The government is reviewing negative gearing and capital gains tax, but this won’t be enough to fix our housing shortage

By Michelle Cull Associate professor, Western Sydney University

Associate Professor Michelle Cull has taught undergraduate and postgraduate accounting and financial planning programs for over twenty years at Western Sydney University. In 2021, Michelle received the Western Sydney Women Educator of The Year Award.

Michelle has published in areas of accounting, financial literacy, financial planning, education, ethics and trust. Michelle supervises numerous PhD students and is co-editor of the Financial Planning Research Journal.

Negative gearing and capital gains tax are back on the national agenda as Australians deal with a housing crisis and politicians look for ways to tackle the issue and win voters’ support at the upcoming election.

The Labor government confirmed this week the tax concessions were being reviewed. Meanwhile, the government is struggling to pass its Help to Buy housing assistance legislation through the Senate.

The Help to Buy legislation is aimed at helping first home buyers on low and middle incomes purchase their first home. The government would contribute up to 40% of the home purchase price and require only a 2% deposit from buyers. Buyers could eventually buy back the government’s equity share.

But the legislation has stalled with the Greens wanting more including rent caps and pulling back negative gearing while the Coalition says the government “shouldn’t be in the business of co-owning people’s homes”.

The review, revealed on Wednesday, could reportedly include a cap on the number of properties a person could negatively gear. The changes would not affect anyone who is currently negatively geared.

Negative gearing lets taxpayers claim deductions on their tax for the expenses relating to owning an investment property. They can save on tax as the property potentially rises in value. They can also be eligible for a reduced capital gains tax when they sell the property.

But any changes to negative gearing and capital gains tax policies could face further opposition – depending on how they are implemented. The crucial issue is whether the changes free up enough housing stock and make it more affordable for buyers and renters.

Home ownership in Australia

Based on National Housing Supply and Affordability Council data, home ownership across most age groups has been declining since the 1970s.

Younger households, aged between 25 and 34 years, are hardest hit, having 34% of household income spent on mortgage costs in 2022–23.

About 67% of households in Australia are home owners, and the remainder renters. While the proportion of owners with a mortgage has increased since 1994, so too has the proportion of private renters.

Size of the investment market

Just under 10% of all taxpayers negatively geared their properties in 2020–21 and more than 70% of property investors have only one investment property.

While there have been calls for changes to negative gearing policy to cap the number of investment properties at six, this would impact about only 20,000 individual property investors.

Changes to capital gains tax

Suggestions to increase capital gains tax (CGT) need to be considered carefully, given that

• there is no solid evidence to show that increasing CGT will increase housing supply and in fact, it may have the opposite effect by limiting rental housing available

• any change to CGT legislation also impacts other investments (such as shares), as the CGT discount also applies to other capital gains

• multiple investment properties are often held within self-managed superannuation funds (SMSFs) which are subject to different CGT rules and also benefit from superannuation tax concessions

• the rapid increase in housing prices over recent years is likely to result in very large amounts of CGT being paid on investment properties, even with the current 50% CGT discount.

Other ways to improve affordability and availability

Policy discussions around housing affordability and availability invariably lead to suggestions to change how negative gearing and capital gains tax operate. However, taxation policy is not the only solution available.

Another suggestion put forward is to allow first home buyers to use their superannuation for deposits.

Regardless of one’s position on accessing superannuation for something other than retirement, this suggestion is not viable for low to middle income earners. These households are unlikely to have substantial superannuation balances. Also, they don’t have the earning capacity to service a mortgage for the outstanding amount.

There is currently a push to use self-managed super funds SMSFs to enable home ownership. This would effectively allow individuals to become tenants in homes owned by their super funds.

The government needs to consider ways to make gifting of property between generations easier. Mark Baker/AAP

However, the complexities of superannuation law mean this could cause big problems for people whose relationships break down.

Considering the generational wealth that currently exists in property, the government could consider making it easier for parents or grandparents to gift (or sell) property to their children or grandchildren, in certain circumstances.

This area has not yet been sufficiently explored.

What needs to change

The real issue of housing affordability is multifaceted, and any change needs to be done as part of a broader policy.

It is likely that on its own, changes to negative gearing and/or capital gains tax will not achieve the intended outcome to make housing more accessible and affordable for Australians who want to buy a home.

While the debate around the best way to achieve housing affordability and accessibility continues, and while there are statistics that tell us about the current housing crisis, one crucial thing that is missing is the voice of the very people that any new housing policy should be designed to assist.

More consultation is needed with younger age groups and low to middle income earners who are struggling with high rent and unable to purchase their own home.

Australia desperately needs bold new innovative housing policies that do not rely solely on the taxation system but that consider a raft of measures that meet the housing needs of everyday Australians.

• If you are interested in this topic, you may like to read Michelle Grattan’s opinion - View from the Hill: Albanese and Chalmers play cat-and-mouse on negative gearing with the public – and possibly with each other

This article is republished from The Conversation under a Creative Commons license. Read the original article.

It's time to stop the underquoting ploys

By John Keating

John Keating was Chairman of the REIV Ethics Committee from 200-2008 and has 50 year experience as an auctioneer in the Macedon Ranges.

The auction system for selling real estate in Victoria has functioned very well for many years. However, during the past 25 years the insidious and illegal ploys used by some agents to underquote to purchasers have brought the trustworthiness of estate agents and the auction system into disrepute. Twenty-five years ago "underquote" was not even in the lexicon.

Underquoting, also known as "bait advertising", has become a systemic and entrenched auction practice, which Consumer Affairs Victoria and the Real Estate Institute of Victoria have been impotent to control under current laws and professional codes of practice.

The major problem is an auction sale authority can be signed with a reserve price "to be advised" and there is nothing to stop vendors working in cahoots with their agent from increasing their reserve prices at any time.

Auctions have always been a balance between integrity and street theatre. But the balance has been disrupted and infiltrated by deceitful practices, with thousands of prospective home buyers duped at auctions every weekend in Melbourne. Rogue agents use subterfuge and creative vocabulary to smoke-screen the prices they know their vendors really want.

Many agents are spooked by the idea of increased transparency. They think it will destroy auctions. Many of these are the same agents who 20 years ago were resistant to change and were adamant that banning dummy bids would destroy the auction system. It didn't.

If we can make the auction process totally transparent, many more buyers will be encouraged to attend and buy at auctions, which can only be a positive outcome for vendors. The best way to instantly fix quoting problems would be for the government to legislate that vendors and their agents must publish either a reserve price or an estimated selling price range whereby the lower figure must be the reserve.

If reserve prices were required to be published purchasers would not waste their time at inspections or their money on building and pest reports etc, if the reserve was out of their price range.

Vendors' price expectations would be self-regulated because they wouldn't want to waste their money on expensive marketing campaigns if their own reserves were unrealistic. They would also quickly learn that a published realistic reserve auction with the transparency of the price point where the property will be "on the market'' is a buyer-inquiry magnet.

If vendors did not like such an auction model, they would still have the option to sell by private sale and thereby price their property as high as they like.

The role of agents should be to use their skills and reputations in marketing, product knowledge and customer service to attract the maximum number of qualified prospective purchasers to auctions, to compete in a fair and transparent process to achieve the best result for their vendor clients.

The best auction system is one that has maximum public trust and transparency where prices are set by the market -that is, by purchasers, without artificial price manipulation by agents, auctioneers or vendors.

A core marketing principle is to give purchasers what they want, and what they want most of all is accurate pricing and transparency, not rubbery price guides or no advertised information.

Publishing reserve prices is a simple reform that would be widely welcomed by nearly everybody from first home buyers to the Reserve Bank and will enable the marketplace to be more accurately informed on sale prices and the status of real estate markets.

Most agents who oppose publishing reserves have never conducted an auction with a published reserve price. I have conducted about 150 since 2003, and they do work. To succeed in an environment with published reserve prices, many agents will need to develop new skill sets. This includes agents needing to understand the meaning of misleading and deceptive conduct and learning how to speak the truth to prospective purchasers and vendors.

Buying a home is complicated and stressful. It is one of the biggest financial and emotional decisions in most people's lives and purchasers should not also have to deal with trickery. It's time to stop the underquoting ploys.

This article has been republished with permission from the author, John Keating.

Cities on the front line

Photo by Ben Carless on Unsplash

As Australia faces more intense extreme weather events, cities and urban infrastructure become increasingly vulnerable. Laure Poncet from the Australian Research Council Centre of Excellence for Climate Extremes looks at what happened across the country in 2023, and what we need to design for in the future.

Laure Poncet is a Communications Officer at the ARC Centre of Excellence for Climate Extremes. With a background in climate science and journalism, Laure coordinates communication activities at the Centre, which includes promoting new research to the media and other key audiences. She is particularly interested in translating complex scientific research into accessible language and raising awareness about climate extremes.

Destructive cyclones, extreme heat, back-to-back fires and floods… Australia was hit by a cascade of particularly intense events in 2023. Halfway through 2024, we’ve already seen cyclones, successive heatwaves and severe thunderstorms. Will this year echo the last?

This is hard to predict, but as climate change makes our world hotter, Australia will likely face more intense extreme events impacting all aspects of society. Cities and urban infrastructure are on the front line of the risks associated with these extremes.

In Australia, more than 90 percent of the population lives in cities. To protect the lives and livelihoods of our residents, we must do two things urgently: reduce greenhouse gas emissions and adapt our cities to be more resilient to climate extremes.

Australia has a variable climate

Australia’s climate is highly variable from one year to the next. These changes are primarily driven by natural climate variability, including events such as El Niño and La Niña in the Pacific Ocean, and the Indian Ocean Dipole (IOD). These natural phenomena can lead to changes in rainfall, temperature and weather patterns that can cause droughts, heatwaves, fires, intense rainfall and floods.

For instance, during an El Niño year, we typically expect drier and warmer weather in spring and early summer, particularly in southern and eastern Australia. This dry, warm weather can exacerbate drought conditions and increase fire risk. In contrast, La Niña typically brings above-average rainfall to much of Australia in winter and spring. Through its positive and negative phases, the IOD has similar impacts to El Niño and La Niña. A strong positive IOD was a significant cause of the devastating Black Summer bushfires of 2019–20.

Climate change makes extreme events worse

Our world keeps getting hotter as we continue to emit heat-trapping greenhouse gases. In Australia, temperatures have increased by about 1.5 degrees Celsius since 1910. Superimposing climate change on top of our natural climate variability alters its effects, worsening some extreme events.

For example, climate change causes shifts in weather patterns that can result in more persistent conditions, such as prolonged heatwaves or droughts. Additionally, as the temperature increases, the atmosphere can hold more moisture, fuelling heavy rainfall events, tropical cyclones and severe thunderstorms.

If we look at long-term trends, the role of climate change in extreme events is clear. Since 1950, heatwaves have become more frequent and intense across much of the country, extreme fire weather has increased, and fire seasons have become longer. In some regions, short-duration extreme rainfall events have also intensified. For example, in Sydney, these events have increased by 40 percent over the past two decades.

2023: a year of extremes

In 2023, Australia was hit by a broad range of extreme events, with economy-wide impacts (Figure 1).1 Against the backdrop of the warmest year on record globally, temperatures in Australia were almost 1 degree Celsius above the long-term average. Winter was the warmest on record, while September was the driest since at least 1900.

The year started with above-average rainfall across the country, influenced by three consecutive La Niña events. In January, Cyclone Ellie brought heavy rain to the country’s northern parts, resulting in a rare 1-in-100-year flooding event of the Fitzroy River in the Kimberley region of Western Australia.

Heavy rainfall and flooding impacted transport routes in the Northern Territory and north-western Queensland from late February to early March, leading to widespread food shortages. Increasingly dry conditions developed in late autumn and winter, with New South Wales experiencing its warmest winter on record and its second-worst snow season.

El Niño and a positive IOD, declared in September, brought exceptionally dry conditions and gave rise to an unusually early fire season in Queensland and Victoria. In late October, Queensland’s Western Downs region experienced more than 1,000 bushfires, during which 300 people were evacuated. In the same month, Gippsland in Victoria experienced back-to-back fires and floods. This phenomenon, where two extreme events occur simultaneously, is called a compound event and can be particularly destructive.

The year ended with Queensland being badly hit by an intense thunderstorm over the Lockyer Valley in the south-east of the state, while Cyclone Jasper caused widespread damage to roads, buildings and crops in the north, leaving more than 43,000 homes and businesses without power.

What lies ahead?

Although it’s too early to attribute all these events to climate change (this usually requires several years of research), they indicate what we can expect. In the coming decades, Australia will get hotter. Heatwaves are expected to become more frequent and intense, and to occur earlier in the season. We will likely experience more hot and dry winters, increasing the risk of early-season fires. The trends in tropical cyclones are less certain. Although there will potentially be fewer cyclones, the intensity of cyclones could increase.

While it’s crucial to consider how the number and intensity of extreme events will change, we also need to understand how successive events will compound to cause more significant damage. For example, compound events where extreme wind combines with heavy rainfall are expected to become more common. Heatwaves combined with droughts could also happen more often.

Cities on the front line

Around the world, many cities are already experiencing the impacts of climate change, and these are likely to worsen in the future. The high concentration of buildings and roads, and the lack of trees, make our cities particularly good at absorbing and retaining heat – a phenomenon known as the urban heat island effect. In the future, more frequent and intense heatwaves could exacerbate this effect, putting the wellbeing of residents at risk. Additionally, intense rainfall events could cause flooding and damage infrastructure, while extreme drought conditions could lead to water shortages. Fewer but more intense tropical cyclones are likely to damage buildings, cause widespread power outages and disrupt transportation networks.

To protect the health and safety of urban populations, cities need to adapt to climate change and become resilient to the impacts of extreme events. Strategies such as increasing vegetation and adopting urban design principles that prioritise shade and ventilation can help mitigate the impact of heatwaves and reduce the urban heat island effect. We need to invest in resilient infrastructure that can withstand high winds, heavy rainfall and storm surges, as well as develop a clear understanding of where the risks are, where to build, and where not to.

To manage human-induced climate change, we must drastically cut greenhouse gas emissions. At the same time as dramatically cutting emissions, and as we continue to experience new extremes, we need to reimagine our cities to enable residents to live with these extremes and plan for future climate events.

Footnotes:

(1) Australian Research Council Centre of Excellence for Climate Extremes, The State of Weather and Climate Extremes 2023, climateextremes.org.au/the-state-of-weather-and-climate-extremes-2023; doi.org/10.26190/92kr-0w80.

This article was republished with permission from the author Laure Poncent.

Emotional Architecture: How Curves and Lines Influence Human Experience

By Ema Bakalova

Ema is a trained architect, writer and photographer who works as a Junior Architect at REX in NYC. Inspired by her global experiences, she shares captivating insights into the world’s most extraordinary cities and buildings and provides travel tips on her blog, The Travel Album.

Dive into the psychological effects of curves and lines in architecture and explore how they shape human emotions and interactions with spaces.

When you enter a building, you often immediately sense how it will make you feel. Whether a space feels comfortable and open or claustrophobic and closed off, cold and rigid or organic and fluid, the shapes of spaces — their curves, angles and configurations — play a significant role in their psychological impact and how we perceive them.

Architecture is not just about creating functional spaces; it is about crafting environments that resonate with human emotions and enhance well-being. The shapes and forms used in architecture, particularly curves and lines, play a crucial role in influencing how we feel and behave within a space. By examining studies on shape-induced emotions, exploring examples of therapeutic architecture, and understanding the role of design in user experience, we can appreciate how architecture impacts our emotional and psychological state.

Karen Blixens Plads, Copenhagen, Denmark - Af Jasparbang - Eget arbejde, CC BY-SA 4.0

The human brain responds instinctively to different shapes and forms, which can evoke various emotional and psychological reactions. Understanding these responses allows architects to design spaces that promote positive experiences and well-being.

Curves and Organic Shapes: Comfort and Connection

The City of sciences Valencia valencian community building. Source: pixabay.com

Curved shapes are often associated with comfort, safety, and naturalness. In fact, curves can reduce stress and promote relaxation by actually easing our brains’ threat response. Curves in architecture can mimic organic forms found in nature, like hills, rivers and plants, evoking feelings of calm. Others might perceive curves as facilitating a sense of flow and movement, gently guiding people through a space.

Research in environmental psychology has shown that people tend to prefer spaces with curved elements over those dominated by straight lines. A study by Oshin Vartanian, a professor of perception, cognition and cognitive neuroscience, and colleagues found that participants rated rooms with curved features as more beautiful and pleasant than those with angular designs. The study indicates that when people viewed spaces with curves, the area of the brain associated with emotions and reward was activated, suggesting a sense of safety and positive emotional responses.

I would also categorize spiral shapes alongside curves and circles, as they share the same gentle, flowing qualities. Like other curved forms, spirals are often found in nature and have a unique psychological impact compared to geometric shapes. In architecture, spiral shapes can create a sense of dynamism and fluidity within a space, evoking feelings of movement and transformation. They can symbolize the ongoing cycle of life and evolution, suggesting growth and progress. This is often achieved by incorporating spiral staircases, ramps or curvilinear forms that guide people through a space in an organic, flowing manner. These elements can enhance the experience of a building by encouraging exploration and interaction, reflecting the natural rhythms and patterns found in the world around us.

Lines: Clarity and Structure

James Kampeis - New York building

Straight lines and angles, on the other hand, convey a sense of clarity, order, and structure. They can evoke feelings of stability and strength, which is why they are often used in institutional and commercial architecture. However, excessive use of straight lines can also lead to perceptions of rigidity and coldness. Moshe Bar, an Israeli neuroscientist, conducted studies showing that angular designs activate the brain’s threat perception center. This response may have evolutionary roots, as our brains might perceive sharp angles as potential threats.

While straight lines are associated with efficiency and functionality, they can also create environments that feel impersonal or harsh. In architecture, many people I know tend to gravitate towards designing with straight lines and right angles because they find these forms to be “cleaner” and “easier” to work with. If you move away from using right angles and straight lines, you often find yourself exploring more parametric designs, which are not only more challenging to model and work with, but also more complex to understand and solve from an architectural standpoint.

Somewhere Between

BBVA Head Office Madrid

The integration of curves and lines in architecture goes beyond aesthetics; it shapes how people interact with and experience space. Thoughtful design can enhance user experience by considering the emotional impact of architectural forms. I find this topic fascinating because it applies not only to architecture but also to a wide range of design fields and professional strategies. In my opinion, although research indicates that straight lines and sharp edges in architecture might be associated with increased feelings of stress or perceived threat, this isn’t universally true for all architectural experiences. The impact of shapes on our emotions is nuanced and influenced by a multitude of factors that interact to shape our perception of a space. Some nuances to consider could be:

1. Context and Functionality

In many architectural contexts, straight lines and sharp edges convey clarity, order, and strength. These features can create environments that feel professional, organized, and efficient. For instance, corporate offices and institutional buildings often utilize straight lines to emphasize functionality and reliability. In these settings, the perception of sharpness or rigidity can be mitigated by the intended purpose of the space, which might prioritize focus and productivity over comfort.

2. Balance with Other Design Elements

The overall emotional impact of a space is often the result of a careful balance between various design elements. While sharp edges might initially suggest a sense of harshness, they can be softened by incorporating other features such as:

Lighting: Warm, natural lighting can soften the appearance of hard lines, making a space feel more welcoming.

Materials: The use of natural materials, such as wood or stone, can counteract the severity of straight lines, adding warmth and texture to the environment. Integrating water features or soft landscaping into the design can also help soften sharper edges and create a more gentle appearance.

Color: Color palettes can significantly alter the perception of a space. Soft, neutral colors can create a calming effect, while vibrant colors might energize the space.

Furniture and Decor: The inclusion of curved furniture and decor elements can provide contrast and balance to spaces dominated by straight lines, introducing a sense of flow and comfort.

3. Personal Preferences and Experiences

Individual preferences and personal experiences also play a critical role in how a space is perceived. What might feel cold and uninviting to one person could feel clean and modern to another. Personal associations and cultural backgrounds can shape our emotional responses to architectural elements.

4. Architectural Intent

The architect’s intent and vision for a space are paramount. Sometimes, a sense of tension or drama is deliberately introduced to evoke specific emotions or thoughts. In these cases, sharp lines and edges can be used to create a sense of awe or emphasize a building’s purpose, such as in museums or art galleries where the architecture itself is part of the artistic narrative.

Understanding the complex interplay of design elements that influence our emotional experience of a space allows architects to create environments that resonate with their intended purpose and audience, offering a nuanced balance between form, function, and human experience. Successful architectural designs balance these elements to create spaces that are both beautiful and efficient. Each form can be used to its advantage, enhancing the overall experience for occupants.

This article was originally published on The Architizer. Read it here.

Oliver's insights Will house prices crash? And what’s needed to fix housing affordability

By Shane Oliver, Head of Investment Strategy and Chief Economist, AMP

Key points

- Predictions of an Australian house price crash create lots of interest but have been a dime a dozen over the last 20 yrs.

- However, there is more to the surge in property prices than easy money with a supply shortfall being the main factor. Absent much higher interest rates and or unemployment, a house price crash in Australia looks unlikely.

- The key to sustainably improving housing affordability is to boost supply, better align immigration to housing supply, reduce or delay public infrastructure spending, encourage decentralisation and tax reform.

- A failure to boost affordability risks a further slide in home ownership and rising inequality.

Introduction

Apart from “what will home prices do?" and "where are the best places to buy a property?" the main debate around the Australian housing market has been about poor housing affordability, occasionally interspersed with a scare that home prices will crash. The most recent example of the latter was on 60 Minutes last week with a call by US demographer & economist Harry S Dent that Australian house prices could fall “as much as 50% in the coming years”. But how serious should we take forecasts for a crash? And more fundamentally how do we fix affordability?

Basic facts on the Australian property market

The basic facts regarding the Australian housing market are well known:
First, after strong gains in home prices over many years, it’s expensive relative to income, rents & its long-term trend and by global standards.
Second, flowing from this, housing affordability is poor:

• The ratio of average dwelling prices to average wages (red line in the next chart) & household income (green line) has doubled since 2000.

• The time taken to save for a deposit has roughly doubled over the last 30 years from five years to more than 10 years.

• The portion of income needed to service a mortgage has hit an all-time high, thanks to the combination of the high price to income ratio and the sharp rise in mortgage rates starting in 2022.

Third, the surge in prices has seen our household debt to income ratio rise to the high end of OECD countries, which exposes Australia to financial instability on the back of high rates and or unemployment.
These things arguably make calls for some sort of crash seem plausible.

Crash calls for Australian property are nothing new

US commentator Harry S Dent’s forecast for an up to 50% fall in property prices is nothing new. Calls for an Australian property crash – say a 30% or more fall - have been trotted out regularly over the last two decades.

• In 2004, The Economist magazine described Australia as “America’s ugly sister” thanks in part to a “borrowing binge” and soaring property prices. At the time, the OECD estimated Australian housing was 51.8% overvalued.

• Property crash calls were wheeled out repeatedly after the GFC with one commentator losing a high-profile bet that prices could fall up to 40% & having to walk to the summit of Mount Kosciuszko as a result.

• In 2010, a US newspaper, The Philadelphia Trumpet, warned: “Pay close attention Australia. Los Angelification (referring to a 40% slump in LA home prices) is coming to a city near you.” At the same time, a US fund manager was labelling Australian housing as a “time bomb”.

• Similar calls were made in 2016 by a hedge fund: “The Australian property market is on the verge of blowing up on a spectacular scale…The feed-through effects will be immense… the economy will go into recession".

• Over the years, these crash calls have periodically made it on to Four Corners and 60 Minutes. The latter aired a program called “Bricks and slaughter” in 2018 with some predicting falls of as much as 40%.

• And Harry S Dent was regularly predicting Australian property price crashes last decade that didn’t occur.

Why a crash is unlikely?

Of course, a crash can’t be ruled out, but as I have learned over the last two decades the Australia property market is a lot more complicated than many “perma property bears” allow for.

First, the property market is not just a speculative bubble fuelled by easy money and low interest rates. Sure low rates allowed us to pay each other more for homes but the key factor keeping them elevated relative to incomes has been that the supply of new dwellings has not kept up with demand due to strong population growth since the mid-2000s and more recently with record population growth resulting in an accumulated shortfall of around 200,000 dwellings at least but possibly as high as 300,000 if the reduction in average household size that occurred through the pandemic is allowed for. This partly explains why property prices have not collapsed despite the threefold rise in mortgage rates since May 2022.

Second, the property market is highly diverse as evident now with strength in previously underperforming cities like Perth, Adelaide and Brisbane but weak conditions in Melbourne, Hobart and Darwin.

Thirdly, Australian households with a mortgage have proven far more resilient than many including myself would have expected in the face of the rate hikes in 2022 and 2023. This is evident in still relatively low mortgage arrears (of around 1% of total loans). This may reflect a combination of savings buffers built up through the pandemic including in mortgage pre-payments and offset accounts, access to support from the “bank of mum and dad”, the still strong jobs market allowing people to work extra hours & an ability to cut discretionary spending (suggesting definitions of what constitutes mortgage stress may be overstating things). Of course, arrears are starting to rise as these supports recede, so the continuation of this resilience should not be taken for granted.

Finally, the conditions for a crash are not in place. This would probably require a sharp further rise in interest rates and/or much higher unemployment. Sharply higher interest rates from the RBA are unlikely as global inflationary pressure is easing and global central banks are now cutting. Our inflation & rates went up with a lag versus other countries & are likely to follow on the way down. Higher unemployment – with jobs leading indicators pointing to less jobs growth – is the biggest risk though.

So, a property price crash is a risk, but would likely require a deep recession. Our base case for average home prices remains for modest growth ahead of a pick-up after rates start to fall.

What can be done to boost housing affordability?

Of course, a house price crash would improve housing affordability – but it’s also a case of “be careful of what you wish for” because a crash would likely also come with a deep recession and sharply higher unemployment which could see many lose their homes along with a hit to incomes. However, improving housing affordability is critical as its long-term deterioration is driving excessive debt levels and increased mortgage stress and contributing to a fall in home ownership (the blue line in the first chart). Of course, other factors have also driven falling home ownership since the 1960s including people starting work and family later in life, a decline in perceptions that owning a home is necessary for security & growth in other forms of saving beyond housing. But worsening affordability is likely a big contributor and falling home ownership due to this is something we should be concerned about as its contributing to increasing inequality and if it persists it could threaten social cohesion.

So, beyond crashing home prices, what can be done to boost housing affordability? My shopping list includes the following:

• Build more homes - relaxing land use rules, releasing land faster and speeding up approval processes, encourage build to rent affordable housing and greater public involvement in provision of social housing. The commitment by Australian governments to build 1.2 million homes – backed up by incentives and strong moves by at last NSW and Victoria over five years starting from this financial year is a welcome and big move down the path to boost supply. So far though approvals and commencements running at around 160,000 to 170,000 homes annually are well below the implied 240,000 target.

• Refocus on building more units – we will need more units (which are lower cost) than houses in the mix. The only time we consistently built more than 200,000 homes per annum was in the unit building boom of the 2015-19 period. Back then unit approvals were around 50% of total approvals whereas they are now about one third.

• Slow down infrastructure spending – home builders are now regularly complaining about the difficulty in building apartments. Apart from issues around approvals, much of this relates to cost blow outs and labour shortages and beyond the disruption caused by the pandemic an ongoing driver is the competition for resources from booming public sector infrastructure projects.

• Match the level of immigration to the ability of the property market to supply housing - we have clearly failed to do this since the mid-2000s and particularly following the reopening from the pandemic, and this is evident in the ongoing supply shortfalls. Of course, we need to be careful to not over-react with the crackdown on student visas and numbers risking a lasting negative impact on our education sector which is our biggest export earner after iron ore and energy.

• Encouraging greater decentralisation to regional Australia – this should be helped along with appropriate infrastructure and of course measures to boost regional housing supply.

• Tax reform - including replacing stamp duty with land tax (to make it easier for empty nesters to downsize) and reducing the capital gains tax discount (to remove a distortion in favour of speculation).

Policies that won’t work, but are regularly put forward by populist politicians as solutions to poor affordability, include: grants & concessions for first home buyers (as they just add to higher prices); abolishing negative gearing (which would just inject another distortion into the tax system and would adversely affect supply), although there is a case to cap excessive use of negative gearing tax benefits; banning foreign purchases altogether (as they are a small part of total demand and may make it even harder to get new unit construction off the ground); and a large scale return to public housing (as a major constraint to more units is excessive costs and delays, and just switching to public housing won’t fix this).

This article originally appeared on AMP Insights. Read it here.

What makes a city great for running and how can we promote ‘runnability’ in urban design?

By Jua Cilliers Head of School of Built Environment, Professor of Urban Planning, University of Technology Sydney

If you’ve ever run a big marathon in your city, you’ll know the feeling can be electric. Blocked off streets, cars temporarily banished from the road and a sense of enormous freedom as you run.

For most runners, however, running through cities on an ordinary day is not always pleasant. Planners often focus on walkability and bicycle-friendly cities, which is great to promote active transport. But we don’t generally plan cities to be good for runners.

Yet, millions of us are runners; it’s one of the world’s most practiced sports and more of us are joining run clubs.

Making our cities “runnable” could inspire even more people to take up running. So, what makes a city runnable?

Urban design and ‘runnability’

It was at conference of the International Society of City Planners in Jakarta in 2019 that a group of us – all planners who love running – began to seriously consider city planning with a focus on runnability. We even held a “run-shop” (instead of a workshop) where we ran together to explore the city.

For the past five years our group has been reflecting the runnability of cities. We realised factors such as safety, air quality, accessibility, and infrastructure play a significant role.

Our recent paper published in the Journal of Urban Design and Planning explored the key urban design elements that make a city runnable.

Among other things, runnable cities prioritise:

• accessibility

• uninterrupted movement for runners (avoiding stops, crossroads and railways)

• safety

• aesthetic appeal and

• well-maintained green infrastructure, such as parks, urban forests, and trees (which also improve air quality and reduce urban heat).

So, how can planners build these elements into urban design?

Urban design principles that promote runnability

Several urban design principles can enhance the runnability of a city:

Connectivity and accessibility: This means developing a network of interconnected running paths and trails that are easily accessed from various parts of the city (especially neighbourhoods). Even better if can be green corridors that connect to other parks and open spaces, and support continuous movement.

Safety and security: Ensuring running paths are well-lit and separated from vehicle traffic is crucial. Traffic calming measures such as vehicle lane narrowing, wider footpaths, and appropriate landscaping enhance runner safety. Street trees also help reduce car speeds, as they alter our perception of how wide the road is and provide a psychological cue that we’re in a residential area. Redesigning urban infrastructure to include dedicated running paths alongside walking paths and bicycle lanes, is a great idea.

Inclusive design: City design should encourage active mobility, which means including benches, water fountains, and restrooms along running routes. It means building footpaths that enables running, and avoiding uneven, slippery or unfavourable surfaces such as cobblestones. It also means making it easy to find your way around – even in unfamiliar environments.

What makes a city unpleasant for running?

Narrow pavements, sharp corners, noise (including traffic noise) and areas with many traffic lights are some of the big concerns for city runners.

Other factors that make a city less “runnable” include:

• high pollution levels

• inadequate infrastructure, such as potholes and broken or non-existent paths

• poor lighting

• unsafe traffic environments

• unleashed dogs

• encounters with cars and cyclists

• urban heat (which is exacerbated by too much concrete and not enough greenery).

Around 75% of athletes on the exercise app Strava indicated extreme heat affected their exercise plans in 2023. Given the pace at which the climate is changing, factoring urban heat into city design will grow ever more crucial.

We don’t want our cities to become so hot that going for a run feels impossible.

Does it matter what trees are planted alongside the paths?

Street trees offer benefits to pedestrians and runners.

However, they also bring challenges. Tree roots can buckle sidewalks, fallen leaves or fruits can make paths slippery, and trees can sometimes block the view of nearby traffic.

The type of trees planted along running paths are therefore crucial. Native trees are often the best choice, as they are well adapted to the local climate and require less maintenance. They provide shade, improve air quality, and support local biodiversity.

Trees with high canopies and low root invasiveness offer shade without obstructing the paths or damaging the pavement.

Where are the great runnable cities of the world?

Several cities around the world have been recognised for their runnability. For instance, Copenhagen has an extensive network of running paths and green spaces, along with a strong emphasis on safety and inclusivity.

Cities such as Portland, Vancouver and Amsterdam have also made significant strides in promoting runnability.

And according to the app, Runkeeper, Sydney is a top contender due to its harbour, gardens, coastal paths and parks. Auckland in New Zealand also made the list, celebrated for its harbours, great paths, and runs you can take “just outside the city for trails through seemingly enchanted forests”.

The challenge for urban planners and governments is to extend this urban running experience to cities, and neighbourhoods, all over the world. If we want to create healthier and more inclusive environments, runnable cities might be the answer.

This article was originally published on The Conversation. Read it here.

Solar above, batteries below: here’s how warehouses and shopping centres could produce 25% of Australia’s power

By Bruce Mountain, Professor and Director, Victoria Energy Policy Centre, Victoria University

Imagine if Australian cities became major producers of clean energy, rather than relying on far-flung solar and wind farms.

Far fetched? Hardly. Our cities and towns are full of warehouses, commercial areas, shopping centres and factories. These types of buildings have one very important underutilised resource – large expanses of unoccupied rooftops, perfect for solar and battery power stations.

If our commercial and industrial areas took up solar and storage, it would be revolutionary. Electricity could be produced in cities and used in cities, reducing transmission losses. Commercial businesses could generate solar power during the day, store it in batteries on site and sell it back to the grid during the evening peak.

Our calculations show Australia has enough unused commercial and industrial rooftop space to supply at least 25% of our annual electricity use – five times as much as currently supplied by gas-fired generators.

Australia is already the world’s top rooftop solar nation, per capita. But our solar is largely on our houses. We have four times as much residential solar as we do on commercial buildings. In Europe, it’s the opposite – there’s 1.5 times as much solar on businesses as on houses. The EU’s new Solar Energy Standard is expected to double rooftop solar capacity in four years.

In our new discussion paper, we make the case for a massive expansion of battery-backed solar photovoltaic power on Australian business premises. Call it “business power”.

There are excellent reasons for policymakers and building owners to look at this. It offers a potentially large new source of cheap, reliable, clean electricity with little downside risk.

What’s the benefit of warehouse power stations?

Rooftop solar has been Australia’s quiet achiever. In 2023, rooftop solar produced 70% more electricity on Australia’s rooftops than either hydro generators or solar farms.

Solar farms are largely built in rural areas, as it’s easier to get large tracts of land. But city-based solar has advantages. City solar doesn’t change land use, need vegetation cleared or change the beauty of the countryside. Solar and wind farms in rural areas have to send power to cities, necessitating expensive new transmission lines. Some planned new lines have proven controversial.

When you add storage, you turn cheaply produced solar into a much more valuable commodity – reliable evening power. In evenings, the sun has set and demand soars. This is when much more expensive coal, gas or hydro generation dominates supply.

Locally produced battery-backed solar can also make better use of our distribution networks – the urban poles and wires. In a recent report, the peak body for Australia’s energy networks found surplus capacity in our distribution networks could be used by decentralised power generation and storage.

By contrast, some large rural transmission lines are already hitting capacity limits as distant wind and solar farms take up spare capacity.

What would it take to start this in earnest?

When a business owner or householder goes solar, it’s usually to save money. By producing their own power, they reduce how much expensive grid power they buy.

By contrast, our proposal would encourage businesses to install solar and batteries so they can export power to the grid.

A scheme like this would need policy support to get it started. That’s because it’s much less profitable to sell to the grid than it is to avoid buying from the grid. In electricity, as in other markets, wholesale prices are almost always lower than retailer prices.

To make it attractive to businesses, we propose the incentive of new floor prices (minimum prices) for electricity sold to the grid by businesses. It would cover electricity injected into the grid outside solar peak periods – before 11am or after 2pm – and from behind-the-meter batteries discharging to the grid during the evening peak, from 6pm to 9pm.

Floor prices would have to be set carefully to make investment worthwhile – but without unnecessary public largesse. To be eligible, businesses would have to have enough storage relative to the solar installation to be able to reliably store solar power to sell in the evenings. The payback period would differ from one business to another.

"Cemetery Curve, former Milwaukee Electric interurban" by Aaron Volkening is licensed under CC BY 2.0.

What’s in it for the public?

Like almost all competing energy policies, this scheme would require governments to use public funds to stimulate supply. Why might consumers or taxpayers support this?

Our governments are already using the money of taxpayers and electricity consumers to fund new gas power stations, to prolong the life of ageing coal power stations and to encourage more large renewables and storage. We believe this scheme would stack up favourably on cost, speed, cleanliness, reliability and ease.

The scheme also offers a comparatively cheap way to cut greenhouse gas emissions. The value Australia’s government places on avoiding one tonne of carbon dioxide equivalent in 2024 is A$70. We estimate our scheme could cut emissions at a cost of around $23 a tonne.

What’s next?

Let’s say governments introduce these floor prices. What would happen next?

We anticipate business owners would weigh up the benefits. Many would decide to take advantage of the policy directly, while others might rent their rooftops to specialist companies to do the same.

Recent regulatory changes mean businesses are now legally able to export power without messing with their existing retail contracts.

Of course, policies come with risks. Desk-based studies like ours can only go so far. Important information is often only revealed by putting policies into practice. But schemes like this one could easily be tweaked or closed to new entrants – just as state governments did in ending premium solar feed-in tariffs.

In short, there seems to be little to be lost and a potentially large benefit to society.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Five fixes are called for to clean up the CFMEU

By Innes Willox, Chief Executive, Australian Industry Group 5 August, 2024

Innes Willox is Chief Executive of the Australian Industry Group, a leading industry organisation representing businesses in a broad range of sectors including manufacturing, construction, transport, defence, ICT and labour hire. Innes was appointed Chief Executive in May 2012.

Australia has a once in a generation opportunity to rid our biggest construction union of ingrained criminal and corrupt conduct. We cannot afford to miss it.

Placing the construction division of the CFMEU into administration can only benefit our economy, construction companies and the construction workforce who deserve a reputable and strong union to represent them.

The question is what next?

The pending appointment of an administrator to clean up the CFMEU is an unavoidable response to a sad saga of failed regulation of workplace relations in the building and construction industry.

Clearly, the CFMEU could never have been credibly left to fixing its own mess.

Putting the union into administration is a sensible first step to cleaning it up.

Deregistration is always an option to keep in the back pocket, but the deregistration of the Builders Labourers Federation in 1986 simply gave birth to the CFMEU as many of its officials and delegates simply changed their job titles.

Government directed action through the administration process needs to involve far more than just weeding out CFMEU connections to organised crime. Removing criminality does not warrant accolades.

Stories of a pattern of widespread bullying, thuggery, intimidation and misuse of power by the CFMEU in Australian workplaces are not new. Some of it may fall short of criminality but it has been tolerated for far too long. The culture of fear that has evolved has simply made it impossible for industry participants to speak out.

The average Australian would be revolted and disgusted if they knew the full extent of the systemic abuse and stand-over tactics that construction employers report to be routinely deployed by CFMEU representatives.

Court judgment after court judgment has piled up against a union where paying fines and ignoring judicial admonishments appeared to be part of the business model. Workers have been bullied into joining the CFMEU. Employer representatives are routinely intimidated and harassed. Taxpayer-funded construction projects have faced monstrous delays and cost overruns.

The union has acted like it alone controls projects and worksites. Safety has commonly been weaponised as an industrial tool to stand over employers and contractors.

Five fixes are needed.

An administrator of the union needs to be able to clean out its leadership that has tolerated and even encouraged criminal infiltration. A union is not a charity aiming to provide hardened criminals with “second chances” to be its representatives or delegates.

Just as the corporate sector and its regulators can have zero tolerance for criminal behaviour, the union movement must be in the same boat. The CFMEU’s construction division needs a clean slate and to start again.

Secondly, the Federal Government needs to drop its ideological objection to the construction sector having its own regulator. The abolition of the Australian Building and Construction Commission was always madness and has enabled and emboldened the increasingly appalling behaviour on our construction sites.

To say, as some ministers have, that the ABCC was only about policing “stickers on hard hats” is a farcical and deliberate misrepresentation of its role. Tens of millions of dollars of fines after court actions for countless safety breaches, unlawful disruptions and acts of horrific intimidation demonstrate that a new and separate construction sector regulator is a priority.

Thirdly, the new union right of entry laws need to be withdrawn. They will simply let the acolytes of John Setka run amok across the economy, using spurious claims about safety to force their way into worksites to intimidate small business owners, hold up production and foster discontent.

In construction, it is almost inevitable that even with the CFMEU in administration, other strongly aligned unions on site will use the powers to cause maximum disruption in retaliation for their demise.

Fourthly, governments need to urgently step in to block the CFMEU’s ongoing efforts to use its redundancy fund Incolink to force out competing funds in the sector. Incolink is simply a back doorway the union has used to levy money from employers and then funnelled millions of dollars into its accounts to fund the payment of fines ordered by the courts. The lack of oversight and regulation is astounding.

Fifthly, governments need to review their procurement rules that have wasted billions of dollars on infrastructure projects and allowed the CFMEU to flourish when it has been offered open chequebooks. The incentive is to drag projects out, not to finish them.

The productivity decline of 2.9 per cent last year in the sector is a massive drag on the economy. Funding a productivity gain in a construction enterprise agreement is virtually non-existent. Cost blow outs in infrastructure are a major driver of our inflation curse.

All of this would be helped if governments dropped their feigned shock at what has happened on construction sites. The “I knew nothing” defence demonstrates either intentional or wilful ignorance of what has occurred on their watch.

This is a line in the sand moment. The time for decisive repair is now. The union needs to be cleaned up to allow it to legally and properly act on behalf of its members. This will likely take years, but it must happen for union members, constructors and our economy to genuinely prosper.

This article has been republished with permission from AI Group. Read the original article on their website here.

Turbulent times ahead for Australian construction industry

Domenic Schiafone is a Director of RLB in Victoria. He has extensive knowledge in all areas of quantity surveying, and financial and cost management.

Having worked with a variety of construction processes and contracting methods, his focus is on cost planning and estimating for high-rise developments and sporting projects.

Joining RLB in 1998 as a cadet quantity surveyor, Domenic became an associate in 2007. Relocating to manage our Dubai office, Domenic was involved in many large scale developments in the Middle East. Returning to Melbourne in 2011, he was appointed to his current role in 2014.

Domenic’s project experience is significant and diverse, covering a broad range of industry sectors in Australia and overseas. He holds a Bachelor of Property and Construction from the University of Melbourne.

According to the Rider Levett Bucknall (RLB) 2nd Quarter 2024 Oceania Report, the Australian construction industry is navigating a turbulent economic landscape in 2024.

Domenic Schiafone, Director of RLB Oceania Research & Development, stated, “The Reserve Bank of Australia (RBA) has predicted subdued economic growth coupled with a constrained labour market. This scenario suggests a continuation of the upward trend in labour costs, a critical component of overall project expenditure.”

“Further intensifying inflationary concerns is the stagnation of productivity growth within the construction sector. Since our Q1 2024 report, four of nine cities reported a rise in forecasted construction escalation for 2024, with the other five remaining steady. Overall, the rate of escalation remains significantly higher than the 4.0% CPI uplift anticipated for the full calendar year,” he added.

“Our research into construction output per worker since 2000 has found that since 2013 there has been a 26.5% increase in the number of workers within the overall construction workforce, who on average are working 2.0% fewer hours per annum and achieving a 25.4% lower output.”

Impact on project delivery

The anticipated rise in construction costs will have a significant impact on project delivery across various sectors, including public infrastructure, private sector development, and residential housing. Increased construction costs will likely lead to delays and budget overruns for public infrastructure projects, impacting essential services such as transportation, utilities, and healthcare. For private developers, the rise in construction costs will make it more challenging to deliver projects within budget, potentially leading to cancellations, delays, or a reduction in the quality of construction materials and methods. The affordability of housing is likely to deteriorate further due to rising construction costs, exacerbating the housing supply shortage and making it even more difficult for Australians to achieve homeownership.

National forces driving cost pressures

Several national key forces are converging to drive up construction costs in Australia. The construction sector in Australia has experienced a concerning decline in productivity in recent years. Overall, Australia’s labour productivity fell by 3.7% in 2022/23, according to the Australian Productivity Commission’s 2024 Productivity Bulletin. In the construction sector, labour productivity fell by 1.8% – well below the long-term average growth rate of 1.3%. This suggests a requirement for more resources, particularly labour and materials, to achieve the same level of output. This decline contributes to higher costs for construction projects. RLB’s analysis of the construction output per worker highlights the current output of the construction workforce, historical changes in the construction workforce, and the impact these changes are having on overall output per worker.

Policy and economic landscape

The potential for further interest rate hikes by the Reserve Bank of Australia (RBA) to combat inflation presents a complex situation for the construction industry. While higher interest rates may dampen demand for construction projects, they also increase financing costs for developers, potentially hindering project viability. Calls for government policy changes are gaining traction, particularly regarding tax reforms aimed at improving housing affordability. These reforms could involve changes to negative gearing and capital gains tax arrangements, which currently incentivise property investment and, according to many industry commentators and analysts, contribute to the housing supply shortage.

Labour market shortfall a critical challenge

A significant challenge lies in the industry-wide dearth of skilled tradespeople. BuildSkills Australia estimates a national shortfall of 90,000 skilled workers, which will be required to meet the Government’s National Housing Accord target of 1.2 million homes over five years, highlighting the severity of the issue. This shortage is particularly acute in Queensland due to the construction demands of the 2032 Olympic Games. The lack of skilled labour directly impacts project budgets as wages rise to attract available workers.

Cost pressure impact on the states

RLB’s Construction Market Update Report noted that the impact of these cost pressures varies across different regions in Australia. Queensland faces a particularly challenging construction cost environment, with a robust pipeline of projects creating high demand for skilled labour, exacerbated by the construction program required for the 2032 Olympic Games in Brisbane. New South Wales is grappling with high land prices, persistent construction cost escalation, and competition for skilled labour from Queensland, threatening project feasibility and potentially leading to a slowdown in new project commencements. Victoria faces the challenge of meeting ambitious housing targets while burdened by developer taxes and limited land availability, impeding the construction of new housing units and keeping construction costs elevated. South Australia is at the forefront of addressing affordability concerns with housing reforms that have shown promise in stimulating residential construction activity, potentially leading to an increase in housing supply and a moderation of construction costs. Despite recent increases in project approvals, Western Australia is experiencing significant cost pressures, highlighting the broader national trend, though increased project approvals offer hope for increased construction activity.

This article was originally published on the RLB website. Read it here.

Econosights: Australian housing supply challenges across the states and territories

By Diana Mousina, Deputy Chief Economist, AMP

Key points

- Housing demand in Australia has been running above housing supply for the past two decades causing a dwelling shortage.

- High population growth in recent years and low levels of dwelling construction has made the housing shortage worse.

- However, there are variations across the states and territories, with some in a housing shortage (Qld and NSW) and some likely in oversupply (Victoria) which is influencing dwelling prices in capital cities, rental vacancy rates and rental growth.

Introduction

Most of the usual analysis on the Australian housing market focusses on the national problem of housing undersupply. However, this disguises the mixed outcomes across the states and territories which influence housing values and rents across capital and regional cities.

Government housing policies

In 2023, the Federal Government signed a “National Housing Accord” which is purely an aspirational target to build 1.2 million new “well-located” homes over 5 years from mid-2024. The states, territories and local governments will receive $3.5bn in payments towards this target as an incentive to build more homes. Australia went through a building boom from 2013 until 2019, with an average of 193K dwellings built per year over this time (see the chart below).

Since 2019, building construction has trended down, from the impact of high interest rates, elevated inflation for construction costs, high wages growth and issues with finding suitable labour (due to border closures and numerous infrastructure projects crowding out labour in residential construction). Over the year to March, approximately 172K dwellings were completed but dwelling starts and building approvals (a good forward guide to actual construction) suggest that over the next 12 months dwelling completions will drop to approximately160K, well short of the government’s 240K target.

Despite the governments goals to build more dwellings, 95% of residential construction is done by the private sector in Australia. The states and territory governments and local councils have responsibility around the development and supply of new land. They control the release of land and the growth of greenfield areas, how the land is used, how it is developed as well as ensuring that these areas have essential services. Support for social and affordable housing comes from both the state and federal governments. And the Federal government can also provide incentives for the states to build, as they have done with the National Housing Accord.

Housing demand and supply

Housing demand is determined by population growth (mostly driven by net overseas migration) and changes to household size. In Australia, the average number of people per household has declined from 2.9 persons in 1983 to a little below 2.5 persons in 2022. The number of people per household rose in the initial phase of the pandemic and then started declining in 2021 as individuals opted for more living space.

Housing supply is determined by completions of homes, after taking into account demolitions, conversions and vacant properties. Prior to 2000, housing demand and supply were fairly balanced in Australia. After this time, housing demand started running above supply, with persistent undersupply ramping up from 2005 (see the chart below).

Our estimate is that housing demand is currently running around 240K and will slow to 185K over the next few years as population growth subsides. Housing supply is expected to be ~167K in 2024 and average around 180K in the out-years which means that the housing supply shortage will continue. On our estimates, the total accumulated number of dwelling undersupply is around 200K dwellings nationally which is around 78K households (based on the assumption that there are 2.5 persons per dwelling). However, there are differences in supply and demand across the states and territories

Housing demand versus supply across the states

We have derived an estimate for housing demand versus supply on a state basis, with a similar process to the national data. Our findings show that the largest accumulated housing undersupply since 2000 is in Queensland and New South Wales, followed by Tasmania, the Northern Territory, Western Australia and South Australia. But Victoria looks to be seeing a large oversupply of dwellings along with some oversupply in the ACT. The chart below looks at the accumulated over and undersupply of dwellings across the states and territories.

Qld’s housing undersupply started accumulating during the mining boom from 2005 (until the peak in the mining boom in in 2012) when population growth was high. Low construction in recent years has made the undersupply problem worse. Qld has experienced high interstate migration since 2018 (see the chart below) due to affordability challenges in neighbouring NSW, with the pandemic further increasing interstate migration into Qld. Victorian housing completions have run at high levels relative to other states in recent years and the outflow of interstate migration during the pandemic (see the chart below) deepened the oversupply.

Housing undersupply is supporting dwelling prices in Sydney, Brisbane and Adelaide. Perth home prices have also accelerated lately which reflects some housing undersupply but is likely more due to better affordability in WA (also evident in a recent increase in interstate migration). Melbourne home prices are underperforming the rest of Australia, reflecting oversupply and tax policy changes which have dampened investor confidence.

The supply of housing also affects the rental market. Nationally, the rental market is tight with low vacancy rates, particularly in Adelaide and Perth currently (see the chart below). Brisbane, Sydney and Melbourne vacancy rates are off their lows, but are still in the ultra-low single digits and below the long-run average level which is keeping rents elevated.

Rental growth has been strong across Australia, up by nearly 8% over the year to March, with the strongest growth seen in Perth, Sydney, Brisbane and Melbourne (see the chart below). Rental growth has turned down in Darwin, Canberra and Hobart.

State budgets

The state and territory budgets didn’t have any major concrete policies to target dwelling supply, besides more aspirational plans to build additional homes (for example Victoria had the most ambitious targets to build 80K homes per year for the next decade). A lot of the focus both in the state and federal budget was on increasing social and affordable housing, supporting crisis and transitional accommodation repairing public homes, greater funding allocation for homelessness services and helping build the capacity of Aboriginal and Torres Strait Islander community controlled housing organisations. Most states have first home buyer grants available for new dwellings along with stamp duty concessions. QLD has the most generous first home buyer policy now, doubling the grant in this year’s budget for some time.

Implications for investors

Fundamentally, Australia is not building enough homes to keep up with demand which is putting upward pressure on home prices and rents. States that have the highest level of undersupply like Qld and NSW need to lift construction levels significantly. However, based on current levels of building approvals, issues with labour shortages and high material costs we think that construction levels will remain below underlying demand and keep upward pressure on home prices for some time yet.

This article was originally published on the AMP website. Read it here.

How to ensure higher-density housing developments still have enough space for residents’ recreation needs

By Anthony Veal Adjunct Professor, Business School, University of Technology Sydney and Awais Piracha Associate Professor of Urban Planning, Director Academic Programs, Geography Tourism and Urban Planning, Western Sydney University

Growing populations and housing shortages are affecting cities worldwide, including in Australia. It’s driving them to adopt high-density development near public transport hubs instead of endless suburban sprawl on city fringes.

In Sydney, the state government has plans for transport-oriented developments within 400 metres of 37 existing train stations. These will include 170,000 new dwellings.

In Melbourne, work has begun on a massive project, the Suburban Rail Loop. In the first of four stages (SRL East), 70,000 dwellings will be built around six new stations.

These developments pose unique challenges for urban planners. In particular, residents of these higher-density precincts will still need public open space and recreation facilities.

Communities and local councils are concerned higher residential densities will increase pressures on infrastructure, services and open space. Local residents often oppose such developments. They fear these new, denser communities may lack vital infrastructure and services, shifting the burden of meeting these needs onto neighbouring areas.

Open spaces are crucial for physical activity and an attractive and healthy urban environment. However, traditional methods of planning open space are designed for lower-density suburbs. They struggle to meet residents’ recreational needs in high-density areas.

We’ve developed a new planning tool to help ensure higher-density developments provide enough recreational space.

High density challenges traditional planning

We reviewed open space and recreation planning methods around the world and assessed their suitability for meeting recreational needs in high-density areas.

The most common “standards” method specifies a certain area of open space, such as hectares per 1,000 population. Our review found it has been criticised for its “one size fits all” approach and lack of supporting research evidence. The approach may work in low-density suburbs but not in high-density areas that simply don’t have enough open space to meet the specified standard.

Another traditional approach is the “demand-based” model. It relies on consultation with an existing population.

But the population of the transport-oriented development is not resident at the time of planning. It’s also likely to differ from the surrounding population – for example, in age structure.

A better approach is needed. Our solution is the Recreational Activity Benchmark (RAB) model.

This model focuses on the new population’s likely level of recreation participation. This benchmark is based on anticipated characteristics of the new residents, such as age structure, and associated recreation patterns. Existing survey data from across the metropolitan area indicate the patterns we can expect.

A mix of strategies is needed

To meet this benchmark level of recreation demand in the limited space available requires a mix of strategies.

The first strategy is to rely more on indoor facilities such as sports halls, gyms and swimming pools. These allow for high levels of physical activity using much less land than traditional playing fields. They can be open for longer hours, are unaffected by weather and can be built as part of high-density, multi-purpose developments.

The second strategy is repurposing non-traditional open spaces for recreation. In particular, designing streets, footpaths and pavements as pleasant green areas encourages walking and cycling. Maintaining these areas for such activities thus also provides for recreation.

As part of this strategy, rooftops, school yards and other unconventional areas can be transformed into active recreation zones. Cities around the world have used innovative design solutions.

Singapore’s Dual-Use Scheme opens school yards to the public after hours. Seoul has creatively transformed a former highway overpass into an attractive walkway and public space.

A highway overpass was turned into the Seoul Skygarden running through the congested heart of the city. Sagase48/Shutterstock

Other solutions include green streets, vertical gardens, multi-functional street furniture and water features.

Specific examples include Tokyo’s “green roads” and Seoul’s street workout stations. The Singapore Sports Hub employs a dedicated team to offer diverse activities, making the best use of limited space.

These solutions all help meet physical recreation needs in high-density developments. The limited amount of open space can then be reserved for informal recreation, such as walking and quiet contemplation.

In Japan, green roads integrate greenery along the road with surrounding green spaces. photoK-jp/Shutterstock

Making sure recreation needs will be met

Higher-density development around transport hubs aims to overcome housing shortages and avoid the harmful impacts of urban sprawl. Our planning tool can help overcome community concerns about these developments lacking spaces for recreation.

This tool establishes a benchmark recreational activity level derived from participation rates per person across the metropolitan area. It calculates the land needed to support recreation and reallocates participation to activities that require less land or can be done indoors. In this way, it ensures high-density areas can still meet residents’ recreational needs.

The RAB model enables planners to produce a range of possible scenarios. Different mixes of facilities and activities can be flexibly developed to suit different local environments and different anticipated resident populations.

This article was originally published on The Conversation. Read it here.

Grattan on Friday: it’s good to put administrators into the CFMEU – but how do you prevent future crops of bad apples?

By Michelle Grattan Professorial Fellow, University of Canberra

John Setka leading a CFMEU rally in Sydney in 2023.CREDIT:MICHAEL QUELCH

Former leading Canberra press gallery journalist, Laurie Oakes, now retired, had a cut-through question about the government’s response this week to the CFMEU crisis.

“Bill Shorten tough and effective on CFMEU,” Oakes posted on social media after Shorten’s appearance on the ABC’s 7.30. “Why wasn’t it Albo taking the lead?”

The prime minister could point out he was in Queensland, campaigning, and unveiling candidates for the election. Regardless, Oakes’ question was spot on.

The PM wouldn’t have missed the sharp comparison with Shorten, the former Labor leader, who is always closely watched by the Albanese camp.

Albanese has answered questions about the CFMEU scandal all week. But despite the magnitude of the issue, he has left the public front-running to Workplace Relations Minister Tony Burke.

The government needed to cauterise the imbroglio as fast as possible. Hence the huge flurry of activity, centred on having the Fair Work Commission get underway the appointment of administrators into the construction division in eastern Australia.

On Thursday the ALP’s national executive suspended the affiliation of the construction division to the NSW, Victorian, South Australian and Tasmanian branches of the Labor Party. This means the party won’t levy any affiliation fees or accept donations. Delegates won’t be able to attend ALP conferences.

(The construction division is almost all that is left of the union. The miners have left and the manufacturing division is on the way out. The only other division is the Maritime Union of Australia and no action has been taken against it.)

The desire to put the CFMEU issue behind it may have driven the government’s choice to have the Fair Work Commission apply to appoint the administrators, rather than doing so itself.

“What I’m wanting to do is make sure this is a process under the regulator and not a political process,” Burke said at his Wednesday news conference.

Burke has promised the government will play an active supportive role to the Fair Work Commission, even legislating if that becomes necessary. Still, it’s hard to avoid the conclusion the government’s aim is to keep the follow-through at a distance, especially in the run-up to the election. That’s likely to mean fewer media questions.

When he was workplace relations minister in the Gillard government, Shorten took a different course with the Health Services Union.

The HSU was even more scandal-ridden than the construction division of the CFMEU. In dealing with it, the government acted directly, itself applying to put in an administrator.

Shorten has a special interest in the CFMEU. The Australian Workers’ Union, which he formerly headed, has had years of conflict and competition with the CFMEU. Shorten retains his interest in industrial relations more broadly. Nevertheless it was notable to see him turn up in the high-profile 7.30 interview on the day of Burke’s announcement (albeit with approval from the PM’s Office).

Former leaders are always in a somewhat ambiguous position, given the levels of paranoia that characterise political parties. Shorten mostly stays within his ministerial guardrails, but inside those he determines his own tactics.

At the moment, as Minister for the National Disability Insurance Scheme, he is pulling out all stops to try to get his legislation to reform the scheme through parliament. Recently this included holding a news conference with Pauline Hanson.

Shorten won’t have another chance at leadership, but he has a legacy to protect and advance. The NDIS grew out of his idea. It’s important to the government generally that the reforms are put on track before the election. It’s actually also in the Liberals’ long-term interests – it would be harder for a future Coalition government to rein in this scheme, which has run out of control.

Returning to the CFMEU, the week-long revelations have meant Labor has again found its post-July 1 “good news” on the cost of living totally overshadowed by domestic stories that are negative for it (never mind the drama in the United States). The first distraction, as the tax cuts were landing, was the resignation of Labor senator Fatima Payman from the party and speculation about whether a “Muslim vote” could harm Labor in western Sydney. Then came the union stories.

Labor will hope its quick response on the CFMEU issue will mean that in voterland it washes over fairly quickly.

Many people, one would expect, will be highly cynical about the reaction of political and union leaders who declare the revelations about criminality have come as “a shock”. While the extent and details may have surprised and appalled, the atrocious conduct of the construction union has been common knowledge.

The public would likely think the politicians protest too much. People’s general scepticism about their representatives was again highlighted by this week’s Essential poll that found three quarters of Australians think politicians enter into politics to serve their own interests.

It will take years to know whether industrial conduct in the construction industry can really be reformed. The deregistration of the Builders Labourers Federation in the 1980s failed to do the job.

The CFMEU’s Queensland/Northern Territory secretary, Michael Ravbar, a one-time member of the ALP national executive, flagged in a defiant statement that change will be fought by some. “Albanese has panicked and soiled himself over some unproven allegations in the media,” he said. “These gutless Labor politicians talk tough about affiliation fees and donations because that’s the only language they understand – money. The CFMEU is an industrial union, not a political outfit. Our strength has always come from our members on the shop floor, not from ladder-climbing politicians in the halls of power.”

After the ACTU suspended the construction division on Wednesday, ACTU staff were told to work from home as “a health and safety” measure. The CFMEU generates a level of fear in all sorts of places.

No doubt the administrators will clean out the union. But you’d be an optimist to feel confident that one collection of bad applies won’t eventually be replaced by another. Finding a way to stop the tree being blighted by yet more rotten fruit may be beyond any administrator. At the very least, it will require more rigorous regular spraying and pruning than we’ve seen in the past.

This article was originally published on The Conversation. Read it here.

Looking back at the Olympic venues since 1896 – are they still in use?

By Vaughan Cruickshank, Senior Lecturer in Health and Physical Education, University of Tasmania and Tom Hartley, Lecturer in Health and Physical Education Education, University of Tasmania

Olympic Games are big affairs that require massive infrastructure projects to build the various stadiums and venues.

Many of the sports have specific requirements – fake whitewater and rocks for kayaking, huge slopes for ski jumps, or sand for beach volleyball. On top of that, these venues need to be able to support large crowds and the technology needed to manage the events.

As former Victorian premier Dan Andrews discovered in 2023, hosting big sporting events costs big money.

The Tokyo Olympics are estimated to have cost A$23 billion dollars, a lot of which was spent building infrastructure.

A 2022 report from the International Olympic Committee revealed that 85% of the stadiums, venues and structures used in the Olympics are currently still in use.

But how are they used, were they new structures and what happened to the 15% of venues that have fallen into disuse?

Stadiums

Panathenaic Stadium in 1896 - Athens, Greece. Built and modified since circa 330 BC, it was used in the first modern Olympics in 1896. Via Wikimedia Commons

Panathenaic Stadium in 2021 - Athens, Greece. Currently used for various purposes. George E. Koronaios, via Wikimedia

The all-marble Panathenaic Stadium hosted the first modern Olympics in Athens, Greece in 1896. It was used again during the 2004 Olympics (archery and the marathon finish) and is now a popular tourist attraction that has hosted events such as concerts and fashion shows in recent years.

Francis Olympic Field in St Louis in the United States was used as the main venue for the 1904 Summer Olympics. It is the oldest Olympic stadium still in regular use for official sporting events.

It has been renovated several times and is currently used by Washington University’s track and field, cross country, football, and soccer teams.

Many Olympic stadiums continue to be used for local, national and international sports such as athletics and soccer, as well as large concerts and performances.

For example, the 1960 Summer Olympic Stadium in Rome, Italy is the home ground of the national rugby union team and soccer clubs Roma and Lazio. It has also hosted matches in the 1990 FIFA Soccer World Cup, UEFA Soccer Champions League, World Athletics Championships and more.

Fisht Stadium in Sochi, Russia hosted the 2014 Winter Olympics and Paralympics. It also hosted games in the 2018 Soccer World Cup (including Australia vs Peru) and is now the home stadium for soccer team PFC Sochi.

Cities that have hosted multiple Olympics have refurbished and reused venues.

For example Tokyo reused 1964 venues such as the Tokyo Metropolitan Gymnasium and Nippon Budokan Hall in 2021; the Los Angeles Memorial Coliseum and Rose Bowl were both Summer Olympic sites in 1932 and 1984 and will be used again in 2028.

Venues

The National Aquatics Centre, known as the 'Water Cube', under construction in 2007 – Beijing, China. Used in the 2008 Summer Olympics. Angus, via Wikimedia Commons

The National Aquatics Centre, known as the 'Water Cube', 2015 – Beijing, China. Used in the 2008 Summer Olympics.

Olympic venues continue to be used for sporting and non-sporting activities.

Many existing venues such as skiing slopes and summer venues such as Banyoles Lake (rowing - 1992 Barcelona Summer Olympics) and Wimbledon (tennis – 1908 and 2012 London Summer Olympics) hosted their sport before the Olympics and have continued to host it after the Olympics.

Other venues have been reused in a variety of ways.

For example, the stadium and skating and ice hockey venues used in the 1928 and 1948 Winter Olympics in St Moritz, Italy are now part of a private residence.

The 1980 Winter Olympic village in Lake Placid, US, is now a federal prison.

The Water Cube (swimming, diving, water polo – 2008 Beijing Summer Olympics) is now a popular water park.

Unused Venues

Alonzo Herndon Stadium, 2014 - Atlanta, Georgia. Used in the 1996 Summer Olympics. Peter Ciro

Copacabana Stadium, 2016 – Rio de Janeiro, Brazil. Used in the 2016 Summer Olympics. Currently dismantled. Gabriel Heusi via Wikimedia Commons

Some Olympic venues such as the Mt Eniwa downhill events site (alpine skiing – 1972 Sapporo Winter Olympics) and Copacabana beach volleyball arena (beach volleyball – 2016 Rio Summer Olympics) were temporary venues that were dismantled after the games as planned.

Many other older venues have been renovated and redeveloped.

Other venues have unfortunately fallen into disrepair for various reasons.

The Trebevic Olympic Bobsleigh and Luge Track (bobsleigh, luge – 1984 Sarajevo Winter Olympics) was damaged during the Bosnian War (1992-1995) and has not been repaired. It is now overgrown and covered with graffiti.

Alonzo Herndon Stadium (hockey – 1996 Atlanta Summer Olympics) is in a similar graffiti-covered state of disrepair.

Most of the Helliniko Olympic Complex (softball, canoe/kayak, hockey, baseball, basketball – 2004 Athens Summer Olympics) is closed or has been demolished due to poor planning and political, economic and administrative upheaval.

Australia

Melbourne Cricket Ground, 1956 – Melbourne, Australia. Used in the 1956 Summer Olympics. Radford, Anthony J., State Library of Victoria

Heidelberg Olympic Village, 1956 – Melbourne, Australia. Used in the 1956 Summer Olympics. Rose Stereograph Co, State Library of Victoria

So how have Australia’s Olympic venues fared? In short, pretty well.

Most Melbourne 1956 Summer Olympic venues such as the Melbourne Cricket Ground (athletics, soccer, hockey, opening and closing ceremonies) and Exhibition Building (basketball, weightlifting, wrestling, modern pentathlon) are still used regularly.

Only the Melbourne Olympic Park Velodrome (cycling, currently a medical centre) and the Merritt Rifle Range (shooting, currently a housing estate) are not in use.

Venues built specifically for the Sydney 2000 Summer Olympics such as the Sydney International Aquatic Centre (swimming, diving, water polo) and Penrith Whitewater Stadium (canoeing, kayaking) continue to be some of the premier locations for their sports in Australia. The Olympic Village is now part of the suburb on Newington.

Some temporary venues such as the Bondi beach volleyball arena were dismantled after the games as planned. The Sydney Entertainment Centre (volleyball) is the only non-temporary venue no longer in use. It was demolished in 2016 as part of the redevelopment of Darling Harbour.

As we head towards the Brisbane Olympics in 2032, careful planning will be needed to ensure that planned infrastructure is cost effective and can be used by local residents, and others, for many years after the games have finished.

This article was originally published on The Conversation. Read it here.

Cheaper mortgages, tamed inflation and even higher home prices: how 29 forecasters see Australia’s economic recovery in 2024-25

By Peter Martin - Visiting Fellow, Crawford School of Public Policy, Australian National University

Australia’s top economic forecasters expect the Reserve Bank to start cutting interest rates by March next year, taking 0.35 points of its cash rate by June.

If passed on in full, the cut would take $125 off the monthly cost of servicing a $600,000 variable-rate mortgage, with more to come.

The panel of 29 forecasters assembled by The Conversation expects a further cut of 0.3 points by the end of 2025. This would take the cash rate down from the current 4.35% to 3.75% and produce a total cut in monthly payments on a $600,000 mortgage of $335.

The forecasts were produced after last week’s news of a higher than expected monthly consumers price index.

Several of those surveyed revised up their predictions for interest rates in the year ahead, while continuing to predict cuts by mid next year.

Only one expects higher rates by mid next year. Only four expect no change.

Now in its sixth year, The Conversation survey draws on the expertise of leading forecasters in 22 Australian universities, think tanks and financial institutions – among them economic modellers, former Treasury and Reserve Bank officials and a former member of the Reserve Bank board.

Eight of the 29 expect the first cut to come this year, by either November or December.

One of them is Luci Ellis, who was until recently assistant governor (economic) at the Reserve Bank and is now at Westpac. She and her team are forecasting three interest rate cuts by the middle of next year, taking the cash rate from 4.35% to 3.6%.

Reserve Bank a ‘reluctant hiker’

Ellis says inflation isn’t falling fast enough for the bank to be confident of being able to cut before November. But after that, even if inflation isn’t completely back within the bank’s target band but is merely moving towards it, a “forward-looking” board would want to start easing interest rates.

Another forecaster, Su-Lin Ong of RBC Capital Markets, says in her view the bank should hike at its next board meeting in August after the release of figures likely to show inflation is still too high. But she says the bank is a “reluctant hiker” and keen to keep unemployment low.

Although several panellists expect the Reserve Bank to hike rates in the months ahead, almost all expect rates to be lower in a year’s time than they are today.

The panel expects inflation to be back within the Reserve Bank’s 2-3% target band by June next year, and to be close to it (3.3%) by the end of this year.

Twelve of the panel expect inflation to climb further when the official figures are released at the end of this month, but none expect it to climb further beyond that. And all expect inflation to be lower by the end of the financial year than it is today.

One, Percy Allan, a former head of the NSW Treasury, cautions that the tax cuts and other government support measures due to start this month run the risk of boosting spending and falling progress on inflation.

The panel expects wages growth to fall from 4% to 3.5% over the year ahead, contributing to downward pressure on inflation, but to remain higher than prices growth, producing gains in so-called real wages.

It expects wages growth to moderate further, to 3.2%, in 2025-26.

Consumer spending is expected to remain unusually weak, growing by only 1.7% in real terms over the next 12 months, up from 1.3% in the latest national accounts.

Mala Raghavan, from the University of Tasmania, said even though inflation was falling, previous price rises meant the prices of essentials remained high. AMP chief economist Shane Oliver expected the boost from the Stage 3 tax cuts to be offset by the depressing effect of a weaker labour market.

Unemployment to climb modestly

The panel expects Australia’s unemployment rate to climb steadily from its present historically low 4% to 4.4%.

Moodys Analytics economist Harry Murphy Cruise said although the increase wasn’t big, the effect on pay packets would be bigger. Employers were shaving hours and easing back on hiring rather than letting go of workers.

Panellists expect China’s economic growth to slip from 5.3% to 5% and US growth to slip from 2.9% to 2.4%.

Australia’s economic growth is expected to climb from the present very low 1.1% to 1.3% by the end of this year and to 2% by the end of next year. Although none of the panel are forecasting a recession, most of those who offered an opinion said if there was a recession, it would start this year when the economy was weak.

Some said we might later discover that we have already been in a recession if the very weak economic growth of 0.1% recorded in the March quarter is revised and turns negative when updated figures are released in September.

Home prices are expected to continue to climb notwithstanding economic weakness. Sydney prices are expected to increase a further 5% in the year ahead after climbing 7.4% in the year to May. Melbourne prices are expected to rise a further 2.8% after climbing 1.8% in the year to May.

Percy Allan said Sydney had fewer homes available than Melbourne, and Victoria’s decisions to extend land tax and boost rights for tenants had upset landlords, many of whom were offloading their holdings.

Home prices to climb further

Julie Toth, chief economist at property information firm PEXA, said rapid population growth was colliding with an ongoing decline in household size since COVID. At the same time, fewer new homes were being commissioned and long delays and high construction costs were also keeping supply tight.

The panel expects non-mining business investment to continue to climb in the year ahead, by 5.2%, down from 6.9%.

It expects the Australian share market to climb by a further 5.6%

Read the answers on PDF, download as XLS

This article was originally published on The Conversation. Read it here.

A Big Build or a big bet?

Melbourne’s Suburban Rail Loop aims to help the city become more equitable – but better integration of land use and transport could deliver more benefits for less money

By Associate Professor Janet Stanley, University of Melbourne, and Professor John Stanley, University of Sydney

Melbourne’s current long-term strategic land use plan, defined in Plan Melbourne 2017-2050, is grounded on two core ideas.

These are that Melbourne becomes a polycentric city based on a series of activity clusters, mainly in the middle suburbs (called National Employment and Innovation Clusters – or NEICs) and Melbourne would be organised into a collection of 20-minute neighbourhoods.

The Victorian Government’s Suburban Rail Loop (SRL) is part of the state’s Big Build program. Picture: AAP

The NEICs are intended to promote productivity growth through agglomeration and to develop a more equitable city – particularly by increasing employment opportunities closer to the city’s outer urban growth corridors.

The idea of improving public transport access to middle urban activity clusters has appeal, as a way of supporting their growth potential.

And the Victorian Government’s Suburban Rail Loop (SRL), part of its Big Build program, is intended to play this role.

But this solution is arguably too big for purpose.

Highly developed global cities that have circumferential rail services – that is, trains travelling around an urban area rather than radially to its centre – typically have densities much higher than Melbourne and their circular rail loops are quite short.

Most are also located in the higher-density inner parts of those cities where demand is strongest, whereas circumferential public transport further out typically requires transfers between services.

In 2022, Melbourne’s built-up land area has a population density of 1,746 persons per square kilometre and the SRL has a proposed length of 90 kilometres, from Cheltenham to Werribee.

London’s Circle Line is 27 kilometres long with a much higher population density. Picture: Getty Images

Compare this to London, which data tells us has a population density of 6,504 persons per square kilometre – the city’s Circle Line is 27 kilometres long. Tokyo-Yokohama has a density of 4,584 people per square kilometre, with its Yamanote Line at 34.5 kilometres, and Berlin has 2,934 persons per square kilometre and the 37.5km long Ringbahn.

In short, Melbourne’s SRL is around three times the length of these circle lines, in a city with a much lower population density and a lower patronage potential.

The economics are against the SRL working.

The August 2021 SRL Business and Investment Case for the Cheltenham to Melbourne Airport segment of the SRL (SRL East plus SRL North) showed a positive result, with projected a benefit-cost ratio between 1.0 and 1.7.

However, there are two serious problems with this result.

First, the benefit-cost analysis was undertaken with a low discount rate (four per cent) to convert future benefits and costs over the project’s lifetime into present-day values (this is needed to derive benefit-cost ratios). The usual Australian discount rate for evaluating major infrastructure projects – seven per cent – would have delivered much lower returns for the SRL.

A good argument can be made for using a four per cent discount rate for a project with a long life span, like the SRL, but this is not the usual public policy approach in Australia (unlike in the UK).

The usual Australian discount rate for evaluating major infrastructure projects is seven per cent. Picture: Getty Images

The choice of this discount rate should be subject to wide debate, including consideration of implications for the evaluation of alternative investment opportunities whose impacts accrue over shorter time frames.

Second, as well documented in the media, the expected cost of the project has increased substantially. The cost was estimated at around $AU50 billion for the full project at the initial announcement in 2018, rising to $AU35-57 billion for SRL East plus North in the Business and Investment Case.

The figure now stands at $AU125 billion again for SRL East plus North, as estimated by the Victorian Parliamentary Budget Office.

This would take the capital cost for the full SRL to around $AU200 billion, or about four times the initial estimate made only a few years ago.

Unfortunately, the expected benefits do not grow anywhere near as quickly as this rate of cost inflation. If evaluated today with a more usual discount rate, the SRL would struggle to generate even 50 Australian cents of benefit per dollar of capital cost.

This should be a cause for concern.

Medium capacity transit (MCT) solutions, as proposed by the Rail Futures Institute, are likely to be a more cost-effective and flexible solution to meeting the circumferential public transport accessibility needs of Melbourne’s middle urban clusters in a faster timeframe.

The expected benefits of the SRL do not grow anywhere near as quickly as the rate of cost inflation. Picture: Shutterstock

This kind of cluster development could then be further enhanced by direct investment in cluster competitive strengths – like supporting further growth of their universities and hospitals or medical research facilities – together with investing in place-making.

These investments plus MCT would be a more integrated way of promoting polycentric growth in Melbourne than relying so much on the SRL.

The savings from not pursuing the costly development of the SRL could also be used to promote a much faster roll-out of the distinctive and very innovative Plan Melbourne idea of 20-minute neighbourhoods; this concept has been taken up by many European cities as well as others in Asia, Canada, South America and recently, Singapore.

A 20-minute neighbourhood offers most services that most people need most of the time, including shops, schools, health services, parks and recreation.

This form of land use reduces urban sprawl through higher-density housing, builds community and fosters social capital, improves accessibility and offers a greener environment.

As a result, the likely outcomes are improved health and wellbeing, increased social inclusion and increased economic productivity, along with a reduced need to travel, which also helps to reduce transport emissions.

The Victorian Government is trialling 20-minute neighbourhoods in Melbourne. However, these trials have overlooked the public transport component, instead relying on walking and cycling.

The Victorian Government is trialling 20-minute neighbourhoods but have have overlooked public transport. Picture: Getty Images

An 800-metre catchment, as used in the trials, and said to be an acceptable walking distance, is unlikely to offer access to many service needs. This dependence on active transport doesn’t offer equality in opportunity for all people, potentially leaving out many older people, those moving or carrying heavier loads, people with an impairment and people with multi-tasking requirements – like work, child-care and school drop-offs, shopping and the list goes on.

A larger neighbourhood is required to offer essential services, supported by a frequent neighbourhood local public transport service.

Improving circumferential public transport access to serve Melbourne’s middle urban clusters is an important requirement for delivering the city’s intended land use development. But the Suburban Rail Loop is an expensive solution to this challenge.

It comes at the cost of other important infrastructure and service improvements that are likely to be effective in reducing inequality and facilitating growth with lower emissions.

Medium Capacity Transit options plus direct investment in cluster development is a more cost-effective way forward, complemented by a greatly accelerated rollout of 20-minute neighbourhoods across middle and outer urban Melbourne, at increased densities.

This would give Melbourne big benefits without such a big bet.

This article was originally published on the Pursuit. Read it here.

Prefabs and the ‘missing middle’: how to get Australia back on track to build 1.2 million homes in the next 5 years

By Dr. Parisa Ziaesaeidi, Associate Lecturer in Architecture, Western Sydney University

Dr. Parisa Ziaesaeidi is an architect with experience in both academia and industry. She holds a PhD from the Queensland University of Technology in Australia. In addition, Parisa is an Associate Fellow of the UK Higher Education Academy. Her research interests focus on social sustainability, large and small-scale built environments and neighbourhood design.

The National Cabinet set an ambitious target of building 1.2 million well-located homes over the next five years to tackle Australia’s housing crisis. The focus of the National Housing Accord is on complementary development that improves existing neighbourhoods. This includes infill development on vacant or underutilised land in established urban areas.

Infill development uses existing infrastructure and avoids urban sprawl. It can create more compact neighbourhoods with diverse housing choices.

Well planned and designed infill development makes it easier for residents to use public transport and active transport such as cycling and walking. It also reduces the loss of native vegetation and farmland. It’s generally a win for the environment, people and the public purse.

The question is how can Australia achieve its housing target? The current rate of construction is too slow to deliver 1.2 million homes by July 2029. And can we do so in a way that meets people’s needs and preference for medium-density housing rather than ultra-dense high rises?

The answer is to build so-called “missing middle” housing types such as low-rise apartments, townhouses and duplexes. Prefabricated construction can deliver this sort of housing much more quickly.

Federal Industry Ministry Ed Husic, who is hosting a roundtable today on the role prefabricated housing can play in achieving the target, said:

We know that this gives us a great opportunity to use advanced technology to build these homes. Prefabs have come a long way from what people used to associate them with and they’re providing really quality solutions.

The missing middle: a crucial component

Development in Australia tends to gravitate toward either low-density urban sprawl or ultra-dense, high-rise development. While medium-density development exists, it’s missing from the housing mix in many areas.

Missing middle housing fills the gap between large family houses and high-rise apartments. It’s an important step toward supplying enough well-located housing in our cities.

Low-rise apartments, townhouses and duplexes can help Australian cities grow through inside-out, medium-density development. Cities then won’t have to spread out to house growing populations.

The missing middle may be more affordable for residents such as young professionals, small families and seniors. Building this housing in established neighbourhoods will, in turn, improve their social mix.

Prefab offers speed and affordable quality

Prefabricated housing can be important for delivering this missing middle. By making construction more efficient, it can produce more affordable homes. And reducing waste makes the homes more sustainable.

Only about 5% of Australian housing is prefabricated. Wild Modular/AAP

Precise manufacturing in controlled factory conditions means prefab homes can be more consistently high quality than those built on site. And they can be built in weeks rather than months.

Off-site production also reduces construction activities on the housing site. There’s less noise, traffic and nuisance for neighbours.

This is good for urban areas where housing demand is high and solutions are urgently needed.

Yet only about 5% of new housing is prefabricated in Australia. In contrast, 84% of new houses in Sweden use prefabricated elements.

A proven approach overseas

Experience overseas shows how medium-density prefab can deliver more housing that’s accepted by the community.

A shining example is the Stanley 1351 in Los Angeles, California. It’s an innovative development in an area where space is limited and neighbourhood disturbances must be minimised. It uses prefabricated modules to construct medium-density housing.

The result is a dynamic urban centre with a wide choice of housing types. Its thoughtful design and quality construction enhance the community. The development also minimises carbon emissions.

This approach needs policy support

To realise the goals of the National Housing Accord, governments and everyone else involved in housing construction must work together to develop comprehensive policies. This policy framework should enable the use of emerging construction technologies such as prefab and modular housing.

Moving beyond the prefab stigma requires a multi-pronged approach. Projects will have to be designed, built, financed and executed to have a permanent, high-quality look and feel. They should fit right into the streetscape.

Stanley 1351 demonstrates how prefab construction can do this. The new homes are integrated with the surrounding architecture, making them more welcoming to residents.

As Ed Husic acknowledges, public doubts about the long-term viability of prefabs must also be overcome. Certification of compliance with building codes and standards is a way to ensure structural integrity, durability and safety.

The crucial goal of increasing the supply of homes depends on integrated strategic planning that encourages innovative and efficient methods to achieve good outcomes. This means creating vibrant, sustainable and desirable communities that meet diverse housing needs.

Strategic and participatory planning done well can help uphold people’s fundamental right to housing. Planning that encourages the demonstration and widespread adoption of prefab and modular methods can play an important role in achieving these housing goals for Australians.

This article was originally published on The Conversation. Read it here.

How many 20-minute neighbourhoods does Melbourne really have?

Walkable cities are gaining traction. Our Map of the Month shows which Melbourne suburbs are walking distance to childcare, pharmacies and GPs

By Dr Kerry Nice, Dr Sachith Seneviratne and Professor Mark Stevenson, University of Melbourne

Choosing where to live is a complex decision. You need to balance finding somewhere that’s affordable, is suitable for your housing needs, is a convenient location and has nearby services and amenities.

But what services and amenities do you need, and how close do they need to be?

A 20-MINUTE WALK AWAY

Twenty-minute neighbourhoods feature in many Australian planning strategies like the Victorian government’s Plan Melbourne 2017-2050.

The 20-minute neighbourhood grew from the concept of the 15-minute city. This is a city that promotes higher density, mixed-use development and emphasises active transport (like walking or bike riding) to reach work, shopping, education and entertainment.

This concept gained popularity during COVID-19, with many global cities – like Barcelona, Paris, Milan and Madrid – publishing plans to encourage the types of urban development needed for 15-minutes cities.

For example, Barcelona has been building ‘superblocks’ where they ban or restrict cars to create zones of increased public space conducive to walking and cycling.

This has brought with it considerable health and economic benefits.

WHAT IS A 20-MINUTE NEIGHBOURHOOD?

Imagine you lived somewhere where almost everything you need in your day-to-day life is 20 minutes away. If you needed to see a doctor, shop for groceries, visit greenspace or a park, or go to work – it is all just a 20-minute walk or bike ride away.

The Victorian plan for a 20-minute neighbourhood has six hallmarks:

1. Safe, accessible, and well-connected

2. Supportive of local economies

3. Provide convenient access to services

4. Are climate resilient

5. Provide high quality public spaces

6. Housing density that make a 20-minute neighbourhood viable

But a 20-minute neighbourhood isn’t one-size-fits-all. Different people at different stages in their lives will consider some features essential to their needs, and others may be superfluous.

A retiree might rank access to GPs or community centres high, while a young family will put more value on access to nearby childcare and schools.

IS MELBOURNE A 20-MINUTE CITY?

Melbourne is often ranked one of the world’s most liveable cities (number three in 2023), with Melbourne’s inner north recognised as having the coolest street in the world.

But Greater Melbourne is a large and diverse city, with huge variations between its higher density inner-city neighbourhoods and its much lower density suburbs and peri-urban regions.

For our Map of the Month, we looked at access to various services across Melbourne – specifically childcare centres, primary health GPs and pharmacies – to determine how many neighbourhoods are truly 20-minute.

This work is based on a project we are completing for the ARC Centre of Excellence for Children and Families over the Life Course to map spatial disadvantage when it comes to access to services across Melbourne and Perth.

To accomplish this, we conducted a ‘shortest path’ analysis from every intersection in Greater Melbourne (about 500,000 points) to count the number of these services that can be reached within a 20-minute walk (or 1,600 metres).

Using this data, we created an index of accessibility to childcare, GPs and pharmacies for each suburb across Greater Melbourne (see our Map of the Month at the top of this story).

Most inner and middle suburbs in Melbourne seem to have broad access to these services within 20 minutes. However, access drops off towards the fringes, with peri-urban areas having low to no 20-minute access to these services.

Childcare seems more evenly distributed across the city than GPs and pharmacies.

When we look in more detail at certain areas, and include the number of each service available within a 20 minute walk, we can see that many of the inner and mid-city gaps are in areas with large parks, green space, creek corridors and green wedges around the edges of the city.

At this level of detail, there are some notable gaps in suburbs along the Frankston train line, in the predominately industrial areas of Port Melbourne and Altona, and towards the high-growth areas in western Melbourne.

Suburbs like Frankston and Mornington show small pockets of high availability surrounded by large areas of low to no access.

The corridor from Altona through Newport to Port Melbourne varies greatly, with some large gaps in coverage.

The implications of this are clear. Some areas are well serviced while neighbouring areas miss out. Areas like Fishermans Bend are planned to support large increases in residential populations, but currently there are very few services available to provide new residents a 20-minute neighbourhood.

This risks building car-dependency in these areas.

We should note that our analysis only measured the presence of a service but not its capacity – like whether a childcare facility can accommodate the local demand.

Our research continues to explore what needs to be done to ensure that our 20-minute neighbourhoods not only have the services that are needed, but that there is a match between the number of local residents who need to use them and the capacity of these childcare facilities, pharmacies and GPs to provide them.

There are also many other elements of 20-minute neighbourhoods that need to be examined: access to art and culture, nearby public transportation, provisions for active transport and the list goes on.

But of course, none of this is any use to most residents without suitable affordable housing in these areas.

Map of the Month is a science communication project of the University of Melbourne (Melbourne Centre for Cities, AURIN, Melbourne Data Analytics Platform and Pursuit) using maps to spark important policy conversations across metropolitan Melbourne. This pilot is supported by the Lord Mayor’s Charitable Foundation and in partnership with the Victorian Office for Suburban Development and the Municipal Association of Victoria. Academics, community leaders and government representatives from across Melbourne contribute to the maps and accompanying stories.

This month’s story was produced with support from the the ARC Centre of Excellence for Children and Families over the Life Course, and the map was produced by Dr Sachith Seneviratne, Flavia Barar and Dr Emily Fitzgerald. Childcare data is from ACECQA and pharmacy and GP locations from the National Health Directory.

This article was originally published on The Pursuit. Read it here.

Oliver's insights Australian home prices were up again in May – but the tension between high rates and the chronic housing shortage remains

By Dr Shane Oliver - Chief economist and head of investment strategy at AMP

Key points

- CoreLogic data showed national average home prices rose 0.8% in May, their strongest rise since last October.

- The housing market remains remarkably resilient with the housing shortage and still solid jobs market providing support, offsetting the downwards pressure on prices from high interest rates and poor sentiment towards housing.

- We expect home prices to rise around 5% this year as the supply shortfall continues to dominate, but the pushing out of rate cuts and the possibility of rate hikes along with the rising trend in unemployment pose a key downside risk.

- Home price gains are likely to remain widely divergent though with continued strength likely in Perth, Brisbane and Adelaide for now partly helped by interstate migration but softness in other cities, particularly Melbourne and Hobart.

Introduction

National average home prices rose another 0.8% in May, pushing them further into record territory. However, the gains remain highly diverse. Conditions in Perth, Brisbane and Adelaide continue to be very strong, helped by relatively lower levels of supply evident in total listings running more than 30% below their five-year averages, and strong interstate migration in the case of Brisbane and Perth. But this contrasts with far more constrained conditions elsewhere. Sydney has made it back to its record high but only just and the other capitals remain well below their record highs. Melbourne and Hobart are seeing total listings well above their five-year average.

After overtaking Melbourne median property values in January, Brisbane has now overtaken Canberra to have the second highest median property values amongst Australian capital cities. Sydney remains at the top. Of course, the surge in prices in Brisbane, Adelaide and Perth will in time worsen their attractiveness for interstate migration eventually leading to slower property price growth in those cities.

The chronic housing shortage continues

The property market remains caught between the extreme housing shortage and high interest rates, with the former continuing to dominate. The chronic housing shortage got the upper hand over high interest rates last year as immigration levels surged and continues to be the main driver of rising property prices. Put simply, the surge in population growth to a record 660,000 over the year to the September quarter last year driven by record immigration levels meant that around an extra 250,000 new homes needed to be built, but instead completions have been running around 170,000 as the home building industry struggles to keep up with rising costs and material and labour shortages and as approvals to build new homes fell.

So underlying demand for housing (the blue line in the next chart) has been very high over the last two years relative to housing completions (the red line) resulting in an annual shortfall of around 90,000 dwellings in 2022-23 and another 80,000 dwellings this financial year (ie, the gap between the blue and red lines).

This is estimated to see the accumulated housing shortfall rise to around 200,000 dwellings by the end of this month. See the next chart. This is a conservative estimate – if the decline in the average number of people per household seen in the last few years is sustained then the accumulated shortfall could be around 300,000 dwellings. Which would be well above where we were before the unit building boom got underway around 2015.

Unfortunately, the housing shortfall looks like it will get worse before it gets better. Immigration levels are likely to slow over the year ahead but still remain high and housing construction is likely to remain depressed in the face of cost pressures and capacity constraints. In fact, approvals are now running around 160,000 new dwellings a year, which is well below government objectives to be building 240,000 dwellings a year over the five years from July.

At the same time, access to “the bank of mum and dad” and savings buffers built up through the pandemic appear to have protected the property market from high rates over the last two years. Anecdotes suggest that all cash purchases and access to “the bank of mum and dad” reached a record last year.

But there is now a high and widening gap between home prices and the capacity to pay

The big negative influence on the property market remains poor and still worsening affordability and high mortgage stress on the back of high prices, high debt levels and high mortgage rates. For decades ever rising property prices relative to incomes were made possible by ever lower interest rates. But due to the rebound in interest rates from May 2022 and national average home prices on the rise again there is now a wide divergence between buyers’ capacity to pay for property and current home prices – with the capacity to pay down by 27% on our estimates since April 2022. See the next chart. In the absence of rapid interest rate cuts this continues to point to a high risk of lower property prices at some point. This is reinforced by ultra-low sentiment towards property. A sharp rise in unemployment in response to weak spending in the economy would add to the downside risks flowing to property prices from high mortgage rates.

Outlook

However, for now the supply short fall continues to dominate. So, after an average 8% gain last year, we expect that national average home prices will rise again this year but with national average gains a bit more constrained at 5% as still high interest rates act to restrict demand and rising unemployment boosts distressed listings. The supply shortfall points to upside risk, but the delay in rate cuts and talk of rate hikes risks renewed falls in property prices as it’s likely to cause buyers to hold back and distressed listings to rise.

Home price gains are likely to remain widely divergent though with continued strength likely in Perth, Brisbane and Adelaide for now partly helped by interstate migration but softness in other cities, particularly Melbourne and Hobart.

Some signs of softening

Interestingly, there are some signs of a softening at the margin: auction clearance rates have cooled from their highs; new listings are up sharply in some cities possibly reflecting rising distressed listings; and after leading early in the property upswing, top quartile property price gains are the weakest in most capital cities as affordability and borrowing constraints are starting to bite pushing buyers into lower-priced property.

This article was originally published on AMP Insights. Read it here.

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Sky-high vanity: constructing the world’s tallest buildings creates high emissions

By James Helal, Assistant Dean (Sustainability), The University of Melbourne and Dario Trabucco, Associate Professor, Building Technology, Università Iuav di Venezia

Since ancient times, people have built structures that reach for the skies – from the steep spires of medieval towers to the grand domes of ancient cathedrals and mosques. Today the quest is to build the world’s tallest skyscrapers, such as Burj Khalifa in Dubai. Soaring above the rest, its decorative spire accounts for 29% of its total height – 4,000 tonnes of structural steel just for aesthetics.

Burj Khalifa isn’t unique in this respect. “Vanity height” – the extra height from a skyscraper’s highest occupied floor to its architectural top – shapes city skylines around the globe.

In a world where environmental concerns are paramount, is such architectural vanity justifiable?

Our research shows the pursuit of “vanity height” makes this a pressing issue. Even a modest spire increases the carbon emissions from the production of materials for a skyscraper’s structure by about 15%.

Building tall is not just about architecture; it’s big business. Being ranked among the world’s tallest buildings can transform an otherwise ordinary skyscraper into a globally recognised icon. This creates an incentive to add vanity height.

Our proposed solution is to rethink the global standard for ranking the world’s tallest buildings.

A matter of measurement

The way we measure the height of skyscrapers is at the heart of this issue. The Council on Tall Buildings and Urban Habitat (CTBUH) is the ultimate authority on skyscraper heights. It bestows the coveted title of “world’s tallest building”.

Historically, there wasn’t much debate over skyscraper heights as early buildings typically had flat roofs. The first significant issue arose in 1929 when the Chrysler Building in New York City installed a last-minute spire, securing the self-proclaimed title of the “world’s tallest building” over the Bank of Manhattan.

The Council on Tall Buildings and Urban Habitat, founded in 1969, established criteria in the early 1970s that included decorative spires. This formalised a practice that would be contentious time and again.

A landmark moment in the council’s history was the 1998 showdown between Petronas Towers in Kuala Lumpur and Sears Tower in Chicago, now known as Willis Tower. Imagine these two giants side by side: the pointy spires of the Petronas Towers, with 88 floors, and the flat-topped Sears Tower, with 108 floors. But the council uses “height to architectural top”, which includes decorative spires. As a result, it declared Petronas Towers the tallest building in the world, outstripping Sears Tower for the title.

Back in Chicago, this was not a popular verdict. Picture the folks on the 108th floor of the Sears Tower looking down at the celebrations on the 88th floor of the Petronas Towers, perplexed by how those extra metres of spire made the difference. The decision even made its way into popular culture with Jay Leno joking on The Tonight Show:

All the council does is, once every ten years, they look up in the sky and say, ‘Yep, that’s the tallest!’

Even if extra height does not secure a place among the world’s top 100 tallest buildings, height still matters. Skyscrapers gain valuable prestige as the tallest in their city, region or country, or by earning use-specific accolades like “world’s highest restaurant” or “world’s highest religious space”.

The hidden cost of vanity height

Sixty years ago, the renowned Bangladeshi-American architect and engineer Fazlur Rahman Khan demonstrated the exponential impact of a building’s height on the amount of material needed to build it. Indeed, doubling the height of a building could triple the structural materials required. A stronger structure, using more materials, is needed to withstand greater wind and earthquake loads on taller buildings.

This means there’s a large “embodied carbon premium for height”. This premium is the additional greenhouse gas emissions from producing the extra materials needed for a taller skyscraper.

A telling example from our study shows that even a modest spire, making up 16% of a building’s total height, can increase the embodied carbon of a 90-storey skyscraper by 14%. In maximising the building’s height for aesthetic, status or financial reasons, designers are prioritising these concerns over environmental sustainability.

We took a detailed look at Dubai, a city celebrated for its towering skyline. We found the collective vanity height of its 100 tallest buildings adds up to more than 3.5 kilometres.

We estimate these decorative elements contributed at least 300,000 tonnes of greenhouse gas emissions. That’s both the direct embodied carbon of the spires and, much more importantly, the embodied carbon added by reinforcing the buildings to support the extra structural loads.

To put this impact into perspective, 300,000 tonnes of emissions is equivalent to the embodied carbon associated with building about 2,400 average Australian homes. It’s a hefty price to pay, simply to adorn 100 skyscrapers with pointy hats that inflate their heights and status in global rankings.

Redefine heights to set more sustainable standards

The Council on Tall Buildings and Urban Habitat, which champions the motto “Towards Sustainable Vertical Urbanism”, has a crucial opportunity to lead change. What if it revised how we measure and rank tall buildings to better reflect this commitment to sustainability?

In light of our findings, we call on the council to remove the incentive for vanity height. We propose the “height to highest occupied floor” be adopted as the main standard for ranking skyscrapers by height.

Such a change may be controversial. Burj Khalifa would keep its title as the world’s tallest, but One World Trade Center with a vanity height of 155 metres, for example, would drop nine places, losing its status as the tallest in North America.

However, for every building that falls in the rankings, others will rise. Our research shows there are more winners than losers among the 100 tallest buildings worldwide. So support for this change could outweigh resistance.

Cities continue to grow and environmental challenges are becoming more acute. The need to re-evaluate our approach to architectural design is becoming ever more pressing. In particular, vanity architecture features like excessive decorative spires burden not only our skylines but also our environment.

Ultimately, we’re all better off if we change how we rank the world’s tallest buildings.

This article was originally published on The Conversation. Read it here.

Ways to improve the quality of life in Australia’s fast-growing cities

Having worked on strategic planning with over 400 global cities, Professor Greg Clark explains what Australia needs to address with its own population growth.

CBRE provides thoughtful, forward-looking insight into real estate trends, strategies and opportunities around the world.

Today’s global cities are expanding as deeper epicentres for human activity and endeavours beyond the traditional work hub. 

UN figures suggest that almost 10 billion people will live in about 10,000 cities globally by 2100. For Australia, the government's 2023 Inter-generational Report predicts that 40 million people will live here by 2061 or sooner, with the population rising by 15 million over the next 36 years. This is the equivalent of the current populations of Geater Sydney, Metro Melbourne, Brisbane and South-East Queensland, and Metro Perth being re-added in that time span. 

This broaches the critical question of how our existing cities will adjust to this population growth, meeting the demand for essential infrastructures and amenities tied to the ideals of sustainable work, life, and play.  

One of the world's leading urbanists, Professor Greg Clark, has some answers. Having worked on strategic planning with over 400 global cities, including London, New York, Paris, Sao Paulo, Barcelona, Hong Kong, Singapore, and Shanghai, Clark is an authority in explaining how Australia can tackle its rapid urbanisation curve.  

Together with CBRE's New South Wales Director of Government and Industry, Ash Nicholson, the duo addressed everything from Australia’s current housing shortage to the future of work to blueprinting a successful 24-hour economy.  

Options for a successful city 

Accommodating for population growth is one of the key challenges in Australia amidst an ongoing housing supply crisis. Clark says that if Australia is to add another 15 million people over the next 36 years, there are only four options to consider. 

1. Let sprawl be unbound and allow every city to expand outwards 

2. Build new cities in fresh locations, as was done historically with Canberra 

3. Enable existing cities to densify and become higher within their current city limits 

4. Connect cities and towns better with enhanced transport to build a networked model of distributed densification with more compact cities and towns working together. 
   

These options are not all mutually incompatible as Clark indicates. 

"If you look around the world, the model that's being pursued in the cities that are doing really well is a combination of option three and four in my model,” says Clark.  

“Think Singapore, Vienna and Nordic cities like Stockholm, Oslo and Helsinki. They're building new infrastructure to enable smaller cities and towns that are close to large cities to develop, optimise and become specialist locations. That infrastructure in turn enables a larger overall housing market, labour market, investment market, and infrastructure platform. And when they do all of that, they usually combine it with densification in the city centre as well.”  

These are the models that appear to work in cities that can provide affordable housing on a larger scale with specialist locations for new industries and a high amenity set for its citizens.  

“We've come to the point in our century of urbanisation where the existing models that cities have been using have become saturated. What we must do is break out of the existing model by adding new dimensions to the city, often by creating additional locations within the same metropolitan area.”

Revaluating the great Australian dream 

Will the great Australian dream of owning a family home with a backyard meet its demise in the future? While it’s harder for home buyers to secure a freestanding home on a block of land nowadays, it’s not impossible, according to Clark. 

“Urban populations are elastic and they're growing very fast. Urban land is inelastic and finite. If you have a model that uses the car as the main form of transport and has the main form of living as the quarter acre block with single-family home, the only way you can grow the population with that model is through sprawl.  

“The problem with sprawl is that it produces very high commuting times and very low amenity sets. It leaves people very dissatisfied and it's bad for productivity and health as populations grow. It's almost bad in every way.” 

Clark believes the solution is to break out of that mould without needing to abandon the appeal of the nice family home in a well-facilitated suburb entirely.  

“You have to complement it with other things. You need to densify and improve the amenity set in your towns so that the suburbs surround towns where there's good amenities, great connectivity, reliable public transport with high capability and capacity.  
 
“If you can do that, you achieve what I call a cohabitation of the old model of low density living in suburbs, with medium density living in connected towns. This is in tandem with high density living in city centres, which can provide different kinds of amenities and choice. This combination provides more choice overall. 

“I don't think you have the option simply to continue with the Australian model of the owner-occupied single-family home with every journey being by car.” 

Defining the future of work 

There’s little doubt that the pandemic has permanently changed the way that millions work around the world. It’s why the experience factor has become such an important tool in today’s dynamic work environment.  

“It's the experience of being at work, the experience of the office, the experience of the district around the office, and the experience of the journey to the office that we have to work on,” says Clark.  

“The net effect of the pandemic on cities was a shift away from them simply trying to service corporates, consumption, and commuters, towards being hubs for habitat, innovation and experience.”   

Cities, he suggests, have their long-term value-add tied to their ability to be great places to live, innovate with new value creation, and host enriching experiences. 

This means innovations like the ability to curate new creative and productive activities, as well as focusing on the quality of experience offered to people.   

"If the experience is not engaging and fulfilling, people won’t want to come into the office. If given the choice, they'll choose not to.” 

Creating the 24-hour economy 

The notion that cities are no longer just destinations for workers and commuters highlights the topic of 24-hour economies and how to successfully foster them. In New South Wales alone, there is already strong leadership helping to build an economy around the clock. 

“Politically, we have a minister with arts, music, nighttime economy, and roads. This shows the focus on connectivity,” says Nicholson. 

“We have a dedicated 24-hour economy commissioner with an expanding team and remit. Most importantly, we have a 24-hour economy plan.  

“The ongoing misconception around the 24-hour economy is that it's only about entertainment and going out at night, but it's so much more than that.  

“It's the key workers that keep our city optimised at night. It's the healthcare workers, the supply chain workers, and of course the cultural and place factors that really make people attracted to live, work, and play in a location.”  

This article was originally published on CBRE. Read it here.