In a rapidly growing and gentrifying area, what are the implications for community facilities?
To answer this question, our consulting team took a deep dive into the changing housing market in Footscray, a rapidly changing suburb in Melbourne.
This is a great example of how you can use demographic information to build a narrative about a place to make an evidence-based decision. Not everyone realises that we do this kind of in-depth consulting work. If you have a decision you need to make which could benefit from demographic insight, don’t hesitate to contact us. It’s quite long but really interesting so grab a cuppa!
Housing development and drivers of change
The suburb of Footscray is traditionally an established residential, industrial and commercial area located only 6 km from The Melbourne GPO. Owing to its close proximity to the Melbourne CBD, its strategic importance within the rail network and the plentiful supply of old industrial land for redevelopment, Footscray is expected to become an important urban centre, attracting significant levels of residential and commercial development over the next 25 years.
In terms of development potential, there is a significant amount of old industrial land that has been identified for future residential development. Since the last Census, the area has already had significant development of approximately 1,263 dwellings, and from 2017 to 2041, it is expected that an additional 13,800 dwellings be added.
This increase in dwellings stock is expected to drive a very significant population increase. In 2011, the population of Footscray was 14,025. By 2016, this population is expected to have increased by 2,857 people, at an annual growth rate of 3.5%. This continues until 2026 which is when the available identified larger sites are exhausted.
After that period, there is a decline in growth, with the majority of development coming from the redevelopment of discreet areas of the Central Activity District (CAD) on an opportunistic basis, with the turnover of current commercial premises to mixed use high rise dwellings, and infill in the remainder of Footscray in the established residential areas. The period 2017 to 2026 represents very significant growth with an annual rate of 9.6% between 2017 and 2021, falling to 6.1% to 2026.
The population change experienced will be dictated by the types of dwellings constructed. Predominantly these will be multi-storey apartment blocks, although some medium density town-house development will occur in the Banbury Village development and in other old industrial strategic sites located outside of the Footscray CAD, such as the Kinnears Rope Factory. This type of development is expected to be marketed to investors rather than owner-occupiers, and much of this stock is likely to add to the rental pool.
Owing to the economics of construction, much of the identified development is likely to contain predominantly one to two bedroom apartments, rather than larger style flats that appeal to family households. This type of development is likely to drive growth in younger adults and smaller households that are typical of inner city areas, rather than families with children. This market will also be attracted by the location of Victoria University within Footscray and the significant transport amenity, allowing access to other tertiary educational establishments and jobs within the Melbourne CBD.
The role of primary housing will be to attract young adults, owing to the sheer volume of development, the relative availability of property, and the development of medium density housing outside of the Footscray CAD, however there will be an increase in all age groups, including children. The area will grow in young families (parents with children aged 0-4 years), principally owing to the large population, availability of dwellings, affordability (especially in terms of rent) and through births. This group grows more significantly than other children age groups, as many young families move out as their circumstances change (potentially with the addition of a child). The dynamic of the housing market is illustrated in the migration chart below.
It is assumed that the main growth in Footscray will occur over an extended period. Over the last 25 years, Footscray has had very little development, certainly not in comparison with the neighbouring suburbs of Maidstone and Maribyrnong. It is only in the period 2006 to 2011 that any real residential development has taken place, and most of this has not been in the Footscray CAD, but in the surrounding established areas and along the Maribyrnong River (Salt Creek Precinct). This suggests that the Footscray development market is underdeveloped and may face greater risk of a future economic downturn, or over supply of apartments. This is addressed within the forecasts by spreading identified developments and opportunities over a longer period, from 2016 to beyond 2026.
Historic dwelling additions, City of Maribyrnong & small areas, 1991-2011
Source: ABS, Census of Population and Housing, compiled and presented in profile.id
Even with a large number of approvals for large multi-storey developments within areas such as the Joseph Road Precinct development has been slow to commence, with two sites within the precinct having commenced this year. These projects represent significant risk and will require a large number of pre-sales before financial institutions are willing to back the projects. Footscray, despite its locational advantages, has no real track record for this type of development, and developers and investors are being immensely cautious; it appears some of these sites have been resold a number of times post approval, presumably because of the risks in proceeding. Additionally, there are a number of rival locations within the City of Melbourne and neighbouring LGAs which are being put forward as potential locations for higher density development (E-Gate, Fishermans Bend, North Melbourne), as well as Southbank and Docklands which have been successfully developed and still have remaining capacity.
Finally, the Reserve Bank of Australia has identified the apartment sector as being at risk of softening with a potential oversupply of apartments. There has been significant concentration of apartments within areas such as Melbourne CBD and localities within its vicinity, and the large volume of new apartments still planned and under construction in the major capital cities has also put pressure on developers’ finances by driving up developer site and construction costs.
Whilst indications are that listed developers’ balance sheets generally appear healthy, a fall in apartment value is likely to affect future development in Footscray because it has a less developed market presence. There may also be additional exposure to downturns in foreign markets as some degree of foreign investment seems critical to some of these developments.
How will the composition of the population change?
Historically, Footscray has been an industrial area with a large manufacturing base and is home to a working class community employed within those industries. Post war it housed a number of migrant communities, many of whom found employment in these industries. In the 1970s the area became home to Vietnamese refugees, which remains the largest community of non-English speaking descent in the area. In 2006 the area fell in the 21st percentile in terms of disadvantage, with a SEIFA score of 939. Although not the most disadvantaged area in the City of Maribyrnong, it is still significantly more disadvantaged the average.
The traditional role and function of Footscray as an industrial and working class area is however changing. It is anticipated that the area will attract wealthier young professionals and students, and become less diverse in terms of income, ethnicity and age groups, mirroring to a greater degree the trends seen in the City of Melbourne and other inner City areas which have gentrified over recent decades. This is driven by the proximity of Footscray to the City of Melbourne, local transport infrastructure, the availability of significant ex-industrial sites for redevelopment (such as the Joseph Road Precinct), rising land values and the type of development which it is beginning to attract.
The vast majority of recent approvals have been for multi-storey mixed use buildings, with large numbers of apartments. These are generally smaller apartments with one to two bedrooms, many of which are sold off-plan to investors with the intention that they will provide a rental income. These development are likely to attract younger adults, looking for accommodation closer to employment, transport and education opportunities. The presence of the Victoria University and the ease of access to other tertiary education options, will also encourage the trend to a younger housing market, with high student demand for housing.
Many of these trends are already occurring, evidenced by changes in the community between the 2006 and 2011 censuses.
- Cultural and Linguistic Diversity
At the 2011 Census the largest overseas born population was Vietnamese, representing 9.4% of the population. Second was Indian (7.3%) and then Chinese (5%); however this is changing and the proportion of people born overseas or from non-English speaking backgrounds is falling as a combination of ageing and in-migration of people identifying as Anglo-Celtic. For example, the Vietnamese born population has declined within Footscray partly because of the age of migrants, with some people who arrived in the 1970s having passed away or moved on to other areas, and because there have been very few migrants arriving from Vietnam since the late 1980s.
The proportion of people within Footscray and born overseas has also fallen. In 1991, this group represented 54% of the total population of the suburb, whereas in 2011, they formed 44.9%. The fall is in people from a non-English speaking background, which decreased from 49.6% in 1991 to 40.5% in 2011.
India is second largest place of birth and represents a more recent wave of arrivals. This population has increased as a proportion of the total population from 2.4% to 7.3% (with an increase of 691 people). This is a younger population with a large proportion of this group arriving a students, rather than as refugees (as with the older more established Vietnamese community).
Ancestry data also reveals some interesting trends, capturing people who have been born in Australia to parents born overseas, or who otherwise identify with a specific ethnic background.
The chart illustrates that the largest groups are people collectively from an Anglo-Celtic background (Australian, New Zealand, English, Irish, Scottish and Welsh). In total this is 5,968 people (38% of total respondents), representing an increase of 1, 414 between 2006 and 2011. The other significant group is from India, representing 7% of the population. In total the number of people identifying as Indian was 920, an increase of 292 since 2006 (or 32% of the total number of people identifying as Indian). It can also be seen that the area has lost people of Vietnamese ancestry, and other people identifying with groups involved in earlier waves of migration (Greek and Italian). This is not only because of the age of the original migrants, but also because their children and grand-children have migrated to housing in other areas.
Overall the figures indicate that the area is becoming less diverse, with a higher proportion of people in the area coming from Australian or English speaking backgrounds. Furthermore, people who are overseas born and from non-English speaking backgrounds are increasingly likely to come from an educated background and are either arriving on professional grounds or are resident on student visas. In the past, Footscray has acted as a point of settlement for refugees or poorer migrants, which is the history of the Vietnamese community or the post-war migrants such as Italians and Greeks.
The chart below shows 40% of overseas born arrived in Australia between 2006 and 2011 (a total of 2,409 persons); however looking at overseas born, the total number of people resident in Footscray from countries which have been associated with refugees since 2001 is approximately 542 (representing an increase of 101 persons from 2006). Given its historic role post war as a reception area, this role and function is changing.
The largest change in education has been in the number of people who were educated to year 12 or beyond. Over the period 2006 to 2011 this group increased by approximately 1,500, with minimal change in any other category.
In terms of income, this too is indicative of a wealthier population entering the area. The largest growth (in terms of equalized income, which is a standardised measurement allowing different households to be treated the same in terms of earnings compared with number of dependents), the largest growth has been in the highest quartile, whilst there has been a fall in the number of households within the lowest quartile of earnings.
- Development Type
In terms of drivers, the majority of development between 2006 and 2011 has been in higher density housing, with a minor loss of separate housing. Although this has been a relatively modest net gain in terms of medium and higher density housing over the a twenty year period as explained earlier, the number of opportunities and building approvals have increased since 2011 and the future will see a very large increase in these dwelling types and the trends in social change are likely to become more pronounced over the next five to ten years.
Along with the increase in medium and higher density housing between 2006 and 2011 the largest increase in tenure was in renting from a private landlord.
- Land Values
Land values have been increasing both in terms of rental values and mortgage with the highest quartiles in both showing the largest increase, especially in term of owning property. Although Footscray remains more affordable than the average for City of Maribyrnong, this gap is closing and it is likely that as development gets underway in Footscray it will become a more expensive area within which to both buy and rent.
Footscray is a suburb undergoing significant change, both socially and in the level of development it can expect. Whilst it remains more diverse than other areas of the City of Maribyrnong and the greater metropolitan area, it is likely to change. This is partly due to the ageing of existing communities such as the Vietnamese but also the changing role and function of the area driven by its proximity to the Melbourne CBD, infrastructure and development.
Although there is some uncertainty over how quickly many of the large scale development projects will get underway, owing to uncertainties in the market, it is inevitable that development will occur and that it will be transformative in terms of the likely markets it will attract to the area. This has huge implications for the future provision of services.
Existing communities will not necessarily disappear, but will be less prominent and at risk of becoming marginalised. Equally, the area is likely to continue to attract large numbers of overseas students and professionals, as shown with the growth in the Indian population. These communities will also have needs, albeit different to those of earlier migrant groups.
Finally, owing to the prospective increase in the rental market and the transient nature of young adult age groups – who whilst happy to rent when studying and establishing themselves in a career, are more footloose in terms of where they live. As personal circumstances change, these young adults will most likely leave the area in search of affordable family type housing. This poses a challenge in that there is less social investment to the community, with the more permanent population risking marginalisation in terms of services and amenity.
.id is a team of population experts, who use a unique combination of online tools and consulting to help organisations decide where and when to locate their facilities and services, to meet the needs of changing populations.
 Reserve Bank of Australia Financial Stability Review – April 2016