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Tackling Darwin's property affordability

It seems whenever I engage in a discussion about urban development around Darwin I am told that purchasers are only prepared to buy houses on small blocks because that is all they can afford.  This raises two important questions for the Urban Development Institute of Australia (NT): firstly, if this is reality, is the industry offering the right product mix, and secondly, how do we as an industry continue to provide affordable, liveable homes as development costs progressively increase?

 Part of the answer to the first question can be found through unpublished research conducted for the then Department of Lands, Planning and the Environment (now the Department of Infrastructure, Planning and Logistics) during 2010.

 The research identified four distinct housing market groups:

– young families engaged in professional or white collar employment (20 percent were blue collar workers) with above average incomes.  This group included 28 percent of Darwin home buyers;

 

– a cosmopolitan, “middle Darwin” group who are environmentally aware, and have average household incomes (13 percent were blue collar workers), which included 32 percent of Darwin home buyers;

 

– retirees or white collar workers (16 percent blue collar workers), mainly with no children, who valued privacy, safety and security and had lower incomes than the young families group and included 20 percent of Darwin home buyers; and

 

– a group of generally professional or white collar (10 percent blue collar), older males with a low maintenance lifestyle who are confident and see themselves as leaders.  This group included 20 percent of Darwin home buyers.

 The first two groups (representing 60 percent of home buyers) were most likely to prefer either an elevated or ground level house in lower density suburban or rural developments and did not find city living attractive.  In contrast, the third group (20 percent of buyers) were most attracted to city living, although they were neutral on most other choices.  But the final group (also 20 percent of buyers) preferred higher density living, such as in urban activity centres, and did not find lower density suburban or rural housing attractive.

 While the research was not specifically directed at preferences for smaller blocks of land, it clearly identifies differing market segments and shows that some buyers prefer higher density living. UDIA (NT) would like to see further research aimed at clarifying the proportion of buyers who prefer smaller allotments and the reasons for this.  However, it seems that choices are not necessarily solely based on affordability of the different options.

 The answer to the second question is partially answered above – there will always be a demand for lower density housing and a mix of property types and price points needs to be provided.  But the question concerning delivery of affordable, liveable homes in an environment of rising costs requires further consideration.

 Design and green spaces are two important issues.  The increased emphasis on smaller homes throughout Australia, as well as in other parts of the world, is helping to identify new designs and new products suited to smaller interior spaces. Well-designed houses and apartments, even if they are smaller than the traditional Darwin block, can capture breezes and provide a sense of space, particularly when there are functional “green” areas nearby, providing they are skilfully located within well-designed suburbs and apartment buildings.

 Unfortunately, the costs of development in Darwin suburbs are higher than elsewhere in Australia, even higher than in other tropical regions, such as north Queensland.  Our cost issues are partly about scale – we simply do not build enough homes to enable economies of scale to operate.

 Costs of compliance with our cyclone coding, additional freight costs for getting materials to Darwin, higher costs of labour and delays caused by the wet season all contribute to our higher costs.  It is to be expected that future costs of delivering housing will increase as the costs of labour and materials increase, and the demand for greater services (such as broadband, underground electricity services, playgrounds) continues to increase.

 UDIA (NT) believes that delivery of affordable, liveable homes in the future will depend on:

-           The NT Government ensuring land release programs and investment in infrastructure keep pace with the demand for new housing;

-          continued innovation by the development industry;

-          tax regimes that do not unfairly discriminate against home buyers (particularly first home buyers);

-          population growth that enables Darwin to start to take advantage of economies of scale; and

-          transition to a more stable economy than that which has characterised our growth for almost 150 years.