However, Ayres defended the government’s program and shamed his former colleagues in the opposition on Wednesday for attempting to unwind it. Similar policies had never been subject to such moves in previous parliaments, he said, and the answer to feasibility concerns was to expand the scheme, not cut it back.
“Parliamentarians should be putting citizens first and working together to ensure there are more places for people to call home,” Ayres said.
The analysis, conducted with Astrolabe Group, was based on construction costs of $5500 a square metre, which developers and industry consultants said was reasonable. It also factored in a profit margin, or minimum acceptable return, of 18 per cent.
As such, a 90-square-metre, two-bedroom apartment cost $522,000 to construct, plus land cost, planning and legal fees, government charges and then profit margin. It made the minimum sale price of such a unit more than $1.1 million.
Independent experts said ongoing construction across Sydney showed it was still feasible. The Rider Levett Bucknall crane index shows western Sydney had 58 residential cranes in the sky in the first quarter of 2024, while southern Sydney had 40 and Wollongong eight.
Planning professor Peter Phibbs, from the Henry Halloran Trust at the University of Sydney, said some of the UDIA’s assumptions were “a bit weird” because developers would not build the same-cost apartment in Tuggerah as the north shore. He said the TOD program would probably work in middle-ring suburbs such as Lidcombe or Lakemba, but agreed viability in outer metropolitan areas was doubtful.
“Some dude can buy a townhouse with a little backyard for just about the same money,” Phibbs said. “Unless you’ve got a big price gap between an apartment and a house, people don’t want to buy an apartment.”
Adam Byrnes, director of western Sydney-based Think Planners, said the TOD program might “stack up perfectly” for developer-builders who had purchased land at cheaper prices.
“We have clients looking at it because they own the land – it wasn’t stacking up before and now it will,” he said. “[But] if you’re starting from fresh, it would be very difficult.”
Byrnes said it was a long-term play. “Building prices will fluctuate, tax regimes will fluctuate, sale prices will fluctuate. Over time, it may all play out just fine.”
The government says the TOD program will create capacity for 170,000 new homes over 15 years, but its new housing targets rely on the scheme delivering a portion of that in the first five years.
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Planning Minister Paul Scully said the macroeconomic conditions impeding access to finance and skilled labour were well documented and turned his focus to the Liberal Party’s attempt to block the government’s housing reforms in parliament.
“It beggars belief that we have an opposition in NSW who wants to create further uncertainty with its attempt to outlaw TOD locations,” Scully said.
“To cast doubt on the certainty of the 37 locations that have been agreed with 12 councils would have a much more significant impact on feasibility of development and the planning system than the short-term pressures of general economic conditions.”
Developers backed up the industry association’s warnings. Rick Graf, development director of UDIA member Billbergia, said projects under way or selling in Sydney’s west were happening only because they came through the pipeline when costs and interest rates were lower.
“West of the latte line, it is almost impossible in the Sydney basin at the moment to sell for more than it costs you to build and develop,” he said.
Graf said the north shore and inner west TOD sites would be feasible if developers could buy and amalgamate land at sensible prices. “But if everyone’s hanging out there for $9 million [for their property], it’s not going to happen.”
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