Hi, I’m Amber Sherlock and welcome to Face to Face. Today I’m joined by Tom Forrest,
Chief Executive of the Urban Task Force Australia. Thank you so much for your time today, Tom. It’s
a pleasure. Can you tell us firstly, what does the task force do? Urban Task Force Australia is a
peak industry representative organisation that represents the top 120 property developers and
equity financiers in Australia. We represent the people who build the houses, who build the
workplaces, who build the data centres, who build the retail centres. At the top end of the
property development sector, they are the members of the Urban Task Force. Interest rates have just
gone up again and perhaps we’re looking at a recession here in Australia. What are your thoughts on
that? Well, I wouldn’t want to talk up the idea of a recession coming forward. Of course, that’s
possible. But in the meantime, we have a real problem with inflation. The fact that interest rates
have gone up and the fact that that was also driven largely by factors that existed before the war
took place, before the war started, before the petrol prices went up, that’s a concern.
And I think that’s why the RBA have taken the step of increasing the interest rates. What needs to
happen? Well, we need to see investment from the federal government on economic growth for the
country, not handouts, not matters that aren’t going to boost the growth of the economy.
And one of the things the Urban Task Force has been saying is we’ve got a housing supply crisis.
Lots of immigrants coming in. That’s good for the economy. We need those immigrants to build up our
skills base. But if we don’t have a place to house them, that’s a real problem. The immigrants
coming in gives the federal government revenue. Great. It’s up to the federal government now to
spend that money on helping the states with the infrastructure support to develop the housing
supply so that we can also have lower house prices. Now let’s talk about property developers.
How important are they for the economy? The property builders are the people who build the houses
that we live in. Sometimes we get a bad name, I’ve got to say. memories of the Joe Bielke-Peterson
White Shoe Brigade abound. And some of the members of the property sector don’t particularly help
our own reputation. But the fact of the matter is 95% plus of the property developers in Australia
are high-quality, reputable organisations who are controlled by governance systems,
publicly listed companies, some of the largest companies in Australia. they employ roughly 10% of
the total workforce from the people who build, from the people who do the marketing,
from the people who do the sales, from the people who maintain the buildings going forward. 10% of
the workforce. It’s a very significant component of the economy. And frankly, without…
the property development sector and the property developers building the houses, we’d be reliant
upon the government to build them all. We’d have social housing for everyone. I don’t think that’s
a positive option. What’s the biggest misconception about developers? I think the idea that
developers are making rapacious profits is just wrong. It’s a misconception. I mean,
you do hear that at a lot of dinner parties. You do. And I’m sure there have been periods in
history where that has been the case, where the prices have just been going up and up and up. But
in recent times, it’s not been the case. In the COVID period, we saw large numbers of skilled
migrants leave our country and go back. If they had a 457 visa, they didn’t get JobKeeper.
They went home. We had problems with material shortages arising from both the Suez Canal and COVID,
shortages of containers being available to bring goods to Australia. That drove up the prices.
We had… shortages of labour that I mentioned have caused the prices that we’re paying
construction workers to go up far, far higher than the inflation rate. While other workers around
Australia have been getting less than the inflation rate in terms of their wage rises, construction
workers have been getting considerably more. Why? Because there’s a significant shortage.
They’re using their bargaining power to drive the price up. That’s natural. A combination of those
things, though, has meant that the cost to build a house is actually more than the public are
prepared to pay, and that’s exacerbated by increasing interest rates. So a combination of those two
things is, firstly, it costs you too much to build the house, and secondly, you can’t sell it for
the… to even cover your costs. So you think developers are being unfairly blamed for the housing
crisis? I don’t think it would be reasonable at all to blame property developers for the housing
crisis. I think property developers would be delighted to build as many houses as is feasible to
build. But if they’re going to lose money on it, they’re not going to build them. I think people,
everyday Australians, are just seeing housing prices rise and obviously the first person to blame
is the developers, but perhaps it should be the government, you’re saying? Fees, taxes, charges,
over-regulation, restrictions on zoning that stopped us converting empty office blocks during the
COVID period into housing supply. We’ve got a shortage of housing supply. We’ve got far too much
empty offices. and yet the zoning rules wouldn’t allow the transition as they have been allowed in
other economies and they’ve prospered from that wisdom. We’ve been too slow to respond and our
planning system has been part of the problem. That’s why you’ve seen in states right around
Australia a real focus on driving up the housing supply by easing the planning restrictions.
In New South Wales, we’ve had the Housing Delivery Authority, the HDA. In New South Wales,
we’ve had over 300 expressions of interest, which will deliver up to 100,000 new homes coming
through a new pathway for planning assessment. That really is a positive move and something that
will flow through the system coming forward, something that the Urban Taskforce has been calling
for, and we’re pleased that the government’s been listening. But we need to see more and more.
slashing of the red tape, slashing of the costs and the extra fees, taxes and charges,
because what really happens is they get passed on to the end consumer.
Every time the government puts a tax on property developers, that tax ends up being on the people
who are buying a new home or even more distressingly, people who are renting and really can’t
afford that increase. So let’s talk about that red tape. You identify that obviously as one of the
biggest problems facing developers. It’s red tape in the restrictions we have on zoning,
restrictions that allow you only to build commercial property in certain sectors, retail in other
sectors, industrial in other sectors. residential, limiting the height,
limiting the style, all of those sorts of restrictions lead to a lack of a capacity for the
development community to deliver what the community is demanding at that point in time. If the
community right now are demanding housing supply and there’s all this red tape saying,
oh, no, you can’t do housing there and stopping you from getting the height and density which might
make a project feasible. you don’t get the housing supply. So the politicians can say as much as
they like, we need to have housing. Housing’s our top priority. But if they don’t change the rules
to make it easier for the property development community to do that, to deliver what they want,
then they won’t get the results. And that’s sort of where we are now. We’ve talked about red tape.
What are other issues facing property developers nationally? It’s something I mentioned earlier.
It’s the question of feasibility. It’s the question of getting rid of all of the different costs
that burden a property developer. So allowing for manufactured homes.
which would improve the productivity on the workplace. Manufactured homes are where rather than
everything being built on site and every house being built almost bespoke, you start building more
and more of those components in factories. You might start with the bathroom pods.
You might start with aspects of the kitchen. But you can build more and more and more through a
prefabricated manufactured house and then they become individualised, a bit like a motor car.
according to your preference. So Volkswagen, for example, they own Seat,
they own Volkswagen, they own Audi, they own Skoda. 70% of those cars are identical.
And yet when you look at those four brands of cars, they look completely different.
So what we’d like to say is let’s have our houses 70% made in a factory and then we can make them
look… in accordance to the consumer’s preferences and desires once they get onto site.
70% built in a factory, 30% on site, faster, more efficient, drives productivity forward.
That’s the sort of thing we want to see moving forward in Australia. You represent a large range of
organisations from smaller developers to larger developers. Are you noticing perhaps a smaller one
struggling more? I think the pressures on the property sector are affecting the…
property development community right across the board. We’re seeing some of our members who
specialise in, for example, data centres doing quite well because there’s enormous demand for that
and yet still… there are pressures on them because every time you build a data centre, they’re an
enormous consumer of power, they’re an enormous consumer of water. That’s water that otherwise
might serve us more housing supply. There are pros and cons to every single development.
We need those data centres to drive our economy and to put us at the cutting edge where we really
need to be in terms of the productivity of our nation. But we also need the houses.
So there’s always going to be questions. Some of the smaller property developers do quite well with
more niche products, looking at more expensive apartments on the North Shore,
which are designed to accommodate downsizes from larger homes, people who might be able to sell
their home for $4 or $5 million from the North Shore, move into an apartment worth $2.5 to $3
million, and then they’ve got a little bit of extra money in the bank to help them through their
retirement years.
smaller developers who do very well in that space. So it’s not fair to say that one size is doing
worse than another. Everyone’s under a little bit of pressure and looking for an opportunity to
make it work. Where it will work, you’ll see housing supply. Where it doesn’t work, that’s going to
be a more difficult proposition. Well, the government is flagging changes to the capital gains tax.
So what’s your view on that? Capital gains tax is a relatively small contributor to the cost of
housing. We say, We don’t oppose a proposal that you would reduce the concession on capital gains
tax for existing homes. Because when it’s on an existing home, that’s just encouraging an investor
to compete against a mum and a dad for the purchase of that existing home, pushing up the price
without adding to the supply. What we say, though, as a corollary to that, is you should have…
an increase in the concession for new homes. So that would be a taxation incentive to the property
development community to build more new homes because there’d be more people out there who are
incentivised by the tax system to buy those new homes. So rather than having investors compete with
mums and dads or young families for the existing homes, you actually incentivise the construction
of new homes and that’s exactly what we need to see. In your pre-budget submission, you called for
improvements to the Housing Australia Future Fund. What would that entail? The federal government
has spent billions of dollars, $10 billion they’ve put into the Housing Australia Future Fund.
But they’ve prioritised that primarily for social and affordable housing. They’ve had three rounds
of allocations of funding through the half, as it’s known in the trade.
We would like to see greater collaboration with the private sector. We’re starting to see that in
round three. In round two, there was not so much. It was extremely bureaucratic. It was really
difficult. It took a long time to get through all of the requirements. We’ve seen them ease up some
of those concerns through the half round three, as it’s known. But we would like to see more
collaboration with the private sector where you have affordable housing in conjunction with market
-based housing being built together so that the half funds effectively support both the delivery of
market housing and affordable housing and therefore deliver the affordable housing for those that
need that support as well as driving up the market housing supply. That’s what really will have an
effect on housing affordability going forward. If better infrastructure is the key to housing
supply, what would this look like? You know, when we talk about the better infrastructure,
we’re not talking about high-speed rail lines and pet projects of any politician who wants to get
something a little bit more difficult off the front page. We’re talking about the pretty boring
stuff, water. water infrastructure and roads. That’s primarily what we’re talking about when we say
housing-related infrastructure. We’re talking sewage pumping stations. We’re talking…
the delivery and the pumping for the potable water or the drinking water that goes in and supports
the delivery of housing. That’s where we’ve got real constraints, particularly in Sydney’s north
-west and south-west. Sydney water’s pretty much at its limits at the moment and it needs to have
a significant increase in investment. Now, that can come from property developers, but as I
mentioned earlier, that’s just going to increase the price for the end consumer. We say the federal
government… got its budget booming from all the immigrants that are coming in and going straight
into employment, driving income tax receipts, driving company tax receipts. Great for our economy.
but they should be spending some of that money by helping the states with their real problems with
roads funding and water infrastructure funding. That’s what I’d like to see from the federal
government. What about the idea of build to rent? Is that part of the solution for Australia’s
housing crisis? Build to rent products won’t solve the problem, but they are definitely a component
of it. As is always the case in all aspects of life, there are changing preferences and one of
those preferences amongst younger generations is not to purchase a home and lock yourself into one
location. People are more mobile in their employment these days. They move often jobs,
they move state to state, city to city. We have people coming in on international contracts for
short periods of time. All of those people are looking for build to rent options as a way to
often… co-located with high-quality transport, co-located with a new metro line,
co-located with a train station or a bus service or a light rail service. That’s the perfect
opportunity for build to rent. But we don’t want to say… should be just bill to rent.
There are some companies that like that product. Superannuation funds like to fund bill to rent
products because it delivers a long-term financial and predictable financial stream back to
superannuation funds and pension funds. They like that product as an investment option.
But I think bill to sell will always be the preference of the property development community
overall, but bill to rent has a role to play. It’s all housing supply, be it student housing.
be it co-living, be it build to rent, be it market housing, be it high-rise apartments, be it
house and land packages in the outer suburbs. It’s all supply and all supply is good supply because
without it, prices will just go up. Exactly. And I feel that build to rent generation we’re talking
about will often feel like they’re locked out of the housing market because prices… to rise.
Where do you see that housing market heading just in the next 12 months? It’s been well publicised
that we’ve had significant numbers of net overseas migration into Australia in the recent times.
Part of that was overcoming the loss during COVID and that was absolutely necessary and it was
always going to happen. But the numbers of housing that we’re provided don’t go anywhere near
matching the growth that we’re seeing in the population. That would only mean that prices are going
to continue to go up unless, of course, there’s a complete crash and nobody wants that. The banks
don’t want that. The treasurers don’t want that. The finance community doesn’t want that. The
development community doesn’t want that. Anyone who owns a house doesn’t want to see the value of
their property going through the floor. So what we need to see is a steady increase in housing
supply to stop there being a bubble created and then a crash because that’s the last thing.
We don’t want… housing prices going up and up and up and up and then bang, suddenly going down.
Absolutely not. That would be a disaster. So are you optimistic or are you concerned about the
future? I’m optimistic because the Federal Housing Accord gave all of the states a target.
1.2 million homes over five years. Now, the states are finding it hard to deliver against their
target. For example, in New South Wales, the target equates to about 76,000 homes a year on a pro
rata basis. We’re only delivering about 50,000 a year. And we’re coming up to two years into the
accord. We’re nowhere near getting to the target. The fact that we’ve got a target has refocused
the minds of the politicians and the public servants to find new ways. I mentioned the Housing
Delivery Authority. There’s reform there in New South Wales. There’s the low and medium density
housing reforms, increasing the height in ordinary suburbs within 800 metres of a whole stack of
train stations. There’s infill affordable housing bonuses, where if you provide some affordable
housing, you get a bonus. All of these things are good and each of the states around Australia have
adopted a version of the same thing. In Victoria, there’s been significant increases in the bonuses
allowed for housing supply. Similarly, in Queensland and in Perth. That means I’m positive about
the way government is… improving the system, but I’m at the same time concerned about those
things we can’t control, like inflation, like fees, taxes and charges, like changes that may be ill
thought through on things like capital gains tax. If we go the wrong way, it’s a pretty delicate
stage we’re at right now and it could send us into a very depressing state. I don’t want that to be
the case. I remain optimistic about where we stand. That’s good to hear. Finally,
you do represent property developers. If you could make one policy change tomorrow to perhaps fix
the Australian housing crisis or represent your members, what would it be? I would increase the
focus on mixed-use development. Rather than saying you can only build a certain type of property
development in this location or a certain type in that location, I would say… Let the market
decide what should be built in each location. If the market sees an opportunity for mixed use, that
is retail on the podium and then housing on top or even above a supermarket or even above a car
sales yard, why shouldn’t they be co-located? They are in every other country. If you go to
Japan… pretty much you’re allowed to put whatever retail you like on the ground floor and then it
can have housing above it. And that’s why all the way through Tokyo, it’s alive every part of the
day from 24 hours of every day. Similarly, if you go to London or New York or Paris,
there’s life because there’s… commercial activity mixed with housing activity.
You’ve got the population with the commercial activity right below you. That’s the sort of
excitement I think sometimes we miss out on here in Australia. So I’d say let’s pursue mixed use.
Let’s get the planners who have overplanned our cities out of the way for a while and let the
people decide what should be put where. Tom Ferriss, thank you for joining me today. That’s a great
pleasure.