Saturday, September 29, 2007

Sydney's Urban Consolidation (High-density) Depression

Brickworks, one of Australia's largest building materials suppliers, has warned that the Sydney area is about to enter its most prolonged housing construction downturn since the Great Depression, according to an article in the Sydney Morning Herald.

Sydney house prices have exploded relative to incomes. In just 10 years, the cost of the median price house, including mortgage interest, has risen $450,000 in Sydney (inflation adjusted). Sydney prices relative to incomes are now running three times prices in Atlanta, which is the fastest growing large urban area in the high-income world.

Some analysts have blamed higher interest rates for the downturn, apparently unaware of the fact that interest rates today remain well below post-World War II norms. Moreover, interest rates can hardly be cited as the cause of either the price run-up or the current Sydney depression, since neither has occurred in other markets, all of which have experienced the same global interest trends.

The problem is more fundamental and is the result of government land rationing and taxing policies, which are called "urban consolidation" (called "smart growth" in many other nations). All of this has contributed to an explosion in land costs, with little new housing being constructed. The result has been a virtual destruction of housing affordability,

Housing starts in New South Wales are at their lowest point today since 1958, according to the same article. This, in context, is extraordinary, given that there are more than twice as many households today in New South Wales as in 1958.

Wendell Cox
Demographia | Wendell Cox Consultancy - St. Louis Missouri-Illinois metropolitan region
Visiting Professor, Conservatoire National des Arts et Metiers, Paris
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1 comment:

Tony2 said...

Unfortunately,this issue of housing affordablility never becomes an issue at election time,largely because both major parties are the real cause of the problem by supporting Urban Consolidation for the last 20 years.They don't want the masses to know the truth of their incompetence re housing affordability.The Greens and Democrats have also been avid supporters of these high density policies over the same period,so never raise this issue in Parliament.Maybe its time for the proposition politics of the United States,where any issue can be voted on at election time if enough people sign petitions.There's no democracy at the moment in Australia if all the parties support a policy, and the population opposes it.Lets have more debate about referenda at the upcoming Federal election.The average voter is not influenced by failed ideology ( Urban Consolidation )or developer donations to both major parties.They just want to retain our traditional Australian housing standards that our political parties seem to out to destroy