Hidden costs of a Good Education

Hidden costs of a Good Education

Julia Gillard has always been a passionate advocate for education and although there’s been heated debate over the Gonski reform package, there would be few to disagree that our education system needs a significant overhaul if we’re to successfully compete on an international arena.  As it stands, Australia pales in comparison to a host of other countries in basics such as reading and maths, and this must change.

Whilst I am largely in opposition to any proposal which suggests stripping funding from universities or converting scholarships into student loans, placing new graduates in a debt situation which – in the USA – has reached proportions oft compared to an unsustainable ‘bubble’ on the scale of their pre GFC housing crisis. The problem of providing children with a decent education also resonates across the housing market for our biggest home buying demographic – the family buyer.

No one is debating how lucky we are to live in a wealthy country which has thus far avoided the fate of Europe and America – in which youth unemployment is crippling the prospects for following generations.

However, if we’re to maintain a pool of talent essential for driving the necessary innovation to successfully navigate Australia into a post mining culture, as well as provide the necessary qualifications to enable the earning opportunities for younger generations struggling to ‘afford’ the affluent lifestyle Australia has forced upon its residents – (housing costs of which have been inflated through years of poor planning for population growth, ensuring most need to stay closely located to the capital city centres to secure adequate employment) – Education is a big part of the puzzle.

Yet it remains the case, that one of the substantial difficulties for families – or university students – fighting to gain a foothold into the best university or school suited to their needs – is locked in the cost and scarcity of accommodation.

Melbourne has experienced the largest population growth over the past decade and the subsequent squeeze has forced the greatest influx of residents into the outer suburban ‘growth regions’ – areas such as Caroline Springs, Point Cook and Melton for example, in which you can purchase a family home on a decent block of land for half the current metro median of $561,500.

Yet the advantage these regions offer in terms of affordability gets stripped away due a woeful inadequate supply of infrastructure which is always promised, but rarely delivered. This would include poor roads, nonexistent ‘fast’ public transport systems, and more importantly, oversubscribed, underfunded schools unable to cope with the massive boom of new residents – most of which are families.

Last year the Victorian government announced the development of six new fringe suburbs – Diggers Rest, Lockerbie, Lockerbie North, Manor Lakes, Merrifield West and Rockbank North – which are planned to accommodate no fewer than 100,000 new residents.  Planning Minister Mathew Guy made a point of stressing these suburbs would be adequately facilitated with appropriate infrastructure, and I don’t doubt the goodness of his intentions.  However, currently there are barely a handful of small local primary facilities servicing the area.


Despite the continual tiresome argument by the HIA that cheap credit, by way of reducing rates, is the ‘only’ quick fix answer to encourage first time buyers to the new housing market.  Many of these first home buyers are young couples looking for suitable abode to raise a family; therefore getting adequate facilities into the regional growth areas is the only long term and ‘urgent’ solution to solving current construction crisis.

This infrastructure should include well facilitated and resourced schools – which I’d advocate is something that would provide a far greater level of encouragement to move ‘outwards’ than a rate cut.

For families in the middle suburban regions of Melbourne, gaining a good education for their children is one of the main reasons many battle to stay centrally located, yet if you analyse the statistics, being in a school zone for one of the top 20 or so government schools in Melbourne can increase the price of properties in the area by at least 10 to 15 per cent – and the smaller the zone, the greater the pain.

For example, the McKinnon Secondary College, located South East of Melbourne’s CBD is one of the best-performing non-selective government schools in Victoria, yet it only has a zone of around ‘6sq km’ which spans over four suburbs.


Median House price $920,000

Comparing a property on one side of a road ‘outside’ the zone to the opposing side which falls inside the zone, can result in $100,000 ‘plus’ difference in the sales price.  Therefore, whilst the school doesn’t discriminate on ability, it unwittingly reserves a place only for those able to afford the inflated accommodation costs.

Rental yields for family accommodation are also significantly inflated for properties located within a popular school zone, and due to consistent demand, capital growth tends to provide better than average returns, therefore, it’s no surprise investors and developers are another demographic who target the localities.

Neither is it unheard of for an old property within the neighbourhood to be rented by a desperate family never intending to move in, but simply using the address to meet the criteria for enrolment into year 7.

I’ve even heard of school principals camping out early mornings and late into the evening, checking letter boxes and electricity usage to assess the level of activity in a property “suspected” of sitting vacant while the family lives elsewhere.

It’s also follows that housing within a popular school zone tends to be held for longer periods – periods lasting at least the length of a child’s secondary education and often beyond.  Issues of supply are therefore at the forefront of concern for families hoping to move in and get a bite of the educational cherry.

It was reported early last year that 229 government schools in Victoria turned students away due to pressures of capacity – the urgency of reform to ensure good teachers and educational facilities meet a certain standard across the board cannot be overstated.

The unfortunate bubble effect on real estate prices in well-established popular and restrictive school boundaries is an issue of concern for all hoping to provide their child with a good education. This is especially the case when school zones are either reduced or extended based on under- or over-capacity.

Therefore, should a property suddenly fall outside the zone, it results in an instant loss of equity. The same would result if a school moved or for some reason closed – something we saw happening with relative frequency in Victoria last year.

Below is a map from the REIV which illustrates the median house price by suburb, relative to the metro median at the end of 2012 which was recorded at $555,000.

The colours coded with the darkest blue indicates house prices which are more than double the metro median, and orange – house prices more than 25 per cent below the metro median.  (The white spaces are areas for which there is insufficient data.)


map 2 map 3


Not surprisingly, all areas surrounding the ‘good’ government schools which reportedly provide the “best” educational facilities Victoria has on offer, are a shade of blue or deep blue indicating inflated house prices. They also map very closely to the colours exhibited on recently released ABS data which ranks geographic areas across Australia in terms of their relative socio-economic advantage and disadvantage.

The orange areas are the ‘fringe’ suburbs where first home buyers or families – supposedly ‘moaning’ about inner city house prices – are encouraged to “migrate” and raise their children.

As mentioned earlier – until we can get a reasonable level of infrastructure into these localities to provide a comparable educational advantage – or fast train services to enable students and quality teachers to commute outside their immediate area – the colours are not set to change and they will continue to suffer a social disadvantage.

University students don’t find it any easier.  We all read the story earlier this year in which contained an example of a young graduate renting out a balcony in Sydney for $215 per week.  It’s little better in Melbourne, where student accommodation can often equate to a 3 bedroom house being converted into a 7 bedroom model (as below) and marketed to a potential investor offering ‘huge rental returns.’

floor plan

Whilst most students expect to live in ‘sub-par’ accommodation whilst gaining their degree, it should be understood that the price, standard and supply of housing facilities is one of the major aggravations a young graduate will have to endure.

The adequate provision of secure accommodation obviously plays a significant part in the success or failure of their studies.  Expecting students to foot a larger proportion of the bill to support their term at university – as suggested in the Gillard Government reform package – will inevitably feed into the problems mentioned above in regard to overcrowded accommodation.

It will be years until we see the significant effects of increased education funding, and the issues above pose additional questions – do we do away with school zones all together? Pour a higher proportion of any funding package to the disadvantaged suburbs to level the playing field by way of providing comparable alternatives?

There does seem to be a case for highlighting the unfortunate social divide between accessing quality education and the consequential “bubble” in accommodation costs which plays into issues of relative inequality.

Catherine Cashmore


The Downsizing Realities of our Property Market – ‘To where’ do Retirees Move?

The Downsizing Realities of our Property Market – ‘To where’ do Retirees Move?

The idea that demographically we’re moving into a nation of downsizers is somewhat debateable. Certainly affordability constraints are having an effect on the ‘property choice’ for young ‘home buying’ couples, but it doesn’t stop the flow of regular articles suggesting “families are increasingly flocking to high-rise apartments” which was all but stated as ‘fact’ in a recent ‘ibisword’ news letter – not to mention mainstream columns regularly delivered through the national press assuring readers we’re all becoming a nation of ‘happy strata dwellers.’

Whilst there’s no doubt we’ll see a future shift into apartment living as density in the capital cities continues to increase, the demographic most are concentrated on are our elderly downsizers. This is the great “Tsunami” many expect will tip not only the Australian property market over the edge with a flood of supply, but also that of the UK and USA – marring any recovery they’ve had to date.

We’re told our baby boomer retirees will all be downsizing en-mass – so it’s worth investigating if this is correct, and if so, asking if the relative boom of inner city apartment stock currently being constructed in our inner suburban localities – the majority of which consist of 4 stories or more and are principally located in both Melbourne and Sydney – is going to suit their needs?

Proportionally we’re growing ‘older’ as a nation – census data tells us the number of 20-44 year olds has expanded on average by 4.6 per cent per year in the five year period leading up to the census – however by 2020 it’s expected to slow to 1.2 per cent per annum – (a trend clearly demonstrated by the United Nations World Population pyramid which extrapolates the data out to 2050.)


By the time we get to 2051 the elderly population over 65 will have doubled from the figures recorded in 2004, and over 85 year olds will have quadrupled. These are the ‘baby boomers’ who hold roughly half of Australia’s housing stock – a mix of owner occupied dwellings and investments.

The first group of 65 year old “baby boomers” started their retirement in 2011 and over the next 20 years, the others will follow suit.  It’s broadly assumed by property commentators and urban policy makers that most will be looking to downsize. With unit and apartment approvals running at an all time high  it’s taken for granted that our elderly downsizers will increasingly migrate towards these inner city developments becoming part of the ‘happy strata dwellers’ I cite above.

It’s perhaps worthwhile looking at the definition of downsizing before investigating where the bulk of the next decade’s retirees will head.  Whilst moving to a smaller dwelling is what most assume as the definition of downsizing, it can equally encapsulate the demographic that simply locate into cheaper accommodation – perhaps not negotiating on interior space, but moving to an area where they can purchase a similar sized home for less expense.

The only commonality between the two seems to be ‘land size’ – few are able to maintain lavish gardens and therefore opt for ‘low maintenance.’

Late last year the Australian Housing and Urban Research Institute produced a paper entitled ‘Downsizing amongst older Australians’ – which attempted to address preliminary questions that hang over the accommodation needs of older Australians through an number of surveys, lengthy interviews, community meetings and ‘clues’ contained in ABS data.

Whilst they were able to recognise some broad trends contained in the census results, the research noted a severe lack of ABS information from which to assess the lifestyle needs of downsizers – therefore, despite the growing urgency on urban policy makers to provide adequate accommodation to meet ‘expected’ demand, we have scant details regarding preference of property type, price, and location an elderly retiree would require to successfully navigate the process.  Hence why there are now calls for the census questionnaire to address the topic in detail.

Albeit, it was unsurprisingly noted from the ABS data available, that increasing numbers are leaning towards lower density dwellings as they move into their twilight years, and there is also evidence to suggest most retirees who moved in the five year census interim stayed in the same SD area.  However, without deeper analysis there’s little to suggest apartment living is the preferable option.

The preliminary results from the AHURI survey were presented by Bruce Judd, Catherine Bridge, Hazel Easthope and Edgar Liu at the Australian Housing Researchers Conference in Fremantle earlier this year – the full power point is available here – however I’ll outline the results below.

From the 2815 ‘older people’ surveyed, only 43 per cent had ‘downsized’  and although it’s generally assumed the predominant reason for downsizing would be monetary their survey revealed the biggest motivation for a move later in life is a ‘life event’ such as illness or the children leaving home. Financial gain as a motivator lagged behind ‘death of a partner,’ and this falls in line with previous literature which notes a ‘reluctance to release capital unless ‘non housing wealth’ was close to being exhausted.’  (Faulkner, 2007)

chart 2

With this in mind, it’s no surprise that their preliminary research paper also outlines a common trend for older residents to ‘stay put’ indicating many don’t want to move if they can avoid it.

Downsizing from a 4 bedroom house to 2 bedroom unit for example, would not just compromise living space, but also force the mover to ‘downsize’ their possessions – some items of which no doubt have sentimental attachment and a lifetime’s worth of memories attached.

Furthermore, in a 3 bedroom home, children and visitors can come to stay – in a unit, it’s harder to entertain – not to mention negative financial and psychological stress that dissuades older families from upping sticks – such as stamp duty costs and selling fees and the general physical effort.  For these reasons (and others,) it’s well recognised that the majority of older people continue to live in suburban dwellings with 3 or more bedrooms.

In line with the issues of unexpected expense, one of the participants surveyed commented;

“There are other expenses in selling houses – (Stamp) Duty, Agent’s fees and so on – and then removal fees. … I paid a monthly fee while the furniture was in storage. So, than was another cost..I wasn’t really prepared for.” (Male, 60-64, single, owner, regional, NSW)

From those who had downsized, there was certainly evidence of a proportional move into apartments – albeit, the larger proportion continue to reside in a separate house.


chart 3

From those who did downsize, the predominant difficulty seemed to be sourcing appropriate accommodation – with comments such as;

“We’re not alone in saying, well where’s this suitable smaller place? …That type of dwelling…that’s being built within retirement villages where they’re two or three bedrooms; they’re really quite well set up and…well designed. But their problem is, that’s where they are, in a retirement village often on edges of suburbs.” (Female, 60-64, couple, owner, urban, VIC)


“…We’d been looking for about 10 years… for…a block about this size, a dwelling rather like this that we could buy on our own. We couldn’t find such a thing. Doesn’t exist. We looked as far up the central coast. So…what this retirement village offers was the next best thing.”

The above data falls in line with my own experience working with elderly downsizers.  Most are understandably fussy in their accommodation needs – affordability is a factor – modern apartment owner corporation fees are not ‘modest’ by any means, and most I deal with, would prefer a small ‘villa’ unit or town residence to an apartment.

Evidently, in our ‘squeeze as many on the block as possible’ culture, properties fitting the description above are not readily available.  Inner city suburbs lack the space, and outer suburban localities where more appropriate accommodation exists, often lack public transport and adequate infrastructure to meet demand.

Therefore, although it’s assumed there’ll be a ‘downsizer’ Tsunami into the apartment market – there is little evidence to suggest as such – and for those who do downsize, finding suitable stock can present significant difficulties. It’s probably for this reason, high rise apartments continue to experience inflated vacancy rates coupled with a large proportion of student renters, whilst elderly ‘empty nesters’ choose to ‘stay put.’

The AHURI research outlined – between the 5 year census interim period, only “one quarter of older Australians 65+ moved,” only 43 per cent of the survey respondents who had moved since turning 50 had downsized, most moved to detached dwellings – with only 24 per cent moving into flat’s or apartments.

Meanwhile, the ‘home buyer’ duel income property shoppers, who make up Australia’s largest buyer demographic would no doubt appreciate an extra supply of inner and middle suburban 3 and 4 bedroom houses which are held by the ‘downsizing’ population – just as first home buyers would benefit from an increased supply of ‘starter’ 1 and 2 bedroom low rise established apartments, which unlike ‘high rise’ dwellings, give a first home buyer an increased ability to obtain financial approval with lower owners corporation fees, but which have been largely ‘soaked up’ by investors taking advantage of negative gearing tax benefits or purchasing as part of a diversified SMSF portfolio.

It’s clear the property needs of ‘home buyers’ must be addressed by urban planners if we’re to free up the market stagnation which will increasingly affect city dwellers as the population expands.

Adequately funding infrastructure for our fringe suburbs to boost the construction sector as well as reducing hefty development overlays which are passed onto the buyer, addressing policies to constrain investor and foreign acquisition into the established sector which does little to increase supply, not to mention the recent trend of ‘land banking’ vacant blocks which could be subdivided into homes ideally suited to both the downsizer, and young family buying demographic.

All of the above have played their part in disproportionally inflating inner and middle ring house prices, stagnating the market and reducing the options for first home buyers who are told to migrate some 30km from the CBD into a ‘nether nether land’ in order to purchase a house in which they can   settle for a period of time and adequately raise a family.

Until such a time – we can expect more pain ahead in a property market that fails to cater for ‘home buyers’ and largely benefits investors.


Catherine Cashmore