The carbon tax will change property.
Construction, of both residential and commercial buildings, will move to the use of less greenhouse intensive materials.
Building operation will focus even more on energy saving; and values might finally start to show a low carbon premium.
Which is what carbon pricing is intended to do. And what the industry has been working towards for some time.
Of course there will be winners and losers. Changes to regulatory and tax regimes always create new haves and have-nots. And no doubt there will be economic dislocation, amplified by the uncertainties of the tax, to dull property returns.
Macquarie Equities Research warns of an unusual pattern of retail sales next year, with spending jumping in mid-2012 as the government’s compensation package arrives, then falling in late 2012 when the energy bills are paid.
Nevertheless, some of the warnings about the impact of carbon pricing should be looked at carefully.
Construction costs will rise, but perhaps not so much as to add 5 per cent to the price of a new house.
Alan Pears, an associate director of the Centre for Design at RMIT, has been working on energy efficient buildings since the 1970s, including the Australian Conservation Foundation’s ground breaking 60L Green Building in Carlton.
He says many of the warnings over-estimate the impact of the amount of embodied greenhouse emissions in the construction materials, and then under-estimate the concessions to the concrete and steel manufacturers.
RMIT puts the amount of embodied greenhouse emissions in a new house at about half a tonne a square metre. At the set carbon price that is about $2500 for a 220 square metre home.
More importantly, builders will start to use products with lower embodied emissions.
Pears says some concrete manufacturers are already blending concretes with lower emission slag or fly ash. At the same time some house projects are using recycled steel.
‘’If you choose the right suppliers, even without changing materials, you will be able to reduce the greenhouse emissions and the cost,’’ he says.
Materials will also change to reflect the costs and embodied emissions. Plantation timber will jump up the list.
Treasury says that Australia will continue to have a strong construction sector with carbon pricing but that differences will emerge within the sector.
Treasury also expects much lower growth in construction in the 2020s, ’30s and ’40s than in the three previous decades.
But that’s another story.
The complexities around carbon pricing are compounded by all the additional greenhouse incentives.
The billion dollar green building retrofit allowance, a promise of the last election but now delayed a year, has disappeared behind the promise of consultation.
To help, the Property Council has commissioned the Allen Consulting Group to model the impacts of the tax on the sector – including construction costs – and to develop a tool to estimate the increases in energy-related operating costs.
Those who were around for the introduction of the GST will also remember the myriad of issues accompanying the change.
Tenancy agreements based on gross leases – where the landlord pays all outgoings – created a headache for owners unable to pass on extra costs. And rents linked to the CPI became an issue for the ACCC when the jump in inflation was due to the introduction of the tax.
Such issues are inevitable.
Landlords and tenants, builders and developers should prepare for the little issues – while they keep their eye on the big picture.
The Australian Financial Review