Carbon tax may slow home construction

By Stacey Moseley

The cost of building a home is likely to increase following the introduction of the Labor government’s carbon tax last weekend, a senior economist has claimed.

According to Dr Andrew Wilson, senior economist at Australian Property Monitors (APM), less homes may be built as a result of the Gillard government's new carbon tax.

“We need to look at the cost of construction; various models have shown that the cost of a new home could rise between two to five per cent for house and contents as a result of the carbon tax,” he told Smart Property Investment's sister publication, Real Estate Business.

“We need to wait and see how all the various pieces of the supply chain for new housing are affected by the tax.”

July 1 marked the start of Australia’s first-ever carbon tax, a policy that enforces emissions costs on the country’s 294 largest polluters.

The federal government has imposed a tax of A$23 per tonne of carbon emissions. The tax is set to increase by 2.5 percent annually until 2015, when an emissions trading scheme will replace the tax.

“The new housing industry has been subdued over the last couple of years in most states, and this is something that the industry really doesn’t need, another price rise, particularly for builders who are already struggling under very thin margins in terms of their product,” Dr Wilson said.

“So I think the cost of construction is something we need to be very watchful of, especially new home and apartment construction, as a consequence of the carbon tax.”

Opponents to the tax predict its inclusion will mean mine and factory closures, job losses, and an increased cost of living for Australians as higher energy prices find their way to the consumer.

To offset the increase in energy prices, the prime minister has pledged $7 billion in tax cuts and assistance to eight million households. More than A$1 billion was paid in the month of June to families, students, and pensioners in anticipation of the tax.

“I think the affect of the carbon tax will be something that will be revealed over time,” Dr Wilson said.

“Of course there are particular concessions that are being made to particular households and families to offset the cost of the carbon tax but these things take time to wash through the system.”

The introduction of the tax comes just a month after the NSW government announced the new first home buyer’s grant which focuses on generating movement in the construction industry. As of October 1 this year those buying new property or building can receive up to $15,000 while also receiving a stamp duty exemption.

“It is sort of a cross-wind here; we are getting incentives to buy new homes. But will it be offset by the increase in the price and cost of new homes as a result of the carbon tax?” Dr Wilson asked.

“We will await the outcome of this, but certainly I think this is an issue and something that will be revealed over the medium term on the cost of home building.”

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