Liberal Treasurer Scott Morrison handed down his maiden budget for the Turnbull government on Tuesday night.
Whilst the introduction of a new bank levy took each of Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), Macquarie Group Ltd (ASX: MQG), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) by surprise, overall, the 2017-18 Federal Budget contained slim pickings in the way of Earth-shattering news.
Although infrastructure and infrastructure-related stocks Boral Limited (ASX: BLD), CIMIC Group Ltd (ASX: CIM) and Transurban Group (ASX: TCL) are heralded as big beneficiaries of the government's $75 billion binge on infrastructure, most of this news was previously announced.
Although ScoMo's budget provided confirmation of the pro-infrastructure agenda of the government, I believe most of the upside is already priced in to the respective share prices of infrastructure stoccks, making for a crowded trade.
Instead, in my view, the real dark horse from the 9 May budget is housing.
Housing agenda
Scott Morrison revealed a plethora of policy updates to generate affordable housing for all Australians.
The biggest change announced in Tuesday night's budget was the ability for first home buyers to salary sacrifice up to $15,000 per annum (within concessional caps, to a maximum of $30,000 in total) to their superannuation in order to build a home deposit in a concessionally taxed environment.
Other key changes included the imposition of additional restrictions on property developers who sell off-the-plan dwellings to foreign purchasers. Developers must now limit the extent of their off-the-plan sales to foreign purchasers to 50%. This should result in more property available exclusively for Australian residents.
The Treasurer also tweaked the taxation treatment of investment properties by increasing the capital gains tax discount by 10% (to a total of 60%) for those who invest in affordable housing developments. Capital allowances on plant and equipment (i.e., depreciation deductions on building fixtures) were also tightened with investors now only able to claim deductions on actual outlays incurred for the plant and equipment. This has the effect of reducing negative gearing benefits.
Despite these changes, I don't imagine they will have a massive impact on slowing down the housing market. This augurs well for REA Group Limited (ASX: REA).
REA Group
As my fellow writer Tom Richardson wrote here, REA Group continues to be a standout growth stock, riding the tailwinds of a buoyant property market to post double-digit profit growth for the quarter ended 31 March 2017.
Like fellow technology peers Webjet Limited (ASX: WEB) and CarSales.Com Ltd (ASX: CAR), REA Group's market-leading position enables it to post solid growth by attracting strong volumes to its flagship business – realestate.com.au.
Given the budget measures do nothing to detract from continued housing demand, I'd expect this trend to continue, leaving REA Group's growth story still intact.
Foolish takeaway
Even though REA Group continues to be exposed to the risk of a housing slowdown, I believe Tuesday night's budget measures do very little to abate domestic housing demand.
Whilst the measures impose further restrictions on foreign off-the-plan sales (reducing foreign demand), the flipside of this is that there should be more property available to Australian residents (and thereby increased supply to list on realestate.com.au).
Furthermore, the new policies should foster domestic demand through increased discounts to capital gains on affordable housing and access to concessional savings schemes via superannuation for first home buyers. This should translate to increased housing activity in the near term.
Therefore, with REA Group benefiting whenever there is increased activity in the market, I believe its market-leading position earns it a closer look as a stock to buy at the right price.
With the stock trading near all-time highs today, I believe investors should wait for a pullback before buying. Watch this space.