Anna Bligh’s proposal to provide $3000 to first home buyers who choose to establish themselves outside south-east Queensland is an admirable objective, however her proposal will never be a long term solution. Queensland has become far too focused on Brisbane and the Gold Coast, where 60% of the population live. This has stressed infrastructure in the south-eastern corner far beyond its capacity to keep pace.
There are lots of similarities: in Australia, Sydney faced the same situation at the turn of the century, and so Canberra was created. In Brazil, Sao Paulo and Rio de Janeiro were replaced by Brazilia as the new capital in the 1960’s.
Thursday, November 19, 2009
Sunday, October 11, 2009
The Trouble with Council Infrastructure Charges
Infrastructure charges are probably the least understood tax we have. Basically, they are a tax on developers (big and small) who are held to ransom at the point of obtaining title to newly subdivided land, to pay charges which are calculated on an undisclosed basis. The calculation of the tax is not made public. There is a published schedule but without explanation of how they are arrived at. This is a most unusual circumstance in a democratic society. The only way they can be challenged is in court.
It is not surprising that infrastructure charges are highly controversial, particularly when they have risen in the Gold Coast by approximately 100% per annum since 2003. You have to pay them or you don’t get titles. You can’t question them, or even obtain a copy of the calculations.
So the whole basis of charging has to change. May I suggest a flat charge across the city in each category (residential, industrial, commercial etc), which is reviewed each year by an independent arbiter such as the Ombudsman? In addition, the charges should compensate some types of developments such as shopping centres, which although they impact on infrastructure, provide a positive community benefit. Current charges for shopping centres consider only their impact on infrastructure and are consequently prohibitive in most cases (e.g. Aldi and Westfield at Coomera).
Council has not been acting illegally but the current system is not transparent and very expensive to administer because of its complexity.
It is not surprising that infrastructure charges are highly controversial, particularly when they have risen in the Gold Coast by approximately 100% per annum since 2003. You have to pay them or you don’t get titles. You can’t question them, or even obtain a copy of the calculations.
So the whole basis of charging has to change. May I suggest a flat charge across the city in each category (residential, industrial, commercial etc), which is reviewed each year by an independent arbiter such as the Ombudsman? In addition, the charges should compensate some types of developments such as shopping centres, which although they impact on infrastructure, provide a positive community benefit. Current charges for shopping centres consider only their impact on infrastructure and are consequently prohibitive in most cases (e.g. Aldi and Westfield at Coomera).
Council has not been acting illegally but the current system is not transparent and very expensive to administer because of its complexity.
Tuesday, September 29, 2009
Avoiding a Housing Bubble
The Reserve Bank’s Tony Richards has today (30th Sept) urged local Councils and the QLD State Government to create the environment for the supply of more new homes in order to prevent a house price bubble from occurring. But the real problem is the lack of sufficient development finance for new subdivisions and apartments.
The Federal Government should urgently make it easier for second tier financiers to attract capital by removing the Government’s deposit guarantee granted to the ‘four pillar’ banks. This would redirect investment deposit monies toward specialist property financiers who offer higher interest rates to investors, and specialise in lending for new property development.
At the moment, most investor deposit funds have flowed to the four pillar banks because of the protection offered to investors by the Government’s guarantee of all deposits less than $1 million. But what is needed is a level playing field, allowing second tier and traditional property financers to compete for investor deposits to use for lending on property development, which will flow into new housing supply.
The Federal Government should urgently make it easier for second tier financiers to attract capital by removing the Government’s deposit guarantee granted to the ‘four pillar’ banks. This would redirect investment deposit monies toward specialist property financiers who offer higher interest rates to investors, and specialise in lending for new property development.
At the moment, most investor deposit funds have flowed to the four pillar banks because of the protection offered to investors by the Government’s guarantee of all deposits less than $1 million. But what is needed is a level playing field, allowing second tier and traditional property financers to compete for investor deposits to use for lending on property development, which will flow into new housing supply.
Wednesday, August 5, 2009
Political lobbying and “Donations”
The lobbying of politicians to support better business conditions has, and always will be, an integral part of the democratic system.
In the case of property development, the stakes are very high, as are the risks, the most common of which is the rejection of a particular proposal. So developers are entitled to spend large amounts of money to present their project in the best way possible. This includes professional fees to lobbyists and public relation firms. No problem so far. Even ex-politicians are entitled to a life after politics, and they should not be excluded from working as lobbyists.
But when direct payments are made for “contact” with politicians, an immediate conflict of interest arises. Politicians are supposed to be paid adequately to represent their constituency without the need for additional payment. In fact it is against the law for politicians to accept bribes, and for anyone to pay politicians for favours (except the unions).
The difficulty is that as much as it is policed, brown paper bags will continue to surface, and many more are not even detected.
The capitalist system and the disproportionately high levels of value adding which is commonplace in property development will ensure that “money talks”.
All that we can hope for is that the legal system works and continues to make political bribery illegal. This should be extended to include all political donations to individuals and parties, including invitation only lunches and dinners. It should also include donations from trade unions.
The end result might be that less money is spent on election campaigns which may not be a bad thing. The more political parties have available to spend on campaigns, the more they will spend. This also works in reverse. With smaller budgets, more cost efficient campaigns will emerge, perhaps with more extensive use of the electronic medium.
In the case of property development, the stakes are very high, as are the risks, the most common of which is the rejection of a particular proposal. So developers are entitled to spend large amounts of money to present their project in the best way possible. This includes professional fees to lobbyists and public relation firms. No problem so far. Even ex-politicians are entitled to a life after politics, and they should not be excluded from working as lobbyists.
But when direct payments are made for “contact” with politicians, an immediate conflict of interest arises. Politicians are supposed to be paid adequately to represent their constituency without the need for additional payment. In fact it is against the law for politicians to accept bribes, and for anyone to pay politicians for favours (except the unions).
The difficulty is that as much as it is policed, brown paper bags will continue to surface, and many more are not even detected.
The capitalist system and the disproportionately high levels of value adding which is commonplace in property development will ensure that “money talks”.
All that we can hope for is that the legal system works and continues to make political bribery illegal. This should be extended to include all political donations to individuals and parties, including invitation only lunches and dinners. It should also include donations from trade unions.
The end result might be that less money is spent on election campaigns which may not be a bad thing. The more political parties have available to spend on campaigns, the more they will spend. This also works in reverse. With smaller budgets, more cost efficient campaigns will emerge, perhaps with more extensive use of the electronic medium.
Tuesday, July 28, 2009
South-East Queensland Regional Plan (SEQRP)
The SEQRP became law on 28 July 2009. It has been in the making since 2005, coinciding with Terry McKenroth’s abrupt exit from Parliament. Following his considerable influence in its content, Mr. McKenroth went on to consult to property developers as to where the opportunities to seek development approvals were.
The SEQRP was conceived out of Labor’s chronic 20 year ignorance since its election in 1989 (interrupted briefly in 1999) of the need to continually up-date infrastructure. It was driven from an economic perspective more than a market perspective.
The theory is that it is not economically viable to provide infrastructure to outlying areas. Given that developers fund most of the infrastructure (water, sewerage, drainage, roads and parks), this theory is not easy to defend. There is the argument that the State Government provides hospitals and police stations, however just about every other piece of infrastructure is funded from developer contributions. The government gets off lightly.
So the argument runs that it is more economical to have infill development (meaning apartments/townhouses) within existing residential areas. This creates two problems:
1. The neighbours don’t generally like a change to their amenity, particularly if the locality has been conventional detached housing for a long time, and
2. It is very costly to upgrade water, sewerage and stormwater mains to accommodate increased densities, because the pipes are generally laid at depth within existing road reserves. So, in reality it is no cheaper to provide infrastructure in infill areas.
Market Considerations
The SEQRP has not evolved out of market needs, rather out of a government funding crisis. There is no evidence that the assumption of 60% of new development being infill will eventuate. People won’t necessarily be attracted to apartment living simply because the Town Plan has large areas dedicated to it, and neither will developers, if the market doesn’t respond.
Over a long period of time (30 years), the proportion of Australians living in attached dwellings has been constant at 28%. The SEQRP is assuming that this will change to 50% of new house buyers over the next 20 years. This is a very brave assumption, totally unsupported.
Demographics are constantly changing. The baby bonus has resulted in the natural population increase (births over deaths) in Queensland increasing from 25,007 in 2004 to 35,799 in 2008 (ABS 3101.0), overtaking interstate migration. This has increased the number of traditional young families, who overwhelmingly do not want to live in apartments.
High-Rise Preferences
The Gold Coast’s fascination with high-rise apartments is unrelated to residential development preferences, because they are primarily holiday apartments. It makes perfect sense to build high density near the beach, but not in the suburbs, where residential amenity is paramount.
High density brings with it parking and traffic issues, shadows, and that insidious feeling of a city in decline.
The SEQRP was conceived out of Labor’s chronic 20 year ignorance since its election in 1989 (interrupted briefly in 1999) of the need to continually up-date infrastructure. It was driven from an economic perspective more than a market perspective.
The theory is that it is not economically viable to provide infrastructure to outlying areas. Given that developers fund most of the infrastructure (water, sewerage, drainage, roads and parks), this theory is not easy to defend. There is the argument that the State Government provides hospitals and police stations, however just about every other piece of infrastructure is funded from developer contributions. The government gets off lightly.
So the argument runs that it is more economical to have infill development (meaning apartments/townhouses) within existing residential areas. This creates two problems:
1. The neighbours don’t generally like a change to their amenity, particularly if the locality has been conventional detached housing for a long time, and
2. It is very costly to upgrade water, sewerage and stormwater mains to accommodate increased densities, because the pipes are generally laid at depth within existing road reserves. So, in reality it is no cheaper to provide infrastructure in infill areas.
Market Considerations
The SEQRP has not evolved out of market needs, rather out of a government funding crisis. There is no evidence that the assumption of 60% of new development being infill will eventuate. People won’t necessarily be attracted to apartment living simply because the Town Plan has large areas dedicated to it, and neither will developers, if the market doesn’t respond.
Over a long period of time (30 years), the proportion of Australians living in attached dwellings has been constant at 28%. The SEQRP is assuming that this will change to 50% of new house buyers over the next 20 years. This is a very brave assumption, totally unsupported.
Demographics are constantly changing. The baby bonus has resulted in the natural population increase (births over deaths) in Queensland increasing from 25,007 in 2004 to 35,799 in 2008 (ABS 3101.0), overtaking interstate migration. This has increased the number of traditional young families, who overwhelmingly do not want to live in apartments.
High-Rise Preferences
The Gold Coast’s fascination with high-rise apartments is unrelated to residential development preferences, because they are primarily holiday apartments. It makes perfect sense to build high density near the beach, but not in the suburbs, where residential amenity is paramount.
High density brings with it parking and traffic issues, shadows, and that insidious feeling of a city in decline.
Monday, June 15, 2009
Tourism Australia’s Bar Needs to be Raised
The Chairman of Tourism Australia, Rick Allert, in his letter to the editor in the Gold Coast Bulletin on 16 June 2009 titled “Australia Still has enduring tourist appeal”, has invited evidence to show that his group’s performance has been below par in recent years.
Mr. Allert rests his case on the success of Tourism Australia’s promotion campaigns on the fact that in four of the last five years ‘record’ numbers of visitors have arrived in Australia. The fact is there should be a record set every year, if for no other reason that the world’s population is continually increasing at about 1.2% per annum. To maintain market share, Australia must increase its visitor numbers by at least 1.2% per annum.
Over the past three years (to December 2008), the Australian Bureau of Statistics recorded that annual growth in visitor arrivals to Australia have been 1%, 2% and -1%, which is less than the world’s population growth over the same period. World tourism grew by 2% in 2008 despite the global recession (UNWTO World Tourism Barometer, January 2009).
So, if Tourism Australia measures its performance on setting new records every year, it hasn’t done so in aggregate over the past three years. It has failed its own test.
Perhaps Tourism Australia needs a new performance indicator, like 3% growth in visitor numbers each year. This would be real growth.
Mr. Allert rests his case on the success of Tourism Australia’s promotion campaigns on the fact that in four of the last five years ‘record’ numbers of visitors have arrived in Australia. The fact is there should be a record set every year, if for no other reason that the world’s population is continually increasing at about 1.2% per annum. To maintain market share, Australia must increase its visitor numbers by at least 1.2% per annum.
Over the past three years (to December 2008), the Australian Bureau of Statistics recorded that annual growth in visitor arrivals to Australia have been 1%, 2% and -1%, which is less than the world’s population growth over the same period. World tourism grew by 2% in 2008 despite the global recession (UNWTO World Tourism Barometer, January 2009).
So, if Tourism Australia measures its performance on setting new records every year, it hasn’t done so in aggregate over the past three years. It has failed its own test.
Perhaps Tourism Australia needs a new performance indicator, like 3% growth in visitor numbers each year. This would be real growth.
Monday, June 1, 2009
Women in Tourism June Breakfast
I am speaking at the WIT Breakfast this Friday. Here are the details:
Guest Speaker: Mr Bill Morris, author of the Midwood Queensland Investment Report
Date: Friday 5 June 2009
Time: Guests arrive from 6.30am for a 6.50am start
Venue: Mantra Legends Hotel, Cnr Surfers Paradise Blvd & Laycock St, Surfers Paradise
Bill Morris will present a pre-release of the May 2009 Midwood Report including the latest property and tourism findings for the Gold Coast and Queensland.
Tix just $35pp, book now at www.womenintourism.org
Guest Speaker: Mr Bill Morris, author of the Midwood Queensland Investment Report
Date: Friday 5 June 2009
Time: Guests arrive from 6.30am for a 6.50am start
Venue: Mantra Legends Hotel, Cnr Surfers Paradise Blvd & Laycock St, Surfers Paradise
Bill Morris will present a pre-release of the May 2009 Midwood Report including the latest property and tourism findings for the Gold Coast and Queensland.
Tix just $35pp, book now at www.womenintourism.org
Tuesday, May 19, 2009
Budget Implications – First Home Buyers Grant (FHBG)
The Federal Government’s own advisors – the Australian Bureau of Statistics – advise that 93% of FHBG’s go to established home buyers and only 7% go to new home buyers. Therefore, the FHBG does very little to stimulate the economy or create jobs. The only beneficiaries of established home transactions are real estate agents, lawyers and financiers.
We need more new homes constructed in Queensland and around Australia, to employ more trades people and purchase more building materials. But the FHBG boost, which will extend until 30 September, and a further extension until 30 December 2009 is in the same form as before.
Even though there is a small incentive (+$7,000) to buy a new house, this obviously has not had the desired effect. The boost needs to be a lot more than $7,000 because new houses require landscaping, fencing, windows, carpets etc which are additional costs compared to established homes.
Effectively, the FHBG should give more incentive for new home buyers and less for established home buyers. The overall cost of the scheme would have been lowered at the same time because there are considerably less new home buyers than established home buyers in the system.
We need more new homes constructed in Queensland and around Australia, to employ more trades people and purchase more building materials. But the FHBG boost, which will extend until 30 September, and a further extension until 30 December 2009 is in the same form as before.
Even though there is a small incentive (+$7,000) to buy a new house, this obviously has not had the desired effect. The boost needs to be a lot more than $7,000 because new houses require landscaping, fencing, windows, carpets etc which are additional costs compared to established homes.
Effectively, the FHBG should give more incentive for new home buyers and less for established home buyers. The overall cost of the scheme would have been lowered at the same time because there are considerably less new home buyers than established home buyers in the system.
Wednesday, May 6, 2009
Upcoming Presentations
Women in Tourism Breakfast - 5 June
I will be speaking at the forthcoming Women in Tourism networking breakfast at Legends Hotel, Broadbeach, Gold Coast, on 5 June 2009. I will present a pre-release of the May 2009 Midwood Report including the latest property and tourism findings for the Gold Coast and Queensland. For more information or to reserve your seat at this event, visit www.womenintourism.org. We hope to see you there!
Home Buyers Show - 13-14 June
The Midwood Queensland Investment & Prodap Reports will be exhibiting at the Brisbane Home Buyers Show on 13-14 June 2009 held at the Brisbane Exhibition Centre. Here I will be speaking at a free seminar during the show on both saturday and sunday (13 & 14 June). Contact my team on 07 5522 8755 for your half price ($7.50) entry ticket to the show. To find out more about the event visit www.homebuyersshow.com.au.
I will be speaking at the forthcoming Women in Tourism networking breakfast at Legends Hotel, Broadbeach, Gold Coast, on 5 June 2009. I will present a pre-release of the May 2009 Midwood Report including the latest property and tourism findings for the Gold Coast and Queensland. For more information or to reserve your seat at this event, visit www.womenintourism.org. We hope to see you there!
Home Buyers Show - 13-14 June
The Midwood Queensland Investment & Prodap Reports will be exhibiting at the Brisbane Home Buyers Show on 13-14 June 2009 held at the Brisbane Exhibition Centre. Here I will be speaking at a free seminar during the show on both saturday and sunday (13 & 14 June). Contact my team on 07 5522 8755 for your half price ($7.50) entry ticket to the show. To find out more about the event visit www.homebuyersshow.com.au.
Wednesday, March 25, 2009
Hewson Off the Mark on First Home Buyers' Scheme
John Hewson’s (ex-leader of the Liberal Party) latest remarks are surprising coming from one so well qualified in economics (he has a doctorate).
He is comparing Australia’s first home buyer’s scheme with the USA sub-prime debacle, saying that young couples are being falsely induced by the grant into long-term commitments they may not be able to fulfill.
The difference between the two is that USA mortgages were mostly non-recourse, whereas all the Australian mortgages are the opposite. In other words, Australian mortgagees would pay their mortgages first out of their pay cheque, rather than last.
The other point Mr. Hewson ignores is that house prices are currently at their lowest (or very near to it), so that capital gains over the next 2-3 years is more than likely, thereby increasing the borrower’s equity immediately.
He is comparing Australia’s first home buyer’s scheme with the USA sub-prime debacle, saying that young couples are being falsely induced by the grant into long-term commitments they may not be able to fulfill.
The difference between the two is that USA mortgages were mostly non-recourse, whereas all the Australian mortgages are the opposite. In other words, Australian mortgagees would pay their mortgages first out of their pay cheque, rather than last.
The other point Mr. Hewson ignores is that house prices are currently at their lowest (or very near to it), so that capital gains over the next 2-3 years is more than likely, thereby increasing the borrower’s equity immediately.
Wednesday, February 18, 2009
State Government’s South-East Queensland Regional Plan Will Alter Our Way Of Life
The Queensland State Government has just issued its second revision of its regional plan for SEQ 2009-2031 for public comment.
The current version incorporates increased dwelling density by providing for 735,500 new dwellings to the year 2031, up by 28% on the initial plan released in October 2004.
It is proposed that this increased density will be achieved by requiring a minimum density on all new subdivisions of 15 dwellings per hectare. This is equivalent to one dwelling per 600sqm (after deducting parklands but before roads). As a comparison, there was never any minimum density until now, but maximum densities were stipulated for Residential A (10 dwellings per hectare) and Residential B (40 dwellings per hectare).
The reasoning behind increasing densities is given as ‘smart growth’ whereby infrastructure costs are minimised. New communities or subdivisions will be designed as ‘walkable’ communities in which families will not be ‘automobile dependent’.
Queenslanders should be deeply concerned about the way its government is headed on these issues. It could change the way of life of your children and grandchildren, more so than Greenhouse issues.
Queenslanders have long cherished the quarter-acre block in Residential A subdivisions. Whilst this has whittled down from 1,000sqm to 600-700sqm (on average) over the past ten years, there is no evidence that Queenslanders want to go any further down to increased density. The government’s target will see newly developed lot sizes reduce to 300-400sqm, with no backyard, no room for a pool and no room for external storage.
Proponents of increased density say that there will be ‘common’ facilities provided by the developer and a designated central park. The proportion of Queenslanders currently living in detached housing is 72%, a figure which hasn’t changed over the past three Census periods (15 years). Hence, there is no trend toward attached, denser housing as is being implied in the government’s plan. I urge all Queenslanders to view the website where the Draft Plan is located at www.dip.qld.gov.au and respond before the closing date for comments by 3 April 2009.
The current version incorporates increased dwelling density by providing for 735,500 new dwellings to the year 2031, up by 28% on the initial plan released in October 2004.
It is proposed that this increased density will be achieved by requiring a minimum density on all new subdivisions of 15 dwellings per hectare. This is equivalent to one dwelling per 600sqm (after deducting parklands but before roads). As a comparison, there was never any minimum density until now, but maximum densities were stipulated for Residential A (10 dwellings per hectare) and Residential B (40 dwellings per hectare).
The reasoning behind increasing densities is given as ‘smart growth’ whereby infrastructure costs are minimised. New communities or subdivisions will be designed as ‘walkable’ communities in which families will not be ‘automobile dependent’.
Queenslanders should be deeply concerned about the way its government is headed on these issues. It could change the way of life of your children and grandchildren, more so than Greenhouse issues.
Queenslanders have long cherished the quarter-acre block in Residential A subdivisions. Whilst this has whittled down from 1,000sqm to 600-700sqm (on average) over the past ten years, there is no evidence that Queenslanders want to go any further down to increased density. The government’s target will see newly developed lot sizes reduce to 300-400sqm, with no backyard, no room for a pool and no room for external storage.
Proponents of increased density say that there will be ‘common’ facilities provided by the developer and a designated central park. The proportion of Queenslanders currently living in detached housing is 72%, a figure which hasn’t changed over the past three Census periods (15 years). Hence, there is no trend toward attached, denser housing as is being implied in the government’s plan. I urge all Queenslanders to view the website where the Draft Plan is located at www.dip.qld.gov.au and respond before the closing date for comments by 3 April 2009.
Monday, January 26, 2009
Sunshine Coast Has Most Unaffordable Housing in the Western World
An internationally accredited demographic research company, Demographia, has just released the findings of its fifth annual international housing affordability survey.
The survey covers Australia, Canada, Ireland, New Zealand, United Kingdom and USA. It compares regional housing affordability by calculating the median house price divided by the median household income for each region. A quotient of five or higher is considered to be ‘seriously unaffordable’. A quotient below three is considered to be ‘affordable’.
Affordability has improved in some regions over the past 12 months as house prices have weakened, however there remain some unacceptably unaffordable regions such as the Sunshine Coast, Australia (9.6), Honolulu, Hawaii (9.1), Gold Coast, Australia (8.7) and Sydney, Australia (8.3), all rated in the top five locations in the western world for unaffordability.
Many USA regions became more affordable over the past 12 months due to the severe downturn in house prices, which had occurred there. The USA had nine out of the lowest ten rankings (1.8 - 2.1).
The findings of this survey should ring alarm bells throughout Australia, and in particular Queensland.
The high levels of housing unaffordability are attributed to the lack of supply of serviced land in affordable locations, in particular town planning policies which aim to constrain housing development to areas within existing established areas. These policies are generally referred to as ‘urban consolidation’ or infill development, and are fundamental objectives of all State Governments.
Given that all of the States in Australia (except Western Australia) have Labour governments, it is difficult to understand why they would each seek to install planning policies which act against the best interests of their traditional constituents, i.e. higher house prices.
State Government planning ministers argue that there is sufficient land allocated within the ‘development footprint’ to satisfy demand for 20 years or more and therefore land supply is not restricted. But what they don’t say is that the allocated land is more expensive because it often has existing services which require upgrading, to accommodate increased density. Where existing services need to be amplified or new pipes laid under existing roadways, the cost of that work is very high, much higher than in ‘greenfield’ locations.
Additionally, infill sites are more expensive because they are better located. Hence, the stock of ‘entry level’ housing has diminished, and potential first home buyers are often forced to rent. Not surprisingly, the proportion of renters in Australia has increased from 25% to 32% over the past decade. This is the undesirable outcome of these State planning polices, quite the reverse of what Labor governments should be trying to achieve.
The answer is for Councils to permit more ‘out of sequence’ development where the developer funds the majority of the infrastructure. Examples of this are Forest Lake (Inala, Brisbane), Springfield (Ipswich) and Yarrabilba (Waterford), but there are not enough of these types of projects to satisfy demand for affordable housing in Australia. With a surplus of developable land this should be able to be accommodated with developer subsidies.
Population ‘caps’, such as is applied to Noosa on the Sunshine Coast, only exacerbate the problem of affordable housing because limited supply means higher land prices. Even though Noosa has yet to reach its ‘cap’ of 60,000 people, the expectation is there, and land has been valued accordingly.
The survey covers Australia, Canada, Ireland, New Zealand, United Kingdom and USA. It compares regional housing affordability by calculating the median house price divided by the median household income for each region. A quotient of five or higher is considered to be ‘seriously unaffordable’. A quotient below three is considered to be ‘affordable’.
Affordability has improved in some regions over the past 12 months as house prices have weakened, however there remain some unacceptably unaffordable regions such as the Sunshine Coast, Australia (9.6), Honolulu, Hawaii (9.1), Gold Coast, Australia (8.7) and Sydney, Australia (8.3), all rated in the top five locations in the western world for unaffordability.
Many USA regions became more affordable over the past 12 months due to the severe downturn in house prices, which had occurred there. The USA had nine out of the lowest ten rankings (1.8 - 2.1).
The findings of this survey should ring alarm bells throughout Australia, and in particular Queensland.
The high levels of housing unaffordability are attributed to the lack of supply of serviced land in affordable locations, in particular town planning policies which aim to constrain housing development to areas within existing established areas. These policies are generally referred to as ‘urban consolidation’ or infill development, and are fundamental objectives of all State Governments.
Given that all of the States in Australia (except Western Australia) have Labour governments, it is difficult to understand why they would each seek to install planning policies which act against the best interests of their traditional constituents, i.e. higher house prices.
State Government planning ministers argue that there is sufficient land allocated within the ‘development footprint’ to satisfy demand for 20 years or more and therefore land supply is not restricted. But what they don’t say is that the allocated land is more expensive because it often has existing services which require upgrading, to accommodate increased density. Where existing services need to be amplified or new pipes laid under existing roadways, the cost of that work is very high, much higher than in ‘greenfield’ locations.
Additionally, infill sites are more expensive because they are better located. Hence, the stock of ‘entry level’ housing has diminished, and potential first home buyers are often forced to rent. Not surprisingly, the proportion of renters in Australia has increased from 25% to 32% over the past decade. This is the undesirable outcome of these State planning polices, quite the reverse of what Labor governments should be trying to achieve.
The answer is for Councils to permit more ‘out of sequence’ development where the developer funds the majority of the infrastructure. Examples of this are Forest Lake (Inala, Brisbane), Springfield (Ipswich) and Yarrabilba (Waterford), but there are not enough of these types of projects to satisfy demand for affordable housing in Australia. With a surplus of developable land this should be able to be accommodated with developer subsidies.
Population ‘caps’, such as is applied to Noosa on the Sunshine Coast, only exacerbate the problem of affordable housing because limited supply means higher land prices. Even though Noosa has yet to reach its ‘cap’ of 60,000 people, the expectation is there, and land has been valued accordingly.
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