Developers a vital part of the home affordability equation

IT took less than 18 months for the state government's shared equity scheme - a lifeline for the first homebuyer market - to exhaust its three-year, $300 million budget.

Last week's revelation that the program had been suspended pending discussions with the newly elected Liberal government generated concern from the property industry's major advocacy groups - the Real Estate Institute of WA, the Urban Development Institute of Australia (WA), and the Housing Institute of Australia.

The speed and unanimity of the response showed just how important a relatively small government program, introduced in February 2007, had been in fostering a sustained turnaround in the market at its lowest price point.

In the June quarter, first homebuyers accounted for about 30 per cent of buyers, well above the general market average of 20 per cent.

As a cohort, first homebuyers had dropped to 8 per cent of the overall market at the height of the property boom.

First homeowner grants have also been buoyant in recent months, up from 1,137 in June to 1,280 in August.

For some, it's an indication that the market is starting to turn for the better.

"We're already starting to see some signs of that with the first homebuyer market, which has picked up," Cedar Woods managing director Paul Sadleir told the recent WA Business News property forum.

"That's usually a good indicator that the other parts of the market will follow, but it will take a bit of time."

Many in the industry expect the shared equity scheme to continue, but there's also the belief that more needs to be done to address the affordability issue and bring first homebuyers back to the market.

For LWP Property Group managing director, Danny Murphy, part of the solution lies in the product offering being put forward by developers.

"We're in a joint venture with a builder to build some two-bedroom houses. Now, that hasn't happened for 40 years, I suppose," Mr Murphy said.

"We're finishing those within the next three months, probably priced at under $330,000, and they'll walk out the door.

"That will lead to demand for that type of product - people will start with two bedrooms, one and a half bathrooms probably, and move up through the chain."

However, Mr Murphy believes the industry, particularly smaller developers, has been slow to respond to the need for smaller lots and cheaper houses.

"A lot of the builders are adjusting to the size issue, so they're now having plans available that have three bedrooms. I think that's the next step for the domestic industry. There's probably more innovation at the developer level, mainly the commercial and larger residential level," Mr Murphy said.

Lot size is part of the affordability equation, but cheaper building materials are also vital to bringing the end cost of housing down, particularly given the continuing rise in steel prices.

According to Mirvac WA chief executive Evan Campbell, there needs to be greater innovation in the types of building materials used in WA.

"I think government has to incentivise developers to encourage lightweight [materials] with some private projects. The reality is, things are built out of brick veneer and compressed sheeting...in Queensland, New South Wales and Victoria. From a thermal weighting point of view, it's fine - the market accepts it. We just can't afford to continue, in housing, to build a full brick and suspended slab.

"We're building some houses at Waverley Park in Melbourne that cost $850 per square metre to build. That same house costs $1,400/sqm to build in Kwinana. That is unsustainable and we'll have to change the mindset," Mr Campbell said.

"I encourage government to reward those developers that do [adapt], because that will impact on affordability and allow our first homebuyers and our younger people to enter the market and live their dream of buying a home."

While the development industry has called for rebates to bring in sustainable and affordable building products, regulatory changes are also required to change the scale and type of building allowed.

"We need a total overhaul of the whole planning approvals system, and I think it's time that the government, both state and federal, actually gave something back to the property industry, because for a long time we've been an easy source of revenue," Match managing director Lloyd Clark said.

"If you look at the amount of GST and stamp duty paid [on projects] and land acquisition at a purchaser level, it would be great to see some of that money channeled back into green initiatives, assisting and providing affordable products."