With housing affordability an issue in most Australian capital cities, state governments need to re-focus if they are to ease the burden on home buyers. Exhibit A is the Victorian Government’s adoption of a First Home Owners Grant (FHOG) scheme similar to the grants implemented in NSW, QLD and SA last year, which thus far have proven to be both unpopular with first timers and ineffective in stimulating new housing.
According to the Victorian Government, the $7,000 grant, currently issued to first home buyers for both established and newly constructed homes, will be scrapped on July 1 in favour of a $10,000 grant for new homes and apartments. Other than a 40% stamp duty concession up to $600,000, the new FHOG in Victoria gives no incentive for a new generation of buyers to purchase an established home.
Victorian Treasurer Michael O’Brien said the changes will boost housing construction and create new jobs in the Garden State. However, the experience in NSW has proven that partiality to new homes with the FHOG does little to fuel confidence in the housing construction industry. To illustrate this point, the Australian Bureau of Statistics showed last month that only 988 first home buyer loans were granted in NSW last December – the lowest take up of loans in 20 years.
Indeed, if state governments want to support both first timers and the construction industry, they should start focusing on removing the red tape surrounding land releases in first home buyer hotspots. In many of these areas, the land is there but taxes and council bureaucracy is discouraging developers from building.
In NSW, the state government should be applauded for the release of its white paper, ‘A new planning system for NSW’, which plans to slash development applications on new and existing homes to 25 days or less.
According to the white paper, the strict proposals include maintaining the existing ten day complying development assessment track for smaller applications such as new homes and home extensions. At present, the government estimates that new homes are taking an average of 64 days to assess, with home alterations taking 58 days.
It is a step in the right direction and Andrew Sorensen, Principal of Raine & Horne Charmhaven, says it will kick-start demand for new homes on the Central Coast. “There are large parcels of land at The Entrance, for example, which are ripe for development, while any changes in the rules and regulations that enable people to split larger blocks would also be worth considering,” he added. “Currently, splitting blocks is costly and the bureaucratic hoops just don’t make it worth the effort. It’s a logical step to free-up planning red-tape to facilitate housing growth in the Wyong Shire, which in turn can help address the housing shortages in the capital,” added Mr Sorensen.
The newly-elected Barnett Government in WA is also focussing on new land reforms, with a push on breaking up large land holdings near the CBD for sub-development. “The dire shortage of listings has propped up demand, with the strongest buyer enquires occurring on vacant properties with sub-divisional opportunities and land,” said Phil Hayes, Business Development Manager for Raine & Horne. “The promises made by the Barnett Government to continue the push on sub-divisions and new infrastructure have improved investor confidence in the WA housing market.”
To illustrate this point, Raine & Horne Cannington recently sold two 570 sqm subdivided blocks at 52 Elizabeth Street, East Cannington, which entertained over 300 enquiries from eager buyers and developers. “Everybody wanted to put offers on these blocks,” said Tim Chant, Principal of Raine & Horne Cannington. “We accepted an offer of $330,000 on each lot within a couple of days of them appearing on the market, and we are still getting buyers coming at us with higher offers.”
In summary, while the moves in NSW and WA are a good start, further reforms are now needed to help home buyers take advantage of the current lending conditions and low interest rates, especially if state governments want to build some serious momentum in addressing housing shortages and affordability.
Angus Raine is a leading commentator on the Australian property industry and has been CEO of the Raine & Horne property group since 2006.