Some developers are reportedly now offering sales commissions three times the level of a couple of years ago, along with a range of other incentives to entice buyers back into the market. Even the rental market is struggling, with apartment vacancies rising and rents falling. If it had been true that "residents are heading skyward into apartments, leaving behind the traditional Australian dream (of a detached home)" then why would this be happening? And why would most of you have answered 'yes' to the 150 lot subdivision over the 150 apartment project in the opening paragraph?
The problem going forward is that enough investors will have long memories of being caught with negative equity in off the plan apartment projects, and even when the finance taps are reopened, lenders may be equally cautious. Getting apartment projects out of the ground in anything like the record numbers we have seen in recent years is unlikely – meaning fewer additions to the dwelling stock from this type of product until market confidence (from investors, owner occupiers, financiers and developers) returns. This could be some years.
The "missing middle" – townhouses and duplex style projects – have been promoted as a solution and while these may have much going for them in urban planning circles, they are not popular in the detached residential neighbourhoods in which they've been appearing. Communities are making their hostility known to elected councillors and those same councillors who need to face the electorate at the ballot box are aligning with community opposition to "the missing middle." This is democracy at work. Suggesting that opponents are 'wrong' or 'misguided' or that they hold 'inappropriate views' is nothing less than a form of ruling class elitism. (Perhaps it would be better to dispense with democracy and simply start doing what some urban planners insist is needed, despite 'poorly informed' community opinion?). So for a variety of reasons, the 'missing middle' is unlikely to fill the supply void for housing in sufficient numbers to keep pace with projected population growth.
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This leaves traditional suburban development. While much derided by some urbanists and designers, it remains the preferred form of housing for families. It's just that many families now struggle to afford them. And now, finding land to create them has been made increasingly difficult. With the exception of Melbourne (which by accounts has responsibly adjusted its forward land supply in line with market demand), other cities have rigid growth boundaries and a range of planning and environmental overlays which will inevitably choke the supply of new suburban housing going forward. While it may remain desirable in the market, the notion of further suburban expansion in anathema to many planning schemes. It will become both scarce and (as happens with scarcity) expensive.
So what's going to meet the housing demand for the future waves of population we are told will inhabit our cities? High rise apartments? Little appetite for some time. The missing middle? Problematic politics. Greenfield suburban housing? Good luck finding the sites.
It will be interesting to watch how this all plays out in the years ahead. Shortages of supply – if this is what we will soon face – usually lead to the same outcome. Which could see the whole cycle of policy induced market dysfunction begin all over again, until the next correction.
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