Stockland managing director Mark Steinert stood up at the annual stockbrokers’ conference on Thursday and summarised how Melbourne had caught up with Sydney.
“Ten years ago I wouldn’t have felt it even necessary to come down to Melbourne to do business.”
Now, the boss of the country’s largest residential developer says it’s a market Stockland cannot afford to ignore.
He is not alone in recognising that the pre-eminence gap that Sydney has held over Melbourne is closing.
The Australian Bureau of Statistics says that by 2053, if not sooner, Melbourne will be our biggest city, a title it last held after the boom in the 1860s which followed the gold rush.
The gap is now about 400,000; the Greater Sydney population is 4.76 million compared with Melbourne’s 4.35 million.
Mr Steinert heralded Melbourne’s successful land release policies. “It’s like Singapore,” he says, adding that “affordability remains a challenge in Sydney”.
Many would agree that cost of housing remains a key difference between the two cities. They would also say that Melbourne has the advantage because of its location and geography, allowing it to expand outwards at much lower cost to accommodate new interstate and overseas arrivals.
AMP Capital Investors chief economistShane Oliver says the “logic” of population growth is that it is a key driver of both economic growth and greater productivity, while also driving demand for investment in things like hospitals, roads and rail networks and making cities more appealing to multinationals.
He credits the Jeff Kennett -led state government, which implemented planning policies like Postcode 3000, for turning around perceptions of Victoria as a backwater.
Sydney, Mr Oliver says, “lost its mojo” and its way from 2000 after then premierBob Carr ’s post-Olympics statement that the city was “full”.
Bank of America Merrill Lynch economist Saul Eslake agrees.
He says Melbourne’s planning authorities have done a better job at ensuring the economic benefits of population growth, such as greater dwelling construction, rising retail sales and greater diversity, have not been outweighed by a lack of investment in infrastructure, though more needs to be done and soon.
Melbourne Lord Mayor Robert Doyle says a key aspect of the city’s growth is that it has been “smart”, guided by programs like Postcode 3000 which began in 1992 and provided incentives for people to live in the city, with the aim of reviving its ghost-town feel after 5pm.
“Postcode 3000 (led by urban planner Rob Adams) cost the city nothing, but generated enormous building activity and employment. Very few programs can boast all those outcomes with no capital outlay,” Lord Mayor Doyle says.
Melbourne has also embraced the “knowledge economy” Mr Doyle says, and become a leader in sectors like education, retail, hospitality, conferences and events.
“Melbourne is a multi-sector offering.”
In 1978, architect Norman Day called Melbourne the “doughnut city” to describe “an empty useless city centre”.
“You could have filmed end of the world movie On the Beach in Melbourne back then,” Mr Day said.
He says the seeds of Melbourne’s revival were sown almost 20 years before Postcode 3000 when Melbourne civic architect Peter McIntyre and then president of the Royal Institute of Architects wrote the Strategy Plan for the City of Melbourne.
“This led to the reconsideration of public transport and gave us the city loop, which fed into the city, made it comfortably to walk around and removed the demand on cars.
“It also restricted high-rise development to the edges of the city creating a soft chocolate-like centre of lower rise buildings and city squares that captured the sun and were there for people to enjoy.
“It was the first brick in the wall. It opened up the secret benefits” of Melbourne like its laneways, something Sydney is now trying to recreate.
AFFORDABILITY IS KEY
Melbourne native and CEO of WBP Property Group Greville Pabst says the city’s key differentiator with Sydney remains its affordability.
“The natural confines of Sydney are its geography, which makes it uncompetitive from a cost of land perspective,” Mr Pabst says.
“A house and land package on the fringes of Sydney will cost you $550,000 to $600,000 but in Melbourne its closer to $400,000.
“You can also buy a one-bedroom flat in the Melbourne CBD for $350,000, which is an affordable option for those who want to live in the city and a lot cheaper than Sydney.”
Among those to have chosen Melbourne over Sydney is recent Canberra arrival Nicky Connor.
She picked Melbourne because of its affordability, café culture, more relaxed atmosphere, better transport infrastructure, friendliness, multiculturalism, artiness and its growing reputation as a shopping mecca.
“We’re paying $500 a week for two-bedroom townhouse in Abbotsford, which would cost $700 a week in Sydney and $650 in Canberra.
Former Sydney Lord Mayor Lucy Turnbull, now chair of powerful think tank, the Committee for Sydney, believes it’s important that both Sydney and Melbourne prosper and manage their growth well.
While highlighting that Sydney still makes a higher contribution to GDP than Melbourne – 22 per cent versus 17 per cent – she says it’s important that the debate not descend into a “football match” between the two cities.
“Every Australian has vital interest in the success of both large capital cities. We are not competing with each but with other global cities in our region.
“Every Australian city is in a battle for global talent. It’s about human capital, attracting and retaining the best people.”
But she accepts that Sydney did not invest in its growth after the Olympics: “Bob Carr’s statement in 2000 that Sydney was ‘full’ had a major impact on the city’s morale. We’re still getting over that statement. You can’t stop a city growing, but you have to manage that growth.”
She believes Sydney is starting to shake off the post-Olympics shackles. “We have projects like the $8.3 billion North West rail link, the re-birth of Darling Harbour, the Central to Eveleigh rail corridor. These are just some of the projects giving Sydney the momentum it needs.
“There’s also the draft metropolitan plan for Sydney which is about delivering better integrated infrastructure for the city, the WestConnex motorway linking Sydney’s west with the airport, plans for a second airport and Parramatta’s development into Sydney’s second city.”
Ms Turnbull says Sydney can also learn from Melbourne’s local council amalgamations during the Jeff Kennett era. These, she says, were the impetus behind its subsequent growth.
“We have 41 local governments in Sydney’s metro area. No other global city has as many. We need to amalgamate them into eight or 10, otherwise it’s very hard for local government to talk with one metropolitan voice,” she says.
The other issue she says is housing affordability, something all really successful cities have to grapple with.
“It’s a sad consequence of globalisation. But what we have to do is create the right housing and density and give people better housing choices,” she says.
Sydney Business Chamber executive director Patricia Forsythe also believes Sydney is recovering from the “lost decade” since the Olympics. “That has clearly changed since there was a change in government in 2011. The pace has picked up.
“We’ve had an upturn in approvals for greenfield development sites in south-west Sydney and a desire to increase housing density in our middle ring suburbs and around key transport corridors.
“When I look across towards Barangaroo – which will be the new banking and services hub – the cranes I see are all symbols of growth.”
“Many of the significant global companies still choose Sydney for their Asia-Pacific [headquarters] because of the strength of its banking sector. For others, such as northern hemisphere expats, its Sydney’s lifestyle and liveability – good weather, the harbour and beaches – which make it so appealing.”