Everything is impacting our housing crisis

WITH GARETH KENT, DIRECTOR PRESTON ROWE PATERSON

With mid-year fast approaching the new “7 Star Standard” regulations for new residential properties are due to come into effect from the 1st of May 2024.

The aim of these changes is to increase new builds from a “6 Star” dwelling to a “7 Star” dwelling to cut greenhouse gas emissions for new residential dwellings from 7.0 per cent to 11.0 per cent.

The cost impact will be felt most during the design phase and in additional construction costs. This will be a further spike in building costs that have skyrocketed over recent years with another blow for the affordability of new dwellings and those trying to break into the home ownership market.

The current construction costs combined with the recent spate of cash rate increases have already seen a surge in people who have purchased vacant land, finding themselves unable to afford to construct their dwelling. In addition, there has been a reduction in funds available from the banks for construction loans which adds a further hurdle to their ability to provide construction finance.

In a recent case study, PRP observed the effect of the “7 Star Standard” changes:

A single storey Hebel build dwelling with solar panels, battery, insulation, hot water heat pump, double glazing and two courtyards was found to not achieve a “7 Star” energy rating. The solution to enable the house to reach “7 Stars” was to remove a courtyard and to reduce the size of the remaining windows, this reduced the amount of glass required to meet the standard.

This results in a classic case of “shrinkflation”. For the same (barely affordable) price, a typical result will be that the overall floor size of the dwelling will have to be reduced to accommodate the requirements of the new standards. This not only directly impacts the new homeowner but will have flow through effects for all those in the residential property supply chain: builders, material suppliers, developers, councils, etc.

In addition to the “7 Stars Standard” changes, new regulations by the National Construction Code (NCC) are being implemented to provide improved access to dwellings for people with a disability. This includes the requirement for access to include at least one entry being step free. The new NCC now sets out mandatory sizes for doorways, corridors, toilets and bathrooms. An example of the new rules is at least one entryway being a minimum of 820 millimetres wide to allow space for wheelchairs and other mobility aids.

Noting Geelong’s record growth over the past few years, the property cycle pendulum has swung, and construction of new dwellings has ground to a crawl, along with sales of vacant land for residential builds. While no doubt well intended, the continued addition of overlay requirements and restrictions on basic building projects will only slow the recovery further.

It is a comedy of errors, tougher restrictions on building, higher taxes on land combined with the highest migration statistics on record, in the March quarter alone Australia has received 157,684 new arrivals.

We are set to exceed the previous highest yearly arrival numbers of 518,000 with arrival numbers for the 2023/24 period to be well above 600,000. It is too late for policy changes to stop arrivals.

Data released by the Australian Bureau of Statistics (ABS) confirm approvals for new private sector houses in Victoria fell by 16.7 per cent across January 2024 – the sharpest reduction of any state in Australia. So much for the ‘Big Build’!

Government and the building industry face a real challenge in finding the balance between meeting our environmental responsibility and adequate access for those with disability AND maintaining Australia’s historical capacity to provide affordable opportunities for EVERYONE to own or build their first home.

Unfortunately, the reality is that housing affordability is just not being considered in these policy changes, whether its changes to building codes, increases in property taxes, increase considerations for the environment, increase in migration, every decision and change comes with a cost. And every decision increases the squeeze on housing affordability.

How much more can we afford to pay?

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