Data confirms houses near jobs are way too expensive

Cross-posted from The Conversation:

Australia’s capital cities are getting more and more units, that are largely concentrated and come with a hefty price tag, a new report shows. And while these areas also have lots of jobs, the high price for houses means many on low incomes won’t be able to access that employment.

Between 2006 and 2014, more than 50% of new units were built in the 20% of local government areas with the highest number of jobs.

When compared internationally, it would seem that Australian housing supply has not been as weak as is widely believed. However, the report points to some stark differences in housing supply patterns, emerging across Australia’s capital cities.

In Sydney, Perth and Brisbane, new housing supply has lagged slightly behind population growth. In the other capital cities, housing supply actually outpaced population growth between 2006 and 2014.

Housing supply and house prices

The issue of housing affordability has traditionally been pitched in terms of supply failing to keep pace with growing demand, and house prices rising in response to the imbalance.

Yet, house price inflation has surged even in metropolitan areas where housing supply exceeds population growth. The evidence suggests a complex relationship between supply, population growth and price that is shaped by both supply and demand-side factors.

As prices and rents rise, housing costs continue to eat up larger shares of household incomes, particularly in moderate and low-income groups.

The study shows 80% of new unit approvals were located in the top 20% of local government areas with the highest unit prices. This is while 80% of new house approvals were in the top 40% of local government areas with the highest house prices.

There is very little new supply in areas where house prices are lower, where households on low to moderate incomes can afford to live.

Affordable housing, cities and productivity

The lack of affordable housing in the vicinity of employment centres can pose threats to the productivity of our cities. If suburban residents are forced into longer commutes to access employment in the CBD, it can reduce productivity.

A potential consequence is that low-paid workers are deterred from seeking jobs in CBDs. This would then cause certain skills to become unavailable, and businesses to be less efficient, because they cannot quickly fill vacancies with suitable applicants.

Our data shows new units have grown by 30% in areas which have the most jobs, between 2005-06 and 2013-14. In contrast to this new units have only grown by 2.5% in areas with less jobs.

It would appear that unit approvals are concentrated in areas with abundant job opportunities. So productivity could improve, as congestion eases, and commute times lowered, if (and it’s a big if) these dwellings were affordable to those wishing to take advantage of these job opportunities.

New housing supply has grown at a pace that matches population growth rates, at the national level. However, there is plenty of variation across the capital cities.

The strongest growth in the number of units has been in the territories (though this is from a low base), followed by Melbourne and Brisbane. However, the strongest growth in the number of houses has been in Perth, at around 22%.

Sydney has experienced much lower growth in its number of houses, at less than 10%. This reflects the very different patterns of development in the two cities.

In Perth, Brisbane and Sydney, increases in the supply of housing didn’t keep pace with population growth during, between 2006 and 2014. However, the drivers of this shortfall are varied.

Perth’s population grew very strongly over the period that we studied. The roughly one-quarter increase in population would stretch the capacity of most housing construction sectors.

However, even though Sydney’s population growth (at 14%) is below the average across all capital cities, its housing supply failed to match this growth. These outcomes highlight the different demand and supply side factors operating across states.

We currently have a national housing policy narrative that is dominated by a consensus view that higher levels of housing supply are the solution to housing affordability problems. While increased supply will always help take steam out of pressured markets, our study suggests a more nuanced approach is needed to the supply side, while not ignoring the demand side pressures.

It’s important that we identify those barriers to expanding affordable housing supply that have been impeded in the majority of our cities, especially for low income households.

Article by Rachel Ong, Christopher Phelps, Gavin Wood and Steven Rowley from Curtin University

Comments

    • I think Bangladesh built universities in villages and Indira built factories in villages.

      Deng Xiaoping built factories near the ports and got villagers to live near the factories or even in the factories.

      Deng turned out to be a genius.

      • In the UK Chase Manhattan Bank moved it’s HQ from the City to Bournmouth. Barclays moved it’s operational HQ to somewhere in the Midlands south of Manchester. Good for their staff turnover figures, not so hot if you didn’t like working for them (Barclays had a bullying culture. Chase was good to their people).

  1. Move on. Nothing new there.
    I spent 15+ years having to work in London. Once you scraped up a deposit (I worked in Saudi Arabia to get it) You either got a dog kennel 40 minutes away or a house in Bristol, Swindon or Cambridge (etc) and took the train.(3 to 5+ hours a day traveling).

    Welcome to the effects of uncontrolled immigration.

    • I reckon it is due to height limits and a lack of high speed rail.

      Not allowing tall buildings to come up = insane house prices.

      How cheap would floating housing be. Cruise ships are getting bigger and bigger – so what is the cost of a room in a ship.

      Venice style transport.

      • They’ve got high speed rail from Bristol to Swindon to London. Just one minor problem, cost of season ticket from Swindon to the Smoke (115 KM) is a paltry $14,000 annually excluding rip-off parking charges at (heavily policed by traffic wardens) Swindon. Aren’t they lucky…I lived in Toothill near Swindon (my first house) for a while & did the that commute. All in all I’d rather live in outer Sydney or Melbourne if forced by circumstance. At least you wouldn’t get pissed on every morning as you hoof the last bit to the train…

        We’ve so much to look forward to as the numbers (we didn’t ask for) explode…

  2. armchair economist

    Meh, what jobs r u tslking about? If u got a proper job u get the house and the car that goes with your job. Like many have said, get a better job!
    There is no end to ppl wanting what they cant afford but feel entitled to be it houses, food , healthcare, etc

    • Hang on there AE
      Adults of pre senile age don’t need health care over here do they? I mean, why else would most of them be able to afford to look like f@@@@@g elephants? Oh, hang on, Sorry – tut tut – attack of Political Incorrectitis again. Got to be more careful…….

    • Torchwood1979

      Jobs are for losers. Just get some positively geared IPs with potential for great capital growth (ie. where Chinamen want houses). The capital growth alone will outstrip any stupid ass taxable income you could bring in by working at some shithouse job you hate.

  3. I think we want such retarded dysfunctionality lest we get bored. Just look at the Scandis. Nobody likes them. They’ve got it sorted but they are so fucking boring.

  4. the problem here seems to be that you cant increase supply in an environment of stagnant prices. Supply and prices rise in lock step and that occurs when demand is high.Its a vicious circle.

    • It would be pretty simple where people were free to buy a block of land and then get a builder to construct something on it.

      Instead the model, for some strange reason, seems to be that dudes buy land and speculatively build houses/units to sell. Or you have to go to a project developer who “releases” lots when the market runs up enough. Of course in a dysfunctional system like this supply is going to sphincter-tighten when demand falls away.

    • I agree Brian. The rising prices create the incentive to build and lower interest rates help that along as well for the demand. Hence targeting any concessions to new builds only makes great sense. Reward supply response. No matter how much many of us despise the ALP we should vote for them just on this.

  5. We need this housing bubble to pop.
    And we need to CEASE IMMIGRATION. TOTALLY.
    Sooner the better.
    Get back to reality.
    Give kids and our youth hope that with a good work ethic, anything is possible. Give our youth a reason to try, to work, to aspire. Not the current message of disconnect if not on the gravy train courtesy of nepotism, inbreeding, immigration, etc etc.
    Right now, that is a cruel distant dream, aided and abetted by a generation who never understood how good they had it, and doing everything within their power to keep this insanity afloat. Include chinese investors who dont give a fuck about destroying local culture. Go fuck yourselves. We need to amass a force that will fight against the disintegration of our way of life. Period.

  6. The Woodlands in Texas has a higher income than any area of Australia and would be cheaper than any area of Australia. On the edge 50min in traffic to a city growing faster than Melbourne or Sydney. Exxon sold their downtown skyscraper and bought 500 acres to build their campus. There is as much traffic coming as going to downtown. You can buy 2 acres with a large home on it for 250k 10 minutes drive from Exxon. Rent is high, construction and growth everywhere. Houston has no zoning. The area that the woodlands sits does not even have building codes almost no government involvement. It is the closest area in the world to free market capitalism and it green, safe, walkable and affordable. Street view any part of the woodlands and it is better than anywhere you will ever see in Australia.

    • davidjwalshMEMBER

      You’re quite right – my business in Houston was ‘inside the loop’ so rarely got out to the Woodlands but when I did I was always struck at how it was really a city within the greater Houston area. Don’t know if you’re aware that the guy who started the development was the bloke who invented fracking and had a vision for a new, planned community where people could work and live comfortably and pursue their dreams – he succeeded big time.

      Nothing like it in Oz. Impossible to get past the rentiers and influence peddlers……..poor fella my country

    • @ Robert,
      Yes, there is much less government control esp. with building controls. That’s why when they have a tornado
      the houses blow over. Since cyclone Tracy we have strict controls including inspections DURING the building process.
      House construction in a lot of US states has a site inspection and an inspection at the end of construction only. Don’t try and tell me they have more tornados than Aust. They just have more video cameras.

  7. Diogenes the CynicMEMBER

    The supply comes when demand is high. You see it with office towers and hotels. Perth is an example – there were no hotels built in the city for a very long time post the late 80s bust. Demand finally caught up about 15+ years later. At the peak of the boom in 2007 you couldn’t get a hotel room anywhere. Now there are stacks of new hotels and more being built/renovated and demand has fallen away. I rode past the Esplanade hotel construction site on my bike on Thursday and laughed, they have just started building the hotel! If they are quick they will be finishing in 2 years and yet Perth has been in a serious slump for 2 years already…

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