GRIEVANCE DEBATE - Housing Affordability
Mr CADMAN (Mitchell) (4.37 p.m.)—I grieve today about the opportunities denied young people to own their own home in the capitals of Australia.
Madam Deputy Speaker, I am sure that you are aware because of your knowledge of the area that the cost of a house and land package in Sydney is more than the cost of the equivalent package in New York, San Francisco or Miami. Australia has one of the most expensive homeownership regimes in the world. With taxes and charges of $150,000 per tiny household block of land in Western Sydney, the state government of New South Wales has created some of the most expensive land and house packages in the world.
I will speak to the House today about the theory that interest charges are a significant factor in the cost of a home. Interest rates do have an impact, but not the impact portrayed by some sections of the media and the Australian Labor Party. Some taxes on land have risen by more than 300 per cent in the past five years and the cost of infrastructure that has a life of 30 to 50 years has been loaded onto first home buyers. It is no wonder that homeownership in New South Wales has gone beyond the reach of all but the wealthiest. New houses in Sydney incur total infrastructure charges of $68,233 compared with the actual direct infrastructure cost estimate of $1,752. That difference of roughly $66,000 is paid by first home buyers. These figures are from the Urbis report of November 2006. In fact, local government charges add more than $33,000 to the price of an average block of land and state government charges, including GST, add $115,000 per block. It is no wonder that young people cannot afford their own home.
It is interesting to note the impact of those charges on the amount of mortgage interest paid each month. At the current interest rate of 7.62 per, on an average mortgage of $550,000 interest paid on the state government taxes and charges component of $160,000 amounts to $1,130 a month. That is paid every month by new home buyers in Western Sydney just to cover the cost of state and local government charges on their home. The monthly repayment on an average mortgage of $550,000 at the current interest rate of 7.62 per cent is $3,891. Prior to the recent interest rate rise—when the interest rate was 7.37 per cent—the mortgage payment each month was $3,796. The difference in the monthly payment is $94. However, each month homeowners pay $1,100 in interest to cover the taxes and charges imposed on their house and land package.
A number of reports have been prepared, including a productivity report and report produced by the Institute of Public Affairs and the Housing Industry Association. Mr Bob Day, the president of the Housing Industry Association, was quoted this year as saying that the artificial barriers that have consigned countless young Australians to a life of rental merry-go-round have been created by these measures. The report, which was presented by Bob Day and Professor Ron Silberberg, referred to less land and more cost for young people trying to get into the housing market. That is the issue facing those wishing to own their own home in Australia today, not interest rates and rental property availability.
The Australian Labor Party’s proposal to ease pressure on the rental market by providing a concession for rental home builders will make it more difficult for young people to purchase land. There will be more and more competition for a diminishing amount of land being released by the state governments. I will provide the facts about the amount of land available for release. The Australian Land Supply Study released in January states that in 2005-06, 3,150 lots were being provided in Sydney, but the underlying trend in demand meant that 5,700 lots should have been released. There was a shortfall of more than 2,500 lots in Sydney last year. Let us project that figure to cover 2006 to 2026. There is a massive difference. The current trend indicates that 69,600 lots will be provided over those 20 years, but that 132,900 will be required. That is a shortfall of more than 50 per cent. The situation in Melbourne is just as bad—housing lots are in short supply. The Australian Labor Party is saying that it will increase demand for the small number of lots available by encouraging renters to purchase land.
One of the interesting quotes from the Property Council and the Urbis study is:
One of the reasons governments have increasingly restricted the supply of developable land has been to curb their infrastructure spending responsibilities. A regrettable parallel policy has also developed whereby state and local governments, particularly in the last five years, are demanding that the costs of any infrastructure associated with residential development be met by the residents living in new apartments or houses, where a developer has supplied that stock to the market.
Instead of the basic direct costs being supplied for things like water, sewage and essential services, now we have road upgrades, public transport services, council libraries and upgrades to water storage and treatment added on to the cost of the land.
One only has to look to see the way in which this has affected the capacity of young people to purchase land. I quote from the same report from the section relating to the area where I live, which is entitled ‘While young families pay more’—in Mosman, the millionaires do not pay any of these costs, but young families in a typical housing estate do:
This typical housing estate in Sydney’s north-west growth corridor is located over 30 kilometres from the city. A typical new four bedroom house and land package will set a young family back $570,240.
Built into that price are $163,000 worth of housing taxes—from the GST to stamp duty ... land tax ... state infrastructure levy, council infrastructure levy and section 94 charges.
Plus, the cost of travelling has been increased by about $14,000 per year for that family. The battlers in New South Wales are being punished. (Time expired)
Author: Alan Cadman MP
Source: House Hansard - 13th August 2007
Release Date: 13 Aug 2007