Urban Taskforce CEO, Tom Forrest, today welcomed the research paper released by the Reserve Bank of Australia (RBA) entitled: “The Apartment Shortage”, that identified the additional costs created by the NSW planning system and the resultant shortages in supply of apartments that are driving up the price of apartments particularly in inner Sydney.
“Keaton Jenner and Peter Tulip of the RBA have published an independent assessment of development costs across eastern seaboard cities. The RBA found that the excessive planning restrictions associated with delivering apartments in inner Sydney were disproportionately high”, Mr Forrest said.
“The RBA has independently compared the planning regulation cost of bringing a new home to completion in NSW with other jurisdictions. The findings highlight the need for significant reform to planning regulation in NSW”.
The Apartment Shortage Report found home buyers will pay an average of $873,000 for a new apartment in Sydney, even though it only costs $519,000 to supply, a gap of $355,000 (68 per cent of costs). This compares with smaller gaps of $97,000 (20 per cent of costs) in Melbourne and only $10,000 (2 per cent of costs) in Brisbane.
Significantly, the report concluded that the gap between the supply cost and the delivery to market cost was sustained by planning restrictions and planning risk. The additional costs are due to the excessive time taken to obtain approvals in the NSW planning system and the high degree of risk associated with approvals, despite the strong demand for new apartments.
“Given the economic shock created by COVID-19, the RBA’s independent confirmation of the excessive costs associated with the NSW planning system presents an opportunity for the NSW Government to cut housing prices by approving more supply and allowing for more height”, Mr Forrest said.
The Urban Taskforce is on record saying the NSW Government has responded well to COVID-19 with new fast-tracked assessment programs and the new Planning Delivery unit. However, the fact remains that the planning system had slowed the planning approval process even before COVID-19 hit. Planning approvals, particularly for apartments, have now fallen off a cliff. It is important to remember that almost 70% of all new dwellings build in Sydney are apartments.
“This important piece of independent research cannot be ignored by policy makers in NSW”, Mr Forrest said.