Is the urban fringe getting bigger?Posted: May 21, 2010
The proportion of new dwelling commencements planned for the outer suburban growth areas increased sharply between the release of Melbourne 2030 in 2003 and the release of the revised strategy, Melbourne @ 5 Million, in October 2008.
Melbourne 2030 envisaged 31% of dwelling starts would be located in the growth areas over the period to 2030 (page 30). It expected virtually all the rest would be located within the established suburbs, either clustered around major activity centres or dispersed across the suburbs.
The subsequent update, Melbourne @ 5 Million, made a dramatic change. It increased the proportion of dwellings expected to be constructed in outer suburban growth areas to 47% – half as much again as envisaged by Melbourne 2030 (page 3).
This change was consistent with the reality of what was happening in the market.
The authors of Melbourne 2030 probably felt at the time that 31% was a reasonable “stretch” target. Over the four years from 96/97 to 00/01, only 38% of new commencements were in the growth areas.
However four years is a short period to use as a basis for policy. As it happened this was a relatively quiet period compared to the boom that followed.
In the new decade, increases in assistance to first home buyers from the Federal and State governments greatly increased demand for lower priced housing and hence for properties on the fringe. Close to three quarters of recipients of the First Home Owners Grant, which was introduced on July 1 2000, bought properties in the outer suburbs in the early years of the decade. The result was that more than half of all commencements were in the growth areas and currently the proportion is still approximately 50%.
It would be easy to condemn Melbourne 2030’s original target as lacking sufficient “science”. Be that as it may, we need to be mindful that it would have been extremely difficult to predict the scale and duration of the boom much less how Governments would respond. Also, it is a 30 year target – it might yet prove to be close to the mark if, for example, there were to be a prolonged slump sometime over the next 20 years.
Dr Steve Keen’s much publicised 200 km walk from Canberra to Mt Kosciuszko after losing a bet that house prices would fall by 40% as a consequence of the GFC, shows how difficult it is to predict where prices are heading. Lest anyone doubt Dr Keen’s forecasting abilities, note that last week he was voted by an international panel as the economist who first and most cogently warned the world of the coming Global Financial Crisis.
It would be easier to pillory Melbourne @ 5 Million for its lack of conviction. Like Melbourne 2030, it doesn’t have any sort of strategy for actually increasing the share of new dwelling construction within established areas. But given that it takes the status quo as its target, I suppose it doesn’t need to.
As I’ve stated before, my view is that many fringe settlers would prefer a more central location if the market could deliver a better space/price compromise in established suburbs. The idea that most Melburnians are committed to a detached house on a spacious suburban block is past its use-by date – as a consequence of generational change and other factors, the status and functionality that once attached to space is increasingly shifting to location.
A key reason the market isn’t delivering affordable options in established suburbs is lack of supply. There needs to be a coherent strategy that moves beyond mere aspirations and shows how the key obstacles to supply in established suburbs will be overcome.