New RBA report finds NSW planning has caused apartment shortage

The Reserve Bank of Australia has released a new report titled The Apartment Shortage which identifies costs created by the NSW planning system.

It outlines the resultant shortages in supply driving up prices and has been accepted by experts such as Urban Taskforce CEO, Tom Forrest.

The RBA found that the excessive planning restrictions associated with delivering apartments in inner Sydney were disproportionately high.

By comparing the planning regulation cost of bringing a new home to completion in NSW with other jurisdictions, it highlighted the need for significant reform to planning regulation in NSW.

The Apartment Shortage Report found home buyers will pay an average of $873,000 for a new apartment in Sydney, even though it only costs $519,000 to supply, a gap of $355,000 (68 per cent of costs).

This compares with smaller gaps of $97,000 (20 per cent of costs) in Melbourne and only $10,000 (2 per cent of costs) in Brisbane.

Significantly, the report concluded that "the gap between the supply cost and the delivery to market cost was sustained by planning restrictions and planning risk."

Click here to enlarge:

Mr Forrest said, "the additional costs are due to the excessive time taken to obtain approvals in the NSW planning system and the high degree of risk associated with approvals, despite the strong demand for new apartments."

"Given the economic shock created by COVID-19, the RBA's independent confirmation of the excessive costs associated with the NSW planning system presents an opportunity for the NSW Government to cut housing prices by approving more supply and allowing for more height."

"The fact remains that the planning system had slowed the planning approval process even before COVID-19 hit. Planning approvals, particularly for apartments, have now fallen off a cliff."

"This important piece of independent research cannot be ignored by policy makers in NSW", Mr Forrest concluded.

Many projects have also been derailed as confidence sinks and by delivery difficulties, most notably in Melbourne where work sites have been hit by tough restrictions.

You can read the full RBA report here.