CANBERRA - Australia announced measures on Tuesday to boost the supply of homes and tighten the screws on foreign property investors in a bid to temper the soaring property prices in the country's major cities.
Treasurer Scott Morrison used the annual budget to try appease an electorate angry that they will likely never achieve the great Australian dream of owning their home, but said there was no "silver bullet" to make housing more affordable.
The conservative government of Prime Minister Malcolm Turnbull has blamed a lack of supply for sky-rocketing house prices and on Tuesday announced setting up a A$1 billion National Housing Infrastructure Facility to help develop new homes. It will also make underutilized and surplus land available for housing.
Morrison gifted tax concessions to first-home buyers by allowing them to save a maximum of A$30,000 extra in their superannuation funds, which incur lower taxes than other savings, toward their housing deposit.
However, economists have said such measures would help only at the margin, given the government's reluctance to tweak a tax treatment on property massively favored by the wealthy known as 'negative gearing.'
Morrison did unveil a small change to that tax break, disallowing travel expenses-related deductions for residential property investors.
"This is an integrity measure to address concerns that such deductions are being abused. This will rein in a high growth deduction item and improve taxpayer confidence in the negative gearing system," Morrison said.
Surging house prices, primarily in Sydney and Melbourne, have taken homes out of reach of many young Australians. Home values are surging at a red-hot 16 percent annually in Sydney and 15.3 percent in Melbourne.
Since January 2009, home values in Sydney have more than doubled while Melbourne has increased by 93 percent.
The government will impose an annual charge of a minimum A$5,000 on foreign owners of residential real estate if the property is vacant for at least six months of the year, a move aimed at increasing homes available on the rental market.
The government will introduce a 50 percent cap on foreign investment for new housing developments.
To help free up larger homes for younger families, from July 1 2018, older Australians considering downsizing will be allowed to contribute up to A$300,000 from the sale proceeds into superannuation as a non-concessional contribution.
Private investors will be encouraged to pour money into new and existing affordable housing via a 60 percent discount on capital gains if they hold the property for a minimum of 3 years.
Housing has become a hot political topic in Australia with regulators worried about the danger of a debt-fueled bubble in housing. The Reserve Bank of Australia (RBA), worried about tepid inflation and subdued domestic demand, has held off on lowering interest rates further after easing twice last year, largely because it is loathe to encouraging further borrowing.
Editing by Jane Wardell