First National is calling on governments and local councils to coordinate planning as well as policy to minimise restrictions on housing supply. Poor coordination has arguably contributed to an erosion of affordability that has led to the lowest levels of Australian home ownership in four decades.
A shortage of affordable housing in capital cities affects the functioning of the economy, wellbeing of individuals, and the cohesiveness of communities. The nation’s housing prices rose an average 2.3 per cent in March, and, since the commencement of the current growth cycle in June 2012, the cumulative increase runs close to 16 per cent.
‘Although these gains have mostly been in Sydney and Melbourne, the price of land for new homes nationally has climbed hugely, largely as a result of exorbitant headworks costs. Developers can only contain costs and maintain affordability by subdividing land into ever-decreasing block sizes’ said First National chief executive, Ray Ellis.
‘Local council headworks charges used to cover things like water and sewerage but they now include a host of other charges, including infrastructure costs for roads and, in some cases, recreational and community facilities, electricity charges, footpath networks and more. As a result, the land cost of a new home has surged by 150 per cent per square meter in the past decade’.
Affordability is a complex problem with many factors affecting current circumstances. Changing demographics, cost of living, interest rates, stamp duty and taxes all play a role. However, the major driver is the undersupply of housing and, at the moment, the housing market is absorbing supply faster than it is being added.
‘Although the number of new residential listings coming to market is higher now than it was at this time last year, the total amount of real estate for sale in Australia is actually close to 4 per cent lower. While this means homes are selling very quickly, if supply is not addressed, the gap between supply and demand will significantly widen by 2015, potentially reducing affordability’ said Mr Ellis.
State based stamp duties discourage turnover of housing and inhibit labour mobility. Such taxes also discourage older homeowners from downsizing and, when the GST was introduced, were supposed to have been removed.
A recent ‘affordability roundtable’ held in Canberra identified the need for a wide range of options including financing that unlocks the potential of shared equity as an alternative form of finance for first home buyers. Finance product innovation along with a coordinated and strategic approach from Government is now what is needed, urgently.