A record number of homes built in Sydney over the past year is struggling to address the city’s housing affordability crisis, as the state and federal government remain at loggerheads over the best policy approach for addressing the problem.
More than 31,000 new homes were built in Sydney in the 12 months to October, the highest annual number of new homes in over four decades, according to new data released by the Department of Planning on Thursday.
But as median house prices in Sydney continue to hover around $1 million, the new data is likely to fuel the debate over the need for federal government intervention to address housing demand through taxation reform.
The Reserve Bank said in its monthly board minutes this week that parts of the property market were back on its radar as they were “strengthening”. Investors have been boosting the market attracted by record low interest rates and negative gearing which the federal government has ruled out changing.
NSW Planning Minister Rob Stokes said the figures showed the NSW government was “helping deliver a record number of new homes across Sydney” in a bid to address the backlog of the 100,000 homes needed across the state.
“By building a simpler, more efficient planning system, we’re working to improve housing supply and choice to help people get into the market.”
But academics said supply alone was incapable of addressing Sydney’s housing affordability crisis, a point which Mr Stokes acknowledged last month in a widely reported speech in which he called on the Turnbull government to reform negative gearing arrangements.
“Supply is just one part of it. It certainly isn’t going to relieve the affordability crisis we seem to be perpetually living with in Sydney,” Professor Bill Randolph, director of the City Futures Research Centre at UNSW said.
“Housing affordability is largely a function of the taxation and subsidy system that impinges on housing demand.”
Professor Peter Phibbs, head of urban and regional planning at the University of Sydney, said the federal government had “passed the buck to the states” through its unwillingness to address demand through changes to the taxation system.
Mr Stokes “had done everything right” by endeavouring to boost supply, he said, but attempting to solve housing affordability through supply alone was like “trying to put a bushfire out with a house”.
“It will help, and we should do it,” he said. “But we’re at 40-year highs [in building completions] and it hasn’t generated any significant benefit.”
Professor Phibbs said Sydney’s overheated housing market would ultimately have flow-on consequences for the local economy, including the loss of young talent to other cities, such as Melbourne, or overseas.
“We’re tying to compete internationally for global talent. Do you think young innovators are going to want to come to Sydney and pay such a wack of their income on housing?”
Last month, Mr Stokes generated national attention when he broke ranks with his federal colleagues on the issue of negative gearing, and accused the Turnbull government of falling “victim to the Canberra culture that promotes opposition over consensus”.
“Surely the focus of the tax system should be directed towards the type of housing we need. Why should you get a tax deduction on the ownership of a multimillion-dollar holiday home that does nothing to improve supply where it’s needed?” he said in a speech to the Committee for Economic Development in November.
In all districts of Sydney, the number of new homes built in the past year surpassed the four-year average, but it was in Sydney’s middle and western suburbs where most of the construction was concentrated.