Extract from "The ubiquitous rationale of growthism" by Tim Murray:
In a speech that could have been ghost-written by any of the aforementioned Canadian growth-a-holics, Premier John Brumby of Victoria spoke of his government’s plan to “manage growth”, because you see, growth is inevitable, and growth projections must be treated as, if anything, “pessimistic”, i.e. conservative. Thus Melbourne is going to grow at least 44 per cent by 2030, with 6.2 million people by 2020. “Demographer Bernard Salt has projected we will regain our title (sic) as Australia’s largest city within 20 years.” Note that the Premier treats a population growth plateau like a sports trophy to be raised aloft in triumph. Melbourne will regain its “title” like Mohammed Ali regained his title against George Foreman. Similarly when Victoria was “losing” people in the 1990s, presumably the state of Victoria was a “loser”. But now “the exodus has been turned around and people are now voting with their feet in favour of Victoria”. It is as if Premier Brumby is fighting an election campaign and people moving to Victoria are casting a vote for him. A commonplace illusion among Premiers, Governors and Prime Ministers
But he does acknowledge the strain that in-migration places on infrastructure and states that a million extra residents will require 380,000 new houses or apartments. Given Melbourne’s growth rate, he projects only a 17-year supply of land, and housing affordability, planning and supply issues demand full attention. He confesses that “the faster we grow the greater the demand on land supply”. Yet the one option that Brumby will not consider of course is to lobby the federal government for a severe cutback on immigration. Out comes a variant of Canadian Cliché number two: “we are facing a skills gap of 123,000 jobs over the next decade, which could curb our ability to benefit from the climate change economy.” Victoria attracts 27 per cent of Australia’s skilled migrants, and Melbourne 25 per cent of migrants of all categories. It is curious that the Premier would think that the importation of workers would be key to fighting climate change, when research clearly indicates that the best climate change fighting strategy is reducing population growth.
Certainly the Vancouver experience leads one to question the party line of housing lobby groups that releasing more land is requisite to housing affordability. Australian Property Monitors operations director Michael McNamara argues that “demand for housing is extremely flat and developers haven’t been able to sell the projects that they’ve got, let alone launch new projects - so we totally dismiss the argument that releasing more land on our cities’ outskirts is going to affect affordability”. ANZ Bank senior economist Paul Braddick says “there is no strong evidence to suggest that a lack of land supply has been driving up prices. The proof of that is house prices have gone up across the board - indicating it is not just land availability that is the culprit here.” Macquarie Bank analyst Rory Robertson attributes the fact that city house prices have grown 75 per cent faster than wages in the past 20 years to a halving of interest rates, the halving of capital gains taxes in 1999 and massive immigration which chose to settle in the eight capital cities.
Of relevance here is a study done by Bob Birrell and Ernest Healy of Monash University in 2003 entitled Migration and the Housing Affordability Crisis. While the authors acknowledge that Melbourne’s housing price spiral “cannot be attributed to recent migration levels,” they qualify their statement with significant findings. “The impact of migration varies sharply by metropolis. For Sydney the share of household growth attributable to net migration in 2001-2002 is 47.8 per cent Migration makes the next biggest impact in Perth where it is projected to contribute 33.5 per cent of household growth, then Melbourne where it constitutes 28.6 per cent of growth in 2001-2002.” By 2021, however, migration will account for 63 per cent of Melbourne’s household growth.
“Developers and builders are already heavily dependent on immigration to sustain their activities in Sydney. Within a decade those operating in Melbourne and Perth will be dependant on immigration for nearly half the underlying household growth. This will apply to Australia as a whole by 2021 when 48.4 per cent of household growth will derive from overseas migration.” It is in this context that the idea advanced by population sociologist Sheila Newman that property developers are key lobbyists for the country’s ecologically suicidal policy of high immigration becomes very plausible. As Birrell and Healy state, “It is no wonder that the housing and property industries in Australia are so keen for high migration”.
That immigration has a crucial impact on housing affordability is not immediately apprehended in any correlation of housing price increases in six major Australian cities with a given volume of migrant settlers. From 1989 to 2002 Sydney increased 30.7 per cent, Melbourne 20.5 per cent, Brisbane 45.8 per cent, Perth 23.5 per cent Adelaide 28.1 per cent and Canberra 34.8 per cent. What must be understood, however, is while certainly investors and speculators played a major role in the housing price spiral, immigration boosted their confidence, and without that the spiral would never have taken off. That is why, Birrell and Healy explain, Sydney’s housing bubble remained the strongest, for even if immigrants demanded mainly rental accommodations, “this is still vital to investors if they are to fill their properties with tenants”.
“In the case of Sydney, the intuition of residents and some politicians that immigration is a factor in the housing affordability crisis, is correct. The absence of the immigration component of household growth in Sydney would significantly reduce the underlying gap between demand and supply. There is little doubt that a reduction in the national immigration intake would improve affordability in Sydney.”
The authors conclude by saying that “Immigration is an important underlying factor shaping growth in demand for housing prices because of its role in household formation … By 2021, according to our projections, the migration component of household formation in Sydney will be around 75 per cent, in Melbourne and Adelaide 60 per cent and in Perth 54 per cent”.
As a rule of thumb, according to Albert Saiz of the University of Pennsylvania, “an immigrant inflow of 1 per cent of a city’s population is associated with increases in average rent and housing prices of about 1 per cent .” (Journal of Economics, Volume 6, Issue 2)
By that token then, immigration has added 18 per cent to the price of Vancouver real estate, or to put it another way, it has reduced the supply of housing stock available to resident buyers and the price mechanism has adjusted accordingly.
The logic of growthism calls for an increase in supply, for more housing units through more density and/or the release or development of more land. The logic of common sense, however, calls for a decrease in demand, that is, a decrease in tax incentives for real estate investors and speculators and a reduction in migrants.
Whether it be Vancouver or Melbourne, throughout the Anglophone world, the issues are the same, cloaked in the same euphemistic code language of growthism. The choices are ours to make.
Full article:
http://www.onlineopinion.com.au/view.asp?article=9020&page=0
