While fronting the House of Representatives economics standing committee last week, the CEO of NAB, Ross McEwan, called on the state governments to enact “decisive moves” to increase housing supply.
Following on from CBA’s and Westpac’s committee hearings on Thursday (15 April), Mr McEwan said on Friday (16 April) that a supply boost is critical for warding off housing heat, with the bank predicting a boost in prices of at least 10 per cent in 2021.
Mr McEwan called on the states to streamline approval processes for land development and residential construction in order to offset the incentives for first-time buyers, which will “inevitably” push up house prices further and faster.
The NAB CEO noted that it was taking developers “five to seven years to go from a paddock to having land available for somebody to put a house on”.
“That is an area I would encourage the states to have a serious look at,” he said, adding that it would potentially make a “big difference” to house prices.
He asked: “How could you reduce that time quite dramatically? Particularly [now] as you’re seeing a resurgence of people wanting to build.”
Mr McEwan added: “We need to get that land supply in circulation a lot quicker than the five to seven years.”
Indeed, the popularity of building homes has been stoked by government incentives such as HomeBuilder.
According to the Australian Bureau of Statistics (ABS), the latest data for building activity (covering the December 2020 quarter) shows that the number of construction commencements on detached houses hit a 20-year high of 33,761.
Meanwhile, the ABS data showed that the value of total building work done rose 0.1 per cent to $29.4 billion in the December quarter, in seasonally adjusted terms.
According to the ABS, the rise was driven by new residential building work done, which increased by 2.6 per cent to $15.4 billion.
Assistant Treasurer Michael Sukkar has stated that HomeBuilder helped drive this demand.
The scheme, which was extended last year to provide a $15,000 grant for building contracts (new builds and substantial renovations) signed between 1 January 2021 and 31 March 2021 (inclusive), aims to provide eligible owner-occupiers (including first home buyers) with a grant to build a new home or substantially renovate an existing home.
While applications for the HomeBuilder scheme have now closed, the federal Treasurer recently announced an extension to the construction commencement requirement for the HomeBuilder grant from six months to 18 months for all existing applicants.
In a joint statement, Treasurer Josh Frydenberg and Mr Sukkar said that the extension would bring the total level of expected government support for the construction sector under the HomeBuilder program to $2.5 billion.
The government’s decision to provide existing applicants with an additional 12 months to commence construction has followed unexpected delays in the construction industry caused by supply constraints as a result of the coronavirus pandemic.
This includes delays in global supply chains and recent natural disasters (such as the floods in NSW and Queensland, and a cyclone in Western Australia), the government said.
[Related: Major banks revise house price predictions]