We need to get creative on the solutions to housing affordability: John Cunningham

GUEST OBSERVER

We need to get creative on the solutions to housing affordability.

Focusing on first home buyer and retiree activity is critical to literally get NSW moving again as the figures are so compelling.

Sales activity in many parts of Sydney has dropped by over 30 percent in the past 10 years, whilst the population has grown by over 15 percent.

This is not a good story and when you consider we are slipping behind on new construction at the rate of 5,000 dwellings per year, a fast turnaround is critical. We need to greater flexibility in town planning to provide the types of dwellings that will entice people to move, not just the high rise jungles solution currently on the table.

Vibrant integrated communities around infrastructure and transport hubs are essential to long term community benefit, where low cost housing solutions and both retail and commercial interests are side by side with mixed low, medium and high density residential living. It’s not hard to achieve but it requires vision and resolve to make it happen and happen quickly.

Queensland and Western Australia provide interesting examples as to how Governments can address affordability. Both states lowered stamp duty, reducing a major deterrent to people relocating, which saw people moving to new homes more frequently as their living requirements changed.

The net impact on Government revenue overall was negligible but the opportunities for first home buyers were given a boost.

By assisting those living in largely empty family homes, perhaps close to retirement or on a pension, Government has an opportunity to free up stock.

With presumably no mortgage these people are asset rich, however under the current system if they wanted to sell, all they would achieve is a reduction to their asset base and possible loss of entitlements by having too much money in the bank.

If the cost for people to move to smaller homes was reduced, ideally by removing stamp duty for retirees and ensuring sale proceeds aren’t means tested, more people would bring their properties to market and thereby increase supply.

Encouraging new supply is a central solution to addressing the affordability issue. While the NSW Government is making a conscious effort to provide new housing, this attracts investors because the depreciation on a new build is significant.

Without discouraging investors, who play an important role in a diverse market, we need to investigate new ways to help those serious about a first home purchase. Simply waiting for prices to drop is insufficient and may lock would-be first home buyers out of the market forever.

For too long both state and federal governments have stuck their heads in the sand on the affordability issue - and when the market takes off like it has the past three years they “cry wolf” and start looking for band-aid solutions.

There is no singular quick fix because the horse has bolted in NSW due to 10 years of inaction.

However there is still hope and it will need a co-ordinated response from both federal and state governments working with the construction industry and all property industry stakeholders to get an equitable duty and tax regime in place to incentivise more activity in both established and new housing.

John Cunningham is president of the REINSW and can be contacted here.