Can Do Newman needs to undo bad policy

By Michael Matusik, 10th May 2012

The Queensland Building Boost began under the previous State Government last August, with the usual fireworks and rockets, and a promise of help for the housing industry.  Oh…..that is way too tame; it was really a political wedge to shut-up the development industry.  And it worked a treat.

The $10,000 grant was promoted as a panacea that would lift demand and help get more new development under way.  Too many believed that would be the case, with some – even in the development industry – calling for the boost to be extended.  And it was.

To facilitate the anticipated building blitz, the then government set aside $140 million to fund the boost. That’s help for up to 14,000 housing starts across the state.

But as we have constantly reiterated, building grants and the like are not always the answer.  Often, as with the First Home Owners Grant, they can be inflationary and/or fail to provide the promised outcome.

The boost finished at the end of April and unfortunately, along the way, housing starts in Queensland had dropped.

In fact, the latest ABS building approval figures, out this Monday, show that Queensland dwelling starts totalled just 26,515 for the year ending March, compared to 29,210 new housing commencements for the 12 months to March 2011.  So we got 10% fewer houses built across Queensland, despite the boost.

While Queensland saw a flurry of applications as the boost drew to a close, the number of dwelling starts was disappointing, to say the least.

As at 19 April – the latest figures we can get – only 8,929 building boost applications had been received by the Queensland Government, and 6,367 approved.  That’s just $64 million worth of grants out of the $140 million allocated.

So what can be done?

Well, dropping interest rates isn’t the answer.  I wouldn’t be surprised if Christmas crackers featured a new lame joke this year.  Q: “How many interest rate drops does it take to stimulate the housing market?”  A: “More than you have available.”  Okay, I won’t give up my day job!

It will also take much more than dropping the sustainability declaration form and reinstating the stamp duty rebate on second-hand Queensland property purchases to get things moving again.

In fact, we have argued that what Queensland should do to help nudge new housing starts is to remove stamp duty off new sales and keep the existing taxes on established property as they exist today.  However, this would involve breaking an election promise and Queensland maybe isn’t in a budget position to do this yet.  But it will need doing – the sooner the better –  and hopefully before the LNP’s second term.

So what else can be done in the meantime?

The first bit of property-related legislation that should be ripped up is the Property Agents and Motor Dealers Act.  The whole concept of PAMDA was flawed from the start.  Twelve years have now passed since it was introduced and it needs immediate repeal.  In today’s internet world, it is an archaic piece of legislation.

In particular, and if nothing else is done during the LNP’s first term, please burn Form 27c, which requires all real estate agents in Queensland to list how much they charge for commissions.  Valuers, on instructions from the mortgage insurers and banks, are deducting the amount the agent is paid in excess of the standard Queensland sale fee of 2.5%.  The 27c is a product of the Gold Coast fly in and fly out marketing of 25-plus years ago.  It only applies to Queensland and, as we argued late last year, the distribution of costs should have no bearing on the end value of a product.

PAMDA, and especially Form 27c, are deterrents to investment in Queensland.  If the State Government really wants to regulate real estate and development, then all parties involved in the property industry – architects, planners, builders, lawyers, quantity surveyors etc. –  should be subject to disclosing their costs.

The state has no right to dictate a maximum selling fee on property, just like they have no right to dictate what a lawyer or architect charges for service.

The second thing that needs be done is reinstating State Government subsidies to local government for municipal infrastructure. Queensland’s mining industry started 40-odd years ago; it isn’t a recent occurrence.  The wealth created from such activity used to be redistributed via infrastructure subsidies. This made residential development relatively cheap – well, cheaper than interstate. This was a key competitive advantage for Queensland.

In short, cheaper new housing encouraged interstate migration to Queensland.  It created employment and wealth, too, and was all based on subsidised municipal infrastructure.

In order to close a budget gap, Queensland Labor stopped these subsidies. This made the price of new development land very expensive as it bore the full cost of infrastructure associated with it (and often beyond!). Council charges on land rose dramatically too. This, more than anything, is killing new residential development in Queensland.  It will remain dead unless infrastructure charges are again subsidised.

The third thing that needs doing – and for mine is why Queensland lost its AAA rating and had so many “budget gaps” – is to cut the waste. The LNP needs to remove “zombie projects”.  A commissioned audit needs to occur, but in essence many of the things that were started in the lead-up to the past state election, because “they were a really good idea at the time” (i.e. they bought votes), need to be canned.

The zombie list should include regional plans; state-based planning operatives and many of Queensland’s building/planning laws.  Why, for example, can a granny flat in New South Wales be rented out to anyone, but in Queensland it must be occupied by a direct dependant?  Oh, I could create a list as long as your arm when it comes to irrelevant Queensland property-related legislation.

So in short, Cando needs to change to Undo. 

In order to get things going, Premier Newman needs to undo quite a lot of things.

Michael Matusik

Michael Matusik is a leader in residential market analysis and property advice in Australia.

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