Developers 'choking' land supply

Local councils want an investigation into land banking by developers, claiming they are manipulating the market and fuelling the housing affordability crisis by choking off supply of new lots.

The WA Local Government Association has suggested developers and investors sitting on tracts of vacant land be slugged a higher rate of land tax as an inducement to release more blocks for construction.

But developers deny there they are withholding land, arguing that it is in their interests to sell housing lots quickly to avoid losing money on huge holding costs.

As more and more people find themselves priced out of the great Australian dream, a Senate inquiry into housing afford- ability has been swamped with submissions from affected stakeholders.

In its submission, WALGA suggested one way to improve housing affordability would be the introduction of stamp duty discounts for retirees to sell the family home and downsize.

It said retirees buying a smaller property should be eligible for a concessional rate of stamp duty, which would encourage greater turnover in the property market and free up bigger homes for younger families.

WALGA highlights how stamp duty acts as a disincentive by pointing out a one-to-two bedroom home in Perth sold for last year's median price of $525,000 would leave the buyer with a $19,000 bill.

In a further change, profits from the sale of the family home should be exempt from the pension means test so as not to penalise downsizers.

But the association puts a lot of blame for high house prices on developers trickling out new lots.

"Land banking and the manipulation of the market through the limited release of land by developers is a key issue that needs to be investigated," WALGA said.

The peak body cited a 2011 WA parliamentary inquiry that found 25,000 subdivided and undeveloped lots were being withheld by developers in Perth alone as proof of the problem.

Both large-scale developers and mum-and-dad investors were sitting on land lots, in many cases speculating that its value would increase.

WALGA said the existing tax regime offered little incentive to build, with investors able to claim deductions for expenses such as loan interest and coun- cil rates while building on vac- ant land increased its rateable value.

But Urban Development Institute of Australia WA chief Debra Goostrey rejected the suggestion developers were sitting on land in the current market, saying they faced hefty costs and government penalties if they did not quickly sell.

"The logic says that no developer who has developed a lot will withhold it," she said.

"It's like saying 'let's have a shop, lock the door and let everyone look in the window'."

Ms Goostrey said some owners may land bank in areas well beyond the current edge of suburbia with a view to releasing it in 20 to 30 years' time when urban development reached it.

Land banking and the manipulation of the market through the limited release of land by developers is a key issue that needs to be investigated." WA Local Government Association