According to the Urban Development Institute of Australia, new housing completions are headed for their lowest levels in almost 70 years. Due to a decrease in new apartment completions and falling numbers of detached houses, the state’s total new builds are on track to sink to just 9,256 in 2022, based on current approval numbers and assuming greenfield land sales this year are similar to 2019.
This decline in new housing completions has been an ongoing concern for the last year or so. In 2019, just under 32,700 homes were completed, down from 40,185 in 2018. While there was a spike in 2018 due to a large number of new apartments that were completed, it’s clear that this decline has been underway since around 2016.
“We are on track for the lowest dwelling completions since 1953,” UDIA NSW chief executive Steve Mann said. “There were 9,047 dwelling completions in 1953.”
The UDIA says that state government moves to lift a cap on how much developers have to pay for infrastructure in greenfield areas could make the situation even worse.
Australia’s housing pipeline is shrinking, with the COVID-19 pandemic response causing mobility restrictions and slowing interstate migrations. The decrease in demand will have affects on the industry for a while to come: investment bank UBS has already forecast new housing starts nationally – another indicator of supply – to fall below an annualised 100,000 in coming quarters, which is down to 1960s levels. Governments face the challenge of creating policies which allow the building sector to continue to work while the economy is depressed, while also keeping the sector sustainable and able to fully bounce back once the economy begins to recover.
NSW developers fear a lifting in the cap on development contributions due to kick in at the end of June 2020 – a policy announced in 2017 – will hit them with greater costs than they can bear in such a difficult market, especially as low-density, greenfield projects are the ones best placed to keep work ticking over.
“We’re already looking down the barrel of a significant retraction in apartment supply across last year in particular, with the levels of project launches and the flow into commencements,” said Toby Adams, UDIA NSW’s head of policy and research. “We need to support all sectors of the residential market to bounce back. But the greenfields market would be best placed to respond most quickly.”
The state’s recently announced $70 million spend to co-fund infrastructure such as drainage, roads and public parks to support the construction of 31,000 new dwellings in north-western Sydney’s Blacktown and The Hills areas alone was insufficient, Mr Adams said. The UDIA wanted to see more money and also for the money to be spent in other ways, such as the housing accelerator fund, rather than on local infrastructure. The recapping of developer contributions was critical, according to Mr Adams.
“They don’t know what the cost is going to be post-July 1,” Mr Adams said.
Planning and Public Spaces Minister Rob Stokes said the spend was an interim measure to help lower costs for developers in the crucial north-western Sydney region, and that a report by NSW Productivity Commissioner Peter Achterstraat would make more sweeping recommendations to change the system by year end.
“A holistic review of the contributions system is currently under way so that we can deliver true reform, rather than just tinkering around the edges,” Mr Stokes said.
This article was adapted from one originally published on the Australian Financial Review by Michael Bleby. To read the original article, please click here.