Falling House Prices 'A Fallacy'

By: Marissa Calligeros  Brisbane Times                    November 19, 2010 - 3:17PM

New house prices in Queensland will not be affected by the introduction of capped infrastructure charges, one property analyst says.  Premier Anna Bligh yesterday announced a decision to reduce developer levies, with industry leaders claiming the move could see new house prices fall by up to $20,000.
The Infrastructure Charges Taskforce, established in March following the government's Population Growth Summit, made 14 recommendations for sweeping reform in the development industry, including halving infrastructure charges from $40,000.

 But property analyst Michael Matusik said it was highly unlikely home buyers would benefit from the reduction.

"This is just moving the deck chairs on the Titanic. We should expect more of these [government] furphies as we get closer to the state election," he said. "What drives prices up [and down] is availability of credit, followed by job creation or losses ... and confidence and supply." Mr Matusik said the reduction in levies could bring down the price of a new dwelling by four per cent, although it was an unlikely outcome. "Developers operate in the private realm and they can charge whatever they like - a few bucks 'saved' in lower infrastructure charges will have [no] real influence on the setting of end prices," he said. According to developers, current infrastructure charges increase building costs by 35 per cent. Urban Development Institute of Australia state president Warren Harris said the reduction in charges was the first necessary step towards address housing affordability. "It was going to get worse and worse and drive affordability further south," he said. "This measure is a first step in the right direction." Although Mr Harris said the government needed to also address development approval times.
"While we are sitting for two, three or four years waiting for approvals there is a whole churn of holding costs that are being added back to projects," he said. "We would be happy for the implementation stage to roll around fairly quickly to get the affordable outcomes." Mr Matusik said the number of vacant lots of land across the state had increased 25 per cent in the past year to 2850, leading to discounted development site sales. Property Council of Queensland executive director Kathy MacDermott said the reduction in infrastructure charges would fuel competition in the market and drive down house prices. “Viability will be improved not only through a reduction in current infrastructure charges in some locations, but the provision to pay these charges at the time of delivery – not up-front in a project – will result in reduced holding cost expenses for developers," she said. “Increased market competition will ensure savings achieved from the reform will be passed on to the home buyer."  regardless of the impact on buyers the reduction in the charges will slash the government's revenue from property development. In the past financial year, the state government received revenue from property taxes of $3.5 billion, according to the Property Council.