RBA and government moves welcome: But more will be required

03 February 2009

Property developers today welcomed the co-ordinated action from the Federal Government and the Reserve Bank to try and avoid an Australia-wide recession.

The Urban Taskforces chief executive, Aaron Gadiel, said that the one per cent cut in the Reserve Banks cash rate, together with the $42 billion fiscal stimulus, would boost business confidence.


The key to any economic recovery is the construction sector, Mr Gadiel said.


Any effort to kick start the large-scale development of new homes should be welcomed by the community.


However, its important that the Federal Governments scheme to build 20,000 social housing dwellings supports, and does not displace, private enterprise.


The scheme will work best if the private sector leads the development of new social housing properties.


A scheme that relies on bureaucrats to plan the development of new social housing dwellings could lead to the de-skilling of our property industry.


The long-term future of housing supply will require a strong private sector capable of being entrepreneurial and innovative.


The private sector can deliver the sort of high quality housing that the community is crying out for, and avoid the mistakes of previous social housing schemes.


Thats why we welcome the announcement that at least some dwellings will be ˜spot purchased by the government in the open market.


The purchase of homes newly-developed by the private sector should be the primary means of securing these 20,000 homes.


This will avoid creation of new ghettos of social disadvantage.


Mr Gadiel said the construction sector has been jeopardised by evaporation of business credit.


Lenders are telling property developers they will not renew loans for projects with uncertain planning approvals, he said.


When they do lend, the margin taken by the banks has tripled two and a half per cent above the cash rate, when it used to be as low as 0.8 per cent.


Previously, development projects were financed with a loan amount of up to 75 per cent of a propertys value – now this has been cut to around 50 per cent.


The Federal Government should consider extending its recently-announced Australian Business Investment Partnership to include debt-funding of new large scale house and apartment projects.


Mr Gadiel said the Federal Government should also move as quickly as possible to extend the $21,000 grant to first home buyers for new homes.


The grant was announced in October last year as part of the first economic security package and is due to end on June 30.


Between October and November last year, the number of new houses purchased by first-home buyers shot-up by almost 10 per cent, Mr Gadiel said.


Mr Gadiel said the increase in first home buyers had been the main good news in an otherwise grim picture for the industry.


In the three months to September 2008, construction work started on 5,997 new homes in NSW a 26 per cent fall on the equivalent 2007 figure. This is 44 per cent below the average figure recorded for this quarter back to 1984.


On a seasonally adjusted basis, new NSW home construction fell 27 per cent in comparison with the June quarter. Queensland also saw a fall in new home construction in seasonally adjusted terms declining by 23 per cent in comparison with the previous quarter.


Developer-driven building activity has been the hardest hit, Mr Gadiel said.


NSW apartment and town house construction has nearly been cut in half when compared with the same period last year.


Mr Gadiel said the building approval figures were even more significant because they indicated the likely level of construction activity within 6-12 months.


Home approvals for September to November 2008 were 47 per cent below the average historical level of new home approvals for that time of the year.


In the same period, Queensland recorded 22 per cent less home approvals than its average.


The Urban Taskforce is a property development industry group, representing Australias most prominent property developers and equity financiers.



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