REA chief economist, Nerida Conisbee, has penned another self-serving article calling on governments to encourage the building of more apartment blocks to help ‘solve’ Australia’s housing affordability crisis. From The Australian:
Apartments are under attack, but they’re no longer housing’s poor cousin. Our future cities need apartments in the right areas, not housing in the wrong ones. That planning starts now.
With so much concern surrounding housing affordability, you would think any measures to increase supply would be welcome. While most people recognise this is one of the most effective ways to moderate price growth, why has it become so difficult to develop and buy apartments?
We know that high levels of apartment development have moderated price growth…
Foreign buyers are often a target and are sometimes blamed for rising prices.
The truth is, they help to drive apartment developments, as many new projects would not have begun construction without their investment…
Apartment investors are also being discouraged, with many stamp duty concessions being scrapped. It’s certainly not an ideal time for this to happen given that these buyers are also being hit with higher costs of funding. Like foreign buyers, investors have been critical in producing more housing…
Few people seem to have much sympathy for property investors, but renters will also suffer from apartment crackdowns…
Large apartment developments in established suburbs can create more traffic, greater requirements for car parking and more demand for schools, but introduce the right density of apartments in areas where there is demand and we start to solve the puzzle.
A rise in NIMBYism (not in my backyard) definitely does not help with ensuring a steady supply of housing in places people want to live.
Continuing to build housing on the fringes of our cities is expensive and does not always lead to good social outcomes.
We also know that Australian housing preferences are changing. The large home on a big block is still the preference, but more people are prepared to live in an apartment to get the lifestyle they desire and a more centralised location.
It’s hard to argue that Australia is not building enough apartments when approvals are still running at twice the long-run average:
Driven by the migrant hotspots of Sydney and Melbourne:
Like so many commentators, Conisbee has failed to mention the elephant in the room that is causing the purported housing undersupply: the federal government’s mass immigration program, which has more than doubled since the turn of the century:
This is the primary driver of the population explosion that has occurred in Melbourne and Sydney:
Clearly, the first best solution to housing affordability in Sydney and Melbourne is to normalise Australia’s immigration intake. Anything else is treating the symptom, not the cause.
