6 October 2022

Housing crisis enters dangerous new stage and government needs to act

| Ian Bushnell
Join the conversation
56
Housing development.

The ACT needs more new housing of all types, and fast. Photo: Michelle Kroll.

Despite what pundits are saying about a 20 per cent drop in property prices due to the Reserve Bank’s war on inflation, Canberra is unlikely to experience that sort of correction.

That’s great for homeowners, particularly for those who bought before the pandemic, but bad for anybody wanting to get into the market.

The combination of a lack of supply and Canberra’s relatively high average incomes means the market will find a new floor out of the reach of many.

Some have given up on the whole idea of the traditional freestanding home altogether. Even the next step down, the townhouse, has become a stretch at $600,000 plus, especially in a time of rising interest rates.

That leaves apartments, where many, hoping for an entry point, will need to linger for more than they expected, or maybe forever.

At the same time, rents continue to rise and vacancy rates under one per cent persist.

That’s adding pressure at one end of the market, while those who have done very well out of property in the last few years – and we’re talking a 30 to 40 per cent increase in value – have the leverage to invest or upgrade.

READ MORE Prices fall again but units and townhouses holding up

And there appears to be enough of them keeping that section of the market ticking over.

Some might say what’s new, that’s Canberra property.

But what is new is how the market dynamic has shifted at the same time as supply has dried up, with a lot of stock sold, even off-the-plan homes that haven’t even been built yet.

That spells trouble for a city with a growing population, increasing demand for public service workers and wanting to rebuild its international student market.

The cost of housing has been a recruitment barrier for years and has probably inflated salaries as well but now, as developers such as Geocon’s Nick Georgalis predicted last year, the situation is critical.

For those unfortunate not to be in the public service, or a family surviving on one income or on fixed incomes, housing will devour more of their cash at the same time as bills for basics such as food go through the roof.

Beneath the glossy veneer of the national capital, a growing underclass is competing for dwindling resources.

READ MORE Saving trees and an aggressive infill agenda? It’s one or the other, say builders

How did we get to this?

Some point to a tax regime that favours property owners, others blame the ACT Government for strangling the supply of land and not building enough social and public housing.

Whatever the case the only answer is more dwellings – be they houses or apartments – and quickly.

The government is looking to build-to-rent options, but that means large apartment developments with long lead times, and points to its public housing renewal program, although its target looks like being way short of what will be required.

The ACT continues to negotiate with the Commonwealth about securing land such as portions of the AIS campus and the CSIRO land in Belconnen, and more assistance for social housing.

READ ALSO Woodbury Ridge’s state-first certification paves way for crucial biodiversity values

A recent Productivity Commission report recommended that all housing assistance be brought under the next National Housing and Homelessness Agreement to help governments prioritise spending to the people in greatest need.

“A two-track approach is needed to ease the pressure on low-income renters – the capacity for low-income renters to pay for housing needs to be improved and constraints on new housing supply need to be removed,” it said.

The $5.3 billion Commonwealth Rent Assistance program should be reviewed and State and Territory governments should commit to targets for new housing supply and accelerate planning and other reforms.

The Commission urged coordinated policy action across jurisdictions, homelessness prevention and early intervention, and Aboriginal and Torres Strait Islander housing.

The problem will be the lag time, particularly in the ACT where prices and rents will remain high, and supply will be in a trough until a new construction pipeline is established.

The ACT Government has resisted accelerating its land release program but the conditions have changed. Canberra needs more housing and fast, and the government as the monopoly land provider can do something about that, and should.

It should also review the 70:30 infill/greenfield mix to provide more choice of homes, beef up the planning authority to speed up DA assessments and expedite its planning reforms.

Join the conversation

56
All Comments
  • All Comments
  • Website Comments
Latest

Ten years ago there was not this housing shortage. Most Australians could find a decent rental property at a decent price in their own country. There were enough homes for Australian citizens (which should be the priority). Unfortunately governments (of all sides) keep selling off Australian land and homes to foreigner investors, and wanting to have a ‘big’ Australia which causes terrible issues. The big problem is foreigner buyers, high levels of immigration and far too many people coming to Australia.

devils_advocate1:34 pm 26 Oct 22

Foreign investors are not permitted to purchase existing residential real estate, and the enforcement and compliance regime was strengthened some years ago.

They are allowed to purchase new, or off-the-plan residential real estate, and often these foreign investors provide the critical mass to finance new projects so they are helping to add to supply.

HiddenDragon8:43 pm 07 Oct 22

Margaret Freemantle makes a good point about Airbnb – a ban would not be easy to enforce, but ease of administration does not stop governments (most particularly the ACT government) from banning and regulating things when it suits them. Even a partially successful ban would reduce some of the competition faced by longer-term renters and prospective buyers.

Land-banking is another activity which needs to be dealt with.

There’s the more obvious sort of land banking instanced in a recent article on this site about a southside golf course. Then there’s the less obvious examples in the form of land still used (or ostensibly so) for primary production of some sort close to Canberra suburbia as well as public land which would currently be claimed to be off-limits because of precious conservation values. Those values will, of course, be consigned to the dustbin when the ACT government eventually decides it needs the revenue from developing that land.

Mike McGettrick2:13 pm 07 Oct 22

As usual Ian you make a lot of sense.

This is pure fiction. Just because more people want to live here doesn’t mean that the government “NEEDS” to do anything. Or that the people already here have to adjust to a bigger and bigger Canberra destroying more and more of our beautiful setting. Let people go and live in the existing “Big Smokes” if that’s what they like, or go to smaller regional towns that aren’t yet -like Canberra is – at risk of losing what makes them attractive.

Apartments should be made to have the tree canopy part of their roofline. Too many apartment dwellers don’t own any trees.

Daily Digest

Want the best Canberra news delivered daily? Every day we package the most popular Riotact stories and send them straight to your inbox. Sign-up now for trusted local news that will never be behind a paywall.

By submitting your email address you are agreeing to Region Group's terms and conditions and privacy policy.