100,000 Approved Homes: Tim Sneasby On What Actually Stops Them Being Built

There are more than 100,000 approved but unbuilt dwellings sitting in New South Wales right now, not stuck in council red tape, not waiting on a DA, approved and going nowhere.

And meanwhile, state governments across the country have spent the last five years dismantling strategic institutions, overriding councils and stripping back design standards, all in the name of fixing the housing crisis. So if planning really was a problem, why isn't this housing getting built?

Tim Sneasby has worked on both sides of the table, urban economics consultancy and local government strategic planning, which means he understands the pressures developers actually respond to, not just the ones that make good press releases.

He's watched the YIMBY movement morph from a genuine critique into something closer to political cover, and he's tracked the moment the intellectual architects of abundance started acknowledging what planners have been saying all along. that zoning reform was only the outermost layer of a far more complex problem.

Today, we want to get into what actually drives housing delivery, why interest rates move prices 30 times more than supply does, what's really happening with those 100,000 unbuilt homes, and what it would take to build cities that we actually want to live in. Welcome to the elephant in the room.

This is the podcast where we love to talk about the big things in property that never usually get talked about. I'm Veronica Morgan, real estate agent, buyer's agent and buyer's agent mentor, co-host of Foxtel's Location, Location, Location Australia, author of Auction Ready and co-host of Your First Home Buyer Guide.

Hi, I'm Chris Bates, ex-financial planner and mortgage broker, currently ranked number three in the annual MPA Top 100 Mortgage Broker Awards. Before we get started, everything we talk about today is not personal advice, and we recommend you engage the services of a licensed and experienced professional.

Tim Sneasby is a manager of town planning at a Sydney council where he's got to be like the Oral-B dentist. We won't show his face. We won't tell you which council. He also teaches urban economics at New South Wales Uni and the University of Sydney, where he's an honorary senior lecturer.

He's a former Australian Young Planner of the Year, and we are really excited to have this conversation with him today. Welcome, Tim. Thank you so much for joining us. Thanks, Veronica. Thanks, Chris. Pleasure to be here.

Tim, we found out about you because one of our listeners actually sent us a question, which we do get from time to time. And as soon as we did find out, we read some of your articles. We were like, yep, let's get him on.

So I appreciate any listeners that ever want to get a guest that want to come on, just let us know because we do do it. So, Tim, thanks so much for joining us. I mean, we've gone on a bit of an episode hunt.

trying to unpick the sort of changes in New South Wales government and is that the canary in a coal mine for different states and how you know our cities are going to evolve um you know and the challenges in Sydney we there may be in other states as well in other cities but um yeah and as we sort of have gone down that journey we're sort of realizing that there's a lot of approvals right and there's a lot that are going through the system and

I guess I'm trying to understand what's actually going to get built. So when you sort of think about these changes in the New South Wales government and people have been blaming zoning as the issue, how do you feel about it?

Yeah, it's a great question, Chris, and something obviously I've written a lot about over the recent years, but something I've certainly thought about since I started working as a planner almost 20 years ago.

And so even when I started as a planner 20 years ago, there were calls to cut zoning, red tape, cut development assessment, timeframes, fast track, so on and so forth.

At that time 20 years ago, those calls were coming almost exclusively from the development industry. or the development lobby themselves, not necessarily the industry as a whole, and then also from treasury departments as well.

So that was really the only, I suppose, institutions that were making those calls. Fast forward to now, and that really is...

the dominant narrative that if we simply cut zoning red tape, if we up zone everywhere all at once, if we improve the assessment timeframes, then we will have abundant cheap housing for everyone. So one of the things I said in my recent article was that

For every complex problem, there is a simple answer, and it is always wrong. And that's really something that stuck with me from my professor of geography all those years ago.

And when we talk about complex problems, housing, house prices, the housing crisis, as it's called, You know, it's one of the most complex problems out there, really.

And I think it's the sort of problem that we really need to be throwing absolutely everything at, given that it reaches everybody. So, Tim, is the approach they've gone with the government, in your opinion, is that sort of the right approach?

I mean, as I've sort of got and I had to, you know, hands in the air, I've been trying to learn about this and I'm way out of my depth. I'm just trying to speak to great people like you, right, and understand this deeper and

Sort of what I sort of saw these approvals go, I was like, oh my God, they're just going to flood the city. It's going to be all these new apartments.

And then as I go deeper, well, maybe there's not enough builders or maybe there's now too much choice for buyers and buyers aren't sure what to buy because they've got too much choice. And then maybe these, and then I started doing more digging.

I'm like, well, actually these aren't most likely going to get built because there's not enough buyers for these and there's not even enough builders. And so, I don't know, when you think about the way they've got about it and they sort of railroad it through and just sort of mass rezoning of suburbs,

It's sort of brought a lot of, you know, potentially winners who have, you know, amalgamated sites and actually got deals done, not just sort of on options. But then it's brought a lot of uncertainty to the whole city as well.

And then people are unsure what to buy because they're like, well, how's this going to play out over the next 10, 20 years? So what's your opinion on the way they've got about it? Would there have been a better way? And what should we do?

Yeah, I mean, there's many elements to that question. First, I'll bring it right to the essence of the question. And the question's really about is the massive upzoning that they've undertaken across the entire city, all at once, is that the approach to reduce house prices or reduce rents?

And so fundamentally, that's something that I would disagree with completely.

compared to the sort of more dominant Yumbi economic type narrative, which says that planning is the binding constraint to housing supply, and that a lack of housing supply is what has caused high prices and high rents.

So that's really the fundamental building blocks of that Yimby economic argument. And really, it's also actually the framing of which mainstream economics or neoclassical economics looks at all types of economic problems. So if you...

remember from your economics learnings at university or whatnot, you know that when economists talk about things like high prices, they look at a supply and a demand curve, right? And so within that type of economic thinking, demand is always given. So you put demand to the side, so you go straight to supply.

And then also within that sort of neoliberal hegemony is this idea that if you've got an issue with supply, then it's regulation. And so that framing for the mainstream economics is really always naturally going to go to planning regulations, right? Like that's their natural home.

And so that's taken carriage within all the, I mean, it's all the treasury departments of various different state and federal governments

around the world have subscribed to that view, but it's also, it's gained mass appeal with certainly younger people and this idea, well, certainly this Yimpy movement, which is in a way it's masquerading as a progressive movement, which backs hard right-wing libertarian economics, you know, to have unfettered free markets.

So, and, you know, frankly, that's a funny thing about housing is that

There's really a political economy to all of this and people have their political worldviews, they're progressive or they're conservative or whatnot, but it's funny how a lot of people treat housing as something that's neutral and that sits outside of the political economy.

But I'm supposed to come back to the question, so there's this idea that this is the framing that planning is a binding constraint, it's holding back supply and supply is why we have high prices and high rates.

The competing view to that is the view that our housing system, like many other types of assets, has become finite. And so what that means is that financial conditions backed by macroeconomic forces have led to a situation where you have really high house prices.

And that's the same, I talk about housing as an asset class, that's the same for other asset classes, whether that's retail, commercial, industrial, or even farmland. And so one of the slides that I like to show when I'm lecturing is two identical charts showing the price from...

sort of the last 40 years. One is the price of housing in Sydney. One is the price of farmland in Australia. They're identical charts, right?

And, you know, the question I ask is, well, what I don't understand here is how has the New South Wales planning system caused farmland to be so expensive in Australia, right? So that's the natural joke, right?

You know, so realistically, when you look at these at a global scale, when you look at this issue across Australia, different asset classes, you find there's this global phenomenon with the financialization of assets. And there's many, many factors that have driven that. So there's the two competing views in summary.

One is the sort of supply side economics type view. So I'm just trying to get my lights to work here. And the other view is really that it's this financialization of housing that that's caused the problem.

And look, the supply side argument is intuitive, isn't it? I mean, because it just, of course, just a bit more. And politicians love it because it sounds positive. And actually on both sides of the political spectrum, they're sort of unilateral around this. And obviously the Yimbys love it because it gives them opportunities.

And the reality is, though... We've seen situations where in the same market conditions, in a booming market, for example, you've got prices rising in one segment of a city and prices falling in another.

And just an example would be the last time there was a boom in Milton where established properties were going up very rapidly in price and yet apartment values were going down. So things can operate. And so they would argue that's good.

That's great because that's providing opportunity for first home buyers, et cetera, et cetera. So, yeah, again, it's not simple, is it?

But I think that if we go back to sort of the constraint of councils, you know, so there's this belief that councils are in the way and that councils have been blocking approvals, but...

I think you've reported that 95% of development applications in New South Wales anyway get approved and Sydney just came through its biggest ever construction boom under the same planning system now being blamed for the crisis. So how did the narrative get so far ahead of the evidence and who's been letting it run?

Yeah, what a great question. So yeah, I'll touch on some of those points you made. And the fact is that certainly over the last couple of decades, 95% of DAs are approved in New South Wales. Sydney's just had its largest housing boom under this planning system we're dismantling.

Australia is a world leader in housing supply. For a long time, we've always been above the OECD average in terms of housing supply for the last 10 years. Or even for the last 25 years, housing supply has outpaced population growth.

But you wouldn't think that based on headlines, would you, and the general narrative? No, absolutely not. And the other one I like to say is that, and this relates to the 100,000 approved but unbuilt, but if you look at the last two years in Sydney, less than half,

of DAs for multi-residential development, like apartment development. Less than half have actually gone right. And so at the same time, all of those facts are clear as day, but we're going through this approach. And I think you really nailed it before, Veronica, when you said that.

The whole supply side, it's a really compelling argument. And the example is

You look at bananas when we had a cyclone a couple of years ago, we had a supply shortage and the price of bananas went up. And so I think most people have a basic understanding of that. And so that's when you say, well, hey, we simply can just increase the supply of hair.

We've just got to cut red tape and then prices will come down. And there's really not... huge display of what the empirical evidence is.

And certainly in the cases where the government does say, look, we've got evidence for it, it's really around cherry-picked evidence about certain, this city upzoned and they got more housing.

Australia actually has a low number of houses per population because we've cherry-picked the right number that suits our narrative. So

it is really about yes but speaking to you know very specific types of scenarios like the one um that politicians like to talk to is about Auckland you know Auckland up zoned and they've you know as a result uh they've got rents that are lower than they otherwise would have been and so

I could speak to that and why that doesn't necessarily translate to places like Sydney or to other places or to the fact that there are issues with the research that's been done there. But by and large, it really relies on vibes, economics. Supply, that's a good point.

And councils actually are pretty useless at doing things. So put two and two together, you can say that businesses That really makes sense. It's, I suppose, a master signifier for the political class.

This idea of, yeah, these sort of powerful industry groups, politicians and their advisors and legacy media all sort of working together with that master signifier.

Is there like a middle ground though? Like, you know, we are getting more supply, whether it's nowhere near as much as is getting zoned. But, you know, when you look at drive down Rose Bay right now, I mean, nothing was really built there. Nothing was built in Mossman.

Nothing was, you know, I mean, there was definitely stuff happening on the Northern train line, but nothing like what's coming now.

So like, while it's not going to be at the level, while it's nowhere in it, there is still, and when you think about where new supplies being created in say Sydney, you know, you've got a lot around the airport, you've got a lot in,

You know, the Eppings, you've got a lot in Parramatta, you've got a lot on the fringes.

Like there was a real lack of, you know, in the inner city, you know, and that's mainly due to the feasibility, I would say, also around for developers to actually be able to get it out of the ground and a scale to actually be able to sell it.

But is there any, like, so is there a middle ground where instead of this blanket, come on in, Todd, LMR, mass rezoning, a mishmash, you know, community uproar, no certainty.

There's a middle ground where if it was strategically just thought through a bit better, you would still get pretty much the same supply, but you would have got it in a way that was much more council-led.

But maybe the nimbyism, though, of just fighting every DA, I don't know, maybe this is a belief the media have caught up as well. Maybe that sort of those community action groups.

I mean, I've been in meetings when people have been fighting DAs of, you know, calling up their mates when something new has been lodged. So is it the success of NIMBYism has also then meant that they've had to come in really hard? I don't know. I'm just trying to... What's your take?

Yeah, look, that's it. I'm glad you asked that question. And I really like that framing because it really, I think, speaks to the...

to the way I think the media have manufactured consent for that dominant narrative, you know, and talking about NIMBYs and councils and so on and so forth, because NIMBYism is real, right? You know, it's absolutely real. We all see it. We all witness it.

We are all frustrated by it at various times in our life, whether professionally or personally. So it is real, but, you know,

When you worked as a planner as long as I have, and you've looked at all the research around that, NIMBYism doesn't reduce housing supply at an aggregate scale in any way. Even at a micro scale, it's really limited in its effectiveness because

We have in place legislative frameworks that are set from the outset that guide development assessment decisions.

And so you might get 100 submissions on a DA, but if that DA is compliant and it meets the objectives, then those 100 submissions won't make a difference, right?

You might get one submission on a DA which points out and says, actually, you know, there's this issue here with this DA, by the way, and they've shown this diagram, but actually, in reality, it's actually going to take all of my sunlight. You know, that is a powerful submission because it speaks to...

So this idea that... NIMBYs can stop overall development. There's absolutely no basis for it, except to say that NIMBYs are real, that they are a pain to people, whether...

you know, professionally or personally, you know, but to say that we have a robust democracy, we've got processes in place. And here's an example, right? So if council was to refuse either an upzoning then it can go to an appeal process.

And if it has merit, it will get approved by the state government. It's the exact same thing with development applications, right? If council refuses a development application, there's an appeal process. So there's checks and balances within our democratic system.

And so, yeah, it's this idea about Nibiruism really stifling supply at an aggregate level is overblown. But I will say this.

Cases like the Lower North Shore and the success of DAs being lodged there, that for me does indicate that there are places within Sydney without a doubt where there has been unmet demand and that there could have been upzoning of those places, particularly I think that Lower North Shore area.

Does that mean that you need to come in with a, you know, from a top-down centralised approach and, you know, sort of do it in the way that we have done it with the Todd and Lomi draws? Or could there have been a better approach?

And I would argue that the better approach would have been to say, I think I've just done this in the past, is that they say, Council, you have a housing target. If you don't act on it, then we will.

And so that's been done in the past, and councils always act on it, right? You know, there's a handful of councils that get pointed out, like, you know, the Kareem guys or the Hunter's Hill of the world.

You know, and they're sort of used as straw man arguments for, you know, say there was Hunters Hills only approving 20 dwellings a year. That's what's wrong with our New South Wales planning system.

Like literally they're the sorts of straw man arguments you see all the time, despite the fact that every other council, you know, are approving vast numbers and they sort of.

These straw man type arguments, but the better approach would be to go through a proper master planning process where you get buy-in. And also as a part of that process, you actually can create place-based outcomes, which create value.

better centers better town centers better neighborhoods you know you are calibrating design for that area so you say well the tall buildings can go up here maybe we can scale down to these areas here are some geographical or hydrological constraints how do we work with these heritage assets over here and you can do that in a way which you can

get an outcome which delivers just as much housing, if not more housing, than this up-zone everywhere, all-at-one approach of the Todd and the Lowe and mid-rise. And that's the historical approach of strategic planning in Greater Sydney. That's what we've been doing for a long time.

That's why we had a record housing boom less than 10 years ago in Sydney under that older system. And the benefit of that system is that you can capture value to fund infrastructure And you can capture value to deliver affordable housing. You know, under the current approach, those opportunities are very limited.

How does that differ? Because, you know, the government's going to argue that, well, you know, we'll give you three extra levels if you just add in, you know, was it 10 or 15% of affordable housing, which we all know is affordable in relation to that area anyway. So how is that?

Because I haven't heard that argument put forward before. So can you explain it for us? So if I can understand your question, you're saying that the state government had this bonus where you can provide affordable housing. You know, aren't they doing that? Aren't they providing affordable housing? You know, councils can do that?

No, no, no. The question really is, Ryan, what you've said is that the current planning laws really allow for less social housing or affordable housing than what was previously in place. So I'd love to hear the...

comparison because the rhetoric is, well, all developers need to do is add, is it 15% of affordable housing and we'll give them three extra levels. So that's a lot of extra floor space for a very small amount of affordable housing that they're providing. So how does it work?

Explain how your argument works. Yeah, that's a great question. So Affordable housing as a concept is fairly new in New South Wales and even in Australia. Forever and a day over in England, they've been providing affordable housing as a part of their development. They've been mandating it, in fact.

And so only probably in the last 10 years has the state government said, actually, okay, now we will take an approach where we're capturing some of the uplift and funding that towards 30%. towards affordable housing. And so they have allowed councils to do that.

And so various councils have different schemes around what they've determined to be a viable affordable housing contribution. The council I work at, we've got a target rate of 10%.

recent up zoning which which only had a fairly small up zoning we were able to implement uh around nine and a half percent affordable housing for that and so when councils do it it's in perpetuity it's affordable housing forever it's it's either it's dedicated it's given to council or given to a chp and it's genuinely affordable it's you know maybe 30 of income for example uh

The state government's approach is to say, okay, well, we've got these bonuses where you can get more height and more floor space, subject to you providing affordable housing for 15 years only. That's the first thing. It's not in perpetuity.

The second thing is that it's owned by the developer, so they recycle that. They'll do something with it. And then the third point is that it's actually not affordable in any way.

And, you know, there's been an expose on the fact that the state, you know, they've found apartments which are actually renting at above median rents for that area.

And the loophole is because the guidelines say that the rent has to be discounted by the market rate. The market rate could be for that... exact same development. So if a two-bedroom apartment in that development was renting for $2,000 a week, then a 20% discount on that.

And it's just a small discount. It's not like a substantial discount, which is what a lot of councils would have. then if we discount that by 20%, then let's just say that's $1,600 a week, right? And you might find a two bedroom apartment in that suburbs ranging for $1,000.

So, you know, that's really an implementation issue and the state government needs to fix that up. But, Yeah, so that's really the frustration. And, you know, Chris, I know you mentioned before, over in Wallara in Rose Bay there, you've had upzoning and you've had new housing.

And so the thing about that is that in that low-mig-rise policy there, they've got a 0% mandate for affordable housing. So you get a large up-lived and you have to provide a 0% affordable housing. And there's no... infrastructure contributions mechanism that ties that uplift to fund new infrastructure in the area.

And that's what a master plan approach would do. It would say, okay, well, we're having all of this uplift. We've got this many people.

We are going to tie in an infrastructure contribution associated with that development, which is generally paid by the landowner in the form of a reduced sale price with the ROV.

you know, so you lose those opportunities to actually do that specific place-based type infrastructure.

So the argument, we had Paul Scully on a few weeks ago with, and we had some, you know, different people buying sites, et cetera.

We've had lots of different people on this conversation, but what is their sort of argument towards, like, if you're going to put it on their side, around their argument towards councils, that they haven't embraced these master planning, you know, ideas, they haven't sort of,

come up with an alternative solution where they're trying to all come together and try to create sort of new supply within their councils like you know their argument is that they weren't going to do it the only way we're going to do this is that we'll just have to come in and change it at a state level like that was kind of what they're saying so

Was there just a real, because there was no solution, no councils leading the way, I guess, or maybe there are, like, you know, particularly in sort of like, you know, the Kuringai or the beaches or the, you know, the eastern suburbs or the inner west.

Like, if, for example, they all were given a bit more time or maybe they felt like there was a pressure, if they didn't get it by a certain date, they were going to get this alternative option. Yeah. Should that have been the approach? Because now they're all sort of scrambling, right?

Inner West have got their own option. Kurunga have got their own. You know, eastern suburbs, you know, there's still. So what would be, you know, the better option here? Because I think they're going to argue is that, you know, they were just the council's wish weren't going to do it themselves.

Yeah, I mean, it's an interesting argument because that's what we've been doing in councils forever and a day. Like, I mean, how do you think we had the largest housing boom we had? Like, it's forever and a day. We've always followed a process where we have growth targets.

We say, okay, we've got these growth targets. What's the next area that we can identify for accommodating additional population? How do we do that? So on and so forth. Yeah. I appreciate that there might have been some councils where that wasn't working, like Karingai, for example, or others.

But by and large, that was the approach that has been taken. It's been very successful, as I pointed out, in all of those supply numbers. But we've had this fairly false framing that councils weren't doing anything wrong.

And it's like when they said, we've got to cut all this red tape because we need more supply. Okay, well, which red tape are you talking about has failed? Can you actually point to me a specific example? But like literally out of all of these press releases, there's not a specific example saying,

You know, this part of the planning system has failed because of X, Y, Z reasons, right? And so certainly I think a better approach to the state government could have been to say, okay, councils, here's your new growth targets.

You have to achieve those for those councils that don't go through that proper process and end up zoned as a part of their traditional strategic planning, master planning process that we're going to come into all year.

You know, so the state government, I think two, three years ago, they said, hey, councillors, we want you to do low mid-rise upzonings and we're going to give you an opportunity to respond to us. And then I think about a month later, they announced the low mid-rise policy.

You know, so it was sort of like the term for that, but it was disingenuous. But I mean, from my understanding, like Mossman's going through a whole like re, you know, discussing, do we put a lot more around here or do we spread it?

Do we, you know, so it's almost forced the councils to prioritise this to number one on their sort of hit list is basically finding ways that is better to actually increase density, to create more supply, more opportunities for developers. So like, and, you know, is that sort of the win out of here?

Is that, you know, that... Mass rezoning has put a lot of fear into people, but then it's forced the councils to come potentially with lifting height limits, with creating the ability for greater density.

Because you can say that, yeah, the zoning was already there, but if people can't make it stack up on those current limits, then they won't build. And from my understanding, we have been building a lot of greenfield estates. We've been building a lot of high density in certain pockets, but...

not as much supply, particularly those sort of well-located areas because the argument was that, you know. Yeah. Maybe I'll touch on that argument first, this idea that we haven't been building in well-located areas. And, you know, it's funny.

I think I wrote an article about it a while ago. The Sydney Money Herald did a stranded Sydney series where they talked about the failings of of greenfield development, the lack of infrastructure. And the conclusion that they landed was that, oh, it's because NIMBYs don't want housing near them in inner Sydney.

That's why we have greenfield development. Which, you know, if they'd spent a short amount of time speaking to planners or actually looking at the evidence of housing supply, they'd realise that was completely untrue.

And so an example there is that, you know, as you would know, housing works in sub-markets. You've got submarkets within submarkets. So this idea that someone who wants to buy a Greenfield house in Kellyville will then go and buy a house in Wallara, sorry, an apartment, forget about it.

Straight away, the submarkets aren't comparable in any way. That's the first thing to say. The second thing to say is that for probably the last 15 years,

the vast majority of new housing stock has been apartment stock, has been infill stock. And so it was quite funny. Except there was a small blip in and around 2020, which was a result of the HomeBuilder bonus given by the state government at the time.

And that shifted a lot of demand towards Greenfield. And when I say shifted demand, it really actually just induced that demand for those people that were already going to buy it there anyway.

And so we actually saw a change in that long-term historical split. But actually what we're seeing now is just a reversion back to that split, which is around 85% infield and around 15% greenfield. And that's been the case for a long time. And really that was driven, you know, the shift from greenfield

really sort of started, I suppose, post-2000s in a way in which we've sort of adopted more apartment living. I mean, obviously we did it in the 60s and whatnot as well, but I think there's been a big cultural shift in Australia. There's been all sorts of shifts that have driven apartment development.

So that idea that we're being forced to build in greenfield areas, it doesn't stack up when you look at the evidence, the historical evidence in Sydney. And the other point today is that

Yeah, like places like Moss, Kuringai Council, like, you know, they're exceptions to the rules where, you know, those are the sorts of places which... have clearly had unmet demand for housing and now that's being thrust upon them in a way in which they weren't delivering in the past.

Yeah, but to suggest little old Mossman's going to solve our housing crisis is completely disingenuous. And you look at places like Waverley or Wallara in the eastern suburb, I believe it's the second most dense LGA in all of Australia. two-thirds of their stocks are apartments.

Even Wallara is in the top 10 most dense. The way that the media portrays Wallara LGA, it's this wealthy enclave of large housing estates. And it does have that, but it's also actually by and large apartments and much denser than

Most areas within Greater Sydney, so there's this idea that we've got rich Nimbys living in wealthy areas, hoarding housing, when the reality is that some of those areas are actually some of the densest and have densities in line with European cities.

And that's fascinating, actually, because I've often wondered about that myself. And, you know, yeah, there is that sort of perception that, oh, they're resisting development. The NIMBYs are, you know, running rampant. And certainly in Mossman, like you're saying, Mossman, you know, was sort of behind in terms of his delivery.

And so, but, you know, we're hearing of the types of developments that are getting out of the ground and they're expensive, you know. Yeah, like you say, they're not contributing to affordability. They're really allowing people to move around within the suburb as opposed to bringing more people in necessarily.

Can we get to some of the numbers? Because, you know, you've done some research on it. You looked at the Reserve Bank's own modelling, you know, finding a 1% drop in interest rates pushes prices up by 30%.

While doubling housing supply moves them, and I presumably mean down, by 5% over many years. Can you talk to that? I mean, because if the demand side levers are that dominant, why has the entire policy conversation been around supply? Whereas...

You know, demand is obviously, like you're saying, and demand moves and demand is different in different areas as well. And so it's not we have this homogenous group of buyers that will just go wherever the supply is. It doesn't actually work that way. Talk to that for us, if you can.

I mean, it's sort of like you could probably say,

economists and governments a little bit like that Disney cartoon, you know, we don't talk about Bruno. You know, any parents know that song, we don't talk about Bruno. Like we don't talk about Demarque. Demand's too hard to talk about, and so we don't talk about that. Demand is a given.

I mean, the federal government position of the 2019 election, I think, tried to tackle demand. And certainly we know that the current federal government have done that recently with the most recent budget. And it's worked just quietly because it's very quiet out there at open houses. I can tell you that.

Yeah, and certainly, I suppose the other side of demand, so that's the effective demand and the underlying demand, which is the overall household formation rate, which is driven by population growth and by

you know household formation people moving out and starting their own home etc um you know so that's another thing that's obviously has a huge impact but you know it's and certainly the government when they said okay well we had a postcode spike but actually we want to get migration down to xyz level and i forget whatever that was i remember looking at the time and

and actually comparing it to historical housing development numbers. And it wasn't a number, whether that was a coincidence or not, that aligned with our historical housing production rates. So I suppose the government in that space, but demand is one of those ones that

You know, it's much trickier. And I suppose, you know, there are levers that the government can pull around taxation settings, around macro prudential control, certainly around migration, although they'll indicate that they can't really change that. They can't touch that.

But, you know, they're the ones that... I think, have the most immediate and the most profound impact.

But it's much more difficult to do that than to do planning reform theatre, which costs governments nothing, which says, okay, look at us. We're doing this busy work of cutting red tape and you know, everything's all happy days.

And, you know, I mean, 10 years time, they might have to change their story if the numbers don't actually change. But yeah, certainly in terms of, you know, the RBA's own work showed the biggest driver of housing prices is by far, in a way, interest rates. And we all know that, right?

When interest rates get cut or when they go up, that's had a massive impact. And so that's, you know, really... been the main driver of the financialization of all asset classes across the globe. It has been a record low interest rate environment globally.

And so you're getting people chasing lower and lower yields. And so that's been a massive driver. Then in places like Australia, there's added layers like the taxation benefits of investing in housing as well. And not to mention the cultural side of things as well. We've got these TV shows around how do we

you know, how do we do up a house and how do we sell a house and all that sort of thing. So it is really the great Australian dream. And, you know, and like, here's the other thing about Samhain, right?

If we want to talk about our construction labour force, like we have one of the largest construction labour forces as a percentage of our labour force in the OECD, right? So it's not as if we don't, we've got a small construction labour force and we can just ramp that up.

And, you know, we know that in the absence of increasing skilled migration for construction, it's a very slow time to actually build up a construction workforce. And no one speaks about the fact that, you know, when you have major infrastructure pipelines, that clouds out.

And then the other, really the elephant in the room, as part of this podcast, is the renovation construction workforce. If you look back 50 years ago, very little of the construction workforce was spent. in doing renovations.

Now, you drive around in any of those areas, every fifth house is getting renovations. So the percentage of our construction labour force that is absorbed by doing home renovations is truly massive. This is quite interesting.

I was talking with my ex who owns a mid-tier construction company and he was saying, you know, everyone's talking about the increasing cost of building around materials. He said, I really think that the increase in cost is going to be in labour and that's going to far outstrip materials.

And he was talking to a lot of the things that you were just mentioning. You're nodding. I'm presuming that means you think that could be right. Yeah. Yeah, absolutely. And it's probably a lesser known fact about me is that I have family that are volume home builders. Right. Not in Sydney.

You know, they build over 300 houses a year and, you know, they're also property developers. And yeah, I mean, all of that stuff is true. And that's not being discussed, is it? Because we're talking about inflation and inflationary effects and how that impacts interest rates.

But also, the thing is, too, if you do look at over time, there's been periods of time when prices have risen, even in higher interest rate environments.

So when you were saying that the RBA's modelling shows that a 1% fall in interest rate contributes to a 30% increase in prices, I'm presuming that's sort of the immediate after effects within sort of a fairly constrained timeframe. Is that fair to say?

Yeah, I'm glad you asked that question because that research has done prior to, I think it was done around 2019. And so what we saw in the last couple of years was a period of time, which is sort of unprecedented where interest rates are increasing, but prices are still going up.

So that was really interesting. And maybe if they were to update the research in the next five or 10 years, that research might be different or it might talk about lag effects. For example, it might talk, you know, that could be the dead cat bounce, for example.

Yeah, but there's also, I think there's, it's like with any shock, I mean, we're currently in the current market. And I know that some capital, in terms of price growth in capital, say, Sydney and Melbourne really bit hard at the beginning of this year, even with the first interest rate rise.

And now we've had this budget that's really just killed it. we are seeing an absolute slowdown in price growth in Brisbane, Adelaide and Perth, which have been booming, as we know, for a number of years.

And so you can actually have different market activities, but you get a period of time where everyone just says, all right, I'm going to wait now. And everyone sits on the fence waiting, waiting, waiting, waiting.

But there's also a point of time, even when rates are rising, where people think I've got to get on with my life. I need to upgrade still. I need to downsize still. I need to get in the market still, whatever it is. And so there's this period of inertia, don't you think?

And this is the thing that, you know, this is the nuance of demand, that it's human behavior, really, that's underlying all of this, apart from the fact we all need a roof over our heads. Yeah, absolutely.

And I forget if it was a number that I saw last year or certainly it was in the last 12 months I saw this number. I think it was in Sydney last year or the year before.

I think it might have been like more than half or around half of purchases of homes were without finance. Like you might know that number better than I do, but it was

That number blew my mind to see that there's so many transactions in the market which are done in isolation of interest rate movements.

Well, I mean, a third's owned by people without mortgages. And then you're right, like particularly cash buyers, particularly, you know, I've got a lot of people with a lot of money, right, that are driving transactions that don't need mortgages, particularly as you go further and further up the sort of wealth spectrum.

I mean, you can see a $12.6 trillion of property values, $2.5 trillion of mortgages. There's $10 trillion of equity in it. I don't know. I guess what I'm sort of thinking about, I'm like thinking about my clients, right?

I'm going, right, so we've got a lot of sort of couples in Sydney and different states. But if I think about the Sydney couple, you know, who are thinking about having kids or have got kids, like... There's just been, yes, we've built apartments, but we've built one beds and two beds, right?

And we've built studios and we've built for investors that are often a little bit cheaper to build. They're not as desirable. There's a lot more renters in them. Particularly when you get into this family stage, maybe you want more community. You want something a bit quieter, maybe a bit safer.

You want a bit more predictable sort of neighbours.

And so they get stuck. They're like, well, what's my options? Well, my options are to go further out and buy a house. I can go Greenfield. There's not much in the apartment space that I can look at. There's not many three-bed apartments. Or do I leave Sydney? Do I go to Central Coast?

Do I go to north of Wollongong? Do I go even further regional? And that's just pushed the Sydney pressure onto those markets that haven't got enough child cares and schools and things like that. So I don't know.

I guess when I look at it, I go, well, if we did build more medium, sort of higher density, family suitable, bigger blocks, and I feel like there would be a buyer pool there, but we haven't built it and it's hard to...

So is there an argument that maybe councils need to be more prescriptive in what they build and maybe they needed to jump on the front foot with this and... Or is it that we can't, because the current system isn't working, right? People are leaving Sydney. People are moving further and further regional.

So something had to change. Yeah. Gosh, there's so much to that. I'll actually start with the last point that I've been discussing with friends and

around life cycle changes right so what you're speaking to is is a life cycle change and we know that uh when people are younger they'll trade off uh uh location and there's a the major true trade-offs are location and dwelling size and so when they're younger they prefer to have a better location and then they

go through that process, but they prefer more size. And certainly in our mum's group, when we lived in Coogee, you just saw that happen. By the time bub number two came around, everyone just fled and went everywhere to the suburbs, interstate, back to Ireland.

But the broader question, so people, they prefer a larger place. I'm one of those Coogee refugees. I live in a house now not too far from Coogee.

But the broader question here is, well, if we're saying that people actually want to live in houses, or they maybe want large apartments, and I'll cut point in a second, it's sort of an interesting future that we have for the Australian dream, when 85% of new dwellings are apartments.

And we have a large cohort of people that see apartments as a temporary measure. So that's a broader philosophical question. But the point about, like, should councils promote more mid-rise housing and with more larger apartments? It's a very, very good question.

So what we saw in the 2018 boom, and I'll speak to where I work, was high and large, a lot of investor grade type stock, one and two bedroom apartment. That's where the money was. And the point about what housing gets built, it relates to underlying, it relates to effective demand, right?

It doesn't relate to underlying demand. What the population needs, it relates in terms of what is going to make money. And so that made the most money in that boom. And guess what's being built where I work now? Not one and twos, three bedders.

And so we see, and again, I'll speak to that Rolari example with the low mood rise. I've looked at all of those DAs. I had a big table of them. And what really stood out in that was lots of three and four bedroom apartments.

But what also stood out was eight story towers, eight full floor apartments. Right. And, you know, so we're, oh, how great is this? We're getting, you know, more housing moving in this well-located area. Okay, well, is that going to make a rental in Auburn $5 a week cheaper in 20 years' time?

Like, how does your trickle-down filtering economics work, right? Because that's the theory. The issue we found, and we did this research at my work to say, look, how do we get more three-bedroom apartments? Speaking to all the large developers, that's the most profitable product at the moment.

So there's no intervention in the market required to deliver that. Certainly where I work, we're in some of those wealthier areas. But that target market is the downsizers selling their $8 million houses, buying a $3 or $4 million apartment. They're not families.

And then the opposite is true when I was speaking to all my colleagues out at Western Sydney Councils is that they can't get three-bedroom apartments because it's a different market and it just doesn't stack up. And so they're getting more investor-grade stock.

And then the issue around mid-rise housing, I've had this conversation a lot, is, well, people don't want to live in really tall towers. They don't want big strata. They want to live in mid-rise stock. And so the issue we've seen, particularly post-COVID,

is we saw a divergence between detached house prices and apartment prices. Before that, house prices and apartment prices largely tracked each other. And so over time, you saw them sort of moving together. And then post-COVID, detached housing just really diverged.

And that's created a major issue for feasibility, in addition to the construction cost issue, which is really killed feasibility in most parts of Sydney. But it's meant now that it's much, much harder to assemble sites

for redevelopment because your raw land inputs are so much more expensive and your end product hasn't increased as much because apartment prices haven't increased as much.

So if I look at an eastern suburbs type example, 10 years ago, you might have been buying $1.5 million houses and selling $100,000 apartments as your end product. Now you're buying all...

to $5 million houses and you're selling only $1.2 million apartment, 1.5 million. So that's really killed feasibility for a lot of sites. And that sort of niche knowledge, like all of the developers, you speak to the developers, they all know that stuff, right?

But that niche knowledge, it doesn't get out in mainstream because you prefer to, like the Sydney Morning Herald would prefer to speak to the YIMBY groups or Committee for Sydney or some other sort of person.

But if a developer can't make money for it, promise, and they understand the cost of the site, and that's actually those that have been built.

Because a lot of approvals are actually not actually owned by the developers. At the end of the day, they're still an option, right? Well, yeah, that's true as well. So they're not necessarily land banking either. No, that's true.

I don't know of any analysis that's actually looked at that, but without a doubt, that would be a part of it. But yeah, apart from probably select the northern parts of the eastern suburbs and the lower North Shore, most areas in Sydney aren't feasible for new apartment development. That's a major issue, right?

And that's what's driven that.

that number and you know we saw that exactly at the end of the 2018 but right the entire was like paramount for example uh were blacklisted by the banks both for the developers the developers had to go to the shadow banking sector with like really really high interest rates and consumers couldn't like they couldn't settle on their apartments or they or they couldn't get finance to buy apartments out there so you had this boom which was actually killed by your macro prudential control

You know, that's a less sexy headline than, you know, cut red tape for planning.

But not only that, but that sort of feeds into our latest budget as well, which is trying to funnel all the investors and first home buyers have been incentivized by pretty much every state and territory to buy brand new anyway for a long time.

So then you've got, okay, well, let's encourage new builds and that could be stymied by banks. Yeah. Yeah, well, that's right.

I mean, that's the greatest irony is that, you know, speaking to a lot of the developer contacts I've worked with over the years is that, you know, post COVID, so many of them are just saying like,

We need, like, because construction costs increased by so much, they said, like, we need house prices to go up if we want to build more house supply. Like, that was the number one thing they were saying.

It was like, yeah, but you do realize that the government and the media are saying that if we build more housing, prices will come down. Like, why do we build them? And, you know, and they sort of laugh about it.

And I say, like, you know, like, funny, like, the narrative is that the government's saying that they'll upset all these areas, prices will come down. Yeah. And, you know, like they just like, I mean, they just laugh. They like, you know, that's sort of quite humorous.

I mean, it's my life and it's affected my life, but it's quite funny. You know, this idea that we, you know, as soon as prices come down, we know immediately there's like an impact.

There's like an automatic breaks that the market puts on because housing supply compared to building widgets compared to bananas, it's really based on financing, you know? And so you can't just simply plant more bananas. Well, also bananas are a commodity and housing is not.

And I think that just to make that mistake of just trying to treat it like it is, it's sort of naive at best. It's been a really fascinating chat, Tim, and we really appreciate you coming along.

We like to round off or wrap up any of our episodes with an example of a property dumbo. So that's a story with a lesson in it that we can learn from. Have you got one for us? Yeah, I do.

So interestingly, we saw probably a month ago, there was all over the media, there was these announcements about light rail being extended from Kingsford in the eastern suburbs right down to La Perouse and

You know, all of my WhatsApp channels, my Facebook groups, neighbours, so on and so forth, are talking about the extension of light rail. And, you know, it only took someone with a fairly basic level of investigative research, i.e.

clicking on the link of that organisation to see that, well, hang on a second, the media is just regurgitating a press release from a light rail operator and builder. So...

So it's sort of gained so much traction as this, and people were just genuinely thought like this was a thing happening, right?

And literally all it was was just this private interest saying, hey, we think this is a good idea, feathering their own nest and getting mistaken as policy, right? And that probably really, I think, is a good microcosm for what we've spoken about today.

Why I find it extremely funny that he says I was a dumper, because I first saw her in my sister's letterbox when I was around her place. I was like, you know, she lives in Maroo. And I was like, oh, you've got a light rail coming.

And then I saw something else and I said to her again, oh yeah, don't forget, you know, you've got this white rail coming. So I find it really funny because I didn't do enough research on it. I mean, I have seen planning.

I've done like, you know, around the sort of the extension of it before in the past. And, you know, there's been arguments around getting the Metro there and, Yeah. So I guess I was already kind of like sold on this idea that it's going to happen.

And then I read the headline and the headline sort of matched what I thought might happen one day. And then I was like, Oh, that's cool. That's coming. Um, so, uh, I'm sure.

And I think even the agents are talking about it too, um, as well because, uh, she's trying, yeah, she's thinking about selling and, and, um,

You know, and like, she's also, yeah, I mean, as an example, she's a part of these sort of the Sydney refugees that I do think that, you know, is there, that there's not a viable option sometimes, particularly once kids arrive.

And, you know, I think that's the, and whether zoning's the right change, whether, you know, like... Obviously, this is what we're unpacking today, but there is a real issue, I think, that Sydney's struggling with. It's due to the topography. It's due to national parks.

It's due to where our Sydney, our lack of infrastructure. There's so many other issues rather than just zoning, but it is a challenge that Sydney has to sort of face because you are going to find people who are just going to keep leaving, right? And that's not good for talent.

It's not good for people living here. It's not good for lifestyles. It's not good for family life. It's a real issue they're trying to solve. But I don't agree with the way they've got about it personally, just coming in and railroading it. I think it's just made everyone feel very uneasy.

And I don't think developers would like it. I don't think councils like it. I don't think builders like it. I think everyone's just unsure. And he's sort of acting, you know, out of the fear of, you know, and I don't think it's good for the buyers.

I wouldn't want to be buying $4 million or something and have no idea What's going to be built around me in the next 10 years? Like that just, I mean, sounds crazy.

Or whether it's going to get built, whether it's going to be on time, whether it's going to be, you know, there's already enough risk with buying off the plan, right?

Yeah. It's not just buying off the planet, it's buying houses that are potentially impacted by development in their neighborhood. And there's a real lack of, I guess, certainty that's crept in.

And like you say, you spend $4 million on a house, which let's face it, a lot of people aren't in the position to be able to do that. But in Sydney, that's not uncommon.

And then you get stuck with something that you could have a block of units at the back and the side of you. It's

There is a lot of uncertainty at the moment and I think add that to everything else that's going on and maybe that's had something to do with Melbourne as well because Sydney and Melbourne, we've talked a lot about both cities and the wholesale planning reform that's been imposed on those cities and maybe that's got something to do with...

prices as well. We talk about the many, many, many levers that go into driving our property markets, and this is just one of them. And Tim, I think this has been an interesting chat because it's lazy thinking to think that it's only one big thing, i.e.

red tape or the budget or negative gearing, capital gains tax, whatever, population growth. It's absolutely lazy thinking to put it down to any one of those things. It's complex.

And like you said, if you've got one answer, then it's going to be wrong. Thank you, Tim. It's been a great chat. Thanks very much, guys. Pleasure. Thanks, Tim.

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