Dwelling infrastructure levies mean demand for new housing is at generational lows; 40% of the price of a new home attributed to taxes, fees, charges, levies and regulatory compliance costs
Tweet Topic Started: 23 Jul 2013, 11:39 AM (2,721 Views)
It does help to create a floor to some degree. In some cases, NG can increase the price of new property. If an apartment complex is built in a desirable location then the prospect of claiming depreciation and using negative gearing will influence the decision of an investor to buy a new apartment. The extra competition with other buyers will enable the developer to make a fatter margin than he otherwise would. If demand is high there is nothing to stop developers from making larger profits and in these cases the selling price is much higher than the cost of production.
Competition prevents fat margins. Instead we get more supply.
But that is not our issue right now. Our issue is supply is too low because demand and prices are too low. Removing NG will only make matters worse from a supply perspective.
Catweasel
23 Jul 2013, 01:46 PM
Catweasel say strange.
Government the costs; developer the costs; inefficiency of thousand the bureaucrats; land the extreme price was a massive in a Japan.
Costs not the remove.
But still biggest pop-pop in a history.
Funny the thing,
Many the years after pop-pop,
all a cost the go down and Japan construction now a one of most efficient in world.
It show mouse what change of perceive and behave can do.
source?
Elastic
23 Jul 2013, 01:54 PM
Catweasel
23 Jul 2013, 01:46 PM
Catweasel say strange.
Government the costs; developer the costs; inefficiency of thousand the bureaucrats; land the extreme price was a massive in a Japan.
Costs not the remove.
But still biggest pop-pop in a history.
Funny the thing,
Many the years after pop-pop,
all a cost the go down and Japan construction now a one of most efficient in world.
It show mouse what change of perceive and behave can do.
Exactly Cat. The cost of production isn't as rigid as we might think.
I don't think anyone is suggesting it is rigid. In fact, I think the artcile is very clear that the cost of devlivering new housing could fall by 30-40% very quickly if we had the political will.
The supply of new housing in Melbourne seems to be adequate. There is an abundance of apartments in the inner city and housing on the outskirts. Demand seems reasonable but if the price of the inner city apartments was halved then there would be much greater demand for them. That is why I don't fully understand your assertion that demand is low because prices are too low. Higher prices may lead to more developers being able to make a profit on marginal developments thereby increasing supply.
The supply of new housing in Melbourne seems to be adequate. There is an abundance of apartments in the inner city and housing on the outskirts. Demand seems reasonable but if the price of the inner city apartments was halved then there would be much greater demand for them.
There is no doubt in my mind prices are > cost for most of Melbourne. That is why there was a supply response in 2010-2012
Quote:
That is why I don't fully understand your assertion that demand is low because prices are too low.
That was not my assertion. I said supply was low (in most markets, mainly Sydney) because prices/demand is too low. If we want more supply, we need either - higher prices (which is what the RBA wants), or - lower cost of production (which is what the article is suggesting).
Quote:
Higher prices may lead to more developers being able to make a profit on marginal developments thereby increasing supply.
Yes. So long as prices are higher than cost. We are not at that point yet for many markets (but I accept your point on Melbourne - I would also say the same for Perth).
There is no doubt in my mind prices are > cost for most of Melbourne. That is why there was a supply response in 2010-2012
That was not my assertion. I said supply was low (in most markets, mainly Sydney) because prices/demand is too low. If we want more supply, we need either - higher prices (which is what the RBA wants), or - lower cost of production (which is what the article is suggesting).
Yes. So long as prices are higher than cost. We are not at that point yet for many markets (but I accept your point on Melbourne - I would also say the same for Perth).
The cost of land is the main component of most inner city property in a place like Sydney or Melbourne. Is it the increasing cost of land relative to the construction which makes infill development more profitable for developers?
There is no doubt in my mind prices are > cost for most of Melbourne. That is why there was a supply response in 2010-2012
That was not my assertion. I said supply was low (in most markets, mainly Sydney) because prices/demand is too low. If we want more supply, we need either - higher prices (which is what the RBA wants), or - lower cost of production (which is what the article is suggesting).
Yes. So long as prices are higher than cost. We are not at that point yet for many markets (but I accept your point on Melbourne - I would also say the same for Perth).
The cost of land is the main component of most inner city property in a place like Sydney or Melbourne. Is it the increasing cost of land relative to the construction which makes infill development more profitable for developers?
There are two different businesses in residential development.
The "Estates" Business (think Delfin / Stockland), supply's new land or house/land stock on the fringe of major cities. Raw land costs almost nothing in the scheme of things ($20-$50 per sqm). After all of the development costs (Power, roads & gutters, sewage, roads, etc), and after government charges, land costs get up to $300-$500 per sqm before allowance for return on cost (ie: Margin). Since land is the item for sale, the higher the land price the better the margin.
The "Development" Business (think Mirvac, Australand etc), buys the serviced land knowing the fringe land costs $300-$500 per sqm. Land is an imput cost for a medium / high desnity development, so the higher the land price, the tighter the margins.
With a declining population you don't need a supply response as each year you already have too many properties.
Catweasel say yes.
That the narrative.
That not around in a 89.
But Western expert somehow also not the see.
But now mouse can nod head in agreement.
Because it know.
Now.
What it not know in a 1989.
Seem a strange that expert cannot the model a future demographic a 30 years ago.
And how pot-belly mouse in suburb is now a wise to a future.
b_b
23 Jul 2013, 01:55 PM
Competition prevents fat margins. Instead we get more supply.
But that is not our issue right now. Our issue is supply is too low because demand and prices are too low. Removing NG will only make matters worse from a supply perspective. source? I don't think anyone is suggesting it is rigid. In fact, I think the artcile is very clear that the cost of devlivering new housing could fall by 30-40% very quickly if we had the political will.
Chin scratch has very relevant remedy that appeal to a all.
More belief than remedy.
That master that can coordinate as it the please.
To garner support from and grant freedom to a mouse.
It the never-end battle for skull of mouse.
It not the end.
If master cannot re-configure like game board.
But master sometimes face its own internal dilemna.
For which it have little the control.
Army of public sector.
Have to eat too.
And its psychological ethos.
Well explored by a John Raulston the Saul in a Voltaire's Bastards.
It does help to create a floor to some degree. In some cases, NG can increase the price of new property. If an apartment complex is built in a desirable location then the prospect of claiming depreciation and using negative gearing will influence the decision of an investor to buy a new apartment.
If NG+Depreciation can bring the bizcase to buy so it stacks up at or above the cost of building, it could increase the market value of new property and possibly even improve the bizcase for building property.
But at the moment it doesn't (and in Brisbane at least it has been a very long time since it has). You just can't get enough rent to make it worthwhile buying a new property to rent out, so investor incentives would be having minimal impact on the new home market.
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