Terry Ryder exposes how government taxes, red tape, and soaring construction costs—not “greedy developers” or interest rates—are the real culprits behind Australia’s worsening housing crisis.

The real barrier to fixing the housing crisis

The single biggest issue preventing solutions to the housing shortage in Australia at the moment is the incredibly high cost of building new dwellings.

It is also what is having the biggest impact on housing affordability, not high interest rates as some would have you believe.

Nearing a million-dollar price tag

The official data shows that the median price for home sites in capital cities is now around $420,000, and the average cost of building a new house is $530,000.

That means it’s getting close to a million dollars to create a new house and land package in our capital cities.

Not just about “greedy developers”

Despite what some suggest these high costs are not all as a result of “greedy developers” trying to screw every last dollar out of hapless buyers.

The Housing Industry Association (HIA) has released some interesting data which shows that government fees and account for about half the cost of a new house and land package in cities like Sydney.

That effectively means about 15 years of loan repayments (on a 30-year loan) go toward paying off that portion of cost of a home.

Industry survey reveals key obstacles

The Residential Property Survey, published each quarter by National Australia Bank, asked industry professionals what the barriers were preventing the construction of new housing, amid the worst housing crisis in the nation’s history.

Almost three-quarters (71%) of respondents said that construction costs were the main hurdle to starting new housing developments.

When you understand that between 40% and 50% of the cost of creating a new dwelling is taxes, fees and charges at all three levels of government, you realise that government is the single biggest cause of the hideously high cost of building new homes.

Red tape and falling productivity

Adding to that is the red tape that causes delays in building new homes. In the NAB survey, 62% of respondents said delays in achieving approvals to build homes was a major issue preventing new housing supply being achieved.

A report from the Productivity Commission found that the residential construction industry is half as productive today as it was 30 years ago. That means we were building homes twice as fast in the 1990s compared to now. And the report blamed bureaucracy as the biggest factor.

More pressure on prices and rents

Other smaller issues affecting supply according to the survey are a shortage of tradespeople, lack of development sites and high interest rates.

The ongoing shortages of homes – which will continue for the foreseeable future – means that there will be upward pressures on prices and rents for years to come.

Terry Ryder is the Founder of Hotspotting and Host of  The Property Playbook on Ticker.