Half the cost of a new Sydney home is taxes, levies and red tape

The latest report by the Centre for International Economics demonstrates that Sydney 50% of the cost of a new house going to taxes and red tape. The report was commissioned by the Housing Industry Association to compare housing costs in capital cities and Sydney has the largest extra cost of all Australian cities.

City Taxes and red tape %
Sydney 50%
Melbourne 37%
Perth 33%
Brisbane 32%
Adelaide 29%

The report found that a large number of reports are now required for the planning application for a new home with reports required for soil tests, native vegetation protection, contamination, heritage assessment and traffic management. An earlier research project by the Urban Taskforce found that some Sydney councils require up to 27 reports for a development application for a simple house.

Mirvac Ascot development in Brisbane

There are 81 separate reports required for residential DA’s across all of the Sydney councils. Clearly some of these reports are necessary to assess a development application but the number of expensive specialist reports has grown dramatically, adding even more to the cost of building homes.

The Urban Taskforce is most concerned that more taxes and levies are coming in New South Wales due to the removal of the cap on local infrastructure levies from July 1, 2020. The cap had been $30,000 for greenfield homes and $20,000 for infill homes but these caps are being incrementally increased until no cap applies from next year.

We believe some councils will add $100,000 for a greenfield home which will simply be passed on to home purchasers which is $70,000 more than the previous cap. Sydney will then have a tax and red tape cost of closer to 60 percent of the cost of a new home.

The total extra cost for Sydney was $840,874 compared to an extra cost in Adelaide of $436,165.

While we do not want in any way to lower construction standards it is likely that the excessive planning delays for most projects combined with the massive extra costs from levies and red tape are putting pressure back on the cost of building and this needs to be considered by the NSW Building Commissioner.

The Urban Taskforce is very concerned at the downturn in housing approvals in Sydney and the evidence of such excessive extra costs for each home is making the situation worse.

The federal Minister for Housing, Michael Sukkar, was reported as saying the states, particularly New South Wales, must reform their planning systems and the Urban Taskforce agrees with his assessment of the fundamental problem with housing supply in New South Wales and particularly in Sydney.

*source Property Observer

Posted in Latest news, News on 23rd August, 2019