Property analysts have called on the ACT government to do more to ease housing affordability constraints as skyrocketing demand contributes to record-breaking price hikes.
Record-low interest rates have contributed to high demand met with short supply of properties across the country.
PRD chief economist Diaswati Mardiasmo said governments were faced with the choice to curb demand or improve supply to tackle affordability.
"Curbing demand might prove to be difficult, especially as access to property home ownership is well embedded in the 2021 federal budget, " she said.
"Improving supply would be the leverage but that is going to require more strategically placed policies to not only increase new residential offering but also to ensure it is the correct type of residential stock."
She said housing affordability had declined in the ACT. The average home loan in the ACT in March was $531,970, an increase of more than $30,000 in 12 months.
Canberra's median house price surged to $927,577 in the last quarter according to Domain, an annual growth of almost 20 per cent.
Dr Mardiasmo praised the ACT government's plan to abolish stamp duty but said more could be done to aid affordability including releasing larger blocks of land and encouraging developers to build houses, rather than focusing on apartments.
She said removing red tape for "mum and dad investors" looking to subdivide large blocks could also assist.
"It's not just about having any kind of supply, but it's actually about adding the right supply," she said.
Chief Minister Andrew Barr said there was "very little evidence" to suggest those measures would have a meaningful impact on affordability.
Mr Barr said there was "very little evidence" to suggest those measures would have a meaningful impact on affordability.
"The construction industry is currently already at almost full capacity, skills and materials shortages are a more substantive issue, any developer incentives wouldn't add to the current supply capacity constraints," he said.
"Greenfield developments are very costly for state and territory governments - requiring new roads, new parks and new schools to support suburbs.
"Apartments developments and townhouses that are located close to public transport routes and town centres are a more affordable way for many home buyers to purchase their first property."
He said "bespoke" subdivision of large blocks "would not provide positive outcomes for the community".
"There are traffic implications and planning implications to consider when allowing for denser residential precincts," he said.
"The government is committed to at least 70 per cent of new dwellings coming from urban infill, but this requires careful planning."
Property analyst Terry Ryder from Hotspotting said one of the underlying factors of house price growth was the the cost of building new property.
"The cost of creating new housing is so expensive in Australia, and that feed into the value and value of existing houses," he said.
Mr Ryder said the ACT government's land release system played into supply issues, by "drip feeding" blocks to the market.
"There's always far more people applying to but that land ... the demand and the supply [that is] made available, just pushes up the price," he said.
Mr Ryder said state and territory governments used the housing market as a "cash cow" by lumping taxes and charges on purchases which he said increased prices.
He commended the ACT government's plan to abolish stamp duty, which is part of a 20-year tax reform program, but it comes at the cost of increasing residential rates and land tax.
Chief Minister Andrew Barr said the ACT government's plan was viewed by most economists as a more sustainable revenue model.
"Our reforms have ensured that low and middle income first home buyers pay no stamp duty on a range of property purchases, and pensioners in the ACT no longer pay stamp duty on property they purchase when looking too downsize," he said.
To boost the construction sector during the pandemic, stamp duty was also removed for greenfield blocks and some off the plan apartments and town houses.
"The fact is that in Australia, property is seen as both an essential right, but also a wealth creating industry," Mr Barr said.
"This is driven by Commonwealth government tax settings, such as negative gearing and the capital gains tax discount, that enable investors to purchase property as a means of creating wealth.
"Until this relationship shifts, then state and territory governments will continue to fight an uphill battle when it comes to supporting owner-occupiers and addressing housing affordability."
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