Tasmanian Government 2020-2021 Budget Community Consultation 6 December 2019 - HIA
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Tasmanian Government
2020-2021 Budget Community Consultation
6 December 2019HIA: Stuart Collins Executive Director Tasmania Housing Industry Association 30 Burnett Street NORTH HOBART QLD 7000 Phone: 03 6230 4600 Email: s.collins@hia.com.au HIA is the leading industry association in the Australian residential building sector, supporting the businesses and interests of over 60,000 builders, contractors, manufacturers, suppliers, building professionals and business partners. HIA members include businesses of all sizes, ranging from individuals working as independent contractors and home based small businesses, to large publicly listed companies. 85% of all new home building work in Australia is performed by HIA members.
1 Introduction
The Housing Industry Association (HIA) welcomes the opportunity to participate in the
budget community consultation process.
This process is being undertaken at a time when the Tasmanian economy is outpacing
the nation and in 2018-19 it grew even faster, at 3.6 per cent, than any other state or
territory – something it has not achieved in three decades. This is a far cry from the 1.0
per cent average growth rate in the eight years following the GFC, including a 0.3 per
cent contraction in 2012/13. The last two years have been even better than the 2002-09
pre-GFC period (3.1 per cent per annum).
Without question the housing market has been a key driving force behind this economic
revival and must continue to be front of mind in any economic decision-making by
Treasury and relevant government departments and agencies. It is also essential that
State government continue to provide stimuli to help ensure Tasmania’s housing market
operates to its full potential and any decline in activity in the coming years is softened by
the strength of the broader economy.
Continued wage growth and support from the RBA should also help with recent
improvements in housing affordability in Tasmania, even in the face of rising dwelling
prices, or at the very least help maintain Tasmania’s affordability advantage over the other
eastern states capitals.
HIA is available to provide further information in relation to its submission or any other
matters that arise during the budget consultation process that may require further industry
input.
-1-2 State of Play - Tasmania’s Housing Highlights
In 2018/2019 Tasmania has led the way with housing activity contributing to healthy
economic conditions. Some of the highlights that can ascribed to residential construction
include:
In 2018-19, ‘dwelling gross fixed capital formation’ expanded by 11.6 per cent to
$1.4 billion, contributing 0.5 percentage points to Tasmania’s 3.6 per cent
economic growth rate. It outperformed household consumption on food (0.3) and
new engineering construction (0.5). The only sectors that contributed more for
the year were exports of services (0.6) and certain government activities1.
Unlike Sydney, Melbourne, Brisbane and Canberra, Tasmania’s housing boom
has been overwhelmingly concentrated in its detached dwelling sector. Detached
starts peaked at 2,623 in 2018/19, the highest level since 1993/94. Even as this
comes off the boil and returns to levels more consistent with demographic
demand, starts are still expected to remain at historically high levels (1,805 in
2021/22).
Multi-units have fluctuated around 100 starts per quarter in recent times but even
this sector is expected to expand steadily on the back of demographic growth
provided State strategic plans and local planning conditions encourage density
and infill.
Renovations activity has also held up strongly in recent years, with the value of
council-approved alterations and additions reaching $143.4 million in the 12
months to September 2019, the highest level since 2012. This is impressive in
light of the credit squeeze that weighed on the economy over the last year.
The value of new housing work done also peaked at $788 million in 2018/19 and
is expected to cool only slightly ($769 million in 2019/20) before exceeding this
peak again in 2021/22 at $793 million. Renovations investment is also expected
to reach a six-year peak of $641 million in 2020/21.
Dwelling prices are up by 26.6 per cent since they started accelerating in August
2016. That is an average annual rate of 7.7 per cent. Even in the last year they
are up by 3.3 per cent. These gains are also relatively consistent between
houses and units. Compare this to national figures where dwelling prices are up
by just 0.9 per cent since August 2016 and still down by 2.3 per cent for the last
12 months despite the modest turnaround in Sydney and Melbourne.
1 National government gross fixed capital formation (0.5), national government consumption (0.9) and
state and local government consumption (0.6)
-2- Rents for houses and units in Hobart are also up by 10.9 per cent and 12.2 per
cent respectively since September 2016 and do not look to have started cooling.
Vacancy rates are also remaining around record lows, at 0.6 per cent in Hobart in
September 2019.
In the labour force, construction employment has come back from its 23,506
annual average in August 2018 but still remains healthy with over 20,000. Wage
growth in Tasmania has also been outpacing the nation for the last four years,
driven by the private sector no less.
3 Budget Recommendations
The Tasmanian government has a role to play in assisting industry by creating the right
economic settings. Accordingly, HIA seeks a commitment from the Tasmanian
Government to continue to fund and allow for programs under the budget that are linked
to and support housing supply, and importantly, the supply of affordable housing. In
particular HIA recommends:
A. Extension of the First Homebuyers Grant
Lending to first home buyers as a share of total lending has been strong recently.
First home buyers in Tasmania accounted for a quarter of all dwellings financed in
September 2019, up from just 16.1 per cent at the beginning of 2017 and
representing over 2,000 loans over the past 12 months.
The availability of the $20,000 First Home Owner Grant (FHOG) has also assisted
over 250 individuals, couples and families as at 31 October 2019 to enter home
ownership increasing Tasmanian housing stock and alleviating pressure on rental
properties and social/community housing.
Further to this, ensuring that housing in Tasmania is affordable for young
households is essential for the State’s future. Tasmania has a much older population
than Australia as a whole (42.2 years versus 37.2) and issues stemming from an
aging population are likely to be more acute in Tasmania than elsewhere. Equally
the State needs to ensure that it can attract skilled workers from interstate and
overseas. Affordable housing has historically been one of Tasmania’s key
advantages in attracting workers from other jurisdictions and policy makers should
aim to maintain this.
It is HIA’s understanding that the government intends to wind the FHOG back to
$10,000 from 1 July 2020. This would be irrational given the current mandate on
government to improve housing supply and deliver affordable housing. The FHOG
needs to be preserved and at its current level of $20,000 or more. The HomeShare
scheme and other incentives aimed at the affordable end of the new housing market
should also be retained.
-3-B. Red tape and reduction and regulatory efficiencies
HIA calls for the allocation of appropriate funding for red tape reduction and continued
improvements to the State-wide planning scheme. This includes the resourcing,
development and implementation of key projects aimed at reducing impediments to
building and development resulting in delays and significant cost escalations such as
the Tasmanian Development Regulatory Reform Project and iPlan/PABP.
C. Skills funding
Growing the industry skills base is critical in avoiding supply side constraints to new
housing delivery. The government must continue to invest in traditional construction
training and apprenticeships and provide support to the VET system. These funds
must be available not only to TAFE but private training providers (RTOs). While the
Tasmanian Building and Construction Industry Board subsidises training, this is self-
funded by industry and needs to be complemented by government funding through
the likes of Skills Tasmania, who also have a role to play in contributing to construction
based training.
Currently significant funding and investment is targeted at attracting and training new
workers. To ensure a relevant and productive construction workforce it is important
that there is an additional layer of training investment aimed at professional
development, skills retention, upskilling and re-skilling. Increasingly this training is
taking the form of short courses or micro-credentialling with an identified need for
safety, business and digital training.
HIA also seeks ongoing funding for the YouthBuild Program at Claremont College that
has been redesigned to integrate with the Department of Education’s Construction
and Architecture Package of Learning. This will enable Year 9 and 10 students to
complete practical electives and will enhance pathways into the construction industry.
D. Removal or reduction of State taxes on new housing and land development
To achieve greater fairness and affordability HIA supports reform to the State’s current
tax system, particularly the stamp duty regime. Recent research commissioned by
HIA found that up to 50 per cent of the final price of a house and land package in
Sydney is the result of upfront taxes and red tape charged by the various levels of
government. In Hobart, HIA considers this figure to be commensurate with Adelaide
where the cost is 29 per cent. While it is towards the lower end of the scale it is still a
significant cost impost on new home production and affordability.
As such, reform of the Australian taxation system - and of State and Territory
Governments’ current tax arrangements – is considered a priority and would show
-4-that all Government’s recognise the impact upfront and hidden taxes are having on
housing supply and home ownership.
HIA supports the removal of inefficient and inequitable taxes such as stamp duty and
payroll tax on new housing construction. Further, we support the replacement of stamp
duty applied to new housing construction and payroll taxes with broad based
community taxes. In addition, we support a restructuring of the GST so that
(effectively) new housing construction is exempt and that the application of GST to
new housing construction and existing housing is similar.
E. Infrastructure investment
An increase in infrastructure spending by government is needed to generate
employment and improve liveability without reliance on industry and developer
contributions. As the housing market cools, measures must be undertaken to protect
employment in Tasmania. Infrastructure investment will help to accommodate future
growth in population and from a housing perspective, is historically a strong catalyst
for private sector activity.
4 Conclusion
Tasmania has enjoyed strong economic performance recently and activity in the
housing market has been and enabler of this success. The more buoyant housing
market has seen pronounced growth in tax revenue collected from the property sector.
In order to fully capitalise on this, the revenue generated must be reinvested in the
State. Investment must focus on improving productivity with this money best spent on
infrastructure, skills, red tape reduction and tax reform. In planning for Tasmania’s
future growth, budget measures must ensure the housing industry can respond to any
increases in demand for housing, particularly at the affordable level.
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