June 2021

This is the 35th in a series of articles summarising monthly news and happenings in Sydney real estate, and more broadly.

New scapegoat revealed

A new report from OECD (Organisation for Economic Co-operation and Development) points a fresh finger at State and local council regulations for the rising house price bubble in Australia. The article describing this in Business Insider stated this was an ‘unexamined factor behind the failure of housing supply to keep pace with demand’.

The article notes that Australian house prices are the fourth highest in the OECD world, behind only New Zealand, Canada, and Sweden. Whilst low interest rates were acknowledged as a significant contributor to the current price escalation globally, not so obvious in Australia was that regulation was stopping the building industry from keeping up with demand. While owners of units in the Opal Tower, or Mascot Towers might raise an eyebrow over any suggestions of deregulating the building industry to achieve faster outcomes, Luiz de Mello, director of policy studies from OECD is quoted as saying, “Greater flexibility in land use regulations and zoning such as height caps in cities, and the speed of administrative processes for construction, would make supply more responsive to the increase in demand.”

The article also notes that a number of Australian bodies such as The Reserve Bank of Australia, Commonwealth Productivity Commission and NSW Productivity Commission have all brought attention to restrictive regulations affecting the housing market – in NSW especially, which is stated as taking twice as long as other states.

This is not contradicted by other news. For example in a recent article in Domain, in response to a lottery to randomly allocate 31 lots between 379 interested buyers at a new subdivision in Menangle, the new southern point of what can be considered part of ‘Sydney’, Toby Long, general manager of Mirvac is quoted as saying “The demand is there, but supply simply isn’t keeping up with it.”

Regardless of the eventual scapegoat, increasing numbers of voices are noticing that the property market especially in NSW (and especially Sydney) is spiralling out of control. A separate article in Business Insider cites a study involving UNSW professor Duncan Maclennan who interviewed 87 experts in the field. The culminative effect of these interviews was that, “[t]hey concluded that all levels of government are required to fix the current market, namely by increasing market supply and building the underlying infrastructure required to service it.”

Saul Eslake, former chief economist at ANZ and a current advisor to the Parliamentary Budget Office said the sector was experiencing a ‘triple crisis’ of growing inequality, heightened instability, and distorted economic growth.

This lattermost of the crises attributes is expanded on by The UNSW team, who conclude that 50% of all household wealth is tied up in property – completely skewing the Australian economy. One solution, the article states, is a Royal Commission, and with unseen fingers pointing vaguely to Canberra, the article concludes that ‘someone’ needs to take responsibility for the mess.

Bradfield becomes official 3rd CBD

The ABC reports the NSW Govt announced Bradfield as the third CBD for Sydney. Hopefully they bought the land at a good price. With over $1 billion slated for infrastructure, Liverpool – it seems – can kiss any aspirations of being the 3rd CBD goodbye. Instead the cows and sheep of the current Bradfield farm lands have suddenly become captains of industry for South West Sydney.

One of the many interesting things about this is the location. For example, allocating the abbreviation ‘CBD’ presents an interesting connotation as the ‘C’ stands for central. Bringelly / Bradfield is currently on the outer edge of Sydney’s broadest suburban sprawl. It will take a lot of development west to Warragamba, and south to Camden to put the ‘C’ in CBD, but then as illustrated above, there needs to be heightened supply of property to meet Sydney’s ever growing demand. It looks like the Government knows where its planning needs to expand to.