Author: asalvador

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Whilst the latest CoreLogic results indicate a pullback and gradual slowing down of the Sydney housing market, which is indeed weighing down the broader market – it is my view that we will see a return to continued growth across our major cities over the medium-to-long-term.

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I was recently discussing the subject of cities and growth with a parliamentarian who subscribed to the old Bob Carr and Dick Smith view that not all growth is good and that our cities may have already reached their optimal number of residents. But many people disagree and I totally disagree. As I respectfully explained to my parliamentary friend, there are certainly consequences to growth but there are far greater consequences to no growth. Just ask the Japanese, who have suffered negative population growth and asset price deflation for over 20 years now. It is not a pretty picture.

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In fact, in my view, it is only growth that can keep an economy alive and a workforce active for new job seekers. Growth is also supremely important for the renewal of cities, the revitalisation of old and obsolete industries and for the repositioning of our smart and innovative nation into the world’s new order.

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Central to growth, remains our still-very-well-positioned policy of active immigration. And this is vital because immigration still makes up the bulk of our current 1.5% growth rate, which is amongst the healthiest in the OECD. Surprisingly as the latest ABS figures show, Victoria is now our strongest growing state which is underpinning strong housing demand. On the other hand, we have witnessed a 68% drop in Western Australia’s growth rate since its Everest-like peak in 2011-12 which brought in tens of thousands of people during the mining boom.

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With the boom now finished, we have seen an outflux of residents to other states resulting in a weaker housing market with more properties for sale and less demand for them. It’s simple economics. This also explains the woes of Queensland in the last three years, where the property market has undergone very modest growth, partly due to a decline in international immigration.

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Our eight biggest cities now account for over 77% of Australia’s total population of almost 25 million, indicating that we do still love being in the big cities. This is a trend that I do not foresee changing and as our cities continue to experience strong migration levels, I believe that house price growth will continue.

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So, despite some open calls to cut immigration levels, I say we should embrace our growing cities. We have arguably some of the world’s most liveable cities and we should plan them for more people and for more growth. We should then use the additional taxation revenue to provide a first-class transport system and better supporting infrastructure which is generally always good for property prices.

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So I say in a simple way to my parliamentary friend and those others who think that growth is the problem; it is very clear to me that well-planned growth in all of our cities is actually the solution, and that solution is well within our antipodean grasp.

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Note: original post also included an inline image not migrated automatically: https://cdn.moble.com/w/690/150128/file/Picture1.png (in-article image)

In my view, the answer to Sydney’s housing affordability problem is a complex one. It is not just one thing that will eventually give rise to a solution, if it were so simple it would have been done already.

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This is not solving two equations in two unknowns with a quick pop-out answer. It is a little more like a Sudoku where all the numbers impact on each other and there are so many combinations that can be used, most of which lead to wrong answers.

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We are still very lucky by world standards. We have a highly-productive city (and nation) with lots of room to grow, supporting a highly-prosperous middle class, perched atop a huge pile of mineral-filled dirt, that supports enough crops and livestock to feed Asia for decades to come. All this whilst we enjoy some of the planet’s nicest sandy shores and eucalypt bushland.

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But housing affordability is a serious issue that we all need to tackle together.

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Taking Sydney as an example, the fact is that there are now some 26 suburbs, where houses have an average price of $2 million and the median house price is sitting on just over $1.2 million, completely out of reach for the average person.

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The reality is, we are not trying hard enough to make “a real go” at solving this issue. We call it window dressing, but the French have a far more elegant idiom: “L’habite ne fait pas le moine” or “the habit does not make the monk”. Robing the problem in a semblance of respectability does not give substance to a credible solution.

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But I like to think of things in a simple way: what composes the market price of a home? There are three broad categories: construction; land; and fees and charges. Profit goes on top – you know that thing that you need in a capitalist system to make any idea a reality.

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So, I would say that construction costs are the least flexible, as they are composed of materials, which are harder to obtain with each year that passes and labour which is capped at a minimum rate and generally costs somewhere between $3,000 to $4,000 a square metre of gross floor area.

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Next we have the land costs, which sit somewhere around 30 per cent of the total price for the average home. Land price should be the most elastic part of this equation, yet in Sydney it is not for two reasons; Sydney has a very slow and old approval process, often taking three to five years to gain permission to subdivide land or build and deliver an apartment building. Even after your land is zoned for a house, you still require a costly development consent that often takes years and tens of thousands of dollars to achieve. Secondly, land is a limited commodity confined within a geographical basin, bound by National Parks, The Blue Mountains and the vastness of the Pacific Ocean.

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That leaves only fees and charges: the GST; Stamp Duty; Land Tax; Contributions to Council and many others, which now add up to about 30 per cent of the price of a residential dwelling. This means that for a medium sized project of 50 units, you would need to write a cheque in excess of 1 million dollars to the council.

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So, if the government was serious about an affordable housing solution, if the three tiers of government could live without all or some of their taxes, we could deliver an $800,000 apartment to the public for a mere $560,000. That sounds better already doesn’t it?

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Going further, if the Crown which owns most of the land in Australia could put the land up for free, we could deliver apartments to the public for $320,000. Now that’s starting to sound a lot more affordable, isn’t it? And the government can put as many conditions on that as it might like; reserved for young people and key workers or perhaps no resale for twenty years.

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Nothing is unfixable, particularly because the main fault here lies in the rules and we make the rules. So, let’s make new rules and better rules to best guide our ever-changing societal needs forward. And if we ever forget which is the most important rule to use, I offer the sagacious words of US Supreme Court Chief Justice Sutherland, who said: “Salus Populi Suprema Lex Est”…” the Welfare of the People is the Supreme Law”.

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Let us solve our problems using our own rules. Let us not think that we have created a monk simply through brown-textured corded cloth. Let us ask governments on all levels to offer valuable and well-located land and remove taxes, in the interest of the very tax payer these assets and revenues are intended to support.

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It’s not simple but it is possible with some thoughtful manipulation of the basic rules of governance and we should not forget the tenets of the supreme law: “the welfare of the people”.

It’s not easy to build a bridge and I can assure you as an engineer, that it’s not easy to build the Harbour Bridge – a Through-Type Arch Bridge of significant proportions.

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This is the defining monument for Sydney. One that we have come to affectionately refer to as “The Coat Hanger”. And we have been proud to have “hung our coats” on it since 1932.

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And the Bridge’s similarities with that simplistic household item are unmistakable. It is reputed that no lesser than the Father of the American Constitution, President Jefferson had made the first coat hanger out of timber. The coat hanger has also filtered into the world of architecture, becoming the inspiration for the legendary Frank Lloyd Wright’s award-winning Meyer May House in Grand Rapids.

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But our beloved “coat hanger” is much more than that.

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It is a triumph against diversity, having been built amidst the Great Depression. Over 1 km long and 134 metres above Sydney’s stunning Harbour, it contains a staggering 53,000 tonnes of steel – enough to make 2.1 billion wire coat hangers. That’s sufficient for every man, woman and child in China to “hang” two items of clothing each… staggering.

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It also has over 6 million rivets and takes 272,000 litres of paint for one coat. That is enough to paint 81,600 houses in one year. This would be enough to solve Sydney’s affordability crisis, if they could all be approved, built and painted in one year – a challenge we have not yet been able to master in Sydney.

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So happy birthday Coat Hanger – many, many happy returns and don’t let it worry you that you’re on a Cricketer’s Devil’s Number of 87, because you are soon going to get a letter from Her Majesty Elizabeth Regina, to congratulate you on being a great servant to this Nation and reaching your Century.

Where would you be if your were at a world-class university that boasts among its alumni 23 Heads of State, including 8 U.S. Presidents; a Japanese Crown Princess; 2 U.S. Chief Justices; 7 world Prime Ministers; 49 Nobel Prize laureates; 23 Pulitzer Prize winners; a UN Secretary General; and 22 billionaires? You would unmistakably be standing before that famed 1636 sandstone and iron gate with the emblem containing the Latin word Veritas – the Truth. The truth is that you would be at Harvard.

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There are so many impressive things about Harvard, including the many fine art galleries containing world-famed paintings by Monet, Pollock, Klimt, Renoir, Rubens and Munch. Museums with Greek marble carvings of Emperor Augustus and Domitian, dating back to the first Century AD. Theser are Egyptian statues of Ramesses II, carved in 1279 BC. Add to that a Natural History museum that houses some of the rarest fossil records ever discoered on Earth, and a magnificient campus spread over 120 hectares… and you begin to have somethign thatis not just special, it is perhaps unique.

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One of the most interesting and unique places at Harvard has to be the Widener Library. Harry Widener was a successful busiensesman and bibliophile who had graduated from Harvard in 1907, aged only 22. He was a rare book collector and had begun his 3,300 collection, whist still an undergraduate at Harvard. With his first editions that included Dickens, Robert Louis Stevenson, Charlotte Bronte and William Shakespeare, Widener’s collection is today regarded as one of the most valuable in the world.

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On Wednesday April 10th, 1912, Widener boarded the RMS Titanic at Cherbourg with his father, mother, his father’s valet and mother’s maid. Sadly, however, the RMS Titantic, shortly after midnight on April 15th, 1912, collided with an iceberg and sank with a heavy loss of life. His mother and maid survived by boardign a lifeboat, but Harry and his father were both amongst the Titanic’s many victim, who met an icy cold death in the North Atlantic.

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After his death in 1912, his mother donated the then-massive total of $2 Million for the construction of the building that is now the iconic Harry Elkins Widener Memorial Library. Today, the Widener Library houses over 3.2 Million books and adds some 60,000 volumes to its collection annually.

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The gift of knowledge is a truly beautiful thing and out of intense tragedy was born eternal triumph. The triumph of the written word that gives every student the power of knowledge, made possible by the generosity of spirit and hand of the magnanimous Widener familt, whose gift of Harvard university will contribute to the education of thousands of students and scholars for generations to come. As Benjamin Frankling once said: “An investment in knowledge pays the best interest.”