Sydney Slumps while Melbourne Jumps
Building Approvals showed a strong rebound in the first half of 2009 attracting a great deal of attention (1). The rebound is a sign of the macroeconomic stimulus (lower interest rates and the First Home Owner Boost) flowing into the housing market. However, digging deeper into the numbers highlights some underlying structural problems within Australia's major capital cities' housing markets.
The total number of dwellings approved in Australia fell by 18.2% between 2007-08 and 2008-09. The total number of new dwellings approved in the major capital cities fell by 16.0%. There was a significant range in the falls across the cities with Brisbane down by 30.0% and Melbourne down by 2.0%. Melbourne was the only city which had an increase (1.7%) in the number of approvals in Other Residential (townhouse, flat, unit or apartment) dwellings. It's interesting to note that Sydney was the only city to see approvals for detached housing lower than approvals for townhouses, flats, units and apartments.
New Building Approvals in Australia's Major Capital Cities 2008-09
| % change from previous year |
||||||
| New houses |
New other residential building |
Total dwellings* |
New houses |
New other residential building |
Total dwellings |
|
| Sydney |
5,961 |
7,351 |
13,542 |
-10.6% |
-35.6% |
-26.3% |
| Melbourne |
21,441 |
10,017 |
31,751 |
-2.9% |
1.7% |
-2.0% |
| Brisbane |
8,470 |
4,231 |
12,735 |
-29.0% |
-31.3% |
-30.0% |
| Adelaide |
5,816 |
2,338 |
8,294 |
-12.8% |
-13.0% |
-11.6% |
| Perth |
11,108 |
2,625 |
13,843 |
-5.3% |
-49.4% |
-19.2% |
| Total Major Capital Cities |
52,796 |
26,562 |
80,165 |
-10.6% |
-24.7% |
-16.0% |
| Australia |
93,764 |
37,228 |
132,073 |
-13.6% |
-27.6% |
-18.2% |
*Including alterations and conversions
24.0% of Australia's building approvals were in Melbourne in 2008-09, followed by Perth with 10.5% and Sydney (10.3%) in third place. Brisbane (9.6%) and Adelaide (6.3%) filled fifth and six spots respectively.
With the exception of Sydney these shares of new building approvals in each major capital city is roughly in line with the population growth being experienced by each city. In 2008-09, the number of approvals in Sydney is at least 5,000 fewer dwellings than the immediate population growth would suggest is required.
Australia's Major Capital Cities Share of Total Building Approvals
| 2007-08 |
2008-09 |
|
| Sydney |
11.4% |
10.3% |
| Melbourne |
20.1% |
24.0% |
| Brisbane |
11.3% |
9.6% |
| Adelaide |
5.8% |
6.3% |
| Perth |
10.6% |
10.5% |
| Share of all Major Capital Cities |
60.7% |
59.2% |
Structural problems within the Sydney housing market are preventing residential land (both brownfield and greenfield) being brought efficiently onto the market. These structural problems have been adversely impacting on the Sydney housing market over the past four or five years. This is undermining Sydney's current and long term economic growth prospects.
Over the same period Melbourne has been steadily increasing its share of the Australian population. But the city's housing market has been struggling to provide a suitable quantity and mix of housing types across the city. If not addressed this presents its own threats to future economic growth.
Neither Sydney nor Melbourne's (or any other major city in this country) challenges can be overcome with macroeconomic policy levers. If anything, the current policy settings are sowing the seeds of problems further down the track. What are required are effective spatial policy settings which encourage new housing in areas close to transport and employment opportunities and the full range of services.
Footnote: (1) Australia Bureau of Statistics, Building Approvals, Australia (cat. no. 8731.0)