Jason Rose

RESIDENTIAL property investment plunged by nearly 11 per cent during the 2009 financial year, as the global financial crisis caused listed companies to shelve projects and residential developers blamed government red tape for a lack of new homes built.

Yesterday, the Australian Bureau of Statistics’ figures on the country’s national GDP expenditure for fiscal 2009 revealed dwelling investment slumped a seasonally adjusted 10.9 per cent. In the June quarter it dived 5.5 per cent.

Senior manager for building and construction for BIS Shrapnel, Jason Anderson, said housing or commercial property investment was unlikely to improve for the September quarter.

And while dwelling investment was predicted to be better next financial year than last, it would still be poor. “We have it only at about 3 per cent,” he said.

“It (the dwelling investment number) has gone nowhere for the last five years with rising interest rates, but in a good year we could have a rise of 15 per cent and we think that is what will happen in the following year, especially in apartment construction.”

The amount spent on new commercial buildings fell by 15 per cent, with investment in the June quarter down 8.8 per cent. Mr Anderson said commercial property building approvals were down sharply in the December 2008 and March 2009 quarters as developers cancelled projects.

The decline in residential dwelling investment adds weight to concern that Australia is facing a serious undersupply of housing. The Housing Industry Association predicts an undersupply of a million new homes over the next five years, with Sydney hard hit.

Mr Anderson said annual residential investment slumped after a sharp drop in building approvals in the December quarter after a string of interest rate rises.

But developers lashed out at governments for the decline.

Gold Coast developer Norm Rix said land tax in Queensland had increased from 1.5c in the dollar to 2c in the dollar at June, making development unviable.

He said two of his subdivision projects had been placed on hold.

“Government charges are so high now, it makes a lot of developments uneconomical to do,” Mr Rix said.

But Queensland Infrastructure and Planning Minister Stirling Hinchliffe said Priority Infrastructure Plans ensured infrastructure charges were based on transparent planning and user-pays principles, reducing the likelihood of unforeseen costs being imposed on developers.

NSW apartment developer David Hawes, managing director of the Glenside Group, said tough state planning laws made many residential projects unviable for developers. Strict rules on density meant the only way developers could make money on many residential projects was by developing a higher-priced product.

There were also few land sites that could be acquired in Sydney’s inner and middle-ring suburbs at affordable prices.

“There have been no (housing) price increases for the last five years, but construction costs have gone up about 40 per cent in the last six years,” Mr Hawes said.

The HIA’s chief economist, Harley Dale, said the flow-on effects of lower interest rates and the first-home buyer’s grant on development should start to be seen by the end of the year. “We are at the tail end of the longest building down cycle in Australian postwar history,” Mr Hale said.