Urban Taskforce, a lobbying group that represents property developers and equity financiers has raised alarms around a decrease in incoming housing supply in NSW, particularly in apartments.
In a submission to the ongoing parliamentary inquiry to housing affordability and supply, the group pointed to Australian Bureau of Statistics data, which showed the NSW planning system approved almost 10 per cent less dwelling constructions in July than in June. It was the third declining month in a row.
Across the broader state, housing approvals reached their peak in 2015/16 and 2016/17, at around 73,000 approvals each year, according to Urban Taskforce.
But in the past financial year, Australian Bureau of Statistics data showed there were 59,399 total approvals across NSW, with a little less than half (28,964) being apartments.
While there was a 20 per cent rise in apartment approvals year-on-year, it was a fair drop from its peak in 2015/16, when 44,001 apartments were approved.
Urban Taskforce has expressed concern at a drop-off in planning approvals in the Sydney apartment market, claiming a number of councils have ignored targets set by the Greater Sydney Commission.
“Urban Taskforce is concerned that the NSW government is not ensuring that councils meet them. Targets need to be regularly monitored against performance. There can be no excuse for councils refusing to accept the targets,” the submission said.
“LGA [local government area] housing strategies must come with sanctions for those councils that selfishly refuse to contribute to housing supply, resulting in rising new home prices inflicted on those least able to afford them. However, they should also come with rewards when they exceed.”
Further, Urban Taskforce reported a large number of approved developments have not progressed due to a “collapse” in off-the-plan sales, largely due to a lack of sufficient finance to pass the scrutiny of banks and non-bank lenders.
Typically, a certain proportion of the development will need to be pre-sold before a lender will release funds for construction financing.
The group has suggested the government roll out loan guarantees in exchange for lower project pre-sales thresholds for developers to meet, recommending the establishment of a dedicated stimulus fund.
Further, the submission has called for a Homebuilder package that would apply to the NSW apartment market, to stimulate demand for higher density options.
NSW planning too slow and complex, say developers
“Urban Taskforce has consistently contended that we need greater supply, less red tape, greater flexibility, faster approvals and urgent reform of the NSW planning reform,” the submission stated.
“The states need to address planning constraints on new housing supply or prices will continue to go up.”
Urban Taskforce has criticised the NSW planning system for being complex and for having a limited capacity to efficiently manage rezonings.
The state has the longest development application time frames on the eastern seaboard, the submission stated, noting times grew by 44 per cent between 2015 and 2018, and can take several years.
Urban Taskforce reported too much information is being requested by councils at all stages, but particularly at the development approval stage.
Further, it can reportedly take five years or more to have a planning proposal for the rezoning of land finalised.
“The RBA, the NSW Productivity Commission and Commonwealth Productivity Commission – all point to the extra costs and the slowness of the NSW planning system,” the submission said.
The NSW Productivity Commission has previously found that the state needs a more responsive and flexible planning system and the tight regulation of land use is “one of the fundamental determinants of housing supply”.
The NSW government’s housing 2041 strategy has said that 1 million new homes are needed in Greater Sydney between 2016 and 2041.
The federal budget position has also assumed that net overseas migration will return to around 160,000 per annum, before rising to 225,000 per annum in the coming four years in the post-COVID recovery period.
However, data from the NSW Department of Planning, Industry and Environment, has shown that Greater Sydney and the NSW planning system are already short of the state’s target, according to Urban Taskforce.
There had been 22,168 new home constructions completed across Sydney in the first nine months of the 2020/21 financial year.
The year before, there had been 32,464 completions and 32,444 new home approvals across the state, compared to 42,414 completions and 39,645 approvals in 2018/19.
“Just under one third of all overseas migrants settle in NSW. The current housing affordability crisis, driven as it is (in part) by a lack of housing supply, poses a real threat to the Commonwealth’s budget position,” Urban Taskforce stated.
“There is a very real imperative for the commonwealth government to take a proactive stance and to drive the states to deliver changes to the planning system to increase housing supply.”
[Related: Make RBA overlook housing stability: UNSW]
Sarah Simpkins is the news editor across Mortgage Business and The Adviser.
Previously, she reported on banking, financial services and wealth for InvestorDaily and ifa.