Productivity Commission asks for submissions on housing affordability, looks at land supply, construction costs, taxes, credit availability

Productivity Commission asks for submissions on housing affordability, looks at land supply, construction costs, taxes, credit availability

The newly set up Productivity Commission is asking for submissions on its investigation into housing affordability in New Zealand, saying there is concern that the fact that house prices remain significantly higher than a decade ago has led to a decline in affordability.

In an Issues Paper calling for submissions, the Commission says the inquiry will examine demand and supply factors driving housing affordability, such as land supply, infrastructure, building costs, government regulations, taxes and levies, availability of finance and the preferences of New Zealanders.

“There is nothing more central to wellbeing for most people than affordable high quality housing,” Commission chairman Murray Sherwin said.

“Our first task is to better understand the key drivers of housing affordability and to what extent there are distortions in the housing market. The Commission wants to maximise quality housing options for all New Zealanders, regardless of their income or whether they rent or own,” Sherwin said.

The Productivity Commission was set up under a coalition agreement between the ACT and National Parties. It is due to release its draft recommendations for improving housing affordability in October this year. It will deliver its final report and recommendations to the Governmentby 1 February 2012.

House price jump

Between 1990 and 2001, national average house prices had appreciated at an annual rate of only 2% in real terms and even fell in a number of districts, it says in the paper.

"However, from around 2002 house prices increased in concert across all regions and local districts, and since then, cumulative growth in the national house price index has exceeded that of most other OECD countries (OECD, 2011)," it says.

"New Zealand house prices hit their peak in 2007. They had risen over 180 per cent in real terms relative to 1990 levels, and all local districts experienced at least an 85 per cent increase. Notably, the largest price increases exceeded 200 per cent in real terms and were concentrated in major urban centres and holiday locations. Since the global financial crisis nominal house prices have fallen around 5 per cent."

What to blame?

A combination of both supply and demand factors had been identified in studies and literature for explaining the surge in real house prices, it says in the paper.

"These include a sharp inflow of migrants during the cycle, favourable credit conditions, a rise in average incomes, declining nominal interest rates, very low unemployment, strong gains in the terms of trade during the period (with dairy prices driving up rural land values), response lags of residential construction, increases in the costs of building homes and shortages in materials and skills," it says.

"These factors likely inflated expectations of future house price increases, though it is difficult to determine whether a housing bubble had formed," it says, quoting OECD comments made this year on New Zealand's housing market.

"An issue for this inquiry is whether the recent experience with housing prices is merely a recurring and transient phenomenon, with a corresponding short-term effect on real prices and affordability, or whether it is the consequence of more fundamental changes in housing markets."

Housing markets may not deliver efficient or appropriate outcomes for the following reasons:

• Demand may become excessive if people develop unrealistic expectations about the returns from housing relative to other investments. Although people eventually adjust their expectations to market realities, such adjustment can be very disruptive and can take a long time with long lasting effects.

• The demand for housing may be inflated or distorted by government policy settings — for example, the taxation treatment afforded to housing compared to other assets or services.

• The supply of new housing may be unduly slow to adjust to increases in demand due to, for example, any inefficiencies in the building and construction industry or any deficiencies in government regulation (or its administration) such as insufficient and delayed land release or planning and consenting constraints.

• Poor productivity in the housing supply chain resulting in more expensive housing than otherwise would be the case.

Home ownership rate falling

An important trend was that home ownership rates in New Zealand had declined as a proportion of total households from around 75 per cent in 1991 to 67 per cent in 2006, with 27.5 per cent renting and 5.5 per cent living in social housing (2006 Census), it says in the paper.

The level of home ownership in New Zealand was slightly below the OECD average.

"The declining home ownership trend may be associated with the rise in real house prices and general decline in housing affordability," it says in the paper.

"Other partial explanations include a trend towards postponing household formation until later in life. This has accompanied the increasing uptake of tertiary education (often with student loans), and later marriage and childbearing which are often identified as the dominant drivers of the propensity to own (Morrison, 2008). The most significant falls in home ownership are in the 25-40 year old age groups (House Price Unit, 2008). The extent that this fall is explained by deferral of home ownership by this particular group remains an open question," it says.

"The decline in New Zealand of home ownership rates contrasts with the trend of increasing owner occupancy rates observed in most other OECD countries (OECD, 2011)."

Too much investment in property

Compared to other OECD countries, it appeared household investment portfolios in New Zealand were too concentrated in housing and land assets, the Commission says in the paper.

"The strong preference for New Zealanders to invest in residential property may also be partly explained by perceptions of risk associated with property compared with other types of investments," it says.

"There is some evidence that New Zealanders invest overwhelmingly in property because they feel more confident and ‘trust’ property investment more than other forms of investment (Braithwaite and Kemp, 2007). Given the high transaction costs associated with buying and selling a house, including search costs, fees and commissions, the cost of buying and selling housing could also be influenced by any changes in practices of real estate agents."

Due to the tax system?

"If the tax system favours housing relative to other types of assets, then demand for housing will be artificially inflated, pushing up house prices. If different types of tenure are favoured over other types, then taxation may influence tenure decisions towards or away from home ownership (Davis and Hunn, 2007)," it says in the paper.

"For owner occupiers, the tax system in New Zealand exempts imputed rents (where the implicit rental benefits derived from owning one’s home are taxed) and capital gains from taxation. Mortgage interest is also not tax deductible."

"However, investors in rental housing in New Zealand enjoy generous tax treatment because of the absence of a capital gains tax and the extent that rental losses can be offset against other income (OECD, 2011). It is commonly suggested that excessive investment in housing has been caused by the concessional treatment of capital gains and by the tax advantage of negative gearing, thereby distorting the allocation of resources. (Although the tax arrangements for rental property investors also equally apply to investment in other asset classes.)," it says in the paper.

"Estimates prepared by the House Prices Unit (2008) suggest that the ability to deduct losses from rental properties increases the value of a medium-price house to the investor by NZ$25,000.

However, council rates were considered a form of tax on property.

"Local authorities have the discretion to set rates in order to cover costs. The imposition and level of property tax does not appear to be impacting on the New Zealand housing market. Revenue from local authority rates averages 2 per cent of GDP as of 2008 (about the OECD average) but has declined as a percentage of housing values — from 2.2 per cent in 1980 to 0.65 per cent in 2008 (OECD, 2011)," it says in the paper.

Share crash changed behavior?

Investor and overall activity in housing markets might also depend on the returns available from other types of investments and asset, such as equities.

"A cross country analysis by the OECD of housing prices relative to equities across three decades shows no tendency for property to systematically outperform stocks over the long term. However, in New Zealand’s case, homeowners would, on average, appear to have received superior returns compared to equities over the late 1980s and most of the 2000s (OECD, 2011)," it says in the paper.

Opening the fringes vs density

Planning and land-use policies were important because land use generated externalities that may not be included in the market price, for example congestion and environmental degradation.

"Land-use planning systems aim to correct for such market imperfections. But land-use and planning policies can also restrict supply responsiveness which has wider implications for house prices and affordability," the Commission says.

"At the same time, positive externalities or spillovers can arise from planning and public investment decisions where schools, community facilities, parks, and transport development are capitalised in the value of private property (the so-called ‘unearned increment’)," it says in the paper.

"The supply of land can be increased by re-zoning ‘green-field’ land to allow development for housing construction on the fringe of towns and cities (expansion). Land can also become available through ‘brown-field’ re-zoning of existing inner city and non-residential land to allow higher density housing (intensification). There are strong arguments made in favour of both approaches," it says.

"New Zealand cities have historically grown by expanding the land area that they cover through new suburbs. This has resulted in population densities that are below many other cities in the world but closer to densities in most Australian cities (Housing Prices Unit, 2008).

"In better understanding the demand drivers in the housing market, the Commission is interested in the preferences of home buyers in New Zealand for particular housing development models and why this is the case. For example, one survey of new home buyers showed that detached suburban living with a commute was preferred over medium or high density housing nearer work (Page, 2007). As much floor space as possible given their budget constraints and a double garage were identified as the top priorities," the Commission says.

Construction productivity low

Productivity in New Zealand's building and construction sector was low, relative to other countries and other sectors of the New Zealand economy, and labour productivity had been flat over time (Building and Construction Sector Productivity Taskforce, 2009)," the Commission says in the paper.

"Low productivity in the construction sector translates into higher than necessary construction costs. Indeed, work by the House Prices Unit (2008) shows that construction costs, and building costs more generally, have increased significantly since 2001 therefore putting upward pressure on house prices," it says.

Specifically, since 2001:

• the cost of building a new house has generally increased in line with house prices;

• the cost of labour and builders’ margins increased by over 88 per cent;

• the cost materials increased by around 50 per cent; and

• the cost of sections has more than doubled (115 per cent).

"Furthermore, recent work by the OECD (Caldera Sanchez and Johansson, 2011) suggests that increasing construction costs in New Zealand are an important factor in explaining housing supply rigidities," it says.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

43 Comments

Comment Filter

Highlight new comments in the last hr(s).

Why are we having an enquiry when all the answers on affordability are already been thrashed especially on this site. How much will the enquiry cost? Waste of money.

Indeed a waste but it's going to a good cause...err I mean some good people...and space on a bottom shelf in a Beehive basement dungeon has already been set aside for the report...next to the Savings Working Group report and the other working group whatsits....be a terrible waste to not fill the space....

Please don't rust this report. I was told the house price would be flat if we had killed the property investors.

Now this report told me, in last 10 years,  the labour cost double, the developer's margin doubled, the section price doubled, the material cost 50% increased. Where is the property investor's problem?

Dr Roof Ron

Are you drunk man...!

This isn't really telling us anything we don't already know, it's just pointing out all our worst traits! No surprise we're still smiting from the share market crash 20 years on, hell we still whinge about the underarm to any Aussie who'll bother to listen to us.

The biggest problem is local authorites. The costs of doing a subdivision of a section into two is about $100,000.00 of which over $60,000 goes to the local council in fees. The rest goes to land surveyors , engineers and the like. (people who actually do the work )  

This gouging by Local Councils ensures there will always be a supposed land "shortage " and prices will be kept artifically distorted and sky high.

To have this level of administered costs is , to the best of my knowledge, unheard of anywhere on earth.

Not much subdividing going on now though is there!...sort of swamped with silly little plots that cannot sell....

You need the land for the chickens Wolly.....

and a cellar for the fungi...while they say quite a lot of 'green' is grown in many an attic...and spare room.

a cynic might say they are simply wanting to look like they are addressing the issue....are they really serious about developing an economy that is based upon more than kiwis selling houses to each other? Or actually, they are happy for the status quo to continue (in an albeit slightly tweaked form) because they know that the kiwi economy is so fundamentally limited that this is our only way to even moderate prosperity?

I take the cynics view. There is more than enough research, data and analysis on NZ's housing issues and ways to resolve them 

these fackers are as bad as Labour in terms of talk fests! 

A realist would probably agree with the cynic!

IMO it's still being a bit too optimistic saying retaining the status quo will lead to even a 'moderate prosperity'.  More like future pain for the average New Zealander, especially the young.

Also I'd be inclined to say National seem worse than Labour in terms of talk and no action. How many comissions/reports have we now had conducted and then rejected/ignored!?.... What a waste of $$$

 We have sold all 3 of our properties to foreigners and banked over $150K in capital gains - an Indian, Korean and Iraqi.  I'm sure I heard a joke that started with that sentance.

jokes aside shorts, you nailed it! All this woe is the NZ housing market and 'just watch it collapse tomorrow' and  'we are stuffed' etc etc leads to nothing when it is foreigners who are buying our over-inflated property and pushing up the house prices! The whingers on this site have to let  the idea of a so called 'Kiwi' owned NZ go, suck it up and realise that prices will keep on rocking upwards and upwards and it won't be the hard workers desperate to get a foot-hold in the property market who are buying the large portion of it... they're just going to be getting poorer as your Iraqi, Korean and Indian gazzilionaires keep pushing up their rental price.

Olly is right, get in if you can, cos you'll only be making bigger bucks as these guys come in and buy up large! Thus creating a housing shortage, that won't be addressed by the despots in governement, as they have some lovely rentals too... prices are going to really boom soon! 2006 saw nuthin'... we have water and milk here... stability and water... and if you're rich the government will take care of you... did I mention water? Ol' average hard working joe citizen who is desperately trying to get ahead is going to have realise too that they're going to be living hand to mouth till they die, cold and growing fungi in their shitty leaking over priced rental ... the good news is it won't be for long as the will probably die quite young as they won't be able to afford health care once our little dictators by democracy realise they can subsidise their rich cronies by cutting national health too...

Selling NZ to foreigners is not merely insane greed; it's treason, as far as I'm concerned.

In NZ, is treason still punishable by death, or has that penalty been reduced?

The good news is that the people who think that selling out NZ to foreign powers is a good idea are in the minority, and won't clog up the courts and tribunals for too long.

Treason ! ....... just a tadge histrionic , aren't we ....... European settlement is barely 170 years old here . 90 % of us are foreign stock . A mere 10 % of this population can truely say that these are my assets , mitts off .

....... treason ! ...... Bizarre !!!

And that in itself is little more than intellectual possession rights.....created  by law and enacted to serve the monetary security of the claimants.

Recent events in Christchurch  and indeed around the globe have demonstrated possession of the ground beneath your feet or the waters that fill a bay are not much more than a conceptual system  that can be undermined or washed away by what...is...a physical event of genuine ownership.. ....

That is what muddies the water.....as to "foreign ownership"  and so we have to decicde what our ..real...problem is.....

I suspect it is the usurpment of realized  and unrealized wealth potential......the exploitation by others , more motivated and less conscious of the environment surrounding them .....less regard for the impact pursuing thier monetary interest will have upon that environment.

In short our fears and aprehensions..(  and some well founded) must be addressed but not by words of politicians......but in law to provide the inellectual security we feel we need as present occupiers of this land.

In the case of China ...for me a no brainer...can't by land there..(in law)...can't buy it here..(in law)end of story.

pip pip my dear Christov... deep and inspiring... but alas way too late... this site seems to be about Kiwis buying in NZ, that is no longer the case. There is no such thing as reason when it comes to power and the current government is puffed with it and are not thinking beyond the next 3 years and 5 months...  and are more than content to flick our beautiful country to whomever has the Renminbi to buy it. Also in the equation are Kiwi boomers who in their desperation to die rich are selling NZ to the highest bidder. These people who are already wealthy mostly by virtue of being born when they were born, mostly don't give a snot about the people coming behind them...

So on-wards and upwards I tells you... Boom baby Boom!

Wish I could find fault with your post Mandalay....but there is a whole lot of truth in it.

I shall not be apathetic however....! I'm off to burn something down before they lay hand to it. 

you think BH will offer me a job?

Mandalay ...Provided.....you work ...hard ...long....spell Roubini's name right....smote people who question your journalistic integrity.....and can see what's funny in Dilbert...I think your in with a shot old boy  .....however rumour has it he's a tad overstaffed due to the lack of controversy....I swear to God you wouldn't think it was an election year ....it's a non event ...a foregone conclusion.....a no show by the opposition.....a bloody joke. 

While some of the  ancestors of Maori were here from the late 13th century, we are still a nation. Obviously we are going to have to fight the realestate industry.

too late my friend... that horse has long bolted!

I hope that was sarcasm....

either that or desperate spruiking 

 

spruiking? My goodness... look at what's happening man... things don't just happen because we want them to happen... If that were the case I'd buy my 200square metre villa on 1000 square metres in Devonport for 120K...  (how the boomers got rich in the 70s and 80s) but alas those days are long gone!Houses are selling and they are selling for higher prices than at the peak before the global crunch that was going drop house prices by more than 30%.... yeah yeah I know there is a graph somewhere on this site that explains YOY growth and degrowth, inflation, flatulation and Roosts home affordability claiming things really are cheaper than in the late 90s... Maybe that's the case for foreign investors buying up swathes of Auckland property, but most people I know and I do know quite a few and talk to them alot... are poorer now than ever. A big percentage are struggling beyond struggling and barely hanging on to their homes. The ones who don't own property are mostly giving up on that dream... this is NZ 2011...  and the boom to buy NZ, particularlt AKL property hasn\t even started yet!

 

are they really serious about developing an economy that is based upon more than kiwis selling houses to each other?

I think they probably are, as they know perfectly well how crap the economy is, and always will be, when it's based around kiwis selling overpriced houses to each other.

I take the cynics view. There is more than enough research, data and analysis on NZ's housing issues and ways to resolve them

They need an official, authoritative, and impartial view on this. A lot of the existing research is from assorted lobbyists, spruikers, and economists employed by organisations with a vested interest in there somewhere.

It doesn't mean they won't promptly bin the report, but the way they are doing it does make sense.

PROPERTY MARKET FUTURE

For gods sake give people an incentive.

Something to aim for own thats in their reach and guess what it provide shelter and a living.

Couldn't be more basic, aye!

 

as I said earlier, there is no incentive... we who live and work here will mostly never be able to afford to buy here!

If interest rates are going to stay low like they have been for at least 2.5 years now, then something needs to change.
Otherwise people will just keep borrowing money to buy rentals, especially when it's so easy to write off large portions of the expenses, against income.
We could just about get away with such lax tax laws when we had high interest rates, but not anymore.

Um - someone (BH?) should track how many landlords there are now, versus say back in 2000.

Everyone is sleeping under a roof - and if they weren't paying rent for it, they might be able to own it. Who were they outbid by? Those landlords.

You could kill that really easily  - but you'd lose the election......

The housing part is simple, I could still build for $500 a sq/m, or a little better.

Of course, you could blame the folk who wanted a mediterranean look, too. Lotta regulations spun out of that, and they inevitably reflect in permit fees.

 

"Who were they outbid by? Those landlords"

Complete garbage. For every rental property I own, I've been outbid on another 10 by over-enthusiastic home buyers - some local, some foreign.

Landlords generally shop for bargains, and the notion that they drive up prices is misguided.

Prices are set by supply (new construction), demand (population), replacement cost, market sentiment, interest rates, ability to service loans etc etc...

LOl yeah right, so you are trying to say %27 of the market makes no difference to prices?
Why did properties that have no appeal to anyone other than investors, such as converted flats, go through the roof like everything else? if investors had nothing to do with price rises?

Also as the percentage of investors has been steadily increasing, how come prices went through their biggest period of rises in our history?, if your theory was true, the higher proportion of investors should have pushed prices down, not almost doubled them.

Please explain to me exactly how that 27% managed to force the other 73% to pay twice as much for a property??  Garbage.

"Why did properties that have no appeal to anyone other than investors, such as converted flats, go through the roof like everything else?"

I already answered that, but in case you didn't read that far here it is again - prices are set by supply (new construction), demand (population), replacement cost, market sentiment, interest rates, ability to service loans etc etc...

"Also as the percentage of investors has been steadily increasing, how come prices went through their biggest period of rises in our history?, if your theory was true, the higher proportion of investors should have pushed prices down, not almost doubled them."

The fact that the percentage of investment properties has been rising slowly for many years and in 2005 there was suddenly a boom further proves there is no correlation between the two. There was a boom due to what I mentioned above - supply, demand etc and also availability of credit.

It won't be the last boom there ever was, and this won't be the last recession there ever is. The more things change, the more things stay the same ;)

No one is trying to say investors are the sole reason for higher prices, there are a number of reasons, but as you have more demand from one sector - investors, then it can do nothing other than increase prices.
But trying to argue investors have no affect on demand is a joke, and dishonest.

There is no way a higher population of non investors can be affecting prices, while a higher popluation of investors doesn't affect prices.

If the general popluation has increased, which you note is a reason for house prices increases, then investors must actually be competing pretty hard with non investors, to have gained a larger share of all houses, during the time the rest of the poluation increased.

"There is no way a higher population of non investors can be affecting prices, while a higher popluation of investors doesn't affect prices"

That's true, philthy, but what you are saying is a higher population of "people" relative to houses will influence prices. Whether you are an investor or a home owner is mostly irrelevant.  I would wager though that if it was 100% investors and 0% homeowners prices would actually come down - true investors are after yields and want to pay as lower price as possible.

Murray - you've got an excellent first name, but a flawed way of looking at things.

I do physics. If you open a tap at the bottom of my water-tank, the level at the top comes down.

I you weren't there the houses at the bottom of the tank would be available for the first -home buyers. I suggest that if your kind (you don't provide a service, the houses already exist, and the folk will live in them - you're just a parasite) stayed out, the whole shebang, top to bottom, would get cheaper. Hell, you even admitted being in the bidding pricess - then say 'no mea culpa'?

Come on, have a wee think. Logic beats denial every time.

 

"your kind (you don't provide a service, the houses already exist, and the folk will live in them - you're just a parasite)"

Sheesh, PD!!  You make it sound like owning a rental property is worse than running a P Lab!

Shame on me for trying to get myself and my family in a better position so we don't have to hold our hand out to the government and the taxpayer at age 65.

What a terrible person I must be - my tenants smile and wave at me as they head to the beach on the weekend, while I stay behind and prune their trees, wash their house and clean out the gutters. Then I go home and pay the local rates bill, the insurance bill, and the regional rates bill - half of which pays for the bus that they take to work every day.

"the whole shebang, top to bottom, would get cheaper."

What makes you think that if there were no investors, the people selling those houses would suddenly say "Oh, I see your a lovely homeowner and not one of those nasty investors, so I'll drop my asking price especially for you"??!!

"Hell, you even admitted being in the bidding pricess"

Yes, and I dropped out at 300k where to me the price made sense, only to watch two competing home buyers bid to over 400k - how exactly does that make it my fault that the house sold for over 400k?

The last boom was a global phenomenen and was largely driven by easy credit, although was compounded as the article above notes by things such as population surges and bottlenecks in building supply. It's time to get off the "whip the landlords" bandwagon!

The "house price increases are all caused by landlords outbidding owner-occupiers" brigade has never been able to explain why:

The MOST capital gains have been where there are NO rental properties and the LEAST capital gains have been where there are the MOST rental properties.

 

Untill the neighbourhood is so run down that the old folk who hung on die or are forced out by noisy tenants and renewal begins. Then the big boys make massive capital gains.

They should have a graph showing house prices versus increasing bureaucracy.

They have a graph for immigration and house price increases and it is rather convincing.

www.interest.co.nz/kiwisaver/52140/migration-policy-linked-inflated-housing-prices-government-spending-and-low-savings

The interesting thing about the "tenure structure accross countries" graph is that the countries to the left of NZ (which have less owner/occupiers) include the most prosperous -Sweden, Norway, Denmark, Finland, Holland, Germany etc. whereas the countries to the right with much higher levels of home ownership includes the PIGS.

One would surmise that aiming to increase the proportion of home ownership might be a bad idea.

Good point Bob. The quality of their housing stock in general is a lot higher quality though compared to our cold, dank, leaky weetbix clad versions and also a lot higher density. We pay through the nose for an inferior product in general. I lived in Europe for a few years and rented a nice warm apartment close to transport and facilities. It was great. Came back to NZ and expensive rat holes mostly.

We should have a wof on rental houses that covers energy efficiency and dampness etc. Wouldn't be as profitable for landlords if they weren't allowed to take advantage of people and I guess and they'd throw their collective toys out of the cot until they got their way.

As for the report....well I'd like to think that it would do some good ten years after the event began but it's going to be ignored along with all the others isn't it. Why even pretend? The Pollies won't do anything to fix the economy and do everything to prop up the ponzi scheme while the tradable export sectors choke. I guess they know sheeple will believe anything when the pronounce export lead recovery!

I doubt any one of them has even been involved in exporting anything except State owned assets and young Kiwis to Australia. Why stop there?...Gekos to Germany are popular I hear,  beach front properties to Chinese and High Country sheep stations to the Uber rich.

Meanwhile younger generations will continue to be locked out of jobs and housing so Goff and Ilk (aka it's 'my retirement!') can keep all the lollies. The last remnants of the working poor shoulder the burden for the bureaucratic largesse, rorts, speculation, distortions and interest payments on our debt.  And we approach our own Greece moment while the deck chair shuffling continues on the good ship NZ Lollypop. Chin chin.

Cocktails anyone?

 

Vested interests snippy...the banks rule ok....save the bubble is the Cabinet cry...

$30,000 of the new build cost is thieving gst to the govt so they can hand it out to landlords as a subsidy...to keep the price of renter property bloated...to protect the bank bubbles..

As for all the other costs....the Councils are nothing but socialist programmes aimed at taking as much ratepayer money as they can steal using the laws handed down by idiots in Parliament...the Keynesian make work schemes are par for the course in all Councils...and they have to grab extra loot now to finance the bloated CEO pay packs...

That leaves the remaining reason all the materials cost heaps more than they should...Labour costs....wages old boy....Union power....and wages have to be jacked up and kept up otherwise the wage earners would not be able to afford the bloated rates and stonkingly stupid prices for new houses etc...

All part of the greater game of "let's be a govt that operates an idiot economy"