Housing inquiry hearing in Karratha

I was in Karratha, Western Australia today with the Senate Committee inquiring into housing affordability. I hadn’t been to this town before, although I have previously been to Port Hedland, which is ‘just up the road’ (about 240 kilometres).

The cost and availability of housing in Karratha (and most of the wider Pilbara region) is just appalling. While people working in the mining and resource industries in the region earn very high pay, many agencies and local businesses cannot get sufficient staff simply because those people cant afford the housing costs (assuming they could find a house to start with).

The Committee was told that weekly rent for a four bedroom house was around $1200 in Port Hedland and around $1500 in Karratha. We saw fairly average looking houses being built that we were told would be selling for up to one million dollars.

It was a reminder that the nature of housing need is very different in different parts of the country. I have been sceptical about the incessant mantra from property developers arguing that inadequate supply of land for development is the main reason for the crisis in housing affordability and availability, but there’s no doubt that at least for this region inadequate supply is at the heart of the problem.

Land is starting to be released by the state government in more reasonable quantities in recent times. While that will hopefully lead to a tapering off in the ridiculous spike in housing costs that is currently occurring, in one sense its too late, as they can’t really reverse the rise by releasing too much at once without devaluing the (overpriced) housing asset that many people have now paid for. A number of witnesses appearing before the inquiry argued that the legal requirement for Landcorp, the state government’s land agency, to maximise its earnings had contributed to both the cost of land and the delays in it being released.

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3 Comments

  1. Indeed there is no simple solution. If one tries to make things more affordable then this is at the cost of the current asset holders.

    But surely the benefit over recent times has greatly gone to asset holders in real estate.

    The best only I can see is for average prices to increase less than wages for many many years.

    Open market operation by the public sector could be an option, but it is much harder to make houses and land available on reasonable terms (that is balancing the impacts of the land use) than it is to just print more money as in the financial markets.

    These localised effects surely are an effect of too much progress too rapidly. If only we had stretched the supply of ore out over a longer period. But I guess this is then called protectionism and labelled “bad”. (And also, curtailing demand as is so vehemently objected to by the Liberal party members).

    In the end, if no one in power is willing to make the needed changes to reduce market volatility and achieve the desired aims then all this effort is just for show.

  2. As a 30yr old proffessional I feel the stress of the housing affordability crisis but I am adamantly opposed to the release of more land. By moving further out from our cities and towns we are putting more strain on our services- garbage, postal and transport. It’s ugly and it’s environmentally unsound.
    What we need in high density housing. Attitudes have changed and not many people really want the 1/4 acre block in whoop-whoop any more.
    Maybe the government could help bring people together and help negotiate with developers. Part of owning your own home is the freedom to set your own rules and design it the way you want. So if people could link up with a bit of a plan for a highrise it would feel more like home and because the money is available at the outset with individual unit owners taking out their own loans it should be more affordable than a conventional highrise.

  3. Austin, Rebecca, all home owners and potential First Home Owners

    Austin, you are correct – to “make things more affordable then this is at the cost of the current asset holder.”

    But, given housing bubble has property up 300% in 7 years it would not hurt most to trim the fart. Also, any solution should be aimed at helping FHO & recent home buyers if house prices fall.

    I believe the solution is simple, although a little painful. But we are at a crossroads in terms of housing the population. What do we want – little pain or big pain?

    A simple solution – revisit negative gearing – offer it to all home owners. Here is a good summary of NG that explains why NG should be flushed down the toilet –

    http://www.prosper.org.au/2007/11/01/negative-gearing-incompetence-or-conspiracy/

    If you are a home owner or potential FHO then reading the above article (200 words approximately) by Dr. Putland will clarify what you are up against.

    If enough people knew explicitly the cause of the housing unaffordability problem then solution would be forthcoming sooner rather than later.

    Rebecca

    I too believe that if the plan is to increase population then we need to limit the spread of the city footprint, or should that be city tyre-treadprint.

    Australia has some of the most sprawling car-cities in the world. Now as petrol costs are starting to bite and commutes chew into what would otherwise be free time the penny has dropped. At least for the peasants. Our rulers and town-planners are still a step behind common sense, and probably always will be.

    We also need to make sure there is accommodation available for the inflow of immigrants. The current skewing of tax rulings that encourages the hoarding of properties by investors rather than building new ones is deliberately putting upward pressure on rents and therefore inflation. Then the media blames the RBA for increasing interest rates. There is nothing to blame other than tax rulings favouring investors.

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