What’s keeping house prices high?

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House prices in Australia have now reached “absurd levels” claims one observer, so what it is that’s keeping our property market afloat in these uncertain times? And why are interest rates just one small part of the puzzle?

According to Peddle Thorp design director and architect Peter Brook, the simple truth is that housing prices will remain high unless infrastructure demands lessen.

Governments at all levels are placing demands on developers for infrastructure, such as electricity substations, roads, and drains – and then imposing huge rates and charges as  well, he claims, and this is pushing up the cost of housing stock.

“Lowering of interest rates was only one part of the equation for returning housing prices to some form of sanity,” he said. “People have concentrated on interest rates, yet the impact of rate decreases pales into insignificance compared to the regulatory demands placed on developers.”

The problem, said Brook, is that these costs have increased greatly over time – and have to be passed onto the property buying public in the end.

“Developers are increasingly being asked to pay for basic infrastructure to get a building even started,” he said. “With planning regulation and costs centered around vague concepts such as neighbourhood character, we find costs escalating and there seems to be no end to this insanity.”

Do you agree that developer costs are adding to the cost of buying a property? Have your say by commenting below, or joining the debate on our online property investment forum.

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