Australia

Sydney's Long and Lengthening Commute Times

Wendell Cox — Sun, 20 May 2012 22:03:27 -0400

The New South Wales Department of Transport Housing and Transportation Survey reports that the average one way work trip in the Sydney metropolitan area (statistical division) reached 34.3 minutes in 2010. As a result, Sydney now has the longest reported commute time in the New World (United States, Canada, Australia and New Zealand), except for the New York City metropolitan area (34.6 minutes).

Longer Commutes than in Dallas-Fort Worth or Los Angeles: Sydney's average work trip travel time has increased approximately 10 percent since 2002. The 34.3 minute one way travel time is approximately 30 percent higher than that of larger Dallas-Fort Worth, which about half as dense. Part of the reason for the longer commute time in Sydney is its far greater transit dependence. Approximately 24 percent of work trip travel is on transit (which is slower for most trips). This compares to approximately 2 percent of travel in Dallas-Fort Worth.

Even Los Angeles, with its reputation for "gridlock" has a shorter average commute time, at 28.1 minutes. This is made possible by the extensive Los Angeles freeway system, greater use of automobiles and more dispersed employment patterns (despite the higher density of Los Angeles relative to Sydney). The average Sydney commuter spends nearly an hour longer traveling to work each week than the average Los Angeles commuter.

Even Longer Commutes Ahead? Sydney's densification policies (urban consolidation policies) seem likely to lengthen commute times even more in the future, given the association between higher densities and greater traffic congestion.

Population Growth in Australia Has Normalized

Leith van Onselen — Mon, 21 Nov 2011 18:01:58 -0500

Yesterday’s Daily Telegraph contained an interesting article on the increasing number of Australians departing Australia permanently:

OVERALL migration from Australia has soared to a record high – with 88,000 leaving in the past year, almost half from NSW.

The stampede abroad is a 90 per cent increase 10 years ago, figures from the Department of Immigration show.

Half the emigrants are Australian-born who have chosen to start new lives in Britain (15,119), New Zealand, (14,596), the US (8046 and Singapore (6952)…

At the same time, the number of people emigrating to Australia has dropped, by 9 per cent to 127,458 in the past year, making the ratio of departures to arrivals a record high…

Upon reading this article, I decided to crunch the numbers to determine how Australia’s migration numbers are tracking. The below chart shows the permanent arrivals vs permanent departures numbers alluded to in the above article. The ratio of arrivals to departures is also shown:

As you can see, the number of net permanent arrivals into Australia – around 45,000 for the 12 months to September 2011 – is well below the long-run average (around 65,000). The ratio of arrivals to departures is also in long-term decline and currently sits at a 35-year low of 1.5 times.

However, the broader net overseas migration (NOM) statistics published by the Australian Bureau of Statistics, which measures in/out migration of anyone residing/leaving Australia for a period of 12 months or more (rather than permanently), paints a different picture.

According to these statistics, NOM is still above long-term trends, but has declined sharply from the peak level seen in the year to September 2008, from around 315,000 to 170,000:

With the decline in NOM, Australia’s population growth has also fallen significantly, from a peak of just under 470,000 in the year to September 2008 to just under 320,000. The share of population growth coming from immigration has also fallen over the same period from a peak of 67% to 54%.

Finally, in percentage terms, it appears that Australia’s population growth and immigration are returning to average levels after surging in the 3 years to 2008:

With the ABS scheduled to release the June quarter NOM data in mid-December, it will be interesting to see whether Australia’s NOM mirrors the permanent arrivals/departures figures and registers another fall.

This piece originally appeared at Macrobusiness.

Leith van Onselen writes daily as the Unconventional Economist at MacroBusiness Australia. He has held positions at the Australian Treasury, Victorian Treasury and currently works at a leading financial services company. Follow him @leithVO.

Australia Central Banker: Higher House Prices a "Social Problem"

Wendell Cox — Sun, 28 Aug 2011 13:11:54 -0400

Glenn Stevens, the Governor of the Reserve Bank of Australia expressed concern about the growing gap in housing affordability in the nation to a parliamentary committee on Friday. Stevens raised questions about the cost and supply of housing, asking:

"How is it that we can't add to the dwelling stock for the marginal new entrant more cheaply than we seem to be able to do," he asked.

According to an article in the Perth Western Australian ("High price of homes 'stealing future'") Stevens went on to say that key State and local government issues around supply, zoning, transportation and infrastructure seemed to be making a simple block of land more expensive than was necessary.

Virtually all of Australia large urban areas have implemented urban containment policies (called "urban consolidation" in Australia and "smart growth" in the United States). The result has been to increase house prices from 2 to 3 times the historic norm relative to incomes. These price increases are consistent with the overwhelming economic evidence of a strong association between urban containment policies, especially those that ration land for development through devices such as urban growth boundaries.

The Chairman of the Reserve Bank of New Zealand has identified a 10-times "across the urban growth boundary value" difference per acre in Auckland, which is similar to findings in Portland, Oregon.

Stevens concluded his housing comments noting that: "There's a very big inequality between generations building up and I think that's a social problem as much as any economic point."

Australia's 2011 Census: Chock Full of Surprises

Michael Matusik — Thu, 21 Jul 2011 00:17:04 -0400

There is nothing better than a good old count to check out what’s really happening. And a lot has happened across Australia over the last five years. But what actually has happen to the country’s demographic fabric might surprise many.
There are ten trends which I think will emerge out of our next national count on Tuesday 9th August.

1. Acceleration towards suburbia. Despite what we are feed by the intelligentsia most Australian’s want to live in a suburban settling. The amount of new development on the fringe and the proportion of the population living out there will have increased over the last five years. This trend is also likely accelerate in coming decades as to will a shift to “opportunity” regions, many of which being regional towns. And there is the real surprise, many of those that moved to suburbia are young – the 25 to 34 age group.

2. Increase in household size. Household sizes are no longer shrinking. 2006’s 2.6 people per household average will be closer to 2.8 this census and may rise even higher in the future. Why? The baby bonus, change in overseas migrant mix, low housing affordability and poor government decisions like, ironically, the first home owners grant and the more recent increase in owner-resident transfer duties in Queensland.

3. More family households. Despite forecasts of more lone person and couple households, we are likely to see an increase in the proportion of family households this census. In fact the proportion of lone households is likely to fall, as many are forced to live in shared arrangements or move back home with family.

4. Increase in net wealth. Despite the GFC, rising household costs and now declining house prices our net household wealth will have risen sharply between census periods; as too will our household incomes. Equity in our homes (and investment properties) will have also risen, with more people owning their home outright than ever before. The August 2011 poll will also find that Australia’s net household wealth is also at a record high.

5. Working longer. The number of hours reported as worked each week will be up, but when they were clocked will be increasingly outside of the core 9 to 5. Yet, and whilst not a census measurement, our productivity and ability to innovate will be down. In broader terms our economic measurements are wrong – we have suffocating, quarterly consciousness and proprietary trading rather a focus on nurturing talent and innovation. The county is far less dynamic as a result.

6. Change in demographic mix. A shift in overseas migrants from China, India, Africa and the Middle-East and less arriving here from more traditional sources such as the United Kingdom, Europe and New Zealand. This means bigger household groups, a younger age profile and rising demand for detached housing (and burqas too).

7. Larger homes. Whilst there has been shrinkage in apartment sizes of late and only really to make them easier to sell, most other housing types across Australia over the last five years have gotten bigger. High and rising land costs, relatively cheap building costs and increasing household sizes are the main reasons why. Our aging demographic will also want big new homes – assuming that baby boomers move – but how cheap new housing will be to build in the future is uncertain at present. Home owners are also moving less often and the distance, when the do move, is becoming less. “Fewer moves, local focus” should be the catch-cry for the next decade.

8. Fewer marriages. And those that are taking the plunge are getting married later. The average age of mothers having their first child should exceed 30 years.

9. Dissolution of relationships. Not only are fewer Australians getting married, but we are breaking off relationships at an increasing rate. Family and relationship disbanding reflects our declining resiliency and mounting acceptance of the nanny state. We don’t seem to overcome hardships these days, just “cut and run”. From a housing prospective if our households are fracturing so easily, then why are our prescriptions for housing increasingly rigid?

10. Less religion. Last census more Australia’s nominated that they believed in the Order Of The Jedi than Christianity, so maybe the census is bunkum after all. Yet more Australian’s are likely to nominate that they have no religion at all. Whilst we are not America, we do live largely an American way of life and were founded on similar values – industriousness, honesty, marriage and social cohesion – but these seems to be unravelling. This census count should show us how far lost we have become.

To paraphrase international urban authority Joel Kotkin “Whatever your politics or economic interests, the 2011 census will show that the country is changing and in a dramatic way – if not always in the ways often predicted by pundits, planners or the media. It usually makes more sense to study the actual numbers than largely wishful thinking of mostly urban-centric, big-city based and often quite biased analysts.” As we wrote after the last census, it maybe time for the planning industry to take a breather and set a different course with regard to our urban land use. Hopefully this time around the planning intelligentsia will take some notice.

The Matusik Snapshot is opinion and not advice. Readers should seek their own professional advice on the subject being discussed. Comments are welcome, contact me on michael@matusik.com.au.

Adelaide Land Prices Top Sydney

Wendell Cox — Mon, 18 Jul 2011 13:05:44 -0400

The median price of serviced (improved) lots for new houses in Adelaide is reported to have risen above that of far larger Sydney by the Housing Industry Association of South Australia. Housing Industry Association of South Australian Executive Director Robert Harding attributed the high price of land to government policies that have limited the supply of land available for building. Nearly all thousands of square miles of land around Adelaide are off-limits to house building due to state government restrictions.

Adelaide is the slowest growing major metropolitan area of Australia, yet has some of the worst housing affordability among larger metropolitan markets. The 7th Annual Demographia Housing Affordability Survey found median priced Adelaide housing to be 7.1 times median household incomes, ranking the metropolitan area eighth most unaffordable out of 82 with more than 1,000,000 population.

Before the adoption of its strong smart growth (urban consolidation) land use restrictions, median house prices in Adelaide were one-half or less the present level (Figure). By comparison, new houses can be purchased in much of the United States for less than the median price of an empty lot in Adelaide ($180,000), though not in areas that have adopted smart growth restrictions.

Turn the Focus Towards Australia's Regional Towns

Michael Matusik — Fri, 13 May 2011 17:30:27 -0400

Too much property reporting and media attention is given to our capital cities, and not enough effort is spent analysing our regional towns.

As a result, too few investors understand Australia’s regional potential. Right now, not only are many of our regional centres at the bottom of their cycle, but larger, long-term trends are at play. Indeed, regional Australia is on the cusp of some big demographic changes.

Here’s why: In recent years our capital cities have attracted around two-thirds of Australia’s population growth, with many of these new residents settling in the outer suburbs. Our capitals also generated the lion’s share of employment.

But over the last twelve months or so, this trend has shifted, with close to two-fifths of our new jobs now being created away from our major cities and in regional towns. Past trends suggest that population growth will follow.

Deteriorating lifestyle (and rising costs) – in our three major capitals, at least – is likely to add further momentum to this new regional push.

It’s not too hard to understand why Australia’s regional areas are sometimes overlooked. A quick look at the demographics of Australia reveals a country the same size as mainland USA, or 20 times the size of Japan, with only eight capital cities throughout its eight states and territories. This is one of the most urbanized countries in the world, where only 15% of the population resides in rural areas and a vast interior.

This week, regional focus has come under the microscope with the unveiling of the 2011 Federal Budget by Australia’s Deputy Prime Minister and Treasurer, Wayne Swan. The Government plans to flood regional areas with 16,000 skilled migrants via the introduction of new initiatives to encourage skilled migration to regional areas.

Additionally, regional areas are set to receive critical infrastructure upgrades to hospital and health services, and funding to support strategic planning and growth.

Astute property buyers should start to look beyond the capitals for investment opportunities. The big winners in this regional resurgence will most likely be the resource towns – the “muscle towns”, as Bernard Salt recently called them.

By this, we don’t mean the fly-in-fly out places like Moranbah, but places critical to the delivery of iron ore, gas and coal – like Wollongong, Newcastle, Gladstone, Surat Basin (Toowoomba) and Townsville. Expect big things in these regions. Two thirds of the new jobs created across Queensland last year were in the Gladstone region alone.

Regional Australia is to become a whole lot more.

Housing Crisis in Australia

Kirsten Moore — Sat, 05 Feb 2011 22:53:41 -0500

Even if Australia is a beautiful place to live, it is far from affordable. Results from the Demographia International Housing Affordability Survey show that some of the country’s major cities rank near the bottom of the list of areas with affordable housing. Out of the 325 cities analyzed, Perth ranks 291st, Melbourne ranks 321st, and Sydney ranks 324th. At 6.3, 9, and 9.6 respectively, each one has a median housing price to median household income ratio at least three to six points higher than the 3.0 price to income ratio demarcating affordable from unaffordable housing. Compared to these places in Australia, living in New York or London seems almost reasonable.

Residential property prices in Australia have risen 250% in the past ten years, mainly due to the Government’s concentration on incentives for investors and speculators. A first home buyer’s program and negative gearing incentives for home and property owners have taken a toll on the housing market, creating such “inexcusable” conditions according to Australian Greens housing spokesman Senator Scott Ludlam.

The 2008 Senate Select Committee on Housing Affordability’s investigation into this issue reveals that the Government spent about $50 billion annually on capital gains exemptions and negative gearing incentives, while only spending $512 million over the course of five years to improve the supply of affordable housing. Rental affordability is not much better, as indicated by the gap of 493,000 affordable and available rental properties in Australia.

Ludlam and others have started to call this a “crisis,” an adequate term given migration trends all over the world. Cities with unaffordable housing, such as New York, London, and San Francisco, are losing people moving to the less expensive suburban areas. If Australia continues to have housing bubbles and affordability issues, cities like Melbourne and Sydney may experience high out-migration rates in the coming years, which would not bode well for cities on the rise.

Australian Local Governments Stop Forced Amalgamation

Wendell Cox — Mon, 22 Nov 2010 14:14:44 -0500

Local government consolidations are often proposed by a wide range of interests, often out of the belief that they will produce more efficient (less costly) governments. Much of the academic literature supports this view. However, the evidence indicates that material savings routinely fail to occur from such amalgamations. The claimed $300 million annual savings in Toronto's megacity quickly became higher costs and a larger bureaucracy.

As in the Canadian provinces of Ontario and Quebec the Australian state governments of New South Wales (Sydney is the capital), Victoria (Melbourne is the capital) and Queensland (Brisbane is the capital) have been aggressive in forcing municipalities to merge over the last two decades. Often these attempts have met with opposition from residents. A forced amalgamation in Montreal was so unpopular that a new provincial government established mechanisms to "demerge." Despite formidable barriers, 15 cities chose independence.

Sometimes amalgamations are proposed for much smaller jurisdictions than 2.5 million population Toronto or even the 1990s merger that created the 90,000 population city of Melbourne, which is the core city of the Melbourne metropolitan area.

In July, the New South Wales government announced intentions to amalgamate three jurisdictions ranging with a total population of 35,000. The city of Armidale-Dumaresque, Uralla Shire and Gyura Shire are located in the "New England" region of New South Wales, one-half way between Sydney and Brisbane. The amalgamation would have replaced the local governments with the New England Regional Council, a mega-jurisdiction of 5,000 square miles (13,000 square kilometers), a land area approximately equal in size to the area of the states of Delaware, Rhode Island and the province of Prince Edward Island (Canada) combined.

The proposal met with determined opposition, from citizens and from the local governments. For example, the Uralla Shire Council submittal to the state Local Government Boundaries Commission, cited pitfalls of local government consolidations, relying on both Australian and international research. The Armidale Express reported that two former Guyra Shire council members mobilized that community against the amalgamation. There were substantial concerns. One was an interest in preserving historic communities, and the nearly universal aversion to moving city hall farther away. Errors were claimed in state government analyses that led to the amalgamation proposal and fiscal concerns were raised.

In the end, the Local Government Boundaries Commission recommended against the proposed amalgamation. Minister for Local Government, Barbara Perry made the announcement on November 17. Uralla, Guyra and Armidale-Dumaresque will not be forced to amalgamate.

The decision brought immediate positive responses from local leaders. Uralla Shire Mayor Kevin Ward said that he couldn't be happier with the decision. Guyra Shire Mayor Hans Heitbrink said that the decision not to merge the three councils speaks volumes about the spirit of the communities who fought to save their separate local government areas. Armidale-Dumaresq Mayor, Peter Ducat, spoke of the stress that the decision will relieve for council staff and the community.

They have reason to be pleased. Rarely, if ever, in recent decades have Australian jurisdictions retained their communities and their local democracies in the face of state amalgamation proposals.

The Commonwealth Bank of Australia/UBS-Demographia Data Dispute

Wendell Cox — Wed, 15 Sep 2010 20:13:10 -0400

The Age (Melbourne) headlined a story "CBA Accused of Choosing its Facts." CBA is the Commonwealth Bank of Australia, while UBS is the Swiss investment house. Commonwealth produced a report comparing housing affordability in Australian metropolitan areas to international metropolitan areas (Australian Housing and Mortgages: CBA Mortgage Book Secure). According to The Age:

Investment forums and housing blogs were alive with talk yesterday that an 18-page presentation used by the bank had replaced unfavourable housing affordability figures with data showing housing costs were not out of step with other cities in the world.

One slide compared Australian housing affordability to several cities, citing figures from a combination of the US urban planning research house Demographia and the investment bank UBS.
The slide showed housing in Sydney and Melbourne was more affordable than cities such as San Francisco, New York and Vancouver. But it used UBS data exclusively for the Australian cities, and Demographia data for the overseas cities.

The data were not comparable. Commonwealth relied upon Median Multiple data (median house price divided by median household income) from the 6th Annual Demographia Housing Affordability Survey for international metropolitan areas. However, Commonwealth used a median/average multiple (median house price divided by average household income) calculated by UBS, the Swiss investment house, for Australian metropolitan areas. These are very different indicators.

There would have been nothing wrong with having used the median/average multiple, had it been shown for all metropolitan areas, Australian and international. However, comparing the median/average multiple to the Median Multiple is invalid. Average household incomes are routinely higher than median household incomes and the use of an average income figure inappropriately biases Australian housing affordability relative to international metropolitan areas.

For example, the UBS median/average multiple for Sydney is reported by Commonwealth to be 6.2. Commonwealth finds Sydney to be more affordable than San Francisco's, which it indicates at 7.0. However, the San Francisco figure is the Median Multiple and the comparable figure for Sydney is 9.1, making Sydney less affordable than San Francisco

In fact, had the UBS median/average multiple been used for all metropolitan areas, including the international metropolitan areas, it is likely that the gap between Australian metropolitan areas and international metropolitan areas would be of similar magnitude to that shown in the Demographia International Housing Affordability Survey.

From time to time, various interests have suggested alternate measures of housing affordability for Australia and then compared or suggested comparison to our Median Multiple data. Of course, that is invalid.

The Age article by Eric Johnston was carried in other Fairfax Media outlets such asThe Sydney Morning Herald and the Brisbane Times, and the subject has been covered by financial blogs.

Note: Author Wendell Cox of Demographia.com and Hugh Pavletich of PerformanceUrbanPlanning.com are co-authors of the Demographia International Housing Affordability Survey.

Australian Opposition to Loosen Land for Housing

Wendell Cox — Thu, 19 Aug 2010 16:05:13 -0400

The opposition Liberal-National Coalition, locked in a close battle with the ruling Labor Party in Australia's Saturday elections, has adopted a housing policy to improve the nation's housing affordability. The policy would require states to monitor housing affordability and to release more land for development. There would also be a review of the efficacy of development charges.

Australia suffers from some of the most unaffordable housing in the world, with a Median Multiple (median house price divided by median household income) of 6.8, which is more than double the historic norm of 3.0. With recent interest rate increases, the median household would have to pay more than 50% of its gross income to service a mortgage on the median priced house. Little more than 15 years ago, house prices were affordable in Australia, which had seen home ownership rise from approximately 40% before World War II to approximately 70%. The principal cause of the loss of housing affordability has been the virtual universal adoption of "smart growth" ("urban consolidation") land use restrictions, which have (among other things) made it virtually impossible to develop inexpensive housing on the urban fringes, with the price of rationed land driven up many times.

The Coalition's housing policy includes the following provisions that are directly related to removing the urban consolidation barriers to affordable housing:

In order to continue to receive federal funds, States and Territories will need to increase land supply and reform their planning and approval systems under the National Affordable Housing Agreement (NAHA).
States and Territories will need to set affordability targets to guide land releases and dwelling approvals. In order to receive federal funds States and Territories would need to demonstrate that they had a plan for delivering these targets and those approvals and land releases occurred consistent with the targets established.
The Coalition will review of State, Territory and local developer charges, which have been contributing an increasing component to the cost of development. State and local governments that build higher charges into the cost of housing will be less able to meet their home affordability obligations under the Compact.

Housing affordability has been an issue of substantial concern in Australia for years and has emerged as the top concern among voters in this election. State governments have talked about housing affordability, but have done little. Over the past five years, house prices have continued to rise relative to incomes. Just in the last nine months, a mortgage payment on the median priced house has risen from $500 in Adelaide to more than $800 in Sydney.

The Coalition policy, however, represents the second significant development in recent weeks (Note). The first was an expansion of the Melbourne urban growth boundary by 440 square kilometers. All of this may signal an overdue attention to housing affordability in Australia.

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Note: Performance Urban Planning statement on the Coalition housing policy.

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Photograph: Adelaide: Urban fringe land (no houses allowed). Photograph by author