the productivity commission report: 3 key property development insights

the productivity commission report: 3 key property development insights


November 2017
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The Productivity Commission Report: 3 Key Property Development Insights

Last month, the Australian Government Productivity Commission publicly released a planning report to address issues dealing with population growth in Australia. 

The report, titled Shifting the Dial: 5 Year Productivity Review, looks at Australia’s health system and labour market, along with other issues. 

Chapter 4 is particularly relevant for the property development industry, since it deals directly with town planning issues, such as public infrastructure, road funding, land use, and housing accessibility. 

On land use, the report concludes that there are discrepancies between State and Local Government planning, along with an overly complicated zoning system. 

A Productivity Commission report overview

The report cites the following attributes as beneficial to a well-functioning city:

  • Access to the right housing in the right location
  • Good transport options
  • A sense of safety
  • Thriving businesses (and their accompanying employment opportunities)
  • Access to quality services
  • A good social, environmental and aesthetic design.

Cities that cover all these bases are considered “resilient” – they’ll be able to withstand such issues as congestion, threats to public safety, and natural resource scarcity, along with acute shocks such as disease outbreaks or terrorist attacks

With cities defined by their size and population, it’s important to have good policies around the use of available space, the types of activities people can undertake, the pace and distribution of population growth, and the ease of movement or people and goods. 

It’s the first one that’s important for property developers. Land and planning policies can determine the location of homes, businesses and other important infrastructure services. They can also define the types of developments allowed and the density of such buildings.  

In this blog post, we’ll look at three key takeaways from the report, and how they could impact property developers in the future.

States and territories should implement best practice development assessment models

Development approvals have always been a tricky area, with complex processes and often lengthy approval periods. 

In fact, State planning departments and large local governments are often faster at processing responses than smaller councils, which can get bogged down in their own zoning restrictions and specific overlays. 

The report cites strong growth in inner city apartments in Melbourne and Brisbane, where the State Minister for Planning and the large Brisbane City Council respectively have strict assessment responsibilities and frameworks for development.

The report recommends local councils and State and Territory Governments further implement best practice in assessing developments, using a track-based system developed by the Development Assessment Forum in 2005.

In this model, authorities would process development proposals according to assessment “tracks”, where they would be subjected to scrutiny based on their levels of risk or impact posed.

Zoning regulations need to be more flexible

The report paid some attention to the process of zoning, highlighting the issues that arise from excessive and prescriptive zoning classes. 

While it’s the State that legislates the types of zones allowed and the activities to occur within them, Local Governments can add further regulations with approvals needed for specific types of developments, along with additional parameters every development must meet.

It means a lot of red tape for property developers with every new project. Yet the report concludes that the best regulatory design would include flexible zoning frameworks when it comes to land use. The benefits of this would include:

  • Allowing new and innovative businesses to enter local markets (and others to expand)
  • Providing greater flexibility to adjust to changing business activities and community needs
  • Providing scope for complementary land uses to develop and compete
  • Minimising the need for spot rezoning.

For development proponents, the problem is that the same types of land use can be treated differently across council areas, and the prescriptiveness helps discourage investment. 

Eliminating stamp duties could be beneficial to property developers

The report states that stamp duties add to the price of housing, and so have been found to deter people from moving for work or lifestyle reasons. This also leads to less productive use of the land.  

Stamp duties have been found to:

  • Deter businesses from investing in land and capital
  • Discourage people from downsizing
  • Lead to over-investment in property renovations

But for property developers, there’s more to it; with people holding onto land longer, there are fewer opportunities to use that land for more productive means. 

The report recommends that the State and Territory Governments remove stamp duties from residential and commercial properties and instead implement a transition to a tax on the unimproved value of land. 

Should this happen, reducing the costs of transactions and encouraging more movement, property developers could see a two-fold benefit:

  • More people may be willing to invest, without the costs of stamp duty involved.
  • Property developers could have greater access to land to develop into more useful purposes.

This report sheds plenty of light on the potential for improved land use in the future. It presents some promising prospects for property developers and we can’t wait to see what happens as a result of its conclusions. 

For more industry news, be sure to stay up to date with the Development Ready blog!