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Standing Committee on Tax and Revenue
26/11/2021
Housing affordability and supply in Australia

HELMERS, Mr Andrew, Managing Director, MJH Group [by video link]

LAVARING, Mr Brett, Head of Corporate Affairs, MJH Group [by video link]

LONG, Mr Toby, General Manager, Residential Development NSW, Mirvac [by video link]

RHYDDERCH, Mr Richard, General Manager, New South Wales, Stockland [by video link]

WARNER, Mr Leigh, Senior Director, Research, Jones, Lang LaSalle [by video link]

Committee met at 13 : 15

CHAIR ( Mr Falinski ): I declare open this public hearing of the House Standing Committee on Tax and Revenue for the inquiry into housing affordability and supply in Australia. In accordance with the committee's resolution of 25 July 2019 the audio of this hearing will be broadcast on the parliamentary website and the proof and official transcripts of the proceedings will be published on the parliament's website.

Ladies and gentlemen, the arrangement for this panel will be pretty simple. It will end at 2.15 on the dot. I am going to allow each of you five minutes for an introductory statement. I will cut you off at five minutes. If you want to give less than a five-minute opening statement, that would be gratefully welcomed. I have a series of questions that have been given to me by Cameron Murray, which I will be asking you. The shorter the answer you can give, the more grateful the chair will be. Then I will open it to other committee members, alternating between parties, and that will end at 2.15, even if you're in the middle of an answer or someone is in the middle of asking a question.

I welcome the witnesses to give evidence today. This hearing is a legal proceeding of the parliament. Giving false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. The evidence given today will be recorded by Hansard and attracts parliamentary privilege. It is important to note that, although your evidence is protected by parliamentary privilege, this protection cannot be enforced outside Australia. I invite you to make an opening statement before we proceed to discussion. Mr Long, would you like to give an opening statement?

Mr Long : Sure. I'll be brief. Mirvac is one of Australia's leading and most respected developers. We are a listed company and have been delivering a diverse range of new homes across the country for almost 50 years—our 50 years comes up next year. We have a strong commitment to quality, good design and community creation. I've been with Mirvac for 24 years. In that time I have never seen a project where getting it to market as quickly as possible is not the paramount driver. We don't have land banks. All our projects are in the process of being either rezoned, getting DA approved or pushing hard to deliver facilitating infrastructure to allow us to sell and sell as quickly as possible. The driver for us is recycling our capital and delivering homes to the market as efficiently as possible.

Rezonings in New South Wales are now taking in excess of seven years, but this does not mean we can start after the rezoning. We've got development approvals for the civil works, which is a further 18 months to two years. Then there is the construction of the roads, servicing and infrastructure, which is another six to nine months. Then there is the building of the house, which can take between nine to 12 months. Adding it up, it means that it's more than 10 years to hand over the keys to a homebuyer. So, over many years, we have provided recommendations to governments around the country to help expedite the release of a diverse range of new housing types to the market, to meet growing demand and make housing more accessible to more Australians.

I'd like to note that the Productivity Commissioner for New South Wales did extensive work around housing the people of New South Wales, and I'd highly recommend and encourage reviewing his findings and recommendations.

CHAIR: Thank you very much. Mr Helmers, would you like to make a brief opening statement?

Mr Helmers : Yes, it will be brief. We're the third-largest builder of single residential houses in the country, operating in four states across the eastern seaboard, completing about 4½ thousand houses a year. We believe the biggest challenge to housing affordability is land supply, land supply and land supply. I don't know of any land developers who are not trying vigorously to bring every piece to land in their bank to market as quickly as they can—to get it out to there to the buyers in what has been a boom market for a couple of years now. To put it into context, in 2017 we purchased 450 square metre blocks in a suburb called Box Hill in New South Wales. They cost us $550,000. Four years later, that same block of land got sold this weekend for $1.2 million. That's a 120 per cent increase, by anyone's guess, in a period of four years. With our house prices, over that same period, a typical house built on that block has increased from $264,000 to $351,000, about an $87,000 increase, which is 32 per cent, over that same period. The biggest challenge to housing affordability is land supply, land supply and land supply. It's the same in every state. That's the end of my statement. Thank you.

CHAIR: Thank you very much. Mr Rhydderch, would you like to make an opening statement?

Mr Rhy dderch : I would, and it's similar to what Toby and Andrew have said. I echo a lot of the things that were said. In the context of Stockland, Stockland is a top-50 ASX listed company. We have a market capitalisation of $11 billion at this point in time. We've been operating in Australia for 70 years. We're the largest diversified property group in Australia, and we also are the largest developer of residential land in Australia. We provide housing right across Australia, with a key focus on the eastern seaboard and Perth in Western Australia. We sell more than half of our product to first homeowners. Typically, 80 to 90 per cent of our product is sold to owner occupiers. Picking up on what Andrew spoke about in terms of land supply, that is critical. There are a lot of factors that read into affordability and the magic pie that we all look at. It comes down to land acquisition costs, development costs, development contributions, scale of development, approvals and time frame to get those approvals, and infrastructure timing and delivery. Coming back to supply and availability, that is absolutely crucial. I've got some good examples of that, which I'd like to share with you at some point if I can, Chair.

CHAIR: That would be great. Can I ask you to share that now, because I want to go straight into questions. They'll be short and sharp. As I said earlier, we are finishing on the dot at 2.15 pm. So please do share those with us, for two or three minutes.

Mr Rhydderch : Thanks, Chair. When I was looking at this across our portfolio, I wanted to compare the two big cities, Melbourne and Sydney. Melbourne and Sydney populations are roughly the same, with about 5 million people. In terms of looking at land supply, 32,000 will be delivered this year in greater Melbourne. In greater Sydney, it's 13,300. So the level of supply is quite differen When we actually look at what we're selling at those prices, in Melbourne, we're selling completed lots at about $900 to $1,000 a square metre. In Sydney we're selling equivalent lots at $1,800 to $2,000-plus and rising, and in terms of the example in Box Hill, that's probably getting up to $2½ thousand a square metre. So our business is going to settle close to 3,000 lots this year in Melbourne, and we're going to settle just over a thousand lots here in New South Wales. That's because of supply.

Our business wants to be overweight in New South Wales, but we can't find the land to buy and deliver like we can in Melbourne. The reason we can find it in Melbourne is that the Victorian Planning Authority, basically, has a PSP process. They're dedicated on delivering land, and they're focused on that because it's an economic driver, whereas it's not held in the same regard here in New South Wales. That's why pricing is so acute and it is an issue here particularly in New South Wales but it's an issue in Queensland and also in Western Australia. But the state that does it best is Victoria.

When I look at what we actually purchase land for, in Sydney, it's costing me now $4 million to $5 million to go and buy unimproved land. In Victoria, that's at $1½ million to $1.7 million. So that puts a floor under what you can sell stuff for in the market. And it's extremely high to purchase. Because we're developers, we don't hang on to what we buy. We buy it and we basically bring it to market and sell it. And, when you're buying it at $5 million a hectare, that means you can't sell it for less than what you're buying for—otherwise you're not viable. So it's a really key factor, and that's why I wanted to give that comparison between a state that is actually supplying compared to one where there's a supply constriction in a city of the same size.

CHAIR: Thank you. I understand that Mr Warner has now joined us; is that the case? If it's not, I will go to questions. This question goes to everyone; I'd like an answer from everyone. If a new competitor established themselves beside your major residential projects and sold similar dwellings for 25 per cent less than what you sell them for, would that be a good or bad thing for your business financially? Mr Long: good or bad?

Mr Long : It's an interesting question. In my experience, it would be pretty surprising to see a competitor next to me selling at 25 per cent less. In the Sydney market, if they were to buy something that they could make viable at 25 per cent less, I'd be surprised.

CHAIR: But let's say there's someone else crazy enough out there to do that. Would it be a good or a bad thing for your business?

Mr Long : Like anything, it would be a great competitor to have next to you.

CHAIR: So is it bad"

Mr Long : It would just be another competitor.

CHAIR: Mr Helmers?

Mr Helmers : It would be significantly bad. There's no doubt about it.

CHAIR: Thank you. Anyone else, please?

Mr Rhydderch : We take a long-term view on our projects, and people come in and out of the market at lower points and higher points in the market. At Stockland, we take a longer-term view and make sure we're providing consistency to our customers. People do what they do in the market, but we take a view of providing certainty and a long-term vision for our customers.

CHAIR: Sticking with you, Richard: is it not your argument—or at least that of many property lobby groups—that rezoning will lead to lower housing prices and the mechanism will be through more competition from cheaper competitors?

Mr Rhydderch : The price increases we're seeing at the moment aren't good for anyone. But, coming back to the example that I provided before, what happens is that, when you've got more availability of land, it actually suppresses price. It doesn't let price run out of control. That's evidenced in exactly the same size of city with the same immigration and the same economic drivers. Basically, when you look at those two things, what's actually helping the land supply and market down there is a systematic approach to providing available land and it's affordable land. Whereas, here in New South Wales, we're looking at different things. They don't have that same approach. There's not availability and it's driving up the price of land. When I, as a developer, go to actually buy land, I have to spend a lot of money buying it in New South Wales relative to Victoria, so that actually pushes up the price of what you can actually provide to the end user.

CHAIR: Is it not your view that, if we increase the amount of supply, prices will go down?

Mr Helmers : I don't think that's the case. Like Richard, I think what we would expect to see is that prices will not grow. We're a volume house builder across the country. We're looking for more and more numbers. Price growth in land and impacts on affordability are counterintuitive to what our goal is, and that's to build more houses. If we can increase supply through planning, we won't see prices double in four years. That's what we want to—

CHAIR: Sorry to cut you off, Mr Helmers. Mr Long, your view?

Mr Long : My view is consistent with Richard's: rezonings won't necessarily lead to lower housing prices, because we've got an undersupply issue in New South Wales, but they will actually help in making sure that we'll be moderating the rise of prices into the future.

CHAIR: So it will keep price increases down?

Mr Long : Yes.

CHAIR: Mr Long, why do you target such small rates of housing completion?

Mr Long : I'm not really sure what the question means, but we don't have completion targets. We're trying to recycle our capital.

CHAIR: Alright, Mr Long. Mr Helmers, why do you target such small rates of housing completion?

Mr Helmers : I don’t believe we do, and I'm not sure of the question.

CHAIR: Okay. And Richard?

Mr Rhydderch : We don't. We provide the highest number of house sites in Australia. We deliver over 6,000 to 7,000 per annum. We'd deliver more if we could get rezonings, DAs and access to land.

CHAIR: On that point, would you sell faster if you had an inactive project rezoned?

Mr Rhydderch : Yes, we would, because you need the rezoning to actually bring on supply. We've had a number of instances where developments can take anywhere from five to 10 years to get rezoned, and then you need a year for development approval. You then have to go through and get your construction certificates, and then we can actually develop it in six to nine months, depending on which state you're in. So we're actually quite efficient. It's the process before you get to that which is what's holding back supply. When you're looking at demand, it can happen overnight with changes in interest rates and FOMO that leads it. To bring supply to market takes a long period of time. So there's a mismatch when those two things happen.

CHAIR: Mr Helmers, would you like to add to that answer?

Mr Helmers : I concur with Richard, wholeheartedly. It's a supply-side issue. Demand is stable in this country. The reason that we've seen such huge price increases in land and housing over recent months is that demand outstrips supply. It's simple economics 101.

CHAIR: And Richard?

Mr Rhydderch : I gave an answer, Chair, but I can add a little bit to it.

CHAIR: Oh, you did. Sorry. I'm going the other way. But go. Thank you.

Mr Rhydderch : I just want to put the customer lens on that. At the last release of one of our projects here in Sydney, we had 1,200 requests from our database for an appointment within one minute, without any marketing, for 30 lots. We're now out of market for the next three months because we don't have any DAs in place. So we would definitely sell more if we could.

CHAIR: Mr Long?

Mr Long : I echo what Richard has said, and I'll give you a couple of examples. We got a DA, and this is after we got our rezoning. It's taken us five years to get a rezoning. After we got our rezoning, we got a DA in the beginning of November, and we went to market in December. We had 4,800 in our database. Of those, 1,200 nominated for a 30-lot release. So it's exactly the same as what Richard has emphasised: if we had more active rezoned projects, we would be selling faster.

CHAIR: Mr Warner, I understand that you're a property management company, but do you have anything to add to those answers?

Mr Warner : No, I would concur with the general sentiment of what the guys have been saying. Certainly, the big problem is that the demand-side incentives keep pushing demand and prices, but the supply mismatches are what is causing a lot of our problems across the country long term.

CHAIR: It's funny you say that because, after four weeks of hearings, that's pretty much the first thing we were told. Do you think rezoning more areas and more land in Australia would lower dwelling prices by more than 20 per cent than they are now?

Mr Warner : Sorry, I beg your pardon?

CHAIR: My question is: do you think if state local governments rezoned more land to allow greater supply, that you could see dwelling prices develop by 20 per cent?

Mr Warner : No. Straight out, I concur with some of the comments before. It's not going to create that much of a difference. It will suppress growth in prices, but I can't see it, of itself, causing a drop in prices because there are too many other variables that come into the supply demand-balance. To put it simply, no.

CHAIR: If no-one else wants to add to that answer, I'll pass to the deputy chair. Yes, Richard?

Mr Rhydderch : I was just going to add it will moderate price growth; it won't certainly drop it by 20 per cent. The challenge is the vendors who we buy for, the land, their expectation is set by what the market conditions and revenue are at the time and what the previous in global sales are. If there's a large lot of rezoning, there might be a reset, but you're not going to see 20 per cent falls; you'll see a moderation.

Ms OWENS: Thank you for your introduction and your evidence. Can I ask about the costs that don't actually add to a value of a property. By that, I mean things like the length of time you have to sit on a piece of land waiting for rezoning, double handling of environmental things, the uncertainty, councils having done their planning not knowing what your contributions will be. Can I talk about all those things and whether there are ways to reduce the costs of the final house? I think you know what I'm saying.

Mr Helmers : I will go first, from a builder's perspective. Twenty years ago, it used to take us four weeks to get an approval to build a home, not a nuclear power plant, just a home. It takes us close to nine months in some areas. The average would be closer to six to get an approval to build a home now. There are hurdles and approvals required from state governments and local councils and developers that add to the time frame, which hinders us in bringing stuff to construction start and adds to our costs; there's no doubt about it. It hasn't made the delivery of homes better; it's made it longer and more complicated and, as such, the impact on our buyers is quite considerable. They're paying rent or paying mortgage for twice or three times as long whilst they're building a home. It's significant. There would be ways of cutting that red tape, cutting that approval time. We are building houses; we are not building nuclear power plants, and why it takes me six months in some councils to get an approval, I'm flabbergasted.

Ms OWENS: Do any of the other witnesses have anything to add?

Mr Rhydderch : I would like to build on what Andrew talked about with approvals. In the development side of the business we operate, it is well-known in the industry that time, revenue and costs are key drivers. Time comes back to that approval element. If it takes an elongated time to get an approval, you have holding costs, interest costs, rates, taxes. During that time, you get further uncertainty through policy change, which then impacts how much you can bring a block of land to market for. Speed and certainty are critical measures for us in terms of getting to market and being able to provide something affordably. Where it takes a long period of time and you get ladened with increases in contribution charges and all the rest of it, the cost goes up.

Ms OWENS: There was some evidence earlier on that it might be a better system if, when you actually bought the land, it was all done and you knew exactly what was going on. Could that possibly work, and how much is the risk that you take built into the price? You're taking risks that aren't normal. You're taking risks that, when you buy land, it might take five or 10 years to rezone. You don't know. There is a whole stack of unknowns; the certainty is not there when you initially decide to buy a piece of land.

Mr Rhydderch : Yes, and when you're looking at it, certainly from a development perspective, it's a bit different to selling bread at a supermarket. The margin you're probably looking at on a loaf of bread is quite different in terms of the land that you're going to bring to market. That risk level means that you need to get a return that's somewhere in the order of 12 to 15 per cent as a minimum baseline, which basically sets what you need to bring to market. When it gets delayed from timing and interest costs and all the rest of it, that starts eating into your profitability, and you need a viable business. The key part for us is you need to trade and trade quickly, otherwise your rate of return—we're an internal rate of return business and the longer periods of time that we actually take to deliver products means our internal rate of return is less, and our shareholders don't reward us for that, because we're a publicly listed company. Our whole thing is about speed trying to get it to market. You even get approvals that are not commercially viable. We've got a situation in North Sydney where we have an approval that requires you to, on any lot less than 450 square metres, get an integrated housing DA, which takes Andrew six months to get an approval for. That's why I can't sell anything at the Gables, because I've got another layer of approvals to try and do. I'd love to do it, I just can't. I've got to activate these approvals.

Mr Long : It's a good question. I think the other thing is we as an industry understand risk: we understand market risk and we understand construction risk, and we bed those in. What we can't control is planning risk because it's out of our control, and that is the thing that impacts all of us the most—actually having time taken away from us. I'll give you an example. In Sydney, we have a site where the government actually said, 'We will rezone this at the end of 2014.' We, as appropriate developers, went into that area and said, 'Okay, we'll option up some of the land there to be ready to deliver what the government wants—housing for people in New South Wales.' We are in 2021 and that area has not been rezoned. We've had to take up our options in that area, and it's been quite difficult to get any kind of engagement for all sorts of planning reasons. To give you an example, we take on risk, but certainty and working through those elements that we can't control would be much better up-front.

Ms OWENS: I have two more questions. In terms of the value of a property, from my perspective there are three things that add to what the property is worth, not what people pay for it but it's actual value: the land location, the amenities around it and the house itself. Then there's this other range of costs that seem to be in there but that don't actually contribute anything at all. What I'm trying to figure out is if anyone does it well to reduce all that other stuff, which is cost but doesn't really contribute to the value of the property, just its price. Does anyone do it well? Victoria, you tell me, sell land at a lesser value. I assume because they see that as the taxpayer getting a return from selling that land through another mechanism other than its price. Does anyone else do it well? Is there anyone even trying to reduce all that non-productive cost?

Mr Rhydderch : One of the local authorities in Queensland that did it well is Logan City Council. They basically were able to take some things off local councils and move it to self-certification through engineers. There's obviously an audit process related to that. But that would take an approval process to get a sub cert construction certificate from two to three months down to a couple of days.

One of the things I meant to talk about before was that, in a hot market, there's competing demand for resources for what we do in local councils. A lot of councils are understaffed trying to keep up with the demand of the industry at the moment, and they have to prioritise key applications rather than being able to deal with all of them. That, again, becomes an impact on supply. But Logan City Council realised that, and they were able to implement—I wish I could remember the name of it. I'll be able to dig it out and send it to you guys. There were a number of things that they looked at, and they were able to fast-track it and take multiple months out of the DA process.

In Queensland, under the Integrated Planning Act, there's actually legal recourse for rezonings. We don't have that here in New South Wales. We do for a development application, but we don't have it for rezoning. So there's a lot more accountability in the rezoning process in Queensland, and the Victorian system does it well, in terms of the PSP rollout of land and supply. There are some really good examples under different authorities. It's just trying to bring all those together.If you want to increase productivity, get rid of those holding costs and interest and give the industry more certainty, so you don't have to price in risk and you don't have to pay those interest costs, so you can get on it and deliver it. It's silly to think, as Toby said before, here in New South Wales, it can take you five to 10 years to get a rezoning, and then you're talking anywhere from seven to 11 years to deliver a block of land, from start to finish.

Ms OWENS: We're also hearing from people that, when supply does increase, it also increases your costs, because of labour shortages, supply chain problems and the increased time for the authorities to process things because they get overwhelmed. Again, the evidence is also that, if you increase supply and you don't do it well, you increase cost as well. Is that right?

Mr Long : I think, relatively, the value is such a small part of it. That is right, but it's such a minute part of it. I'd emphasise your comment before, Richard: in Queensland—I think the system they have up there is called SARA—they do have a great way of bringing different groups together to give you an approval very quickly. In New South Wales, that doesn't seem to happen, and there does seem to be a lot of double handling.

Ms OWENS: So the additional cost of supply chains and labour are a minor part of the cost, relative to all those other costs—that's what you're telling me?

CHAIR: Julie, I might make this your last question.

Ms OWENS: Does that mean that, if the federal government started to invest in affordable housing and there was a massive build across the nation, or if the military started doing major builds that started to suck up the labour, that wouldn't have a major impact on price?

Mr Long : It would certainly have an impact on price. It wouldn't slow down the supply, though. Andrew, you might be able to add something.

Mr Helmers : Those sorts of schemes are problematic, and the timing of them causes some ructions. If any level of government were to come out now with a substantial public housing scheme or program, the housing construction industry—the construction side—would not be able to keep up. The construction industry—the suppliers, the labour—is at breaking point at the moment and will be for some 12 months or 18 months moving forward.

The difficulty that I find in this whole debate is that state and federal governments used our industry to stimulate the economy. They're just not stimulating supply at the same time. They're out of whack. I don't know of a land developer across the country that wouldn't have every single block that they own on the market today if they could. To Mr Long's point, they just can't. We're not a very large developer at all. We're not in the same sort of scale, but we've got several projects that we've had for four or five years, and we will miss this boom, because I still can't bring them to market. It's not because I don't want to; it's because I just can't. I don't think there's any threat that we're going to see prices of housing stock fall. Demand is still there and will always be there. It's not a demand issue; it's a supply issue. If we have any hope for our children and our children's children to be able to get into the property market, we need to fix supply.

Ms OWENS: Okay. I'm not allowed to ask any more questions.

CHAIR: We might come back to you, Deputy Chair. Terry, do you have any questions?

Mr YOUNG: Thank you for your time, gents. I have a couple of questions. If land were made more readily available to you and released more quickly by governments, what would stop developers then drip-feeding supply and keeping prices up? I'm wondering why a business, particularly a publicly listed business, would want to reduce the price and therefore the profit they would be making to shareholders?

Mr Helmers : I'm not a property developer, so I will speak first. Competition, competition, competition. The market will fix it.

Mr Rhydderch : I was going to say the same thing. When we go to buy the land, we are in a competitive market process with the likes of Toby, and we generally go in there to meet our minimum returns, and that basically is to get in there and do it quickly. We assess how many lots we think we can sell in any given year, based on market and the supply—all of those types of things—and we say, 'This is how hard we think we can buy this block of land,' and then we get in there. We've got to hit those assumptions; otherwise, materially, we start going backwards in terms of returns. Again, it's an IIR business, and to provide a return to shareholders and be in a competitive market sense, we try to be as competitive as we can to deliver stock to market as quickly as we can; otherwise, our returns go backwards. If you get a market increase during that period, you've done well. If you get one that goes the other way and you get your assumptions wrong, we have projects we have to sell because we don't get a good return on them. That market competition that Andrew talks about is the regulator within all of that.

Mr YOUNG: I would have thought, particularly in the last few years, that you would have made assumptions and, in a property boom, you would have more than covered and probably had a win at the moment. I appreciate that's not always the case. That makes a lot of sense. Would it be true to say that, if the process were quicker from when you bought the land to being approved and put out, you could maybe offer lower margins because you don't have to factor in some fat to allow for markets changing?

Mr Rhydderch : I'm happy to answer that one again. We have a number of landholdings. If they were approved and rezoned and ready to go over the last couple of years we would have sold them all by now. I look at some of our landholdings—in Illawarra, for instance, we've only just got an approval and have to work through a bulk earthworks approval. It's only 700 lots, but that would be sold, and that probably would have taken 700 buyers out of the market and probably would have moderated demand down in that corridor at the moment. I look at that corridor specifically, and they had 36 sales for the last quarter in the hottest market of all time. Why is that? It's not because people are holding back. It's because there's no supply. Why is that? It's because the rezonings and DAs aren't in place to deliver that.

Mr YOUNG: There have been a lot of discussions from industry groups and so forth that aren't at the coalface like you. And, to be honest, I'm from private enterprise and business, so they're relying on the goodness of people to distribute some land at a lower price, 20 per cent lower than the rest, and I'm thinking to myself: 'This is nuts. The market is the market, and as businesspeople you get what you can get,' and I understand that competition keeps you honest—that's the way it's supposed to work. It seems to me that the solution here is to make sure you can get the land in a more timely manner, and there needs to be more of it.

Mr Rhydderch : Couldn't agree more.

Mr Long : Couldn't agree more. I support Richard's comment. We're IIR driven. He always pays more for land than I do. I don't know how he does it, but he pays more than I do. I'm always chasing my tail and trying to find more land.

Mr YOUNG: I grew up in Kallangur, across from North Lakes—I know how well they did there. So well done.

CHAIR: Matt, if you're quick, we can go back to Julie for some more questions.

Mr THISTLETHWAITE: Okay—put the pressure on! Thank you for your evidence, guys. There appears to be an oversupply of apartments in the Sydney market. If that's the case, why haven't prices fallen?

Mr Long : I don't know if it is an oversupply. There are certain corridors you may find that have more but it is not an oversupply generally. I will give you some colour. We have released a number of projects in the last little while and they have been taken up very strongly. That is off the plan, which means that we still have a number of years before we have to get rid of those. On that basis, we are not seeing that.

Mr THISTLETHWAITE: Anyone else?

Mr Warner : I would agree. We analyse the apartment market across the country. Yes, there are pockets of oversupply in Sydney. But when you look at the broader population numbers versus the actual delivered stock across the city, there is no oversupply at an aggregated level. The other factor that is supporting prices in that market is just the absolute price gap between detached house prices and apartment prices; that is driving demand. The affordability issue is pushing demand back into that lower price point of apartments now and supporting those prices at those levels, even in the oversupplied pockets.

Mr YOUNG: In the Brisbane market—I cannot speak for Matt's market—I have invested in units. The councils up here released way too many units. There was definitely a stagnation and the prices of units dropped. But most private investors like myself and other people I know have simply hung onto them and rented them out waiting for the market to rebound. Again, the market to determines this stuff. I don't know how much control the government can have. I just think we have to get the supply right and that will fix the problem.

Mr THISTLETHWAITE: But you have both said there are pockets of oversupply and I have one in my electorate that is about 1,200 apartments, completed two years ago, and half of them are empty. The developers decided just to hang onto them, rather than sell them at a reduced price. They are going to wait it out. If it is economics 101, that would dictate that you would drop the price to clear the supply but that is not happening, so it's not economics 101, is it?

Mr Long : I can't talk to particular developers. We would certainly be trading through as quickly as we could.

Mr Rhydderch : We cannot talk to that developer either, but the apartments market, in my view, will have a pretty strong rebound shortly because there has been an massive under-construction of apartments everywhere. You are going to have students coming back, overseas migration, domestic travel, interstate travel, re-emergence of Airbnb. Everything that could have gone against the apartment market probably did during that period of time but, again, people like Mirvac and key developers out there are getting great results in sales momentum in the apartment space. I cannot talk to the developer you are talking to, but it is on the precipice of really going up, in our view.

Mr Warner : I couldn't agree more. From where I sit as an analysis of markets of apartments across the country, Brisbane is a great example raised before. Brisbane peaked in 2016 and it has been clearing all that oversupply for quite some time. The supply levels—we need in Brisbane across the greater metropolitan area, somewhere between 9,000 and12,000. In the next four or five years we will build half of that. Part of the reason is this apartment supply is a big ocean liner and it takes so long to turn around because of the lead times. You have the approval time then you have a marketing time and then you have a construction time. So much can change in the demand fundamentals between conception and the planning phase and delivery, so there will always be a bit of a supply mismatch there. Build-to-rent residential will help even that out a little bit more, and that construction, hopefully, over time will become easier. I certainly think that is a sector that should be encouraged and one of the benefits of that sector is the levelling out that construction pipeline a little bit over time.

Mr THISTLETHWAITE: UNSW City Futures appeared before us a few weeks ago. They had done an analysis of planning times and taxes associated with apartment developments. They did analysis of 881 different residential apartment developments in quite a few capital cities across Australia, so it was quite a big study. The study concluded that the planning determination process, in terms of the whole of the time that it took to bring something to market, was 13 per cent of the total time taken to bring a typical multi-unit development to completion from initial land acquisition. That would appear to be a reasonable time frame. Secondly, government taxes and charges accounted for 11.3 per cent of the total scheme cost. They appear to be reasonable assumptions and findings. What's your view on those?

Mr Long : I'd really like to see that information and break it down into corridors and states. I would be very surprised if those numbers are anywhere near that in New South Wales. That would be my comment.

Mr THISTLETHWAITE: Does anyone have any other studies that would disprove that?

Mr Rhydderch : There was an apartment supply pipeline study commissioned by the UDIA, which was launched yesterday. That talks to supply, but that's specific only to New South Wales. It shows, definitely, an undersupply and some timing constraints around the delivery of that. I'm sure there are plenty of other research reports we could get our hands on.

Mr THI STLETHWAITE: If you could supply those, that would be good. In terms of the time issue, they said it takes an average of 33 weeks for planning out of a total typical development time of 4.7 years.

Mr Long : That must be blended across the whole of Australia, I'd say.

Mr THISTLETHWAITE: Yes, it is. That's what we have to look at—we're a federal parliament; we have to look at policies that cater for the whole of the country.

Mr Rhydderch : Without seeing the report, it's important to understand whether there's a rezoning process ahead of it. Because if they're discounting the rezoning process and you get into just a development application, then that might be okay blended across all the states. But, certainly in New South Wales, there's no way you would get a DA in 33 weeks, once you've had a rezoning, unless you're incredibly fortunate, for whatever reason, and it's probably not a complex or complicated project in any regard. If they've not considered the rezoning—the rezoning component is taking a long period of time. Thirty-three sounds very low. Twelve months is an absolute minimum, but it's anywhere from 18 months to two years for your more complex sites.

Mr THISTLETHWAITE: On the supply issue, what's stopping more land being released by governments, particularly for greenfield developments? From our perspective, if you're talking about multistorey developments—huge developments in already built-up areas in cities—you're going to get opposition from local communities, because they see it as a reduction in their quality of life with increased traffic congestion and all of the issues that come with big developments. If the solution is to try and build out further, what's stopping governments releasing more of that land so that can actually occur?

Mr Long : I think that's not necessarily the solution to the problem we face. I understand that this is about the whole of Australia. When you look at the Sydney basin alone, we cannot continue to develop like we have in every green site. We have to have a balance of both: we have to have the housing in the cities, and we have to have the housing on the fringes. I don't think it's one or the other. Richard, did you want to add to that?

Mr Rhydderch : Probably more in the greenfield context. I know the inquiry is more broad than New South Wales, but I'll give a few specific examples of what's holding back some of those release areas in New South Wales. You've got the Marsden Park, north-west Schofields and Penrith release areas that are tied up with flood infrastructure and funding associated with that. So you need clear leadership investment to make those projects happen. You can look at projects down in the south-west growth areas tied up with biodiversity, koalas and a whole lot of environmental type things. I think some of the areas identified for development have other constraints; once they've been identified, there needs to be strong leadership and a coordination between different referral agencies and the department to take forward a unified approach to development that takes infrastructure along, that takes planning on the journey, that takes environmental and be well considered. When there's a mismatch, it seems like there's no direction or leadership to actually take the bull by the horns and say, 'Guys, we've got to bring this in. We need to look at this. How do we work constructively with industry to make it happen?'

Mr THISTLETHWAITE: One of you mentioned earlier that the Victorian system was better. What's different about that compared to, say, New South Wales or Queensland that makes it better?

Mr Rhydderch : That was me; I mentioned that as well. I worked in the Victorian system for a period of 18 months. When I was there, I was the regional manager looking after the north and western corridors. Nearly every second day I would get a 1,500-lot PSP approved site ready to go that would be brought to me by JLL or Colliers and people like that, and I'd just be going, 'I'm not doing that, because I know the next one I'm going to get is a better location and I will do that.' The PSP process was very obvious. It showed where the next areas were going to be. The Victorian Planning Authority actually took people on the journey. They coordinated the infrastructure delivery. They had all those types of things. In my time when I was down in Victoria—again, I was developing around Truganina and areas like that—there would actually be train stations already in place not far from where the development front is. I went, 'Wow, this is incredible to see an investment in infrastructure to facilitate the new edges of development within Melbourne.' So it was actually a very coordinated approach. It doesn't happen all the time, but the PSP process is a very transparent, rigorous process with deadlines that said, 'This is where it's going and this is how it's going to be delivered,' and it provides certainty to the development industry. Sure, you might be competing with 10 other developments at the same time, but you're all getting in. That competition again also suppresses the price, because if you don't buy this one you can buy that one, or you can buy the other one. That was my experience in the Victorian system.

Mr Helmers : I think they call that planning, Richard!

Mr Rhydderch : Yes!

CHAIR: I think that might be the comment of the day. Julie, you accused me of cutting you off earlier; now I'm going to cut Matt off so that you can finish off in the next eight minutes, please. I will be true to my word—whoever is talking at 2.15, I am just stopping. So time yourself. Julie.

Ms OWENS: I have two questions, and then I'm happy to give the call back to Matt. Can I talk about safety. In Sydney we have Opal Tower, but there's also talk about asbestos coming in in building materials. I walked past a property the other day that was being built, and I swear the wall was not on the slab.

Mr THISTLETHWAITE: Mascot Towers?

Ms OWENS: No, it wasn't actually. There's obviously a lot of concern about safety and, while we do need to improve and speed up the processes, that bit really matters. Do any of you have comments on what it should look like to ensure that every builder is meeting the standards but we're actually getting a reasonable process for the developers themselves?

Mr Long : I will jump in there. In the New South Wales context—and I apologise that I have a New South Wales bent—David Chandler has been organising those things better. For a company like Mirvac, where quality is basically our benchmark, it is not something that's foreign to us. It's bringing those other developers that are perhaps not as astute about safety issues up to that bar. I think getting that balance right though is absolutely important. At the moment, the red tape that seems to be coming out is going over the top. How do you get a pendulum to swing to the right spot rather than swinging one way or the other? I think working with the Building Commissioner in getting that balance right over the next 12 months will be critical.

Ms OWENS: Thank you. Any others? I will move onto the next one. Can I talk about long term planning. We heard evidence that if the state governments and the local councils et cetera had their planning well in advance so that you could see what was coming in terms of land release and when and how long the planning process would take, that it would dramatically improve supply. I'd also like your comments on how far ahead you think that Commonwealth and state governments should plan in terms of social housing? They will have to build it. What would a planning process look like that allowed you and the social housing guys to coexist in a way that added to workforce and supply chains rather than competing for them?

Mr Rhydderch : Everybody's pausing there!

Ms OWENS: Was that a stupid question or was it because it's hard?

Mr Rhydderch : I'll address long-term planning first—again, with a New South Wales bent on this. The Greater Sydney Commission does district plan reviews and the like, and then local housing strategies are meant to fall in below those. There's a real key focus around the five- to 10-year horizon. When we're trying to bring stuff through rezoning, the process that we have in New South Wales means that it needs to be a longer term view than that 10-year horizon. It should be an immediate, 'How do we accelerate housing?' question and the opportunities beyond that. That's so we can go in with some certainty and bring forward large-scale applications to the Greater Sydney Commission and the department, and say, 'Look, here's a 5,000-lot development that you currently don't have in your housing forecast, but you've identified it as a potential investigation area.' We then have the ability to fund infrastructure, studies and the like which could bring on additional housing over and above that contemplated in that five- to 10-year view, which I think is way too narrow.

Currently, you can't do that process in New South Wales. I get approached all the time by private landowners on the edge of the growth centre boundaries, who say, 'I could give you a site which would deliver 10,000 lots over the next 10 to 20 years.' I can't even talk to the Greater Sydney Commission about that because of probity: you can't talk about individual projects. If I go to the department, the department says, 'Well, it's not in the Greater Sydney plans.' If there were an avenue or a mechanism to bring those opportunities forward from a planning perspective, and to take a longer view horizon, then I think that's what's really important.

In terms of the question about social housing: again, the more optics you have for what you want to provide then the industry can adjust and flex accordingly. We know that the industry can go from delivering 13½ thousand greenfield land lots a year to 20,000—that's where it is. Andrew can gear his building companies up and everyone knows that there's a growth story and trajectory that isn't a one-off sugar-hit-type of thing. If we know that there's a dedicated pipeline and a greater level of pipeline, then we can actually gear up over the longer term to make sure that we're not going to have those spikes of supply coming in and out of the market.

Ms OWENS: Thank you.

Mr Helmers : I can provide a quick comment there. I think that one of the huge success stories in New South Wales from a planning perspective was the Hunter Action Plan 2020-2022. We looked at that—our business grew up in that region. It provided certainty to developers and certainty and growth to the community. It has been a huge success. Unfortunately, there just hasn't been a replacement. A 20-year horizon for growth corridors and planning is not unrealistic. The 20 years pass very quickly, in a heartbeat, and that plan hasn't been replaced with enough stock or supply to see us through another 20 years, which is only going to see demand and prices rising because of short supply and overdemand.

Ms OWENS: Thank you.

CHAIR: I might call it time there. Thank you to all of you for coming in on such short notice. In our last round of hearings we had a number of questions put to us by one witness in particular and I think those were worth investigating and getting to the bottom of before our final report, so thank you for that.

If you have been asked to provide any additional information—I think Matt has ask you to provide some information around supply of apartments and tax, and also development timelines—could you please do that by 10 December. You'll be sent a copy of the transcript of your evidence and will have the opportunity to request corrections to transcription errors.

I thank members and witnesses for their time today and declare this hearing, and the hearings for this inquiry, closed. Now we'll get on with writing the report.

Committee adjourned at 14:15