How rapid population growth divides prospective buyers
As we look to what's ahead for 2012, Property Observer is republishing some of our most noteworthy stories of 2011.
The stream of extreme bullish and bearish views regarding the real estate market adopts the guise of a political contest.
Those of us working in the industry are constantly accused of talking up the market for our own ‘greedy’ ends. On the other end of the spectrum are the ‘bubble’ doomsday pundits, who are so determined to see our market suffer an American style crash and shoot down the drain, they hang onto any bit of negative data they can lay their hands on.
The real truth is neither bearish nor bullish, but in many respects overwhelmingly predictable.
Most Australians recognise the beauty and quality of lifestyle we’re privileged to experience in comparison to many other countries. It’s the reason our major cities top the list of the world’s most liveable destinations.
However, debate is rife concerning our rapidly increasing population, simply because our infrastructure in major metropolitan areas is woefully over-capacity. We don’t have enough accommodation in the areas where people want to live, so is it any wonder we continue to see inner-city property cycles of unsustainable booms, followed by flat periods of pain and grief, for potential buyers who can’t afford a foot in the door?
Real estate has always seemed unaffordable and overpriced to first-home buyers – a simple search through newspaper archives will teach you this.
However, as the metropolitan belt tightens, it’s fast becoming a split between ‘those who can’ and ‘those who can’t’. In short, any single person on an average wage fighting to save a deposit will find they’re limited to regional locations with sparse amenities, or high-rise inner-city rabbit hutches which banks are not all that keen to lend on.
Is it any wonder fewer first home buyers are entering the market? The incentive to scrimp and save for a deposit is only there when the reward is achievable.
Prime Minister Julia Gillard, and Sustainable Population Minister Tony Burke, recently commented that Australia's most densely populated cities, Sydney and Melbourne, have reached their ''carrying capacity''.
This could have been a political ploy to gain kudos in the polls – after all, there’s huge consensus to cap Australia’s population, but it would be interesting to debate how we intend to achieve this.
Australia is one of the least densely populated countries in the world. It’s not good enough to protest that much of the land isn’t arable when we’ve already proved our ability to adapt to different terrains and climates. Although we may be able to slow our growth, we can’t single-handily stop it any more than we can single-handily stop climate change! People are going to keep coming, and a consistent fertility rate alone will see a population of 29 million by 2050.
Therefore, unless we look outside the square and find real, feasible options for an increasing number of buyers who can no longer afford to purchase, we’ll see tremendous pressure on rental accommodation and our market will become an investor’s domain.
Increasing stock supply is not the ‘simple’ answer to this equation, if it is to be located where commuting time will outweigh any savings made. Increasing inner-city density is well and good, however, as any first home buyer knows, banks place strict criteria on the type and size of property they’ll lend against.
Many of the Manhattan-style high-rise developments (supposedly built to ease home buyer pain) don’t come close to filling the necessary criteria.
At about $290,000 – the average loan for a first home buyer – it’s all but impossible to purchase something in a metro location that will provide a decent stepping stone for future advancement.
Anyone experienced in property investing knows the number one consideration for home buyers is proximity to public transport. Schools are also high on the list.
We have to face the stark reality that our population cannot be ‘capped’, but neither should we feel like factory-farmed chickens squashed into metropolitan areas where housing is reserved for ‘those who can’.
By 2013 Australia will be the only continent without any high speed rail! A high-speed network linking regional locations would see commuting times to the nearest CBD from as little as 20 minutes and open a wide range of affordable options for homebuyers.
Unless we start understanding extra roof space is not the answer to sustainable population without serious commitment to improving transport systems, we can expect the house hunting-pain of ‘those who can’t’ to get progressively worse.
Catherine Cashmore is senior buyer advocate for Elite Buyer Advocates. With extensive experience in all matters regarding real estate, Elite Buyer Advocates purchases and negotiates more than $100 million worth of property each year for its clients.
