In spite of what everyone believes through natural pride and vanity, the family house is an asset that depreciates.
Don’t be deceived that the value of property goes up and up, which of course it does. The rising prices are caused by the land becoming more expensive, not the house itself.
Rising property values create the illusion that the pile of bricks has appreciated. Alas, the building stock itself often sinks in value and within a couple of generations can even end up with a negative value, because the next owner pays to get it demolished.
With rising demand for the land, the chances of any given house becoming obsolete have increased. The same pressure on the land that causes property prices to exceed inflation simultaneously puts pressure on the existing building stock to be replaced by something more efficient. As a result, the lifespan of Australian houses is falling and the likelihood of the building stock appreciating is decreasing.
There are structural reasons that conceal the historical devaluation of Australian building stock. The bricks and mortar are often valued according to their replacement cost, because the calculation is performed for the sake of insurance. If a house burns down, say, it will cost a great deal to erect the same house again. The replacement cost is always greater than the original cost, thanks to the normal pressures of inflation on labour and resources. This valuation is logical if the decision is always taken to replace the house with a kind of replica; but the costing method obscures the underlying pattern that arises when houses are replaced not because of fire but because of dissatisfaction or obsolescence when the land-use is sub-optimal.
Because the suburbs were built on a sparse footprint, the existing stock is too low and sits on the land in the wrong place, often plonked in the middle of a quarter acre and seldom more than a storey or two high. As this footprint is proving unsustainable in every sense — and the signs of greater density are springing up on this corner or that — you could conjecture that few free-standing houses in Zone 1 Melbourne or counterparts in Sydney and Brisbane will escape demolition within a century.
Looked at historically, Australian development is hesitant and apologetic. We start with a single dwelling in the middle of a block. To fit more people on the allotment, we build a granny flat. Then we demolish both dwellings and erect three or four units. Then we look around for something else to knock down to build a couple more, but always apologetic low-rise, with shy footprint with setbacks and tentative profile, and still with poor prospects for longevity.
Slowly, we make the city denser; but stepwise, by short-term increments that have an expiry date like a mouldy cheese. At each stage, a lot of money is committed toward nothing for posterity, because our traditions have made us resistant to optimal land-use. No domestic construction conforming to existing setback rules is safe from demolition as demand for accommodation mounts and a replacement is indicated.
Ambitious home-owners go in for renovations, paying half the value of the property to achieve a new extension or new service areas. It might delight a family to have a larger kitchen or a bedroom in the roof. The problem is that the house is in the wrong place and would need another four storeys on top of it to be sustainable in a contemporary metropolis.
Australia puts so much money into obsolescent development based on tiny capital and tinier regulatory vision. Suburbia has long been recognised by critics as an ecological disaster, but much less attention has been paid to suburbia as an economic disaster.
We might ponder how the low-density suburbs damage the environment, first by instituting the least energy-efficient detached housing and second by forcing people into cars on our now strangled roads, which fill the air with carbon. But what is never contemplated is how the low-density pattern also has the effect of sucking Australian capital into a vacuum.
This is an extract of Robert Nelson’s latest book “The space wasters: the architecture of Australian misanthropy”, published by the Planning Institute of Australia, 2011.
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Comments (8)
Bruce Moon
Bystander! (logged in via email @imap.cc)
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This is another example of the US style construction/developer oriented argument.
The basic tenets are that;
1/.
land in older (inner) suburbs appreciates because of an increase in (relative) amenity. That is, services provisions such as public transport, access to hospitals, libraries, retailing, etc., is greater (than outlying less dense suburbs) and this 'amenity' is more highly valued
2/.
new housing forms are more appealing than older forms, and lack of maintenance means…
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Russell Hamilton
Librarian (logged in via email @gmail.com)
Robert, I think you should consider Brce's point that "Housing in Australia needs to be seen in context of lifestyle preference, not some fashionable model that enhances the economic outcome for some particular group/s."
Your home is an investment unlike any other. As Frank says a lot of people in higher density units in Europe aspire to live in a detached bungalow.
Also, when you write that "Suburbia has long been recognised by critics as an ecological disaster" you know that that is a contested…
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Eddy Schmid
Retired (logged in via email @westnet.com.au)
Russell, as a Perthite, I must express my views on the issue you mention, in particular the excitement issue.
What exactly would you consider excitement ? An old lady being bashed half to death in her own home, or a teenage party running rampant in your street with Police helicopters hovering overhead and neighbours homes/cars being trashed ?
Maybe someone being shot to death for not paying a drug debt and leaving the bleeding body lying in the street ?
Or simply a party being held in a neighbours…
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Russell Hamilton
Librarian (logged in via email @gmail.com)
Eddy, calm down and read my last sentence again, but first know that the phrase 'cultural cringe' refers to the cringe Australians felt because Australia seemed a cultural backwater compared to the salons and bright lights of London, Paris and New York.
I was saying that there has long been an anti-suburbs feeling among Australian intellectuals (Edna Everage and all that) which is still around today - they think that the suburbs can't generate the same buzz as the great cities. Although I'd prefer to live in the suburb I grew up in (beachside, no train, no apartments, no hotel or shops) I'm happy enough with the one I do live in. I particularly value the quiet, sunny, privacy of my backyard (though keeping the vegetables going through a Perth summer is always a challenge!)
Dustin Welbourne
(PhD Candidate Evolutionary Ecology, Biogeography + Science Communicator at University of New South Wales)
"In spite of what everyone believes through natural pride and vanity, the family house is an asset that depreciates."
Well not to burst ones bubble, but the family home is often not an asset. Often it is a liability, improving from that it is a brick bank account, but rarely is ones home an asset, i.e. something that increases wealth.
Robert, while I agree with much of the mud throwing you have done, you seem to be throwing it in all directions without explication; maybe it is your use of "we…
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David Healy
Retired (logged in via email @optusnet.com.au)
Several decades ago, we worked out the insurance implications of your accurate observation that it's the land that appreciates, not the house. No point insuring sand.
Frank Moore
Consultant (logged in via email @gmail.com)
Robert, better not tell the students of the "joys" of flat living. No backyard. No room for kids to play.
One group of Journo Relatives thought Flat living in Europe was terribly sophisticated - until they had kids... They came home.
This is the result of greedy property developers, many of them foreign government owned and supported enterprises, warping the body politic into the insane policy of enforced over population.
These deliberate over population policies are the root of our urban instability.
It is only this bloat-growth that leads to Robert's current focus.
A stable population policy, bringing stable land/housing prices into play, would focus the minds of the enterprising onto businesses and investments that are international in scope - real world orientated and sustainable - rather than this ponzi scheme of watching your "house" price soar. (At the landless-es expense).
Eddy Schmid
Retired (logged in via email @westnet.com.au)
Had a good laugh when I read this article, especially since I just renewed by House insurance.
Apparently the author of this article has a completelty different view of appreciation of a house then does my insurance company.
Strangely, the value placed on the house, (over 30 years old) is five times what it cost to build a replacement at todays prices.
I was told the factors built into this pricing were the demolition and disposal costs of the current house,(next door has had their neighbours…
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