Prime Minister Scott Morrison, Premiers Gladys Berejiklian and Dan Andrews have at least one thing in common: they are committed to open up the economy commensurate with the uptake of vaccines and the attainment of 70% and then 80% of the population having received two doses of an approved COVID vaccine. BRAVO!

Soon after that, there will be inevitable pressure from universities and from businesses which are struggling to fill jobs to safely re-open the doors to international students and to skilled migrants. Prior to the Delta lockdowns, Governments were already cautiously moving in this direction.

Against this backdrop, record low interest rates and relatively loose APRA controls on lending have combined with State and Commonwealth stimulus to drive demand for new housing.  The issue that now has everyone’s attention is the problem with supply.

Urban Taskforce has welcomed financial assistance for new or first home buyers including homebuilder (versions one and two); the first home borrowers loan scheme; concessions on stamp duty etc.   This has worked with generous government support in the form of Job Keeper, Job Seeker and more recently, Disaster payments, to maintain and boost demand for housing.  But in so doing, prices have been pushed up because of the lack of supply.  The return on ex-pats has further added to demand for new homes on the outskirts of the metropolitan areas.  But interestingly, prices are also going up in the apartment market – over 7% in the Sydney Apartment market so far this year, despite there being a mass exodus of international students and migrants on temporary visas.

Every newspaper will tell you the story – prices are going up – even though the bottom has fallen out of the key drivers of demand in the apartment market – particularly in areas proximate to the major city capitals.

There have been two factors at play here in NSW.  The planning system as a whole (the EP&A Act, the myriad of SEPPs, Regulations, Ministerial Directions, Councils with their own agendas, DPIE, Government policy, and the Panels) is complex, slow, duplicative and is widely recognised as a massive hand brake on the productivity of the State.  DPIE has acknowledged this and has driven several positive reform initiatives in NSW. Some of these are showing signs of working, but the slowness of change is exacerbated by the difficulties with changing the Act and the desire to “not offend” Councils by leaving the responsibility for assessments to them and for decision making to government appointed panels. Most of all – everything is incredibly slow and very expensive.

At the start of the Delta related lockdown of Sydney, Urban Taskforce predicted that the economy generally and the construction industry in particular would be on pilot light till Christmas.  At that time, we publicly called for the NSW Planning system to use this “lock-down period” to ramp up the process of assessments, so approvals were bolstered for the post Covid recovery.

In the first instance, the NSW Treasurer and Minister for Western Sydney did an outstanding job to secure the partial re-opening of the construction sector after it was initially closed for two weeks altogether.  In NSW, we now operate at 50% of maximum site capacity with workers from the “restricted Councils” (in which over 50% of the Sydney area construction workforce reside) being required to have had at least one vaccination (plus a regular Covid test up to 21 days after the first vaccine dose).

The construction industry (including construction companies, developers, peak associations and unions) was at the vanguard of COVID-safe re-opening.  We were the first to actively support a direct link between working and being vaccinated. We led the trials of Rapid Antigen Tests as a stepping-stone between one vaccination and COVID safety.  Not everyone supported all this – many were concerned about the obligatory nature of the settings. But ultimately, it was clear that the NSW Health officials would not let our industry work without a mandated push towards vaccination and both figuratively and literally, we rolled up our sleeves and got on with it.

Unfortunately, the NSW Planning system has not yet risen to the challenge (though we remain optimistic).  The approval numbers speak for themselves (see the charts below).

We are at a cross-roads. At a time when housing prices are already rocketing upwards, we need some one-off big steps to drive up housing approvals and housing supply.  Urban Taskforce has called on the NSW Government to focus the efforts of DPIE on reforms that deliver more housing approvals fasters in all markets across all of greater Sydney and indeed, across NSW.  The call from industry has been to defer new policy initiatives which make the system more complex, that reduce feasibility or yield.

Many in our industry are caught in the ironic position that prices and demand has never been so high, yet approval levels have once again dropped off. Our industry is simply unable to meet this bursting demand.  The chart below, based on ABS data released on 31/8/21, shows there has been a drop off in approvals across Australia, but most concerning in NSW, is the number of new house approvals is about the same as the number of new apartment approvals (this contrasts the 25 year overage of a 35%-65% split between new homes and new apartments).  This reflects some recent increases in approvals in new houses prior to the June lockdown (partly bolstered by homebuilder funding from the Commonwealth), but was worryingly followed by a massive drop off in apartment approvals since the second lock down began.  The positive initiatives from last year to accelerate approvals helped get us through 2020 – but there was no significant change and prices continue to rise.

Source: Data taken from ABS: Click here

As we enter the new year, the economy (well – NSW and Victoria) will emerge from its cocoon. International travel and immigration will return.  International students will return to our universities and skilled migration will come with a rush to fill the many areas of strong demand.  But the big constraint could very well be the planning system.  If approvals are not there, and demand continues to grow, the housing affordability crisis will bite hard.  Affordability is an increasing issue as parents and grandparents increasingly realise that younger generations will have to seriously consider moving cities to find an affordable abode.

The Federal Treasurer has recognised the looming crisis. Jason Falinski MHR has been commissioned by the Treasurer to Chair a Commonwealth Parliamentary Inquiry into Housing Supply and Housing Affordability.  In NSW, the Productivity Commission has called for urgent reform in Planning and the need for flexibility and increased approvals and supply.  Housing approvals and housing supply is the main game in town and all eyes will be on each State’s planning system to ensure it delivers.

Tom Forrest


Urban Taskforce