From Rags to Riches (Download PDF)
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“Cities have the capability of providing something for everybody, only because, and only when, they are created by everybody.”
– Jane Jacobs
The extraordinary changes to our inner cities and downtowns are unprecedented in modern times.
The movement to the inner city is not just a local phenomenon but a worldwide trend that can be observed whether you are in London, San Fransciso, New York, Sydney or Melbourne. It is important to realise that what is being discussed here is not a general movement to a city, rather, this trend is a movement to the real inner core of the city. As cities grow the density of their cores increase and at the same time the density falls in their peripheries. This story looks at the consequences of urbanisation. It is about the extreme premiums being paid to be in a position that is highly walkable, close to the commerce opportunities of the CBD, rich in transportation options and a way of avoiding traffic congestion.
The drastic changes in sale prices as a result of the urbanisation trend have been none larger than Melbourne’s very own CBD and surrounds. In the 90s and early to mid 2000s the focus of the property market was on the tremendous change in rezoned farm land on the fringes of Melbourne. People could buy property or land cheaply and chose to set up their dream homes in the outer suburbs. Now, the focus has shifted and has become more about the centre of each capital city as waves of foreign investment clashes with local resources to secure prime centralised real estate in the inner city regions.
Let’s go back in time to the year 1969, when the Soviet Union launched Venera 6 towards Venus, Nixon became President of the United States of America and Rod Laver won the Grand Slam for a record-breaking second occasion. It was a simpler life. A time when the humble restaurant menu had three choices. When coffee was coffee, and not spoken about as if it were a tropical fruit, “…sweet and well rounded with hints of pineapple, apple and red berries, with subtle vanilla on the finish.” Many of Melbourne’s young and adventurous creatives, artists, and bohemians embraced living in the inner city suburbs, while others fled to escape the dirt and slums that had developed.
In 1969, you could buy a terrace in Drummond Street Carlton North, for a modest $7,000. The surroundings were a little less comfortable back then and the neighbourhood was truly edgy. Edgy back then was more of a negative connotation rather than how we would use the term today as a positive description of many inner city pockets. This was a time when gentrification wasn’t even in the vocabulary.
To put the sale price for the property in perspective, consider the cost of a round the world airline ticket at that time. An airline ticket of this kind could be purchased in 1967 for $567 – roughly a tenth of the value of the North Carlton terrace. The same type of airline ticket is now valued at four times the 1969 price.
On the other hand, the $7,000 terrace is now worth almost a million dollars which is 142 times the original price paid. Even after adjusting for inflation, the house has experienced an extremely large turnaround. $7000 in 1969 is approximately $76,000 in today’s dollars. In inflation adjusted terms a terrace in Carlton North would still be valued at over 13 times that of the one purchased in 1969.
The cost of airline tickets is becoming cheaper and cheaper whilst house prices in the inner city continue to rise steadily.
The question on everyone’s mind is will this huge change in property value be repeated?