Australian Capital Cities: Inward and Upward

By far most of Australia's growth is in our Capital Cities. Data from the 2011 Census show that 71.9% of Australia's population growth has taken place across the eight Capital Cities. Melbourne captured 30.8% of this growth, followed by Sydney (23.4%), Perth (17.9%) and Brisbane (17.4%).

With more of us wanting to live closer to city centres, it seems the only way is up. Contemporary urban design is reflective of this changing consumer trend with a growing number of multi-dwelling and high density residential property developments populating our city scapes.

Capital gains

Absorbing an additional 370,000 people into its city limits, Melbourne's share of Australian business investment and supply of affordable housing has attracted a large number of people. Rising levels of fertility since 2006-07 and a growing ratio of Australia's net overseas migrants treating Melbourne as their arrival city are the demographic ingredients fuelling its growth.'Persons per Dwelling' (see Table 3 and 4) reveal supply/demand equilibrium for Separate Houses, whilst Townhouse and Apartment stock have been outpaced by population growth.

The 'Sydney vortex' exerts much influence on Australia's economic and social fabric, but high costs slowed the city's rate of population growth between 2006 and 2011 to 6.8% compared to 10.1% for Melbourne, 11.1% for Brisbane and 14.2% for Perth. Its slowing supply of Separate Household stock, see Table 1, has created imbalance which in effect has facilitated Sydney's vertical rise. Strong growth in Townhouse and Apartment stock and population figures endorse this upward shift, but quick reference of Table 3 and 4details that despite significant growth in stock, population growth has been stronger leaving Sydney in a position non to dissimilar to Melbourne.

Despite a broken economy, a flat housing market and still having to mop up the financial and social costs of the 2011 floods, Brisbane has sustained high levels of population growth. Its share of overseas migration has slowed, but it has experienced a strong 'baby boom' with a high number of births accounted for by the escalation in 25-34 year olds. Stock growth has responded to these demand trends, but yet again an imbalance prevails in the supply side of the multi-dwelling equation. Tables 3 and 4present the respective change in density, which appear less acute than that of Sydney and Melbourne.

The population of Perth has surged attracting overseas and inter-state migrants. Increases have taken place across the entire age spectrum, but notably amongst those aged 25-34. Continued strong business investment and employment opportunities largely account for this demographic trend. In response, Separate Household Stock has provided a sufficient supply with Multi-Dwelling statistics depicting trends similar to other Capital Cities.

A simple explanation for these recurring patterns is indicative of people's changing residential dwelling preferences. Once the domain of young singles, the poor or the elderly, Multi-Dwelling living has become popular because of affordability constraints, societal and attitudinal changes and its function as an investment vehicle for the wealthy or more commonly, the 'aspirational' wealthy. On the basis of these factors, this product, its diversity and quality has expanded to satisfy this increasingly abundant yet prosperous housing segment.

Housing demand

The rate of population growth across Australia's Capital Cities has fuelled demand for housing, causing stock levels to rise by 11.4%. Affordability constraints largely explain the escalations in multi-dwelling residences as the Averages in Table 1 and 2 present. The popularity of multi-dwelling residences extends to valuations with capital gains in every city, except Melbourne, posting higher rates of annualised return in the 5 years to September 2011.

Between 2006 and 2011, average monthly mortgage repayments ballooned by 45.5% across the capital cities. In Perth, average repayments increased by 53.8% compared to 31.4% in Sydney. While Sydney is coming off a higher 2006 base, in dollar terms, 2011 repayments had similar values to Canberra and Darwin. In Sydney, limited land release combined with bureaucratic red tape fuel the affordability problem, sustaining this forever-topical issue of supply/demand imbalance. In Melbourne and Perth, the release of land has been more forthcoming and property developers have been able to provide more affordable types of housing across the inner, middle and outer areas of the capital cities.

What we can afford

This transition towards living in multi-dwelling residences - apartment blocks, units, townhouses and so on - has been driven by the mix of affordability, supply, lifestyle and demographics. In most Australian capital cities, separate houses are beyond the financial reach of most first home buyers and many up-graders. To obtain one's own house involves foregoing close proximity to the city and its associated amenities, and/or moving to or beyond the urban fringes. This lifestyle prospect does not resonate with prospective first home owners (Gen Y), and the growing proportion of downsizing baby boomers entering the 'empty nesters' fraternity.

What we want

The response from property developers' has been quick in terms of understanding what these demographic groups want. Evidently, the response has been a success with multi-dwelling residences popping up in and around the re-developed and gentrified foreshores, key satellite centres and major arterial networks of our capital cities between 2006 and 2011.

The examples are many: in Sydney, these properties are strewn throughout Parramatta and the Inner West; in Melbourne, fashionable, beach-side St Kilda presents this popular stock, while the South Bank in Brisbane and Perth's inner city precinct are increasingly represented by apartments. Multi-dwelling properties offer the convenience of existing community infrastructure such as transportation networks, making other amenities easily accessible and in close proximity. This, coupled with high land costs, means the option of building low-rise or stand-alone households in the inner and middle city is neither cost effective nor affordable. It is this multi-dwelling segment of the residential property market which will increasingly dominate Australia's urban communities.

Onwards and upwards

The way we live in our capital cities is changing. The constraints imposed by affordability and in some cases supply, have re-shaped our preferences towards the type and location of the dwellings we occupy or want to occupy. Beyond the 2011 Census data, and beyond 2013, Australian cities will continue to absorb people and present new affordable housing frontiers and possibilities for its residents, as they continue to grow and push us increasingly upwards and closer together.

Date posted: 2014-01-14 | posted by: paulr




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