Poor planning threatening home ownership: First National

First National Real Estate has called on governments to cut restrictions on housing supply.

According to the real estate agency, poor planning and policy co-ordination has contributed to affordability issue leading to Australia’s lowest level of home ownership in 40 years. First National cites a 2.3% average national price rage in March and a cumulative price increase of 16% since June 2012 at the commencement of the current growth cycle.

First National chief executive Ray Ellis attributes price increases to infrastructure costs.

“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 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% square meter in the past decade.”

While First National has acknowledged changing population demographics, living costs, interest rates and stamp duty and taxes as factors in affordability, the company believes that under supply is the major driver for increased prices. According to First National, the market is absorbing all new supply, a sentiment aired earlier this week by RP Data’s Cameron Kusher.

Ellis says that supply side issues may contribute to further affordability issues.

“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%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,” he said.

Further policy factors that are hindering the efficiency of the market include state based stamp duties, First National has claimed, which discourage housing turnover and inhibit labour mobility. According to the agency, stamp duties were “supposed to have been removed” when the GST was first introduced.