Headworks cutting property off at the knees

Media Release – 2 August 2011

First National Real Estate Chief Executive, Ray Ellis is calling on governments and local councils to reduce exorbitant headworks costs in an effort to address housing affordability and kick start sorely-needed development across Australia.

“The financial crisis has had a big impact on the real estate sector, both restricting development funding and amplifying the effect of infrastructure charges,” Mr Ellis said.

“Where once local councils’ headworks charges paid mostly for water and sewerage, they now include a host of other charges, including infrastructure costs for roads and in some cases recreational and community facilities, electricity charges, footpath networks and more.”

In Western Australia, it is estimated a simple two-lot subdivision could cost at least $25,000 to $30,000 depending on location and local council charges.

In Queensland, the industry is looking at setting building charges at $27,000 for houses and capping one-bedroom apartment charges at $13,500.  These charges do not include state government infrastructure charges such as roads, when these are added, the development costs start creeping into ‘unviable’ territory.

Commercial development fees on the Gold Coast are up to 10 times higher than other states, according to recent investigations.

In New South Wales, Victoria and Western Australia, headworks charges varied between $58,000 and $404,000 but on the Gold Coast a similar development was charged $2.5 million.

In Tasmania, a developer was recently charged $44,428 in “headworks” charges, equating to around 1 per cent of the cost of a $50 million development.

A 155-lot subdivision in Tasmania was recently put onto the back burner because of an $810,000 headworks charge.

And, in South Australia, the different infrastructure requirements plus internal infrastructure including roads, parks, common service trenches, stormwater basins, service connections and public lighting, could well see a rough cost per allotment in excess of $60,000, plus legal costs.

According to Mr Ellis, councils and governments, especially those in regional areas, need to change their attitude if they want their regions to prosper.

“Regional areas are in desperate need of growth and, if the bureaucrats and policy makers really want to attract people to these areas, these headworks costs defy logic as they stand in the way of development,” Mr Ellis said.

“There is an ideal opportunity to develop these regions as desirable locations for people to move to, but developers need to be given the right incentives to do this, such as reducing headwork charges to make the developments more commercially viable”.

As a fundamental economic driver of the Australian economy, more needs to be done to encourage property development, both residential and commercial and the best place to start is with governments and councils looking at what is a fair and reasonable charge, rather than just a money grab.