Fears government action will hit greenfield housing

Moves to restrict the practice of land banking could catch out some of the biggest contributors to the nation’s housing supply.

Penalising overseas-owned builders from building homes in Australia would make the Albanese government’s goal of 1.2 million homes harder to achieve.

The spectre of a government crackdown on land banking by foreign developers could spook the market and lead to a fall-off in new housing development, according to key industry players.

Treasurer Jim Chalmers sparked concerns when he announced in his budget speech that the government was “easing pressure on the housing market by banning foreign investors from buying established homes, and cracking down on foreign land banking as well”.

This has raised concerns among offshore home builders, which have dramatically increased their presence in Australia and make up a key part of the country’s housing operators.

Large Japanese companies ranging from NEX Building Group to Sumitomo Forestry, which has a majority stake in top home builder Metricon, could be discouraged, along with industry stalwarts like Singapore-backed AVJennings.

Local development heavyweights including Lendlease and Stockland, which rely on offshore players for capital partnerships to back housing projects, could also be impacted until clarity emerges about the government’s intentions.

Housing Industry Association chief economist Tim Reardon lashed out at the government for blaming investors, foreigners and foreign investors for the housing shortage.

He argued that it was driven by government policies and called out the benefits of overseas players in the local housing market.

“One in 10 detached houses built in Australia is built by an overseas-owned builder,” he said.

“These global home builders bring to Australia an investment in leading edge building technologies and products. Penalising these businesses and making it harder for them to build new homes in Australia can only lead to fewer new homes being built.”

Mr Reardon said that global builders were responsible for building thousands of ‘‘spec homes’’ every year, where they buy greenfields land and build a home that is then sold.

“Prohibiting them from purchasing land adds further complexity and costs to delivering a new home to market,” he said. “The underlying cause of the shortage of housing is too much government involvement in the market, and the solution to increasing supply is less government red tape.”

Mr Reardon questioned whether large Japanese companies would keep funding the local industry if they were limited to only minority stakes to skirt any crackdown.

He said leading builders contacted the HIA in the wake of the budget speech to express their concerns. “Last night, I had three of the 10 largest home builders in the country ring and yell at me about it,” he said.

He said offshore builders could help fix the housing crisis and were not the problem. ­

“The Japanese-owned businesses are highly vertically integrated. They bring with them management skills as well as prefabrication engineering products. They are the solution to the productivity problem. So why are you forcing them out?” he said.

Mr Reardon warned that the tough line taken by state and federal governments was feeding into the housing shortage. “Since 2015, a range of punitive taxes have been imposed on foreign investors by state and federal governments. The consequence of this is that these investors have withdrawn from the Australian market, and this is a key reason why the volume of apartments commencing construction is now almost half of what it was in 2016,“ he added.

The HIA economist warned that penalising overseas-owned builders from building homes in Australia would make the Albanese government’s goal of 1.2 million homes harder. “Foreign investors build new homes. They don’t live in them and cannot take them out of the country,“ he said.

Master Builders Australia chief executive Denita Wawn sad the federal government had made a range of “sensible, modest measures” to make inroads in tackling labour shortages, infrastructure and modern methods of construction.

“Unfortunately, the very businesses who are expected to solve the housing crisis have been left disappointed this evening with minimal support to bring down business costs, incentivise growth and reduce regulatory barriers,“ she said.

Property Council president Carmel Hourigan called for a focus on the supply side of the housing debate. “The focus should be on supply,” she said. “We need more homes to house a growing population, but we are only building homes half as fast as we were in 1995.”

Ms Hourigan, who is also Charter Hall Office chief executive, overseeing a $27bn portfolio backed by local and international investors, called for lower taxes on the sector, noting commercial projects were also being held up.

“We need a simpler, smaller property tax take, removal of surcharges on foreign institutional investors and we need planning reforms to get all property projects that support communities, including commercial and industrial assets, built with minimum delay,” she said.

Ms Hourigan praised the federal government’s National Housing Accord for driving a wave of east coast state planning reforms that would not have been otherwise possible, but noted problems in getting industrial projects started.

“The absence of last-mile infrastructure is making the delivery of new homes, industrial and commercial assets, and schools and hospitals slower and more costly than it needs to be,” she said.

The PCA president said that multi-year delays were common across the country, significantly slowing the delivery of new assets and increasing costs.

While there was progress with both sides of federal politics backing funding to unlock the last mile, she said that more must be done. “There needs to be an increase in funding and a concerted effort from state planning ministers to urge utilities and agencies to unlock the final stages of water, power and sewerage infrastructure,” she said.

Ms Hourigan also noted the problems promote by building costs rising over 30 per cent since March 2020. “Welcome big builds and the energy transition also mean generous government contracts crowd out workers who would otherwise build new industrial hubs, commercial centres and homes,” she said.

“BuildSkills Australia says we need 90,000 more construction workers by 2029 simply to help build the homes we need,” Ms Hourigan said.

She said that the property sector urgently needed skilled workers to deliver critical infrastructure and projects and warned that government investment in training and TAFE wouldn’t be enough to meet housing targets, major state infrastructure projects and rising green energy demands.

“Construction trades are not in the top 10 occupations for either permanent or temporary migration. We need to prioritise skilled construction workers. Australia must compete for global construction talent,” Ms Hourigan said.

Originally published as Fears government action will hit greenfield housing