The Economics of Land-Use Intensities in Melbourne, Australia

Abstract

NE consequence of rapid inflation of the prices of land and property in cities is factor substitution. At higher land prices, the intensity of use will increase and, for any given use, less land will be purchased (Figs. 1 and 2). One of the more interesting questions in urban geography relates to this trade-off: exactly what are the consequences of increasing intensity, particularly, what changes in urban land use are likely to result? In this paper an unusual set of data, made available to me in my role as consultant to the city of Melbourne as part of an international planning group (INTERPLAN) that prepared the city's strategy plan (goals and policies for future development), is used to shed some light on the question. Specifically, land prices, property values, land-use intensities, and net annual returns (rents) of all properties in the city of Melbourne are analyzed and interrelated, and the economies and/or diseconomies of more intense developments are measured.