Australia

The Next Australian City: the Suburban Evolution

Guy Gibson and Ross Elliott — Fri, 14 Jun 2024 12:01:10 -0400

Australia, much like America, is a nation of suburbs. The overwhelming majority of its people live, work and play in the suburbs of Australian cities. And while Australia is one of the most urbanised nations in the world, with two thirds of them living in their capital cities – and principally Sydney, Melbourne and Brisbane at that – it is the suburbs of those cities that remain the preferred place to live.

The evolution of Australian cities and suburbs is a theme explored in this book by Suburban Futures, edited by Guy Gibson and Ross Elliott. It features 30 authors and includes international perspectives by Joel Kotkin, Wendell Cox, Peter Gordon, Alan Berger and June Williamson and Ellen Dunham-Jones. The Canadian experience is told by Antony Lorius and Laura Taylor. Every Australian state and territory is also covered, each by a different author – all experts in their field but all with different perspectives on the history and future of suburban development.

North American readers will find much that is familiar and much that is new in this book. The editors have sought to provide a fresh sense of legitimacy for the suburban story of Australia which – much like in North America – is frequently the subject of disdain and derision. “The suburbs are about boredom, and obviously some people like being bored and plain and predictable, I'm happy for them … even if their suburbs are destroying the world,” was an infamous comment by noted Australian urbanist Elizabeth Farrelly. That’s not a view shared by authors in this work, who nonetheless are unafraid to tackle valid concerns around connectivity, mobility, equity and amenity.

The Next Australian City is for this reason both enlightening about the Australian experience, and challenging in terms of how its cities and suburbs will be shaped by global and local forces into the future.

Available at Amazon.

Detached Dwelling Approvals in Australia Break Another Record in April

Wendell Cox — Mon, 07 Jun 2021 20:07:02 -0400

Newgeography.com Context Note: We are pleased to present the following press release from the Housing Industry Association, Australia’s association of home builders. For some years, planners and governments have pursued densification policies that encourage households to choose multi-family rather than detached housing. Historically, detached housing has been dominant in Australia, but in the middle 2010s, multi-family housing was a majority of new construction in some months. With the pandemic, remote working and the increased demand for space — both in houses — and in gardens, detached housing construction rose strongly and again dominates housing construction.

To read the full press release, click here.

Australia: Detached Home Building Record Predicted

Wendell Cox — Thu, 18 Feb 2021 15:03:12 -0500

Housing Industry Organization Chief Economist Tim Reardon has predicted that detached housing production will set an all time record in 2021 in Australia. The demographic shifts resulting from the Covid-19 Pandemic are the root cause. According to Reardon: ““Regional locations in many states are showing a larger increase in activity than capital cities as the population moves away from inner city living.” This mirrors a trend reported in other nations.

More at: links.hia.com.au.

On the Death of Australia's Jane Jacobs

John Muscat — Thu, 14 May 2020 14:05:34 -0400

The life of trade union leader Jack Mundey, who died this week, is being celebrated across the Australian media. He undoubtedly had a long lasting impact on Sydney, but perhaps in ways most commentators fail to acknowledge. As secretary of the communist controlled NSW Builders Labourers’ Federation from 1968 to 1975, Mundey pioneered a boycott tactic which came to be known as ‘the green ban’. In short, if the union disapproved of a property development on heritage or environmental grounds, BLF members would be withheld from the site. The BLF’s share of the construction workforce was such that this type of strike effectively killed the project.

Mundey came on the scene at a crucial time in Sydney’s post-war history. Cost-efficient developments in transportation technology like motorisation, particularly trucking, and containerization ended the industrial sector’s need for proximity to maritime facilities, which had been the case since settlement, and rail junctions, which had emerged in the mid-19th century. This led to a dramatic transformation in Sydney’s industrial geography, including a process of inner-city deindustrialization. The traditional light industrial ring surrounding the CBD and extending westward along the harbour foreshores began to disappear. Transport hubs which had serviced the ring like Darling Harbour wharves and rail yards became redundant. As factory, workshop and warehouse owners moved their operations to cheaper sites in the western suburbs, industrial workers left the inner-city in droves for the prospect of a quarter acre block. Until now, the cost of housing across inner suburbs was suppressed by low amenity associated with noisy and dirty industry. The departure of these activities combined with locational advantages created the potential for a rapid escalation of land and property values.

Read the rest of this piece at The New City Journal Blogspot.

Bertaud Book Suggested for Australian PM Scott Morrison's Reading List

Wendell Cox — Wed, 04 Dec 2019 20:36:25 -0500

Australia’s Grattan Institute has included former World Bank principal planner’s Order Without Design: How Markets Shape Cities on its annual “Prime Minister’s Summer Reading List” (Summer starts in just a couple of weeks there). It is a good recommendation. We reviewed the book earlier this year.

Some excerpts from that review follow:

“Alain Bertaud’s new book, Order without Design: How Markets Shape Cities (MIT Press), is particularly timely, because of the rising concern about the challenges facing middle-income households. The broad based affluence that followed World War II brought unprecedented affluence to many millions of people, principally in the high income nations. This also raised the standard of living for people living in or near poverty. The progress has been well documented by economists, such as Diedre McClosky and Robert Gordon.”

Bertaud says that “current planning practices place “constraints put on the supply of urban land and floor space by restrictive regulations” that “are causing severe urban dysfunctions.” According to Bertaud, urban planners pay insufficient heed to urban economics:

‘I think that, worldwide, the unfamiliarity with basic urban economic concepts by those in charge of managing cities is one of the major problems of our time.’”

And that:

“Poorly conceived urban strategies are not just innocent utopias. They misdirect scarce urban investments toward locations where they are the least needed and, in doing so, greatly reduce the welfare of urban households. These failed strategies make housing less affordable and increase the time spent commuting.”

Finally, Bertaud offers advice that is “spot on” for leaders interested in preserving the middle class:

“The main objective of the planner should be to maintain mobility and housing affordability as a city’s population increases and it diversifies its activities (emphasis added).”

Many more state and provincial leaders need to read this volume than Prime Minister Morrison.

Australia's High-Rise Apartment Crash Turns Apocalyptic

Leith van Onselen — Tue, 03 Dec 2019 21:06:37 -0500

Yesterday, the Australian Bureau of Statistics (ABS) released its dwelling approvals data for November, which revealed that dwelling approvals nationally have crashed by 35% in trend terms from the March 2015 peak, driven by a mammoth 52% decline in unit and apartment approvals.

Today, I want to focus on the high-rise apartment segment, which is driving the bust and is also the subject of deep concerns around quality.

The next chart shows the picture at the national level in annual terms, which shows that high-rise apartment approvals have crashed by 53% since peaking in October 2015:

As shown above, there were 36,691 high-rise apartments approved across the nation in the year to October 2019, well down from the peak of 78,089 in the year to October 2015.

Detached house and townhouse approvals are also falling swiftly; albeit at a slower rate.

Below are the same charts at the state and territory level:

The high - rise apartment approvals crash has been driven by NSW (-57%), VIC (-57%) and QLD (-70%), which have all fallen massively from peak. ACT’s high-rise approvals have also crashed (-40%).

The below chart shows the high-rise bust across the major markets:

The crash is broad-based, nasty and ongoing. It is the smoking gun of RBA panic.

The Urban Consolidation Effect (Zoning Effect) on Australian House Prices

Wendell Cox — Tue, 10 Apr 2018 23:19:04 -0400

As George Bernard Shaw is reported to have said, Britain and America are two countries separated by a common language. So too, America and Australia, not to mention America and Canada, New Zealand, and elsewhere.

That was brought home to me with respect to my recent article (The Urban Containment Effect (Zoning Effect) on Australian House Prices) which detailed the extent to which land use strategies that destroy the competitive market for land on urban fringes also destroys housing affordability. This is a malady evident virtually everywhere in Australia.

For Australian readers, a better title would have been “The Urban Consolidation Effect (Zoning Effect) on Australian House Prices,” since “urban consolidation” is the most used term for urban containment in Australia. “Urban containment” is the more widely used international term.

Figures 2 and 3, from the original article, are reproduced below, substituting “urban consolidation” for “urban containment.” The core findings are revised to substitute “urban consolidation” for “urban containment” below:

The Urban Containment Effect in Major Australian Cities (2016)

Houses are more costly as a result of urban consolidation. Assuming typical mortgage provisions, (Note) the urban containment effect adds from $150,000 to nearly $500,000 to house prices in major Australian metropolitan areas --- this is not the house price, but the additional impact of urban containment (Figure 2). The urban containment effect adds up to $29,000 to annual payments on the average house in Australia’s major metropolitan areas (Figure 3).

• In Sydney, the urban consolidation effect adds $489,000 to the house price making the annual mortgage payments $29,000 higher. Figure 4 shows the components of the average house price in Sydney.

• In Melbourne, the urban consolidation effect adds $324,000 to the house price, making the annual mortgage payments $19,000 higher.

• In Brisbane, the urban consolidation effect adds $159,000 to the house price, making the annual mortgage payments $9,000 higher.

• In Perth, the urban consolidation effect adds $206,000 to the house price, making the annual mortgage payments $12,000 higher.

• No data is available for Adelaide, but the present median multiple (median house price divided by median household income) suggests that the urban consolidation effect adds at least $13,000 to the mortgage.

These are significant amounts, especially to families starting out and renters who would like to participate in the proverbial “Great Australian Dream” of home ownership.

Australian Treasurer Given Primer on Housing Economics

Wendell Cox — Sun, 14 Jun 2015 22:53:45 -0400

Wodonga (Victoria) mother of two Mel Wilson has made headlines across Australia with an open letter to Federal Treasurer Joe Hockey on housing affordability. In commenting on Australia's housing affordability crisis, the Treasurer has told a press conference "The starting point for a first home buyer is to get a good job that pays good money."

Australia has a severe housing affordability problem. As the Demographia International Housing Affordability Survey showed in January, Sydney median house prices had reached 9.8 times median household incomes of by the third quarter of 2014. In the intervening months house prices have escalated so much that some say the median price will soon pass $1 million.

It was not that long ago that house prices were far more reasonable in Australia. Nationally, in the early 1990s, house prices averaged around three times incomes. Since that time, house prices have more than doubled relative to incomes. This is placed a considerable burden on purchasing households, especially first home buyers.

Ms. Wilson incredulously took Treasurer Hockey through the economics of buying a first house in Sydney. She reminded him that it would take all of the average wage earner's take home pay for four years to save the down-payment on the median house, now priced at A$915,000 (approximately US$700,000. The entire letter is published below.

In a later statement, the Treasurer, to his credit, indicated the need for strong lobbying of the states to make more land available to increase supply. The problem in Sydney and Australia is not unique. Similar house cost crises have developed from London to Toronto and San Francisco, where governments have severely limited the land that can be used for new residences, with the wholly predictable result that prices escalate out of control.

Ms. Wilson, and other concerned (or baffled, as Ms. Wilson puts it) Australians should hope that Treasurer Hockey's "strong lobbying" is successful. The economic reality is that until there is liberalization of the land use restrictions responsible for much of the housing cost escalation, there will be no relief, other things being equal. Indeed, house prices are likely to just keep going skyward. This requires a mid-course correction toward policies that place improving the standards of living and reducing poverty at a higher priority than urban design.

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Letter from Ms. Mel Wilson to Treasurer Joe Hockey:

Dear Joe,

I just wanted to touch base with you regarding your comment that young people are able to enter the property market if they just “get a good job that pays good money.”

I just wanted to ask you how one might go about this?

Are you going to be reviewing all the current Awards that are in place to ensure that most jobs pay “good money”?

Are you going to be creating hundreds of thousands of new jobs that, under your Awards, pay over $100,000 per year?

Apologies if I have missed this fantastic news, but as someone working in 2 senior HR roles, I believe I would have known about this so that I could pass the message on to some very tired, over qualified employees who currently fall under various Federal and State awards and are being paid between $18 to $25 per hour.

Are you aware of what the average Australian wage is?

Are you aware of what the average Australian mortgage in Sydney is?

Are you aware of the first-home buying process?

Just in case these facts and figures aren’t available to you, I thought you might be interested.

The average weekly wage according to the Australian Bureau of Statistics on 1st January 2015 was $1,128.70, or $58,692.40 before tax. This means a take home amount of about $904.00 per week.

The median house price in Sydney, according to the Domain Group Housing Price Report, as of March 2015, was $914,056.

Not sure if you know how first home buying works at the moment, but you normally need a deposit of about 20%. This is to pay for the Stamp Duty (which is a State Tax you must pay every time you buy a property), and also to assist in the approval process so that you don’t need to pay Lenders Mortgage Insurance.

So in this instance, the first home buyer would need about $182,811.00 saved to purchase a house that is the average price in Sydney.

So to go out and get one of these “good jobs that pay good money” I assume these young people you speak of would need to go to university first.

On average, it takes about 3 -4 years to get a degree, so if a young person goes to University straight out of school, they can expect to finish their course and be ready for the workforce at about 21, with a HECS-HELP debt of over $20,000. To make this a bit easier for you to understand, let's say there is a young person named Joe Junior who has done just this.

If Joe Junior is extremely lucky, and is up there with the best of the graduates from that course and that year, he will get a job straight out of University paying usually under the average wage.

However, lets just be extremely generous here and say that Joe Junior got a job and was on the national weekly take home wage of $904 per week.

Joe Junior needs to only save every single dollar worked for about 4 years to save his $182,811 deposit for their first home. Thank you, Mr Hockey, for throwing in that $7,000 first home owner grant too – that meant Joe Junior could get into his first home 8 weeks earlier!

Just a quick side note, this example does not take into consideration the rising house prices, or Joe Junior’s HECS-HELP debt that he obtained from getting his degree to get one of your so-called “good jobs”.

Joe Junior is now 25 (not so junior anymore), has been living at home with his parents this entire time and has not been able to spend a single dollar on any bills, board or holidays or public transportation. He also can’t afford a car or petrol for a car but then again “poor people don’t drive cars”. Oh wait, Joe Junior isn’t a poor person – he has a “good job that pays good money.”

Luckily Joe Junior’s parents have been happy to drive their little Joe Junior to and from work every day and provide free housing, clothing, medical expenses and also provide the food for his breakfast, lunch and dinner each day.

So finally Joe Junior has saved his $182,811 deposit (of which only about half will go towards his mortgage due to the stamp duty cost), and can now purchase his first home, with a mortgage of about $822,650.00.

According to the Commonwealth Bank’s online mortgage estimator, the repayments for a mortgage of this amount are $1,073.00 per week over 30 years.

So hopefully Joe Junior’s average weekly wage of $904.00 has gone up enough to cover the cost of the mortgage.

Joe Junior has been applying for these “good jobs hat pay good money" that you speak of (I assume by "good money" you mean more than the average wage as you have just seen it is not even enough to cover the cost of the average house prices' mortgage in Sydney), but hasn’t had any luck as yet. He needed to stay in the same job post university to demonstrate to the bank job stability so that he could purchase his first home. So he only has a degree, and experience in the one job, one industry, and there are just not that many jobs out there paying “good money.”

Joe Junior now also can’t wash his clothes, eat food, or get to and from work as he no longer lives with his parents, so getting one of these “good jobs” is even more difficult.

So Joe Senior, are you really aware of all the facts and figures when you says things like buying your first home is “readily affordable” to young people?

Just slightly confused as to what you were thinking when you said these words at the media conference in Sydney.

Looking forward to another one of your politically correct, direct and well thought out responses.

Regards,

Another baffled Australian

Urban Containment: Land Price Up 5 Times Income & Smaller

Wendell Cox — Fri, 11 Apr 2014 16:58:17 -0400

The shocking extent to which urban containment policy (urban consolidation policy) is associated with higher land (and house) prices is illustrated by a recent press release from RP Data in Australia. The analysis examined the vacant building lot prices for the period of 1993 to 2013.
During the period, the median price of a vacant lot rose 168 percent after adjustment for inflation. This is nearly 5 times the increase in the median household incomes of the seven largest capital cities (Sydney, Melbourne, Brisbane, Perth, Adelaide, Canberra and Sydney).
But it gets worse. The median lot size was reduced nearly 30 percent. This should put paid to the myth that urban containment reduces lot prices as it reduces their sizes (Figure). The same dynamic has been indicated in the United States.

Australia has been plagued by huge house cost increases relative to incomes in association with urban containment policy. Before the adoption of urban containment policy, it was typical for house prices to average three times or less than that of household income. Now, Sydney has the highest median multiple (median house price divided by median household income) of any major metropolitan area in the New World, with the exceptions of Vancouver and San Francisco. Melbourne, the second largest metropolitan area in Australia, has a median multiple of 8.4, making it fifth most costly in the New World, behind San Jose. All of Australia's major metropolitan areas "severely unaffordable," including slow-growing Adelaide (6.3), as well as most smaller areas.
For a complete listing of median multiples by major metropolitan area, see the 10th Annual Demographia International Housing Affordability Survey.
Additional information on the RP Data research is available at Australian Property Through Foreign Eyes

Growing Traffic Threatens Sydney

Wendell Cox — Fri, 04 Apr 2014 09:38:54 -0400

In the "letter of the week" in The North Shore Times, Save Our Suburbs President Tony Recsei decries the rising traffic congestion that is occurring in Sydney from the densification policies. Urban planners had misled residents into believing that higher population densities would reduce traffic congestion as more people shifted to mass transit. Recsei notes that "While in higher densities, a slightly higher proportion of people use public transport, this is completely overwhelmed by the greater number now in the area who still have to use their cars for all sorts of reasons." With an understandable pride typical of Sydneysiders, Recsei asks "Why should policies be allowed to transform beautiful Sydney into just another overcrowded city in the world?"

Why indeed. There are two overwhelming outcomes that are shared by cities that have climbed on the urban containment bandwagon: (1) destruction of housing affordability and (2) severely intensified traffic congestion. Sydney suffers from a particularly acute strain of the disease. The land rationing of urban containment policy has house affordability to a severely unaffordable level. Sydney's traffic congestion has also become among the worst in the world. Of course things could be worse. Vancouver, with an urban planning regime to which some Sydney leaders and planners aspire, is even worse in both categories.

Note: Tony Recsei is also a newgeography.com author (an example is Predictable Political Punditry Down Under).