Sam Elbanna, the principal of CPM Realty and a 20-year industry veteran, says the problems NSW face have been caused by:
- The State Government’s impost on developers – astronomical charges and taxes, including stamp duty
- Council’s Section 94 levies (to fund community infrastructure) The painfully slow approval process The State Government withholding land
The current undersupply of dwellings in NSW is around 50,000, and is predicted to reach 80,000 by the end of the year. Exacerbating the problem is:
- Population growth. NSW recorded the greatest increase in population in Australia - 119,534 over the 12 months to June 2009 (source: RP Data, ABS – raw numbers)
- Historically low construction. Medium and high-density dwelling starts plunged by 28% in 2009, hitting their lowest level since 1987 (source: BIS Shrapnel)
Mr Elbanna says there are dozens of developers in Sydney who have been forced out of the industry through a combination of Government charges, Council inaction and lending authorities reacting to the global credit crunch by imposing unrealistic financing conditions.
“The ever-increasing State taxes and Local Council levies on developers have been the major cause to what is now a real social problem - that of housing undersupply and affordability,” Mr Elbanna said. “This leads to a worsening of the rental crisis as would-be purchasers are forced to rent, therefore increasing demand and driving up rents to levels that we are currently experiencing. When you have an imbalance in demand and supply, as we do now, prices grow out of the reach of the average person.
“The State Government has reaped a windfall in stamp duty receipts from property over many years, while levies by local authorities have risen well ahead of inflation. This represents a huge impost on developers which they, of course, have to pass on to customers.
“Then, the purchaser has to pay ridiculously-high stamp duty on every transaction which, in itself, forces property prices to increase.”
What can be done to improve housing supply and affordability? Mr Elbanna says:
- The State Government should have a long-term land release strategy. The housing cycles cause periods of low stock levels and, as a result, land prices increase dramatically. During these ‘boom times’ the Government should fast-track land releases to ease pressure on supply and keep land prices at reasonable levels.
- Fast track the approval process. Delays cost developers and, ultimately, end users, money. This includes waiting for the initial development approval, then when all the services are completed the developer is paying interest whilst waiting for plans to be sealed and registered.
- Local Governments should borrow funds to provide infrastructure (roads, bridges, parks etc) and services (sewerage, water, power etc) rather than placing levies on private developers. Local Governments would recover this investment through annual rates charged to householders for decades to come. Currently home buyers have to pay for these services twice - through increased land prices (because the developer has to pass on all taxes and levies) and again through their annual rates.
- Reduce stamp duty on developers and property purchasers.
“It is not only ‘The Australian Dream’ to own your own home - it has been clearly demonstrated that home ownership brings with it both major social and financial benefits to Australians and the economy,” said Mr Elbanna. “Keeping property at affordable levels allows the First Home Buyer to enter the market, build up equity over time, and trade up.
“In later life, this equity often relieves governments of the financial burden of having to fund retirees.”
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