Victoria still leads the way in affordability

Harley. 3863 HIA_025VICTORIA still offers an affordable option when it comes to new house and land combinations despite some of the
government-inspired costs associated with it.
Housing Industry Association chief economist Harley Dale says Victoria – notably Melbourne – can be described as the best of a bad bunch given the “high rate of taxes’’ that the housing sector faces.
Mr Dale says Victorian residents along with inhabitants of other capital cities and regional areas suffer from an array of taxes levied for community services such as roads, parks and pavilions. “However, when it comes to hidden and indirect taxes related to costs such as excessive charges for physical and social infrastructure levied on the new homebuyer, excessive planning delays that add cost, and the speed with which residential land is available to meet current demand, Melbourne doesn’t come out looking as bad as Australia’s other highly populated cities,’’ he says.
The economist says total taxes levied on an average $511,002 house and land combination in Melbourne amounts to around $180,000 or 38 percent of the pairing’s total price. The comparable figure in Brisbane is more than $190,000. In Perth it is $225,000, and in Sydney it is $270,000.
“Another indication of Melbourne’s relative new house affordability comes from the per square metre cost of a block of residential land. This figure currently sits at $484 in Melbourne, but is $600 in Perth and $572 in Sydney.’’
The HIA says given its comparative affordability, Victoria will still continue to build large numbers of new homes – both attached and stand alone – in the next few years. But it will play second fiddle to New South Wales for the first time in more than 10 years because Sydney is enjoying a building boom after a decade of recession in the housing industry.

“NSW is trumping Victoria as having the highest number of new dwelling commencements.
In NSW there are expected to be more than 49,000 starts for the 2013-2014 financial year compared with Victoria’s 47,900. The Victorian figure represents a 6 per cent decline from 2012-13. “However, to put the figure in perspective, the
long-term average for annual commencements is 38,500,’’ Mr Dale says.
“Driven by a decline in medium-high density dwellings, commencements are forecast to fall by 8 per cent in 2014-15 and by a further 3 per cent in 2015/16, bottoming out at a level of just over 43,700. Bear in mind that this level is still 14 per cent higher than the long-term average. Growth of 3 per cent is forecast for 2016-17.’’

But Mr Dale warns that state government have to take steps to ensure housing is affordable for those entering the market.

“There is no doubt that excessive taxes and charges are challenging the right of Australians to succeed in their dream of home ownership,’’ he says.
“A failure by governments at all levels to address this excessive cost base levied on an otherwise efficient industry will mean the great Australian dream fades further and the nation fails to adequately house its ageing and growing population.’’

By Andrew Brasier

Published in The Indian Weekly (First Weekly Indian news Magazine in Melbourne, Australia)