Destructive Cities: A new spatial planning and property paradigm?

This book is the third in a trilogy which began with Australia 2050: A big Australia?  [2010). and   Beyond the Fringe [2013). Destructive Cities will be published in 2016 and extends key propositions   in the first two books. Namely there is no practical alternative to accommodating a population of 40 million people by 2050 and current regulatory frameworks actively work against this outcome. Second that understanding cities should focus on understanding and facilitating employment and rapidly changing industry structures [turbo charged by technology] and not direct most strategic effort on residential/design/environmental outcomes. Destructive Cities argues that Australia is on the eve of what promises to be one of the most radical periods of structural change in its history and the property sector is ground zero.

Despite the looming shadows of an ageing population, falling productivity, slow growth and the end of the resources super cycle, relatively  few people are discussing  solutions  and gearing up to ride the waves of innovation beginning to swell offshore.

The traditional property cycle drivers will be supplemented by major structural   change [economic and social]. Understanding new geographies and new property products [e.g.,   new retirement   living products, new freight and logistics and impacts of emerging technologies] will provide lower risk and potentially improved employment outcomes.

The mining boom in Australia   had significant   negative effects on the service sector [80% of all jobs] and masked major structural changes in employment in Australia which have occurred since 2001. For example employment in the health and medical sector is now the fastest growing in Australia.

The negative effects are highlighted by the Reserve Bank of Australia [Graph1] in terms of employment.

The good news is that as Graph 2 demonstrates, capital expenditure in the services sector has begun to accelerate quickly.

Destructive Cities argues that the future of Australian cities is dependent on the future competitiveness of the tradeable service sector. That is service sector exports such a tourism, education, professional and scientific services and business services. The high cost base in Australian cities significantly reduces international competitiveness but as the Australian dollar trades between US 60c and 70c it is possible Australia will see its first services sector trade surplus by 2017.

Graph 1

Australia is being transformed by four primary AIGE factors; Ageing and Health, Information, Technology, Globalisation and Exports.

This is partially relevant to the integration between tourism and international education and business services integrating with continued Asian investment in the property sector.

Structural changes will generate business sector demand for new property products, new locations and highly mobile labour forces. Unlike the suburbanization ‘long wave’ (1950-2000) which had previously driven property development and planning, from 2015 the AIGE era will not rely solely on fringe urban expansion and the move from ‘suburbanisation’ to ‘functionalism’ not just inner city living. Functionalism focuses on access, freight, competitive (productive) economic outocmes, employment (e.g., labour force participation and labour mobility), and the identification and delivery of major projects. As a result, new city shapes and property development opportunities will emerge.

Graph 2

Destructive Cities argues that, by 2060 Melbourne and Sydney will be the same size that Chicago is today. Brisbane will grow and there will be intensification of the eastern seaboard; Australia’s global opportunity will be driven by Asian population and economic growth. Gloabilisation encompasses the flow of technology, knowledge, people, values, ideas, capital goods and services across national borders and Australia has a wonderful opportunity to move beyond just the export of goods and resources to technology, knowledge and services. Tourism, off the back of the wave of Chinese wanting to holiday in Australia, and the export of education and business services to Asia are the big winners here.

An ageing population will drive the health sector as Australia’s number one employment and number one public expenditure sector and the types of location and funding of both medical and health facilities, will change while the accommodation for the over 65s, from retirement villages to aged care facilities will need to change to cater for an ageing population that will have different needs, expectations and mobility.

Information and communication technology is changing economic and spatial relationships in overt and covert ways which is the beginning of major changes in supply chains and consumer behavior. The big real estate winners will be groups that can provide appropriately located accommodation for freight and logistics providers (just look at the growth of large distribution sheds around major transport interchanges) and those who can embrace technology for the delivery of services. For example the success of Silver Chain’s home hospital-level care, normally provided in a hospital or emergency department, in the comfort of your own home with the medical equipment monitored from a suburban office and highly trained clinical staff who can be dispatched from a central location to your home.

This is partially relevant to cumulative growth outcomes due to the linkage and interdependency between sectors. For example, tourism, international education and business services integrating with continued Asian investment in the property sector creates significantly induced employment growth. The ‘global sericisation wedge’ between china and the USA is likely to be the key employment driver for Australia turbo charged by technology. As the graph indicates Australia services export volumes are increasing rapidly. By 2016 Australia is forecast to have its first ever trade surplus in services. In 2015 the ABS assessed tourism as representing 2.7% of GDP – a greater share than agriculture, (2.5%). This sector could double in size in the next ten years!

Graph 3


Despite the critical growth in the services sector little is known about its key drivers. Tradeable services sector employment should be a key driver of city building because they can become an export sector which prevents Australia from relying highly cyclical and after destructive trade episodes and mining booms. No planning is undertaken to facilitate outcomes e.g., no tourism spatial plans have been produced. City building in Australia cannot innovate and add economic value until the future shape of the service sector, turbo-charged by technology, becomes front and square in the debate.



About MacroPlan: MacroPlan’s experienced and qualified economists align their understanding of macro-economic forces with micro-economic variables such as geographic and industrial characteristics, demographics, labour market shifts, resource demand and commercial realities.  Contact Brian Haratsis, Executive Chairman today to discuss your property research requirements.

Brian Haratsis
Executive Chairman E: P: 03 9600 0500