PCA chief executive Ken Morrison explains why supply is the real culprit when it comes to housing affordability, and how initiatives like Build to Rent and resurrecting the National Housing Supply Council could help alleviate the problem.
What are the biggest challenges for the property sector in 2018?
The challenge for our industry – like almost every other industry – is to again communicate the value we add to the economy and to communities around Australia.
We have seen what has happened with the banks and there is a lesson about engaging with the public about the industry and its benefits to communities and the economy.
It’s strange that commentators don’t understand that the financial success of this industry is a direct correlation to the value we create – so we want thriving communities where people enjoy living and being there, we want business parks that attract the world’s best companies, we want retirement villages that residents recommend to their friends, we want precincts that have an energy and a buzz around them, and we want commutes that are shorter and cities that are more productive.
There is an old saying – a rising tide lifts all boats – and our job is to create that tide of jobs and prosperity for all.
It has been suggested that in fact, we have an over-supply of housing and it’s not supply that is a problem but rather inefficient use. What are your thoughts?
I disagree. The primary challenge before Australia is increasing supply because Australia’s population is growing all the time. The population trajectory in our cities is only heading one way. We must plan for growth rather than be ‘growth deniers’.
Of course, there will be times when large numbers of apartments enter the market in pockets. But they are digested by the market in time as the population grows.
More people means more housing, and when we get this wrong, it puts incredible pressure on house prices.
We have consistently called for the re-establishment of the National Housing Supply Council because that will provide data on under and over supply – and will provide the market more information.
What are some ways developers could become more sustainable?
First, Australia has a good story in this space, but that doesn’t mean there isn’t room for improvement. There is.
In the Global ESG benchmark for real estate assets, Australia and New Zealand continue to lead the world. Our biggest companies have proven that energy efficiency, emissions reduction, diversity, inclusion and health and wellness can be integral parts of property management.
We have already seen the top performers cut their emissions intensity by over 40 percent in the last decade and have set net zero emissions targets for their portfolios by 2040, so the leaders are getting on with it.
We are seeing leaders in the sector are investing in innovative building materials and high performance façades but that is not universal for the sector. Many only deliver to the minimum standards required in the National Construction Code.
There is still work to do in explaining the benefits of more efficient façades, as well as improved air tightness. Fundamentally sustainability needs to be seen as a stronger part of the housing quality equation, and that’s a consumer sentiment shift that’s got a long way to go.
What are some of the things that state and federal governments should be doing to keep the construction industry growing?
Government’s job is to create the right settings, so this can deliver what the country needs from it.
When this industry is freed up to do what it does best – it delivers jobs, investment, growth, stronger communities and housing that you can afford.
The first place where we can start is to have two serious debates. The first is in relation to productivity. The Productivity Commission says they believe there is $29 billion in lost productivity in our cities. Better cities policy, infrastructure, planning and tax policies could unleash tens of billions in economic benefits.
Second, housing affordability remains a structural issue, even though we’ve seen some of the heat come off in recent months. We need the right planning, the right infrastructure, less costs on the production of new housing, and support for new rental housing options like Build to Rent. Plus, we’ve got to get off this slippery slope of increasing foreign investor taxes. The reality is foreign investment is investing in new supply which takes pressure off property prices.
What are your opinions on ideas like Build to Rent schemes - do they work, and should they be implemented in Australia?
Yes. Build to Rent is a potential new asset class that can dramatically expand the housing options available to Australians. We have seen overseas this asset class provide greater security of tenure, provide significant new supply and make a very positive contribution to the market.
It works incredibly well in the US, Japan, UK, Germany and other places around the world.
The federal government raised a roadblock to Build to Rent late this year and we continue to put the case to them about the benefits of Build to Rent for the economy, housing affordability and in meeting the needs of renters.