State of Australian Cities Report 2012

Each year, the Federal Government likes to take the temperatures of our major cities and prepare a prognosis of what lies ahead. The latest makes for sobering reading. Put simply, there’s a lot to do… including a total shift of focus.

BY SHANNON MOLLOY of Australian Property Investor Magazine

State of Australian Cities 2012

Most Australians want to live in or near the CBD of a major city, as that’s where our jobs tend to be based. Problem is, there’s a chronic undersupply of housing and what’s available is expensive.

The solution of building vast and sprawling estates on the far outskirts of town has fundamentally failed because these new developments are too far away, not supported by required infrastructure and poorly planned.

That’s the blunt assessment delivered in the State of Australian Cities 2012 report, which is the third of its kind. It paints a picture of population, productivity, sustainability, liveability and governance across urban centres with populations greater than 100,000. There are 18 of those, by the way.

What it shows is our cities are expensive, short of housing and have inner-CBD pockets in hot demand among would-be residents. It also seemingly declares that outer-ring residential developments aren’t cut out for the challenge.

The gap between population growth and housing supply is the biggest it’s been in more than 100 years. Not helping the matter, there’s been a steady decline in the number of housing lots produced per capita across our capital cities. Blocks are also getting smaller and more expensive.

More than 75 per cent of the total population lives in one of our 18 major cities, while the proportion of folks living in a capital city has grown steadily over the past four decades – especially in Sydney and Melbourne.

More and more of us want to live in or very close to the middle of a city itself, which means there’s a premium for such properties. In Sydney and Melbourne for example, the price of a dwelling close to the CBD has soared five-fold since 1986 while one 50 kilometres from the city centre has only doubled in value in the same period.

Despite that, Australians love to build obscenely large houses. In fact, they’re the biggest in the world – bigger than American homes. We’re not as size conscious when it comes to units, though. They’re actually shrinking in size despite the number of families with kids who live in units rising.

Combining with growing demand to put extreme pressure on prices, rental vacancy rates are tight across all capital cities but the pressures are “particularly severe” in Perth, Darwin and Canberra, the report found.

The prescription is for more housing that’s sustainable and smart, a major injection of infrastructure spending to support burgeoning communities and a dose of careful planning so we build these dwellings in areas they’re needed.

The government has admitted we’re at “a crossroads” when it comes to housing and something must be done. As Transport and Infrastructure Minister Anthony Albanese told The Australian Financial Review today, “we can’t keep building at the same rate on the outskirts of our cities”.

In his view, we’re not building enough homes near transport and employment hubs – also known as ‘those places people want to live’. And now we’re paying the price. Who knows how bad it’ll get before it starts to get better.

So, it’s time for an overhaul. Albanese has called for a “mechanism for large-scale urban renewal” in identified suburbs close to city centres and transport facilities.

He hasn’t yet said what that mechanism might be. Whatever the plan, given our current challenges and the ones just around the corner, it might be too late to adequately treat the symptoms of massive growth.

Among other things like struggling transport networks and unsustainable community design, this will likely contribute to higher house prices and growing rents. That’s good news for some but obviously not for others.

Shannon Molloy is the deputy editor of Australian Property Investor magazine www.apimagazine.com.au

You can read the full State of Australian Cities report here.