17 March 2010 – Australians could be on the cusp of “getting it” in terms of downsizing their houses to more sustainable and affordable levels, if you take note of Stockland chief executive Matthew Quinn.
Mr Quinn, who heads Australia’s biggest residential developer, said the evidence was coming through in the rate of sales for Stockland’s smaller and dramatically lower cost dwellings it had recently released at the Highlands community in Melbourne. “They’re walking out the door,” he said. More evidence was buried in the lower financing figures for housing Australia-wide, which he said were likely to reflect downsizing in house choice.
At Highlands, which is at Craigieburn, less than an hour north of Melbourne and near a train line, Stockland recently released 10 house and land package, each with land size of 212.5 square metres and house sizes of 144 sq m,for only $269,000. All of them sold out on the first day and the company now plans to roll our similar offerings “across a range of our communities.”
Mr Quinn was speaking at an Australia-Israel Chamber of Commerce business lunch at the Hilton Hotel in Sydney yesterday (16 March 2010) on the topic of affordability, which he said was a time bomb in the making.
He said that currently the picture for young people was bleak. Households on an average income of $1387 a week and paying an average mortgage of $712 a week for housing, have $460 left after tax with to pay for food, health, clothing, education and anything else an average family needs, he said.
The average house price was $485,000 but the price that the average household could afford was only $330,000.
Huge pressure on prices came from a number of sources. Population growth, expected to reach 36 million by 2050, was one. But Mr Quinn pointed out that even without immigration the natural growth rate would see Australia at 30 million by that time.
Another spike in house prices came from the first home owners grant introduced, despite warnings, without finding a way to create more supply, he said.
Currently undersupply of housing in Australia was 200,000 dwellings, a figure growing by about 60,000 dwellings a year, so that by 2020, underbuilding was likely to be 1.4 million.
“Prices will go through the roof,” Mr Quinn said.
Among possible answers were finding ways to build up densities in the metropolitan zones – shutting the gates was not an option.
Another was possible constitutional reform that could ride through the impasse of the various levels of government failing to co-ordinate their policies and activities.
Taxes were another. In Queensland, a quarter of the average new home price of $460,000 was due to taxes, said Mr Quinn quoting Property Council of Australia figures.
Yet despite these deep and it seems systemic failures, it could be that Stockland in a single stroke has delivered what all the property and building lobbies have failed to do – a housing option that has slashed prices and undercut the ideal affordable pricing point of $330,000 by a huge $61,000 margin.
How? By ridding the family home of the spaces that are hardly used anyway, Mr Quinn elaborated: the entertainment room, the formal dining room, the extra bedroom not needed by the family of three or four.
As Mr Quinn told the lunch crowd yesterday, Australia has the reputation of paying the highest price for housing of almost every country in the world, but the numbers are deceptive: Australia has the biggest average new dwelling size in the world, but second lowest cost per sq m, he revealed.
So a big part of the “unaffordability” was the sheer size of houses that the industry has been delivering to consumers.
Now at Highlands, the housing development industry seems to be finally delivering an alternative to the “choice” that previously consisted of various iterations on McMansions.
For Stockland this is the type of brave step that demonstrates genuine leadership and could kick start the sustainability revolution in housing – affordability included.