Building more outer Melbourne suburbs without infrastructure a foolhardy move

Building more outer Melbourne suburbs without infrastructure a foolhardy move
Building more outer Melbourne suburbs without infrastructure a foolhardy move

Two articles that caught my attention last week were Chris Vedelago’s excellent piece on Melbourne’s outer-suburban estates where buyers who previously committed to a house-and-land purchase using a “holding deposit” of some $500 to $1,000 (or in some cases 5%) were cutting their loses and cancelling projects following an inability to gain finance as a result of the post-boom slump – an inevitable consequence of short-term first-home buyer grants and incentives.

The other was Roz Hansen’s excellent speech – originally delivered at The Sambell Oration to the Brotherhood of St Laurence ” entitled “A Tale of Two Melbournes? The Disparities of Place and How to Bridge The Divide” and printed in Property Observer last week.

Vedelago’s article pointed out the harsh consequence an inevitable rush to market induces when foolhardy first-home buyer grants are introduced and subsequently scrapped in an attempt to boost new home sales.

According to the report (in which the research was derived from the “specialised urban research organisation” Research4), developers have had nearly 1,800 lots returned this year as plans to build new homes were scrapped.

Other data from Research4 indicates that a drop in Melbourne’s land sales accounted for an 83% overall fall in the national number of land transactions from the peak of the second quarter 2010 to first quarter of 2012.

On the face of it, the data is shocking, however it’s not surprising. The 2009-10 boom in land sales was driven wholly by a rollerball of acquisitions induced principally by first-home owners taking advantage of increased state grants and the additional federal first-home owner boost –not to mention the low interest rate environment.

The effect subsequently inflated Melton’s population by some 7,535 new residents and increased the median lot price by a lofty 60%, which, according to ‘Research4’, made it the “fifth most expensive land market out of 33 submarkets across Australia”.

The foolhardy nature of inducing so many residents to move into a sparsely facilitated suburbs, lacking in essential infrastructure – and subsequently abandoning them in “never never land” as grants are scrapped, causing land prices to fall sharply, seems to be of no consequence to state governments, which are busy introducing yet another round of incentives to stimulate (prop up) the construction industry in outer suburbia.

Hansen voiced thoughts I have shared in many of my columns for Property Observer – principally the poor planning and failed “infrastructure” promises that equate to municipalities where residents are more likely to suffer health issues such as eating disorders and depression accumulating from inadequately integrated and facilitated communities.

As I have previously mentioned, unless we address the core issues behind our new greenfield estates, recent history will keep repeating itself and the outer suburbs will (for want of a better word) become the relative ‘ghettos’  of Melbourne town.

It would be far more sensible to build up already facilitated satellite towns such as Geelong and Ballarat in Victoria as an example, and continue to extend our train and public transport amenities, than create new suburbs of sprawling Mc Mansions where the trade-off of a bigger house is of little consequence once you step outside the front door.



Perhaps Australia wasn’t hit hard enough by the GFC to learn valuable lessons in community innovation and sustainability?  Instead governments seem to concentrate their efforts on how to continually prod and poke the housing market under the misguided hope a jump in construction and resurgence of pre-GFC booms are the economic drivers that could rescue state and federal balance sheets as we enter 2013.

The HIA (which understandably are not unbiased in its commentary) on the one hand screams how ‘affordable’ housing is, with its ‘housing affordability index’ showing levels are back to the early 2000s.  And yet, at the same time the HIA informs us that “The RBA must cut interest rates to bolster the chances of a housing recovery in 2013.”

What the HIA fails to address is how home owners will survive when rates finally rise and the incentives that the industry advocates ad infinitum are once again withdrawn.

First-home owner’s grants and low interest rates are of no long-term help to a failing construction industry.  All they do is provoke an endless series of relatively short-term boom and bust cycles – hurting construction workers and home buyers over the long term and providing a great example of Einstein’s beautiful definition of Insanity – “doing the same thing over and over again and expecting different results“.

Hansen mentions that landlocked residents need to turn to “buses, walking and cycling”.  However, in a  recent study prepared by” Adelaide thinkers in residence”, it was noted that in the absence of train lines,  “when driving is the only option for travel – then walking and biking are abandoned”. In other words, they are not preferred modes of transport for our 21st-century generation outside of recreational activities.

For outer suburbia, we need train lines – firstly because people need a fast way of commuting to existing workplaces and inner-city amenities, and secondly, because factories and additional jobs will not “up sticks” and move outwards if the only option they have to recruit staff is in a local neighbourhood of falling land sales and poor infrastructure facilities.

Research4 also made comment that “Melbourne’s first-home buyers could soon be priced out of the new homes market unless the state government returns a $13,000 grant scrapped in June”.

It bases its research on the stark reality that outside of an incentive-fuelled environment,  in which buyers have an uninfluenced period of time to think about their purchase, a large majority  opt not to buy in outer suburbia for profoundly obvious reasons.  Reasons that must be addressed before a construction boom can adequately address both housing affordability and population growth.



Melbourne’s market in particular is a concern because an unprecedented decade of growth has led to a housing market that is clearly overpriced for a growing minority of buyers. Even an uplift in transaction levels as we finish the year with a Christmas rush of bumper auction activity hasn’t spurred values with RP Data recording a 1% fall in dwelling medians for the month of November and a 2.5% drop for the year to date.

A lack of first-home buyer activity has been noted by a number of players.  In a recent article that recognised “the lower interest rates are not causing [first-home buyers] to rush into new dwellings,” Meriton’s Harry Triguboff commented that the Reserve Bank would need to drop rates more than a “quarter or even half a per cent” to boost spending.

Obviously Triguboff is looking for a quick solution best served to his own interests – principally boosting sales of his high-rise developments.

However, issues of affordability can only be addressed by rectifying the disparities in the type of accommodation available for the first-home buyer demographic and ensuring it is “foot through the door” affordable.

Currently the only choices on offer are either a) out of price reach - especially for single-wage purchasers, b) not in a location that provides a viable trade-off between the cost of commuting and purchasing, or c) in accommodation that first-home buyers are prevented from purchasing due to restrictions from various lending institutions.

As a case in point, back in 2011 when Melbourne’s Fishermans Bend (”Australia’s first inner-city growth corridor”) was mooted, Planning Minister Matthew Guy stressed the project would focus on affordable housing.   However, he was either misleading the public or ignorant of the core drivers that boost buyer activity, because as a number of commentators and planners pointed out at the time, in order for the suburb to work  and not become another Docklands, there would need to be a mix of low-density housing well suited families and first-home buyers .

However, it’s now revealed Melbourne’s new CBD zoning has all but ensured the area will be dominated by high-rise developments fitted out to appeal to the predominant market for high-rise accommodation – principally Asian investors, who (when compared with Aussie home buyers) have cash to burn, value high-spec accommodation and are certainly not in the market to offer rental rates for less than premium returns.

Hansen ends her speech stressing that she is ‘optimistic’ about the fate of Melbourne, although she hopes futures aspirations will not be ‘business as usual’ - however, I am less optimistic.  Successful long-term planning policies require a fundamental change in the way both town planners and ministers think about housing.  In essence this means looking up from the budget books and enforcing a much stronger collaboration between both state and local community.

However, if the scheduled council meetings and calls for public opinion are then followed by the same old course of action regardless of local opinion, 20 years down the line and Einstein’s theory of insanity will once again reach fulfilment.

Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.

Catherine Cashmore

Catherine Cashmore

Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.


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