A special briefing for Australia's leading residential chief executives
Residential Developer e-Brief – May 2010
This issue looks at:
Welcome to the May 2010 Residential Developer's e–brief.
Over the last few months, the Government’s attention has been on taxation and budgets with the release of the Henry Review in April and the Federal budget in May. The latest housing data shows a mix of responses, with housing approvals lifting in March only to dip in April, whilst land sales also slowed. The National Housing Supply Council released its second report on the ‘state of supply’.
After two years, the harmonisation of occupational health & safety laws reached a milestone with the declaration of the ‘Falls Code’ however the national legislation is yet to commence.
Energy efficiency hit the spot light again, following the adoption of 6-star under the Building Code of Australia. The Federal Government is now looking at what comes next, with discussion on a new framework and the Prime Minister looking more broadly at how energy efficiency can fill the void left by the delay of an emissions trading scheme.
In the light of all these changes, the Government’s Third Intergenerational Report has triggered a flurry of debate about Australia’s future population growth and how we can supply the housing to accommodate up to 36 million people living in Australia by 2050.
A Federal election remains likely sometime during the year and HIA continues to look at issues and opportunities to put to all sides of Government to address housing affordability and to improve housing supply.
As always, HIA welcome feedback from members on issues affecting the residential development industry so that we can focus on the matters that concern your business the most.
Regards
Kristin Tomkins,
Senior Executive Director, Building, Development and Envrionment
Budget for Recovery
The centre piece of the Federal Budget 2010/11 is the move back to surplus in 2012/13, three years ahead of the schedule projected in last year’s budget.
A surplus of $1 billion is forecast for 2012/13, leaving little room for further significant spending announcements in the lead up to the Federal election unless expenditure commitments were offset by cuts elsewhere.
To view HIA's response to the Budget, click here
2nd State of Supply Report released by the National Housing Supply Council
The Minister for Housing, the Hon. Tanya Plibersek released the National Housing Supply Council’s second report on the “State of Supply” in late April.
The Council was established in 2008 to monitor housing demand, supply and affordability in Australia and specifically to highlight potential gaps between housing supply and demand. HIA is represented on the Council by Stuart Wilson and Warwick Temby.
The 2010 report highlights the growing gap between demand for and the supply of housing. In June 2008 the gap was 99,500 dwellings. As of June 2009 this gap has increased to 178,400 dwellings – some 78,900 dwellings more. The Council’s projections for underlying demand and potential housing shortfall are close to those released in HIA’s Housing to 2020 research last month.
The large increase can be mostly attributed to the dramatic growth in population but other factors are considered to have assisted including a drop in building activity in 2008/09 – particularly in the multi-unit market, together with barriers to the building process including planning regulations and taxes. The report also suggests that the Global Financial Crisis has had a significant effect on residential completions during the reporting period.
The shortfall is predicted to continue as the population continues to grow along with a significant increase in the ageing population which will require new dwellings that are better suited to their needs.
The NHSC at the launch expressed concerns about the current situation and its affect on housing affordability – particularly for those on lower incomes, many of whom are paying in excess of 50% of their incomes on housing costs – whether that be purchasing or renting.
The NHSC also suggested that improvements can only be made with better strategic and structural planning, more efficient development assessment arrangements, better infrastructure planning and innovation from industry and the skills of developers to adapt to a changing demographic and their needs. It was also suggested that better connections between the profit and not-for-profit partnerships may help.
The Government has acknowledged that the shortfall situation requires a coordinated approach across all three levels of government. The Minister outlined that through COAG the Federal Government has put in place reporting measures requiring the states to plan for and outline infrastructure planning and development as well as population increases along with housing supply and affordability matters.
Click here to view a copy of the Report.
Land Sales Suggest Faltering Recovery
The December 2009 quarter HIA-rpdata.com Residential Land Report highlighted the risk of the new home building recovery losing momentum from the second half of 2010. The latest report revealed that residential land sales, the earliest hard indicator of future new home building activity, are losing momentum.
Land sales were 13.4 per cent lower than in the December 2008 quarter, a very sharp slowdown from annual growth of 61.6 per cent evident for the September quarter. This situation presents clear evidence that land is not being released in sufficient quantity to meet the demand for new housing, which is being reflected in undue upward pressure on land prices.
The weighted median land value for Australia was up on the previous quarter’s record result, reaching $185,222. This figure represents annual growth of 13.1 per cent, the fastest pace since mid 2004. The weighted median land price for Australia’s six capital cities (excluding Canberra and Darwin) was up by 15.9 per cent on the corresponding quarter in 2008, while the regional median land price increased by 13.4 per cent. Further upward pressure on prices will stymie the housing recovery, result in further housing shortages, and place upward pressure on rents and existing home values.
For more information click here
Building approvals weaken in April
ABS Building Approvals figures for April provide a weak update regarding future new home building activity said that the Housing Industry Association, the voice of Australia‟s residential building industry.
HIA Chief Economist, Dr Harley Dale said that a very weak April result for detached house building approvals, where they reached their lowest level since May last year, reinforced the importance of keeping interest rates on hold today.
“Detached house approvals fell by 13.9 per cent in April. Detached house approvals have been losing momentum for some time, although monthly levels remained quite high, and have now experienced a large decline that was widespread across states and territories.
To view all the building approval figures, click here
There are unfortunately too many supply side constraints that stand in the way of a stronger recovery: planning delays; lack of available land; skilled trade shortages; taxation on new housing; increased regulation (e.g. energy efficiency).
The Federal Government’s Henry Taxation Review rightly points out that supply-side impediments remain the key to improving housing affordability in Australia.
This point was re-iterated in the Federal Government’s Housing Supply Council report on the state of supply which estimated Australia’s housing shortage at almost 200,000 dwellings and likely to increase strongly on current construction trends.
For more detailed information on housing shortages/surpluses by region contact us at economics@hia.com.au.
Henry Taxation Review
The Federal Government’s tax review and subsequent government response was met with mixed reviews and considerable political and media debate. HIA welcomed the review work and considers the report to provide an important blue-print for reforming Australia’s taxation and social security system.
The Henry Review made a number of recommendations directly impacting housing. These included less favourable arrangements for negative gearing and capital gains tax and the introduction of a broad-based land tax which would replace stamp duty. Quite sensibly, the Henry Review pointed out changes to the taxation treatment of investment properties should not be altered until the supply impediments in housing were fixed.
The review recommended:
- An equal treatment to capital gains, rental income and household savings via a 40 per cent discount to income. For capital gains and negative gearing arrangements this represents a less favourable arrangement compared to current arrangements where a 50 per cent discount applies to capital gains and no discount applies to the income write-off for a negatively geared property.
- Scrapping stamp duties and replacing with a broad-based land tax
The government subsequently has ruled out such changes to the property market, providing certainty to the 1.6 million mum and dad rental investors.
The review made 138 recommendations many of which are major reforms. The majority of the 138 recommendations were ignored, put on ice or ruled out by the Federal Government.
The Federal Government has picked up a handful of the review’s recommendations and come up with a few of their own. The most important changes are the proposed 40 percent Resource Super Profits Tax and a gradual increase in the superannuation guarantee from 9 per cent to 12 per cent.
To view a copy of the Final report, click here
National Code of Practice for the Prevention of Falls in Housing Construction
Notwithstanding considerable action to address the 2 metre height criteria in the draft National Code of Practice, Safe Work Australia moved to declare the Code in April by majority vote. It is now up to individual States and Territories to determine whether they will adopt the Code prior to the completion of the National Occupational Health & Safety legislation reforms currently underway. If the Code is not called up, it will be available as guidance material.
To view a copy of the Declared Code click here.
A step closer to harmonised national safety laws
When it comes to Occupational Health and Safety (OHS) laws there is no single national system - all states and territories have responsibility for making and enforcing their own laws. However this is set to change following an agreement between all states and territories to harmonise OH&S laws across Australia.
To give effect to this, a Model Work Health and Safety Act (Model Act) was recently settled by the Workplace Relations Ministers’ Council. This followed a long development process and six week public consultation period, to which HIA made a number of submissions.
The provisions of this Model Act provide wider enforcement powers and increased penalties for OHS offences and will potentially widen the OHS duties and personal liability in most jurisdictions. Key provisions are detailed below, some of which may impose new obligations for some jurisdictions.
The Model Act is not currently law however when adopted by each state and territory as part of their commitment to OHS harmonisation it is likely to become law in most states by 1 January 2012.
For more details on the harmonisation process click here.
National Building Energy Standard-Setting, Assessment and Rating Framework
The Department of Climate Change and Energy Efficiency released a Discussion Paper in April to facilitate public consultation in relation to the development of a new Framework for the assessment of energy efficiency in buildings – both new and existing and across the residential, commercial and industrial sectors.
The Paper offered up a series of key questions in relation to the current manner in which we rate buildings in Australia for their energy efficiency.
HIA prepared a comprehensive response to the Paper calling on the Government to provide a clear direction for the residential building sector through sector based targets. HIA responded to the broad range of issues set out in the Paper.
The Framework is intended to be in place by May 2011 to allow incorporation into the BCA and will also underpin the introduction of mandatory disclosure for residential buildings in 2011.
For more information on the National Strategy on Energy Efficieny and the Framework.
To view a copy of HIA”s submission click here.
Mandatory Broadband requirements for Greenfield Developments still set to proceed
The Federal Government announced that all ‘new’ greenfield and major infill developments would need to provide broadband optical fibre directly to the home from 1 July 2010. The Bill to establish these requirements is currently before Parliament, however a legislative instrument (regulations) is yet to be finalised. HIA has opposed the change due to the inequity of new homes having to pay upfront, for infrastructure that will be provided to existing homes at no up-front cost.
Draft information in relation to the potential exemptions from the legislation was released recently and indicates that all brownfield (infill) sites and smaller greenfield projects will only be required to provide ‘fibre ready’ infrastructure, connecting at a later date to the National Broadband Network. It is proposed that only greenfield projects with more than 200 buildings or lots and where the capital cost of fibre installation would be less than $3,000 will be required to provide full fibre infrastructure.
Senator Conroy last week advised that the legislation, intended to be in place by 1 July 2010, will now be delayed until 1 January 2011, to allow the Government to address a number of issues. Whilst the delay is sensible, HIA is currently in discussions with Telstra to ensure that existing development projects are not unduly delayed and that there is clear information on how Telstra will apply their universal service obligation over the next 6 months.
For more information on the Bill and greenfield requirements, click here.
Intergenerational Report 2010
The Intergenerational Report 2010 provides a Federal Treasury analysis of the economic, infrastructure and public finance sustainability challenges of a growing population. The transition of the ageing workforce and the skill shortage challenge to economic sustainability is given comprehensive analysis.
For more details on the Report click here.
Australian Workforce Futures: National Workforce Development Strategy
The Federal Government launched its National Workforce Development Strategy in March.
The Strategy provides recommendations with some funding priorities to raise productivity – increase skills and avoid future skills shortages, improve adult literacy and numeracy, position the tertiary education sector to ensure it has the capacity to deliver skills to the new economy and also to support government partnerships with industry and enterprise to further the recommendations.
The recommendations of the Strategy align with the broader Federal Government skills agenda discussion on immigration needs, short to medium resource sector shortfalls, and longer term intergenerational issues.
For more information, contact Nick Proud.
Migration Overhaul
The Federal Government is reprioritising immigration policy to promote a demand based approach favouring employer sponsored and "shortage demand" occupations. The Government has culled the National Migration Occupations in Demand List replaced by a new Skilled Occupations List to prioritise independent migration applications and guide employer sponsored arrangements.
State Migration Plans are also to be overhauled with all States currently developing a state migration strategy and a state occupations priority list that is to include forecasts of annual demand per occupation. Each of the State agencies are currently collating data, engaging consultants and carrying out modelling to produce State Migration Plans by 30 June 2010.
More information is available from the Department of Immigration.
STOP PRESS
National Rental Affordability Scheme - Round Four Expressions of Interest opens 14 June 2010.
You can subscribe to HIA’s Economics Group to obtain our regular reports on housing performance and forecasts. Contact Kirsten Lewis at k.lewis@hia.com.au or on (02) 6245 1393
You may also wish to consult our website: economics.hia.com.au to access the HIA Economic Group’s Event Calendar. |
