Mateo on why Australia needs to shed its quarter-acre block fixation.
ABC Radio presented an interesting story this past Thursday, looking at the disproportionately high price of housing in Darwin (transcript here).
According to a recent study, the average rental price in Darwin is a staggering $290 per week more than in Melbourne.
Prices are, expressed in the most simple way, determined by the interaction of supply and demand. Yes, Darwin has become something a hub for those seeking the riches of the 21st century gold rush that is our mining ‘boom’. However, it seems safe to say - with no disrespect intended to Darwinites - that looking to demand only is an insufficient explanation for this localised bubble.
The most effective way to ease housing prices, according to Graham Kemp from the Northern Territory Master Builders Association, is to relax supply. From the transcript:
“It’s quite an education process to make people realise if their kids are going to be able to buy their own house that they’ve got to make some compromises to what used to be the thousand metre square block.”
There are two additional points raised in this story which, to my mind, separate it from an otherwise mundane glance at a supply and demand mismatch. One is an ambitious plan by the (since deposed) Northern Territory ALP to lower barriers to entry in the housing market: no-deposit home loans.
The other is the role played by future expectations. Chris Young from the NT Chamber of Commerce:
“Access Economics is telling us we need 20,000 permanent workers in the territory over the next five years. These are not construction workers, these are just those that are coming in for other things.”
The implication here is that developers are willing to raise considerable sums of capital to build vast new developments, because they expect workers to continue flocking to the city - and those workers have got to be housed.