The government will put pressure on the states to ease planning regulations for residential land and improve the supply of housing, Treasurer Scott Morrison
“Housing in Australia, especially in Sydney, Melbourne and Brisbane, is expensive and increasingly unaffordable, but that does not mean it is over-valued,” he said in a speech to the Urban Development Institute of Australia yesterday (24 October).
“Improving housing affordability right across the housing spectrum must therefore be a key policy goal for Governments at all levels, including the Commonwealth.”
To create an effective policy on housing affordability, it was essential to look at the individual factors, he said.
“Of all the determinants of house prices in Australia, whether cyclical or structural, the most important factor behind rising prices has been the long running impediments to the supply side of the market.
“This not only relates to the volume of supply but also the responsiveness, flexibility, diversity and composition of that supply, as housing needs becomes more complex.”
One of the main causes for the current market undersupply was a period of weak construction in the mid to late 2000s, Morrison said. This glut has yet to be reversed even with the large volume of construction occurring now.
“Whilst Sydney, Melbourne and Brisbane have record supply, most of this is in the inner city apartment market,” Morrison said. “Unfortunately, we are still seeing a muted supply of detached housing in other parts of our cities.”
Hurdles to development
Other factors preventing proper housing affordability include complex land planning and development regulation, insufficient land release, transaction and betterment taxes, public attitudes to urban infill, and physical geographical constraints.
The states could be doing a lot more to improve both the planning and provision of infrastructure, the Treasurer said. As an example, he pointed to one Melbourne construction project which took 12 years to progress from land acquisition to the development of a new suburb.
“While some construction standards are important for maintaining the safety and quality of newly constructed dwellings, some of these hurdles sounded almost farcical,” he said.
“More needs to be done to ensure that supply increases more broadly – both in terms of location and type of dwelling – and that the roadblocks to this increased supply are removed.”
The real pinch point
With the proportions of people owning their own homes dropping from 71% to 67% over the past 20 years, it is taking longer for people to own their own property and then pay off their mortgage, he said.
“This trend has the potential to undermine retirement incomes, with superannuation cashed in on retirement to clear the mortgage or having mortgage costs eating into retirement income or undermining their ability to save more as they approach retirement.”
The “real pinch point” is being able to get into the market, he noted, as a 20% deposit on a median home loan is more than 100% of the average Australian’s annual household disposable income.
“The market is getting away from people. No matter how hard they work or save or even earn, they are finding it harder and harder to get into the market.”
However, he said the solution to this was not to crash the market but to implement housing policies that “mitigate the artificial inflation of asset prices, ensure that supply is not restricted from responding to genuine demand and that enable homebuyers, through their own efforts, to make more rapid progress to being able to enter the market”.
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