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2019 ULI Australia Young Leader Scholarship Winner
Each year the leadership of ULI Australia recognises the significant contribution of a ULI Australia Young Leaders Group member. The ULI Aus
May 2, 2019
Lauren Bensadoun
ULI Sydney’s April City Forum took place on 10 April 2019, sponsored by Aqualand, and focused on the Australian Residential Market.
The Australian market is currently suffering from an over-supply of available housing, causing weakened sales and value. Ben Hendriks of Mecone kicked off the evening with an insightful presentation, and gave the opinion that there is a long-standing issue with housing supply in Sydney; The supply cycle is for long periods of under-supply, intersected by short periods of over-supply.
The first factor that needs addressing is how the price to income ratio is making housing unaffordable, especially to those who have yet to enter the market. Sydney is said to be the world’s second least affordable market, after Hong Kong. Although, there are still large areas with relative affordability, but the affordability comes with trade-offs such as longer commutes, less access to amenities and services (such as education and health services), amongst others. Interestingly, the areas suffering the most are predominantly investor led, while the areas that typically provide larger housing types or are owner occupied are holding up better than expected.
Understanding that there are multiple sub-markets operating throughout Sydney, the question is: Is there a disconnect between planning and housing markets? Sydney is a large, international city, and should be planned as such. Presently, most of the focus revolves around supply, but what exactly is causing the over-supply? A change must occur around housing diversity and better transportation networks.
Sydney must diversify its housing market to accommodate for renters, students, seniors, families, etc. Diversity is necessary, as the market is continuously changing. Over the past 10 years, there has been a major decline in the household occupancy rate from 4.5 to 2.6 people per household.
Furthermore, in terms of the transportation networks, Sydney planned poorly for increased population growth. In 1981, London and Sydney forecasted the same population for 2034, yet our transportation networks do not compare to that of London’s, or most other international cities. This is negatively affecting the livability of Sydney, and is ultimately contributing to the current over-supply in the market.
The evening continued with a panel discussion from Ben Hendriks of Mecone, Esther Cheong of AEC Group, Lisa Chikarovski of Chikarovski & Associates, and Daniel Khong of Capella Capital. Some key takeaways from this discussion are outlined below:
· When looking at the data presented, it would be valuable to overlay the demographics. Many Sydney residents are retiring and leaving the city. Retirees are more interested in agricultural pursuits, saving money, and having more land.
· Younger demographics will move to places with more employment opportunities. The average person will commute up to 1.5hrs to get to work – but no more than that.
· It is imperative that we deal with “construction fatigue.” Meaning, project owners must make it a top priority to minimize the impacts on the community during construction.
· The “30-minute city” is not likely a reality for Sydney. Unfortunately, the city is far too behind in infrastructure and is in a constant game of catch-up. In order to become a “30-minute city,” the government must be far more future-focused.
· Diversifying the housing market in Sydney is the key to future success. Currently, the market is heavily run by investor stock.
· From FOMO (fear of missing out) to FONGO (fear of not getting out). When the market is high, the public has FOMO. Fear of not getting into the “booming” housing market. However, in the current down-turn, FONGO is taking over as people are worried about not getting out fast enough. The media is hugely responsible for this, causing a massive selling-frenzy by dramatizing the current down-turn in the market.
The old “Australian Dream” of owning a large house on a ¼ acre lot is not what the new generation desires. People are willing to give up bigger houses and land in exchange for a livable city. This means housing diversity, better transportation networks, and better communities. People will trade space for time.
With regards to the current down-turn in the market, it is simply a part of the expected economic cycle. Economists are confident that the next “pendulum swing” will happen in the next 2 – 4 years when the market will be back in an under-supply. There is potential for massive returns for investors if they hold their nerve, not give into FONGO, and hold onto investments until the next pendulum-swing in the cycle.
This event launched the partnership between Mecone and ULI Australia in producing the Residential Development Review – A monitor of housing development, land supply and transport infrastructure. The Residential Development Review is published twice a year, with Sydney, Melbourne, and Brisbane editions. Find the April 2019 editions here. Read the latest editions on Knowledge Finder.
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