There are some very simple steps which could reduce the cost of Sydney apartments by about $60,000 – from, say, $550,000 to $490,000. Many of the steps also apply to Melbourne.
If the steps were taken it would also provide a fantastic boost to the Sydney construction industry, which is now struggling. If we do not take these steps then Chinese buyers will purchase the vast bulk of inner Sydney apartments.
Here are my six steps:
1) In inner city areas we need to recognise that five-to six-storey apartments are uneconomical. We must change the culture and build apartment blocks with 12 storeys or more. These large apartment blocks are the only solution to the dwelling shortage because outer suburban cottages require too much land and too much infrastructure. Worse still, the home buyers are forced to spend too much money on transport and too much effort is required to go to work and come home.
2) We need to streamline the approval process, which currently can take can take two to three years even when an application complies with all the controls.
3) The state government advisory document called SEPP 65 stipulates strict requirements for the number of units requiring light into the living rooms, which leads to the incorporation of far too many two-storey crossover units. These are not favoured by the market and add enormous cost to a development.
4) The NSW Land & Environment Court takes far too long to hear cases and then far too long to hand down decisions. In any event, the majority of decisions seem to be in favour of councils and against developers. It’s a huge burden on the cost to the buyer.
5) Section 94 contributions, which are charged by individual councils, must be fixed at a maximum of $20,000 per apartment and should include all works required by councils and other authorities to the roads and utilities surrounding a development site. These should be payable at occupation of development.
6) Affordable housing levies, where they exist, should be abolished as this is purely a tax on development and the provision of affordable housing is a burden which should be shared by the entire community, not just the development industry.
Australian buyers are back in the market but they are being forced to pay unnecessary costs. Lower interest rates will increase Australian buyers but supply is artificially being held back and the costs boosted by state and local governments.
Harry Triguboff is managing director of the Meriton Group.