Two complaints you often hear in the media are that the economy isn’t performing as strongly as it could and that housing has become unaffordable.
Well, an increase in residential construction would reduce both these problems.
That’s why governments and regulators should make it easier for developers to build housing estates and apartment blocks.
Right now, it’s too hard for projects to get approved.
This was a concern even before the coronavirus crisis, but it’s especially relevant now given that our economy needs all the support it can get.
Fewer obstacles would mean more housing
Governments should reduce red tape for developers, so it’s easier for them to bring new projects to market.
Regulators should also ease borrowing rules so it’s easier for them to finance new projects.
Please be clear – I’m not proposing a free-for-all. Building and borrowing still needs to be regulated. What I’m proposing is that the approval process should be faster and simpler.
The housing pipeline is getting thinner
The latest building approvals data from the ABS highlights the residential construction problem.
The number of approvals in January 2020 was 11.3% lower than the year before. That included falls of 8.8% for houses and 15.2% for units.
Looking on a state-by-state basis, we can see that four states recorded annual declines in housing approvals while two posted modest gains:
● Western Australia = down 27.6%
● New South Wales = down 27.0%
● Tasmania = down 20.1%
● South Australia = down 4.0%
● Victoria = up 0.5%
● Queensland = up 1.6%
Once a council gives approval for a home or development to be built, it might take two or three years to actually happen. So what the ABS data shows is that the number of new homes in the pipeline is lower now than the year before.
Australia needs more housing
The Housing Industry Association, which represents Australia’s home building industry, recently unveiled some concerning forecasts.
Between 2014 to 2018, developers started work on about 105,000 new multi-unit homes per year. Compare that to the HIA forecast for the next three years:
● 75,750 in 2020/21
● 77,390 in 2021/22
● 80,980 in 2022/23
Let’s make life easier for developers
That’s why I’m calling for governments and regulators to make life easier for developers, especially in light of the coronavirus-induced downturn.
Make it easier for developers to get projects approved. Make it easier for developers to get projects financed.
More development means downward pressure on property prices. It also means more jobs, not just for the construction industry but also suppliers in other industries.
Build, baby, build.