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Approaches for calculation of holding costs in the context of greenfield residential development

Garner, Gary O. (2010) Approaches for calculation of holding costs in the context of greenfield residential development. In Garner, Gary Owen (Ed.) Proceedings of the 16th Pacific Rim Real Estate Society Conference, Pacific Rim Real Estate Society, Wellington, New Zealand.

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Abstract

There are increasing indications that the contribution of holding costs and its impact on housing affordability is very significant. Their importance and perceived high level impact can be gauged from considering the unprecedented level of attention policy makers have given them recently. This may be evidenced by the embedding of specific strategies to address burgeoning holding costs (and particularly those cost savings associated with streamlining regulatory assessment) within statutory instruments such as the Queensland Housing Affordability Strategy, and the South East Queensland Regional Plan. However, several key issues require further investigation. Firstly, the computation and methodology behind the calculation of holding costs varies widely. In fact, it is not only variable, but in some instances completely ignored. Secondly, some ambiguity exists in terms of the inclusion of various elements of holding costs and assessment of their relative contribution. Perhaps this may in part be explained by their nature: such costs are not always immediately apparent. They are not as visible as more tangible cost items associated with greenfield development such as regulatory fees, government taxes, acquisition costs, selling fees, commissions and others. Holding costs are also more difficult to evaluate since for the most part they must be ultimately assessed over time in an ever-changing environment based on their strong relationship with opportunity cost which is in turn dependant, inter alia, upon prevailing inflation and / or interest rates. This paper seeks to provide a more detailed investigation of those elements related to holding costs, and in so doing determine the size of their impact specifically on the end user. It extends research in this area clarifying the extent to which holding costs impact housing affordability. Geographical diversity indicated by the considerable variation between various planning instruments and the length of regulatory assessment periods suggests further research should adopt a case study approach in order to test the relevance of theoretical modelling conducted.

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ID Code: 31434
Item Type: Conference Paper
Keywords: Holding cost, Greenfield, opportunity cost, regulatory assessment, housing affordability
Subjects: Australian and New Zealand Standard Research Classification > ECONOMICS (140000) > APPLIED ECONOMICS (140200) > Urban and Regional Economics (140218)
Australian and New Zealand Standard Research Classification > ECONOMICS (140000) > Economic Theory (140100) > Economic Theory not elsewhere classified (140199)
Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > COMMERCIAL SERVICES (150400) > Real Estate and Valuation Services (150403)
Australian and New Zealand Standard Research Classification > ECONOMICS (140000) > APPLIED ECONOMICS (140200) > Financial Economics (140207)
Divisions: Past > QUT Faculties & Divisions > Faculty of Built Environment and Engineering
Past > Schools > School of Urban Development
Copyright Owner: Copyright 2010 Gary Garner
Deposited On: 23 Mar 2010 15:56
Last Modified: 10 Jun 2010 00:25

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