 20% of GDP, including safety leadership and incentives from government on both public transport and encouraging people in the private and public sector back to the office.”