A report from the Property Council of Australia and global real estate firm Savills shows that without government action, the Lower Hunter will fall short of its 2029 housing target by nearly 12,000 homes and the Central Coast by 3,800 homes.
The Release the Pressure - Hunter and Central Coast report is the final instalment of a three-part investigation into the impact of new taxes and charges on development and building costs.
It provides further evidence that housing projects are being stifled by high taxes and charges, and slow planning approvals, across Greater Sydney, the Illawarra, Hunter, and Central Coast.
The Property Council has doubled down on calls for the NSW Government to temporarily suspend the Housing Productivity Contribution (HPC) and water authority Development Servicing Plans (DSPs) and commit to no new taxes during the National Housing Accord period (2024-2029).
The HPC came into effect in October 2023 and Hunter Water DSP charges are being phased in over three years from July 2024. The HPC adds up to $8,000 per lot to construction costs in the Hunter and Central Coast and DSP charges can be as high as $25,604 in the Hunter or $6,822 on the Central Coast.
Property Council Hunter and Central Coast Regional Director Amy De Lore said there was a critical need for immediate government action to address these barriers.
"High infrastructure costs and taxes, coupled with lengthy approval processes, are making it nearly impossible for developers to secure the financing needed to deliver new homes," Ms De Lore said.
"Government has no control over construction costs and interest rates - so suspending taxes and charges, and speeding up the planning system, are the only levers it can pull to have any immediate impact on housing delivery," she said.
Savills modelled costs for housing subdivision (greenfield) and residential apartment (infill) developments in the Lower Hunter and Central Coast, measuring the impact on project viability under different scenarios if charges were removed and assessment times accelerated.
The research also tracked how the costs of delivering housing have become progressively worse since 2018, showing how the phase-in of HPC and DSP charges will continue to have an adverse impact on delivery.
The modelling showed no greenfield or new apartment developments were viable with HPC and DSP charges in place and a typical development assessment time of 18 months applied.
"Greenfield development begins to become possible when one or both of the government charges are suspended, but infill is only viable when all charges are removed, and assessment times significantly reduced," Ms De Lore said.
Savills National Director Property Consultancy, Stephanie Ballango said the challenges cast serious doubt on the NSW Government's strategy to focus on apartment development in existing neighbourhoods as some kind of silver bullet solution to the housing crisis.
"Our analysis shows that even if taxes and charges were suspended, apartment infill development in the Lower Hunter and Central Coast remains financially unviable," she said.
Ms De Lore said this was backed up by anecdotal evidence from the industry.
"We're hearing that councils aren't yet seeing the level of interest in new apartment builds that the Government anticipated and there's no doubt feasibility is an issue."
Release the Pressure: Hunter and Central Coast - key findings:
- Taxes and charges make up of 15 per cent of greenfield development costs in the Lower Hunter and 20 per cent in the Central Coast
- Taxes and charges make up and about 7 per cent of infill development costs in both the Lower Hunter and Central Coast
- Under the current 'base case' scenario, about 18,500 new homes will be delivered in the Lower Hunter and Greater Newcastle by 2029 - 11,900 fewer than the Housing Accord target - while around 5,600 new homes will be delivered in the Central Coast by 2029 - 3,800 fewer than the Housing Accord target
- By adopting the recommendations of the report, up to 23,000 new homes could be delivered in the Lower Hunter and Greater Newcastle by 2029 and up to 8,750 new homes could be delivered in the Central Coast by 2029.
