Industry body and surveying firm say supply constraints, not investor taxes, are driving prices higher
Australia’s housing affordability crisis stems from weak construction productivity, labour shortages, slow planning and government charges rather than investor tax settings, according to the Property Investment Professionals of Australia (PIPA) and MCG Quantity Surveyors.
They say political debate has focused on negative gearing and capital gains tax while structural limits on new supply have been left largely untouched.
“We keep hearing about negative gearing and Capital Gains Tax as if they’re the levers that will magically fix affordability,” said Mike Mortlock (pictured top left), managing director at MCG Quantity Surveyors. “The real issue is that we simply cannot deliver homes at the speed and scale required. Productivity has flatlined, labour is stretched, approvals are slow and governments have embedded significant costs into every new dwelling.”
The federal government’s goal of 1.2 million homes over five years implies about 240,000 completions a year – 25% to 35% above the recent annual average of 170,000 to 190,000 dwellings, based on Australian Bureau of Statistics data. Mortlock said current industry capacity falls short.
“We’re asking an already strained sector to deliver a step-change in output without addressing the reasons it’s struggling now,” he pointed out. “Targets and wishful thinking don’t build homes – capacity does.”
ABS and Productivity Commission figures show construction labour productivity has barely improved for decades, unlike sectors such as manufacturing and professional services. Mortlock warned that without productivity gains, extra demand risks flowing into higher prices rather than more supply.
Public infrastructure programmes are also drawing on the same trades and materials used in housing, with elevated vacancy rates across construction roles.
“Housing is competing with government-funded megaprojects for workers and materials,” said Cate Bakos (pictured top right), chair of the Property Investment Professionals of Australia. “Until we coordinate pipelines, we’re effectively bidding against ourselves, and homebuyers will pay the price.”
The Productivity Commission has long identified complex planning rules and lengthy approvals as a key drag on new housing. Multiple assessment stages and extensive documentation increase holding costs and financing risk.
New homes also attract a wide range of government imposts – including goods and services tax, stamp duty, infrastructure contributions, local levies and compliance charges – which can make up a large share of the final price in some corridors, according to industry leaders.
“You can’t talk about housing costs without talking about the taxes and charges baked into every new home,” Bakos said. “The government is not a bystander in the property price pressures. It’s a major cost participant.”
“While some are state-based taxes, the reality is that property investors endure a disproportionate level of tax when contrasted against share market investors. Property investors are widely viewed as scapegoats for additional taxes, and the unintended consequences of such targeted taxation will be damaging to the property market as a whole.”
Mortlock said targeted incentives and policy support are needed to improve building methods and lift productivity if governments want to expand supply without locking in higher price levels. “If we want more homes without permanently higher prices, we need to build differently and not just build more,” he added.
Bakos urged a shift away from debate over long‑standing investor tax settings towards reforms that increase the pace and efficiency of new construction. “Housing affordability won’t be solved by reallocating existing homes,” he pointed out. “It will be solved by increasing the speed and efficiency with which new homes are delivered.
“We need a coordinated national productivity agenda for housing that spans planning reform, labour strategy, innovation incentives and a review of embedded taxes – not a political discussion about long-standing taxation policies that have supported the supply of new investment properties for decades.”
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