The Northern Territory news Thu 13 May 2010
The Northern Territory news; NewspaperNT
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Community newspapers -- Northern Territory -- Darwin; Australian newspapers -- Northern Territory -- Darwin
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Nationwide News Pty. Limited
8 NT BUSINESS REVIEW, May, 2010 P U B : N T N E W S D A T E : 1 3 -M A Y -2 0 1 0 P A G E : 1 0 8 C O L O R : C M Y K PROPERTY08 ! ! ! ! ! ! ! Winston Group 46fa10/10 New homes pay price Extra cost passed on By KERRY OSBORNE, NT Urban Development Institute president THE NT economy has weathered the global financial crisis relatively unscathed. Future growth and opportunities, particularly relating to the mining and oil and gas industries, will benefit NT businesses with flow-on benefits to employees. Population growth, increased employment, better wages and working conditions, better training and improved job satisfaction should be expected. Most importantly, there will be opportunities for future generations to establish themselves. Growth for growth's sake is, however, not always a good thing. These benefits will all be offset by increased living costs which, if not carefully managed, have the potential to detract from the enviable NT lifestyle we enjoy. The biggest single living cost is accommodation, whether it be buying or renting. As with most items, inflationary pressures will see the cost of delivering a new home go up every year. However, our housing cost increases are always far greater than inflation. Why? The answer is simple: each and every year additional layers of complexity are added to the construction of a new home. The common aspect of these changes is that they all apply to a new home, not existing ones. This sees new home buyers heavily penalised. Some of these will be improvements in comparison with an existing house and represent improved value. For example, a new house with air conditioning, internet and pay TV in every room represents better value than an older house with ceiling fans. Are these new services needed or are they luxury items we could do without, at least until first homebuyers can better afford it? Other cost may be less obvious and provide indirect benefit through reduced long-term maintenance or operating cost. For example, insulation in the ceiling or a solar hot water system is a cost that will pay itself off through reduced power costs over time. The potential benefits can be measured both in energy savings and reduced impact on the environment, and have convinced government to subsidise the cost of installation. The subsidy is offered to existing home owners who likely can afford it but not the new home buyers who cannot. Some increased costs are the result of improved amenity that will enhance and/or maintain lifestyle for example, larger block sizes, public open spaces and safety. Often decisions on amenity are not made by those who are using the facility. As a result, they may not be fully used or provide value for money. It does raise the question as to whether the new homebuyer should, in fact, have greater input into the size and type of house they want and need. Grandparents needed a big back yard when they were growing up but they didn't have a Wii, internet and a plasma screen TV. Some increased costs are the result of improved safety for example, earth leakage protection and smoke detectors. How far should we go with these issues. Do we make the house completely fireproof? Other costs are simply costs with no direct benefit to the home owner. In many instances these are hidden costs in the form of indirect taxes, compliance costs or insurances. Some of these costs are new, others have simply been passed over by governments. Is it acceptable for government to transfer its costs on to first homebuyers? Has the government service been compromised in the process? Government building inspectors have been replaced with private certifiers. Is this a better option or does it simply save government costs? All of these costs are directly or indirectly imposed on the property developer who, in turn, passes them directly to the new home owner. As almost all of these costs are applied only to new houses and not existing houses, an imbalance is created where the value of an existing house has increased for no reason other than high demand and lack of supply. A great outcome for existing home owners, but not so great if you are renting or trying to buy your first home. The Urban Development Institute of Australia is a representative organisation made up of property developers and associated businesses. Over the next couple of months the UDIA will be writing a monthly article in the NT Business Reivew identifying the increased costs associated with delivering new houses in Australia and specifically throughout the NT. The intent of these articles is to raise public awareness, identify the benefits these increased costs deliver and encourage debate as to whether they are necessary, whether they could be otherwise delivered and whether they should apply to existing houses, as well as new houses. Next month's article will focus on improved services and facilities offered in new houses and apartments. We encourage response and feedback for readers and will attempt to incorporate this into future articles. Website: www.udiant.com.au No added expense for old properties CITY CENTRE: building expenses go up each year