Melbourne heads for a 2 speed economy and property market

I recently wrote a blog about why it’s better to invest in the inner suburbs rather than the outer suburbs.

A recent article in The Age –  ‘City heads towards two-speed economy’ – reports research by Dr Marcus Spiller, an economist and planner. It discusses the ‘extreme advantage’ of those living inner urban as compared to those living outer urban, including extensive research into the past and present of these two divides and, more importantly, the rapidly growing wealth gap.

In summary:

Melbourne could soon have a dual economy: a permanently prosperous inner city, surrounded by ”client” suburbs where jobs are hard to get to and lack security. …And the continued spread outward of the ”already super-sized” Melbourne could leave residents in these new outer suburban areas at risk of ”profound social exclusion’.

As you read on you’ll understand why the inner ring suburbs of Melbourne (and for that matter all our capital cities) are likely to exhibit stronger capital growth than the outer suburbs.

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Melbourne could soon have a dual economy: a permanently prosperous inner city, surrounded by ”client” suburbs where jobs are hard to get to and lack security, a new study warns.

And the continued spread outward of the ”already super-sized” Melbourne could leave residents in these new outer suburban areas at risk of ”profound social exclusion”.

Melbourne is one of the Western world’s lowest-density cities, stretching more than 100 kilometres from east to west and 90 kilometres from north to south.

Four of the last five former Victorian premiers talked to economist and planner Marcus Spiller as part of his research, published in an urban planning journal ahead of last week’s new metropolitan planning strategy, Plan Melbourne.

Dr Spiller, a principal of influential consultants SGS Economics and Planning, recommends reinstatement of a body similar to the long-defunct Melbourne and Metropolitan Board of Works, as a way of de-politicising planning and tackling the growing social divide of access to jobs.

The MMBW’s planning powers were removed in 1983. But all four ex-premiers – John Cain, Jeff Kennett, Steve Bracks and John Brumby – said there was no use in ”rolling back the clock” to reinstate the Board of Works, which one referred to as a ”dinosaur lacking entrepreneurial energy”.[sam id=37 codes=’true’]

All four agreed, however, that the elevation of planning as a voter issue and ”the introduction of a new [planning] strategy with each change of government” had exacerbated the ever-outward spread of the city’s suburbs.

Melbourne is one of the Western world’s lowest-density cities, stretching more than 100 kilometres from east to west and 90 kilometres from north to south.

Dr Spiller’s report makes clear the extreme advantage inner-city residents have over the outer suburbs in access to work.

A Carlton resident, the study said, could access 890,000 jobs by driving for 30 minutes in peak hour, while those in Cranbourne East could get to just 345,000.

The disparity in access to employment is even starker for those using public transport: a Carlton resident had 724,000 jobs accessible within a 45-minute public transport journey, compared with just 5000 for someone in Cranbourne East.

Over the past two decades there has also been a widening disparity in housing values.

In 1990, a house within a kilometre of the CBD cost just over $200,000 while a house 80 kilometres out cost a little over $100,000. By 2010 a house next to the CBD had a median price around $1.4 million compared with between $300,000 and $400,000 in outer Melbourne.

Dr Spiller’s paper suggests that, after the planning functions were stripped from the MMBW, no new force emerged to plan for the entire city. Instead, individual inner-city councils often frustrated attempts to encourage urban density. Meanwhile, lower land prices encouraged expansion on city fringes.

Planning ministers had also come to be seen as ”planner-in-chief”, and instead of rising above the political fray had become ”at the centre of the action”, making planning a key battleground.

The Napthine government’s Plan Melbourne predicts the city will grow from its current 4.25 million people to around 6.5 million in 2050.

Key aspects of the plan include a ”permanent” urban growth boundary, encouraging population and jobs growth in regional towns such as Kilmore and Wonthaggi, accelerating planning permit approvals in areas slated for significant housing growth, and encouraging huge employment growth in Melbourne City Council’s area.

Source:  The Age

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Michael is a director of Metropole Property Strategists who create wealth for their clients through independent, unbiased property advice and advocacy. He's been once agin been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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