Industry reacts to housing affordability and supply report

With the release of The Australian Dream – the result of a seven-month federal inquiry chaired by Liberal MP Jason Falinski – industry leaders have largely applauded the fact that the government is acknowledging the seriousness of the rising cost of both renting and buying and has made a number of recommendations that attempt to rein in climbing prices.

While real estate and property pundits generally welcomed many aspects of the report and its associated proposals, insiders don’t all agree on which potential programs hit the mark.

Real Estate Institute of Australia (REIA) president Hayden Groves felt his organisation’s most pressing concerns were broadly addressed, while acknowledging that some detail needed to be ironed out.

“All three of [our] recommendations have been met within the committee report and deliver a road map to significantly increase housing supply and therefore affordability through policy reform,” he said.

“REIA advocated for policies to enable supply, to build more houses and to get government right, including phasing out stamp duty on a coordinated basis,” Mr Groves explained.

One of the paper’s 16 proposals advocates for a coordinated effort among states and territories to replace stamp duty with a land tax.

Mr Groves noted that up to 90 per cent of first home buyers see stamp duty as a major deterrent to buying property and that it now accounts for 4 per cent of the average cost of a home.

“A coordinated national approach is needed to phase out this antiquated tax,” he said, though he noted further consultation was needed as to whether a land tax or a broader tax should compensate for the shortfall.

The Real Estate Institute of NSW (REINSW), however, called the suggested introduction of land tax to supplant stamp duty “essentially a rebranding exercise”.

“Replacing stamp duty with an annual property tax does not remove the government’s dependency on property tax,” REINSW chief executive Tim McKibbin said in a statement from the institute.

He also noted a need for greater detail in addressing some of the barriers to home ownership that are nested within the report’s other proposals.

“The report’s recommendations for incentivising high quality, higher density living close to public transport, particularly under-utilised public transport, is a no-brainer. But the planning process stands in the way of an appropriate development response,” Mr McKibbin said.

“The planning system in NSW is nothing short of atrocious. It is typical for it to take longer to be granted development approval than it takes to complete the construction phase of the project,” he noted by way of example.

Ultimately, Mr McKibbin said, reforms must target the barriers to entry, helping Australian buyers get on the property ladder, without increasing the financial precarity of taking on large home loans.

REINSW also raised concerns about a central proposal of the report, which suggested allowing first home buyers to use their superannuation as collateral for a property purchase.

“Enabling first home buyers to access more money merely increases the debt they will have to service,” Mr McKibbin said.

Noting this was not the first governmental investigation into housing affordability constraints, he stressed that it was more important than ever that this inquiry produced results, which others had failed to do by not adequately addressing supply concerns.

“Let’s hope this time that recommendations around supply translate to real actions and the government recognises the need to wean itself off property taxes,” he commented.

Labor disputes approach

A dissenting opinion from the Labor members of the committee has also thrown shade at the report, arguing it focuses too narrowly on supply while ignoring or rejecting other important evidence.

Criticising the current regulatory system as a “spaghetti bowl” of approaches that added significant time and cost to producing and purchasing housing in Australia, the Labor representatives described the recommendations as a “tweaking of the status quo” that would not address overall issues.

Labor’s dissent drew concern from both REIA and the Property Council of Australia, with both organisations calling the move “disappointing”.

REIA has long emphasised the need for bi-partisan co-operation to truly address Australia’s affordability and supply issues. 

Meanwhile, Ken Morrison, the Property Council’s chief executive, appeared to suggest that their stance would not be forgotten if the outcome of the next federal election is in the party’s favour.

“We note the strong critique of the planning ‘spaghetti bowl’ that has contributed to housing affordability from the Labor members of the committee and the importance they attach to federal leadership and the productivity benefits of reform,” Mr Morrison said.