Affordable housing is the most important thing for future growth, says Jeremy Tauri.
Affordable housing is the most important thing for future growth, says Jeremy Tauri.
There's no getting away from it: building a house is a seriously expensive process. But I've been wondering whether we're making it more expensive than it needs to be and are driving up the cost of existing houses while we are at it.
Statistics made public last week show theconstruction industry is booming -- more than $15 billion of work took place last year, up 17 per cent on 2013.
But it's likely most of this work wasn't really where it was most needed. The houses that are most commonly built are big, expensive places that sell for close to $1 million.
Property developers say it doesn't really pay to build cheap homes because once you go through the consenting process and try to find people to build it in such a busy construction market, you might as well go all out and build something someone will pay top dollar for.
Some have complained that they're waiting more than a year to get consents signed, at a cost of millions of dollars for bigger projects.
Measures are meant to be being taken to address this. There are special housing areas in Auckland where the process is streamlined, but even there we're not seeing much actual construction happening.
The Government is looking at this through its Resource Management Act (RMA) reforms, which will explicitly recognise the need for affordable housing. A report commissioned by the Treasury said the RMA as it stands was adding $30,000 to the cost of the average apartment and $15,000 to the cost of the average home.
Another issue worth addressing is that of tax. Buy a second-hand house and, in almost all cases, you won't pay tax. But when you buy a new one you have to pay an extra 15 per cent in GST. This immediately adds a considerable amount to the buyer's mortgage and pushes up the prices of existing homes around it. If you buy a new $600,000 house you pay $90,000 just in GST.
Property commentator Olly Newland has suggested first-home buyers get a rebate for the GST they pay on new builds, and that is something we can't afford not to explore further. If we're serious about more affordable housing we need to start taking some real action. With migration booming, house prices will continue to be an issue until supply is sorted out. Houses need to be built and it's in everyone's interests for families to be able to afford good, healthy homes to live in.
Jeremy Tauri is an associate at Plus Chartered Accountants.
