Rising costs to put holes in 2030 plan
STEEP labour costs and a run-up in key commodity prices could slow construction of high-density residential dwellings.
This would place further pressure on the Victorian Government's ambitious 2030 plan, which includes the creation of dozens of activity centres across Melbourne.
Property developers are being squeezed out by a range of costs, levies and taxes and an unwillingness by consumers to pay higher prices for apartments in suburbs zoned for high-density development.
Construction and property consultancy Rider Levett Bucknall has warned that rising costs will impede the aims of Melbourne 2030 and recently announced changes to the planning laws to stimulate activity.
It follows similar warnings from the Master Builders Association of Victoria, which said planning reforms were vital to address the issue of housing pressures and affordability — especially within the targeted activity zones.
Last week the State Government announced it would take some planning powers away from local councils after an independent audit of the Melbourne 2030 planning strategy was critical of its progress.
Melbourne 2030 was launched six years ago to prepare and plan the city's transport, infrastructure and housing needs in the face of a growing population and demand for key services. A crucial plank of the policy was the creation of 26 activity centres around commercial and shopping hubs, where higher-density developments would be encouraged.
But recalcitrant local councils and protests from green groups, NIMBYs (not in my backyard) and other anti-development activists has perverted the plan, forcing the Government to act.
Rider Levett Bucknall said growing pressure on skilled construction workers and materials from the economic booms in Queensland and Western Australia was forcing up the cost to developers to build new homes. The industry was bracing for a forecast increase in iron ore prices of 150%, while other materials used in construction were also rocketing.
This adds to the final price paid for apartments, argued Rider Levett Bucknall director Mark Lochran, making them less unattractive to buyers and thwarting the original policy aims of the Government.
"We are expecting a 15% increase in the steel price next month, and steel is used in the mainframe and the reinforcement of concrete," Mr Lochran said.
In recent years the typical cost of high-density residential developments, such as high-rise towers, had increased from $2000-$2400 a square metre to as high as $3200 a sq m, he said.
Mr Lochran said the new planning rules could help expedite planning and development but that tighter lending conditions by the banks had made it harder for developments to get off the ground.
One effect of rising prices was property developers reducing the size of apartments to maintain low enough sale points to attract buyers.
(The Age Newspaper)
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