1. Not enough
Homes for Victorians
VPELA Conference 2017

2. Record population growth
Unprecedented…
Record population growth
7 years as the world’s
most liveable city
Fastest growing city in the world
Record population growth
VPELA Conference 2017

3. Not enough Homes for Victorians
“In short, too many Victorians don’t have a real choice about where they live, or the type of home they live in. And as our population grows, inaction will only make things worse.
Fixing this problem isn’t simple.”
Premier of Victoria launching the Homes for Victorians Policy
VPELA Conference 2017

4. Plan Melbourne refresh
“Melbourne has no time to waste. We need to plan and invest wisely to: cater to the needs of a more diverse and ageing population; break the link between congestion and growth; address housing affordability; mitigate and adapt to climate change; and ensure social and economic opportunities are accessible to all.”
Plan Melbourne Summary
VPELA Conference 2017

5. Where will we live?
70% of the population needs to be living in existing suburbs; we all agree that this is the best outcome to promote opportunities for the community and reduce costs for taxpayers and for the government in providing essential services such as transport, health and education
VPELA Conference 2017

6. Consumer preferences: Amenity over serenity
Dwelling Features
Demography
Safety and Security
Jobs
Convenience and access
Affordability
As countries have become more urbanised, households have increasingly preferred to reside closer to employment opportunities and services over the serenity provided by a detached house further away from urban centres.
For the working population this is often a lifestyle decision, balancing the tradeoffs between affordability, dwelling size and commute time. There are also many other considerations such as proximity to schools, education institutions, health services, transport etc.
As we know, established residential areas are typically serviced by a wider range of community services than are available on urban fringes. When building or buying a new home in an established area the nearby amenities are known, whereas building a new home in a greenfield area has an inherent degree of uncertainty about how quickly the community will grow and when the infrastructure will be established.
These are key factors that have contributed to the growth in the demand for medium density housing in established areas.
Demography There are countless demographic dynamics that have the potential to influence changes in the housing mix. The most notable demographic issue in the Australian context is that our ‘baby-boomers’ are now aged in their mid to late 60s. As this cohort ages further, considerations such as residing within close proximity to health services, residing independently in their own home longer than previous generations and wanting to maintain a lifestyle within the community they are settled in dominate decision making. This creates demand for medium density housing in existing areas to provide an accessible low-maintenance dwelling type that will enable older people to live independently in their own homes for longer.
Changes in demographic trends in younger cohorts are also having an impact on housing consumption. We are seeing people in shared homes for longer and families are generally smaller with a correlating demand in smaller homes.
But we have a vicious cycle, the demand for medium density housing is increasing but we live in an environment that makes the rate and type of supply difficult. More on that later.
Attractiveness of environment
VPELA Conference 2017

7. Demand What does the evidence tell us?
Proportional Change in Total Number of Dwellings – Middle Melbourne (2006 vs 2016)
Proportional Change in Total Number of Dwellings – Middle Melbourne
(2006 vs 2016)
Key Points:
The 2016 census data confirms these conclusions. Housing preferences across metropolitan Melbourne, including Middle Melbourne, continue to change with a growing preference towards medium and higher density living.
In Middle Melbourne there has been a large proportional increase in medium density dwellings.
The primary driver of the change towards medium and high density living is the increasing scarcity of and growth in the price of detached houses. As detached dwellings become more expensive, many people are trading dwelling type for location.
VPELA Conference 2017

8. Demand: What does the evidence tell us?
Proportional Change in Tenure of Dwellings – Middle Melbourne (2006 vs 2016)
Underlining the affordability constraints, there has been a decrease in the levels of outright home ownership and a large proportional increase in the levels of private renters across Middle Melbourne.
VPELA Conference 2017

9. Demand: What does the evidence tell us?
Proportional Change in Household Type by Dwelling Type– Middle Melbourne (2006 vs 2016)
Medium density dwellings across Middle Melbourne are attractive to upgraders, downsizers and first home buyers who seek a compromise between a separate house and an apartment.
VPELA Conference 2017

10. Demand: What does the evidence tell us?
Proportional Change in Dwelling Type by Home Ownership – Middle Melbourne (2006 vs 2016)
Across Middle Melbourne, the ownership of separate houses has decreased whilst there has been a large proportional increase in home ownership in all medium density categories.
VPELA Conference 2017

11. Supply
“With Victoria’s population growing at more than 100,000 a year, we need more houses being built to keep up.” Homes for Victorians
“Without strategies to provide more housing choice, Melbourne will be less affordable and liveable – risking social equity and cohesion, and slowing economic growth…For Melbourne to become more equitable and accessible, local residents need to have a choice of housing within their neighbourhood.” Plan Melbourne
We need an additional 1.6 million dwellings and new jobs to accommodate the 3.4 people joining us in Victoria.
While separate houses still account for most homes in Australia (72%), there’s been an increase in higher density forms of dwelling which now make up more than a quarter (26%) of Australian housing – our castles are getting closer together.
VPELA Conference 2017

12. Supply
While separate houses still account for most homes in Australia (72%), there’s been an increase in higher density forms of dwelling which now make up more than a quarter (26%) of Australian housing – our castles are getting closer together.
VPELA Conference 2017

13. Balanced Housing Hierarchy
Melbourne’s apartment market continues to evolve and mature as apartment living becomes a more accepted form of housing to a broader range of households.
However, Australian cities are relatively immature with respect to their overall apartment stock, when compared to select North American cities .
in 2011 Sydney had 10.2% of its dwelling stock in the form of 4+ storeys while Melbourne’s proportion was considerably less with 3.6% (currently at 5.8% based on the 2016 Census).
VPELA Conference 2017

14. Record supply does not mean over-supply
Whilst it has been encouraging that the proportion of higher density housing is increasing, the supply outlook for Melb’s apartment market is already deteriorating significantly with peak supply already observed in 2016.
Using the apartment data as a guide for supply, we can see that since early-mid 2016, purchaser demand conditions have materially changed and will continue to grow as the population grows. However, as governments and banks implement measures to reduce the demand from investors (esp. from international investors) caused primarily by changed lending criteria for international purchasers applied by domestic banks, capital flow restrictions from China, APRA-directives to slow investment property lending, higher interest rates, and foreign buyer changes, there is a commensurate impact on developer confidence and ability to deliver supply.
Developers have also been impacted by new Better Apartment Design Guidelines and the abolition of the stamp duty concession for investors.
In total, expected population-derived apartment demand will not be satisfied by projected supply with impacts to affordable purchase and rentals.
VPELA Conference 2017

15. Housing Diversity and Affordability
Apartments play an important role in delivering diverse housing stock and affordable prices. In Sth Yarra which is a more mature apartment market, you can see the proportion of new stock delivering affordable housing and a range of housing options. 58% of new stock delivered in below $600k and 42% of new stock ranges up to $3.5 million indicating a variety of housing options.
Sth Yarra – price distribution
VPELA Conference 2017

16. Housing Diversity and Affordability
91% of apt sales below 600,000
21% of established dwellings below 600,000
However in evolving apartment markets pricing pressures from established market not significant enough to allow for premium/luxury product as observed within South Yarra.
These markets need support to create supply and diversity of housing stock at a rate to support the demand.
Box Hill– price distribution
VPELA Conference 2017

17. Australian Housing Under-Supply
The recent report Fixing Housing Affordability produced by the Property Council showed a significant under supply of housing across Australia
VPELA Conference 2017

18. Melbourne Under-Supply
Our policy ambition is often not translated into deliverables due to ambiguity and inconsistency in applying the policy settings. An example is the ambition in strategic planning to have new homes near jobs by mandating activity centres to encourage industrial and residential development. However as this study of the City of Maroondah shows, 15% of all new projects are inside the activity centre zone whilst 75% of projects are outside the activity centre. Pleasingly the majority of new supply comprises medium and higher density projects.
VPELA Conference 2017

19. What do we need to do …and quickly?
CREATE PLANNING TRANSPERANCY AND CERTAINTY:
Set targets for the number and types of new dwellings in existing suburbs.
Allocate areas appropriate for medium and high density projects.
Prioritise diverse and affordable medium and higher density projects over preserving neighbourhood character in those agreed areas eg residential growth zones.
Time limits for the consideration of rezoning applications otherwise automatic approval.
De-politicise planning approvals by giving executive planning teams final approval powers for all applications under an agreed value and referring planning applications over an agreed value to an Independent Expert Panel.
Introduce a code based assessment process for projects under an agreed value.
Accelerate the development of major precincts such as Fisherman’s Bend and Arden McAuley.
Identify and release smaller brownfield sites for development.
Governments and policy makers can reduce housing shortfalls by removing constraints inhibiting the supply response. The current planning system has levers to influence the location, rate and type of new development. These are the levers we are championing to government for urgent attention and change to create impact on supply and diversity in the middle ring.
VPELA Conference 2017

20. What do we need to do …and quickly?
CREATE PLANNING CERTAINTY:
Governments and policy makers can reduce housing shortfalls by removing constraints inhibiting the supply response. The current planning system has levers to influence the location, rate and type of new development. These are the levers we are championing to government for urgent attention and change to create impact on supply and diversity in the middle ring.
VPELA Conference 2017

21. Conclusion
“In short, too many Victorians don’t have a real choice about where they live, or the type of home they live in. And as our population grows, inaction will only make things worse. Fixing this problem isn’t simple.” Premier of Victoria launching the Homes for Victorians Policy “But planning certainty, as well as the time and costs of obtaining approval, limit the supply of available new homes and, in doing so, drive up prices. Unnecessarily slow approvals by councils and utilities delay developers and also drive up costs.” Homes for Victorians
Governments and policy makers can reduce housing shortfalls by removing constraints inhibiting the supply response. The current planning system has levers to influence the location, rate and tyope of new development. These are the levers we are championing to government for urgent attention and change.
VPELA Conference 2017

22. Thank you for listening.
Governments and policy makers can reduce housing shortfalls by removing constraints inhibiting the supply response. The current planning system has levers to influence the location, rate and tyope of new development. These are the levers we are championing to government for urgent attention and change.
VPELA Conference 2017