07 October 2008
Todays one per cent cut in the Reserve Banks cash rate recognises the precarious state of key parts of the Australian economy, including the property sector, according to the Urban Taskforce.
The Taskforces chief executive, Aaron Gadiel, said the cut follows the release of August figures revealing a seasonally adjusted fall in home approvals – 8.5 per cent in NSW and 7.9 per cent in Victoria.
In the last six months seasonally adjusted home approvals fell by 16 per cent in NSW, 19 per cent in Queensland and 1 per cent in Victoria, Mr Gadiel said.
Property development is the backbone of the Australian economy.
The construction activity made possible by property developers contributes $69 billion to the national economy each year and creates 709,000 direct jobs. Its Australias third largest employer.
But, Australian property development is at a turning point.
The Reserve Bank clearly recognises that the worldwide credit crisis is starting to bite the industry hard.
High interest rates and credit rationing by lenders has made new property development projects almost impossible.
Even projects already in the pipeline are in jeopardy.
Lenders are being very clear to developers right now credit is being rationed and those projects that dont have final planning approval may lose funding.
There is little hope of meeting government employment, housing and growth targets without a strong series of projects coming through the development pipeline.
We need a comprehensive rescue package for the industry if we avoid the loss of crucial development projects.
Mr Gadiel said that local and state governments need to build on the Reserve Bank decision by reducing the risks facing developers. He said this can be achieved by:
- swiftly finalising approvals for important local projects;
- speedily dealing with pending requests for residential and employment rezonings; and
- waiving development levies.
Without government action we face the prospect of losing investment and jobs crucial to the economy in the coming years.
If these projects fall over it will leave a gaping hole in job and housing numbers.
The Urban Taskforce is a property development industry group, representing Australias most prominent property developers and equity financiers.
