Tax and legal advice
Land, zoning policy

Zoning policies: ‘oppressive’ and ‘unnecessary’

By Sasha Karen

Multiple experts have come out and confirmed a recent discussion paper by the Reserve Bank of Australia: zoning is the cause behind why property values are so high, rather than the value of the property itself.

The discussion paper, The Effects of Zoning on Housing Prices, authored by Ross Kendall and Peter Tulip, explores just how much the value of a house is driven due to zoning restrictions, and not the actual property itself.

“We estimate that the average Sydney house, valued at $1.16 million in 2016, represents a $395,000 structure on a $765,000 block of land,” Mr Kendall and Mr Tulip stated in the paper.

“However, the reason land is expensive is not because it is physically scarce. Hedonic regressions indicate that home owners do not value it, as land, especially highly.

“Specifically, they value land as worth about $400 a square metre on the margin, or $277,000 for the average Sydney block. This ‘marginal’ or ‘physical’ value of land represents the opportunity cost of extra land, as judged by what people are prepared to pay for it.”

If land was taken at its physical value, the authors stated, an average Sydney property could be purchased by an investor at $671,000 – $395,000 for the actual building and $277,000 for the land.

“Instead, buyers… pay $1.16 million. The extra $489,000 reflects administrative restrictions. That is, zoning restrictions raised prices 73 per cent above the cost of supply.”

This percentage varies on the capital city, but the cost of zoning in the major property markets vary from 42 per cent extra in Brisbane, 54 per cent in PerthPerth, TAS Perth, WA and 69 per cent in Melbourne.

Housing Industry Association’s principal economist Tim Reardon, Property Council’s CEO Ken Morrison and Master Builders Australia CEO’s Dentia Wawn all agree with the discussion paper’s sentiments and called on the government to reform the current planning method.

Ms Wawn said prices associated with house construction have been consistent for the last three decades, while house prices “have risen exponentially”.

“The majority of this land cost is a result of government-determined scarcity resulting from zoning restrictions. These restrictions arguably have a more widespread impact on the lives of ordinary Australians than any other regulation,” Ms Wawn said.

Mr Reardon referred to the current zoning policy as “oppressive planning regimes”.

“The myriad of planning restrictions, delays in gaining approval, taxes and charges are at the core of our affordability challenges which have resulted in decades of undersupply of new housing, particularly in metropolitan areas,” Mr Reardon said.

“Restrictions on the adequate release of land for new dwellings and on the type of dwellings that can be built are at the core of this undersupply of housing.

“Planning restrictions have not kept pace with the ongoing high demand for housing.”

Mr Morrison said by not fixing the current zoning policies, the Australian dream is being given up on by younger potential home owners.

“No one is arguing for a planning free for all – cities need proper planning but what the RBA is pointing to is a whole range of unnecessary costs that must be addressed,” Mr Morrison said.

“It’s felt by every family taking on a mortgage $100,000 higher than it needs to be, and by parents and grandparents wondering how on earth their children will ever be able to realise the same property aspiration they did.

“The RBA’s report confirms that the negative effects of poor planning are particularly evident in infill areas where land is limited such as close to the CBD or transport nodes.”

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  ["title"]=>
  string(51) "Boost for investors as app sets up off-site bidding"
  ["alias"]=>
  string(55) "boost-for-investors-as-new-app-sets-up-off-site-bidding"
  ["introtext"]=>
  string(144) "

Property investors are now able to identify and bid on auctions remotely using a new live-streaming functionality launched by Gavl.

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Called “Request an Auction”, the new functionality enables users to watch and bid on any Sydney or Melbourne auction remotely.

Through Gavl, prospective buyers are now able to register to bid on their preferred auction. The platform will obtain permission from the listing agent and confirm within 48 hours.

Vendors can also request to have their auctions broadcast to a larger buyer audience.

Co-founder Joel Smith said that auctions streamed on Gavl attract 47 per cent more viewers than traditional ones.

He said that Request an Auction will be valuable for remote buyers.

“Buyers are able to have Gavl attend any auction they nominate, so they will never have to miss out on an opportunity due to logistical complications in physically attending the auction.

“Vendors, too, have the opportunity to directly book an auction with us, so they can open up their event to buyers all around the world. With more potential buyers, they’re giving their property the chance to receive more bids and maximise their sales result.”

Mr Smith said that prior to the Request an Auction app, buyers were limited to what they could achieve through the Gavl technology.

Gavl is a live-streaming and bidding platform for real estate auctions.

Mr Smith said that it has streamed more than 6,000 auctions, which have achieved 3.5 million views from 50 countries.

Gavl’s Request an Auction function is currently being offered in Melbourne and Sydney only.

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Boost for investors as app sets up off-site bidding
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Having to split her time between Hong Kong and her original base of Sydney has not slowed Julia Tita’s goal of building a high-performance Australian property portfolio. Instead the resulting alterations to her strategy have positively impacted her investing success.

" ["fulltext"]=> string(3579) "

Having recently purchased her 6th property, Julia joins host Tim Neary to discuss her journey, share her ups and downs over the years, and reveal her thoughts on why some properties are better than others.

Julia also explains why she no longer makes a move without the help of a buyer’s agent, why working with a strong team of specialists is extremely important and discloses her long-term property ambitions.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

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AREAS MENTIONED:

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["secure"]=> int(0) ["page_description"]=> string(11) "sample desc" ["page_rights"]=> NULL ["robots"]=> NULL ["access-view"]=> bool(true) } ["initialized":protected]=> bool(true) ["separator"]=> string(1) "." } ["displayDate"]=> string(19) "2018-06-18 03:15:56" ["slug"]=> string(72) "18171:how-a-move-to-hong-kong-impacted-julia-s-australian-property-goals" ["catslug"]=> string(28) "45:smart-property-investment" ["link"]=> string(92) "/investor-stories-1/18171-how-a-move-to-hong-kong-impacted-julia-s-australian-property-goals" }
How a move to Hong Kong impacted Julia’s Australian property goals
object(stdClass)#1212 (52) {
  ["id"]=>
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  ["title"]=>
  string(88) "‘Common’ referrer practice of being paid on both sides of the fence coming to an end"
  ["alias"]=>
  string(82) "common-referrer-practice-of-being-paid-on-both-sides-of-the-fence-coming-to-an-end"
  ["introtext"]=>
  string(246) "

The practice of property investment firms sharing undisclosed kickbacks among the supply chain involved in development sales will be outlawed in NSW on 1 July this year under the Real Estate Reform being handed down by regulators in NSW.

" ["fulltext"]=> string(2238) "

Property commentator and valuer, Suburbanite’s Anna Porter, said the reform will address conflicts of interest.

She said they arise when a mortgage broker, accountant or financial planner receives part of the commission from the property firm, who receive their fees from the developer or seller.

“This puts the broker into a position by which they are being paid on both sides of the fence,” she said.

“Until now this has been a grey area and there was nothing stopping this practice.” 

Ms Porter said this has been a common practice in the industry.

"Some well-known mortgage broking firms openly admit to receiving $5,000–$10,000 per referral in their pocket.”

She also said this process has been going on for decades.

"Property investment firms commonly pass some of their commission on to the mortgage broker, accountant or financial planner as a reward to them for passing on the referral. This means that many brokers or financial service providers are making significant amounts of money just to refer on to a property firm, often totalling hundreds of thousands of dollars a year," Anna Porter said.

Ms Porter said the Property, Stock and Business Agents Amendment (Property Industry Reform) Bill 2017 will be in force from July this year, and will prohibit this practice unless the broker or referring partner also holds a real estate industry license.

"Under the new laws, if the broker takes a referral fee from the property firm, they will have to be a licensed real estate agent and also hold a corporation’s license,” she said. 

“Subsequently, every transaction that they receive a referral fee from, they will be putting their license up against the transaction and taking full liability for the conduct, practices and outcome of that transaction, even if they have little to do with the transaction; they are a party to it financially and therefore take as much risk as everyone else in the transaction.”

Mr Porter said where a referrer holds a real estate license, and receives a part of the sale commission, they may find themselves in breach of the ethical requirements under the act.

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‘Common’ referrer practice of being paid on both sides of the fence coming to an end

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