QUEENSLAND’S perfect storm will wreak havoc on housing construction and affordability, according to an independent report released today by Access Economics.
Playing a tune now gratingly familiar to the industry, Access Economics has identified major finance and supply issues in the Sunshine State.
It has prompted the UDIA to pressure the State Government to take immediate action to address the rapid decline of Queensland’s ailing housing sector following the release of the analysis.
Two research reports into the slowing pace of housing construction in Queensland, authored by Access Economics director Chris Richardson, reveal that the state is now the worst performing in Australia.
The reports show Queensland’s housing industry has reached its lowest share of national activity in two decades and there is now a real risk that up to another 30,000 to 37,000 positions could be shed in the short-term.
“Our research shows the industry in Queensland contracted sharply through 2009, with construction activity falling by around 8.5 percent,” says Richardson.
“Housing commencements have dropped by more than 30 percent since mid-2008 and the industry faces notable holes in completions which could stretch through to next year and beyond.
“Housing investment has dropped across the state to below 7 per cent of the Queensland economy, its lowest point since 2001. Between the second half of 2008 and the end of 2009, 10,400 jobs were lost in the construction sector.”
The reports pinpoint a number of systemic supply side issues currently faced by the housing sector, such as land not being approved for release at a rate that meets demand for housing, as well as slow development approvals and high developer charges.
Richardson says a scarcity of finance to developers continues to exacerbate the problem. A lack of funding had been accentuated by the collapse of a number of middle-tier financial firms and by the withdrawal of Suncorp from commercial lending and that the tight finance market would further slow Queensland’s recovery from the GFC.
“The current pace of Queensland’s recovery lags that of the broader national economy,” he says.
“Swings in housing construction account for some two-thirds of the year-to-year variability in the performance of the wider Queensland economy, and shifts in housing directly correlate with the retail sector which accounts for 25 percent of spending.”
Another key finding was the unrelenting upward pressure the situation was having on house prices.
“The Queensland population continues to rise at a rate of 2.5 percent however, only one new home is being built for every 4.3 extra people added to the population,” says Richardson.
“Demand is outstripping a very weak supply, pushing house prices up strongly and making them unaffordable to many Queenslanders.”
UDIA (QLD) president Warren Harris, says the multiple factors identified by the reports, when combined with other industry-wide issues, had created a ‘perfect storm’ in Queensland.
“Although the Global Financial Crisis and lack of commercial funding for housing development has been the most recent catalyst in the significant fall in housing approvals in Queensland, in essence it is the straw that broke the camel's back,” says Harris.
“Housing affordability is at historically low levels, interest rates look set to increase and mortgage stress is becoming increasingly evident. Land supply, approval delays and associated costs are adding further uncertainty among developers and increased taxes have been introduced, such as the recent massive jump in land tax as a result of the latest increase in land valuations.
“The challenge now is for the government to recognise just how serious the problem actually is and to immediately implement actions and strategies to deal with it comprehensively and confidently.”
Harris also pointed to March 2010 ABS figures showing Queensland was the only state to report negative growth in full-time construction jobs in the last quarter with a loss of 4269 full-time jobs.
It rams home concerns raised by the industry and the Richardson Reports that this is just the beginning.
“Urgent action must be taken to address the crisis in Queensland and protect Queenslanders’ jobs and opportunity to own a home,” says Harris.
“We are calling for the immediate establishment of an industry recovery taskforce which includes representatives of state and local government, industry and relevant trade unions to consider and deliver immediate solutions such as lifting the restrictions on vendor financing, deferring land tax payments and creating a moratorium on infrastructure charges.
“The UDIA also calls on the State Government to fast-track projects that can deliver much needed housing now and reaffirm its commitment to the South East Queensland Regional Plan’s urban footprint, to provide clarity around the extent of developable land available and certainty for our members.”
Harris is calling on the Queensland Government to make a firm commitment to easing the housing construction crisis by providing a swift and significant budgetary response.
On the Gold Coast, industry leaders met with council’s sustainable futures committee last week, where a $4 million rescue package was secured for smaller shovel ready residential projects - chicken feed given the gravity of the problem, alas a positive step.
“Government needs to address the financial pressure on developers so the pipeline of projects required to house Queenslanders can be delivered, and that means reinstating council assistance for local services and charges so industry isn’t forced to carry the burden of these costs,” says Harris.
“Likewise, we would ask government to defer upfront payment of infrastructure charges, so developers can pay at settlement rather than bearing additional costs and interest payments through the development phase.
“We call on the government to focus its attention on these issues, because our wants as an industry reflect those of the broader Queensland community – affordable housing for our children, job opportunities, and a sustainable future.”
Don’t miss the April edition of Gold Coast Business News where we bring you the latest deals and hot properties in the prestige property space. Is recovery nigh? Find out next week.
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