Senate Economics References Committee on Financial Regulatory Framework and Home Ownership

Event: Senate Economics References Committee on Financial Regulatory Framework & Home Ownership
Date: 16 October 2024, 10:10am AEDT
Speakers: Alex Waldren, National Director Industry Policy, Master Builders Australia
Topics: Financial Regulatory Framework; housing supply; taxation

E&OE

Alex Waldren, National Director Industry Policy, Master Builders Australia: Thank you. Ongoing supply and affordability challenges are limiting housing tenure options and pushing more Australians into rental dwellings and social housing, as we know, and this is unsustainable. A balanced approach to investment in all parts of the housing market is necessary to unlock housing supply, an environment that enables all forms of investment, whether they be private, institutional or public, is needed in the Australian context to sustain the unmet need and future demand for housing.
To understand the financing market, it’s necessary to outline the environment underpinning our housing system here in Australia, and the National Housing Supply and Affordability Council has identified this in its State of the Housing System report that it recently released, and that is that 96 per cent of housing is market traded, and four per cent is supplied by public and quasi-public sector markets.

The private market is underpinned by a legal and regulatory system that promotes strong property rights, which is largely financed by Australia’s major banks, and government intervention has privatised markets over government allocation of resources historically.

The ability to deliver more housing is constrained by productivity and other barriers, and in our view, or the Master Builders’ view, are the key areas for reform. We’ve said a lot about this over the last few years, and in this response to the seven inquiry questions, our observation, we outlay observations, about the Australian situation and make some recommendations.

The key points in our submission are that we think that lending and borrowing provisions that are central to the fate of home building would benefit from a review, like HIA has suggested. Investment generally slows when mortgage and interest rates exceed rates of return, and financing is often overlooked when addressing demand and supply shortfalls.

Existing housing supply measures are needed to address ongoing shortages and future demand. Scalability is crucial, with a combination of housing availability and productivity, it is key to success.
The government’s investment in housing, while having a positive impact on supply in its own right, will be neutralised by barriers such as prolonged labour shortages, persistence of materials, price growth and industrial measures.

Cost escalation is occurring in social housing projects and becoming more prevalent across the country, and we’ve given an example of that in our submission. New approaches to government investment and housing need to be tested, but will be important for cost escalation to be monitored to better understand the cause of such increases. And we’ve said that in numerous submissions around the Housing Australia Future Fund consultation processes, housing is one of the most heavily taxed sectors of the economy, with taxes on property making up 50 per cent of state and territory and local government revenue, adding more tax at the federal level, with changes to negative gearing and capital gains tax concessions will simply add to the tax burden and reduce housing supply. We’ve analysed that in the past, and we’re doing more work around that at the moment.

The Henry Tax Review identified that it would be premature to unsettle existing taxation arrangements before concrete actions are taken to address housing affordability and supply. To this end, we congratulate the government on its national planning reform blueprint and getting on with that and we continue to argue for the focus of reform to be in that space.

Understanding the residential housing market would be enhanced by additional data collection. We’ve said this on numerous occasions as well, and our submission links provide an outline of a few of them, such as including monthly lending data into SA2 or local government areas. First home, including first home buyer loans used in the purchase of new or established dwellings, getting some data on that. Getting more data on, nationally consistent data, on land transactions and stock and the delivery of the pipeline. More data on the performance of LGA processing times for building and development approvals. More data on detailed geographic and housing stock tenure for owner occupier, rented and other market segments.

So that’s just a brief overview of what’s in our submission. Thanks.

Media contact:
Dee Zegarac
National Director Media & Public Affairs
0400 493 071
dee.zegarac@masterbuilders.com.au