02 March 2010
Todays Reserve Bank interest rate rise by 25 basis points, to 4 per cent, will further damage chances of getting more housing developed, according to the Urban Taskforce.
Even when the governments massive public housing program is included new home approvals across Australia still fell by a seasonally adjusted 7 per cent in January, Mr Gadiel said.
Private developed apartments and townhouses plummeted by 29 per cent moderating to a 19 per cent fall when public housing approvals are factored in.
The Reserve Bank Governor, Glenn Steven, when announcing the interest rate increase observed that dwelling prices have risen significantly over the past year.
Mr Gadiel said that home prices were rising because the Australian housing market was undersupplied to the tune of 200,000 homes.
Interest rates are being used to cope with home price inflation caused by a housing supply crisis.
While the origins of this crisis lie in restrictive state planning laws and levies, the Reserve Banks action will only make the situation worse.
We are in the midst of a major development crisis.
State planning laws are still preventing vital urban development projects from taking place.
Developers still have great difficulty in securing bank finance for their projects.
Mr Gadiel said that any increase in interest rates boosted the holding costs faced by developers.
This increase means there is a wider gap between a developers interest bill when holding land and the escalation the lands value.
It will reduce the viability of development across Australia.
The Reserve Bank has been highlighting housing supply constraints as a macroeconomic risk, while recent interest rate rises make boosting the housing supply even more difficult.
The Urban Taskforce is a property development industry group, representing Australias most prominent property developers and equity financiers.
For every $1 million in construction expenditure, 27 jobs are created throughout the broader economy.
The construction activity made possible by property developers contributes $78 billion to the national economy each year and creates 849,000 direct jobs.
