🤔
Some more great work from Richard Temlett and Charter Keck Cramer, putting actual figures to the price gap between market capacity or expectation, and the price developers would now need to charge to make even the most basic apartments stack up.
That gap? At least $100,000 and as much as $300,000 for an entry level dwelling depending on the location.
Put differently, the price of a 70m2, 2 bedroom, entry level unit would be higher than a 3 or 4 bedroom home in a greenfield suburb, or a large 3 bedroom townhouse in the middle ring on a larger site.
Or yet another way – no matter how you cut it, apartments remain a product for the more premium, lifestyle end of the owner-occupier market; they cannot meet the mid or entry level-market any more due to cost.
Richard correctly points out what would need to be done to avoid a four to five year (minimum) delay for the market to catch up: ✅changes to taxes that impact holding and acquisition costs ✅remove GST on building materals ✅loosen regulatory requirements ✅reduce imposts on foreign investors
None of these are on the table based on the State's fiscal position, and State planner attachment to design perfection and utopian ideals.
And with VIC now a net GST recipient, I can't see the federal government removing GST on construction costs any time soon!
The above assumes construction costs don't keep rising. In fact, the rate of increase is slowing, but they are still rising faster than underlying inflation.
Let's also bear in mind, that when apartments are "feasible" in a high amenity areas, because higher selling rates can be charged, that does not make the apartment "accessible" in the sense that it is something that anyone can buy it. The units will suit a cohort, but invariably not entry level buyers or people on either side of median income.
They simply won't solve #housingsupply or #housingaffordability going down this track.
Worse: It remains incredibly frustrating as an industry participant who can deliver housing which is better value, faster to build, and more #attainable to more people, yet continue to be tied up in Council and State Planning processes at the expense of preferencing pet projects (such as the "Great Design" track).
😂I can't wait to see those first apartment blocks built in Broadmeadows or Yarraman Department of Transport and Planning. Definitely won't hold my breath.
UDIA Victoria Property Council of Australia Master Builders Australia Housing Industry Association (HIA)
realestate.com.au Media Nathan Mawby