MAYORAL MINUTE NO. 3/2016
UDIA CONFERENCE NATIONAL CONGRESS 2016, ADELAIDE 7 – 10 MARCH 2016
Councillors,
The UDIA National Congress 2016 was held from 7 – 10 March 2016 in Adelaide. The Congress was attended by Councillors Raymond Harty OAM, Alan Haselden, Tony Hay OAM, Dr Jeff Lowe and Robyn Preston. Cameron McKenzie, Group Manager – Environment & Planning, Ben Hawkins, Subdivision Co-ordinator, Stewart Seale, Manager – Forward Planning and Megan Munari, Principal Forward Planner also attended the Conference. A report summarising the key points as well as relevant observations is attached.
Accordingly, I move that:
MOTION
The report be received.
Clr Dr Michelle Byrne MAYOR
UDIA NATIONAL CONGRESS 2016 7 – 10 MARCH 2016
The Urban Development Institute of Australia (UDIA) is the peak industry body representing the property development industry throughout Australia. The theme of this year’s congress was “BUZZ”. UDIA gathered a first class line-up of speakers including:
Robert Papaleo, Charter Keck Kramer
Mr Papaleo spoke to the 2016 UDIA State of the Land Report (SOTLR) which was released during the congress. The SOTLR is an annual report which looks at the “greenfield” land market primarily. Some of the key facts presented included:
• The average median new lot size nationally is now 453 square metres, down by 4.3%
compared to 2015 and 12.2% compared to 2010 as shown below:
Source: 2016 SOTLR
• The average median new lot price in Sydney, Melbourne, South East Queensland, Adelaide and Perth is $250,658, up 1.4% from last year and 14.8% from 2010. In Sydney, this figure was $440,725, up 29.7% from last year. The disparity between Sydney and the other four major cities is best illustrated below:
Source: 2016 SOTLR
• 55,656 new lots were created nationally, up 9.9% from 50,653 in 2014. This is some 43.6% higher than the number of lots created five years ago. The largest increase was in Melbourne, with nearly two and a half times as many lots released compared to Sydney, as shown below:
Source: 2016 SOTLR
• As shown above, the supply in Sydney actual fell slightly from 2014, with levels of lot production not keeping up with demand due to continued strong population growth. In Sydney, there has only been approximately one months’ worth of housing stock supply for nine consecutive quarters. With increased demand the level of supply in Sydney will need to increase/ grow beyond current levels:
Source: 2016 SOTLR
The SOTLR notes that the historical development split in Sydney between infill and greenfield development is 70:30 and so these numbers on account for some 30% of the Sydney market.
Philip Lowe Deputy Governor Reserve Bank
Mr Lowe previously spoke at the UDIA National Congress in Sydney 2010, he described the economic conditions in the since years since. He indicated the global economy has had a recovery, although the average growth rate is still below what it was before the crisis. In Australia, the expected boom in mining investment did take place, leading to a large increase in our production capacity. For a time, this did result in the economy growing at an above- average pace, but this has been followed by a few years where growth has averaged below
trend as mining investment returned to more normal levels. He indicated, in terms of the
challenges that he spoke about six years ago, the issue of expanding the supply side of the economy and boosting productivity growth is just as pressing as it was then. He said in the housing market we now appear to have a better balance between supply and demand. And in terms of inflation, the outcomes in Australia – and almost everywhere around the world – have been lower than was earlier expected.
His speech centered on the broad themes of the resilience of the Australian economy, the productivity challenge, the balance in the housing market and the inflation outlook.
He indicated in the past two years, the prices of our commodity exports have declined by 40 per cent and mining investment has also declined by almost 40 per cent, which is the equivalent of nearly 3 per cent of GDP. Yet over these two years, our economy has continued to expand at a reasonable pace, with growth over 2015 having been a bit stronger than was earlier expected and not too different from the long-term average.
Importantly, there has also been sufficient growth in aggregate demand over recent times to keep the unemployment rate broadly steady and to accommodate a rise in the participation rate. Taking the past two years together, annual employment growth has averaged almost 2 per cent, which again is not too different from its long-term average. It is also a bit above population growth, so the share of the working-age population that is employed has also risen by around ½ percentage point over the past two years.
The job creation has been particularly strong in a range of household services. Health care has been a stand-out, with annual growth in jobs averaging about 4½ per cent over the past two years. There has also been strong growth in jobs in business services, following a period of weakness a few years ago when exploration activity and pre-construction work in the resources sector were being scaled back. In contrast, there has been little job creation in the goods-related industries over recent years.
He stated that the economy is successfully rebalancing following the mining investment boom and this resilience reflects, in part, the flexibility of three key prices: the exchange rate, the price of money (or interest rates), and the price of labour. The effect of the exchange rate depreciation is evident in the improved conditions and prospects for a number of industries, including tourism, education, agriculture and parts of manufacturing. Just as the earlier
appreciation helped the economy avoid overheating during the resources boom, the depreciation is now helping the economy adjust to lower commodity prices and lower investment in the resources sector.
He indicated the effect of low interest rates is most clearly evident in residential construction activity, which increased by 10 per cent over 2015. This strong growth is having positive spillovers to other parts of the economy. He suggested that over coming quarters, we can expect a further increase in residential construction, although at a slower rate than seen recently.
Mr Lowe stated that low wage growth is one of the factors that has underpinned the reasonably positive employment outcomes. Over the past year, the Wage Price Index (WPI) has risen by just 2¼ per cent, the lowest outcome in the 17-year history of this series Lower still is the growth rate in average hourly earnings measured by the national accounts. These types of wage outcomes are much lower than what most people had become used to and lower than suggested by the historical relationship between wages growth and unemployment. While this low wage growth is one factor constraining consumption growth for many individual households, importantly, it means that more people have jobs and this is clearly a positive for both aggregate household spending and the broader society.
Mr Lowe indicated our central scenario remains for growth in output to be a bit below trend over 2016, but then gradually to strengthen as the drag from lower commodity prices and mining investment wanes, and more of the increased capacity in the Liquefied Natural Gas sector comes on line. He outlined that the main risks to this central scenario still seem to lie in the international sphere.
He outlined that the first couple of months of 2016 have been volatile ones in bond, equity and commodity markets. Our largest trading partner, China, is going through a difficult transition
to a more consumption-led and service-based economy and is dealing with high levels of corporate debt and the complications of opening its capital account. On the monetary front, interest rates in the United States were recently increased for the first time in nine years, while the Bank of Japan unexpectedly moved one of its key interest rates into negative territory.
He indicated it remains to be seen what this means for us. The recent international data have been mixed but, at this stage, do not suggest that momentum in the global economy has been lost. The monetary easing abroad is a complication for us, as it tends to put downward pressure on the currencies where the easing is taking place and thus upward pressure on the Australian dollar. More positively, lower oil prices – which primarily reflect increased supply capacity – are mostly good for global growth: they lower the cost of production for almost every firm in the global economy and put more money in the hands of consumers. The lower oil prices do, however, create financial strains for some economies and for some companies.
He said there are lots of “cross-currents” that the Reserve Bank are watching very carefully at the moment.
He said that future growth in the average income of Australians relies largely on our ability to lift our productivity. While the rebalancing and resilience of our economy is certainly something to welcome, the longer-term challenge is to lift our living standards through finding new things to do and better ways of doing what we currently do. The need for this is made more pressing by the fact that the growth momentum in the global economy is less than it once was.
Ultimately, productivity growth is heavily reliant on decisions made by businesses. But policy decisions can also make a difference. Here, there is no shortage of ideas. They cover strengthened competition policy, better provision and pricing of transportation infrastructure, developing a strong innovation culture, creating strong incentives for entrepreneurship and hard work, and investing in high-quality education.
Mr Lowe indicated the rate of growth in the dwelling stock has increased so that it now once again exceeds that of the population. Reflecting this increase, the share of GDP accounted for by the building of new dwellings has risen significantly and is now close to the various peaks reached over the past 50 years. However spending on alterations and additions had been relatively subdued, overall investment on residential construction remains some way below the previous peaks.
This increase in the supply of dwellings has come on the back of a large run-up in housing prices in Australia's two largest cities. But the increase in supply now looks to be contributing to some moderation in the rate of increase in housing prices in these cities. It is also putting downward pressure on rents, with the CPI measure of rent inflation running at just 1.2 per cent in 2015, the lowest for 20 years.
He said in the period ahead, we can expect a further increase in residential construction, although at a slower rate than took place last year. While this more modest increase will mean a more modest boost to overall GDP growth from home-building, it should assist with the sustainability of the current boom in residential construction. He said it is unlikely to be in our collective interest to have a further surge in the construction of new dwellings, as a share of the economy, then to be followed by what would surely be a larger and more prolonged decline later on. Overall, the recent data on building approvals suggest that we are on a reasonable path.
He stated that from a longer-term perspective, the challenge of providing an adequate supply of reasonably priced housing for an increasing population rests largely on the flexibility of land supply and, in particular, the supply of well-located land. This is because high housing costs largely reflect high land prices, not high construction costs. Here, it is zoning regulations and the transportation infrastructure that can make a material difference. In both areas, progress has been made since 2010, but there is more to be done.
John W. Campbell, Renovo Advisory Services Ltd
Mr Campbell provided a presentation on the $35 Billion revitalisation of Toronto’s long neglected waterfront. Toronto waterfront renewal is the multi-billion dollar long-term plan for environmental improvements, economic activity and overall enhancement of quality of life through development of a designated waterfront area (DWA).
An interesting part of his presentation was an indication that they were preparing for autonomous cars including providing parking areas that could be converted to residential use later. He described a change to autonomous cars as being as big as the chance from horse and buggy.
He talked about the importance of building public trust in projects of this nature with provision of public parks and public spaces up – front as being important to building trust.
He described issues they had has with street – trees lasting only 5-7 years due to the compaction, an issue they resolved with soft-cells underneath to prevent compaction.
Catherine Caruna-McManus, Giant Ideas
Ms Caruna-McManus presented to the Congress regarding ‘smart cities’ and how technology can be harnessed to improve the quality of life through the built environment. Much of the presentation focussed on technology that is not apparent in everyday life, such as driverless cars. The ways in which roads and transport could operate if these cars became more prevalent is dramatically different to how they operate now with efficiencies being achieved via programming and the cars being able to communicate with one another.
Robert Doyle, The Right Honourable The Lord Mayor of Melbourne
The Lord Mayor presented some case studies from the Melbourne CBD relating to the way that local government can work with the development industry to achieve great things.
He discussed Melbourne City Councils laneways policy and other initiatives that involve bringing ‘life’ into the city. The commercial core of Melbourne had no night time economy and Melbourne City Council sought to improve this by increasing residential development in the commercial core. Introducing residential development brought people into the city after business hours and stimulated the economy in terms of small bars, cafés and restaurants.
He also discussed how the development industry can be highly varied. While some proposals demonstrate design excellence and provide a great platform for local government and the development industry to work together, others represent poor quality development that will be detrimental to the city. He stressed the importance of quality and working together to achieve the best outcome for cities.
He shared some of his experiences with developers. He described one developer who had approached him with a proposal that sought to significantly vary a height control on the basis the proposal was “iconic”. His response was that it was not iconic, it was just big. He also recounted a developer who had proposed a “flexi-room” in a development; it read as a cupboard. The message he gave was that there was flexibility in the application of development standards for developers who were genuinely contributing to the public realm.
Terry Goldacre, Harrington Estates
Mr Goldacre presented the project Harrington Estates (located in the Macarthur Region in Southwest Sydney) particularly with reference to delivery of the high quality country club facilities that were provided early in the development to show prospective residents the value of the development.
Harrington Estates is an environmentally integrated residential / large lot development that has a focus on the ecological outcomes, as well as residential amenity.
Martin Haese, The Right Honourable The Lord Mayor of Adelaide
Lord Mayor Martin Haese presented to the Congress regarding the creative culture in Adelaide and the way that Adelaide is revitalising itself and creating an identity. In particular, he discussed the small bars initiative in the city which sought to provide opportunities for entrepreneurs and create a night time economy in the city. In addition to this, several events such as the Adelaide Fringe Festival, have contributed to the cultural identity that Adelaide is establishing.
The Hon. Greg Hunt MP, Minister for the Environment
The Minister spoke about the need for long term plans for our cities. He identified the need to mobilise infrastructure funding and the “re-greening” of major centres, which included addressing environmental challenges relating to air quality and carbon offsetting. He discussed the need to set realistic targets relating to air quality extending as far forward as 2050 aligned with the Clean Air Agreement with standards that are progressively tightened all the while guiding the expansion of our urban canopy. He described the “great greenhouse challenge”
and the need for vision around individual cities, with a view to creating carbon neutral cities and establishing measures as to how this is defined/ labelled.
With respect to Sydney specifically, he supported the establishment of the Greater Sydney Planning Commission and the benefits this would have in engaging all levels of government (federal, state and local) in a bi-partisan way.
Study Tours
Some interesting study tours were provided including
Mt Barker
Mount Barker is the largest town in the Adelaide Hills, home to 14,000 residents. It is 33 kilometres from the Adelaide CBD. In 2009 the State Government rezoned the agricultural land around the town to allow for 35,000 residents. Lots in Mount Barker are available for $75,000 with house/ land packages from $225,000. It reinforces that housing prices reflect land prices more than building costs.
Lightsview and St Clair
Lightsview and St Clair are two in-fill master planned communities a short distance north-east and north-west of Adelaide city centre respectively. Both are predominately residential with ancillary/ supporting retail development. The tour focussed on medium density small lot housing with attached and abutting dwellings on lots as narrow as 3.5m. They also showcased smaller (up to eight storey) residential flat buildings of timber construction, as opposed to steel or concrete, which were more affordable due to the cheaper build costs (including labour, which relied upon residential rather than commercial contractors).
Both developments showcased the benefits of a master planned community, as opposed to development where fragmented ownership is prevalent, allowing a range of development types/ densities mixed amongst one another. Integrated into both were principles drove the sense of community such as the developer having an active role beyond just the initial build, technology (telecommunications) and sustainability (including the retention, protection and
embellishment for active and passive recreation of areas of vegetation and waterways onsite, as well as environmental sustainable development).
McLaren Vale wineries via Seaford Meadows
Seaford Meadows is a new release suburb of approximately 132 hectares south of Adelaide. It is intended to be a predominately residential area comprising a range of low and medium- density dwellings types, including supported accommodation with associated retail, transport, recreational, educational or community development in master-planned locations.
Subdivision works were being undertaken demonstrating the new lot layouts and some medium density development close to the local centre.
The McLaren Vale region is a key tourist destination to the south of Adelaide, which offers an extensive wine region in close proximity to the coast and beaches. The area capitalises on the natural surroundings, to provide a mixture of rural charm and beach lifestyle.
