A developer friend from my days as a business journalist sent me his frank appraisal of the housing affordability crisis, which he described as more of a ‘crisis of expectations’. There are many Brisbane suburbs, Dan wrote, where post-war houses sell for less than $450,000. He named a few – Keperra, Ferny Grove, Grovely, all 12 kms from the CBD with good public transport networks and excellent shopping amenity. Most of these homes are ex- housing commission or ex- war service homes built in the 1950s & 1960s. They tend to be on larger blocks of land than is common in the more sought-after inner city. But they are not on the shopping list of generation X or Y.
“Young home buyers don’t want a bar of them,” Dan said. “They want to be in the trendy inner suburbs with cute Queenslanders which have already been renovated.
“These (older) suburbs are ripe for gentrification and renovation, but the young guns want four bedrooms, a plasma screen on every wall and hip cafés on every corner.
“And they don’t want to dedicate their weekends to renovations, mending fences, tidying up yards, gardening and landscaping.”
As we observed last week, in the first part of this commentary on residential development, many of today’s generation think they can bypass the ‘starter home’.
This means buying a sound, but probably tired, older property in an outer suburb and gradually improving it as time and money allows. At some point in the property cycle, there will be an opportunity to take a profit and move up another rung. And at least older suburbs have character.
In 1962, US songwriter Malvina Reynolds wrote the quintessential commentary on middle-class conformism, ‘Little Boxes’. American activist songwriter Pete Seeger made it a big hit in 1963. You are maybe familiar with the song from its revival as the theme song to the TV series ‘Weeds’ or Roz Pappalardo’s cover with the Wayward Gentlemen.
“Little boxes, on the hillside, little boxes made of ticky-tacky
Little boxes, little boxes, little boxes all the same.”
This satire on fast-developing tract housing in the sprawling outer suburbs of San Francisco does not seem out of place in Australia, 2018. The Little Boxes of our generation are stacked one atop the other in apartment blocks where you can step out on to the balcony and listen to the traffic, admiring the view of your neighbour’s balcony.
The little boxes analogy also exists in the fast-developing outer suburbs of Brisbane – the conurbation developing along the transport corridors between the north and south coasts. The typical house and land package in these new suburbs are quite generic, dominated by a two-car garage which typically takes up a quarter of the house. The house often takes up 80% or more of the land on which it sits, so there is little opportunity to adapt the property as your family grows.
There are advantages and disadvantages to buying an older house in an older suburb. The main disadvantage is it will probably have been rented for years and the upkeep let slide. The main advantage is there will be enough land for kids and dogs, a garden and maybe even a pool!
Older housing such as the ones described by our property developer can be bought by anyone who has saved up a deposit of about $90,000, along with sufficient income to service mortgage repayments of about $2,000 a month.
Considering that many young people in Brisbane are paying between $1,600 and $2,400 a month in rent, that seems like an affordable deal.
While the humble starter home in the post-war suburbs is an option, younger people seeking affordable housing are attracted to inner Brisbane’s proliferating apartment blocks. There was a time (the 1970s and 1980s) when the only people who lived in city apartments were the caretakers of city office blocks. Now, the CBD and its close neighbours (South Bank, New Farm, Fortitude Valley, West End, Kangaroo Point, Milton etc.) have a well-documented over-supply of new apartments.
Brisbane inner city is the only Queensland region where a majority of households’ dwellings are flats/apartments (50.1%) and townhouses/semi-detached (7.4%). The Australian Bureau of Statistics 2016 Census showed that 41.7% of inner Brisbane housing stock is detached houses (compared with 76.6% for Queensland overall).
My take on the Census data for inner Brisbane suggests that the majority of people living there can afford the city lifestyle.
Almost 30% of households in this region earn more than $3,000 a week, with 56% earning between $651 and $2,999 per week. The proportion of people renting (49.9%) is higher than the state and national figures, but the income numbers suggest they can easily afford the median rent of $415 per week. This is not to say the inner city is completely populated by the well-to-do. Some 15% of residents earn less than $650 a week and 11.9% share expenses by living in ‘group households’.
The key demographics attracted to inner city apartments are international students, well paid young professionals and my cohort, older people who have downsized from big houses in established suburbs. If you own a big Queenslander in Ascot, it’s not hard imagine the property selling for $1.2m, which means the empty nesters can buy a three bedroom apartment in South Bank and have change left over to furnish it anew and take a cruise or two. They will also have to budget for storage costs, as there will typically be no room in the high-rise apartment for antique furniture, paintings, vintage cars, boats, jet skis and all the knick-knackery collected over a lifetime.
BIS Oxford Economics created a stir in April with a widely quoted report which highlighted the long-term oversupply issues facing Brisbane.
The report said 20% of Brisbane apartments were vacant and 52 projects had been shelved as a result of the over-supply, The withdrawal of 10,000 apartments before they were even built demonstrates the seriousness of the supply issue, which could last until 2025, report author Angie Zigomanis said.
Domain.com.au reported that BIS arrived at this (disputed) forecast by analysing occupier demand instead of sales demand. Despite the withdrawal of planned apartment buildings, there are another 3,500 apartments being added to the inner Brisbane market before Christmas.
So to answer the question posted last week (can tree changers afford to move back to the big smoke), it all comes down to the price cycle and what a long-term over-supply might do to apartment prices in coming years. The trick might be to shop around in the middle ring suburbs. Instead of looking for a starter home, determined downsizers might find there are three-bedroom apartments in the regional hubs (like Chermside), priced between $500k and $600k.
If you are willing to forego the inner city vibe, you’re still only a 20-minute bus ride from the CBD, but you won’t have to worry about what the over-supply will do to property prices. And the dog, if you still have one, will be able to ‘stretch his legs’ on the lawn outside.
Postscript: If you liked my Nauru song, I have made it available as an MP3 download, with 50% of net proceeds going to a local refugee charity. Here’s the link. http://store.cdbaby.com/cd/bobwilsonandthegoodwills2