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Housing Affordability

Summit 2015

Peter Summers

Managing Director & CEO

AVJennings Limited

Finding rational

reform in an

irrational debate

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Introduction

Housing Affordability

The issue of affordability is of critical importance

• The impact from getting it right or wrong can be significant

Personal impacts

• Purchasing a home is the most significant decision most people make

• Not just buying

• Choosing where to live is a huge decision

Social and economic impacts

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Introduction

Housing Affordability

The focus on affordability is timely and welcomed

• But it has been going on for some time

The gap between debate and reform

• Not just about identifying issues but outcomes

Can’t possibly expect great outcomes if not driven by genuine and informed debate

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Understanding the issue

Housing Affordability

Land Supply

Inclusionary Zoning & Policies

Various Tax Structures

Ownership and Renting

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Housing Affordability

Debate needs to start with an understanding of the issue

Is this happening?

• Apples v Oranges issue

• The role and impact of the Media

• The role and impact of Government

• Does the customer have a say?

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Understanding the issue - comparing apples & oranges

Housing Affordability

Finance

• Interest rates 5-6%

• Bank rules

Costs of Regulation & Innovation

• Has added a lot to the initial cost of a home but ongoing costs are lower

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Understanding the issue - comparing apples & oranges

Housing Affordability

The impact of a user pays system

Generational differences

•The way we live, work and play

•Why the focus on the distance to the city?

Specifications and Inclusions

•More house and furnishings included in today’s homes and projects

•Extends to other things like water tanks, underground power, etc.

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Media

Housing Affordability

A two edged sword

• Gets it on the agenda – particularly with government

• But the impact of style of reporting can be damaging

Consumer confidence – critical

It is important for the Media to understand cycles

Media tend to focus on one point in the cycle without providing broader context

The use of averages, over-simplification or selective sources distorts true picture

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Media

Housing Affordability

“So when you're devising that economic policy for the country, yes

I'm very concerned about Sydney and I think some of what's

happening is crazy, but we've got a national focus as well and that

just increases the complexity.”

- Reserve Bank Governor, Glenn Stevens

- Brisbane, Wednesday June 10, 2015

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Media

That was reported as ‘house prices crazy’

Housing Affordability

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Media

Housing Affordability

Sydney Morning Herald

October 13, 2015

Three days later…

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Media

Housing Affordability

Sydney Morning Herald

October 16, 2015

“You will see in Sydney and Melbourne high single

digit rates of growth as being quite plausible given

the fundamental drivers of what are pushing those

prices up.”

- Andrew Thorburn, National Australia Bank CEO

“We don’t agree with the people at the extreme who

say there’s a big bubble that’s about to burst.”

- Brian Hartzer, Westpac CEO

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Media

Housing Affordability

Media tend to focus on one point in

the cycle rather than take the cycle

as a whole and report where we are

in the cycle.

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Media

Housing Affordability

Media tend to focus on one point in

the cycle rather than take the cycle

as a whole and report where we

are in the cycle.

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Government

Housing Affordability

Layers

• Federal

• State

• Councils

• Where does ownership and responsibility lie?

• Do roles match ownership and responsibility and is there adequate accountability?

The cost and time of uncertainty

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Government

Housing Affordability

Tax

• Federal Government collects $21.48 billion in property related taxes

• State Governments are expected to collect $29.96 billion in 2015/16

• Local Government collects approximately $23.21 billion in fees and charges

The rental market

• Current government strategies

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Does the customer have a voice?

Housing Affordability

Shift to a user pays system

Will reform consider what buyers want?

Is affordability the main or secondary aim?

• Policies around densification can be questioned

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Will we get reform?

Housing Affordability

Will we get unified goals?

• Reform must be aimed at unified goals

Can the tax reform debate be won?

• Rare chance in history

Positive signs

• Words precede action and at least there’s been some encouraging discussion

• Supply rather than demand focus (understanding we have a housing shortage)

• Discussions about affordability

• Tax debate

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Will we get reform?

Housing Affordability

Reform won’t be achieved if dominated by self interest

• Involves people from many different sectors

• Public

• Three levels of government

• Developers

• Suppliers

• Customers (FHBs, Families, Downsizers, Investors, Renters)

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Affordability

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1,000,616

668,030

490,855 479,285

703,000

342,633

390,412 386,417

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

1,100,000

Sydney Melbourne Brisbane Adelaide

House Prices $12 months to June 2015

Overall AVJennings

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Housing MattersCommunity Matters

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