🚗Are you likely to buy a brand new car cheaper than the previous model? We know that never happens.
The same applies to new homes, yet I regularly see suggestions that new dwellings are more "affordable" than existing.
This can't occur because new homes: 💰Cost more to build in materials, labour, taxes (+GST) ⏩Face higher regulatory/design regs – e.g. NCC, ESD, accessibility ⌚Suffer planning & time delays, adding to end price
So an established dwelling of given size/configuration will be less expensive than an equivalent new one like-for-like.
❓Does that mean creating new housing is a waste of time in the pursuit of affordability? Far from it!
New homes: ✅Allow upsizing from small dwellings, or downsizing from larger ones. This frees up existing houses at (relative) discount to building new. i.e. affordability because someone can pay for it ✅In expensive, well-serviced areas, tend to be smaller & less-expensive than houses, creating a different price point for the location. i.e. relative affordability.
Using the car analogy, the former is selling a 5-year old Hyundai i30 & buying a new Santa Fe, or replacing a Porsche Macan with a Boxster.
The latter is buying an Mercedes A- or C-Class when most in the area own E- or S-Classes.
💵Continuing the analogy, there is no point making the Mercedes A-Class at high volume (an $80k car) when most buyers for that config – 4 door, small hatchback – only have a new Kia Cerato budget (~$35k).
🚙Where new homes with less utility/space cost more than existing large dwellings, small units are not feasible even if "newer", "nicer" or "more efficient". Just like a family with $22k to buy a car will get a used Commodore or Camry rather than spend the same on a brand new Kia Picanto.
This is where governent policy on #housingsupply is getting it wrong. The current approach is akin to making people buy new Mercedes A-Classes (expensive mid-size) or Kia Picantos (tiny apartments), when the market mostly needs bigger cars with a new Kia Cerato (greenfield H&L, townhouse) or used Commodore (older house/townhouse) budget. Worse, they keep adding to the cost of building the A-Class in the first place!
Mercedes will build as many A-Classes as they can, but they know they don't meet the needs of or be affordable to all.
Some need SUVs or people movers. Some want something luxurious & small. Some are happy with Ubers, not owning at all.
🤔The solution isn't to only allow building A-Classes. It's to foster a variety of cars with different price points, manufacturers & feature sets to meet broad & varied market needs.