Does public housing keep the buyers away?
When viewed through the prism of house prices, the divide between Melbourne's rich and poor used to be clear with the most expensive housing in the east and south-east, but this is less and less the case as the inner city, especially the inner north becomes gentrified.
The inner city has gentrified over the past two decades with industry moving out and replaced by apartments and the ever-present cafes - many of which are in old factories themselves. This has led to an increasing prevalence of high-end modern developments requiring professional incomes being co-located with publicly provided or subsidised accommodation.
If you stand in Johnson Street, Gertrude Street or on Racecourse Road this is obvious to the naked eye.
Recent Socio-Economic Indexes for Areas (SEIFA) data released by the Australian Bureau of Statistics brings this into sharp relief when contrasted with sale prices for houses.
For those unfamiliar with the data, a SEIFA score in excess of 1000 denotes a suburb whose residents have a socio-economic status that is statistically above average. When it is plotted against the median prices houses sold for over the past year the outcome - in all bar a few suburbs - is unsurprising but quite illuminating. The higher the SEIFA score the higher the property values with East Melbourne at one end and Frankston North at the other. Toorak misses out because of the high number of older flats along the main roads.
What is interesting is the five outliers. They show how the old divide is less pronounced now.
They have a lower than average SEIFA and above average house prices. The five suburbs; Carlton, Collingwood, Fitzroy, Flemington and North Melbourne are all within the top 10 suburbs in Victoria ranked by proportion of public housing. They have a large number of people living in publicly provided housing, most notably in the high rises. These dwellings stand tall and in stark contrast to the terraces and apartments invariably located across the road.
Median house prices in those suburbs range from $725,000 in Flemington to $923,000 in Carlton while their SEIFA scores are between 892 in Flemington and 990 in North Melbourne. This means little until you look at house prices in suburbs with similar SEIFA scores. Albion in the west has the same SEIFA as Flemington but its house prices are half as much. Noble Park North in the outer east has the same SEIFA as Collingwood but with house prices slightly more than half that.
Clearly the location of the public housing has not stopped the other parts of these suburbs under private ownership from gentrifying. This is because, like most matters real estate, it's all about the location.
The high housing prices are driven by the scarce and now in high demand inner city land. These high land values are the catalyst for the transformation of these suburbs with medium density accommodation becoming financially viable for developers and in demand from people wanting to live close to work. In just one year, 2011, the population of Flemington increased by 4.3 per cent, in North Melbourne by 3.8 per cent and 1.6 per cent in Carlton. These population increases don't come from public housing tenants, they are owner occupiers and renters in the private market. The intermingling of public and private housing, whether by design or accident, has been a policy of governments for a number of years now. The idea is that it provides for a more cohesive society with greater opportunities for those who, due to the cost of housing, would be consigned to the outer suburbs.
If the property values are a useful guide then the outcome of this policy so far has to be good news for Melbourne. The diversity now inherent in these suburbs is a positive feature in its own right and its certainly not keeping the buyers away.
Frequently Asked Questions about this Article…
Not necessarily. The article shows that inner-city suburbs with a high proportion of public housing — like Carlton, Collingwood, Fitzroy, Flemington and North Melbourne — still have above-average house prices. Location and rising inner‑city land values have driven gentrification, so public housing alone hasn’t kept buyers away.
Over the past two decades the inner city has gentrified as industry moved out and was replaced by apartments, cafes and higher‑end developments. That process has brought private buyers and renters into areas even where public housing high‑rises remain, increasing demand and property values.
SEIFA (Socio‑Economic Indexes for Areas) scores indicate relative socio‑economic status — a score above 1,000 is above average. The article finds a strong correlation between higher SEIFA scores and higher median house prices, but also highlights important outliers where low SEIFA suburbs still have high prices due to location.
The article explains that proximity to scarce inner‑city land, developer interest in medium‑density projects, and demand from buyers wanting to live close to work can push prices up. For example, Flemington has a SEIFA around 892 but a median house price (~$725,000) much higher than other suburbs with similar SEIFA further from the city.
No — investors should focus on fundamentals like location, land value and demand rather than the mere presence of public housing. The article suggests mixed public/private neighbourhoods have still attracted buyers and seen rising prices, so each suburb needs to be assessed on its own merits.
Population increases in inner suburbs helped drive demand for private housing. The article notes one‑year population rises of 4.3% in Flemington, 3.8% in North Melbourne and 1.6% in Carlton in 2011, driven by owner‑occupiers and private renters rather than public housing tenants.
They show that location and proximity to jobs and amenities can outweigh social‑indicator measures like SEIFA when it comes to prices. Even suburbs ranked in the top 10 for public housing can gentrify and achieve high median prices if the land is desirable.
If you use property values as a guide, the article suggests the policy has been positive: the diversity created by intermingling public and private housing hasn’t deterred buyers and appears to have coincided with rising values in those suburbs.
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