Council charges drive up housing costs: developer

p2223-Olzomer-units-2By ERWIN CHLANDA

 

A property developer says the town council is driving up the cost of housing with unnecessary and unfair charges, including double dipping in some instances.

 

Joel Olzomer says he is a member of a local consortium building four units (pictured) in Mount Johns estate. The council charged $5608 to inspect the project as a single entity.

 

“I don’t believe they actually viewed them at that stage,” he says.

 

“Then it performed an inspection, which took some 10 minutes, to assess the project as strata-titled units,” says Mr Olzomer.

 

“This is the only inspection to my knowledge that has been conducted.

 

“All services on the ground were exactly the same” as when the first inspection supposedly took place, he says.

 

“There was no difference at all to parking, stormwater, drainage, verges and so on,” he says. “Yet we got a further bill of $6080.

 

“This is notwithstanding that the council will benefit from the strata titling, because it will gain four ratepayers instead of one.”

 

Mr Olzomer says this is clearly a cost that has to be passed on to the buyer, although in this case the units will be rented initially “to allow some time for the market to lift”.

 

Council CEO Rex Mooney, when asked for a comment, said the council, like the majority across Australia, “implements fees and charges based on cost recovery that apply to developments within the municipality.

 

“Council fees do not influence or set housing prices.

 

“Development proposals can be a long and timely process, requiring information exchange from various service authorities and ongoing construction monitoring, which does impact on Council resources.

 

“Issues like stormwater, verges, parking, road works and traffic management are part of this process.

 

“In the 2015/2016 budget review currently being undertaken by Council, development charges are being reviewed and this has been ongoing for some time.”

 

Mr Mooney did not respond to the question from the News whether a similar form of multiple charging would apply to larger projects such as Melanka and the old bowling club site, if they include strata titled properties.

 

 

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15 Comments (starting with the most recent)

NB: If you want to reply to a previous comment, start your comment with this notation: @n where n is the number of the comment you want to reply to.
  1. Anonymous (Alice Springs Local)
    Posted March 30, 2015 at 2:12 pm

    @ Heckler: Thank you for respecting my request.
    What I would like to say is, thank you Joel for going to industry groups, politicians, etc and making that effort when you have had no involvement or personal gain. You are doing a good thing for businesses, home buyers and the community! 🙂

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  2. Heckler
    Posted March 30, 2015 at 9:42 am

    @ Erwin. Quotes were for completion. It was (sold the block, hence past tense) slightly sloping and lots of shale so some ground work for foundations and services were required. Those costs weren’t itemised.
    @ Anonymous. I don’t care about Joel’s profit. As I’ve said and he’s made clear, it’s none of my business. But I would like him to at least acknowledge it’s higher than the council etc charges he’s drawing attention to.
    I’ve never called Joel greedy. How could I? I don’t know his construction costs or his asking price. A $50k profit, if it represents around 10% profit, I don’t consider to be greedy at all.
    In fact, if it’s around that mark, he’s probably running a very tight business. And Joel, not me, raised the matters of cost of living and the effect of compounding. I don’t think either of those matters helped his case.

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  3. Anonymous (Alice Springs Local)
    Posted March 29, 2015 at 3:04 pm

    @2 Heckler, You are being very, very sneaky! Joel stated that he did not want to discuss the profit, so why keep trying to bring it up in a round about way?
    I’m sorry that you have had bad experiences with other builders and I don’t think you should be attacking Joel just because of these past issues.
    Heckler, Joel SAID he bought ONE unit not all four units, so could you please STOP assuming that he’s making such a profit and making it out that he’s being greedy, when he is not being greedy as he is entitled to his privacy.
    You are not being a Heckler, you are being judgmental and noisy by trying to find out Joel’s profit and making not so kind assumptions about him. It’s OK for you to ask questions and have your opinion across but please, do it respectfully. The “I’m entitled to strategy” has certainly not worked with me as that’s not Joel’s game. You are saying that’s his game but obviously that’s how you are thinking.
    Heckler, please focus on your questions for Joel and stop targeting Joel as he has done you wrong, when it was other builders and not Joel.
    Heckler, maybe you could take this opportunity to actually get advice from Joel and see how he can assist you, rather then heckle him?
    Heckler, I think you show a lot of concern yourself and maybe you could even ask Joel to provide you with information so you can take your questions further and find the answers you are after.

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  4. Erwin Chlanda
    Posted March 29, 2015 at 2:47 pm

    @ Heckler, posted March 29, 2015 at 8:23 am.
    I fully agree. $3300 a square meter is a rip-off.
    Was that for lock-up stage or fully completed?
    We built a 400 square meter house in 2005 for $270,000. That’s $675 a square meter.
    Add to that 10 times 4.5% CPI increase which would make it $391,500 and $978, respectively, today.
    This included fully furnished and equipped kitchen, laundry and two bathrooms; built-in wardrobes in all four bedrooms, seven reverse cycle air conditioners, two swampies, 12 fans and wall-to-wall carpets throughout except for the living room which has a very attractive polished concrete floor.
    We were the owner-managers. We engaged 12 subbies and suppliers, all on written agreements which provided for payment within two days of completion and certification by a qualified certifier, or supply of the equipment.
    As far as I know, we paid the subbies slightly more than the going rate, yet the project cost us less than a third of what Heckler was quoted. You figure.

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  5. Heckler
    Posted March 29, 2015 at 8:23 am

    @ Joel. I better say it again – I’m not defending the council’s unreasonable charges. You can cite as many examples as you like – eg the AAPA ludicrous charge, second engineer opinion – and I won’t defend them either. And I’m certainly not anti-profit, provided it’s reasonable rather than exploitative.
    I am pro development for Alice. Four to five years ago I obtained quotes from two builders (others didn’t bother to quote) for a house at Stirling Heights. Their quotes came in at an average of $3,300/sqm – didn’t build the house of course. At that time, the quotes were just plain greedy. Development foregone! That explains my negative predisposition to builders / developers. I am not against development.
    You’re right about one thing – your profit is none of my business. So, as you suggest, I’ll divert my heckle to the major issue – unnecessary upward pressure on cost of living.
    Your profit forms a part of the purchase price and therefore part of the borrower’s mortgage and therefore an element of the purchaser’s cost of living. You are keen to point to the compounding effects of all the other construction cost components but not to the compounded effects of your profit. Your $50k / $80k / $100k profit per unit turns into a (roughly) $100k / $160k / $200k cost for the purchaser over a 20 year period.
    And if the purchaser buys as an investor, the majority of those costs are passed on to the renter. How do those figures stack up against the compounded cost of council charges? I don’t know if your margin is reasonable or exploitative, but it is certainly there and has a larger impact on a borrowers / renters cost of living than the council, etc, charges you refer to.
    I applaud you for your apparent concern for the buyer, but are you trying to draw attention away from the cost component (your profit) that is of most interest to you and which forms a significant part of the final cost to the borrower? Your “look over there while I take all the profit I think I’m entitled to strategy” has certainly worked with Anonymous.
    I have the view that some developers / builders, by milking a bouyant property market, contributed to strangling the development of Alice.
    I know of many people who have left town because they couldn’t afford to buy or rent property and struggled to make ends meet. Have greedy builders/developers, ignoring the longer-term effects, played a part in that exodus, I wonder, and contributed to the consequent fall in demand and prices?

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  6. Anonymous (Alice Springs Local)
    Posted March 29, 2015 at 2:27 am

    @2 Heckler: I am not overlooking the fact that property development is a business with a core motive to make a profit as all businesses have a core motive to make profit.
    I don’t think Joel is avoiding anything, as he is pointing out examples of what he has done, he is also discussing how it affects a business and how it can have an impact on the price of a home, new or old.
    Joel is making a lot of valid points.
    I think Joel’s profit does not matter as this story is about the unnecessary fees the council are charging and driving up the cost of housing, not how much Joel earned.
    I do believe that Joel does have genuine concerns about this and you shouldn’t insinuate that he doesn’t care, when he obviously does care.
    I did not state that Joel’s prime motive was for people to go to the movies or buy furniture as it was just an example in regards to the $5,900 that is taken out of the home buyers pocket, as Joel explained, earlier.
    Overall, the article and all of Joel’s comments support what he is saying and he makes and continues to make very strong and valid points.

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  7. Joel Olzomer
    Posted March 28, 2015 at 6:58 pm

    Heckler – I applaud you on living up to your name.
    A few points:
    If you read the article, it states “a member of a consortium” being that I own just one of four units. Not exactly the next Warren Buffett, more like a 28 year old 5th generation Territorian with an optimistic view of the town’s future and willing to take a calculated risk on investing in it.
    I do have a genuine concern about over inflated input costs in construction, obviously, anyone who sells property at some stage has also purchased property.
    The point I am making, is that cost of construction impacts housing prices, not just new houses, but old houses too. For instance, an old ex-government house will have its price inflated as the result of expensive new houses, for the simple fact that real estate values are determined by the comparative value of one property to the next.
    You seem to have a negative view of developers (or is it development?), but the fact is, no one works for a year to construct something if it is a profitless exercise. As you continue to raise this seemingly irrelevant question – I most certainly do not neglect to state estimated profit for the world to see, it’s quite simply none of your business!
    The return on investment will be based upon what a buyer will pay on the day. Not a dollar more, not a dollar less. So Heckler, please feel free to divert your attention to the common issue: Unnecessary upward pressure on cost of living in Alice Springs and the social and economic impacts of this. Cheers.

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  8. Heckler
    Posted March 28, 2015 at 3:29 pm

    @ Anonymous. You seem to have the view that Joel’s profit on each unit isn’t an added cost, like any other. You also seem to overlook the fact that property development is a business with a core motive to make a profit, not to build rateable properties for council.
    Joel neatly avoids any mention of his profit per unit. And you seem to accept that he’s concerned only about the cost for buyers. I don’t believe it. Not for one minute. If that is his prime motive, why doesn’t he just absorb the cost? The $3,000 he forgoes per unit could lessen the borrowers’ mortgage or the purchasers could use the money saved for furniture, movies, etc.
    I don’t know if Joel is being greedy, but it remains a possibility. At a minimum, he’s trying to protect his profit. But is his expected profit at the greedy end of the scale?
    Just to be clear, I am not in any way trying to defend the council charges.

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  9. Joel Olzomer
    Posted March 28, 2015 at 11:45 am

    @3 Heckler,
    There are a whole range of unproductive fees that unnecessarily add to the cost in an already expensive construction environment. Even when I have had no involvement or personal gain, I have gone to the effort of bringing these to the attention of industry groups, politicians and the recently established NT Government “red tape cutting” initiative.
    To name a few examples of unnecessarily high construction cost beyond the commonly used transport excuse:

    [1] Alice Springs Town Council (ASTC) storm water plans – requires the developer provide a storm water design by a registered engineer, about $5000 (fair enough, makes sense). THEN Pay the ASTC (naturally more expensive than the original engineering) for them to have their Adelaide based engineer check the first engineer. Of course this requires the council’s engineer taking a field trip from Adelaide to Alice Springs. On top of the cost of doubling up engineers and interstate travel – there is the issue of lost time.
    [2] Aboriginal Areas Protection Authority (AAPA): Would anyone be surprised to see a quote of $7,600 Ex GST for AAPA to provide indemnity to the land developer on a previously developed lot of commercial land, free of any rocks and trees?
    [3] After the Carey Builders debacle – The introduction of the Master Builders Fidelity Fund adds 1.2% to the cost of residential construction and renovations / extensions. Even owner builders and builders extending their own home have to pay this. The Fidelity Fund website does not appear to be up to date – but as of today, it states no pay out have been made. (An update to this would be good.)
    [4] And a couple broader costs that are incredibly inefficient and have no place in a modern, progressive tax system – Stamp Duty (penalises development) and Payroll Tax (penalises employing too many people).
    It is important to understand that high cost of construction and development has a compounding effect through the economy. High construction costs makes Bricks and Mortar business in rural communities that much harder to compete against internet based business. Additionally, as previously stated, any money borrowed (ultimately by the property owner / purchaser) may end up costing almost double due the interest on the cost.

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  10. Davo of Alice
    Posted March 27, 2015 at 11:59 pm

    Just another case of our greedy little council trying to get their hands on our money without doing anything to earn it.
    As Joel states they will get four times the rates due to strata titling.
    Enough is enough. It’s time the people took the Alice Springs Town Council to court to challenge the ridiculous by-laws and infringements and ripoff rate charges they are making money hand over fist with.
    Rise up and challenge as – remember – they now have carte blanche until August 2017 before we can turf out our pompous Mayor and his cronies.

    View Comment
  11. Anonymous (Alice Springs Local)
    Posted March 27, 2015 at 2:10 pm

    @1 Heckler: Joel makes a very valid point as he would like the people of Alice Springs to have the opportunity to purchase homes without added costs, be able to furnish their new home without falling short pocketed, to have money to spend in general as the price of living is rising and not only that, he is trying to reduce the costs for home buyers!
    Joel isn’t asking for your sympathy, Joel is just getting his opinion across and he obviously is concerned about the costs passed onto purchasers and that is why the story was put into the local paper.
    In response to your question, “raising concerns about the price purchasers pay for a house or unit I wonder what’s going on?” I don’t understand why you are questioning this?
    If you were to buy a house and the developer wanted to try and make the costs less for you, where is the issue?
    Not only that, I live in a property and if I wanted to purchase a house / unit, I would love it, if the developer tried to make the costs less for me, as the home loan itself is a huge amount of money to borrow.
    Also, you said that you’d give Joel sympathy if he disclosed the expected profit per unit?
    Luckily, Joel isn’t after sympathy but more of a solution or an answer to his concern.
    In the article not once has he made it sound like he’s money hungry, he just wants the best for the people of Alice Springs and for them not to be penalized or given more fees when they purchase a home / unit.
    Personally, I think it’s excellent that Joel is trying to minimize costs for home buyers!

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  12. Heckler
    Posted March 26, 2015 at 7:04 pm

    Joel has a valid point about the need for council fees to be related to the work performed. It certainly looks like a first class, compulsory rip-off.
    But when I see a developer raising concerns about the price purchasers pay for a house or unit I wonder what’ s going on. You might get some sympathy from me Joel if you were prepared to disclose your expected profit per unit. You’ve decided to rent them rather than sell, you know the cost per unit and have done the sums. If your expected profit per unit was of the order of $20k I’d have some sympathy for your position. But I doubt your margin is so low.
    A sale price is a negotiation between buyer and seller. Your margin is not protected in any market. In a rising market I doubt you would concern yourself about the costs passed on to purchasers, let alone getting a story in the local paper.

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  13. Alice Local
    Posted March 25, 2015 at 9:17 pm

    Sounds like the definition of crazy! If a developer wants to go to the effort of creating more rates for the ASTC – why the hell would you penalise them?
    I recall reading a story about a NSW man who was taking his fight with the local council to court, as the council was unable or unwilling to provide realistic explanation of a fee or rate they were charging him, making it in fact more like a tax, his argument was that a council does not have clear constitutional rights to implement taxes!
    This story sounds like the Alice Springs Town Council is taxing development? We already have one ridiculous tax on development; it’s called stamp duty. We don’t need another to drive up Alice house prices.

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  14. Joel Olzomer
    Posted March 25, 2015 at 8:47 am

    @1 Yeh Right: The issue here is about what can be done to reduce the cost of living in Alice Springs.
    The ASTC charges equate to almost $3,000 per unit. This is a cost that will ultimately be added to someone’s mortgage. Assuming the purchaser gets a mortgage, at today’s rates on a standard home loan, the $3000 additional cost will end up costing close to $5,900.
    That is $5,900 that is taken out of a home owner’s pocket to buy furniture, go to restaurants, to the movies and all other discretionary spending that the Alice Springs economy desperately needs.
    If the ASTC could demonstrate that the fees were reasonable and commensurate with the minimal works undertaken by them in this project then of course it would be a cost that would be valid.

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  15. Yeh right
    Posted March 24, 2015 at 4:21 pm

    Wow, so the charges are forcing the developer to put up the price. How much? Probably about 0.75% or less.

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