Melissa Neighbor on Density, Windfalls and Who Really Benefits

In this episode, we step into one of the most polarising debates in property right now. Is increasing density and established suburbs the key to restoring affordability, or has the conversation become too binary? Homeowners argue they're protecting amenity and the character of their neighbourhoods.

Aspiring buyers and renters argue the system is stacked against them. Who really benefits from planning restrictions? Will density automatically make housing more accessible? And how do we balance private property rights with the broader need to house the growing population? 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.

To explore his tension, we're joined today by two prominent voices from Sydney's YIMBY. Melissa Naber, a leading advocate for planning reform and increased housing supply, and Emily Dye, an economist and commentator focused on intergenerational housing outcomes. Today, we're joined by Melissa Naber.

Not only is she the co-founder of Sydney YIMBY, she's also a town planner and community engagement expert. And Melissa has become a prominent voice in the pro-density conversation, engaging in policy debates around zoning, community consultation and housing delivery.

We're also joined by Emily Dye, the author of Housing is Becoming a Pipe Dream for Young Australians, with her analysis featured in major national publications and the media. Melissa, it is really nice to see you again. It's been a few years since we last spoke and it's nice to meet you, Emily.

Welcome both of you. Thank you. Thank you.

Emily, from an intergenerational perspective, I mean, how does a fair housing system look like in your eyes?

I mean, if we look at the different generations, when boomers were buying houses, it only cost about two times their income to make a deposit on a house. For millennials, it's five times. And for Gen Z, it's even higher. And so we are obviously struggling to break into the housing market.

And it's creating a real disparity across the generations when it comes to opportunity.

So what do you think is a fair system? Is it a fair system to rent as well? Like how broad, rather than just buying a median home, how do you envisage this should sort of become fair, I guess?

It should be an option for people to be able to, if they want to, save up and buy. I think if people are forced into the rental market, that causes a bunch of additional problems because you end up with

People that would like to have the stability of a home now having this unstable system, they're not getting the benefit of renting, which is the flexibility they can move. They're not getting that benefit. It's actually a cost to them. So it results in a lot of people being worse off.

And it also creates a difference in bargaining power where landlords end up having a lot more power because there are so many people in the rental market that don't necessarily want to be there. So we need a system that gives people more choice.

It's interesting because when you look at the history of homeownership in Australia, probably since World War II, you know, it's when the boomers were buying or actually when the boomers were being born, really. You know, it's a different world now.

And like, for example, you had to bank with the same bank for decades.

a long time you had to get on with the bank manager the bank manager had to approve your loan like it was really difficult to get access to finance today is completely different you could argue that that is actually what that type of thing and it's not the only thing that has actually spurred prices and increased accessibility to the property market on one hand but it also increased prices so it's by virtue of making it easier to get in it then pushes prices up so there's it's multifaceted this sort of argument and I'm always concerned when you look at sort of one metric as to

how easy it is versus how it isn't, you know, and you're going to get boomers that will always argue that it was harder for them and interest rates are not at 17% now, that sort of stuff. But I think we all accept where they've got a housing shortage across the board, right?

So that's going to contribute to all sorts of problems, certainly in the rental side of things, certainly first home buyers getting into the market.

You know, if political incentives currently favour existing homeowners, which is, I think, sort of what you're alluding to there, what type of policies would actually shift the dial then in a durable way rather than just producing short-term political point scoring?

Well, you do have an incumbency problem. The people that are contributing to the discussion on housing are the people that already have housing. They're already in the neighborhood. The people that could potentially benefit, they're not there yet. Like the building doesn't exist. The apartments don't exist.

So they don't have any voting power in those councils. So a lot of what we've been pushing is the state to really... step in and say, hey, councils, you need to actually start providing a certain amount of housing.

Otherwise, all the people in New South Wales are going to be a lot worse off. And so when we have this very localized system where councils have a lot of planning jurisdiction and the ability to block people coming in. They're obviously going to cater to the interests of the homeowners.

And those homeowners want to see their housing prices go up. They want to see things stay the same as they always have. They've got lots of incentives pushing them to want to restrict development. And it just means that all of the young people that might be moving in aren't getting a voice.

And all of the people from various demographics that might move in, they have no options. I'm thinking about this from my planning world as a town planner and in this game for a while now.

You know, I really do see, and in fact, the Productivity Commission have sort of confirmed this, their research is showing that planning, regulation and the like is putting such extra costs onto every single dwelling. I think it's something like $320,000 per dwelling.

due to problems like the planning system and it is a bit of a problem. The Grant Institute has just come out with a really great research paper that did a very big deep dive into the differences between the New South Wales and Victorian planning systems.

And it's quite dramatic in terms of those differences and the bottlenecks to supply that planning is creating. And so if you say to me, what is it that we need to do at the reform level and what do we need our politicians to change?

For me, it's focusing and drilling down on the delivery system for our houses.

Do you think that the pattern work designs and the, you know, I guess a lot more pressure on monitoring sort of approval times and, you know, even just the LMR and the TOD reforms, do you feel like we're making a big improvement here or do you feel like it's still going to, a lot of people are getting clogged up in the system still?

there's still a lot getting clogged up in the system. And in fact, it goes back to what Emily was saying around, you know, the LMR changes, the low to mid-rise changes, the transit-oriented development changes, you know, allowing more density around centres and public transport centres and the like.

The issue is that it does still need to go through the same system, which means it's subjected to the same approval process and notification process. So what we're seeing is a lot of communities resist these developments.

So they are getting clogged up and they're not getting approved because you have hundreds of people up in arms about it. And understandably. I'm not surprised by that. If you think about the quite drastic reforms, relatively speaking, to the last few decades.

And so that hasn't kept pace or gone hand in hand with very much, I would say, community engagement and awareness and an understanding of why these reforms are important to individuals and society at large.

And so all we have are people who are invested in maintaining the status quo, Those voices are amplified through the development assessment process. And we're not hearing from people who might want to live in a certain area. And that's problematic when we want to see more housing get approved.

We interviewed Brendan Coates last week, actually, and we're talking to him about that exact piece of work that they have put together.

And we found it fascinating that he puts forward the argument that Victoria's doing it better in these reforms than New South Wales is because there's a gentle upscale or a gentle upzoning option provided with three-storey townhouses, for argument's sake, that is not offered in New South Wales.

And I think it was interesting because we did have a whole discussion around this sort of what is going to be acceptable development in areas and what's going to win the hearts and minds. I think that's a term that you might bring into this as what's necessary here.

When you suggest to somebody that next to their house... there's going to be a six or eight storey block of apartments, and currently there's a single storey dwelling next to them, that's pretty hard for someone to swallow.

You know, they can talk about lots of other issues in terms of the area, but if it's going to be right literally on their back doorstep, then that is a really difficult and unpalatable thing.

But if you talk about your streetscape sort of gradually going up to three storeys, that's much easier to deal with. Would you be in agreement that perhaps some of these reforms have been

a bit heavy-handed and perhaps without sort of thinking about the nuance or without thinking of a graduation that would make it easier to get acceptance.

If we're talking about really close to public transport where the taxpayer has just invested how much money into building this lovely infrastructure, we're talking a massive amount of taxpayer investment that's going into this. And then if that is being restricted to only three stories, that doesn't make a lot of sense.

When we have infrastructure that can sustain a lot more and we put this effort and this investment into building that infrastructure, we should be building up around those areas. That isn't to say that you're further out to your suburbs that are single family that are further out, that can be up zoned too.

Allowing townhouses, allowing duplexes, the vast majority of Sydney, I believe it's, and Melissa can correct me on this if I'm wrong, around nearly 70% of Sydney is zoned for single-family homes. That's a massive amount of land, and a lot of that land can do that gentle sloping up that you're saying.

Also, I'd add, if you're really close to the city center, if you're within 5Ks of the Sydney CBD, I don't think you have much of an argument to say, oh, we're not going to allow higher density. You're living in the heart of a major international city.

You should be much more willing to accept higher density in that area. If you're living out further, okay, maybe we'll do a more gentle. more gentle approach. I think that's a much fairer argument because you've chosen, you've self-selected to be further out.

It's like those people that move in next to a nightclub and then complain about the noise. You can't move into a city center and then be within 5Ks of the city center or within a couple blocks of a metro station and then be upset when they want to upsum that area.

It's an interesting analogy there. I mean, I often do think about those people that buy close to a pub and then complain about the noise at night. However, this pub didn't effectively, it wasn't built before these people moved in.

In inner city areas, they've got tiny block sizes compared to other suburbs as well. Like, you know, they already are denser anyway. So a lot of people do move into these areas actually liking to be close to people and around a lot of people and all the benefits that that brings. Yeah.

So there's, you know, it's how much, I guess. But how do you respond to the argument that upzoning can create windfall gains for existing landowners rather than meaningful affordability? Because this still plays into the hands to some degree with people that already have these properties. Absolutely.

I think this is the nature of housing delivery in Australia is that the private sector delivers housing. So if we want more housing, we need people to be getting windfalls and we need people to be coming together to sell to developers who can then deliver the homes. It's just how it is.

We have to face that reality. We have to work with that reality. And unless that changes anytime soon, I'm loving seeing owners come together to sell some amalgamated sites so we can have, you know, more diverse housing delivered across our city.

The LMR and total forms, like, that's absolutely what, you know, Yimby, and I think the Yimby's maybe not also helping you in terms of the branding. It's kind of like, it's not just yes in my backyard, it's yes in everyone's backyard. And I feel like it's maybe worrying people a little bit.

I mean, I think, how do you feel about... when you look at the applications for, you know, approvals, I mean, and, you know, applications, development applications, and what their appetite is for developers to build is really not what younger Australians will be able to afford, right?

Like, due to the cost of buying land, developing, you know, the cost to build, when you look at what's getting built, and in some cases are actually going the opposite way. You know, you think about the studio apartments in Potts Point, six, you're going to turn to eight.

So was this what you were expecting, I guess, when you started to see these reforms and, you know, and do you, unless the cost of build goes down, yes, we could increase, you know, reduce holding costs and make approvals be faster, but it's so far beyond the current feasibility for developers to build any significant amount of new developments.

And so is this quite frustrating that Yeah, we campaign for reforms, but what's actually going to get completed over the next five years isn't really going to move the needle.

hear what you're saying you're right the reality of the situation is often at the moment it's only luxury apartments that are stacking up that will change over time but at the moment and these are long-term reforms that's the other thing to remember is that every planning change is actually a long-term play you know it's not going to bring housing on overnight but ideally these reforms stay in place the planning controls loosen right across the city and we start to see more development

over the years and that's really the only way forward. The alternative is we don't change anything, we maintain the status quo and no houses get built. We're going to take what we can get at the moment. What I do like about the reforms is that they have included an uplift for affordable housing.

So that means developers are including in these luxury apartments like affordable housing developments and what that means is we're getting dwellings that are being built in different parts of the city that really wouldn't have seen affordable housing being built before. Can we define affordable? Yeah.

There's a big site in Mossman that was all over the Fin Review this morning, you know, 100 units or something next to a childcare centre. And, you know, I still can't imagine affordable housing in Mossman in Sydney being affordable for, in a true sense.

So it's a ratio, isn't it, to the average rents in the area. Is that fair? Is that how it's calculated? Yeah, it's below market rate. That's right. So yes, you are right that it's not public housing that's not fully subsidized and the like.

So it's still not going to be assisting people at the lowest socioeconomic bracket, but it's better than the alternative. To teachers and AMBOs and nurses, as is often, those sorts of occupations are positioned as being the lifeblood of our cities that are being priced out of affluent areas at the moment.

It's really aimed at that type of market segment, would you say? Essential worker housing is, look, it's hard to say exactly what the market, that affordable housing will serve. There might be some essential workers that that suits. I personally think we need a more concerted effort towards housing essential workers.

And we are starting to see that from New South Wales homes and so forth. We are getting that type of housing built. But I think, as I was saying, overall, we need to move forward. We need more housing and whatever stacks at the moment, we need to be building it.

And we also know that the best research in housing right across the world, not just here in Australia, all shows us that any new housing brings down housing costs overall. So this is what we're trying to see.

People who move into those apartments that might be luxury or even affordable, they are freeing up other apartments. It's bringing on more supply and we do get that trickle-down effect. This is what we need. As I said, the alternative is we lock up our city, no housing gets built,

And we're going to create a dysfunctional city where we don't have productivity, where we don't have families. You know the story. It's not pretty if we lock up our cities. And so the more that we can bring onto the market as fast as possible of all types of housing, the better.

So we're sort of pro sort of, we're on the same boat, right? So we, you know, I personally, I sort of see that Sydney's so competitive in a global landscape to keep people and make us, you know, families to be able to stay here, to attract talent around the world.

Sydney's got to evolve, right? We need to change. What we just did for the last 20 years isn't going to work. We're running out of land west. We've got, you know, we're clogging up, right? And so, but, you know, and they've done these reforms, but where's the gaps?

Like, you know, Brendan made some really good observations around, you know, there's these sites where we should be allowing more townhouses. And, you know, I feel like it's maybe, yeah, it's great with this low and medium rise, and you only get more downsizer apartments in Rose Bay and Mossman.

But, you know, there needs to be a lot more, I feel, to happen here. And does it even stick? Like, it works as if in a few elections time, they want to unwind it. Like, you know, it's not guaranteed. And this uncertainty around

Like what the planning is causing a lot of anxiety across our city, right? And then that's only forcing people to fight back even more. And so do you feel like maybe they've gone too hard? They pissed off all the councils, pissed off all the residents.

And now people are holding a stake in the ground rather than let's come on this together. And that's kind of backfiring a little bit because, you know, all the councils are for, you know, the residents are fighting every single development application. It's not a, let's do this together. Yeah.

Oh, I think you're spot on. I think the community engagement piece and awareness piece has been completely lost in all of these reforms. It's totally predictable that the communities will feel like this. It's inherent in human nature that we get uncomfortable with change or even fear change, right? That's just normal.

And so... What we do know is that when we see true community engagement, what I mean by that is things like democratic processes like citizens' juries. Now, this is processes where citizens, residents choose their experts and they have experts come and talk to them. They see the data. They see the best research.

And from that there, we see that they're making better, more balanced and informed decisions. And that's really the deep engagement that we need to see now, I believe, to make these reforms a success.

You know, we know that when somebody sees the data and understands the trade-offs, they stop thinking just about, okay, how is this going to affect me in my backyard? But how does the decision that we make here in my backyard affect the whole? And how does the whole affect me?

And that's the piece that I think we need to start working on to go hand in hand with these reforms.

Yeah, I think that's one of the areas where Sydney Yimby is very good and is playing a role. It's trying to explain to people that, hey, you may not like that this development is coming in. You may think it's ugly or whatever that might be, whatever your objections are.

But does that really stand up when you realize that your grandkids can't live near you, that you're going to have to drive hours in traffic to see your kid because they live out in the suburbs? and they don't like two hours away through traffic.

I think that people start doing that costing and they start to understand that there is really good arguments that can bring people over to being more pro-development and to realize that, yeah, this isn't convenient to me.

Maybe I don't like this for whatever reason, but at the end of the day, it's better for society. And I think this is where groups like Sydney Envy are very helpful.

I think there's a definite growing, I mean, I'm certainly in the demographic where, you know, I'm not a baby boomer, but I know baby boomers, but I'm also in that demographic where, you know, I'm the sort of, oh, I've got a house in one of those zones now, right?

So maybe I'll have apartments next to me. I'm in a conservation area. So never would have thought that happened, but who knows?

And I think that a lot of people my age who do have kids that are of the age where they're starting to have kids and where they're starting to wanting to buy a house, etc., they are worried about that.

There's absolutely no doubt about that, particularly in Sydney, but in other cities as well. But Sydney is obviously the most expensive city in Australia. But on the flip side of that, do you think it's also possible to underestimate legitimate concerns around sort of infrastructure, congestion, overdevelopment in other ways?

Because I think there's a problem with these binary arguments is, yes, you're trying to get people to meet in the middle and understand the concerns of each side. Is there a movement towards understanding that? And the general disruption that comes from

having your home that you've invested your heart and soul into, brought your babies home from hospital to that sort of thing, and all of a sudden you're sort of faced with the neighbours banding up and selling off their site to a block of units and you're suddenly in limbo land and everything you thought was certain is no longer certain.

We interviewed, I can't remember his name, I'm sorry, but the guy from Melbourne, Yimby, some time ago. There didn't appear to be any... acknowledgement whatsoever of that, just that human emotional cost. And I get that that's an individual's pain versus societal's gain.

But I think there needs to be that movement towards both sides understanding each other more. And I think a lot of these people do understand the pressures on young people. So how is Sydney Yimby thinking about that in any different way to say that interview was with the Melbourne Yimby guy?

Some of it is like some of those concerns are very justified and some of those aren't. I think we're talking about congestion. I think one of the worst things you can do for congestion is urban sprawl and not being more dense and And not putting houses next to public transport.

So I think a lot of the policies that we're pushing, like having this transport-oriented development, is to the benefit and is actually addressing a lot of the concerns of those residents. A lot of those young people that are moving in, they're not driving. They want to cycle. They want to take the metro.

And so there's that. When it comes to the more emotional concerns, like I get. I get that. I do think that there's also, there's a reason why the neighbors are making that decision if they're wanting to make that decision to sell off. There's a monetary value there.

And as callous as it seems sometimes, like the sentimental value of wanting to stay in a home long term, does that override the cost of homelessness?

It's more about their time of life. They're not ready. It's just because it's an imposition on people, individuals that weren't necessarily ready for that decision. And I feel hugely sympathetic for people under those circumstances.

I can equally feel hugely sympathetic for people who can't get into the market. So that's what I'm trying to sort of tease out. Do we have a recognition of that?

makes it a lot easier to win over the hearts and minds of people who are resisting change, you know, but just to basically just to say, well, so sad, too bad, you've had your go, it's someone else's go, because it's not really yes in my backyard, it's yes in your backyard, isn't it?

It's yes in all of our backyards.

Sydney is in terms of if you have a list of all the cities in the world we are one of the least dense cities we're actually below LA which is crazy and then you've got Barcelona at the top and I don't know about you guys but everyone who goes to Barcelona absolutely loves it and so I think we are in a transition phase and I think the Australian dream is changing and I think what we all

expect from our city is changing. And this is just the reality we're going to be facing. You know, unfortunately in life, they're always winners and losers. And also the other thing is you can choose to be a winner or loser about how you look at it. Right.

So if you, you know, as I said, change is hard, doesn't matter what angle it comes from. Change is never easy for us as humans.

But I think we need to mentally gear up for a lot of change across our city as we move up the ladder from below L.A. to hopefully closer to Barcelona. I'm on a personal mission to help more people make better property decisions.

You know, most people don't realise that they can cost themselves hundreds of thousands of dollars over the medium to long term when they make property decisions without all of the information that they need.

And what I do is help people with tricky real estate problems, which often masquerade as simple questions like, should I sell my investment property because the interest repayments are hurting? Or should I buy before I sell? Or the other way around.

You can connect with me and access all of the tools that I've created to help you make better property decisions at veronicamorgan.com.au. And there you will find resources for first home buyers, details about my buyer's agent mentoring program.

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Barcelona was designed in a very particular way, and it's such a success. Even the hexagonal blocks are amazing, right? And it was designed before all the houses were there. They didn't have to knock the houses down to build these really great apartment buildings.

Do you have examples of other cities that have, you know, gone ahead and done what we're expecting our cities to do, which is basically completely change...

The whole makeup and successfully wins and loses how, well, I guess, you know, pros and cons, the ways that things have been done well, the ways things haven't been done well. What can we learn from other cities that have done this? Falkland is a great example.

And exactly to your point that you've both been making is around this three-story gentle density. I think that we need to introduce that into Sydney because that is where we start to get more of a, I guess, a uniform or even a flow of density through our suburbs. It's less intrusive.

And in New Zealand, they upzone to allow three-story townhouses and that whole policy is taken up over there really, really well.

I mean, so I've been obsessed with this, like, since it's sort of come out, right? And I've just keep trying to learn more and more about it.

And I track every single development, pretty much all major projects on New South Wales, you can see on domain real estate, you can see everything that's getting marketed SRM, you know, and you can start to see this. And when you start looking at not just the location.

You go start looking at the street and you go on street view. It's very easy to start saying, hang on a sec, this is on this street. And if you go to street view right now, you're talking houses, trees, and we're talking eight story developments going in. And so

If you were a local in that area, you've gone from houses around you for the last 30 years to eight stories overlooking your backyard or your neighbors. And it's such a big shift.

And it's happening just, to be honest, all along the northern train line, Mossman, Rose Bay, and they're kind of your epicenters of this. And I mean, I guess people in those suburbs are like, yeah, if you band it together and you're selling for 100 million, you're selling three times your price. Yeah, but...

It started around the main roads, but now you're going quite deep into suburbs. Like, because the 400 meters is quite hard to sort of, you know, really measure.

And I wonder if the state government, you know, started to think, hang on a sec, you know, because if you get people to move from that old status quo, which was like literally end any developments, bad development, right? Like that's ultimately where these suburbs were.

You probably had to give them this view of what it could become if you don't compromise. And so I wonder if like they're going to have to sort of wind it back and say, okay, this was maybe too much, but this is an alternative where we're going.

And you're right, it's three levels, it's four levels, but it's not like six or eight levels. And I wonder if you're just going to then just see a lot more community, a lot more people on board because they're like, well, we don't want eight levels and this is a good compromise.

But I do feel like it's too much for these suburbs because like, you know, you can go 65 Muslin Street in Mossman, like, That is what people have spent, you know, $5, $10 million.

Yes, I mean, you could say that, you know, but they've run businesses, they've employed staff, they've contributed to the economy. Just because they've got money doesn't mean they're bad people. They might have been a huge reducer of economic activity in the country.

Then they've gone and done something and they've invested in their home, which is also economic for the country. And now you're saying, hey, now you're going to have a story apartment looking over your fence.

And that community, I don't know how you're going to unwind it because the state government have really upset so many people. And now they're just like so triggered that you're not going to be able to get them on the journey.

That's my biggest fear with this is they've basically missed the opportunity because they've gone too far.

We're in a housing crisis. This is what happens when you restrict housing for so long. This is a decades-long problem. So yeah, it's happening all at once because we've hit the crisis point. We hit the breaking point. Sydney is one of the most unaffordable cities in the world.

It bounces back and forth between who's number one, whether it's Hong Kong, Vancouver, Sydney, this isn't, we've reached a point where it's no longer sustainable, we have to take dramatic action.

And it's like, I'm sorry to these suburbs, but this is what happens when you don't allow three stories, when you don't allow townhouses, when you don't allow slower development, then you do get a more extreme response. And when you live that close to the city center, you have to develop more.

And if it is really so much of an imposition having the site of an apartment near you, then maybe you should be the one that moves. That'll make them so laugh.

You know, it's funny though, I've got an online course teaching first home buyers how to buy property because a lot of them can't afford a buyer's agent, you know, so teach them the process. And we often hear first home buyers complain about rising property prices before they buy.

And then as soon as they become homeowners, they're like, I want prices to rise now. You know, I've gone and saved, I've scrimped, I've done everything I can do to get myself onto this property ladder. Now I want prices to take off and feel good about what I've done.

And I always wonder about what's the incentive if we manage to curtail price growth. And in fact, you know what, in areas of overdeveloped, when I say overdeveloped, because this is my measurement of overdevelopment, okay. So in areas where there's been too many apartments

built and sold often a lot to investors, sometimes to first home buyers as well. And in 10 years time, you've got prices that are still lower than what a lot of these people purchased them for. And this is a situation in Parramatta for many, many people.

I think the pain and gain report, last one that was released from CoreLogic or Cotality, something like close to 30% of resales at a loss in Parramatta. Melbourne is the worst in the country by far and has been for a long time. Brisbane used to be until its recent boom.

So people are buying, a lot of first home buyers are buying these properties. A lot of investors are buying them, providing rental accommodation, but they're ending up losing money. And it's oversupply when you don't have enough people that want to buy it basically to keep prices buoyant. Now, so What's the argument?

And you could say, Brendan said that's successful, right? That's successful in keeping housing affordable. However, why would anyone want to buy one?

Because it's a consumption good. If we stop thinking about housing so much of as an investment good and start viewing it as a home, and a lot of people say that housing is a human right, if you start viewing it as this is a place I live...

and you may have an investment in order to get rental property and have passive income and that's a job and you're serving your renters, then that's good. But if your house is just automatically going up in value, that's not adding new value to the economy.

But what if it's going backwards? Because you still have to take out a 30-year loan. You're still borrowing, you know, what, five, six times your income. You know, you haven't solved those other problems. But what they're not getting is the benefit of buying into a market that rises.

So how do you square that peg?

You don't want the market to rise. I genuinely do. I think that it should stay steady. That's your ideal. Maybe a slow rise to stick with inflation, but the house is aging. It's worth less. Cars do this. I don't buy a car and expect my car to increase in value.

I think we should change our perspective on housing to stop expecting housing to increase. And it is somewhat cultural that Australians think that This is how I'm going to make it rich. I'm going to buy a house and that house is going to go up in value. That's a very Australian concept.

That's not a global concept. Lots of people around the world view houses as I'm going to buy this house so that I have a stable place to live instead of I'm buying this house in order to make a bunch of money.

But if you need more space at a future time, if you're buying an entry-level property and you need more space, you are not going to be able to do that.

So if that's going to be the case in that sort of utopia, then everyone needs to be able to buy a property that's going to last them 40 years. I'm not sure that's what's being built.

Buy something that can keep contributing. We look at this, if you're earning an income, you're adding contributions. If you're investing in a business, that business is creating something new and is contributing to the economy. So...

The way to maximize and to grow well should be by creating productive value for the economy, as opposed to this magical thinking that houses are just supposed to always go up.

And this is the thinking that was a lot of what was behind the housing boom and bust in the United States that crashed the world economy. We need to start thinking of housing as not this magical good that always goes up.

So developers are gonna love that for some reason, but they're also gonna hate it, right? And they need prices to go up. So developers make money through rising prices, right?

And they're also gonna, if their idea is not to make prices going up, they're gonna have to cut costs in terms of build materials, in terms of everything they use. So yeah, they can go higher and higher, but that's also not that cheap.

And so what you will find though in any market, your 11 million dwellings out there, right? Some of those dwellings, everyone rises at different rates.

And just because these apartments that we build that maybe don't go up in value because we flood the market like in Melbourne, for example, or in Brisbane, we flood the market with apartments, right? And so apartments did nothing for 15 years.

And so all the people who bought those apartments didn't make any money for those 15 years, right? And at some point they realized that apartment wasn't suitable for them, but the Other markets around the country didn't stand still.

And so what they did is they invested, they took on debt, they paid mortgages, they paid strata, they maintained these properties, and then they got left behind.

So if you want this idealist world of, okay, prices don't go up, that may happen for some places, but for those people, financial futures will be damaged because for all the people who don't do that and then go and buy scarce assets,

they will still get further ahead because they've still got things that aren't as scarce, that are super desirable.

And so I think the desire to help the next generation, yeah, we get it, but the feeling that they will then, they don't want their properties to go up, well, they're just going to shoot themselves in the foot because other properties are going to go up and they're not going to want to buy the stuff that's getting developed because the reality is it's not going to be scarce.

It's going to have to be more affordable in terms of how it is. And it's not going to be as good as that sort of quieter apartment in the back street that suits a family that was built 60 years ago. So does that sort of world visage?

It's still a savings vehicle. They're still putting money into a house and they're still getting an asset at the end of the day. The fact that that asset didn't grow doesn't mean that they're worse off. It just means that they're not as amazingly better off.

I feel like Sydney is very far away from prices dropping from oversupply. That's not true.

That is absolutely not true. You know, Ryde, Parramatta, Homebush, Lidcombe.

Epping, Sydney Olympic Park, Rothersbury. We could give you a whole list of areas where people have bought for the last 10 years.

There's evidence. And they're selling at a loss. Like, you know, this is a success in some count. You know, some people call this a success. But if you actually need to upgrade or you need more space, you are trapped. And there's loads of evidence here. This is not just our opinion.

This is just borne out. So, and as I said, you know, by some measurements, that's a success. Brendan last week, he said, oh, that's a success. And I can understand why he thinks that way. I can understand why you guys think that way.

But I also know because of our decades of experience in the real estate industry. Some people do get left behind and it doesn't matter. You got a house. No, you don't. You got a two bedroom apartment and I need four bedrooms because I just had twins.

And a lot of people invested in Blockbuster and they didn't make money. And like it's what if you're taking on a risk.

And I think that people need to understand that when you are purchasing a house, you are taking on a risk and you should not assume that housing prices are always going to go up.

So that's back to my question for you is why then would somebody buy a property and take on the huge mortgage and the debt if they're going to accept that they're probably not going to go up? I'm just asking you like in all reality, what's the motivation?

What's the incentive for anybody to buy this stuff?

It's a savings vehicle. You're not paying Rennie into rent. You're now paying money into a house, which you then can sell at some amount. And so you're not losing that cost.

Like I'm paying money right now, a lot of money to live in Sydney, and I'm not getting anything at the end of the day. I'm walking away with zero. These people are still better off in that they've made that decision and they're still walking away with something.

It's a misconception because, so interest you pay on a mortgage,

right that's dead money right you'll never get that money back right the amount that you pay off your mortgage above interest is for savings you're right but the interest plus strata right versus rent you'll find that the interest plus strata is more than what you'll be paying in rent right so there's a cost to own this thing so if the property doesn't go up by that gap then you're actually losing money every month because it costs more to own this thing and then on top of it yes it's for savings but

so is superannuation, so is putting it into a share portfolio, et cetera. So owning a property and it not going up in value and it forcing you to save isn't a great financial outcome. It's actually worse.

Maybe more people should be investing in other assets and in other things that if they don't, if they decide that that's not worth it, then they should put money into businesses. And that's actually adding to the productivity of the economy.

A house existing is not adding to the productive, like there's no, nothing new has been created. If you're investing in this new startup and they make a lot of money, they created something new. Something has been added to the world.

House existing for X number of years is not adding anything to the world. And so we didn't want that to keep going up.

We totally agree with you on that, and that's, you know, productive investment, et cetera. It still doesn't answer the question that if we get a lot of this redevelopment, if this all starts developing lots and lots of housing stock, somebody's got to buy it.

If a smart, would-be owner-occupier sits down and does those numbers, they will not be buying it. Some that have bought the lie, when it is a lie, you know, that you're going to be better off with a property that goes backwards in value. If they bought that, yeah, they'll buy it.

And that does happen because government incentives do incentivize first-home buyers to fall into that trap. The government incentives also incentivizes investors to fall into that trap.

So there are people, plenty of gullible people that are falling into that trap, which is why we've got so many people who lose money when they sell these properties, right?

But if anyone's smart and sits down and does the numbers and works out the probability of making money versus not making money or being better off financially than renting, if enough people realize that, who is going to buy all these properties? I mean, has that been considered? People still need places to live.

I think the reality is we have a significant undersupply and we do not have enough housing for our current population. We do not have enough housing for our future population. You know, if we look at what did happen in New Zealand and in Auckland with that gentle up zoning,

We saw those reforms have a dramatic impact on housing delivery. And what we saw was rents and house prices didn't drop.

We saw them stabilize and they still are growing, but at a much lesser rate than what we're seeing in Sydney, which, yeah, the income versus the price of a home is just astronomical.

We absolutely agree. We need more supply, right? Like we get it, right? But someone's got to build it, right? And someone's going to make money on the build, right? Developers, right? That's fine. Developers are adding value to society as long as they're building good quality products, right?

Which is what's been highlighted over the last five years, right? But I'm confident the way that they're changing and it's now given driven by owner occupiers rather than investors. But the good thing is why Melbourne prices didn't go up and Brisbane and rents didn't go up is because they did build lots, right?

And who funded all that? It's investors, right? Both here plus overseas, right? Was it a good investment decision for all those people?

And the first-time buyers who got stitched up by the state government to buy an apartment in Docklands or Melbourne City or lots of places, was it a good financial decision for those people? And it ended up not being. And so, because they basically all got burnt. Like they all got burnt.

They all lost money over that thing. And that's got out in society, right? So the last 10, 15 years, investors aren't going to make that same mistake. So because they've all been burnt, they understand that apartment prices have issues with scarcity, you know, resale, et cetera. So investors won't buy these anymore.

Like, and first time buyers will be the ones who buy them. And so the next generation, yeah, you've got a home, but you're not going to get anywhere near the growth or returns or any future interactions.

Yeah, you should say you own it, which is great, but just letting you know, that's not going to perform for you from an investment point of view. And this gap of inequality or whatever you think's there, It's still going to be there. It's still going to get worse.

And you're the one who's going to have to deal with this pain. And I don't think that's really understood. Like, I think I get it. They've got a home. They can call it on. They're not going to get kicked out of a tenant. But like, I wouldn't buy it.

Like, I would just I would rent it. Happily rent it. Yeah. Like, that's fine. But I've got to get an investor to buy it. But an investor is not going to buy it. So I don't know how this works. ideal world's going to play out in mass flooding of a market of apartments.

It's just not going to end well for the people who actually buy them.

I think we're going to have to have a bit of a mentality shift in the way Australians are thinking about housing. I do think the demand is there. I think that there are lots of people that are not looking at a home in order to gain a bunch of value from that home.

They're looking at a home because they just want a place to live and they want stability and they want a place to be able to raise a family without being worried about getting kicked out. And that's a real value.

And whether that price, the house, that value goes up or not, that value still exists and they're still going to get that. So there's still going to be demand for that. And the market will adjust accordingly. So right now we've got a restriction on supply through these planning restrictions.

And that's what's causing this. It's not being allowed to move. The supply demand curves aren't being allowed to move. And so supply is not being allowed to meet the current demand, which is much higher than what's being supplied. If demand does drop and then supply drops to meet that, that's fine.

That's the market operating. But right now, we've got a restriction that's been set in the middle of that.

With demand and supply, because we're talking about some specific examples of areas where there's been an oversupply. And I say an oversupply, as I said, my measure of that is how many of the properties that resell sell for more than somebody bought them for.

So the reality is there's not a huge demand if people are

not willing to pay more than what the previous person paid or at least the same right that says to me there's not that much demand when the buyer has control you don't have huge amount of demand but i also get that in really high demand areas so you're talking mosman and rose bay for argument's sake you know those are very aspirational areas where there is a lot of demand and there's a lot of demand from people that currently can't afford to live there so therefore you can see that you build more homes in those areas and absolutely that's going to attract

more people on lesser incomes that can potentially buy properties that didn't previously exist. Has there been any modelling around that? Because it seems to me that the more in-demand areas, this argument, it doesn't matter. You know, there will always be buyers.

But there are lots of areas where you can build lots of stock, and we talk about a housing shortage, and yet there's still places where it's really difficult to sell an apartment.

So these two things can coexist, you know, and that's because people don't necessarily want to live where all these apartments are, right? So has Sydney Inby done any modelling on that type of thing, that areas where this demand is more so than less so?

So you mean modelling around if we were to put more apartments in our existing suburbs closer to the CBD? Is that what you mean? It's not even just close to the CBD. I'm saying close to transport links, close to lifestyle, close to working hubs.

So Homebush, for example, that is actually pretty conveniently located in Sydney to a lot of things. right? But there's still very much downward pressure on prices there. There's a lot of apartments, right? And a lot of them are still selling at less than what somebody bought. But it's a very, very conveniently located.

I think the issue with that area, and I do think that this is probably a bigger issue with apartments in general, is that there's a lot of distrust in apartments.

And that was as a result of some very poorly built buildings that then really did create huge issues for people who, as you were saying, have saved up so much money and invested in it, and then they've lost out because of defects or a poorly built building.

That's why the Building Commission came into effect to change that and now have tightened the regulations around standards for buildings and are enforcing that with quite a heavy hand.

So I think there's a broader or another issue at play there in terms of the prices and what's happening around that home bush area, other than just it's conveniently located, you're right. But I think there's other factors at play.

Melissa. It's been an awesome chat. I do like the work you guys are doing. I do see that change must happen. But I also think that it has to be bringing the community on board with it.

And I also think the movement for all the young people in the room, they've got to really understand what they're wishing for. It might not be the solution that they actually really want.

And I think it's just something that it's very easy to start to see the issues when you start flooding the apartment market. What you'll start to create is poor outcomes for people.

I think it's just keep unpacking that because if you delve deeper into the detail, not saying you, but all the people in the Sydney community, they might start saying, hey, this is not what I want, you know, and this isn't the outcome. We're pushing for the wrong things here.

And so appreciate you coming on, Melissa, and you, Emily. Yeah, awesome.

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