Introduction
Ten years ago, the Australian population was projected to double from 24m to 48m in the next 4-5 decades. Today, it is projected to almost double in 3-4 decades by 2050. It may grow further. Australia is a ‘United Nations in one country’. Some 60% of the population increase, 15m, will be immigrants.
Australian cities are projected to double in population, especially on the east coast. Sydney and Melbourne are planned to grow to 8m. At present, these cities are low density in large areas compared to overseas. Space in apartments, houses, suburbs and cities is the ultimate luxury. The average Australian house is the largest in the world, bigger than the USA and twice the average size in the UK.
House prices in Sydney and Melbourne have increased significantly in recent years, more than other capital cities. Housing supply has increased less than demand. Interest rates are historically low, which has encouraged investment in housing and a trend to more renting.
Migrants are a large part of the population and housing situation. There are some underlying trends at work and some concerns that arise.
Migrants
Australia has a high proportion of migrants in its population compared to other countries, as illustrated in table 1. Immigration is one of Australia’s competitive advantages. Immigrants bring skills plus entrepreneurial and technical expertise.
Table 1 Migrant Populations by Cities
Percent of total population
Sydney 65
New York 29
Paris 20
Berlin 15
Tokyo 2 Note: Migrants and people with one parent born overseas.
Shanghai 0 Source: Bernard Salt in “The Australian”, 14-15.10.17
In Australia, migrants tend to cluster initially in the CBDs or nearby areas and then in time move to the suburbs. They need support at first and then are absorbed into the general population. Overseas, migrants stay where they originally clustered in the cities. Australian immigration is a great success.
In many cases, migrants have come from countries where they experience dense living and a high proportion of rentals. In Australia, they value the greater space, the larger houses and opportunity to own their own home.
Trends
Population growth in Australia is projected to double and increase faster compared to other countries, especially in Europe where the local populations are generally stable or in decline. The projected growth rate is less than Australia has experienced since post WW2 until now when it tripled from a lower base.
People are attracted to migrate because Australia has developed amongst the highest prosperity in the world and the highest liveability in the world. It offers a new start, jobs and opportunity. Relatives and friends encourage people in their home countries to come to Australia.
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As noted by Bernard Salt, the well-known demographer, in his recent article (“The Australian” 14-15 October 2017), the trend of migrants is to first settle in or near the CBDs of the cities with compatriots. Then later, families leave the inner suburbs and move into middle and outer suburbs as they can afford a house to gain greater space and liveability to raise children. They become accepted in the community.
In the late 19th century, people lived densely in and around the CBDs. As Australia developed, they spread into space and formed new suburbs connected to the CBDs by railways. Migrants, by leaving their enclaves and dispersing outwards over the metropolitan area, have continued the long-established trend in more recent times.
Salt noted that recent migrants cluster in specific suburbs and long settled migrants disperse. According to the latest census, recent migrants since 2006 totalled 640,000 in clusters in Sydney. Long settled migrants before 2006 totalled 1.1m and are spread out in the metropolitan area. In Melbourne, recent migrants in the CBD were 3.7% of the population, while settled migrants were 0.4%.
By contrast, clusters of migrants in New York, Paris, Brussels and Berlin remain where they start. As Bernard Salt points out, Australian migrants are socially and geographically mobile. They have economic opportunity and a tolerant population made up of many migrants themselves. There is an expectation that they will join in and contribute to the country. They have done, and Australia has prospered.
Duncan Hayes writing in the “Australian Financial Review” (14-15 October 2017) illustrated the housing trends that fit in with the migrant trends. The CEO of Herron Todd White (HTW) the nation’s largest network valuer, Brendon Hulcombe, is quoted as saying that there is a great property revolution transforming the nation’s property markets. There is a huge increase in CBD high-rise units that are shrinking in size and growth of larger houses on smaller blocks in fringe city areas. There is a shift to renting in CBDs and nearby suburbs by the young. Foreign students and wealthy foreign buyers stimulate high-rise development. Families prefer to move to the suburbs further from the city where they can afford a house. Many adult children are staying at home. The number of cars per family is increasing and adding to congestion.
Harry Triguboff, the property developer, found that inner-city high-rise 3-bedroom flats were not selling as families want more space and so move to the suburbs.
John Meagher, founder and director of Three-Sixty Degrees Property Group, said that finding ways for better use of scarce space is the most important luxury in expensive, crowded Sydney and Melbourne.
Concerns
Australian governments are planning close densification of cities. Sydney and Melbourne will double in size in the inner and middle established suburbs and in the greenfield fringe suburbs from the present population of approximately 3m and 1m (4m) respectively, growing to 6m and 2m (8m) over 3-4 decades. This is a major change and a huge densification in a relatively short time: a great adjustment to community values, individual way of life and general standard of living from the present. Murmurs against population increase are beginning.
The cost of government infrastructure is higher in the greenfield fringes than in the established suburbs. Both are more expensive than in new regional cities.
Housing prices in Sydney and Melbourne have risen markedly and there is concern about housing affordability for first home buyers. Interest rates are low, but economic growth, contrary to usual reaction, is below the long-term average. Wages are growing slowly, not enabling people to afford housing as previously and prosperity is lower for many. Public transport into the CBDs for work is lagging-behind demand. There was a large increase in demand when petrol prices were raised by OPEC, the oil cartel. A few metro rail lines are being built and light rail in Sydney.
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It is unlikely that public transport will ever be as effective as in London with its 8m people in a smaller area than Sydney and Melbourne. Driverless electric vehicles are expected by the authorities to fill the need. They will be constantly on the move to pick-up, not parked or garaged, so will add to congestion.
Densification causes congestion and loss of world leading liveability, particularly spatial liveability. Smart city digital technology will not compensate for loss of spatial liveability. This is more relevant to cities of 8m or more trying to regain some liveability, such as London ranked number 53 in world liveability, and New York ranked number 56. Greater dwelling densification causes greater traffic densification.
Access to jobs by public transport is a strong driver. Most jobs are in CBDs, but it is growing more difficult because of congestion to get there in time and cost. China has found that new high-rise offices in the CBD are less than full. Companies are taking offices to the workers in dispersed suburban hubs unconnected to each other. This is a drag on innovation.
Solutions
There are two main thrusts to manage population increase. The first is planned major densification, like London, by increasing the number of smaller dwellings in the leafy established suburbs and expanding the greenfield fringe suburbs, while introducing smart city tech and driverless electric vehicles. This approach has overwhelming unintended consequences of loss of liveability and prosperity. It is the second-best option.
Another approach is the proposed building of new cities of 1m on either side of Melbourne, Sydney and Brisbane in the regions, connected to the CBDs by High Speed Rail in less than 60 minutes commuting time. These cities would be cheaper in government infrastructure costs and in private building costs than in major cities or their fringes.
The new cities would relieve the major cities of congestion and densification. They would protect precious world-leading liveability. Rural towns on the High Speed Rail line would also grow and afford relief. The aim is for 10m of the 24m increase to be distributed in regionals between the main cities with access by High Speed Rail. Instead of a huge loss there would be a gain. Innovation would be fostered.
Conclusion
The trend to population growth and more migrants looking for a better life in Australia will continue. The urge for their own home once settled and affordable will continue. There will be a strong desire for more space and prosperity. New migrants and foreign students will continue to reinforce demand for inner city high rise units. The demand for rental accommodation may ease, if growth and incomes pick up and housing affordability is less of a problem with higher interest rates and more stable house prices.
Concerns will remain and intensify, if official policy is focused on greater densification and consequent loss of liveability. Innovation may be slowed; prosperity may be less. It is counter-productive.
The long-term trend in large scale immigration is anti-densification. It is built on the desire for home ownership with more space, not less. The smaller dwellings closer together of densification is against the trend of migration and deeply established values. It is little different to where migrants came from, and not attractive. Forcing a change in values is dangerous because it will arrest the Australian competitive advantage from strong migration and its contribution to growth and prosperity.
There is no need to greatly densify cities and suffer the disadvantages. There is an alternative: 6 new cities of +1m on the High Speed Rail line around the capitals.
For further information, please visit the web-site www.veryfasttrain.com.au
PJK©26.10.17
