‘Bumping spaces’ build community – when they are within reach

Social connection needs time and effort, but crucially it also needs meeting places, and our Map of the Month highlights that not all Melburnians have equal access to these ‘bumping spaces’

By Professor Jane Farmer, Tracy De Cotta and Dr Milovan Savic, Swinburne University, Professor Andrew Butt and Dr Annette Kroen, RMIT and Associate Professor Lucio Naccarella, University of Melbourne

When was the last time you visited your local library, community centre or neighbourhood house?

Perhaps it’s not near enough even to think about going there, or life feels just too exhausting after your commute, taking the kids to school and working long hours to make ends meet. Maybe it seems like something other people, not you, can do.

Our Map of the Month shows key ‘bumping spaces’ – libraries, neighbourhood houses and community centres – in Greater Melbourne. Picture: Map of the Month project

But these kinds of community hubs are excellent places for fostering ‘social connection’. Social connection is a complex experience fundamental to people’s health and wellbeing, and a way to form ‘connected communities’ with the capacity to mobilise in an emergency or to support locals in need.

We all need interaction with other people, and people who are socially connected report being happy with their social support, feel connection and belonging, and are satisfied with the quality and amount of connection they get with others.

Social connection is so important to mental, physical and cognitive health that the US Surgeon General has launched a policy ‘call to action’ and the UK and Japan have government ministers responsible for countering loneliness.

Australian policy responses like social prescribing, recently introduced by the Victorian Government, are designed to combat social anxiety and lack of knowledge about how to connect; however, less attention is given to evidence that there are places that can help people connect by making it easier to simply ‘bump’ into others.

BUMPING SPACES

‘Bumping spaces’ help people meet – by accident! You don’t have to go through the work and anxiety of strategising how to meet new friends. These are places where people literally bump into each other – like when you’re waiting in the corridor for your yoga class, queuing to ask a question at the library, or attending a craft group at your local neighbourhood house.

Bumping spaces can also be private businesses, like cafes or corner shops.

Importantly, these places build community by being local and close to home, so you often see the same faces, and eventually come to say hello, and then strike up a conversation.

By helping to build community, these places build social capital and social cohesion, vital neighbourhood assets for economic prosperity and community resilience.

By offering places that are welcoming and ‘neutral’, community-building infrastructure like libraries and neighbourhood houses are accessible and attractive to a diversity of people.

As political scientist Daniel Aldrich puts it, these places nurture “the ties that are hardest to find in our relationships precisely because they connect us to people different from us”.

Libraries aren’t just for books, with many providing novel and eclectic programs, activities and services designed to meet users’ needs. For example, Merri Bek Council has a social worker in the library program and many libraries run community health programs.

Neighbourhood houses and other community centres are lifelines for many people, promoting social cohesion and combating loneliness.

HOW LOCAL IS YOUR LOCAL COMMUNITY HUB?

Our Map of the Month looks at the accessibility of vital ‘community-building’ social infrastructure to Melbourne’s residents – those special neutral places where diverse people can meet by chance – libraries, neighbourhood houses and community centres.

What immediately springs out from the map is the high concentration of community-building spaces in established suburbs, mostly close to the city centre, with apparently fewer in the outer, newer suburbs.

This raises alarm bells.

Melbourne’s outer metropolitan suburbs are some of the fastest growing in Australia and include highly diverse populations that are also affected by financial stress and where residents often have long commute times, with less access to local employment.

These people need to be able to readily access infrastructure to help them literally build new communities.

Looking at the map, the sparse and dotted picture outside the more established inner suburbs suggests that libraries, community centres and neighbourhood houses at the periphery are all serving large areas.

How can people ‘bump’ into their neighbours if they are travelling long distances to attend a class or use the library?

In contrast, the map shows that those living in the inner suburbs can more easily access a range of community-building infrastructure and these places are likely made even more accessible through the increased availability of inner-city public transport.

GROWTH AREAS NEED BUMPING SPACES

The mapped data highlights disparities between established areas and growth areas that are likely occurring internationally. However, these disparities may be particularly significant for Melbourne which is growing rapidly, becoming home to people from areas across the globe.

This means Melbourne suburbs must work hard to grow community belonging, cohesion and multicultural understanding.

Our recent study found that diverse residents of Melbourne’s outer metro reported three main barriers to social connection: having few opportunities to work locally; difficulties and anxiety from being misunderstood due to language or culture; and challenges in finding like-minded people.

Some new residents said they had met other locals at the library or skatepark, through local employment or volunteering, or being invited to join a group by a neighbour or community development worker.

However, people who worked found it hard to access activities near home as places might be closed or feel unsafe during the evenings.

We’ve heard of food deserts without access to shops that sell healthy food, but maybe we should also be talking about ‘social connection deserts’, where people are isolated through lack of access to vital social provisions.

One of the problems we have as social connection researchers is a lack of good data. Knowing where the community-building spaces are is difficult enough, but we also want to know what social connection happens there.

This is an international problem, and we have an opportunity in Melbourne to be pioneers at generating good quality social connection data through a collaboration of researchers, government and community organisations.

Meanwhile, there is something we can all do – get out and use our local community-building spaces.

This is important. By joining a class, going to a talk or event, or even just borrowing a book, you will be supporting these vital places – they will increase their services, open longer hours and maybe new centres will be built closer to where you live.

You’ll get lots of personal benefits, too – who knows, you might even make a new friend or two.

Map of the Month is a science communication project of the University of Melbourne (Melbourne Centre for Cities, AURIN, Melbourne Data Analytics Platform and Pursuit) using maps to spark important policy conversations across metropolitan Melbourne. This pilot is supported by the Lord Mayor’s Charitable Foundation and in partnership with the Victorian Office for Suburban Development and the Municipal Association of Victoria. Academics, community leaders and government representatives from across Melbourne contribute to the maps and accompanying stories.

This month’s map was produced by Amanda Belton, Dr Emily Fitzgerald and Flavia Barar.

This article was originally published on The Pursuit. Read it here.

As New Zealand CBDs evolve post-pandemic, repurposing old or empty spaces should be on the drawing board

By Jose Antonio Lara-Hernandez - Senior Researcher in Architecture, Auckland University of Technology

J. Antonio Lara-Hernandez is an architect and urban researcher with more than 15 years of experience. He was a distinguished member of the curatorial team of the Italian Pavilion at the Venice Biennale 2021. His research and professional experience include works in Mexico, Italy, Switzerland, New Zealand, and the United Kingdom. He focuses on research topics related to informality in the urban landscape, as well as studies on urban resilience and architectural exaptation. Antonio is a prolific academic scientist focused on the impact of the transformation of the built environment at the streetscape level towards the diversity and inclusion city centres.

The COVID-19 pandemic and the hybrid work patterns it fostered have changed the way we think about office space, and central business districts in general. While fears of urban centre “ghost towns” may have been premature, many cities around the world still face dilemmas over how best to adapt.

New Zealand is feeling this pressure too. Office vacancy rates, while dropping slightly, have remained above 12%. At the same time, there is demand for high-quality, modern spaces that fit new work and collaboration models.

This isn’t an entirely new phenomenon. Throughout history, cities and buildings have been designed with specific functions in mind. As environmental and social needs change, however, these designs struggle to meet contemporary demands.

So, what can be done with the empty buildings and unleased floors scattered through cities everywhere? In our new book, Architectural Exaptation: When Function Follows Form, we examine the process by which existing structures or features are re-imagined and re-utilised.

In architecture, the concept of “exaptation” refers to this adapting of buildings and structures for new uses. It is becoming increasingly relevant as a transformative response to sustainable and resilient urban development.

The benefits of adapting

Exaptation in architecture requires us to view built environments not just as physical spaces, but as complex living systems that can adapt and transform.

Reusing and repurposing existing structures also helps reduce waste, CO₂ emissions and energy use, supporting more sustainable urban growth. At the same time, by reusing rather than rebuilding, the historical and cultural fabric of cities is preserved, as well as their inhabitants’ sense of identity.

A famous example is Venice, which has continuously adapted its historic structures to meet modern needs, while maintaining their unique character.

Sometimes seen as a static relic of the past, Venice is in fact a dynamic example of how urban spaces can evolve. The city’s ability to repurpose spaces and structures – turning palazzos into museums or residential buildings into boutique hotels – demonstrates architectural exaptation in practice.

The Highline in New York provides another good example. Rather than demolish an old elevated railway, it was repurposed as a pedestrian walkway, becoming a now iconic public space.

The social life of cities

The notion and application of architectural exaptation also has profound implications for the way we approach urban planning and development. In particular, it challenges the linear thinking and conventional growth models behind building new structures.

Encouraging the creative reuse of existing structures not only reduces resource use, it also embeds a layer of history and culture that enriches the urban experience.

The concept goes beyond the physical to encompass the social and cultural dimensions of city life. By fostering built environments that adapt to the needs of their communities, cities can become more inclusive and responsive to their inhabitants’ needs.

This also aligns with the idea of the “15-minute city”, which aims to fulfil the daily needs of residents within a short walk or bike ride – not unlike a medieval city or town, in that sense.

A paradigm shift

There are economic and logistical challenges with implementation, of course, including structural capacity. Some older buildings may require upgrades to meet required standards for their intended new function.

Building codes and regulations in some places are complex, which may not always align with the intended reuse. Moreover, depending on the infrastructure requirements of the new building’s use – power, plumbing, heating and ventilation systems – upgrades and compatibility work can be needed.

In some heritage buildings, the sensitivity of the architect in balancing preservation and modernisation becomes a key factor. And sometimes it is simply cheaper to build from scratch than to adapt.

But the main challenge is deeper still: encouraging a paradigm shift away from a conventional development model towards a more sustainable one.

To achieve that, building codes and regulations will need adjusting to be more flexible. Economic stimulus packages and financial and tax incentives will underpin any real shift to a new approach.

From Venice to Auckland

A city need not be as ancient and unique as Venice for this to work. Take Auckland, for example, where architectural exaptation could be applied to transform its moribund centre from a “dormitory” CBD into a vibrant and lively precinct.

Auckland’s remaining historic buildings have the potential for adaptive reuse and the incorporation of arts and culture into everyday spaces. This would foster a more dynamic environment, even after business hours. The Britomart precinct is a good example of this already happening.

More than that, given the challenges presented by climate change, architectural exaptation provides a blueprint for making cities more resilient, sustainable and flexible. This goes beyond architectural theory and is a call to action. It urges architects, planners and city dwellers to rethink the role of the built environment.

By learning from the adaptive strategies of the past, we can forge a future where our cities are not only sustainable, but also vibrant and culturally rich centres of human life.

This article was originally published on The Conversation. Read it here.

These maps tell us we need to cool our sweltering streets

Our Map of the Month shows the impact of asphalt and concrete on city temperatures, and why we need to ‘de-pave’ and ‘re-plant’ in a warming climate

By Dr Thami Croeser, RMIT University, and Professor Michele Acuto, University of Melbourne

We’ve just lived through the world’s hottest year on record, as well as the hottest decade on record.

And yet, we keep building our cities out of materials that get incredibly hot during heatwaves – which also stay hot well into the night. For example, unshaded asphalt can reach temperatures of 75°C during a heatwave.

This is why cities experience the ‘urban heat island effect’ – a striking phenomenon which makes cities 4-10 degrees hotter than the countryside.

During a succession of recent heatwaves in Perth, the city experienced seven days above 40°C in February alone. At these temperatures, heat-related illnesses weigh on the economy and can be a deadly threat to vulnerable communities.

Energy demand goes through the roof, often crashing the grid and causing blackouts, while our streets become desolate.

So, what can cities do about heatwaves, and the urban heat island effect?

There’s lots of excellent research that tells us that a crucial part of the response is planting trees – and a lot of them. A recent study found that more than 40 per cent canopy cover is required just to negate the heating effects of asphalt and concrete.

If planting trees is like installing natural air-conditioning, then laying asphalt is like doing star jumps while wearing a thick woolly jumper.

Currently the world is doing both.

We’re planting trees and building whole new suburbs with vast expanses of unshaded asphalt, plus black, heat-absorbing roofs on our houses. The development of apartment buildings follows a similar pattern: inner city areas might be becoming more pedestrian friendly and ‘buzzy’, but our streets are mostly car-oriented, which means we keep all the asphalt and concrete.

With tree planting efforts barely keeping pace with tree losses, we’re going to want to not only up our urban forestry budgets, but also look at the other side of the equation: all that asphalt.

Our latest Map of the Month focuses on this issue. Using detailed data from Geoscape Australia, for every building in Metropolitan Melbourne, we’ve calculated the area around each structure that is made of asphalt and concrete.

We’ve the assigned a colour to each building to indicate whether it’s getting natural air-conditioning or wearing that metaphorical woolly jumper.

If your house is mostly surrounded by asphalt and concrete, it’ll show up as dark red. At the other end of the scale, if you’re lucky enough to be surrounded by trees and vegetation, you’ll see a lot of blue in your neighbourhood.

We also mapped neutral materials (grass and bare soil) and factored these into our scoring. Because we are looking at the impact of different kinds of open space around buildings, we haven’t included the heat impact of the buildings themselves, which can also add to the urban heat island effect.

The results are striking.

In total, we have surrounded our homes and workplaces with 271 square kilometres of asphalt and concrete, an area the size of central Paris and central Brussels put together.

More than half of all the buildings in Melbourne – over 1.5 million structures – are surrounded with land that’s at least a third concrete and asphalt.

The distribution of these ‘sweltering streets’ is very uneven too. New suburbs on the fringe and high-density inner neighbourhoods cop a lot of heavy asphalt cover just waiting to soak up heat.

Check out the difference between the post-industrial neighbourhoods of Abbotsford and Richmond in the City of Yarra – which took on over 5,000 new residents in 2023 – and the adjoining established low-rise residential areas with leafy lushness in Kew and Hawthorn.

There’s also a stark east-west divide, with Melbourne’s wealthy leafy suburbs enjoying much better protection than our hotter – and more socioeconomically disadvantaged – suburbs in the west.

From the established suburbs of Hobson’s bay to the western fringe at Werribee, and all the way north to Craigieburn, is a sea of red. That’s a lot of heat exposure, carried by a lot of people in lower-income, less flexible (and often outdoor) employment, with less ability to pay for air conditioning.

Fortunately, our rolling plains of hot asphalt don’t have to be permanent.

A global movement to ‘de-pave’ cities highlights the many ways that streets can be retrofitted to make space for green cover – often by taking a little space back from cars.

This ranges from small projects to remove parking spaces to widening footpaths and closing lanes to create urban parks.

Recent projects have shown how cities can narrow wide-splayed intersections to both discourage speeding and add new green space.

With millions of square metres of asphalt surrounding the places we live and work, we certainly have our work cut out for us, and de-paving is still a fairly marginal activity in most cities.

As cities like Paris, London and Barcelona lead the way in boldly re-balancing their relationship with the automobile, we see huge potential to turn Melbourne’s asphalt into thriving urban nature.

We want to see some of those red patches on our Map of the Month turn dark blue.

Map of the Month is a science communication project of the University of Melbourne (Melbourne Centre for Cities, AURIN, Melbourne Data Analytics Platform and Pursuit) using maps to spark important policy conversations across metropolitan Melbourne. This pilot is supported by the Lord Mayor’s Charitable Foundation and in partnership with the Victorian Office for Suburban Development and the Municipal Association of Victoria. Academics, community leaders and government representatives from across Melbourne contribute to the maps and accompanying stories.

This month’s story was a collaboration between RMIT’s Centre for Urban Research and the Melbourne Centre for Cities, and the map was produced by Dr Emily Fitzgerald, Amanda Belton and Dr Stuart Lee, using data kindly provided by AURIN and Geoscape Australia.

This article was originally published on The Pursuit. Read it here.

City planners love infill development. So why are cities struggling with it, and how can they do better?

Forestville, Adelaide. Renewal SA, CC BY

By Neil G Sipe - Honorary Professor of Planning, The University of Queensland

Infill development is an increasingly hot topic in Australian cities. It involves building on unused or underutilised land within existing urban areas.

City planners see infill development as essential. It’s a way to end urban sprawl and improve service delivery to a growing population at lower cost. Infill development has increased in popularity over several decades because it uses existing physical and social infrastructure, is close to amenities and enhances local economies.

Governments and planners have set infill development targets. However, these targets are not being met. Greenfield projects on undeveloped land continue to outpace infill development.

Perth, for example, has an infill target of 47%. The rate of higher-density infill actually fell recently to 29% of all new development.

However, most states and territories already have the means to deliver more infill development, in the form of land development authorities.

What are the obstacles?

Infill targets aren’t being met for various reasons. These include:

• opposition from some (but not all) local residents, because of increased noise and traffic disruptions

• difficulty in assembling enough land to make the project feasibile

• higher development costs due to land prices and higher densities

• stronger market demand for greenfield housing

• need to upgrade infrastructure for infill locations

• complex and time-consuming planning approvals.

Greenfield development is popular with developers and consumers because it costs less up-front. However, such development may cost society more. These added costs include transport – both public transport and roads – as well as social, health and other government support services.

Ad-hoc, small-scale infill that typically covers only a few lots is happening. Unfortunately, these projects are not enough to achieve infill targets.

And they are creating other problems. They often convert backyards into housing. This reduces open space and adds to urban heat island impacts.

What have governments done about it?

Governments have worked on increasing infill development for decades. One of the earliest attempts involved land development authorities. The idea originated with the Whitlam government in the early 1970s.

The Commonwealth Department of Urban and Regional Development encouraged states to establish these authorities in response to the “shortages of residential land and the accompanying rapid price rises that occurred in Sydney, as in the other major cities in Australia in the late 1960s and early 1970s”. Their purpose was “to acquire land for present and future urban development and other public uses to help moderate the housing market, stabilise land supply and support the development industry with homesite sales to be made at the lowest practicable price”.

Many states and territories have land development authorities or their equivalents. These bodies have undertaken a significant number of projects, but it’s small when considering population growth.

For example, LandCom in NSW has been involved with 220 projects and provided housing for 100,000 since it was set up. Sydney’s population has grown by more than 2 million people in this time.

As well as NSW’s Landcom, other authorities of this kind include Development Victoria, Renewal SA, DevelopmentWA and the Australian Capital Territory’s Suburban Land Agency. Queensland had the Urban Land Development Authority, which became part of Economic Development Queensland. (The above links include lists of projects.)

We need to build on this work

While land development authorities have been around for almost 50 years they have not been as successful as hoped. One reason is that they have not focused solely on infill development. They also have tended to use land already owned by the government.

There are other issues too. Population growth has outpaced the authorities’ capacity to deliver housing. There are political sensitivities about the government taking away development opportunities from the private sector.

One reason for Australia’s housing problem is the length of time it takes to get a project approved. This is particularly true for infill development.

One attempt to overcome this obstacle was Queensland’s Priority Development Areas (PDAs), which took effect in 2012. According to Economic Development Queensland, “when a PDA is declared, Economic Development Queensland works closely with local government and other stakeholders to plan, assess and guide development within a PDA. This includes the preparation of a development scheme.” Many PDAs are urban infill projects.

Another Queensland initiative announced last February is the A$350 million Incentivising Infill Fund. Its focus is to provide relief from infrastructure charges for “market-ready” private infill developments.

Governments at all levels are looking for ways to make more housing available and affordable. Infill development is a viable option, but it can be improved by making more use of mechanisms like land development authorities. They can provide co-ordinated planning and development at a scale that will improve our cities.

So, rather than looking for new solutions, we should make better use of existing ones that have proven effective.

This article was originally published on The Conversation. Read it here.

Predictions for 2024 Capital Markets investment volumes in Australia

Predictions for interest rate cuts in the next two years will support an increase to local investment volumes. Here’s what experts think investors should keep an eye on in the year ahead. - CBRE

“Cautious optimism as opposed to the blind optimism we saw early last year.” 

That’s the sentiment on the ground right now regarding Capital Markets investment volumes across Australia in 2024. It’s an observation which comes via Flint Davidson, CBRE’s Pacific Head of Capital Markets. 

“We were hoping this time last year that market stability would return with investment demand. However, Australia had to re-price and this is taking some time,” he explains. 

“This year the fundamentals are much more supportive of recovery, particularly as it relates to the normalisation of monetary policy. Pricing has reverted across all sectors in the past 12 months, some by as much as 30 to 40 percent. After a very disjointed past few years, it feels like there is intent to make things happen as we move through 2024.” 

It’s a landscape similarly depicted by CBRE’s latest Pacific Market Outlook 2024 report which indicates relatively flat investment volumes this year before an expected resurgence in 2025. This forecast comes from CBRE’s prediction of two 25bps rate cuts from mid-2024, followed by two more 25bps cuts in the first half of next year. The expected result will be a 3 percent increase in Australian investment volumes in 2024 to circa $20 billion, followed by a 37 percent increase to $28 billion in 2025 aided by a rebound in office sales. 

To delve deeper into these findings on Capital Markets investments, we also spoke to Tom Broderick, Head of Office & Capital Markets Research, Australia, to explain what it all means. Together, the pair will paint a clearer picture of what investors in this space should keep an eye on in the year ahead. 

Industrial and retail: Australia’s expected growth sectors 

CBRE research found that growth sectors such as industrial and retail were set to be early beneficiaries of Australia’s improving transaction volumes.  

“Major institutional investors are typically more focused on gateway cities around the world,” says Broderick. “This means Sydney and Melbourne are likely to benefit more. However, markets like Brisbane and Perth are also benefiting from strong population growth, which is a driver for both industrial demand and retail spend. 

“Industrial & Logistics is seen as the one of the safest sectors given the strong fundamentals such as e-commerce penetration as well as a lack of new supply across many markets. This sentiment will remain as long as rents are able to be maintained and the leasing market is stable.” 

Office sector resurgence 

With trough to peak expansion of cap rates forecast to be 150bps to 200bps for prime office, there’s a need to understand what’s strengthening the post-pandemic office sector and whether it’s sustainable long term. 

“Given the decline in office values, some investors are starting to return to the asset class,” says Broderick. “The pricing is starting to look attractive again while cities like Brisbane, Perth and Sydney are starting to observe solid rental growth, implying the weakened post-COVID leasing market is recovering.” 

When it comes to premium office assets, Davidson is similarly optimistic based on his market observations. 

“Premium office is a finite commodity. It’s very hard to produce more product, particularly at present and in most years of the cycle owners generally aren’t sellers. 

“The window to buy the best quality assets is open now as some REITS and wholesale funds remain motivated to achieve liquidity and developers are seeking funding solutions. While the discounts available are significant they won’t be to the same extent as secondary assets, but it will be the ability to access the best buildings that will motivate the capital. 

“Those looking to get set later in the year or early next will probably miss the window.” 

Student accommodation vs build-to-rent 

This year’s Pacific report highlighted that student accommodation and build-to-rent assets would be less prone to outward cap rate movement than other real estate asset classes. What’s the perspective from the experts on why Living Sectors are proving more resilient to the higher interest rate environment?   

“Both sectors in Australia are still lacking scale and are in their relative infancy compared to other parts of the globe,” says Davidson. “Student accommodation has very strong tailwinds due to the proven demand and operating expenses, undersupply across the major cities and higher returns which are attracting capital. International student numbers in Australia are back to pre-pandemic levels which is putting additional pressure on inner city residential vacancy rates. Student accommodation also has a more favourable MIT tax treatment which is a frustration of owners in build-to-rent.  

The huge influx of international students, which is a key driver for Australia’s overall population growth, could also be a key driver adds Broderick. “However, we are seeing more significant rental growth in the Inner City apartment markets which has trended at 15 percent-plus in some instances during 2023. The structural undersupply of rental accommodation in Australia is well understood by global capital and we are receiving substantial levels of inbound enquiries on how to access the market from Asian investors in particular. When the tax settings are reset for build-to-rent, we anticipate a greater flow of investment into the sector, which is likely to focus initially on the Eastern Seaboard and will then diversify into the other state capitals.” 

Potential investment volume challenges 

While there is significant upside to CBRE's forecasts if interest rate market movements are favourable in the coming years, it’s equally important to be aware of any potential challenges to Capital Markets investment volumes. 

“The bounce in investment volumes will be inextricably linked to the return of normalised monetary policy,” says Davidson. 

“Any delay in interest rate cuts due to inflation proving stubborn is likely to keep volumes subdued, albeit above what we saw in 2023. The extended timeframe required to close transactions will mean transaction volumes will still lag for the first half of this year, however this shouldn’t be interpreted as a continuation of a subdued market. 

“We expect the first movers to be busily setting themselves and taking advantage of a rare phase in the cycle for capital to take advantage of sellers' acceptance of re-set market pricing and a limited number of conviction buyers.” 

Broderick believes that the risk is more weighted to the upside rather than the downside for investment volumes. 

“Recent data releases on jobs, retail sales and inflation have been more pessimistic than consensus views, indicating that the RBA might have to start cutting rates to maintain a stable economy. This will help investor sentiment for commercial property. 

“It generally takes a few years for investment volumes to return to previous peaks. This was the case following the Global Financial Crisis. Investors need to be confident that pricing has largely stabilised before we start to observe growth in volumes.” 

Despite any potential headwinds, investors should find some confidence in Australia’s robust investment climate. CBRE’s Pacific Market Outlook reveals that Australia is currently ranked third across APAC for countries where buyers are targeting cross border investment. The reason? 

“Australia is seen as a safe investment destination by offshore investors given its transparency, strong legal system and fundamentals such as population growth,” says Broderick.  

This was originally published on the CBRE website. Read more here.

Stamp duty is holding us back from moving homes – we’ve worked out how much

By Nick Garvin - Adjunct Fellow, Department of Economics, Macquarie University

If just one state of Australia, New South Wales, scrapped its stamp duty on real-estate transactions, about 100,000 more Australians would move homes each year, according to our best estimates.

Stamp duty is an unquestioned part of buying a home in Australia – you put your details in an online mortgage calculator, and stamp duty is automatically deducted from the amount you have to contribute.

It’s easy to overlook how much more affordable a home would be without it.

That means it’s also easy to overlook how much more Australians would buy and move if stamp duty wasn’t there.

The 2010 Henry Tax Review found stamp duty was inequitable. It taxes most the people who most need to or want to move.

The review reported:

Ideally, there would be no role for any stamp duties, including conveyancing stamp duties, in a modern Australian tax system. Recognising the revenue needs of the States, the removal of stamp duty should be achieved through a switch to more efficient taxes, such as those levied on broad consumption or land bases.

But does stamp duty actually stop anyone moving? It’s a claim more often made than assessed, which is what our team at the e61 Institute set out to do.

We used real-estate transaction data and a natural experiment.

What happened when Queensland hiked stamp duty

In 2011, Queensland hiked stamp duty for most buyers by removing some concessions for owner-occupiers at short notice.

For owner-occupiers it increased stamp duty by about one percentage point, lifting the average rate from 1.26% of the purchase price to 2.27%.

What we found gives us the best estimate to date of what stamp duty does to home purchases.

All over Australia, stamp duties suppress movement. Sam Mooy/AAP

A one percentage point increase in stamp duty causes the number of home purchases to decline by 7.2%.

The number of moves (changes of address) falls by about as much.

The effect appears to be indiscriminate. Purchases of houses fell about as much as purchases of apartments, and purchases in cities fell about as much as purchases in regions.

Moves between suburbs and moves interstate dropped by similar rates.

With NSW stamp duty currently averaging about 3.5% of the purchase price, our estimates suggest there would be about 25% more purchases and moves by home owners if it were scrapped completely. That’s 100,000 moves.

Victoria’s higher rate of stamp duty, about 4.2%, means if it was scrapped there would be about 30% more purchases. That’s another 90,000 moves.

Even low headline rates have big effects

The big effect from small-looking headline rates ought not to be surprising.

When someone buys a home, they typically front up much less cash than the purchase price. While stamp duty seems low as a percentage of the purchase price, it is high as a percentage of the cash the buyer needs to find.

Here’s an example. If stamp duty is 4% of the purchase price, and a purchaser pays $800,000 for a property with a mortgage deposit of $160,000, the $32,000 stamp duty adds 20%, not 4%, to what’s needed.

If the deposit takes five years to save, stamp duty makes it six.

A similar thing happens when an owner-occupier changes address. If the buyer sells a fully owned home for $700,000 and buys a new home for $800,000, the upgrade ought to cost them $100,000. A 4% stamp duty lifts that to $132,000.

Averaged across all Australian cities, stamp duty costs about five months of after-tax earnings. In Sydney and Melbourne, it’s six.

Stamp duty has bracket creep

This cost has steadily climbed from around six weeks of total earnings in the 1990s. It has happened because home prices have climbed faster than incomes and because stamp duty has brackets, meaning more buyers have been pushed into higher ones.

Replacing the stamp duty revenue that states have come to rely on would not be easy, but a switch would almost certainly help the economy function better.

The more that people are able to move, the more they will move to jobs to which they are better suited, boosting productivity.

The more that people downsize when they want to, the more housing will be made available for others.

Our findings suggest the costs are far from trivial, making a switch away from stamp duty worthwhile, even if it is disruptive and takes time.

This was originally published on The Conversation. Read it here.

Prefabricated and build-to-rent houses could help bring rents down

By Ameeta Jan, Associate Professor, Deakin Business School, Deakin University

Australia’s rental vacancy rate has hit a historic low of close to zero. The latest estimate from SQM Research is 1.1%. The latest estimate from the property listing firm Domain is 0.7%.

As would be expected with hardly any of Australia’s rental properties vacant and available for rent, rents have soared – at first in 2022 only for newly advertised properties, and later for properties in general as measured by average rents.

The Bureau of Statistics measure of average capital city rents climbed 7.3% throughout 2023. It would have climbed by more – by 8.5% – had the bureau not taken account of the increased rent assistance in the May budget, which depressed recorded rents by 1.2%.

Demand surged while new supply sank

Vacancy rates have fallen and rents have climbed because the demand for living space has surged; at first in the aftermath of lockdowns as Australians sought accommodation with fewer housemates and more home office space, and later as borders reopened and Australia’s population swelled.

At the same time, the number of dwellings completed dived in response to shortages of both labour and materials.

Before COVID about 50,000 new dwellings were completed per quarter. Since then, completions have rarely exceeded 45,000.

Tweaking tax concessions would do little to help

While the Australian Greens are pressing the government to wind back capital gains tax concessions and limit negative gearing in order to wind back home prices, there’s little reason to think the changes would do much to reduce rents.

Half of all Australian landlords negatively gear by making a net loss on rental income in order to profit later from concessionally taxed capital gains. Attacking these tax concessions would be likely to cause some of them to reconsider being landlords.

But if they sold, more renters would be able to buy and stop renting, leaving the balance of renters and properties for rent little changed.

Rent assistance and caps won’t much help either

While there is popular support for increasing rent assistance, and while it has materially cut rents paid over the past year, it won’t create more rental properties.

Very big increases in rent assistance might even lift rents further by increasing the amount renters are able to pay. However, the effect is unlikely to be big because Commonwealth rent assistance is restricted to welfare recipients.

Rent caps or freezes don’t increase supply either, and run the risk of encouraging a black market in bidding to pay rents over the legally sanctioned cap.

What’s needed is more homes, in the right places

The government’s new Housing Australia Future Fund and associated agreements are intended to support the delivery of 20,000 new social and 20,000 new affordable homes over the next five years.

Separately, the Commonwealth and the states have agreed to an ambitious target of 1.2 million “new well-located homes” over the next five years, up from 918,200 over the past five years.

The Commonwealth has set aside A$3 billion for “performance-based funding” to the states paid at the rate of $15,000 for each new well-located home they deliver in excess of their share of 1 million new homes in five years.

If the states and territories are able to deliver 1.2 million homes over five years rather than 1 million, Grattan Institute analysis suggests rents will be 4% lower than they would have been.

NSW is displaying the sort of initiative that will be needed. The state is allowing developers of projects worth more than A$75 million to build taller buildings with more accommodation as long as they use 15% of the floor space for affordable housing.

NSW is also allowing denser development within 400 metres of 31 train stations.

Build-to-rent would help

In Australia, most rental properties (even apartments) are owned by individual so-called “mum and dad” investors.

Overseas in the United States and Europe, they are more likely to be owned by corporations who build entire blocks to lease.

These corporations are more concerned about long-term returns than individual owners who want the flexibility to sell, so they tend to offer long-term leases on better terms.

In last year’s budget the government offered build-to-rent tax rules which the Property Council of Australia says could create thousands of extra homes.

On one hand, they are unlikely to be homes for low-income renters. Developers require commercial returns. On the other hand, an increasing number of renters have high incomes.

The Australian Housing and Urban Research Institute says while in 1996 households with incomes worth $140,000 a year or more in today’s dollars accounted for only 8% of renters, by 2021 they accounted for 24%.

Pre-fabs could also help, and more apprentices

Another thing that would help is encouraging the use of prefabrication to cut construction times and costs, using locally sourced materials.

Prefabricated homes were used to house migrants after the second world war. More recently they have been used to house NSW flood victims.

They will still require skilled builders and tradespeople, who are in short supply. Only about half of enrolled apprentices complete their training, and the dropout rate has been climbing.

The government has announced an in-depth review of Australia’s system of apprenticeship support. It’s due to report later this year.

It might also help to prioritise the migration of tradespeople. It’s hard to build more homes in the right places, but that’s what we need.

This article was originally published on The Conversation. Read it here.

Can real estate transition funds get older buildings up to scratch?

Retrofitting momentum is increasing but there’s a long road ahead for brown-to-green building transitions

Nidhi Baiswar - Senior Director, Global Sustainability and Climate Leadership

More real estate transition funds are emerging around the world, aiming to transform an abundance of older, energy inefficient buildings into sustainable spaces.

Several major fund managers, including France’s Ardian and Swiss-based Empira Group, have raised, or are currently raising capital. Their focus is on retrofitting and refurbishing commercial and residential real estate as the race to decarbonize buildings, which account for 40% of global carbon emissions, accelerates.

“There’s clearly growing investor appetite for real estate transition strategies as they recognize the financial, environmental and social benefits in making buildings more sustainable,” says Nidhi Baiswar, Senior Director, Global Sustainability and Climate Leadership at JLL. “These transition funds are successfully raising capital but it’s early days as we wait to see exactly how and where capital, which is mainly value-add and opportunistic, is deployed.”

Many markets around the world are currently struggling with an imbalance between supply of, and demand for, sustainable buildings. Tenants, largely driven by their own ambitious carbon reduction goals, want spaces that support their progress and demonstrate proof of commitment to employees, shareholders and customers.

Investors are increasingly taking note. According to JLL’s 2024 UK Capital Markets Outlook, 50% of investors said occupier requirements are one of the biggest ESG drivers behind decisions to buy or bid on an asset.

Yet JLL research across 20 major global office markets also shows that only 34% of future demand for low carbon workspace will be met in the next several years.

For buildings that do currently meet the grade on sustainability credentials, JLL calculates that green premiums on rents currently range from around 7% in US cities, to just under 10% in APAC and over 11% in London. 

Looking beyond prime

While much tenant demand is focused on large spaces in prime locations, much of the action within the growing transition funds market is, for now, eyeing smaller properties in well-connected urban areas. Non-core assets offer an opportunity to demonstrate early successes to investors before scaling up to consider larger, more ambitious projects, Baiswar says.

High vacancy is creating a “blank canvas” for redevelopment of offices, currently the sector going through the most upheaval. But other sectors also offer transition opportunities.

“Office vacancy has of course created an opening for developers – it’s a pretty unique moment in that sense. But we’re seeing transition opportunities across the board, from industrial properties, where there are often helpful long-term owner/tenant relationships in place, to retail parks and multi-let residential,” says Baiswar.

“And some of the transition funds out there right now are highly sector agnostic – broadening their investment horizons to multiple sectors, like proptech and infrastructure alongside real estate.”

Stumbling blocks

But transition, or so-called brown-to-green funds, face stumbling blocks, including finding green building expertise and skills, as well as the right development partners.

“Matching the capital with refurbishment knowledge is a challenge,” says Baiswar. “Opportunities to invest are numerous but finding development partners with a track record is key. It’s why for some, joint ventures are a credible route.”

Australian fund manager Investa last year teamed up with developer Built to form a joint venture aimed at upgrading obsolete offices in both Sydney and Melbourne’s central business districts.

At the same time, inconsistencies in companies’ disclosure and reporting data are adding another layer of complexity.

“Many investors are global in their modus operandi,” explains Baiswar. “That means dealing with an alphabet soup of regulations in multiple jurisdictions. More clarity in Europe, for example, on disclosures for investors will hopefully ease complexity this year.”

Real estate funds body, INREV, has called for new labelling by the EU to replace sustainable finance disclosure regulation (SFDR) articles 8 and 9 sub-categories that are currently in place. Article 8 refers to ‘light green’ funds that promote environmental or social characteristics while article 9 ‘dark green’ describes funds that target sustainable investment.

Data from New Private Markets shows only eight private real estate funds classed as SFDR article 9 have reached a final close since 2018, raising $3.1 billion. In comparison, 34 article 8 real estate funds have closed, raising $25.3 billion.

In London, U.S. manager Fidelity’s article 9 fund has taken on its first project refurbishing a City district building to create more sustainable office space.

“Regulations can help further the performance of transition funds. The better a fund can disclose against compliance with a set of regulations, the more it can promote itself in the market and attract investors,” says Baiswar.

Retrofit urgency

With 80% of today’s office buildings likely to still be in use in 2050, the role that transition funds can play on the road to net zero cannot be understated, says Baiswar.

And retrofitting will require significant investment. JLL’s research Retrofitting to be Future-Fit estimates the cost of retrofitting the office and shopping mall stock across 17 major countries to be close to US$3 trillion.

With many landlords unable or unwilling to spend the sums required to get their buildings up to scratch in time to comply with increasingly stringent regulation, transition funds can fill the gap.

And right now, the tenant demand for sustainable space only strengthens the business case, says Baiswar. “Now and in the next few years there’s a big opportunity to upgrade existing assets to a certain level of performance – while crucially, over time, creating value for the building owners and tenants, and sizeable returns for investors.”

This article was originally published by JLL. Read it here.

Let’s not kid ourselves that private investors or super funds will build the social housing we need

Authors: Brendan Coates Program Director, Economic Policy, Grattan Institute and Joey Moloney Deputy Program Director, Economic Policy, Grattan Institute

Treasurer Jim Chalmers is leading a push to get private investors to help build more social and affordable housing. But we shouldn’t kid ourselves about where the money will come from.

The defining feature of social and affordable housing is a big rental subsidy for the tenant, which no private investor will ever volunteer to pay. In the end, government – that is, taxpayers – will always foot the bill.

The sooner we accept this, the better. Wishful thinking that private investors will wear the cost of rental discounts risks making the limited government subsidies available for housing less effective.

We need more social housing

Social housing – where rents are typically capped at 30% of tenants’ incomes – makes a big difference to the lives of many vulnerable Australians.

Yet Australia’s stock of social housing – currently about 430,000 dwellings – has barely grown in 20 years, during which time the population has increased by 33%.

A stagnant stock means there is little “flow” of available housing to catch people going through hardship, who then face prolonged, agonising waits while struggling to afford to keep a roof over their head.

But it’s expensive

The main reason our social housing stock has stagnated is the expense.

Social housing offers a big rental discount, or subsidy, to tenants.

In Australia, the gap between the subsidised rent and the private market rent is about $15,000 per rental per year.

Because the subsidy to tenants is ongoing, the cost to governments is ongoing. That means that every extra 100,000 social housing dwellings costs an extra $1.5 billion every year.

The same goes for subsidised “affordable” housing, where rents are typically set at 20-25% below the market rate, and which are available to many low- and some middle-income earners.

If the tenant is getting a discount on the market rate, the government will pay for that somewhere along the line.

Private investors won’t wear the subsidy gap

Australia has $3.5 trillion of superannuation savings – the fourth-largest retirement savings pool in the world – but practically none of it is invested in Australian housing. The Treasurer wants to change that.

He’s talked a big game about encouraging private capital, including super funds, to invest specifically in social and affordable housing.

But no super fund should forego returns for its members by paying the subsidy gap for social or affordable housing out of members’ pockets.

It would be incompatible with superannuation funds’ core objective – maximising returns for their members – which funds are obligated by law to prioritise.

Private investors prefer affordable to social housing

If we make encouraging private investment in social and affordable housing the goal, we risk misallocating the scarce government subsidies we have.

Most super funds, and other investors, would typically prefer to invest in affordable, rather than social housing.

Doing so lets investors finance more homes for any given quantity of government housing subsidies that are available, while taking on less-disadvantaged tenants who are seen as less risky.

We’ve been here before: the National Rental Affordability Scheme spent $3.1 billion channelling subsidies to private investors for affordable housing.

Grattan Institute estimates suggest the scheme paid an extra $1 billion in windfall gains to investors, above and beyond the cost of the discounted rents offered to tenants, who typically weren’t the most needy.

Super funds could make social housing more expensive

Super funds can help finance the construction of new social housing via loans to community housing providers – as four major funds have recently agreed to do.

But these loans are likely to be on fully commercial terms.

They are deals attractive to federal and state governments worried about taking on more debt.

But they are also likely to make social housing more expensive to deliver because governments can borrow at lower rates than the returns sought by funds.

Governments can’t avoid their responsibility

Ultimately, governments have to foot the bill for social and affordable housing. And our priority should be social, rather than affordable housing, since its targeted at people at serious risk of becoming homeless.

The sooner that truth is acknowledged, the sooner we can get on with funding subsidies and the less time we will waste on trying to coax private investors into being something they’re not.

The best way to boost funding for social housing would be to double the size of the Housing Australia Future Fund from $10 billion to $20 billion

The government-owned fund uses borrowed money to invest in stocks and bonds and uses the income to cover the social housing subsidy gap.

It makes use of the higher return the government can get from investing than from retiring debt, in the same way as the government’s Future Fund.

Doubling the size of the Housing Australia Future Fund could support the building of up to an extra 30,000 social dwellings over the next five years.

Coupled with a further big boost to Commonwealth Rent Assistance, it could really help low-income renters.

This article was originally published on The Conversation. Read it here.

Why more employees are returning to the office in 2024

CBRE provides thoughtful, forward-looking insight into real estate trends, strategies and opportunities around the world.

CBRE’s latest research is forecasting a strong return to office in Australia and our experts analyse why.

What began as a global push to keep businesses open during the height of a pandemic is now one of the most debated topics in the modern employment landscape: hybrid work. 

While the hybrid work model sits high on the priority list of employee workplace benefits, it’s a more diplomatic setting with options rather than strict return to office mandates.  

What have leading researchers discovered regarding the latest office trends right now?  

The return to office in Australia will continue gathering pace after reaching 71 percent of 2019 levels in 2023, well above the 54 percent recorded in the prior period, according to CBRE’s 2024 Pacific Market Outlook report.

What’s bringing people back into the office 

The concept of a quality work environment continues to evolve alongside the return to office trend.  

CBRE’s findings indicate a clear trend of tenants looking to upgrade their premises. Almost three quarters of the office re-location decisions in major city CBDs have involved premises which commanded the same or higher market rents. For these re-locations, the median net face rent is an additional 10 percent ($/sqm), when compared to what may have been payable if the occupier remained in the same premises.  

This trend is attributed to drivers such as office location, commute time and access to public transport. 

What's more interesting though is the renewed appreciation for workplace design and office technology. Environmental features like natural light and better air quality now rank highly, alongside dedicated spaces for individual online meetings and focused work.  

Attracting Gen Z and Millennials into the office needs even more creativity from building occupiers, with considerations for parking, food and beverage options, and apps which inform when colleagues will be in the office. 

“Great experiences, social interaction and human connection are going to draw more workers into offices,” says Jenny Liu, Director of Workplace Consulting at CBRE. 

“Workplace experience is key to enticing people back to the office and these strategies fall under the key categories of people, place and technology. A workplace experience isn’t just environment, cool furniture and tech anymore. It’s the culture, ways of working, leadership, and how vibrancy is created. This is crucial because people are your most valuable asset, not your real estate footprint and office space.”  

There’s also the importance of leaders’ responsibilities to act as “magnets” for employees who want to learn from them and experience how they deal with clients. 

“They want to grow their profiles and meet other people in the business. How do you curate those moments where people stay? You can’t. You need leaders there to create the opportunities and connections.”  

CBRE Research Manager Thomas Biglands says that face-to-face interaction and collaboration are key to driving more employees back into the office, experiences that aren’t possible via remote work. 

“It’s important that you achieve a critical mass of visitation so that employees come in and feel as though the office is vibrant and full. It’s also important that enough coworkers and managers are in the office so that they see value from coming in. It defeats the purpose if workers show up to the office and end up being on Zoom calls all day.” 

The significance of focusing on workplace vibrancy also doesn’t escape Biglands, who says that ground levels and areas surrounding the building need to be amenity-rich and busy in order to create excitement around return to office.  

“Landlords, local businesses, and even government bodies play an important role in enticing employees back. Building activations and community events are key to enhancing the value proposition of any office tenancy.” 

Why premium offices are in demand  

The pursuit of more people in offices has allowed premium office spaces to thrive in recent times. 

Based on data tracked by CBRE, over 90 percent of office occupiers looking for space in 2023 indicated they wanted prime space (an average of Premium and A-Grade assets) while 45 percent indicated a preference for premium space. This has put pressure on landlords to uplift B-Grade assets. 

“Premium offices offer a high level of amenities and high ESG credentials,” explains Liu. 

“Think retail offerings, community events and yoga classes. A lot more tenants are focused on delivering the offerings from the broader precinct. If a property management team can create great events, the desire to leave decreases.” 

Liu knows this for a fact from her interactions with premium office clients in the field. 

“They do see the value in it. Most of the clients who engage us value their employees and the employee experience. They’re willing to move into premium assets with great amenity, invest in their people and ensure they know how to use their space and adopt the technology to work more effectively. 

“Higher levels of amenities paired with potentially smaller tenancy footprints are making premium assets a more viable choice for companies who might not have previously considered them. They’ll go to places that have great amenities because they care about that and are happy to pay the rents.” 

While client testimonials can help sway occupier business decisions, verifying the cost-benefit ratio is crucial. Biglands says that the best way to determine whether leasing premium office space is beneficial is to simply look at the decisions being made by other occupiers. 

“Occupiers have the best visibility into the contentment, performance and efficiency of their own workforces. The high demand for premium space and outperformance from a real estate perspective (vacancy rates, rental rate growth) shows that firms believe there is a benefit to leasing premium space. 

“They have made the internal decision that the marginally higher real estate costs add value to their operations and that this type of space makes their workforce happier and more effective.” 

The future of work from office 

Occupier demand for premium space isn't showing any signs of slowing to date.   

“Office is having its retail moment; it's going through a reset, not only from a valuation perspective, but also when you think about how tenants want to use the office space these days,” explained David Southon, Executive Chairman of Aliro Group, in a recent CBRE podcast.  

 “As the market continues to recover from the pandemic, leasing conditions will only tighten, and we’d expect rental rates to continue accelerating,” adds Biglands. 

“Minimal new supply coming over the next three to four years will limit availability of space even further. I don’t think premium space is going to get any cheaper over the near term and there are likely more options now than there will be going forward.” 

And while there could be some growth in peak day visitation across Australian cities, it’ll never reach the levels of the pre-pandemic five-day weeks in Liu’s opinion.  

“We will always have to offer some form of hybrid. It is an employee value proposition, and the next generation will expect some level of it. However, as occupiers look to better utilise and manage space, there could be more flattening of the peaks to spread out office use and ensure teams are coming in together for anchor days.”  

CBRE is currently in the process of moving its Melbourne and Sydney offices. Once complete, they will showcase some of the latest innovations in the workplace.  

“With everything from brokers to valuations to property management and corporate services, we must focus on creating a diversity of workspaces to suit our workforce. These people operate in different ways and we’re increasingly hiring diverse groups of people. We want to support them to realise their potential both in and out of work.” 

This article was originally publish on CBRE. Read it here.

The economic, social and environmental benefits of building up rather than out

Peter Achterstraat AM has been the NSW Productivity Commissioner since 2018. Mr Achterstraat was the NSW Auditor-General from 2006 to 2013 and prior to that, served in other roles, including as the Chief Commissioner of State Revenue and Deputy Commissioner of Taxation at the Australian Tax Office

We show that ‘building up’ rather than ‘out’ also has economic, social and environmental benefits, writes Peter Achterstraat AM, NSW Productivity Commissioner.

Over the past few years, we’ve become all too aware that we don’t have enough homes in New South Wales. The ABS reports that residential rents in Sydney – the best barometer of housing affordability – rose 8.6 per cent over the 12 months to September 2023. For those struggling with the cost of keeping a roof over their heads, there seems to be little relief in sight.

Earlier this month, the NSW Productivity Commission published the latest report in our housing series, What we gain by building more homes in the right places. We show that ‘building up’ rather than ‘out’ also has economic, social and environmental benefits.

The economic benefits are clear. Cities like Auckland in New Zealand have shown that relaxing restrictions and allowing more homes to be built can boost the supply of housing and reduce rents by up to 35 per cent. Lowering residential rents increases people’s disposable income by freeing them up to spend more on other goods and services. This is especially important for low- and middle-income households facing cost-of-living pressures.

In a larger and denser city, workers can access more jobs that fit their skills, experience and ambitions. They can build their skills much faster, and be paid for it. More homes near jobs can help women stay in the workforce, reduce the gender pay gap and alleviate families’ childcare costs.

Abundant housing improves living standards in other ways too. When we build more homes around public transport hubs, workers’ commutes are shorter, allowing more free time for recreation and family. More active transit and public transport use can also reduce air pollution. And those living in growing local communities benefit from a wider variety of goods and services that an increased customer base allows.

There are also environmental reasons to build up rather than just out. Our cities have a finite amount of land. Sydney, for example, is hemmed in by the Pacific Ocean to the east, the Great Dividing Range to the west, and national parks and waterways to the north and south. As fires and floods from climate change begin to bite there is a limit to further sprawl.

Higher density can also be a powerful tool for social uplift and increasing equality. Improving disadvantaged students’ access to higher-performing schools by building more homes in desirable catchments can boost test scores by an equivalent of three years of schooling.

If we’re to get ourselves out of this housing crisis, part of the solution is building more well-located homes, including apartments. In Sydney, the median advertised rent for a detached house in 2022-23 was $680 per week, compared to $600 for an apartment, according to CoreLogic.

Having lived in an apartment myself for the past three years, I’ve seen how the benefits of an apartment can outweigh the smaller space for many people. As empty nesters, an apartment has allowed my wife and I to downsize. I don’t have to mow the lawn every fortnight, and we’re close to our children and grandchildren. But in many areas, zoning restricts the housing options available. Many who downsize have to move away from their family and community.

I understand that some people scoff at the prospect of living in an apartment. Since I was young, the quintessential Australian dream has been to live in the suburbs in a detached house with a backyard big enough for a Hills Hoist clothesline. That choice should remain available to those who want it and can afford it. Apartments, townhouses and manor houses (single buildings with three or four dwellings on one lot) aren’t for everyone, but they do make it possible and affordable for more people to live in our city’s most desirable locations. People deserve that choice.

Successes in places like Auckland show that change is possible. To get there, we need to broaden the conversation we’re having in NSW. Existing residents traditionally get the biggest say in new developments, but those who would benefit the most from new homes – younger people, empty nesters, women and renters – too often go unheard. We need to start listening to them. If we don’t, they’ll start voting with their feet.

The NSW Productivity Commission has published a series of reports on housing in the last year. Its report Building more homes where people want to live argued for allowing more apartments to be built in Sydney’s inner suburbs, as well as more townhouses and manor houses. It followed up with Building more homes where infrastructure costs less, which showed that infill development closer to Sydney’s CBD can save up to $75,000 per home in infrastructure costs. 

This article was originally published on CEDA. Read it here.

How will the economy impact you this year?

By Dr Shane Oliver - Head of Investment Strategy and Chief Economist, AMP

House prices falling? Inflation easing? Australian recession? It's shaping up to be a big year. Find out how 2024 is likely going to pan out and what you need to look out for.

5 key themes from 2023

Despite lots of angst at the start of the year, 2023 turned out far better than feared.

1. Stronger than predicted growth. Despite worries recession was inevitable, on the back of rate hikes and a rough reopening in China, it’s been avoided so far. Economic growth in 2023 was around 3% globally and 1.9% in Australia,
helped by a population surge partly offsetting severe mortgage pain for some.

2. Disinflation. Inflation across major countries has fallen sharply from peaks of 8-11% last year to around 3-5%. Australia lagged on the way up and the way down, but we’re falling too.

3. Peak interest rates. Most major central banks look to have peaked and this probably includes the Reserve Bank of Australia.

4. Geopolitical threats proved not to be as worrying as feared – the war in Ukraine remained contained, conflict in Israel flared again but hasn’t spread to key oil producers and the Cold War with China thawed a bit. A lack of major elections helped.

5. Artificial intelligence hit the big time after the launch of Chat GPT with hopes it will boost productivity. The immediate beneficiaries were key (mostly US) tech stocks – which helped them reverse the 2022 slump.

There were bumps along the way – notably in the seasonally weak August to October on the back of sticky inflation (a situation where prices do not adjust as quickly to supply and demand changes, leading to persistent inflation) and rates that stayed high for longer. But for diversified investors 2023 turned out okay.

4 big worries for 2024...

1. Inflation is still too high so central banks could still have another drastic turn if it proves sticky above targets.

2. The risk of recession is high reflecting the delayed impact of rate hikes – this could suggest a high risk of a sharp pull back in shares.

3. Risks around the Chinese economy and property sector remain high.

4. Geopolitical risk is high, with half the world’s population seeing 2024 elections.

...and 4 reasons for optimism

1. Inflation has eased sharply to around 3% in major industrial countries and 5% in Australia, and is likely to continue to fall as supply chain pressures reverse, demand cools and labour markets ease.

2. We expect central banks to start cutting rates by mid-year. While there’s still a high risk of one more hike in Australia, falling inflation should head this off. We believe the RBA has peaked ahead of rate cuts starting mid-year, taking the cash rate down to 3.6% by the end of 2024.

3. Any recession in Australia should be mild as there’s a large pipeline of home building work and business investment plans point to growth.

4. Geopolitical risks may not turn out badly – the US wants to avoid escalation in the Israel/Hamas war, Ukraine could turn into a frozen conflict and elections won’t necessarily affect markets.

Overall, global growth in 2024 is likely to be around 2.5%, down from 3% in 2023. Australian growth is expected to slow to 1.5% with very weak, possibly mild recession conditions in the first half but stronger conditions later. Inflation is expected to fall to 3% in Australia.

8 things to expect in 2024…

1. Easing inflation pressures, central banks cutting rates and prospects for stronger growth in 2025 should make for okay returns in 2024. But it’s likely to be a rougher ride than 2023.

2. Global shares are expected to return a far more constrained 7%. The first half could be rough but shares should benefit from rate cuts and lower bond yields.

3. Australian shares are likely to outperform global shares. Expect the ASX 200 to end 2024 at around 7,900.

4. Bonds are likely to provide returns around running yield or a bit more, as inflation slows and central banks cut rates.

5. Unlisted commercial property returns are likely to be negative again due to the delayed impact of high bond yields and working from home.

6. Australian home prices are likely to fall as high interest rates hit demand and unemployment rises, although expect prices to continue rising in Adelaide, Brisbane and Perth. Rate cuts later in the year will help.

7. Cash and bank deposits are expected to provide returns of over 4%.

8. A rising $A is likely to take it to $US0.72.

…and 5 things to keep an eye on

1. Sticky inflation and central banks.

2. The risk of recession and whether it’s mild or deep.

3. The Chinese economy and property sector.

4. US shutdown risks and the presidential election.

5. How Australian consumer and home prices respond to the delayed impact of high rates, including via rising unemployment.

Like to know more?

Oliver’s Insights 2024 Economic Forecast

This article was originally published on the AMP website. Read it here.

Healthy cities aren’t a question of boring or exciting buildings but about creating better public space

by Haim Yacobi, Professor of Development Planning, UCL

The US developers of a 300ft glowing orb, set to be built in the middle of Stratford, east London, and accommodate upwards of 21,500 concert goers, have withdrawn their planning application.

Las Vegas, in the US, already boasts one such venue, known as Sphere. Citing its “extreme” disappointment at London residents not similarly benefiting from what a spokesperson said was its “groundbreaking technology and the thousands of well-paying jobs it would have created”, Madison Square Garden Entertainment (MSG) has decided the British capital is not one of the forward-thinking cities it aims to work with.

Campaigners have responded with glee, not least because, in response to concerns over the proposed structure’s potential noise and light pollution, developers had initially suggested they invest in blackout curtains. “Residents would be served far better by building social housing on the site,” a representative for Stop MSG Sphere London reportedly said.

Quite how a city both caters to its residents’ needs and sustains its economy is an enduring debate. The tension is between innovation aimed at boosting investment (in this instance, in the entertainment industry) and what urban geographer Colin McFarlne terms the “right to citylife”.

Projects like the Sphere sit on one extreme end of what gets built in a city. The British designer Thomas Heatherwick recently highlighted what he sees as another extreme, though no less harmful: “boring buildings”.

In his new book, Humanise – a Maker’s Guide to Building Our world, Heatherwick says “bland architecture” causes stress, illness, loneliness, fear, division and conflict. Research shows, however, that more than individual buildings, how the city is planned as a whole variously harms or improves people’s lives.

The city as a complex system

The physical and social environment of any given city are just two contributing factors in the complex system that shapes residents’ wellbeing. Public health research has found a positive, non-linear relationship with a higher prevalence of mental health problems in more urbanised countries, particularly for anxiety disorders.

Mental health problems now account for over a third of the total burden of disease in adolescents in urban settings. Research shows that, for young people (a significant proportion of urban populations), health and wellbeing constitute major determinants in their future life prospects.

In Humanise, Heatherwick ignores this complexity. The book is a collection of thoughts, ideas, visuals and reflections on the role of contemporary architecture and architects. In it, the designer suggests that the world is facing a “global epidemic of inhuman buildings” and suggests a list of what to do and what not to do to achieve the reverse: “interesting buildings”.

Heatherwick sees cities as collections of buildings, of architectural objects. The problem here, of course, is that the various aesthetic merits of any given structure can be endlessly debated.

Some of Heatherwick’s arguments (“boring places contribute to division and war”; “boring buildings help to cause climate change”) are plainly simplistic. They also beg the question of who decides what is and what isn’t interesting.

As examples of interesting buildings that bolster people’s wellbeing, he cites, among others, the Parkroyal Collection hotel in Singapore and the Edgewood Mews housing project in Finchley, north London for their generosity.

The first, he says, is “enthusiastic to share its wonder with everyone” and the second offers “more than minimum to the world”.

To me, though, these are extravagant architectural statements of capitalist power (the Singaporean hotel) and an over-designed fortress building (London’s Edgewood housing project).

Recognising the importance of public space in cities

In the early 1900s, the German sociologist and philosopher, Georg Simmel, hailed the advent of a new urban condition. Compared to rural life, he said, the metropolis made people more individualistic, prioritised capitalist modes of production and intensified sensory exposure. As a result, he said: “Instead of reacting emotionally, the metropolitan type reacts primarily in a rational manner”. City dwellers were, Simmel said, less sensitive and further removed from “the depths of personality”.

Mid-20th century architects and planners further explored the socio-psychological damage wrought by urban expansion in the post-war era. In his 1971 book, Life Between Buildings, Danish architect and urban planner Jan Gehl underlined how, more than architecture, urban space itself had the potential to either harm or affirm social interactions.

The capitalist logic underpinning modernist urban planning was harming residents. More and more people were living in high-rise buildings. Open, green spaces were commodified. Private transport was prioritised. Gehl thought it was precisely in these daily situations, where people move between home and work and play, that cities should both “function and provide enjoyment”.

In over-emphasising the design of exciting buildings, Heatherwick overlooks this: that it is between and around buildings that you find the essence of urban life.

Research shows that urban policies have evolved since the 1970s, largely to try to shape cities for the better and to ensure better accessibility, better quality and diversity of housing, open spaces, more reliable infrastructure and more robust services.

After joining the World Health Organisation’s healthy cities initiative in 1987, Copenhagen developed a holistic urban policy. This included walkable streets, public transportation, diverse housing opportunities, more pointed social policies around ideas of community and using taxation to encourage smoking control. Nearly four decades on, the Danish capital continues to be upheld as one of the world’s healthiest cities.

However “good” or “interesting” architecture might be, it cannot tackle poverty, social exclusion and public health on its own. But even high-rise buildings can make a difference to people’s lives if they’re well designed and well regulated. How the built environment is shaped as a whole is crucial.

In denying MSG planning permission for a London Sphere, city authorities have prioritised residents’ concerns over private investment. Everyone benefits from public space and infrastructure being seen as public goods, not commodities.

This article was originally published in The Conversation. Read it here.

MORE AUSTRALIAN ADULT CHILDREN ARE LIVING WITH THEIR PARENTS LONGER

Australian parents are waiting longer for an empty nest as their adult children are living under the same roof for longer, finds the annual HILDA survey

By Sarah Marinos, University of Melbourne

Australia’s young adults are putting their traditional steps towards adulthood on hold – spending more time living in the parental home.

In fact, just over half of young men (54 per cent) and 47 per cent of young women aged 18 to 29 years old are still living under the same roof as their parents.

There are a number of factors preventing young Australians from gaining their first foothold on the property ladder – many young Aussies are taking longer to find their feet in the workforce, incomes are falling and cost-of-living is going up.

The latest Household, Income and Labour Dynamics in Australia (HILDA) Survey finds this ‘seismic shift’ in the nature of Australian households that began in the early 2000s is continuing, says Professor Roger Wilkins, Deputy Director of the Melbourne Institute: Applied Economic & Social Research and HILDA Survey Co-Director.

“The social and economic forces that have driven an increase in the number of young adults living with their parents are still present,” he says.

“We’ve seen a rise in higher education participation, declining full-time employment opportunities for young people, a rising cost in housing, and a trend towards later marriage and family formation.

“The traditional markers of adulthood are happening later in life now.”

The HILDA Survey follows the lives of more than 17,000 Australians each year, over the course of their lifetime, collecting information on many aspects of life in Australia, including household and family relationships, income and employment, and health and education.

A NARROWING GAP

The latest HILDA data was collected in 2021 and found a slight bump in the number of 26- to 29-year-olds living with parents during the first year of the COVID-19 pandemic.

This was mostly due to fewer Australians in that age group deciding to leave home.

The data also shows that the gap between the number of young men and women living out of the parental home is narrowing. In 2001, 47 per cent of men and 36 per cent of women aged 18 to 29 years lived with their parents.

In 2021, that 11 per cent difference narrowed to eight per cent.

HILDA finds men in Victoria, South Australia and New South Wales are more likely to live with their parents than men in other states and territories. Meanwhile, women in Victoria, Queensland and South Australia are less likely to live with their parents – although the reasons for these patterns aren’t clear.

Men employed full-time are less likely to live with their parents, but women who work part-time are more likely to live in the family home than unemployed women. Again, the reasons for these differences are not known.

WHO’S DOING THE HOUSEWORK?

What is the impact of a ‘full nest’, rather than an ‘empty nest’, on family dynamics?

Lyn Craig, Professor of Sociology and Social Policy, says, in short, this living situation generally means more housework for Mum.

“Compared to young adults living alone or in a share house, those living with parents are much less likely to do the same amount of domestic labour.

“Parents living with young adults do more housework. This living arrangement doesn’t turn into a flatmate situation, it typically creates more housework for Mum,” says Professor Craig.

MAYBE BABY…

More importantly, she highlights a more serious implication for young people who are living at home for longer – whether by choice or because they cannot afford to live independently.

“While we are living longer so we have time to stretch out and slow events and transitions during our life course – one thing we can’t really slow is fertility.

“So, there may be implications for young people being able to embark on the great adventure of parenthood,” says Professor Craig.

“Since the mid-20-teens, fertility has fallen below replacement in Australia for the first time and I think that has something to do with the price of housing and young people not being able to afford to establish an independent household away from parents.”

LIVING AT HOME… IN EUROPE

In some parts of the world, it is common for adult children to remain at home for longer.

A Eurostat report found that in the EU in 2021, males left the parental household at an average age of 27.4 years and females at 25.5 years.

Men left the parental home after the age of 30 in 11 EU countries — Croatia, Portugal, Slovakia, Bulgaria, Greece, Slovenia, Italy, Malta, Spain, Romania and Poland.

So is Australia heading the same way?

HAVING FUN WHILE THEY CAN

Professor Wilkins and Professor Craig believe the delay in young people taking traditional steps towards adulthood shouldn’t be viewed solely through a negative lens.

“Some young people would like to start their adulthood journey and to have their own home but Australia’s economic conditions aren’t allowing that.

“Policy action to make housing more affordable and to increase housing supply is a clear way to tackle that,” says Professor Wilkins.

“On the positive side, as a richer society with longer life expectancy, perhaps some young people are making a rational and conscious choice to delay getting into the hard yakka of life.

“They decide to enjoy themselves and have some fun while they are still young.

“As a whole, baby boomer parents are also a relatively wealthy cohort, so their capacity and preparedness to house their kids into adulthood has increased. Perhaps it’s not the imposition it once was on parents who were more constrained economically.”

SUBSIDISING AND STEPPING IN

Professor Craig says accommodating adult children at home is one way in which families today are providing financial support to children who are struggling to gain a financial foothold.

If the bank of mum-and-dad can’t stretch to providing a loan or deposit for a first home, then subsidising adult children to live at home at no or low cost while they try to establish themselves is something many parents are happy to do.

“The adaptation of families is impressive,” she says.

“Whatever families do and whatever situation they face, many of them step in and do good things for each other.

“Adult children staying at home longer may come with some strains, but it can also solve some problems.”

This article was originally published on the Pursuit. Read it here.

Mortgage and inflation pain to ease, but only slowly: how 31 top economists see 2024

A panel of 31 leading economists assembled by The Conversation sees no cut in interest rates before the middle of this year, and only a slight cut by December, enough to trim just $55 per month off the cost of servicing a $600,000 variable-rate mortgage.

The panel draws on the expertise of leading forecasters at 28 Australian universities, think tanks and financial institutions – among them economic modellers, former Treasury, International Monetary Fund and Reserve Bank officials, and a former member of the Reserve Bank board.

Its forecasts paint a picture of weak economic growth, stagnant consumer spending, and a continuing per-capita recession.

The average forecast is for the Reserve Bank to delay cutting its cash rate, keeping it near its present 4.35% until at least the middle of the year, and then cutting it to 4.2% by December 2024, 3.6% by December 2025 and 3.4% by December 2026.

The gentle descent would deliver only three interest rate cuts by the end of next year, cutting $274 from the monthly cost of servicing a $600,000 mortgage and leaving the cost around $1,100 higher than it was before rates began climbing.

Six of the experts surveyed expect the Reserve Bank to increase rates further in the first half of the year, while 20 expect no change and three expect a cut.

Former head of the NSW treasury Percy Allan said while the Reserve Bank would push up rates in the first half of the year to make sure inflation comes down, it would be forced to relent in the second half of the year as unemployment grows and the economy heads towards recession.

Warwick McKibbin, a former member of the Reserve Bank board, said the board would push up rates twice more in the first half of the year as insurance against inflation before leaving them on hold.

Former Reserve Bank of Australia chief economist Luci Ellis, who is now chief economist at Westpac, expects the first cut no sooner than September, believing the board will wait to see clear evidence of further falls in inflation and economic weakening before it moves.

Inflation to keep falling, but more gradually

Today’s Reserve Bank board meeting will consider an inflation rate that has come down faster than it expected, diving from 7.8% to 4.1% in the space of a year.

The newer more experimental monthly measure of inflation was just 3.4% in the year to December, only points away from the Reserve Bank’s target of 2–3%.

But the panel expects the descent to slow from here on, with the standard measure taking the rest of the year to fall from 4.1% to 3.5% and not getting below 3% until late 2025.

Economists Chris Richardson and Saul Eslake say while inflation will keep heading down, the decline might be slowed by supply chain pressures from the conflict in the Middle East and the boost to incomes from the tax cuts due in July.

Slower wage growth, higher unemployment

While the panel expects wages to grow faster than the consumer price index, it expects wages growth to slip from around 4% in 2023 to 3.8% in 2024 and 3.4% in 2025 as higher unemployment blunts workers’ bargaining power.

But the panel doesn’t expect much of an increase in unemployment. It expects the unemployment rate to climb from its present 3.9% (which is almost a long-term low) to 4.3% throughout 2024, and then to stay at about that level through 2025.

All but two of the panel expect the unemployment rate to remain below the range of 5–6% that was typical in the decade before COVID.

Economic modeller Janine Dixon said the “new normal” between 4% and 5% was likely to become permanent as workers embraced flexible arrangements that allow them to stay in jobs in a way they couldn’t before.

Cassandra Winzar, chief economist at the Committee for the Economic Development of Australia, said the government’s commitment to full employment was one of the things likely to keep unemployment low, along with Australia’s demographic transition as older workers leave the workforce.

Slower economic growth, per-capita recession

The panel expects very low economic growth of just 1.7% in 2024, climbing to 2.3% in 2025. Both are well below the 2.75% the treasury believes the economy is capable of.

All but one of the forecasts are for economic growth below the present population growth rate of 2.4%, suggesting that the panel expects population growth to exceed economic growth for the second year running, extending Australia’s so-called per capita recession.

The lacklustre forecasts raise the possibility of what is commonly defined as a “technical recession”, which is two consecutive quarters of negative economic somewhere within a year of mediocre growth.

Taken together, the forecasters assign a 20% probability to such a recession in the next two years, which is lower than in previous surveys.

But some of the individual estimates are high. Percy Allen and Stephen Anthony assign a 75% and 70% chance to such a recession, and Warren Hogan a 50% chance.

Hogan said when the economic growth figures for the present quarter get released, they are likely to show Australia is in such a recession at the moment.

The economy barely grew at all in the September quarter, expanding just 0.2% and was likely to have shrunk in the December quarter and to shrink further in this quarter.

The panel expects the US economy to grow by 2.1% in the year ahead in line with the International Monetary Fund forecast, and China’s economy to grow 5.4%, which is lower than the International Monetary Fund’s forecast.

Weaker spending, weak investment

The panel expects weak real household spending growth of just 1.2% in 2014, supported by an ultra-low household saving ratio of close to zero, down from a recent peak of 19% in September 2021.

Mala Raghavan of The University of Tasmania said previous gains in income, rising asset prices and accumulated savings were being overwhelmed by high inflation and rising interest rates.

Luci Ellis expected the squeeze to continue until tax and interest rate cuts in the second half of the year, accompanied by declining inflation.

The panel expects non-mining investment to grow by only 5.1% in the year ahead, down from 15%, and mining investment to grow by 10.2%, down from 22%.

Johnathan McMenamin from Barrenjoey said private and public investment had been responsible for the lion’s share of economic growth over the past year and was set to plateau and fade as a driver of growth.

Home prices to climb, but more slowly

The panel expects home price growth of 4.6% in Sydney during 2024 (down from 11.4% in 2024) and 3.1% in Melbourne, down from 3.9% in 2024.

ANZ economist Adam Boyton said decade-low building approvals and very strong population growth should keep demand for housing high, outweighing a drag on prices from high interest rates. While high interest rates have been restraining demand, they are likely to ease later in the year.

In other forecasts, the panel expects the Australian dollar to stay below US$0.70, closing the year at US$0.69, it expects the ASX 200 share market index to climb just 3% in 2024 after climbing 7.8% in 2023, and it expects a small budget surplus of A$3.8 billion in 2023-24, followed by a deficit of A$13 billion in 2024-25.

The budget surplus should be supported by a forecast iron ore price of US$114 per tonne in December 2024, down from the present US$130, but well up on the US$105 assumed in the government’s December budget update.

This article was originally published on The Conversation. Read it here.

Australia is welcoming more migrants but they lack the skills to build more houses

By Brendan Coates and Trent Wiltshire

Australia has an acute shortage of housing. Renters across the country face steep rents rises and record-low vacancy rates.

At the same time, net overseas migration has surged to a record high of 518,100 in the past financial year as international students, working holiday-makers, and sponsored workers returned to Australia after our international borders reopened and fewer migrants departed.

The trouble is, very few migrants arriving in Australia come with the skills to build the extra homes we need.

Migrants are back but lack home building expertise

Migrants are less likely to work in construction than in most other industries. About 32% of Australian workers were foreign born, but only about 24% of workers in building and construction were born overseas.

And very few recent migrants work in construction. Migrants who arrived in Australia less than five years ago account for just 2.8% of the construction workforce, but account for 4.4% of all workers in Australia.

Most migrants who work in construction in Australia have been here for a long time. The largest migrant groups in construction are permanent skilled migrants (including their spouses and children), followed by New Zealand citizens (who can remain in Australia indefinitely on a temporary visa) and permanent family visa-holders (many of whom arrived in Australia long ago as the spouses of Australian citizens).

But among those migrant groups where we’re now seeing the biggest rebound in numbers – international students, international graduates and working holiday makers – relatively few work in construction. And just 0.5% of all construction workers are on a temporary skilled visa.

Changing this situation won’t be easy. After all, Australia rightly wants to attract highly skilled migrants who will make the biggest long-term contribution to the country.

That means selecting highly skilled migrants – mostly tertiary-trained professionals. However, the construction workforce is one of Australia’s least educated. Just 22% of Australia’s construction workforce hold a diploma-level qualification or higher – the least of any industry.

What the government should do

But there are steps the federal government can take to make Australia more attractive to skilled trades workers who can help build the homes we desperately need.

First, the government should make it easier for employers to sponsor skilled trades workers to get a visa.

It should abolish labour-market testing and reduce sponsorship fees for the new “Core Skills” temporary sponsored visa stream – for skilled workers earning between A$70,000 and A$135,000 a year – to encourage more skilled trades workers to migrate to Australia.

The introduction of labour-market testing and extra fees like the Skilling Australians Fund Levy are big reasons why the number of visas granted to temporary sponsored workers in construction has fallen from more than 9,000 in 2011-12 to just 4,021 in 2022-23.

The government should also extend its new streamlined, high-wage “Specialist Skills Pathway” sponsored visa stream to skilled trades workers.

That pathway will be offered to workers who earn at least $135,000 a year. Visas will be approved in a median time of just seven days. Yet skilled trades workers earning more than $135,000 won’t qualify for the new streamlined pathway.

Second, the government should streamline the skills and occupational licensing process for skilled trades workers.

Currently, overseas qualified tradespeople must have their skills assessed separately to qualify for a skilled visa and to be granted a licence by a state or territory to practise their trade once in Australia.

The recent Parkinson Migration Review showed how that process can cost more than $9,000 for some skilled trades and take up to 18 months.

The Albanese government should work with states and territories to better align these processes. And it should pursue greater mutual recognition of qualifications and licences with other countries for skilled trades, as recommended recently by the Productivity Commission.

Migration offers big benefits to Australia. But we’d benefit even more if it provided more of the skilled workers we need to help fix the housing shortage.

This article was originally published on The Conversation. Read it here.

Role of BTS and BTR Apartments over the next decade

Richard Temlett is the National Executive Director of Research at Charter Keck Cramer and has become one of Australia’s leading housing market experts and thought leaders on the residential housing market across Australia. Richard believes that property development decisions need to be made using data and an evidence base. He specialises in providing forward looking, evidence-based research and insights that help inform developer and financier strategic property development decisions.

In response to the housing crisis in Australia, the Federal Government is seeking to deliver 1.2M new dwellings (240K p.a.) over the 5 years from 2024 through the National Housing Accord. In addition, and in separate announcements, the NSW Government is seeking to deliver 750,000 new dwellings (75K p.a.) over the next decade, whilst the Victorian Government is seeking to deliver 800,000 new dwellings (80K p.a.) also over the next decade.

Charter Keck Cramer has studied the new housing markets across Australia to understand how these housing targets compare to historical completions. At peak years of supply, Australia completed just under 220,000 dwellings (in FY2017). Whilst not shown in the chart below, NSW completed 73,000 dwellings (in FY2018) and Victoria completed 67,000 dwellings (in FY2017) respectively.

The targets set by both the Federal and State Governments, whilst admirable and certainly more reflective of the underlying demand for housing than past policy commitments, are considered ambitious and somewhat unrealistic having regard to both historic completions, the future supply pipeline and limitations resultant from the current state of the property market.

Quite simply, to achieve these targets, Australian policy makers will need to create the conditions for one of the largest home building cycles since the 1950s and 1960s. To facilitate rapid change, Governments at all levels will collectively need to employ numerous tools to establish preconditions that facilitate feasible delivery of these dwellings. This may include seeking innovative ideas from active overseas residential markets.

This insight seeks to start the conversation about the critical role that the Build to Sell (BTS) and emerging Build to Rent (BTR) apartment markets will need to play to achieve some of these housing aspirations.

How the BTS and BTR apartment markets work

In comparision to the established housing or the greenfield markets (house and land), the BTS apartment market is not well understood by many policy makers. The BTR apartment market is even less understood given it is still emerging as a residential asset class in Australia.

In a typical BTS project, a developer buys a site and then seeks to get planning approval. Once they have planning approval, and when the market conditions are suitable, they will launch the project for sale off the plan (OTP). Once they have enough OTP presales, they will obtain construction funding and build out the project.

In a typical BTR project, a developer buys a site and then seeks to get planning approval. Once they have planning approval, and when the market conditions are suitable, they will obtain construction funding and build out the project. Once completed, the developer or owner will rent out the dwellings and ultimately may look to sell the stabilised income producing asset after several years.

There are key points along the respective BTS and BTR development journey where risks are highest and where Government and policy makers can assist. Some of the key points are at the planning stage, the sales & marketing stage and now as a legacy of the COVID-19 pandemic, the construction stage.

The importance of investors to the BTS and BTR apartment markets

As mentioned above, the BTS apartment market still primarily relies on presales of apartments that are purchased OTP by either investors or owner-occupiers. Charter Keck Cramer’s analysis of the majority of the BTS apartment sub-markets illustrates that investors (foreign, local or interstate) are more likely to buy OTP than owner-occupiers. In many BTS apartment sub-markets across Australia, investors can account for up to three-quarters of all sales in a BTS apartment project, although the range is more typically 50% to 75% of purchasers. This means that in a typical BTS project, over half of all apartments will enter the private rental market whilst the remainder will be owner occupied.

BTR apartment projects, which are purpose-built projects for long-term rent, do not rely on presales of OTP apartments. These projects do need to be financially feasible on completion (from a revenue perspective) to a financier or investor before funding can be provided for the project to proceed. Justification is however required to highlight potential performance based on projected occupancy and returns.

At present, there are a number of major (and sometimes distinct) hurdles that are preventing investment into both the BTS and BTR apartment markets across Australian cities. It is essential for the Federal, State and Local Government decision makers to understand that if the investors are not present in either the BTS or BTR apartment markets, then projects will not get funded and will not get built. This means that no owner-occupiers get new dwellings, and no renters get rental accommodation, nor does the Government get any tax revenue. It’s a lose-lose scenario with devastating consequences for Australian cities.

How many BTS and BTR apartments need to be built each year?

The chart below shows that peak levels of BTS apartments (around 60,000 p.a.) were delivered across Australia over FY2017-FY2020. Policy makers must understand that these peak levels of supply were a function of various settings in place over FY2013-FY2017 that combined and manifested into a significant volume of apartments being constructed over FY2017-FY2020. These included critical settings such as OTP incentives to investors, lower and fewer taxes and charges on buyers and investors, first home buyer grants, greater amounts of investor lending by financiers and lower APRA servicing buffers. 

Based on the Federal and State Government targets, Charter Keck Cramer estimates that there will need to be at least 72,000 and closer to 78,000 BTS and BTR apartments completed in Australia each year to hit the various targets. This is a consistent level of supply which requires ongoing settings that are conducive to the feasibility of the BTS and BTR apartment markets and need to be tailored to meet both the housing cycle and overall economic cycle over the next decade.

Where do these BTS and BTR apartment projects need to be built?

There is a common misconception that all BTS apartments are located in large towers of 10+ levels and that the market is oversupplied. It is this misconception that is likely leading to a fear about density in Australian cities.

The charts below show the location of BTS apartment supply that was built over the last cycle (FY2013-FY2020) across various cities. We have broken this down by number of stories to illustrate the role that mid-rise projects (2-6 stories) have played in housing Australians.

It is very clear that the BTS apartment markets are active in different regions across different cities in Australia. It is also important to point out that mid-rise BTR apartment development (2-6 stories) accounted for 40% of the total supply across Australian cities. Much of this supply was built in the Inner and Middle regions of these cities often close to existing public transport nodes, employment hubs, retail facilities and lifestyle amenity.

The charts below highlight the location of BTS and BTR apartments with planning approvals within all major national cities. Charter Keck Cramer observes that there are 156,000 apartments that have planning approval (and have been de-risked from a planning perspective) across the various capital cities. Around 53,000 (34%) are in mid-rise projects (2-6 stories) already located in the Inner and Middle regions of the cities.

It is evident that there is an opportunity to create the settings conducive to facilitate the feasible delivery of a number of mid-rise apartment projects along key transport corridors close to amenity and infrastructure across all the cities. Importantly, apartments can be built in and around existing infrastructure and there will be less cost to Government to build when compared against the significantly higher infrastructure requirements in greenfield estates.

What needs to be done to get things moving?

It is our view that the impact of the pandemic on the housing market needs to be viewed through the same lens as was the impact of WW2. Policy makers at all levels of Government need to employ streamlined (and consistent & complementary) policy to assist with the feasible delivery of the supply of dwellings. No single tool, nor single level of Government, can by itself solve the housing crises.

The current various Federal and State housing announcements (whilst still light on key details) are a good start and begin to address the major issues relating to planning constraints, density and delays. These housing statements need to ensure that key current issues are also acknowledged and accounted for as they relate to the sales & marketing and construction stages of the majority of BTS and BTR apartment projects.

Government and APRA should also no longer fear investors. BTS apartment investors (foreign, local and interstate) must be brought back into the market via OTP stamp duty incentives, the removal of various taxes and charges, as well as the expansion of lending to investors. The substantial amount of foreign capital waiting to be invested into BTS and BTR across Australia must be enticed to proceed via further changes to the MIT, land tax, stamp duty as well as changes to GST.

The Australian housing market is at a very different point in the market cycle compared to 2017 (when there was the misinformed perception that the market was going into oversupply and that investors were crowding out owner-occupiers and driving up house prices). Furthermore, the banking sector is also well capitalised and the current APRA settings are arguably not reflective of the current risks in the housing market. APRA needs to remove the serviceability buffer for all borrowers and arguably allow the big banks to revert to various settings back to what they were with respect to investor lending in 2017.

Policy makers must appreciate that projects must be feasible to proceed. Neither developers nor their financiers will proceed with development if they are not able to meet their financial returns (reflective of the risk). With this in mind, it is also evident that all levels of Government need to go further and consider setting up an Apartment Viability Fund, provide rental subsidies for renters, support the construction industry through insolvency moratoriums, consider different types of construction methods such as modular construction and also entice more skilled workers into the country to build out these dwellings.

To conclude, the Government has a social and moral responsibility to facilitate the feasible supply of new dwellings and support the development industry. The supply of new BTS and BTR apartments, which will take 2-4 years to enter the market, will ultimately ease upward pressure on prices and rents, and also create jobs and tax revenue for the Government. Whilst some of these changes and policies will undoubtedly be unpopular with parts of the public, such change is required if the new dwelling targets are to be achieved.

This article was republished with the permission of Charter Keck Cramer.

How Australia’s prefab industry can help the housing crisis

Prefabrication is a practical solution to meet Victoria’s urgent housing needs by providing speedy and cost-efficient dwellings

By Dr Tharaka Gunawardena, University of Melbourne; Joyce Ferng, AECOM; Professor Tuan Ngo, University of Melbourne; Professor Shan Kumar, Swinburne University of Technology and Professor Priyan Mendis, University of Melbourne

The Victorian government’s recent announcement that it’s aiming to build 800,000 new houses in a decade might seem very ambitious, but it aims to address a very serious problem.

Housing supply in Australia has not kept up with demand. There’s a national shortfall of housing, increasing interest rates which are creating significant levels of mortgage stress, spiralling rental prices and the large number of people now priced out of the housing market.

All of these factors are contributing to what’s now being described as a national housing crisis.

But could prefabricated modular construction – which basically involves producing standardised components or the whole of a structure in an off-site factory, then assembling them on-site – become a key part of the solution.

Our team sat down to look at some of the key issues and how prefab might help.

DR THARAKA GUNAWARDENA: HOW COULD PREFAB HELP TACKLE AUSTRALIA’S HOUSING CRISIS?

Due to the diminishing availability of skilled labour and the demand for quicker construction, prefab is fast becoming a necessity more than an option.

While providing the means to build houses with speed but with a reduced labour load, prefab can offer many more advantages.

It can allow construction with minimum on-site congestion, waste generation and pollution by moving away from a labour-oriented onsite operation to a more process-oriented offsite manufacturing and assembly process.

The fact that prefab units, especially volumetric modules (where the whole structure including finishes and fittings are manufactured offsite as modules), can be removed from the main structure for future reuse, relocation or repurposing is also a boon. This reusability contributes significantly to prefab buildings having a much lower life cycle energy.

Construction can also start earlier because prefab panels or modules can be manufactured in the factory while the onsite preparation and foundations works get underway.

Financially, investors in housing projects can start generating revenue much earlier and the construction process itself is significantly less vulnerable to adverse weather, which means projects are finished faster.

At the same time, advanced mass customisation methods in design and manufacturing allows architecturally unique housing designs to be built while allowing for mass manufacturing.

In all areas, prefab is a more than capable option in building high-quality dwellings in a short period of time.

JOYCE FERNG: DOES AUSTRALIA’S PREFAB INDUSTRY HAVE THE CAPACITY TO MATCH THE GOVERNMENT’S HOUSING AMBITIONS?

Victoria’s housing goals align well with the PrefabAUS Prefabrication Industry Roadmap for 2023-2033, setting the stage for substantial economic benefits and cost savings associated with Smart Building, which aims to decrease construction time frames and waste while increasing quality, productivity and affordability.

The roadmap projects that Australia could earn an annual benefit of $AU9 billion by 2033, driven by the efficiency of Smart Building practices and prefabrication.

In the short term, prefabrication is a practical solution to meet Victoria’s pressing housing needs. Its ability to provide speedy and cost-efficient housing makes it a strong choice for the demands of both single dwellings and multi-residential buildings.

One piece of analysis points to Melbourne’s potential for 230,000 granny flats, a fast-track solution to housing shortages, thanks to prefabrication and the flexibility it offers in navigating town planning regulations.

This current surge in housing demand is a catalyst for elevating the prefab industry’s capacity and capabilities, from single dwellings to customised complex multi-residential buildings.

But there also is the critical need for strategic initiatives and robust partnerships to provide a foundation for this burgeoning industry – providing answers to housing affordability, climate resilience and carbon reduction through energy-efficient design.

PROFESSOR TUAN NGO: IS THE CURRENT REGULATORY FRAMEWORK SUPPORTIVE ENOUGH TO FAST TRACK THIS MANY HOUSES THIS FAST?

There is an urgent need for more comprehensive standards and guidelines for the design of prefabricated housing.

The importance of a reliable design approach for modular structures cannot be overstated, as an unsuitable design can significantly impact both project costs and timelines.

Currently, traditional ‘limit state design’ criteria, which includes stability, strength and serviceability, are the prevailing design practice for modular buildings. But the absence of comprehensive design guidelines for prefabricated modular buildings can mean these techniques, even when using innovative materials, fall short of expectations.

To ensure a safe and robust design, the design loads (like the dead weight of the structure, the weight of occupants and finishes, and other attachments or fittings) of any structure must take into account all potential circumstances. The design loads in modular construction are different from those in traditional construction because of their unique loading characteristics (owing to the transportation, lifting and handling stages of a prefab installation).

The construction process itself requires distinct infrastructure – demanding careful consideration of factors like geometric inaccuracies and installation procedures.

Offsite construction requires a highly detailed design at the early stages. This means the design requirements for modular buildings are significantly different from those of conventional structures.

But the current design of modular buildings mainly relies on a conventional design system and lacks the necessary design guidelines – so it’s imperative to establish and implement suitable design guidelines for modular prefabricated housing.

PROFESSOR SHAN KUMAR: IS PREFAB COST EFFECTIVE IN THE MEDIUM TO HIGH RISE AND MULTI-RESIDENTIAL MARKET?

If it’s well coordinated (by engineers, architects and prefab manufacturers), uses appropriate materials (timber, steel, concrete and other sustainable composites) and smartly executed by skilled prefab-modular contractors, then prefab construction will certainly deliver a cost effective, quality home on time.

More of these projects in the pipeline would encourage prefab contractors to invest in research and development, which in turn, would help achieve simple, smarter, innovative modern methods of construction.

To bring more building contractors into this prefab-modular construction space, there must be a mandatory skills requirement.

Government-initiated grants for research and development as well as low interest bank loans and tax credit initiatives for setting up prefab manufacturing factories would help create interest and reduce barriers to entry.

In terms of regulatory requirements, they must be made easy to make this smart construction a viable alternative to building affordable homes – not just in mid to high-rise apartments, but also in single dwellings and unit developments.

Upskilling the prefab-modular industry, which should start at the student undergraduate level, is the key to successfully getting the required number of affordable home projects completed on time.

PROFESSOR PRIYAN MENDIS: IN TERMS OF RESEARCH AND DEVELOPMENT, HAS THERE BEEN ENOUGH INVESTMENT TO ALLOW THESE KIND OF RAPID SOLUTIONS FOR THE HOUSING CRISIS?

There is a genuine need for more investment into the research and development of modern methods of construction, with prefab as the base.

This need is real – both from the construction industry and academia.

The University’s Centre for Advanced Manufacturing of Prefabricated Housing (CAMPH) which, for five years, worked in strong collaboration with industry pioneers continues to disseminate its knowledge and expertise long after its conclusion.

However, many more areas – like advanced and sustainable materials, factory automation, robotics, financing and value chain issues – still need further development.

Unfortunately, recent trends in government funding have seen less and less attention given to research and development in the construction sector.

The urgent need to solve the housing crisis demands a more significant commitment in government funding to ensure that higher quality housing solutions are provided for future Australian homeowners.

This article was originally published on The University of Melbourne’s Pursuit. Read it here.

Five ways retrofitting cities can help decarbonise our future

New construction is the source of massive amounts of carbon pollution. Retrofitting existing infrastructure is cleaner, and brings multiple benefits

By Tiana Stefanic, University of Melbourne

Australian cities are not equipped to deal with the shocks and stresses of the near future.

We are seeing high levels of carbon emission, high-cost energy consumption, and the effects of climate change on human and non-human dwellers of the built environment.

The construction industry is geared towards constructing new buildings, however retrofitting rather than demolishing existing buildings would drastically reduce the economic and environmental price we are currently paying.

Researchers Dr Judy Bush, Professor Sarah Bell and Enzo Lara-Hamilton of the Melbourne Centre for Cities at the University of Melbourne recently published an issues paper, ‘Retrofitting for Cities: Challenges and Opportunities in Australia’, to highlight challenges and outline potential solutions.

Here are five ways they say retrofitting provides a blueprint for the sustainable development of Australian cities.

1. SIGNIFICANTLY REDUCE CARBON EMISSIONS

Upgrading existing buildings and infrastructure reduces embodied and operational carbon emissions. Embodied carbon emissions are the pollution that occurs as a by-product of the materials used and the construction of a building, while operational emissions are those produced during the day-to-day running of the building.

The material footprint of Australia’s existing buildings is estimated at 3.8 billion tonnes of material which emitted 1804 million tonnes of CO₂, and consumed massive amounts of energy and water when built. By retrofitting existing structures according to new sustainability standards, future emissions of this scale can be avoided or drastically reduced.

The landmark retrofit project Quay Quarter Tower in Sydney used 98 per cent of the original structural walls and core and 65 per cent of the existing floor plates to save an estimated 12,000 tonnes of embodied carbon when compared to demolishing and re-building.

Researchers at the University of Melbourne’s Faculty of Architecture, Building and Planning have developed a suite of design tools that enable industry stakeholders to make better-informed choices about how their choice of materials can improve the environmental performance of construction projects.

2. INCREASE BIODIVERSITY AND IMPROVE DISASTER READINESS

Urban development has contributed to a significant loss of green space and biodiversity. This has resulted in a loss of urban habitat for plants and animals and a lack of shade and habitable public space for urban dwellers.

Increasing ‘green infrastructure’ in the form of green roofs and walls – alongside more trees, parks and gardens – can deliver multiple benefits including urban cooling and positive health outcomes.

The City of Melbourne’s Urban Forest Strategy lays out their 20-year plan to implement green infrastructure across the city. To help with this they have developed the Green Factor Tool, a web-based, open access green infrastructure tool for new developments.

As we face increasingly frequent and intense extreme weather events, it is vital that we adapt cities to be prepared for pandemics, heatwaves, storms, floods and drought.

Modifying existing infrastructure to mitigate the impact of these events aligns with the Climate Resilient Development framework proposed by the Intergovernmental Panel on Climate Change.

3. REDUCING COSTS AND INCREASING PRODUCTIVITY

Retrofitting can provide positive economic impacts through the creation of high-quality jobs, with less labour required and lower material costs for retrofit projects compared with new builds.

There is also an opportunity to significantly reduce building and infrastructure operational costs and to improve rental yield through increased quality of amenities leading to higher paying tenants.

Beyond Zero Emissions has released a Million Jobs Plan that shows how switching Australia to a low-carbon economy could provide 1,778,000 job years over 5 years. Retrofitting buildings and transport, land regeneration, and subsequent training account for 713,500 job years in this estimation.

4. IMPROVE OVERALL HEALTH OUTCOMES

Retrofitting houses creates healthier and more efficient homes. The Internal Environmental Quality (IEQ) of a building can be improved by increasing thermal comfort and changing the functional requirements of buildings for aging populations and people with disabilities.

The Australian Sustainable Built Environment Council (ASBEC) estimates that with the right policies and actions Australia’s building sector could deliver up to 28 per cent of Australia’s 2030 emissions reduction target, whilst creating healthier, more productive cities.

An example is the BREATH project, led by researchers at the Faculty of Engineering and Information Technology at the University of Melbourne, which considered the cost and energy use associated with ventilation systems in buildings as a measure to reduce COVID-19 transmission.

5. AVOIDING OBSOLESCENCE

A major benefit of retrofitting is avoiding the obsolescence of older buildings through their diminishing usefulness and performance. This can help us to retain historical buildings whilst improving environmental performance.

For example, adapting existing offices to accommodate flexible working can mitigate the financial impacts of changing work habits since the COVID-19 pandemic, retain historical buildings and improve environmental performance.

Making improvements to existing housing, rather than demolishing it, retains tenants who would otherwise be at risk of displacement due to urban renewal projects. The Ellebo Garden Room in Copenhagen is an award-winning example of how public housing can be upgraded to achieve modern standards of energy efficiency and comfort while maintaining communities.

By rapidly improving the sustainability of our existing buildings and infrastructure through retrofit strategies, we can achieve modern standards of efficiency and design. This will reduce the demand for resources and increase the resilience of Australian cities, improving the health and vitality of our communities.

Read more in the ‘Retrofitting for Cities: Challenges and Opportunities in Australia’ issues paper, prepared by the Melbourne Centre for Cities research hub.

This article was originally published on The University of Melbourne’s Pursuit. Read it here.

Regional housing shortages impacting essential workers

Liz Ritchie is the CEO of the Regional Australia Institute. Liz’s primary purpose at the RAI is to make a difference through providing leadership, engagement, information and connectivity. Hailing from country NSW, she understands the issues impacting regional Australia and has designed and executed programs across Australia to engage in economic and social issues affecting our regions. Liz served as CEDA’s state director in Western Australia between 2007 and 2016, and prior to that was CEDA’s Associate Director in Victoria and Tasmania.

We’ve got a situation in regional Australia where aged care providers are desperate for staff but are unable to recruit, in part due to housing shortages, writes Regional Australia Institute CEO Liz Ritchie. With regional vacancy rates only increasing slightly from one per cent to 1.5 per cent in the past year and monthly building approvals decreasing since August 2021, the data paints a stark picture and highlights how important collaboration between government, industry, business and community will be over the coming years.

During the past 12 months there has been one issue, almost above all others, that has dominated discussion. Whether it be in the hallowed halls of Parliament House in Canberra, standing on the sidelines of kids’ weekend sporting matches, or making its way onto agendas in business meetings, everyone has been talking about housing. Specifically, the lack of it in Australia right now.

For the regions, housing is perhaps one of the most foundational targets we need to move on. If we don’t have houses, we can’t attract more people to live in the regions, as highlighted in the Regionalisation Ambition 2032. If we don’t have more people living in the regions, who will fill the 91,400 jobs that are currently on offer in country Australia?

When you start to look at those vacancies at a more granular level, as the RAI did in its recent Big Skills Challenge report, you discover that two of the top three roles in most demand across regional Australia include medical practitioners and nurses, and carers and aides –  which equated to almost 12,000 jobs. This has a significant impact on many industries, particularly aged care.

Many people who live regionally often want to age regionally as well. It’s certainly the case for my parents. But it’s getting harder and harder to do that. We’ve got a situation in regional Australia where aged care providers are desperate for staff, but are unable to recruit, in part due to housing shortages.  

In one recent example I came across, a council in southern New South Wales is spending $500,000 to build accommodation for aged care workers it’s recruiting from overseas. The council says while it is a significant investment, it’s an essential one for the future of the local community.

Apollo Aged Care, which is working to revitalise aged care in regional communities, estimates for every bed a facility has, a house is also needed in that community for a staff member. In some of the communities Apollo operates, investigations are underway into purchasing an old motel to house staff, and in another where there is limited housing stock, the possibility of bringing in prefabricated homes is also being explored.

The Regionalisation Ambition sets a target to increase regional rental vacancy rates to above three per cent and ensure building approvals keep pace with population growth. A year into work on realising the Ambition and regional vacancy rates have increased nominally from one per cent to 1.5 per cent, but monthly building approvals have been decreasing since August 2021. The data paints a stark picture and highlights how important collaboration between government, industry, business and community will be over the coming years to address this wicked problem.

And that’s exactly what this is, a big, wicked problem, for if it was an easy fix Australia wouldn’t be in the position it finds itself now. Whilst we still have a long road ahead of us, the wheels are in motion.

The RAI welcomed the Federal Parliament’s recent passing of the enabling legislation for the Housing Australia Future Fund, to direct more than $10 billion towards the development of social and affordable housing. While we know there will be support for cash-constrained local governments to bring vacant land forward for development, we’re yet to see sufficient detail on the carve-outs for regional Australia. Housing – like health and education – is typically the domain of state governments and to this end, a condition of the Federal Government’s investment is that each state and territory also invest significantly.

Perhaps most exciting though, is the emergence of place-based, locally designed solutions, like the examples above.

In a keynote speech to the RAI National Summit in September, the Minister for Infrastructure, Transport, Regional Development Local Government, the Hon. Catherine King, spoke about the Rockhampton Ring Road project in central Queensland. The $1b initiative involves the construction of a new 18-kilometre section of the Bruce Highway. There will be the need to bring in a workforce to help build the road, but instead of setting up a temporary workers camp, houses will be built to accommodate workers and their families which will become future housing stock once the project is complete.

While in western Queensland, 22 councils have combined forces to tackle the housing issue in their part of Australia. The region has been hamstrung by ageing stock, a lack of a real-estate market and limits on borrowing with market failure as evidenced in the RAI’s Building the Good Life report, released in 2022. When the Diamantina Shire Council investigated building two townhouses to accommodate staff, it was quoted $940,000 for each townhouse. 

Unperturbed, the group is working on developing an organisation that would not only build the hundreds of houses the region needs, but also undertake maintenance works on existing council stock creating a pipeline of work for years to come. In the process, the organisation creates ongoing employment, education and training opportunities.  

Regional Australia still has a long way to go when it comes to managing the ongoing housing issues it’s facing, but when so many innovative solutions are coming from the regions themselves, I have faith we will tackle this, one new house at a time.

This was originally published on the Ceda website. Read it here.