Monthly Sydney Property Insights

While a lot happened in Sydney’s property market during Q2 2017, nothing had greater ramifications for so many suburbs than fresh controversies which erupted over toll roads as the entire future of the car is in question.

This is our special report.

Will the car as we know it – run on petrol and operated by human beings – sometime soon be redundant?

Two world-changing technologies – the advent of the electric car and the driverless car – are currently ripping through the automobile industry. They have the potential to transform not just the way we get around our cities, but the very make up of our cities themselves, including how we buy property, build homes, and decide where to live.

Changing the face of the automobile industry

Cars are the second most expensive purchase most people will ever make after a house – yet they are used on average for just four to five percent of the day. “For 96 percent of the time a car sits doing nothing for the user and it depreciates the moment you buy it – and so it is an industry ripe for disruption,” says Dr Elliot Fishman, director of transport innovation for Melbourne-based Institute for Sensible Transport.

Electric vehicles (EVs) are already becoming increasingly common worldwide, spurred, at least abroad, by government intervention and market forces: last month, the UK and France announced bans on all new diesel and petrol cars by 2040 – Britain, with its right-hand drive cars, in particular, will have a knock-on effect for Australia which will soon import all cars when local manufacturing ceases.

Progressive Norway and the Netherlands are even further ahead, committing to one hundred percent EVs on the road by 2025. Combined with decreasing costs of EVs, the ban has a palpable effect: in Norway, where there is the highest per capita uptake of EVs worldwide, sales in June made up 42 percent of all new cars being registered.

Meanwhile, the commercial use of autonomous or driverless cars could happen within a decade. “By mid-century,” Navigant Research predicts, “the practice of someone primarily driving himself or herself around town in a gasoline car will be as unusual as travelling by horse and buggy is today.”

Staying ahead of the curve, the giants of the automobile industry are leading the charge: from 2019, Volvo has declared it will retire petrol cars entirely, making only hybrids or EVs; Jaguar Land Rover is aiming for fifty percent of all its new cars to be hybrids or EVs by 2020.

What’s wrong with Australia?

True, Australia is lagging other developed countries. While New South Wales is making moves to cut down on the amount of time we use our cars – $12.1 billion was put aside for public transport infrastructure in the 2017/18 NSW Budget, including the “More Trains, More Services” program – Sydney in particular, where roughly eighty percent of trips are done by car, remains reliant on the four-wheeled beast.

Not only that. Teslas here are considered a luxury vehicle but are taxis in Europe. And Australia has the unique problem of users often needing to traverse vast distances. But Dr Fishman insists that we are no more a car-obsessed nation than anywhere else.

Cars are “not hardwired into our DNA,” he says. “Rather than being in love with the car, I think it’s more a forced marriage or a marriage of convenience – we’ve created an urban landscape where often the only viable mode of transport is to travel by car.”

A less car-dependent – or perhaps better still, a car-free – lifestyle so normal in European cities such as London, Paris or Rome is only available in Sydney to those who buy or rent in inner-city areas such as Potts Point or Surry Hills. Lack of public transport in outer suburbs makes living without a car impossible for most.

Meanwhile, the Australian government has failed to prioritise EVs or to offer commercial incentives to buy them: petrol is still relatively cheap in Australia compared to other OECD countries. There are no real tax benefits for buyers to purchase EVs or any major programs to provide state subsidised charging stations, meaning stations are, for the moment at least, few and far between.

Subscribing to a mobile future 

That does not mean that Australia will not, at some point, have to embrace change. Crucially, when that happens, it isn’t just the product itself that car companies and technology providers are taking into consideration – but how they are used in a citywide service.

In the future mobility will be a “service in the same sort of way that we now consume our music. Not by CDs but subscribing to a service like Spotify – we just listen to the music but we don’t own it when we’re not listening to it,” says Dr Fishman.

“There is a difference between the driverless cars versus the idea of a driverless car network,” agrees Professor Gerard Reinmuth, director of architectural practice TERROIR and a professor at University of Technology Sydney (UTS). “The big question we have for the city is: will driverless cars end up in personal ownership or become a service that you can just call for?”

That difference will have a massive impact on congestion. If a driver’s license is no longer required, the very young, very old, and everyone between will be able to buy and use their own driverless cars – creating the potential for more cars on the road and more congestion. Without state intervention that could be problematic: recent University of Sydney research from the Urban and Regional Planning program has found that the privacy, autonomy and the comfort found in taking journeys in one’s own car is as important as cost and convenience in deciding how we travel.

If, however, driverless cars are offered as a service — much like a cheaper version of Uber that we would call only when needed — there could potentially be a dramatic drop in car ownership. Roads filled with automated cars less susceptible to human error could also lead to a reduction in accidents, which create unexpected congestion.

Impact on property

Less congestion could make outer areas of Sydney, and even further afield urban centres like as Newcastle and Wollongong, more attractive areas to purchase property and to live for those who work in Sydney’s CBD: as commuters no longer need to drive, commuting hours could become valuable work time and the car could become an extension of the living room replete with coffee machines and pop-out desks.

“We might find a situation where people are willing to spend more time in traffic because they can do other things – we could see a situation where people are moving further out and spending that time doing work in that car,” says Dr Fishman.

Greg Dickason, executive general manager of technology for Australia’s largest provider of property data and analytics, CoreLogic, sees a large potential for easier commutes and hyper-loops, which put cars on rails through tunnels underground. These would make “Orange, Bathurst and other towns just a 20 to 30 minutes commute away and hence ‘neighbourhoods’ of Sydney,” he says.

If, on the other hand, the advent of driverless cars means congestion getting worse, not better, properties close to the employment areas will become even more desirable than they are today, further driving up inner-city property prices.

Government regulation matters 

As such, technology changes need to be regulated by government. “There might have to be intervention around what grounds there would be private driverless car ownership,” says Professor Reinmuth. “As a society, we don’t like that level of government intervention but for the sake of our cities, we might have to consider it.”

The Institute for Sensible Transport believes that insurance fees and registration fees should be scrapped – and instead car usage should be regulated by a per km charge. Cost would be dependent on time of travel, with peak hour and busy roads more expensive, allocating a scarce resource in much the same way as trains do now.

No more garages?

If we all have our own driverless cars then garages – all seven million that exist in Australia — will remain valuable. If, however, we all subscribe to a service, especially if strongly regulated by the government, the garage as we know it might become expendable. “If we are able to summon a vehicle, use it when needed, then send it for somebody else to use, then the housing stock will have an oversupply of car parking,” says Dr Fishman.

In the suburbs, where it is fairly simple to convert a garage into storage space, granny flats or playrooms, that won’t be a massive issue for homeowners. There are questions, however, as to the wisdom of paying tens of thousands of dollars in the inner-city for a tiny plot of land to park your car today when it might be redundant tomorrow. In the future, these plots could be converted into micro-apartments, helping to solve both the affordable housing crisis and housing shortages in inner-city areas. Still, it is worth remembering that right now a car space or garage adds significant value to a property; that won’t necessarily always be the case.

That conundrum will be magnified for commercial car parks and underground apartment car parks, which often significantly increase the construction cost of a building. “I would think it’s highly problematic if I was in any long term play in the building industry to not build car parks that cannot be repurposed. Long term car parks need to start to be rethought,” says Professor Reinmuth.

Mr Dickason envisages a second, positive trend for cities such as Sydney, which is currently crisscrossed by highways: “The narrowing of local roads and greening of neighbourhoods as parking spaces and garages are reclaimed with no parked cars.” As such Sydney could become “greener, more pedestrian friendly.”

The future of new buildings

For new builds, that means property being built with no car parking at all – in Melbourne’s East Brunswick a five-storey “green” apartment was controversially approved last year with zero car parking, albeit close to a tram line.

“I think that is probably a window into the future where housing might be,” says Dr Fishman. “It’s very helpful not just from a transport perspective but also from a housing affordability perspective – adding a new multi level car park, ends up increasing the cost of an apartment by about $50,000 to $70,000 dollars per car park.”

Petrol stations, meanwhile, are already diminishing in inner-city areas – in future they might be de-contaminated and converted into apartment blocks. That could help with the housing crisis: Sydney will require 664,000 more homes to house a further 1.6 million people by 2036.

Meanwhile, Mr Dickason sees the advent of new “smart” properties, tied to our transport systems: “They will know about what the weather is doing, traffic conditions, the electricity supply and instantaneous costs. Buildings will communicate with the city and will be integrated with your devices and IOT devices. “

Pollution and tunnels                              

The use of electric vehicles, of course, could significantly reduce pollution on our roads – making apartment blocks and houses situated next to highways and tunnels more palatable. It isn’t only cars but trucks, too, that will go electric – SEA Automotive received $517,000 in Victoria government funding last year to develop a fleet of EV trucks.

Residents will potentially not need to worry about living close to tunnel exhaust stacks. Mr Dickason believes that issues around stacks are already “over emphasised. Technology is already good and tunnels have little impact locally.”

On the other hand, Dr Fishman warns that while technology is turning, it could be decades before pollution is reduced entirely on roads.

“Last year over a million vehicles were sold. Almost every one of them was a petrol powered vehicle, petrol or diesel. Those owners expect to have those cars on the road for 8 to 15 years at least – once the owner sells that car, second hand owner using that car for another 5 or 6 years. For the next 40 years, there will be quite a few petrol powered vehicles on our road,” he says. “Stacks that ventilate the tunnels will be putting out health damaging particles – that is certainly going to continue [in the near future].”

It is also worth remembering that noise pollution generated by grating tyres won’t change whether in an EV or petrol car. And one top UK adviser has warned that while EVs do not have exhaust fumes, there is still pollution from tyre and brake dust. Ultimately, less cars – rather than cleaner cars – is still always preferable.

Compounding all of this is the absence of any reliable studies into the long term health effects of living next to a toll road.

Should we invest in properties near motorways?

Eventually, when EVs do take over entirely, pollution concerns may dissipate but not congestion and the need to assess whether it is wise or not to invest in off street parking. How these factors intersect with each other will affect property buyers.

Professor Reinmuth puts it another way: “Is it really right to build massive roads right now when the technology is about to flip?”

Motorway toll company Transurban declared in a recent parliamentary inquiry that motorways could increase lane capacity by up to a quarter – meaning, potentially, a constant stream of automated cars. When completed by 2023, a round trip on WestConnex will cost roughly $25. That is good news for Transurban’s profits, bad news for congestion. “Because the driverless car is to the toll-road operator what the battery hen was to the chicken farmer – a brilliant opportunity to pack more of us in,” noted an article last month in the Neighbourhood paper.

Sydney property buyers should be thinking seriously about these issues as toll roads and tunnels are ploughed through and under their city. If driverless cars do lead to the end of private car ownership privately owned toll roads may not be the solution.

For property buyers it is worth remembering that “position is still everything,” notes Mr Dickason. There will remain a “premium on areas with natural beauty or walkability but expect potential for outlying areas to improve in value.”

Not a matter of if, a matter of when

Many are predicting that market forces – as EVs become increasingly cheap to buy and run – will change the face of our cars, roads, and cities long before government bans like those in the UK or Norway come into effect. As such, it is not a question of if, but when.

The idea that not just petrol driven cars but also trucks and ships can be phased out relatively quickly has got to be the good news story of the year for property buyers and owners all over Sydney whether they’re wrestling with tunnels, stacks, tolls or diesel spewing cruise ships.

And if you think things like this can’t happen, remember how quickly leaded cars and petrol bowsers disappeared after leaded petrol was phased out from 2000.



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