News & Discussion: Population Growth

[AG]

Building costs have risen in real terms by 2-3% over the last 35 years, while residential property prices have risen ten times in real terms. The increase is in the land component, not the building. A decent building block on the Adelaide fringe used to cost half the price of a Holden. Now it is over 5 times the price of a Holden.

This is a bit of a distorted way of looking at how much land values have increased. While it's obviously true that the value of land has increased by leaps and bounds, at the same time cars have become cheaper relative to most things as well, not just land.

[stumpjumper]

Point well made AG. No yardstick is going to be completely fair, because by definition you're not comparing apples with apples. Comparing with elsewhere isn't helpful either.

You could look at the price of a house and land in terms of wages: from 1960 to 1980, the median Adelaide house price was steadily at about 3 times the average wage.

Today, it's about 6 times the average wage. Again, the price of the building has not changed. The price of building the house itself is practically unchanged. It's the shortage of land that's driven up the price, a problem I believe the government could solve tomorrow if it wanted to.

[Will]

Point well made AG. No yardstick is going to be completely fair, because by definition you're not comparing apples with apples. Comparing with elsewhere isn't helpful either.

You could look at the price of a house and land in terms of wages: from 1960 to 1980, the median Adelaide house price was steadily at about 3 times the average wage.

Today, it's about 6 times the average wage. Again, the price of the building has not changed. The price of building the house itself is practically unchanged. It's the shortage of land that's driven up the price, a problem I believe the government could solve tomorrow if it wanted to.

You raise a fair point SJ, however I would not like to see the fottprint of the Adelaide metropolitan area expanded more than what it already is. I believe the affordability crisis could be solved if the government or the government in partnership with the private sector built high-density living in the CBD or in major transport corridors. There are plenty of people who would like to live in an apartment, but because of the unnafordable prices offered are forced to live in big houses in the suburbs. For example, I would dearly love to live in an apartment in the CBD but unfortunately I can't affored to, so therefore I have to live in a big house with a big backyard. If apartments were built to cater for this market, you would see thousands of people take up this opportunity leaving behind their big houses in the suburbs to be absorbed by those whom prefer such living arrangements and so causing the demand on new land to fall.

[Cruise]

For example, I would dearly love to live in an apartment in the CBD but unfortunately I can't affored to, so therefore I have to live in a big house with a big backyard.

Awwww, Poor Will, You could live in a flat in the suburbs, So you dont have to put up with that big yard (personally i like having a backyard)

[stumpjumper]

Will, you say the metro area should not expand, but consider where you stand in the city's timeline. Compared with 1960, the present footprint of the city has expanded hugely, and ditto in 1960 compared with 1920, and so on back to 1836. Which permutation of the city do you say is the 'best' one?

The key to acceptable expansion of the city is good urban design. Open space, greenbelts, zoning which promotes amenity and liveability. The concept of satellite cities has merit here, as does the suggestion of higher density around transport nodes, all with careful attention to the topography of the land (where it's not dead flat). All this can be achieved effectively, economically and attractively, without wholesale urban consolidation.

After all, life is short and we create and appoint governments to safeguard and improve our quality of life. We don't create them to make life less good for ourselves but profitable for those in power and their friends. In short, give the people what they want.

The layout and detail design should be driven by urban design principles, not desperation for any land at all. So the Buckland Park subdivision might not go ahead, and there might be a chain of separate townships down the Fleurieu Peninsula, rather than the continuous esplanade which now runs almost unbroken from Outer Harbor almost to Wirrina.

Big does not have to be merely big. It can be beautiful, too.

[Wayno]

The key to acceptable expansion of the city is good urban design. Open space, greenbelts, zoning which promotes amenity and liveability

unfortunately, housing spreads a lot faster than industry, causing the need for bigger & faster roads (at great expense to eveyone) to the outlying suburbs. It's not scalable really.

[stumpjumper]

You're right, it's not, due to geometry as much as economics - a circular city requires a lot of roads etc for a small expansion. That's where satellite development comes in. Townships with efficient, fast links through open space to the 'mother city'. That's probably just one solution. Urban design is a very complex matter, even for experts, and I'm an amateur.

[Prince George]

I'm almost alarmed at the tone that's developing in these discussions, which seems to be heading towards pining for the good ol' days with cheap land as the solution for affordability and buying into a low-rise version of the "vertical cities joined by super highways" snake-oil that Le Corbusier and GM sold to America back in the "First Machine Age". Those days are gone, the experiment is over, and the results aren't nearly as good as we'd hoped.

In many parts of the western world, particularly Australia and America, we've spent too long living in a fool's paradise where we could assume that everything would be cheap forever. Land is cheap! Petrol is cheap! Electricity is cheap! Water is cheap! Food is cheap! In many ways, I see the increase in the price of land as part of a correction to that pattern that is a long time overdue; petrol prices have risen due to the price of oil, but in terms of the impact that petroleum has on our trade-deficits, I think that it's likely still undervalued; electricity prices better reflect now that it costs a heck-of-a-lot to generate and supply the stuff; water is probably better controlled through use restrictions than price, but if we're going to insist on building de-sal plants, you'd better see the price rise to reflect the trouble that we have to go to; food prices have increased, but not nearly as much as the cost of production - the burden there falling mainly on the producers who have seen their operating margins slashed.

And agriculture and "sprawl" have another important meeting point. Back in days of yore, people had a couple of important considerations for locating their city: it needed transport to other cities, generally a port or a river, later a railway, and then a highway; it needed a supply of fresh water; and it needed to be able to produce its own food, because there was no decent way to transport food from other areas, with the exception of grains and salted meats. The most successful cities were the ones that could best satisfy these conditions; the lack of any of them would mean the city would wither and die (with some notable exceptions like Machu Picchu). Adelaide was able to survive its first hundred years because the area provided these fundamentals.

Then transportation advances changed the playing field - now people and food could travel longer distances quickly, and the need to have agriculture in the area seemed to go away. So the local farmlands were turned into housing - it's always surprising to see photos of the Marion area from the 50s/60s and see how much of it was market-gardens. With the margins for farming now so poor, many landowners on the fringes are seeing residential development as kind of retirement option; unable to save from their income, they can sell the farm for housing to pay for their retirement.

But it turns out that not all land is created equal, especially in Australia whose soil is so old that much of it is under-supplied with nutrients. In a Pareto-principle-on-steriods statistic, Jared Diamond gives the figure of 80% of Australia's agricultural profits being generated by two per-cent of the farming area (it's in Collapse, sorry, haven't a better source for you). And where is that area? Primarily in WA's Great Southwestern grain regions, and around Adelaide. The rest of Australia's agriculture produces food, but at a much greater cost: due to the lack of nutrient in the soil, they have to use much higher quantities of fertilizer; that's much of the reason for Chinese produce being cheap in Australia, they simply have better soils.

Gawler is known for having some of the richest farmland in the state, and what are we doing? We're putting houses on top of it. Once we build on this stuff, it's gone forever. There is no way, no way, to ever reclaim that land; mortar and concrete introduce too much alkalinity into the soil. As expensive as land may seem to be, I think that it's still undervalued. If we only understood better just what are the implications of sticking houses down everywhere, I think we'd be much less cavalier about it.

And on the subject of greenbelts and satellite towns, we've seen those developments over here and they're not pretty. Unable to sustain themselves, they depend on the presence of the "mothership" and become little more than "bedroom communities", emptying out by day as people make the trip to their work in the larger centres. They require high-speed transport as their lifeblood, and ultimately the transport comes to dominate the town. Either the freeway cuts through the town (and you can imagine how attractive that is), or the freeway is over to one side and the area around the off/on-ramp quietly takes over as the new centre of town (that's where all the new development like motels or restaurants will go).

An example of the freeway-changes-town-centre effect that I will never forget is Limon, Colorado. It's a modest sized country town that is at the intersection of Interstate-70, US highways 24, 40, and 287, and State Roads 71 and 86. That sounds like it should have made for a healthy town. But take a virtual drive down Main Street and see all the closed businesses, the lack of anything that looks like prospects for that area. All the new businesses appeared along the Interstate ramps.

And all this open space that supposedly adds so much public amenity? They are phantasms - under-used, desolate wastelands. Even in Adelaide, look at the parklands; isn't that the complaint that we keep hearing about them on this site? There are many more people crowding down Rundle Mall or into the Markets, or (God help us!) Marion than are in the parklands. One of the things that we were struck by over here was how many people were in the parks on almost every day of the year. This summer, we'll have to post some pictures of what a sunny day means to Green Lake Park or Discovery Park; literally thousands of people crowd into them. And the density here isn't that much higher than Adelaide, only twice as great, but people don't have as substantial a yard, and people just seem to value their open spaces far more than we do.

Affordability is an issue, but this perpetual spreading ourselves thinner, ever thinner, is not a solution. Ultimately, that's just going to impoverish the future, who are the ones that will actually face problems that we can just ponder - peak-oil, climate change, feeding a growing population, drought.

[muzzamo]

There is also an argument that increases in land prices have been caused by speculative mania, easy credit/ ponzi finance and house price delusion (people factoring in expected future capital gains when they decide to try pay irrational prices and outbid each other now).

The other factor is that councils and other authorities now charge as much as they can get away with in order to get a block connected up.

You need to have a balance between continuing to grow on the fringes and cutting it all off in order to make the boomers even "wealthier" though higher land values, but on the other hand I'm a believer that speculative mania and bubble psychology has made a substantially larger contribution this time around than land supply policy.

In terms of supply/demand and shortages, lets say we currently have 1.9 persons per household (I can't remember the exact figure), depression/recession comes along and people will bunch together and that number may go up to (eg) 2.1 persons per household and presto there are hundreds of thousands of surplus homes available. A lot of people who can't afford to buy at 6-10x income are being coaxed into buying by the papers and the First Home Owners Grant, and a percentage of these people will find the need to deleverage when they loose their jobs and will either be living in their cars or back with their parents.

[Will]

Will, you say the metro area should not expand, but consider where you stand in the city's timeline. Compared with 1960, the present footprint of the city has expanded hugely, and ditto in 1960 compared with 1920, and so on back to 1836. Which permutation of the city do you say is the 'best' one?

The key to acceptable expansion of the city is good urban design. Open space, greenbelts, zoning which promotes amenity and liveability. The concept of satellite cities has merit here, as does the suggestion of higher density around transport nodes, all with careful attention to the topography of the land (where it's not dead flat). All this can be achieved effectively, economically and attractively, without wholesale urban consolidation.

After all, life is short and we create and appoint governments to safeguard and improve our quality of life. We don't create them to make life less good for ourselves but profitable for those in power and their friends. In short, give the people what they want.

The layout and detail design should be driven by urban design principles, not desperation for any land at all. So the Buckland Park subdivision might not go ahead, and there might be a chain of separate townships down the Fleurieu Peninsula, rather than the continuous esplanade which now runs almost unbroken from Outer Harbor almost to Wirrina.

Big does not have to be merely big. It can be beautiful, too.

I was going to respond but then I read Prince George's response, and it captures the essence of what i was going to say just in greater detail.

However I will say this. Most of my friends and cousins are at a stage when they are starting to buy their own homes. From their experience I have gathered that people buy in places like Aldinga or Blakeview not because they want to live there but because that is where they can afford. In essence if people could choose to they would live closer to the CBD, where all the good restaurants, entertainment and infraestructure options are.

[Cruise]

There is also an argument that increases in land prices have been caused by speculative mania, easy credit/ ponzi finance and house price delusion (people factoring in expected future capital gains when they decide to try pay irrational prices and outbid each other now).

The other factor is that councils and other authorities now charge as much as they can get away with in order to get a block connected up.

You need to have a balance between continuing to grow on the fringes and cutting it all off in order to make the boomers even "wealthier" though higher land values, but on the other hand I'm a believer that speculative mania and bubble psychology has made a substantially larger contribution this time around than land supply policy.

In terms of supply/demand and shortages, lets say we currently have 1.9 persons per household (I can't remember the exact figure), depression/recession comes along and people will bunch together and that number may go up to (eg) 2.1 persons per household and presto there are hundreds of thousands of surplus homes available. A lot of people who can't afford to buy at 6-10x income are being coaxed into buying by the papers and the First Home Owners Grant, and a percentage of these people will find the need to deleverage when they loose their jobs and will either be living in their cars or back with their parents.

Answer me, Do you own property?

[stumpjumper]

Will and Prince George - I think you may be wrong in characterising satellite developments as dormitories. A satellite towship does not have to be an island of Corbusian towers. You're right in not wanting those - the ideal of 'streets in the sky' is well and truly discredited.

Think rather along the lines of townships which are substantially self-sufficient. Without being naively sentimental, I suggest that our regional towns were once more self-sufficient than they generally are now.

Although there are a factors against such self-sufficiency - for example the economically driven consolidation of trading oulets which has meant that businesses as varied as regional drapers and local vets have become things of the past. The draper has been put out of business by the megastore on a greenfield site or the huge fabric outlet in the suburbs of the major city, and the vet has moved to a professional centre attached to a mega-mall far from the township.

It seems ironic that at a time when the internet allows people to work remote from what would have been their city office, much of the local businesses and facilities whose existence would have made visits to the 'mother city' less necessary, are disappearing from the local scene.

I don't know what the answer is. I'm not greatly in favour of government control to produce some desired result because such control is usually too simplistic, the complex reality of the situation usually guaranteeing some unwanted outcome.

[Prince George]

I understood that you meant fully-fledged towns, SJ, but I believe that there are too many factors that work against them and ultimately drive us into a worsened version of what we currently have: instead of people commuting across town, they commute between towns, travelling even greater distances than we do now.

I think the driver is jobs. In the past, people were both less mobile and had more expectation of a "job for life". That attitude founded towns like Port Pirie or Whyalla around a single main employer, and many many smaller towns around their own combination of rural trades. Today it's more common for people to change employer, or even job category, every few years.

So let's suppose that there's a few regional centres with moderate population; you have a job in one and chose to live there too. That's fine for a few years, but the law of averages catches up with you and you leave that job (or the employer goes under, or whatever). The place that you live isn't awash with options, so now you're looking to the other towns or the city. If you can't afford to move house as frequently as you change job (and very few of us can), then you have to commute to and from this other town. This is no different from moving between suburbs of Adelaide, but now the distances are greatly magnified.

Then there are attractions for a business to locate itself in the main city rather than the regional centres - larger pool of workers, centralised transport, more opportunities for "vertical integration" with related companies. That's also bad news for the regional centre, are they stuck having to compete on price with each other? Then they don't even get to derive all the benefits of having the businesses if they have to subsidise them to keep them (like the states competing between each other for contracts or events).

In all, I think that the regional centres have to be big enough to be comparable with the major centre - perhaps 100,000 people is the minimum. Then it is capable of providing a sufficient range of employment opportunities to be able to sustain itself, especially during a crisis like the current one. Smaller towns -- Gawler, Mount Barker, Murray Bridge -- they have a future only as bedrooms for the metropolis up the road, no matter what our intentions are.

[stumpjumper]

So PG what is the answer? Or at least in what direction might the answer lie?

Can planning rules result in something acceptable to all?

Did earlier, 'unplanned' cities actually plan themselves through a kind of native intelligence - eg a conveyancer would want an office near a real estate office etc. Were the pre planning settlements able to deliver the majority what they wanted?

Should the expressed preference of the majority (for detached homes on allotments as discussed) be denied because that majority's representative government finds delivery of the majority preference too expensive when considered with higher priorities.

Should people have to live in their less preferred high density developments around transport nodes because developers find them more profitable and the government finds them more efficient?

If that were the case, what other of people's preference should effectively be banned by the government because it is not cost-effective.

Example: Divorce is not cost-effective. What if the government decided that marriages with a gap between the parties of more than say 10 years had an unacceptably high divorce rate, and therefore banned them. Same difference, as they say, except that in the lifestyle choice of buying a detached house on a fringe or satellite town allotment, there may be fewer costs than are generally imagined.

What if claims of expensive transport and infrastructure relating to greenfield developments are overstated for various reasons.

What if the careful release of greenfield subdivisions were cost-effective, and what if the allotments attached to satellite towns help reinvigorate those towns?

Would that not be a better outcome than having people living reluctantly in T.O.D's, maximising the developers' profits but perhaps creating expensive social problems which the developers do not have to fix?

As I said, I don't know what the answer is.

[Will]

So PG what is the answer? Or at least in what direction might the answer lie?

Can planning rules result in something acceptable to all?

Did earlier, 'unplanned' cities actually plan themselves through a kind of native intelligence - eg a conveyancer would want an office near a real estate office etc. Were the pre planning settlements able to deliver the majority what they wanted?

Should the expressed preference of the majority (for detached homes on allotments as discussed) be denied because that majority's representative government finds delivery of the majority preference too expensive when considered with higher priorities.

Should people have to live in their less preferred high density developments around transport nodes because developers find them more profitable and the government finds them more efficient?

If that were the case, what other of people's preference should effectively be banned by the government because it is not cost-effective.

Example: Divorce is not cost-effective. What if the government decided that marriages with a gap between the parties of more than say 10 years had an unacceptably high divorce rate, and therefore banned them. Same difference, as they say, except that in the lifestyle choice of buying a detached house on a fringe or satellite town allotment, there may be fewer costs than are generally imagined.

What if claims of expensive transport and infrastructure relating to greenfield developments are overstated for various reasons.

What if the careful release of greenfield subdivisions were cost-effective, and what if the allotments attached to satellite towns help reinvigorate those towns?

Would that not be a better outcome than having people living reluctantly in T.O.D's, maximising the developers' profits but perhaps creating expensive social problems which the developers do not have to fix?

As I said, I don't know what the answer is.

SJ, I think our difference of opinion lies in the fact that you are assuming that everyone wants to live in a big house with a big backyard. Although my preference in living arrangement may change when I have a family, at the moment myself as well as most of my friends of my age if given the choice would rather live in a smaller high-density TOD as opposed to a detached house 40km from the CBD. The reason is because for many generation Y people, life is all about lifestyle and I cannot see a lifestyle in the outer suburbs which appeals to me.