Thursday, April 24, 2014

Melbourne's housing wars

Cities are growing all over the planet. In considering Melbourne's housing problems, I was momentarily distracted by San Francisco. Seems there has been an influx of some 75 thousand people over the last decade, leading to some well publicised incidents: demonstrations at Google buses, posting of nasty signs. Serious, I thought. Then I realised that Melbourne is growing by some 50 thousand people every year. So where SF has struggled with 75 thousand, Melbourne has somehow dealt with 500 thousand.

Wikimedia: Biatch at en.wikipedia

Impressive, I thought. Melbourne is successful. In a sense, yes. There are problems with success. It becomes expensive, for one.

"The Economist" global housing prices.

How can it be that it's more expensive to live in Melbourne than in London? At one level, it is the price of popularity. 

How does it do it? Mostly by adding at the edges. The fastest growing areas are in the outer fringes of the city. Great, impressive stuff. Only a matter of some twenty or thirty kilometres and we are all happy. Except that Melbourne sprawls in a way that makes Los Angeles look like an under-achiever. At thirty to forty kilometres, and further. 

So it's just a few extra minutes on the freeway, or a fast train to work? No such luck. The train network has remained basically unchanged for nearly fifty years. Only recently they managed to finally catch up on all the maintenance, and get it actually working on most days. In Melbourne though, taking inspiration from Los Angeles, most people drive cars.  Yes, there are more freeways, and more tollways. But when the population is growing by 5000 a week then it's inevitable that all of this will fail to keep up.

In one sense then, if you want to live in greater Melbourne, then you can. Emphasis on the "greater" part. You will be in outer Pakenham, with a train station and a shopping centre within a short car drive. Or you could live where I do, in Frankston. Only 45km from the CBD. If you work in the city it will be a 90 minute commute each way: you will spend 3 hours a day just travelling.

No surprise then, that the rise in property prices is driven by those areas closest to the city. Bernard Salt (Guardian Australia) talks of the 5km ring, but it's perhaps stretching now to a 10 or 15km ring. There is fierce competition for a limited supply of housing, leading to a steep rise in prices. Way beyond normal price to income ratios. It's quite something for a city so far from the world centres to get prices into this stratospheric area. In the last few years the balance has shifted heavily to investment (ABS), and clearly this is a speculator driven market. Fine if you are rich, but not so great if you want to live in the city.

In the normal course of events, as the price of individual houses rises, then the market would come to the rescue. Developers would buy up houses in large numbers, and redevelop the style of housing. Hong Kong and Singapore wrote the book on limited land supply, but with high rise it's possible to bring an apartment within reach of purchasers.

Melbournians are (mostly) not given to rioting in the streets, or setting up barricades. Most of this stuff is real 'frog in a saucepan of water being heated' stuff. Every week the travel time gets longer, the train or tram more crowded. There is no signal that pops up saying 'now is the time to go crazy'.

Which brings us to the fictional "Murder in the Fabric". It is 2020 and the developers are moving in. They know how to move the lifestylers, and they are going at it like there is no tomorrow. It's Chinese developers versus the 'not in my backyard' crowd, with the younger population cheering the developers on. Somehow it has turned deadly, and George Kostas has to get to the bottom of it all.


ABS statistics on housing finance: 5609.0 - Housing Finance, Australia, Feb 2014

Guardian Australia Monday April 7, 2014 Melbourne's population is Australia's fastest growing, says ABS

No comments: