It's all about the planning

The Queensland State Government announced two new initiatives this week.  The first being plans to develop three new satellite cities capable of housing a total of 250,000 residents at Yarrabilba, Ripley Valley and Greater Flagstone within the Greater Brisbane Region.  The second announcement being that the State Government would offer an increase to the current first home owner’s grant ($7,000) of $4,000 for those who purchase and build new homes outside of the south-east corner of the state.

On the surface, the approval of three new cities to be developed within the South East Corner of the state is a welcome initiative.  Plenty of people want to live in South-East Queensland and nationwide we have housing supply issues.  Housing for another 250,000 persons will satisfy a large component of housing demand but it is important to put this into perspective, over the twelve months to September 2009 there were more than 115,000 new Queenslander’s creating a requirement for 44,308 new dwellings based on the average household size of 2.6 persons.  Three large projects such as these will help, but still fall a long way short of solving the supply side issues.

Head to any one of these areas and you will find that currently there is very little amenity.  These areas are dominated by acreage properties and very little in the way of shops, schools, restaurants and public transport facilities.  The increase in housing supply is very encouraging, but before we see a strong consumer demand to buy into these areas there will need to be significant infrastructure development to provide the required level of connectivity and amenity.  Who will want to live in these areas if there are none of these facilities and who is going to provide the amenity, developers? The Government? 

It would have been a refreshing change to see the announcement of these growth regions accompanied by a parallel announcement that the Government (or someone) is going to build the roads to service these new regions and from the outset construction will commence on public transport amenity (either busways or trains) to ensure connectivity with existing communities and the Brisbane CBD.  Cuts to infrastructure charges and costs associated with developing the land would also have been a welcome incentive to ensure that prices in these new cities are actually affordable.

Also, details on employment in these regions was sketchy at best, is the Government going to encourage the prosperity of these regions by moving public sector jobs to these regions?  Presumably in the initial stages of development some residents of these cities will need to commute to the Brisbane city centre or major working nodes such as Ipswich, Beenleigh or Springwood for employment.  Without the public transport amenity and/or the necessary new roads the development will result in more cars on existing roads such as Ipswich Road, the Centenary Motorway and the Gateway Motorway.  These roads already suffer significant levels of congestion on weekday mornings and evenings and these new communities will likely add to the pre-existing congestion.

Looking at the second announcement of a boost to the first home owner’s grant for those building new homes outside South East Queensland again raises some concerns.  It certainly appears that Government’s are unable to provide the necessary infrastructure to support the population in South East Queensland which is also happening in most other capital cities.  However, is luring first home buyers outside of capital cities the answer?

The success or otherwise of this initiative will be jobs.  For professions such as teachers, police, medical and other jobs where a great number of workers need to do country service or work in jobs outside of South-East Queensland this is likely to be a great incentive.  Outside of these types of professions where are the jobs (and the wages) in these regional areas to lure residents?  Again the Government could potentially assist by sending public sector jobs to regional areas of the state rather than a dependence on these jobs being offered in the Brisbane CBD.  The question must also be asked, if people really wanted to live in these regions wouldn’t they have already moved there?  Especially when you consider in most regional areas of the state property prices are already much lower than those within the South-East corner and prices generally remain below their pre Global Financial Crisis highs.

We saw during 2009 that the First Home Owner’s Grant Boost was a very successful initiative which allowed an all-time high number of first time buyers to enter the market.  However, this incentive was available at a time when interest rates were at their lowest levels in almost 50 years and property prices had come off their 2007 highs. 

Today we are in a position where interest rates sit at what the Reserve Bank suggests are average levels and property values nationally have increased by 12.5% over the year to March 2010.  I wonder why this additional benefit was not offered by the State Government at the same time the Federal Government was offering its own generous First Home Owners Grant Boost.  If this was available at that time the incentives to build a new home in a regional area of the state would have been very significant.

The fact that this new boost has no timeframe associated is also concerning with the proviso that it will be reviewed annually.  I certainly don’t think it is responsible to have incentives such as these carry on ad infinitum however, it is important having a review process and one which is more regular than every 12 months.  A lot can change in just 12 months.  Given that there is no timeframe on the offer a three or six month review would likely be more responsible.  The beauty of the Federal First Home Owner’s Grant Boost was that from the outset it was only available for a limited period of time which created urgency around getting into the market and taking advantage of the Boost.

At the very least the two announcements show that the State Government of Queensland is trying to address housing supply and affordability issues.  In saying this, it’s not as simple as if you build it they will come.  Fundamentally, if someone is going to move somewhere, anywhere, there needs to be at least one good reason and often a number of reasons to make the move whether it is: price, housing quality, job prospects, provision of public transport, retail and dining amenity or a number of other potential reasons.  My concern is that both initiatives fail to provide enough good reasons for property purchasers to move to these areas, but time will certainly tell.

Please let us know your thoughts on these new initiatives from the Queensland Government or similar initiatives in your region and whether or not you think they will be successful.

About Tim Lawless

Tim heads up the RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia

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One Response to It's all about the planning

  1. WinstonWolfe June 1, 2010 at 2:40 pm #

    Why are socialists so slow on the uptake?

    People won’t move to where there are fewer job opportunities. Jobs first, then homes Anna.

    What a govt could do to encourage more people to regional Australia is provide tax breaks for regional employers…..to offset freight costs and social/cultural disadvantage. Drop regional company tax to 25% and raise metropolitan tax to 35%, then you’d be doing something.

    And you’d have to structure PAYE tax similarly to attract employees….

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