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October 18, 2010

Addressing the supposed ‘housing shortage’


Another week passes by with yet more arguments on the wisdom of property investment, one of them being about whether or not this country really is facing a housing shortage.

BY CATHERINE CASHMORE

New reports of an extreme national house shortage recently hit the media, this time from Goldman Sachs which foresees a 250,000 housing shortfall by 2013.

It’s not easy to accurately assess the gap between available house supply and demand. To do so analysts take numerous factors into account including rental vacancy rates, the number of homeless, the level of migration, and various other statistical data from the 2001 and 2006 census.

Somewhat confusing is information in the 2006 Census which recorded 830,000 unoccupied dwellings scattered across Australia. On the face of it this places a large question mark in front of the supply equation and various critiques jumped on the data to form arguments proposing undersupply statistics are myth-based imaginings used by the industry to further fuel an unstainable housing bubble.

However what the data doesn’t represent is how many vacant dwellings are second homes, homes in the process of sale or homes awaiting redevelopment. Furthermore, findings by the National Housing Supply Council in its 2010 State of Housing Supply Report did note that areas with a high proportion of unoccupied dwellings are located in low-density, low demand regions such as neighbourhoods popular for holiday homes, or regional locations lacking amenities to attract significant demand.

BIS Shrapnel senior analyst Angie Zigomanis recently reported that Victoria is starting to build more homes than required. However the main bulk of new home construction is around the outskirts of our cities – areas that simply can’t rival the necessary lifestyle amenities provided in densely populated inner-city suburbs. To be blatant, they’re simply not locations people want to, or can practically reside in. This is probably the reason a mere 16 per cent of first homebuyers opt for new houses, despite government grants offering generous incentives to do so.

If we look at Victoria, the State Government’s answer to the ‘shortage of housing’ has been to action urban land releases on former farmland in growth corridors such as Casey, Hume, Whittlesea, Wyndham, and Melton – areas lacking in public transport, adequate health services, and other amenities needed to support a growing population.

It was boldly stated that infrastructure would be provided in these areas to make them liveable for new homebuyers, however this was to come in the form of a hefty new tax called the ‘Growth Areas Infrastructure Contribution’ – the GAIC. The GAIC is levied if land is sold, transferred or subdivided, or if sizable building works are conducted. The cost can be up to $95,000 per hectare and essentially this cost falls at the feet of the purchaser, further increasing the cost of housing. There is negligible encouragement for any new homebuyer to move into these areas and quite clearly it’s going to do little, if anything, to address the growing issues facing the practicalities of sustainable population growth.

We do need more homes but not in new estates stretching out into far away farmlands. Melbourne already has well populated facilitated areas ripe for development which currently fall low on the radar with homebuyers because they slip outside of zones with feasible transport systems serviced by existing train lines

Doncaster, Rowville Bulleen and Templestowe, for example, were promised train lines in the 1969 transport plans; plans purposely designed to cope with increasing population predictions. The scheme was heavily weighted towards extending the freeway network of which much has now been built. However it still leaves many of our outer suburbs crying out for better public transport systems which would go a long way in attracting families to the outer regions of Melbourne.

In 1985 the city loop was born with planners valiantly stating that it would be able to service 181 ‘plus’ trains per hour, including additional train lines. However, the number of suburban trains per hour has remained much the same as when built – the project has been totally underutilised. Melbourne International Airport is still arguing its case for a rail link. Our larger regional cities such as Geelong, Ballarat, Bendigo and Bairnsdale would flourish with a surge of new growth if people could easily commute in 30 minutes via a ‘real’ fast train network to a true transport hub in Melbourne. Changes such as these would open up affordable options for first homebuyers and greatly relieve the intensity bubbling underneath inner-city house prices.

We now have two independent regional ministers with significant clout to encourage regional development. The potential is ripe for growth and holds much promise. It will be interesting to see if they can sway the government into implementing some of these practical ideas.

Catherine Cashmore is a senior property adviser and buyer advocate for JPP Buyer Advocates – the largest dedicated buyer advocacy in Melbourne. With extensive experience in all matters regarding real estate, JPP successfully purchases and negotiates over $100m worth of property each year for clients. http://www.jpp.com.au

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