Markets 
Opinion
I’ve just returned from four weeks in Turkey, meeting colleagues from the International Network for Urban Research and Action. Annual INURA meetings are hosted by member cities where local researchers and activists show visiting delegates an underbelly rarely seen by tourists. The dark side of Istanbul can hardly be missed though – urban development to the east and west is on steroids.
Bristling residential towers up to 40 storeys extend as far as the eye can see, eating up arable land, pushing basic infrastructure to its limits, joining previously discrete towns into one massive conurbation.
A fascinating aspect of this huge increase in housing supply is that sale prices and rents are not coming down. Why? It’s complicated but it is due partly to the new builds being firmly up-market, partly to collusion, and partly to many being financed by elites from war-torn countries who have no interest yet in releasing their parked holdings.
Vacancy rates all over the world are notoriously difficult to quantify, and those governments that bravely try to tax empty dwellings (which Turkey does not) must rely on voluntary disclosures, so official figures and local estimates are always at odds. The Turkish government does not collect such data, but a local estimate in 2023 had Istanbul’s vacancy rate at up to 11.5 per cent. Researchers from Istanbul University now informally put it closer to 30 per cent.
Turkey is an extreme case and its problems are stark, but the dynamics of building high-end property for higher returns, price-fixing and maintaining housing scarcity are universal.
Spectacular tower demolitions in China in recent years are attributed to poor and/or illegal construction and to geographic mismatches – the apartments being too expensive for the local market or built in areas with low demand. But the underlying motive for these enormously costly explosions is to keep residential prices high.
While mass vacancies and demolitions are the more radical of possible responses to a housing surplus, smaller cities are preoccupied in smaller ways with the very same issues.
The condo boom in Vancouver and Toronto has added thousands of apartments to those cities over the past 20 years and both still rank among the least affordable in the world. It was only when dramatic cuts were made to immigration two years ago, along with interest rate hikes and tighter mortgage tests in an effort to cool the market by reducing demand, that prices began to stabilise.
In June this year, in the face of an approaching housing glut, the Canadian federal government announced a program to buy unsold condos for “affordable” housing. Prime Minister Mark Carney confirmed this would save the developers from having to lower their sale prices.
One thing is abundantly clear everywhere: property investors and developers do not do what they do to bring prices down. Nor do governments want them to, if they are honest. The prosperity of so many nations is so dependent on urbanisation and cranes on the skyline – the cheap signals of economic growth – that the unequal distribution of the proceeds becomes secondary.
In Australia, real estate and infrastructure development and the financialisation of housing are among the best our state and federal governments have to offer our cities. To reconcile this with consequently glaring social injustices, they cling to the delusion that the market will build into surplus until prices come down, redressing housing precarity and homelessness, and leading us out of our affordable housing crisis, hallelujah.
The developers are more realistic. The building booms in Melbourne and Sydney slowed two years ago when profit margins were threatened due to the increasing costs of construction. This masthead reported in October 2024 that property experts were warning that government plans to fast-track new high-rise towers would not be viable without a substantial increase in the prices of apartments. They would need to rise by at least 15 per cent to encourage developers to build new high-density homes, said industry analysts Charter Keck Cramer.
Developers in Australia are also more rational than their international counterparts when faced with the prospect of price downturns. While they, too, are inclined to leave buildings empty, or their investor buyers are, they don’t do so en masse or blow them up or beg for government bailouts (much). Rather, they just stop building.
This is our governments’ nightmare, but if they look past the free-market ideology, they will see their salvation. Even industry personnel such as Susan Lloyd-Hurwitz, former Mirvac CEO and now chair of the National Housing Supply and Affordability Council, say governments need to play a role in building housing “like we used to”.
The evidence is in, internationally and locally. Private markets will resist all attempts to bring prices down. They will never build properly affordable housing. They will build high-end product that brings the highest returns. Governments are in the unique position of having the resources and the capacity to build when and what the market cannot or will not. Yes, there are budgetary limitations, but Australia is a rich country. I can think of a spare $368 billion that would help.
Our cities are still mostly beautiful. We still have arable land. We have good and constantly improved infrastructure. But it’s fragile. Our politicians and policymakers need to see more of the dark realities of the world, beyond propaganda-filled state visits. Or perhaps listen better to those who can.
Dr Kate Shaw is an urban geographer at the University of Melbourne.
Dr Kate Shaw is an urban geographer at the University of Melbourne.From our partners
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