The NSW government should scrap infrastructure charges for developers in order to stimulate house building in the outer suburbs according to a leading business analyst.
Robert Mellor, director of building services at research and forecasting firm BIS Shrapnel, made the statement at a recent Sydney conference.
Developers are currently forking out $33,000 per lot as an infrastructure charge, paying for transport and social infrastructure. The lower prices they are offering for land as a result are being refused by landowners, leading to a stalemate.
Passing on the charges to homebuyers is impossible, because there is already an affordability issue.
Last year only 3,000 lots were developed in Sydney, compared to 17,000 in Melbourne, where charges are lower.
Mellor said the general public should bear the cost of building new infrastructure and not developers.
"We're the ones who have benefited from massive property price rises and we should be the ones footing infrastructure bills, not developers. All the pressure shouldn't be on the developer. New infrastructure should be paid for from existing government resources and the burden shouldered by us all."
Mellor believed the Sydney housing market is becoming a pressure cooker as new building consistently falls behind dwelling demand. Figures show that 27,000 new dwellings were required in the city last year and only around 17,000 were built.
He maintained that a massive shortage of housing will drive rents up by 40% in the next four to five years and the situation will not ease until yields increase enough to attract investors back into the property market.
"Vacancy rates are going to fall further - they will be down below 1% by the end of this year, the lowest level since the 1980s. The consequence of this is massive increases in rents, by up to 40% over the next four or five years. It will be late 2009 before investors feel confident enough to move back into the market," said Mellor.
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