The Federal Government’s 2006 Budget contains a number of positive initiatives for the property sector, according to Knight Frank’s chief executive David Woolford.
Woolford said the initiatives will support business and in turn support the commercial and residential property sectors.
“The most direct impact on the property sector will come from the new tax savings in superannuation.
“The revised tax arrangements for superannuation savings, coupled with tax cuts will most certainly encourage Australians to invest in their superannuation funds.
“This is particularly so for self-employed and high income earners,” he added.
Woolford said the weight of money flowing into the property sector from institutional superannuation funds in the past decade has played a key role in driving commercial property demand.
“This Budget will further add to the pressure for Australian institutions to find high grade, income yielding investments and capital growth for their investors. It will put more pressure on all investment classes, not just property.
“The property sector however will further benefit from changes to depreciation allowances.
“These changes will further increase the tax effectiveness of property investment in both the residential and commercial sectors,” he concluded.
Bovis Lend Lease’s Asia Pacific chief executive Murray Coleman said the 2006 Budget also contains considerable positive news for the construction sector.
“The clear ongoing commitment of funding to infrastructure is both positive news for Australia and encouraging news for the construction sector - whilst this is not a huge amount in absolute terms for infrastructure, applying focus to the three major arterial highways will have a significant impact.
“It will improve access to regional areas, improve their overall attractiveness for investors and increase development potential within the specific regions affected,” he added.
JP Morgan’s chief economist Stephen Walters said the non-residential construction and engineering sector should benefit from the additional funding to infrastructure and the additional incentives for firms to invest via the accelerated depreciation allowance.
Coleman said the greatest boost to the property sector will come from the taxation changes to superannuation, as these funds will flow into the institutional investment market.
“As a result we would expect to see an extension of the already record construction levels in the non-residential sector to beyond 2007 and this may expand further into regional Australia.
“We may also see an increased demand for redevelopment of existing assets to improve their income and capital performance, and this may well also see an increase in international investment in property and other asset classes.” he added.
HIA’s managing director Dr Ron Silberberg said despite income tax relief and other budget initiatives the Government predicts a healthy $10.8 billion surplus for 2006/07.
“The strong surplus announced in tonight’s budget should give business and home buyers the confidence to invest.
A number of budget initiatives for business include an increase in the depreciation rate for investments now 200% for new assets acquired; provide a tax cut for Australian business in the order of $3.7 billion over the next four years and an investment of $2.3 billion in road and rail projects.
“The Government’s significant investment in infrastructure is vital for continued economic growth and employment creation
“HIA urges all governments to contribute to revitalising Australia’s ageing infrastructure. Governments in recent years have cost shifted the provision of urban infrastructure on to home buyers which is both inequitable and inefficient,” Dr Silberberg concluded.
