Home Building Costs

Want to know why housing affordability is so poor in this country?   The answer, in simple terms, is because the cost of building new houses is so high – ridiculously, obscenely high.   The cost of building the typical house in Australia has risen 53% in the past three years – and it now costs close to half a million dollars to build that home.   And that’s just the cost of the house. It doesn’t include the price of the land.   Who’s to blame for this situation?   Primarily, overwhelmingly, it’s government. Politicians and bureaucrats.   They keep making decisions that add to the cost of creating new homes.   Just three years ago, the average cost of building a new house was $320,000.   Now, early in 2024, its $490,000.   Government meddling with the housing industry, and their obsession with using the housing industry as their go-to cash cow when they need to raise money, has caused the average cost of a new house to blow out to almost $500,000.   It’s not the usual suspects that journalists and economists and politicians like to blame for poor housing affordability.   This has got nothing to do with negative gearing, or foreign investors, or mum-and-dad Australian investors, or government grants to first-home buyers pushing up prices.   It’s purely and simply the constant addition to the cost of creating new homes by politicians and bureaucrats.   A couple of years ago, a research study revealed that between 35% and 50% of the cost of a new house-and-land package – depending on where you are in Australia – was taxes, fees and charges by the three levels of government.   Imagine that reality. That every time someone builds a new home in Sydney, half of the cost they’re paying is taxes and fees to government.   Stamp duty, land tax, GST, capital gains tax, application fees, infrastructure charges – and many, many more.    And then there’s the cost of red tape – delays and additional costs caused by bureaucrats.   But that’s just the background. Every year the cost of building a new house grows larger because governments keep changing the rules and regulations – always in ways that add to the costs of construction.   New regulations to make houses safer. New rules to make houses more accessible. New laws to make houses more environmentally friendly. New guidelines to make houses more aesthetically appealing.   Now you might think that those measures are all good things. If houses are (allegedly) safer, more accessible, new energy efficient and better looking, that’s all very positive.   But if you feel that way, you cannot then complain about poor affordability, because you’ve just declared your support for measures that have added massively to the cost of creating new homes for young Australians – thereby causing a further deterioration in housing affordability.   The problem of government taxes, legislation and red tape pushing up the cost of housing has been exacerbated in recent times by the shortages of tradespeople and materials.   Why are there shortages of tradespeople? Mostly it’s because governments around Australia have been trying to spend their way out of the problems of the Covid era with major, new, headline-grabbing infrastructure, which is pulling skilled people out of the home-building industry.   The infrastructure projects that are scheduled to happen in the next five years total $230 billion – at current cost estimates and we can be sure they will blow out to a lot more – and that means the workforce needs to grow 127% to provide the workers and tradesperson required to build all that.   And this will make matters worse for the home building industry.   Master Builders Australia says that the main reasons the cost of building houses has increased so much are ...   Increased building approval times High taxes, particularly land tax The shortage of workers The high cost of materials   Most of the blame for that sits at the feet of government – politicians and bureaucrats.