Several commentators have questioned the merits of Melbourne’s high-rise apartment boom (shown below) because it has failed to deliver affordable housing options for our most important demographic: young families.
From Domain:
Construction estimates vary but independent consultancy firm Charter Keck Cramer predicts 42,220 apartments will go up in Melbourne between 2015 and 2019, accounting for 45 per cent of the national total to be built over the next five years…
Off-the-plan apartments are pitched to the market as an affordable alternative to detached housing, especially in blue ribbon suburbs where house prices have rocketed…
[Families] are among a growing number of new Melbourne households finding the city’s apartment stock, being built at an unprecedented rate, does not suit their needs…
Yet the bulk of three-bedroom apartments – best configured to a growing brood – on the market are in the CBD, at a median cost of $960,000, or $240,000 above the Melbourne median house price, according to Domain Group figures…
The Australian Population Research Institute’s… David McCloskey says: “But looking from the point of, what does the city need? And if you want to have something that aligns with supply and emerging households, then absolutely we are building the wrong stock.”
The problem is compounded by negative gearing and foreign investment, according to Mr McCloskey: the former because it creates market competition between investors and first-home buyers, the latter because it props up the market with a transient buyer…
RMIT planning professor Michael Buxton says some international academics have condemned Melbourne’s average one-bedroom apartment size, of about 45 square metres, as among the smallest in the world, as well as the worst in quality…
“The real problem is, we are so dependent on it,” Mr McCloskey says.
“[Australians] think we’re managing the transition from mining … money is flushing through, but with the huge asset price inflation on real estate it’s a funnel element — it’s not a productive investment that will lead Australia to sell things to people in other parts of the world and increase our overall growth.”
The last four paragraphs nail the issue, in my opinion.
Melbourne’s economy has become so fundamentally dependent on never-ending population growth (immigration) to pump demand and fuel the economy (e.g. via apartment construction) that it has forgotten about the living standards of the existing population.
Instead of creating a sustainable economy that works for Australian families, we are instead creating a whole bunch of expensive shoe boxes in the sky that are marketed for quick profit to investors (both domestic and foreign) and entirely inappropriate for resident families.
Meanwhile, those families seeking established homes are having to compete for entry level stock against a never-ending army of negatively geared investors, thus either forcing them to take on jumbo-sized mortgages or becoming long-term renters.
Alternatively, families seeking a new detached home on the fringe are having to pay exorbitant sums for a postage stamp-sized lot, courtesy of the artificial restrictions on land supply and the hyper-inflation of lot values experienced over the past 15 years.
