![Don't scare the horses: Brickworks CEO Lindsay Partridge and chairman Robert Millner. Partridge says federal Treasurer ...](/content/dam/images/g/v/5/6/l/g/image.related.afrArticleLead.620x350.gv4f2u.png/1490258359700.jpg)
Brickworks chief executive Lindsay Partridge has one message for the politicians threatening to tinker with negative gearing and other housing policies: "Just leave it alone".
It is not surprising that construction companies such as Brickworks and Boral, which are huge beneficiaries of the east coast housing boom, do not want the federal government to tinker with capital gains tax, negative gearing or any other policy which stimulates building growth. There is an element of self-interest in the construction industry's argument to let the cyclical housing industry run its course.
But Partridge's fears that tinkering with negative gearing will disrupt confidence and trigger a collapse in housing prices are legitimate.
The problem with doing nothing, though, is that housing prices will continue to rise and a whole generation of Australians will not be able to afford to buy a house. Housing affordability is a hot political issue which is not going away.
The major banks, encouraged by the banking regulator, are now driving efforts via interest rate rises to curb investor lending growth, which the tax regime favours. The problem with tweaks to investor loan rates, which are driven by regulators whose role is to ensure the banks are well capitalised rather than influence housing prices, is that they will only have a marginal impact on housing affordability.
That approach also does nothing to increase supply, which Partridge and other property and construction executives say is one solution.
The Victorian government is rezoning 100,000 housing blocks to create 17 new suburbs in Melbourne, but supply in Sydney remains tight.
Jump in profits
"The thing about the housing industry is that it is cyclical and the idea is not to do anything silly that scares the horses and puts it into a lull that is not required," Partridge warns. "Just let it build up and eventually it will rectify itself. We had a lot of policies in New South Wales in the early part of the last decade, which really destroyed the rate of home construction. They should just leave it alone."
Brickworks yesterday posted a 35 per cent jump in first-half profits to $104 million thanks to the booming east coast housing market. The company says demand for housing is catching up with the big uplift in migration around six years ago.
Partridge says there is no sign demand will ease up for at least another 18 months. Brickworks has an order bank of more than 200 million bricks, a record.
The industry can no longer keep up with demand for new apartments and even the cooling of the mining boom, which returned thousands of tradesmen to the housing market, has not filled the gap.
Partridge says buildings have been deferred in Brisbane, Gold Coast demand is reasonable, Melbourne is competitive and Sydney is "as strong as we've ever seen it".
Soaring energy costs
Brickworks and Boral are caught in the middle of the two hottest political issues in Australia. Booming property markets are being offset by soaring energy costs, which threatens to send more Australian manufacturing offshore.
Brickworks is looking at New Zealand and Malaysia as an alternative to some of its Australian manufacturing operations and Partridge has no confidence in the ability of federal and state governments to resolve the gas shortage crisis.
"There's only one solution at the end of the day and more gas needs to be put into the network," he says. "The mere fact we have not heard a word from the NSW and Victorian governments doesn't give me much confidence they are going to respond by making more areas available for gas production. I'm not quite sure what their plan is ... it's a bit of a worry."
Brickworks' results were not all positive, with Western Australia building activity declining in the first half. Though Australia has a two-speed housing market, many of the measures being considered to cool property prices, such as further limits on investor loans, apply at a national level.