2015 Housing Affordability Summit

Peter Icklow • CEO The Monarch Investments Group

The Real Reasons Behind Our Housing Affordability Issues

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Peter IcklowThe Monarch Investments Group• Monarch in business for 60 years

• Residential housing developer

• 23% highs to 5% lows

• 50 years personal experience through booms and busts

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Peter IcklowThe Monarch Investments Group

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Peter IcklowThe Monarch Investments Group

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Peter IcklowThe Monarch Investments Group

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Peter IcklowThe Monarch Investments Group• Hands-on 24/7

• Land and housing specialist

• Developed more than 6,000 land and houses

• Offer valuable input to Government

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Supply & Demand

• Supply and demand affect prices and affordability

• Rising population

• Demand NOT reducing

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Supply & Demand

Deaths-1.1m

Natural Increase

+1.1 million

Births+2.2m

Net Interstate Migration-400,000

Net Migration+900,000

Net Overseas Migration

+1.3m

Population Growth2011 – 2031

2.0 million

Source: www.planning.nsw.gov.au

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Supply & Demand

• Artificial measures to reduce demand postpone inevitable issues

• Supply MUST be increased

• Costs MUST be decreased

• Housing affordability issues MUST be addressed

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Main Affordable Housing Issues

• Council & regulatory authority delays

• Delays in the provision of infrastructure & services

• Levies, taxes & GST

• Funding availability for developers & home buyers

• Time is money!

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Council & Regulatory Authority Delays

• Can take years from land release to house construction

• Delays caused by regular changes in regulations increase costs

• Cost savings passed to buyers improving affordability issues

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Council & Regulatory Authority Delays

Approvals Process

Approving AuthorityApproximate Time Frame

Achievable Time Frame

Development Application Council 4 months 6 weeks

Construction Certificates Council 2 months 2 weeks

Subdivision Certificate Council 3 months 2 weeks

Registration of Linen Plan Land Titles Office 2 months 2 weeks

11 months 3 months

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Council & Regulatory Authority Delays

• Generally only one Council approval officer

• Other priorities

• Absences

!!

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Council & Regulatory Authority Delays

• Loss of paperwork

• Approvals not received until months after work completed

• No urgency from authorities

• Buyers ready to move in but delayed by bureacracy

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Council & Regulatory Authority Delays

A Case Study - Edmondson Park (Bardia)

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Council & Regulatory Authority Delays

• Purchased 1992

• Approved for 1,000 lots

• Delays caused by changes in Government

• Further 12 years for subsequent approval

• 20 years to complete Macquarie Links

• Ingleburn Gardens still under development 23 years after purchase

• Proposed 35,000 lots at Menangle Park – completion when?

A Case Study - Edmondson Park (Bardia)

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Council & Regulatory Authority Delays

How can we improve red tape and road blocks?

• Councils to adopt a pro-development mindset

• Ensure adequate staff numbers with delegated authority to approve

• Audit trail of documents within Council to ensure approvals time frames are complied with

• Outsource to private certifiers

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Delays in the Provision of Services

• Sewer

• Water

• Power

• Communications including NBN

• Government should fast track as are essential services for housing

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Levies, Taxes & GST

Based on completed house/land purchase price $650K (land value $300K)

Government stamp duty on land purchase $5,500

Government land tax $6,000

Capital water contribution $4,000

Council rates $3,000

Council levies (including Section 94 & 94A) $32,000

Long service levy $1000

Government 10% GST included in purchase price $59,091

Levies, taxes & GST included in $650K purchase price $110,591 = 17%

Stamp duty on top of $650K purchase price $25,000

TOTAL levies, taxes & GST in total cost $675K $135,591 = 20%

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Levies, Taxes & GST

• Direct tax on new housing NOT existing housing

• Mooted increase up 5% to 15% GST

• Increase of 5% GST increases $650K house to circa $680K

Base House/Land GST Cost to Buyer

10% GST $590,909 $59,091 $650,000

15% GST $590,909 $88,636 $679,545

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Levies, Taxes & GST

How can we reduce costs to make housing more affordable?

• Reduce GST on new housing

• Reduce stamp duty on new houses

• Improve Government budget for less reliance on housing as cash cow

• Councils to reduce developer levies and fees

• Councils to provide more services infrastructure with prompt delivery

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Funding for Developers

• Cyclical nature drives costs up

• Volatility creates planning issues

• Mezzanine lending adds to end cost to buyer

• Consistency driven by Governments

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Funding for Home Buyers

• Buyers rent units whilst saving for house

• Lending rules deterring investors = rental shortage = higher rent

• Consistency driven by Governments

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Funding for Developers & Home Buyers

How to gain consistency in funding?

• Governments to encourage long term lending for responsible development

• Consistent development lending essential part of financial market

• Consistent long term regulatory buyer loan requirements

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Summary of Recommendations

• Industry advisors to Government

• Encourage pro-development mindset in Councils

• Adequate staff with delegated authority to approve

• Outsource to private certifiers

• Audit trail of documents

• Reduce GST on new housing – option to charge lower GST on all housing

• Reduce stamp duty and developer levies on new houses

• Less reliance on new housing as Government cash cow

• Fast track infrastructure services to new release areas

• Encouragement of long term lending for responsible development

• Consistent development lending essential part of financial market

• Consistent long term regulatory buyer loan requirements

2015 Housing Affordability Summit

Peter Icklow • CEO The Monarch Investments Group

The Real Reasons Behind Our Housing Affordability Issues

2015 Housing Affordability Summit

Peter Icklow • CEO The Monarch Investments Group

The Real Reasons Behind Our Housing Affordability Issues

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