Crunch time for Australia’s apartment construction is a wake up call for governments
The Property Council of Australia is calling for coordinated state government efforts to reduce international investor surcharges, stimulate apartment construction and improve planning to avoid a looming apartment supply crunch across Australia’s largest housing markets.
Analysis from Urbis, commissioned by the Property Council, highlights that by 2024 apartment supply will be at crisis levels, across Australia’s three largest markets with construction only 20 per cent of 2018 levels. The overlay of governments’ actions over time has led to a reduction in investment that predates the closure of international borders.
Construction jobs at risk
Property Council Chief Executive, Ken Morrison, said that the reduction in building activity would see the loss of 30,000 construction jobs across Melbourne, Sydney, Brisbane and Perth in the next few years.
“Apartment construction is a critical component of Australia’s future housing supply and a vital job-creator for our economy,” Mr Morrison said.
“While approval numbers are increasing, they mask a decline in construction activity that will lead us to a severe structural undersupply by 2024.”
“Without changes in policy, our apartment building industry will shed 30,000 direct jobs and produce $5.9bn less in housing assets over the next four years.”
2024 supply crunch needs government action this year
Welcome stimulus in the detached housing sector, such as HomeBuilder, and modest apartment stimulus efforts by some state governments have not moved the dial for apartments and surcharges on international investment remain a major handbrake for many potential projects.
“Over recent years we’ve seen a proliferation of new taxes and regulations across Australia that have been a handbrake on investment and directly impacted our levels of apartment supply,” Mr Morrison said.
The Property Council report outlines actions for government to take to avert job losses in the apartment sector, including:
- Providing relief from foreign buyer surcharges.
- Accelerating planning approvals.
- Extending off-the-plan apartment stamp duty concessions.
- Removing land tax barriers to build to rent projects, and
- Abandoning Victoria’s new “Windfall Gains Tax.”
Mr Morrison said that with 3 to 5 years between project inception and completion it was imperative that governments act now to boost apartment investment and avoid a supply crunch in 2024.
“This is a wake up call for governments as our biggest apartment markets will welcome growing numbers of people once COVIDsafe immigration inevitably returns.
“Governments can unlock a wave of new investment by removing recent property tax hikes and overseas investor surcharges,” Mr Morrison said.
“International buyers and build to rent investors will be key to the next generation of projects and further opportunities exist to encourage these investors through planning system improvements and stamp duty relief.”
Without government action to boost apartment supply, the Property Council is warning of significant apartment price and rent increases across Australia’s major cities.