The Rudd Government is gambling that doubling the first-home owners grant for established dwellings, and trebling it for new homes, will tilt the playing field back towards new homes. However this $1.5 billion property market kickstart risks reviving the inner city ahead of the outer suburbs, and the renovations business ahead of new home building, The Australian reports.
The Australian says that analysis it has done suggests that “the stimulus package may be overwhelmed by two bigger trends that go beyond the economic cycle”. Firstly, the property market has been pulling tradespeople toward the inner city, where the typical renovation is worth as much, if not more, than a house and land package in the outer suburbs. Secondly, there has been a wider societal shift over the past two decades in which prospective home owners prefer to live as close as possible to the city centre, even if it means buying an apartment instead of a quarter-acre block.
The report goes on to cite the fact that in the late 1980s, houses accounted for about 80 per cent of all new dwelling starts. But the figure fell below 70 per cent in the mid-90s and has bounced just below that level ever since. The latest result for the June quarter was 68.7 per cent for houses and 31.3 per cent for apartments. It also suggests that “as demand rises in the inner city, and falls away in the outer suburbs, the incentive for existing owners to renovate increases”.
The housing and apartment statistics appear to be national figures. The proportion of ‘other dwellings’ as they’re known, or apartments and townhouses has tracked at a bit less than 50 per cent in NSW for a number of years. There are a variety of factors driving this including the changing demographics - rise of single person households, aging of the population - land release shortages, and a focus on intensifying density to make better use of transport and other infrastructure.
So yes, I think it’s true that there’s been an increase in demand for inner city properties but for more complex reasons than The Australian suggests. In addition, I also think that the “first trend” is actually a related effect of the first. That is, as demand for inner city properties rises, and because much of this housing stock is either aged, deteriorating and in many cases poorly designed, then of course renovation activity will be high in these areas. And if renovation demand rises then again so will demand for tradespeople.
So if it’s true that demand for inner city properties is already reasonably strong, that renovation activity in these areas will continue to occur because of the state of the current stock (and in fact statistics also show that renovation acivity has been steadily growing for the last decade at least and has been remarkably cyclically immune), how is the statement “the $1.5 billion kickstart risks reviving the renovations business ahead of new home building” a reasonable and supported conclusion? I agree Rudd may be attempting to tilt the field back to new homes, but a more accurate (although sadly not as provocative) conclusion would have been to say: “but are these measures enough to combat current building trends?
{ 0 comments… add one now }