During a webinar hosted by the National Housing Finance and Investment Corporation (NHFIC), the chiefs of major developer Mirvac and construction and materials supplier Boral reflected on the state of the housing market.
NHFIC had recently launched its State of the Nation’s Housing report for 2021-22, which noted blocked supply and lagging planning approvals were contributing to a surge in house prices.
NHFIC’s report also warned that the supply pipeline may fall behind demand as the international borders reopen.
There are 550,000 net new dwellings expected to hit the market over the next two years, but the formation of new households is forecast to outpace supply from 2025.
In Melbourne in particular, from 2024-25 out to 2032, household formation is anticipated to outpace new supply by about 61,000 dwellings.
For Mirvac chief executive and managing director Susan Lloyd-Hurwitz and Boral CEO Zlatko Todorcevski, the government’s main focus should be on improving supply and to do that, it needs to work on planning and land approvals.
The NHFIC report had reported some new apartment blocks in Sydney could take as long as six years to hit the market.
Ms Lloyd-Hurwitz called the state of planning around the country the “number one issue in the housing market”.
“There’s differences between states, but in general, particularly in NSW, the planning pathway is convoluted, complicated, but we can do better,” she said.
“And we’ve seen it when the NSW government put in place during the last two years, the fast track process to fast track things that were stuck in the system and had been stuck for years and years. And COVID gave everybody the impetus to get them unstuck and unstuck they were and out they came. We can do it.
“So it is the number one issue until we get a more balanced release of land and more straightforward, without cutting corners or creating bad product.”
Mr Todorcevski added that governments need to slim down planning processes and to free up land to help stop prices surging.
“It’s really important that governments are then focused on increasing supply, otherwise, we are going to see a lack of affordability,” he said.
“And when you see planning horizons that can take six to eight years to make land available, that frankly, in many cases should be made available for housing, that’s not helpful.
“When you see planning processes for a lot of construction activities, whether it’s new concrete plans or quarries, taking inordinate amounts of time, that doesn’t help us support that growth.”
What can the government do?
Looking ahead to the election, there are steps the federal government can take to incentivise states to meet their housing targets, Ms Lloyd-Hurwitz stated. She also recommended collaboration with the state and local levels of government.
“Now, it’s been done before around productivity payments. So there’s definitely mechanisms whereby the federal government can incentivize housing targets,” she said.
NHFIC CEO Nathan Dal Bon added that local governments in particular are key, as they are “at the coalface in terms of dealing with local communities”.
“I think it’s really important to involve local government, in these discussions as well and obviously, part of the planning process falls to them,” Mr Dal Bon said.
“So it’s all levels of government pretty it’s all across all society, including the private sector, if we’re going to make some serious inroads into the supply issues.”
Meanwhile Mr Todorcevski suggested the federal government could consider backing initiatives such as build-to-rent or rent-to-buy schemes.
In Sydney it can take an average couple on a median income around 13 to 15 years to save a housing deposit, Ms Lloyd-Hurwitz said, adding industry and government should be working out a way to shorten the time frame.
“We recognise that it’s often not servicing the mortgage which is the problem, it’s getting the deposit to get the mortgage, which is as fast as house prices go up – way faster than people’s ability to increase their savings,” Ms Lloyd-Hurwitz said.
“….We need to work out a way that if people want to get into the housing market, it doesn’t take them 15 years to save for a deposit.”
Ms Lloyd-Hurwitz noted there are also strategies the development industry can take, to help first home buyers and build more affordable homes.
“We’ve experimented with various different programmes to help people get into the housing market, [including] a rent to buy scheme where people can rent, and then we give them the rent back as a deposit when they come to the end of the rental,” she said.
“That gets them into the apartment faster than it would have by having saved and it’s a way to get people into the market. It’s been very effective in Perth, where we’ve done that.”
Mirvac had also ring-fenced stock previously in Sydney, reserving it for only first home buyers to purchase, when the market was particularly hot.
Meanwhile, Boral CEO Mr Todorcevski commented that construction suppliers can also help developers such as Mirvac, by saving costs on their products.