Many young Australians may never own a home thanks to ever increasing land prices and construction costs, but according to the Federal Treasurer Peter Costello it’s state governments who have affordability dilemma.
In launching The Tragedy of Planning: Losing the Great Australian Dream, Costello lampooned state governments for their restrictive planning regimes and state property taxes.
"The great Australian dream still beats in the breast of young Australian couples and families is to own their own piece of the Australian land. It’s one dream that we should nurture,” Costello said.
"There’s still a whole area of property taxes which are now impacting on young Australians – stamp duties on conveyances, infrastructure levies, development costs and the like," Costello declared.
However, Costello accused the states of deliberately restricting land availability.
"Coco Chanel once advised that in fashion, less is more," he said. "But it seems to me that planning bureaucrats in our state governments have taken this to heart.
"It’s now their land release policy – less means more. Less land, more cost, to young people who are trying to get into the housing market."
The states angrily disagreed with the Federal Treasurer’s harsh assessment and point towards Australia’s three successive rate hikes.
The study by the Institute of Public Affairs found that while housing construction costs had grown slightly over recent decades, there had been an “explosion in land costs”.
Author of the Institute’s report, Alan Moran believes high housing prices were directly connected to state government planning regulations.
"Excessive planning regulations allow governments to interfere with the property owners’ rights to sell or improve the land," Moran said yesterday.
"They restrict land that is available for new homes, and they create a bureaucracy which forces developers to incur costs by buying political favours."
Co-incidentally, the latest HIA/Commonwealth Bank Affordability Report find that the the long held relationship between higher interest rates and falling house prices is unlikely to hold true in this coming cycle.
HIA’s Executive Director of Housing and Economics, Simon Tennent said that with the need for new housing sitting at close to 160,000 homes per annum, spiralling land costs, crippling fees and charges, and planning red tape have made it impossible for the industry to get close to underlying demand in each of the past three years.
“It therefore comes as no surprise that house prices and rents keep rising, with the real irony being that both factors were significant contributors to measured inflation in the June quarter,” Tennent added.
“With every likelihood that affordability will decline further in coming quarters, the need for an urgent and radical re-think on new housing supply has never been greater,” Tennent concluded.
Figures released yesterday from the HIA/Commonwealth Bank Affordability Report show that affordability deteriorated again in the June 2006 quarter, dropping by 5.3% to be 6.1% lower than Christmas last year. With the latest increase in interest rates, affordability would have taken a further hit.
First-home buyers entering the market would have to commit 27.9% of their income towards mortgage payments which is getting even closer to the ‘no-go zone.’
By Nelson Yap
