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After a year unlike any other, the highly anticipated Victorian State Budget has been released today in an attempt to navigate and respond to the disastrous social and economic effects of the COVID-19 induced recession.
As expected, there is a clear emphasis on reigniting the Victorian economy, with an unprecedented stimulus package of $49 billion over the next four years, an increase from the previous year’s budget release of $23 billion. With such an economic stimulus, there will be many flow on effects for the development industry and potential opportunities for our clients.
Consistent with announcements over the past two weeks, the Budget confirmed a $5.3 billion boost and 12,000 new homes to the provision of affordable and social housing in Victoria. This is welcomed change which will positively affect thousands of vulnerable members of our community and will boost the state’s social housing supply by 10% in four years.
As part of this stimulus package, there will be considerable opportunities within the development industry for eligible projects to be considered by the Department of Health and Human Services (DHHS) as detailed in our previous newsletter. With further industry information sessions in the near future, we will keep you up to date with opportunities in this space and what process and criteria such projects will be subject to. As with the Federal Government stimulus packages in the GFC, we would expect a number of clients to have eligible projects that will benefit from the program and aid the provision of more affordable and social housing across the State.
There is also a raft of other concessions which will help stimulate the residential construction sector. Starting from 1 January 2022, Victoria’s Big Housing Build will provide a 50% land tax discount for eligible new developments until 2040, known as the ‘land tax discount’. Similarly, a tax relief on stamp duty for residential property transactions of up to $1 million will also be provided with a waiver of 50% for new residential properties and 25% for existing residential properties. The Government has also extended the $20,000 First Home Owner Grant for people buying or building a new home in regional Victoria to apply to contracts of sale entered up until 30 June 2021.
We expect that this will have a significant impact in stimulating demand throughout the construction industry, from new houses in greenfield sites to apartments and townhouses of all types and locations. We have already seen the Property Council of Victoria come out in support of this initiative and we also expect that these incentives will stimulate activity in the housing sector.
From an infrastructure perspective, consistent with other media releases over the past 10 days, we will see significant investment in transport, including $2.2 billion for the Suburban Rail Loop, $2 billion for the Geelong Rail Line and $1.48 billion for 100 new accessible trams. There will also be $1.6 billion in road network and infrastructure initiatives across a range of areas. Investment in infrastructure is a key initiative and imperative for Melbourne’s ongoing liveability.
Furthermore, there are much-welcomed planning regulatory review and reforms which will also assist in generating housing supply. Victoria’s Big Housing Build includes $52 million to implement the Commissioner for Better Regulation's planning reforms and to grow housing supply across the State. Additionally, there is $59 million allocated in ‘targeted planning system reforms’, which will have an important role in unlocking private sector investment and the delivery of infrastructure, jobs and housing. This has previously been partly the remit of the building Victoria’s Recovery Taskforce so it will be interesting to see if this reform process will build upon the work being done by them or result in another body undertaking the reforms.
COVID-19 has also had other impacts, with the Government increasing its funding by $50 million over the next four years to improve some of the most loved parks and public spaces in Victoria, including 35 playgrounds. Melburnian’s fell in love with public parks during lockdown and it is appropriate that we continue to invest in these spaces for present and future generations.
Whilst the budget was never going to keep everyone happy, there can be no doubt that this Budget will generate a far reaching economic stimulus. It will create jobs, tackle housing affordability and social housing in the most meaningful way in a generation and lay the foundations for infrastructure initiatives essential to the further ongoing development of our State. With a nod to the regions as well, Geelong is another big winner, an appropriate recognition by the State Government of the important role our second city has in the State’s prosperity and economic recovery.
A full review of the budget can be found at: budget.vic.gov.au