Developers: Rezoning more land won’t lower property prices

Developers have fronted the parliamentary inquiry into housing affordability and admitted that simply rezoning land won’t lower property prices:

CHAIR: Is it not your view that, if we increase the amount of supply, prices will go down?

Mr Helmers: I don’t think that’s the case. Like Richard, I think what we would expect to see is that prices will not grow. We’re a volume house builder across the country. We’re looking for more and more numbers. Price growth in land and impacts on affordability are counterintuitive to what our goal is, and that’s to build more houses. If we can increase supply through planning, we won’t see prices double in four years. That’s what we want to—

CHAIR: Sorry to cut you off, Mr Helmers. Mr Long, your view?

Mr Long: My view is consistent with Richard’s: rezonings won’t necessarily lead to lower housing prices, because we’ve got an undersupply issue in New South Wales, but they will actually help in making sure that we’ll be moderating the rise of prices into the future…

CHAIR: Do you think rezoning more areas and more land in Australia would lower dwelling prices by more than 20 per cent than they are now?

Mr Warner: Sorry, I beg your pardon?

CHAIR: My question is: do you think if state local governments rezoned more land to allow greater supply, that you could see dwelling prices drop by 20 per cent?

Mr Warner: No. Straight out, I concur with some of the comments before. It’s not going to create that much of a difference. It will suppress growth in prices, but I can’t see it, of itself, causing a drop in prices because there are too many other variables that come into the supply demand-balance. To put it simply, no.

Mr Rhydderch: I was just going to add it will moderate price growth; it won’t certainly drop it by 20 per cent. The challenge is the vendors who we buy for, the land, their expectation is set by what the market conditions and revenue are at the time and what the previous in global sales are. If there’s a large lot of rezoning, there might be a reset, but you’re not going to see 20 per cent falls; you’ll see a moderation.

The fact of the matter is that developers would drip feed stock onto the market in order to maximise sale prices and profits. That’s what they have always done, as evidenced by Dr Cameron Murray and Highrise Harry Triguboff.

It is ‘economics 101’ for developers to act like a cartel, exercise their market power, and maximise their profits.

Zoned residential land

Developers are sitting on masses of zoned land.

How else would lot prices have soared while developers sat a mountain of zoned residential land, totaling a decade-plus of supply?

Unconventional Economist
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