For the first forty years of my life, I lived in apartments. A city like Mumbai doesn’t offer you much diversity in your living preferences. In fact, apartment living is the only available option for a city with an urban density of approximately 21,000 people per square kilometre.
It was only after moving to Australia that I discovered house living. As mentioned in my earlier post, I couldn’t imagine returning to an apartment after so many years of living in a single-family home.
I began wondering for how long house living would be sustainable. Places like Australia are incredibly fortunate, with its abundance of land, high quality of living, and general housing affordability. However, the question is whether future Australians will continue to enjoy these benefits, or succumb to urban density.
Perth’s current urban sprawl
Perth’s urban density is roughly 311 people per square kilometre, based on its 2 million or so residents. To provide perspective, Los Angeles has a similar city size but houses over 2,900 people per square kilometre.
In the Greater Perth area, around 75 percent of residential dwellings are low-density/single-family housing. The fact this percentage is flipped in Perth city is inconsequential, as this area houses only 10 percent of Perth’s population.
To many rest-of-worlders, this is the definition of luxurious living. The availability of spacious housing options, coupled with the close proximity to a capital city, is unheard of in most parts of the world. Not to mention that land is at a relative discount, due to Perth’s property market slump for most of last decade.
However, in one’s pursuit of the Australian dream, Perth’s growth has been horizontal instead of vertical. Currently, Perth’s metropolitan area is 150 kilometres, which is nearly three times that of New York City. As more undeveloped land is released each week, the unfortunate truth is that this area continues to expand.
Defining the problem
Building horizontally carries an obvious personal benefit. More individuals and families receive their little slice of secluded paradise. However, there are clear and evident consequences of this lifestyle, the extent of which may not yet be fully realised in Perth.
For starters, building outward increases demand for new public works and infrastructure. As more people build in previously undeveloped areas, the government has no choice but to accommodate. This increases public expenditure, which in turn has trickle-down effects to the taxpayers. Further, reliability of some of these services (e.g. internet coverage) may be initially spotty depending on the location.
Then there’s the environmental issue to consider. Cars would be on the roads for longer and more frequent journeys, until reliable public transport infrastructure is available. Even then, it is unlikely that commuting volumes would significantly reduce. On average, Perth residents travel approximately 33 kilometres per day. This statistic is only expected to rise as more choose to live further away.
Having been in the building industry for several years, I can appreciate the portion of transportation expenses that is included in building costs. As more people build further away from established locations, the cost of materials and labor exponentially increases. Therefore, the cost of the build will erode any savings received from the discounted land.
Addressing the issue
In tackling urban density, the Western Australian government has at times proverbially spoken out of both sides of its mouth. On the one hand, the government has advocated for the adoption of “metro hubs”, which are high urban density suburban areas that are located close to existing infrastructure and potential satellite business districts. The intent is to reduce a person’s average radius for professional and personal commuting; a reasonable and welcome suggestion that is adopted in larger cities.
However, the last year has told a different story. The government not only bolstered existing first home buyer schemes in the wake of the COVID-19 pandemic, but also introduced new measures targeted at new home builders. This only serves to incentivise new buyers to build in areas where land is relatively cheaper, which just so happens to be located at the outskirts of the metropolitan area.
An alternative approach would be to attract new buyers towards purchasing existing vertical supply in Perth’s city area and neighbouring suburbs. This in turn would temporarily curtail the urban sprawl, as well as reduce commuting issues and other negative environmental consequences.
Another suggestion is to redesign historically low-density suburbs into medium/high urban density options. Perth’s older suburbs have considerably larger land lots, which could be subdivided to increase supply. However, similar suggestions have previously received considerable backlash from residents, for obvious reasons.
Is the way forward up or out?
The reality is that the Perth urban development model is not sustainable. There will come a point where it is uneconomical to build so far from the metropolitan centre. However, when that day comes, the concern is that the general population would be unwilling to recalibrate their living preferences towards higher-density options.
In anticipation of this future event, there must be greater emphasis on incentivising buyers to buy housing supply in higher-density locations, as well as renovating existing closer supply instead of building further away.
The content outlined above was written, edited and published by the Lost Realtor. The author has over 20 years or real estate sales and investing experience in the Australian property market. He has held senior positions in Australian building companies, including being the General Manager of the residential sales division of Collier Homes. His qualifications include a Bachelor of Commerce degree and a Graduate Diploma in Building and Construction Law.