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How can the world’s 6th largest country have a land scarcity?

Does Australia really have a housing affordability problem?  Maybe not

“Australia doesn’t have a housing shortage – it has an affordable well-located housing shortage.”

This sensible quote is from my mate, fellow Pom and property expert Catherine Cashmore, who you may know from Channel 10’s The Circle. So how can a country as vast as Australia even be discussing an affordability problem?

Coastal locations of the capital cities

The locations of Australia’s capital cities were chosen by the respective governor of each territory or his representative, although in the case of Darwin and Adelaide the surveyor generals instead selected the location.

Philip’s selection of Sydney Cove over Botany Bay is a well-documented episode history, although the specific reasons for the choice are often debated: a deeper harbour, fresh drinking water, the lack of swamps.

Perth and Adelaide were both founded somewhat inland, safely away from their respective ports, reflecting improved naval firepower – by the 1820s cannons had a range that could be measured in miles.

Most Australian capital cities are located coastally, creating an instant scarcity of desirable land close to the city.

In Victoria, an attempt to settle Port Philip Bay was abandoned in 1803 by governor Collins, but later interest in the area was rekindled and it was two private individuals who chose the settlement site of Melbourne, John Batman and John Fawkner, though the respective roles of the protagonists are sometimes debated by historians.

Brisbane, like Melbourne, is situated on a river some way from the harbour. Locations initially considered as possibilities for Brisbane included Port Curtis (now Gladstone), Port Bowen (Port Clinton) and Moreton Bay.

John Oxley, Surveyor General of NSW, chose none of them, instead opting for the location of today’s Brisbane River which he considered to be superior site based upon the usual favoured criteria of that time, the harbour, the water supply and the general lie of the land.

The site of Darwin was selected in 1869 by George Goyder, surveyor general of SA.  Previously cities had been selected by those with a naval, maritime or military background, whereas Goyder was a civilian. In keeping with those who had founded cities before him, Goyder’s main concerns were finding a site within Port Darwin that was free from swamp, had fresh water and a reasonable harbour.

Finally, the selection of the site of Canberra was naturally a political affair, and, as with most political affairs, the foundation cannot be attributed to any one person and committees were the order of the day.

Capital city

Date founded

Date made capital

Founded by

Sydney

1788

1788

Governor Philip

Hobart

1804

1825

Lt Governor Collins

Perth

1829

1829

Governor Stirling

Adelaide

1836

1836

Colonel Light

Melbourne

1835

1850

Captain Lancey

Brisbane

1825

1859

Lieutenant Oxley

Darwin

1869

1911

Goyder (civilian)

Canberra

1913

1913

The grid system in Australia’s capital cities

Australia’s capital cities tend to be laid out in a reasonably neat grid system and their values primarily driven by location. The grid system was already well known about when the first fleet arrived in Australia as it had been used extensively in America.

Sydney’s grid system, as you can still see on today’s maps is particularly irregular. Firstly, due to was inexperienced and inaccurate use of the compass when measuring out the grids in Australia’s first city, and secondly, chain measures were used fraudulently in order to secure larger blocks by adding or omitting parts of the chain.

In Hobart some roads in the grid had to skirt around dwellings in order not to disrupt existing owners, so the grids are by no means always perfectly aligned.

There are some other downsides to the grid system. Parks tended to be kept to a minimum in the city centres so as to capitalise on the best available land for building, and shops often tend to be laid out in a linear fashion spread out along one main road.

Although early development was haphazard, the arrival and influence of Governor Macquarie after 1809 saw Sydney and Hobart develop fine streets and public buildings, although due to existing buildings being in place, the street plans were still not completely regular.

Unlike the early inhabitants, Macquarie gave topography due consideration and thus the higher ground and ridges saw the construction of public buildings such as the barracks, the gaols, hospitals and the courthouses – and in both Sydney and Hobart, the Governor’s house was located close to the port with a perfect view of incoming shipping.

Unlike Sydney and Hobart, Australia’s third capital city, Perth, did not experience an initial phase of tent villages as the early arrivals camped close to the anchorage and this away from the site of the existing city, which is some way down the river. A consequence of this is that Perth’s grid layout saw far better planning and is therefore much more regular than that of Sydney or Hobart.

By the time Adelaide was founded, it had a far more comprehensive city plan, and this was also a plan which was later used by Goyder to map the layout of Darwin.

City designs

The design for the city of Melbourne was supposedly based upon a vague memory of plans for Sydney, and very little regard was given to the natural features of the site for which the city was planned to reside. Consequently, low lying areas around the river in Melbourne flooded and the traffic tended to avoid the hillier areas causing major congestion on the more level streets.

Brisbane also had its planning problems with a second plan being superimposed on an earlier draft, and thus flooding issues were noted there too, a problem which continues to repeat itself in the city today nearly two centuries on.

Prior to the foundation of Canberra then, very little regard was given the topography of the cities, and residential and commercial areas tended not to be separated and sprung up together.

How can the world’s sixth largest country have a land scarcity?

The grid system had one unintended outcome, this being that as the cities were laid out in rectangular blocks from the earliest days an artificial scarcity of city land was created. This problem was exacerbated by all of the early cities being located beside water.

The city blocks were fairly standardised, making surveying and selling them very easy, one consequence of which was a tendency towards speculative activity and rising urban land values. More than a century and a half later, this is still a subject that is very much in the news on a day-to-day basis.

Canberra is an exceptional – a compromise capital city to be located between Sydney and Melbourne, it was completely designed in the early 1900s. Canberra’s design was heavily influenced by the garden city movement and this is evident by the amount of the green space we can still see in the city today. Canberra does feature a grid system in parts, and it also has some more elaborately designed street layouts.

Adelaide had also been a planned city which was designed by Governor-General Colonel Light. Adelaide featured its own grid system and a series of five parks in the central area surrounded by a number of parks on the outer edge, which gave the city much of its distinctive garden feel of today. Light had the foresight even in the mid-1800s to design very wide roads and the parklands represent a major success even today.

As the capital cities develop, land in prime locations close to the centre of the cities becomes ever more expensive as the population continues to grow from humble beginnings towards some 30 million people over the coming decades.

Of course, at the other end of the scale there is vast acreage of land in regional and rural Australia which is virtually worthless. Property investors seeking capital growth should aim to acquire properties on the land which is most in demand.

CBDs can become oversupplied

The major thoroughfares in Australia’s capital cities are often filled with commercial property types, and are perhaps of less interest to average investors.

One of the problems with investing in Central Business Districts (CBDs) is that there are few restrictions on the height of new residential tower block developments and thus it is possible that at various times the market can be over-supplied with residential properties, as has recently been witnessed in Melbourne and, to some extent, Brisbane.

Investors seeking growth may often be wiser to instead seek out supply-constrained suburbs close to the city rather than searching in the city centre itself.

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About

Pete Wargent is a Chartered Accountant, Chartered Secretary and has a Financial Planning Diploma. He’s achieved financial freedom at the age of 33 - as detailed in his book ‘Get a Financial Grip – A Simple Plan for Financial Freedom’. Pete now manages his investment portfolio, travels and works as a consultant in the finance industry from time to time. Visit his blog


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