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Guest observation
We have a lot of property related data in Australia.
Information is released regularly by the Australia Bureau of Statistics (ABS), the Reserve Bank (RBA), a wide spectrum of state and territory and industry organisations, and private corporations.
There are plenty of stories that could be told based on all that information. But are we being told the right stories?
There is a common belief that statistics can be manipulated to support any argument, even the most outrageous claims. However, data does not lie.
It is the people who tell stories they want to tell regardless of what the numbers are. And this is how statistics get bad reputations.
The deception or, more often than not, just the misinterpretation of information due to plain and simple ignorance about the facts is possible because the audience is mostly clueless about what the data really shows. So, we trust the presenter and his or her good judgement and intentions rather than the numbers provided in support of the argument.
It is an art to ask the right question to extract the correct information from a bunch of numbers. And it appears that our education system has failed miserably to teach us how to do it properly.
Consequently, we are at mercy of news headlines and commentary proclaiming one extreme or another – if it is not the imminent price crash, then it must be a bubble.
But which issues are really at play and which are just imaginary, media fuelled propaganda? That is the question.
To make my point clearer, I am sure you have come across hockey-stick-like charts of Sydney house prices (similar to the one provided below) and commentary implying: "... they have reached extreme levels... are not sustainable... something must be done about it immediately...".
 <img src="/images/2014/10/10/sydney_median_price.png" alt="">
Source: Based on ABS data
Well, in absence of other contextual information, the steep rising line can give the impression of rampant and uncontrolled growth.
The impact of this visualisation on an uninformed observer can be quite dramatic and makes it easy for the commentator to draw quite plausible sounding conclusions that "everything is out of control". But appearances can be deceiving. Have a closer look at the following charts.
<img src="/images/2014/10/10/relative_chane_in_median_prices.png" alt=""> 
Source: Based on ABS data
It is the same data that many commentators are using and comes from the same credible source – the Australian Bureau of Statistics. However, this chart puts the information in the right context – that is, the chart compares price growth in Sydney to other capital cities and over a very long time.
These charts are more useful for describing the current state of affairs than looking at the headline statistic of 14%+ Sydney median price growth and proclaiming it is "a rampant speculation beyond all reasons". That is to say, looking at a single number without considering the broader context is meaningless.
In this broader and relative context, you can clearly see that the recent high price growth has just allowed Sydney to catch up to Brisbane and that Sydney is still behind Melbourne and Perth.
More interestingly, over the last 28 years, Sydney prices have not increased significantly more, in relative terms, than the weighted average of eight capital cities.
That is, in June 2014, growth of Sydney house prices over the 28 year period was higher than the national average by only 6.1%. In comparison, Brisbane house price growth was higher by 6.4%, Melbourne growth was higher by 8.7% and Perth by 17.6%.
So, is the current Sydney property price growth a manifestation of mad and speculative exuberance that everybody seems to easily diagnose? Or is it more likely to be the result of a normal market reaction to a long term underperformance, which should have been expected?
To highlight another aspect of how dangerous it can be to take information on the face value, please consider the above chart in the context of advice given to investors to "forget Sydney" and that "Brisbane is the market everybody should focus on next for growth...".
Of course, it is hard to make forecasts and draw far reaching conclusions based on just one, simple chart. However, this chart points to the likely reason as to why Sydney prices had the opportunity to grow so dramatically and why Brisbane price growth is so sluggish in comparison. That is, Sydney underperformed other large capital cities for quite some time while Brisbane property appears to be fully priced at the moment.
I am the first to stress that the above chart is not perfect and that it is far from providing the full story. In particular, it has been constructed based on an assumption that property prices were reasonably balanced across all capital cities in June 1986.
As shown on the chart below, this is a reasonable assumption. That is, median house prices for capital cities were in a relatively tight range in mid 1980's.
 <img src="/images/2014/10/10/derived_median_house_prices.png" alt="">
Source: Based on ABS data
Things are visibly out of balance at present but let's leave the explanation of the reasons this has happened for another opportunity. The graphs provide enough to say for now that there is a clear divide between larger cities such as Perth, Melbourne, Brisbane and Sydney, and smaller cities like Canberra, Hobart and Adelaide, with Darwin the only exception.
If you are still in disbelief about Sydney property prices not being out of the ordinary and think that one chart doesn't prove anything, here is another perspective to consider – relative to average full time adult incomes, the cost of buying a median priced house in Sydney is still 21% less than in 1986.
<img src="/images/2014/10/10/long_term_purchase_affordability.png" alt="">
Purchase affordability in Sydney is declining and is lower than for Australia as a whole but there is still some room for prices and interest rates to move up before the affordability reaches uncomfortable levels (e.g. like it happened in 2008).
If Sydney property prices were indeed out of control, we would have seen the evidence no matter what statistic was used. This is clearly not the case.
In this article I highlighted only one issue – that is, incorrect interpretation of the growth of Sydney property prices. Just imagine how much more misinformation could be floating around in the media and on discussion forums, and how many prominent commentators may be totally clueless of what is really happening in the property market in Australia.
You cannot stop others from exaggerating facts and exploiting data for whatever purposes or agendas they may have, but you can control how you treat such information. I hope this example will make you think twice about what you read and trust from now on.
For a chance to learn more about what is happening with property prices in your area, post a comment below naming capital city you would like to be featured in a special report later this month.
Arek Drozda is an independent property market analyst.
 
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Lies, damned lies and housing statistics

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GUEST OBSERVATION
Market Outlook: unchanged - neutral with negative bias
<ul>
<li>Attractiveness of renting as a preferred accommodation option has further increased (as at September 2014).</li>
<li>Purchase affordability is still very high but declining - it provides support for prices at the current level (as at June 2014).</li>
<li>Confidence in the economy continues to deteriorate with no signs of improvement (as at September 2014).</li>
<li>Housing Credit Impulse has turned down, indicating change in the underlying demand for residential real estate (as at September 2014).</li>
<li>Actual prices are above what could be expected based on changes in housing credit, making them sensitive to adverse changes in economic conditions (as at July 2014). </li>
</ul>
National Real Estate Price Forecast
The latest indicators provide further evidence of weakening market conditions.  
The pessimism about the economy and the rising purchase costs that detract potential buyers from the market have started to impact on overall demand.
Purchase affordability is deteriorating but it still remains high, providing support for the current price level. Nevertheless, prices are quite vulnerable at present and the prospect of further strong growth is rather limited - and conditional on the return of optimism.
In the absence of evidence that demonstrates prices have reached their peak in the current cycle, the outlook for the property market in Australia remains neutral. The scenario of subdued market conditions, leading to no or small growth in prices, remains the most probable outcome for September and December quarters. 
#1 optimal accommodation choice: attraction of renting is increasing
<img src="/images/2014/09/17/BRI_September2014.png" alt="">
The Buy-Rent Indicator (BRI) identifies how cost of buying is changing in relation to cost of renting.
BRI bottomed in June 2012 (indicating the lowest point in the current cycle) and it has been rising consistently since then. The indicator crossed the equilibrium line in March 2014. The September 2014 estimate points to a continuation of an upward trend for this indicator.
BRI is constructed based on the simple concept that renting and buying are substitute accommodation options, hence the optimal choice depends on which accommodation cost is rising in relation to the other. The practical use of this indicator is for identifying market cycles and for timing purchase and sale decisions.
The crossing of the indicator from buy to rent zone gives a signal that buying costs are starting to rise faster than rental costs.
In a market where purchasing costs are rising mainly due to price increases, the optimal point for selling the property will be when the indicator peaks, which should coincide with an interim peak in property prices.
As outlined in the last report, we are already two years into the current cycle.  The longest uptrend in the last 30 years was 3.5 years in duration, hence current cycle peak in property prices can be expected before the end on 2015.
Unless, of course, this cycle turns into an exceptionally long one - for example, due to historically high purchase affordability, if confidence in the economy improves.
All in all, fast moving prices from this point onwards can lead to a quite dramatic reduction in the demand for properties and, in effect, shorten the overall cycle.
Stagnating or slowly growing prices, which seems to be the more likely scenario, can potentially limit the negative impact on demand as growth in buying costs will be offset to a large degree by rising rental costs. This can delay the peak and extend the duration of the overall cycle.
 #2 purchase affordability: at a historically high level but falling 
<img src="/images/2014/09/17/PAI_September2014.png" alt="">
The Purchase Affordability Indicator (PAI) compares changes in the annual cost of buying to changes in average full time adult income, therefore it identifies how purchase affordability has changed over time.
PAI is still at a historically high level despite the September 2014 estimate falling in value. 
This indicator explains that, relative to incomes of Australians working full time, property prices are still very affordable.
The cost of buying a median priced property relative to average income is now 26.1% lower than it was in 1986. So, given the expectations of long term low interest rates, there is still a lot of room for prices to move before Australian property can be considered overvalued.
Article continues on the next paqe. Please click below.
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#3 perceptions about economy: negative and deteriorating
<img src="/images/2014/09/17/EWI_September2014.png" alt="">
The Economic Wellbeing Index (EWI) is designed to reflect general perceptions of Australians about the current economic conditions.
The EWI is falling since June 2013. The September 2014 estimate is in the negative territory and continues trending downwards.
The key premise behind this indicator is that people are generally less inclined to make big purchases when they are worried about the state of the economy.
Actual prices cannot be expected to advance strongly in an environment where a gloomy outlook on the future prevails.
If there is no substantial change in perceptions about the economy, market conditions will be rather soft for the reminder of the spring selling season.
A scenario of subdued market conditions, flagged in earlier reports, has already started to play out in real time - RP Data’s daily price index for five capital cities shows that prices have fallen in mid September from the peak reached at the end of August.
#4 demand: weakening as trend has changed
<img src="/images/2014/09/17/PHCI_September2014.png" alt="">
The Private Housing Credit Impulse (PHCI) provides an indication of the level of buyer activity in the residential property market in Australia, hence it reflects underlying demand for properties.
The September 2014 PHCI estimate is positive but the indicator has just turned south. This is a very strong negative signal indicating change in the underlying demand for properties. The September value of PHCI is subject to final revision.
The practical use of this indicator is to provide early warning about impending changes in housing credit uptake, and hence, changes in the underlying demand for residential property.
A positive but declining value of PHCI indicates that credit uptake is slowing down and therefore, that the underlying demand for residential property is softening.
#5 property price expectation: growth to slow or flatten 
<img src="/images/2014/09/17/PPG_September2014.png" alt="">
The Property Prices Gauge (PPG) is a proxy of a property price index. It becomes a leading indicator when combined with House Price Index (HPI).
PPG recorded a small increase in July 2014 but remains well below HPI.
The PPG is rising but not very strongly. Hence, the support for the current price level is weakening and, as outlined in the last report, this situation can make prices quite vulnerable.
In other words, the fact that PPG cannot move closer to the current HPI level can only imply an underlying weakness in the market and hence, greater uncertainty about the future direction of property prices.
We can already see some tangible evidence of that weakness. In particular, last weekend RP Data reported a reduction in auction clearance rates and their daily index of 5 capital city prices recorded a small decline.
Arek Drozda is an independent property market analyst.
Caveat: The information is provided in good faith and does not constitute financial advice. Use with caution and at own risk.
Background information: For more extended description of individual measures and how to apply this information please refer to the first report in this series: <a href="/expert-insights/buying/buying-more-advantageous-than-renting-yet-change-imminent-april-2014-state-of-the-market-analysis">State of the Property Market, April 2014</a>. 
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Market conditions continue to weaken: September state of the market analysis

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Market Outlook: unchanged - neutral with negative bias
<ul>
<li>Attractiveness of renting as a preferred accommodation option has further increased (as at June 2014).</li>
<li>Purchase affordability is still very high, although slowly declining - this provides strong support for prices at the current level (as at June 2014).</li>
<li>Confidence in the economy continues to deteriorate with no signs of improvement (as at August 2014).</li>
<li>Housing Credit Impulse continues to grow, indicating there is still plenty of demand for residential real estate (as at June 2014).</li>
<li>Actual prices are above what could be expected based on changes in housing credit - although the margin is reasonable it makes prices very sensitive to adverse changes in economic conditions (as at June 2014). </li>
</ul>
National Real Estate Price Forecast
With purchase affordability at a decade high, the underlying demand for residential real estate in Australia remains strong and property prices continue on the upward trajectory, albeit at a slowing pace.
The current price level remains slightly elevated in relation to the underlying mortgage credit flowing into the market, indicating that prices are vulnerable and may suffer an unexpected stall or even reversal at this level (slowing price growth is a manifestation of this vulnerability).
Since buyers are now at disadvantage to renters due to faster rising costs of buying, return to wide spread optimism about the economy is a prerequisite for the continuation of strong price growth.
However, pessimism about the state of the economy is not improving, and hence, it poses a serious threat of derailing what is otherwise quite a robust market.
A sudden return of optimism could reinvigorate buyers and lead to a very substantial jump in prices in the coming months (since buying costs compared to average incomes are still at historical lows).
However, the more likely scenarios at present are either no improvement in perceptions about the state of economy, or a further rise in pessimism. Although this will not crash the market in the short-term, nevertheless, it can potentially put the lid on further price growth in September and December quarters.
Detailed analysis starts on the next page. Please click below.
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Detailed Analysis
<ul>
<li>optimal accommodation choice: attraction of renting is increasing</li>
</ul>
 <img src="/images/2014/08/26/BRI_August2014.png" alt="">
The Buy-Rent Indicator (BRI) identifies how cost of buying is changing in relation to cost of renting.
BRI bottomed in June 2012 (indicating the lowest point in the current cycle) and it has been rising consistently since then. The indicator crossed the equilibrium line in March 2014 and continues on an upward trajectory.
This indicator is constructed based on the simple concept that renting and buying are substitute accommodation options, hence the optimal choice depends on which accommodation cost is rising in relation to the other. The practical use of this indicator is for identifying market cycles and for timing purchase and sale decisions.
The crossing of the indicator from buy to rent zone gives a signal that buying costs are starting to rise faster than rental costs.
In a market where property prices are rising, this marks the point in time when opportunities to purchase a property at attractive prices are limited.
For those intending to sell in the current cycle, it marks a time to start preparing for the sale - the optimal point for selling the property will be when the indicator peaks, which should coincide with an interim peak in property prices.
We are already two years into the current cycle and the next peak should be anticipated sooner rather than later.
Trough-to-peak of two years in duration was not uncommon in the last 30 years but there were also a few cycles with an uptrend as short a 16 months and the longest recorded was just over 3.5 years in duration. 
Further strong increases in property prices and/or a rise in interest rates will increase the cost of buying relative to the cost of renting, making purchasing a much harder option to choose than it is at present. Therefore, fast moving prices can lead to a quite dramatic reduction in the demand for properties and, in effect, shorten the overall cycle.
Stagnating or slowly growing prices can potentially limit the negative impact on demand as growth in buying costs will be offset to a large degree by rising rental costs. This can delay the peak and extend the duration of the overall cycle.
Indicators show that this cycle is a slow moving one and therefore the next peak may be still some way off (i.e. up to two years based on historical evidence). However, it all depends how fast prices and/or interest rates move up from here onwards.
<ul>
<li>purchase affordability: at a historically high level and falling, but only just</li>
</ul>
 <img src="/images/2014/08/26/PAI_August2014.png" alt="">
The Purchase Affordability Indicator (PAI) compares changes in the annual cost of buying to changes in average full time adult income, therefore it identifies how purchase affordability has changed over time.
PAI is at historically high level and the revised June 2014 value has recorded only a small fall in relation to the previous month reading.
This indicator explains that, relative to incomes of Australians working full time, property prices are still very affordable.
In fact, the cost of buying a median priced property relative to average income is now 27.4% lower than it was in 1986. So, given the expectations of long term low interest rates, there is still a lot of room for prices to move before Australian property can be considered overvalued.
Since purchase affordability is declining very slowly at the moment, the support for current prices appears to be strong. It means that the property market should be very resilient if Australia were to experience a case a mild economic turbulence in the near future.
Article continues on the next page. Please click below.
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<ul>
<li>perceptions about economy: negative and deteriorating</li>
</ul>
 <img src="/images/2014/08/26/EWI_August2014.png" alt="">
The Economic Wellbeing Index (EWI) is designed to reflect general perceptions of Australians about the current economic conditions.
The EWI is falling since June 2013. August 2014 estimate is in the negative territory and continues to fall. A more volatile raw measure is also down and the signs of recovery highlighted last month were short lived.
The key premise behind this indicator is that people are generally less inclined to make big purchases when they are worried about the state of the economy.
Actual prices cannot be expected to advance strongly for much longer if there is no substantial change in perceptions about the economy.
If such a change comes soon, we should experience a very vibrant spring selling season, where prices continue to rise strongly.
However, if pessimism prevails, which as this stage seems to be the more likely scenario, it will most likely put a dampener on the pace of further price growth due to reduction in demand for properties.
Nevertheless, there is no reason to panic just yet as the likelihood of prices falling is still very minimal. However, a flat-lining market is not totally out of the question. 
<ul>
<li>demand: still strong and trend is not yet changing</li>
</ul>
 <img src="/images/2014/08/26/PHCI_August2014.png" alt="">
The Private Housing Credit Impulse (PHCI) provides an indication of the level of buyer activity in the residential property market in Australia, hence it reflects underlying demand for properties.
The June 2014 PHCI estimate is positive and the value of the indicator is at its highest since December 2011.
The June value of PHCI is subject to final revision but it is very unlikely the indicator will change from its current direction.
The practical use of this indicator is to provide early warning about impending changes in housing credit uptake, and hence, changes in the underlying demand for residential property.
A positive and rising value of the indicator reflects continued strong demand for residential property. When the indicator turns down, it will signal a change in the underlying demand.
Investors stepping aside, as reported recently in the media, may prove to be the catalyst for change if they are not replaced by home-upgraders and first home buyers. However, so far, the demand holds quite strongly despite rising pessimism about the economy. 
<ul>
<li>property price expectation: growth to slow or flatten</li>
</ul>
 <img src="/images/2014/08/26/PPG_August2014.png" alt="">
The Property Prices Gauge (PPG) is a proxy of a property price index. It becomes a leading indicator when combined with House Price Index (HPI).
PPG recorded a small jump in June 2014. However, actual prices (June 2014 House Price Index) also increased by a similar margin and remain above what could be expected based on housing credit growth. 
The rebound in PPG provided evidence of a relatively strong support for the current prices.
However, the 12 month rate of growth in prices has now started to slow, reflecting softer market conditions in the last few months, as indicated by a flattening PPG.
Despite the rate of growth in prices moderating and PPG recording some gains in June, the gap between the two is not narrowing. It implies that property prices are vulnerable at this level and can unexpectedly stall or maybe even record a small fall.
If the rebound in PPG continues in coming months it will indicate a strong probability of further rises in property prices in the September quarter and beyond. However, any divergence from this uptrend will imply an underlying weakness in the market and hence greater uncertainty about the direction of property prices.
Arek Drozda is an independent property market analyst.
Caveat: The information is provided in good faith and does not constitute financial advice. Use with caution and at own risk.
For more extended description of individual measures and how to apply this information please refer to the first report in this series: <a href="/expert-insights/buying/buying-more-advantageous-than-renting-yet-change-imminent-april-2014-state-of-the-market-analysis">State of the Property Market, April 2014</a>.
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Pessimistic market outlook likely to put a lid on price growth: August state of the market analysis

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GUEST OBSERVATION
Market outlook: neutral with negative bias.
<ul>
<li>Renting is the more attractive accommodation option over buying (as at June 2014).</li>
<li>Purchase affordability is at a historically high level and steady (as at June 2014).</li>
<li>Confidence in the economy continues to deteriorate (as at July 2014).</li>
<li>Housing credit impulse is still growing, indicating continued demand for residential real estate (as at June 2014).</li>
<li>Actual prices are above what could be expected based on housing credit growth, although only marginally but the gap is not narrowing (as at May 2014).</li>
</ul>
National Real Estate Price Forecast
Pessimism about the state of the economy is threatening further price growth, despite purchase affordability remaining at a historically high level. Subdued growth in the Property Price Gauge in the last few months is the first tangible sign of market weakness.
If this situation prolongs, it has the potential to start impacting on demand and actual prices. We can therefore expect a period of slow growth, or even stabilisation, in property prices in the September 2014 quarter.
The current price level is well supported and there is still no indication that the prices have peaked in the current cycle.
Detailed Analysis
#1 optimal accommodation choice: renting more attractive than buying
 <img src="/images/2014/07/29/BRI_July2014.png" alt="">
The Buy-Rent Indicator (BRI) identifies how cost of buying is changing in relation to cost of renting.
BRI bottomed in June 2012 (indicating the lowest point in the current cycle) and it has been rising consistently since then. The indicator crossed the equilibrium line in March 2014 and continues on an upward trajectory.
This indicator is constructed based on the simple concept that renting and buying are substitute accommodation options, hence the optimal choice depends on which accommodation cost is rising in relation to the other. The practical use of this indicator is for identifying market cycles and for timing purchase and sale decisions.
The crossing of the indicator from buy to rent zone gives a signal that buying costs are starting to rise faster than rental costs.
In a market where property prices are rising, this marks the point in time when opportunities to purchase a property at attractive prices are limited.
For those intending to sell in the current cycle, it marks a time to start preparing for the sale - the optimal point for selling the property will be when the indicator peaks, which should coincide with a peak in property prices.
If prices continue to advance, buying costs will rise further in relation to rental costs and the value of the indicator will keep growing. However, stagnant or declining prices may flatten that growth.
#2 purchase affordability: at a historically high level, unchanged from last month 
<img src="/images/2014/07/29/PAI_July2014.png" alt=""> 
The Purchase Affordability Indicator (PAI) compares changes in the annual cost of buying to changes in average full time adult income, therefore it identifies how purchase affordability has changed over time.
PAI is at historically high level and June 2014 estimated value has not change in relation to the previous month reading.
Relative to incomes of Australians working full time, property prices are still very affordable. Since purchase affordability is not declining at the moment, the overall support for the current price level appears to be strong. If Australia were to experience a case a mild economic turbulence, property prices would be unlikely to fall by far, if at all.
Prices have still a lot of room to move before they can be considered unaffordable despite some prominent commentators declaring that Australian property market is in a bubble.
#3 perceptions about economy: negative
 <img src="/images/2014/07/29/EWI_July2014.png" alt="">
The Economic Wellbeing Index (EWI) is designed to reflect general perceptions of Australians about the current economic conditions.
The EWI is falling since June 2013. June 2014 estimate is in the negative territory and continues to fall. A more volatile raw measure is up for the second month in the row but by a very small margin.
The key premise behind this indicator is that people are generally less inclined to make big purchases when they are worried about the state of the economy.
Actual prices are not expected to advance strongly if there is no substantial rebound in the indicator.
If this situation continues, it is also possible that growing pessimism, as implied by this indicator, may soon start to affect demand and prices of Australian properties.
This article continues on the next page. Please click below.
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#4 demand: still strong and well underpinned with housing credit growth
<img src="/images/2014/07/29/PHCI_July2014.png" alt="">
The Private Housing Credit Impulse (PHCI) provides an indication of the level of buyer activity in the residential property market in Australia, hence it reflects underlying demand for properties.
The June 2014 PHCI estimate is positive and the value of the indicator is at its highest since December 2011.
The June value of PHCI is subject to revision. Although the current value is revised down from previous month estimate it would take a significant decline in growth of housing credit to reverse the current trend.
The practical use of this indicator is to provide early warning about impending changes in housing credit uptake, and hence, changes in the underlying demand for residential property.
A positive and rising value of the indicator reflects continued strong demand for residential property. Consequently, market weakness observed on RP Data daily property price index in May and early June was only short lived and prices rebounded strongly in recent weeks. This was the most probable medium term outcome as outlined in the last month’s report.
#5 property price expectation: growth to slow or possibly even flatten 
<img src="/images/2014/07/29/PPG_July2014.png" alt="">
The Property Prices Gauge (PPG) is a proxy of a property price index. It becomes a leading indicator when combined with House Price Index (HPI).
PPG recorded almost no change in May 2014. Actual prices (March 2014 House Price Index) remain above of what could be expected based on housing credit growth and the gap between PPG and HPI is not narrowing.
Although the current price level appears to be well supported, a flattening PPG points to softer property prices in the coming months. In other words, unless there is a rebound in PPG growth in June and July, actual prices, as measured by the ABS’s House Price Index, are expected to record only minimal growth in June quarter and remain flat in September quarter.
Caveat
The information is provided in good faith and does not constitute financial advice. Use with caution and at own risk.
Background information
For more extended description of individual measures and how to apply this information please refer to the first report in this series: <a href="/expert-insights/buying/buying-more-advantageous-than-renting-yet-change-imminent-april-2014-state-of-the-market-analysis">State of the Property Market, April 2014</a>. 
Arek Drozda is an independent property market analyst.
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Pessimism threatening further price growth: July state of the market analysis

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GUEST OBSERVATION
If NSW and Sydney are representative of the market dynamics on the national scale then there is a straightforward answer to question “Where to buy?”
Centrally located properties in the capital city offer the best return long-term for passive property investors, whether owner occupiers or those buying to let.
A Common Dilemma
Property buyers face a choice between more affordable properties which offer attractive rental yields but are further away from the city centre or in regional locations, or more expensive properties in central locations but with possibly much lower rental yields.
Many property advisors would recommend the first option, as it offers better cash flow from day one with reduced capital commitment, all things being equal.
However, for passive investors the second option is a much more sensible choice. This also holds true for those who buy and hold properties over a long period and are not into more adventurous activities like buying to renovate or redevelop, looking for a quick flip, or to access an exceptionally high yield over a short period of time.
Let’s examine historical information that leads to this conclusion.
The Evidence
Housing NSW <a href="https://www.housing.nsw.gov.au/About+Us/Reports+Plans+and+Papers/Rent+and+Sales+Reports/" target="_blank">publishes quarterly sales statistics</a> for Local Government Areas (LGA) and the records date back to 1991 for many locations, totalling just over 22 years of data.
The information is grouped into inner, middle and outer rings for Sydney, as well as into regional centres (i.e. “Rest of Greater Metropolitan Region”) and the rest of NSW.
Simple analysis of changes in median prices over the past 22 years (from July 1991 to December 2013) reveals quite an interesting picture, as summarised in the table below:
<img src="/images/2014/07/15/Table1_change_in_median_prices_NSW.png" alt="">
The increase in median prices in LGAs located in the inner ring outstrips the rate of growth in any other region in NSW.
This is particularly the case with non-strata dwellings which increased over five times in the last 22 years (that is, December 2013 median price is now six times 1991 median price), comparing to 2.4 times rise for the “Rest of NSW”. The difference over the 10 year period is not as dramatic, with the exception of strata dwellings, but still the pattern is obvious.
The following map presents a 20-year perspective on median sale price growth of non-strata dwellings to highlight the key point [click image to launch interactive map]:
<a href="https://www.propertyobserver.com.au/https://mapdeck.com/256" target="_blank"><img src="/images/2014/07/15/SydneyGMR_20yr_price_change_by_region_.png" alt=""></a>
Let’s chart the relative change in median prices over time for additional insights.
<img src="/images/2014/07/15/Chart1_change_in_median_prices_NSW.png" alt="">
The picture is quite clear – over the long term, median prices grew faster in the metropolitan area than in the rest of NSW.
<img src="/images/2014/07/15/Chart2_Inner_Sydney_median_prices_Dec13.png" alt="">
 <img src="/images/2014/07/15/Chart3_Inner_Sydney_change_in_median_prices_Dec13.png" alt="">
Again, over the long-term median prices in the inner ring LGAs grew faster than for the rest of Sydney (with exception of a short period between 2000 and 2003).
Article continues on next page. Please click below. 
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What It All Means
There are important clues in the above charts for property buyers. In particular:
<ul>
<li>The inner ring properties show higher volatility in median price movements at the time of economic uncertainty – which means, timing of purchase decisions is crucial and there are bargains to be found for those with contrarian views (or well informed!).</li>
</ul>
For example, median price for the inner ring increased from $515,000 in March 2009 to $822,000 in December 2013 – a jump of over $300,000 or 60% in just four and a half years, comparing to a $98,000 or 28% increase for the regional part of GMR. The bargain buys can deliver even more substantial returns than indicated by changes in median prices.
<ul>
<li>Between 2003 and the end of 2007, which is generally perceived as a period of no price growth in Sydney, the inner ring still recorded material gains in median prices.</li>
</ul>
This illustrates that attractive and desirable locations tend to maintain the momentum when the rest of the market stagnates.
<ul>
<li>Unless you buy two properties in the outer areas for the price of one in the Inner Ring, the math favours buying in the more expensive area.</li>
</ul>
That is, if you opt for a cheaper property instead of buying in the Inner Ring, even if that location experiences comparative price growth to the inner ring, the higher priced location would have delivered better overall profit.
For example, based on the above chart, a $100,000 property purchased in 1991 in regional part of Greater Metropolitan Region would quadruple in value to $400,000 by December 2013 (i.e. $300,000 rise). Not bad. However, a property purchased for a median price in the inner ring, which also quadrupled in value, would increase from $200,000 to over $800,000, delivering $600,000- a whopping $300,000 more- in capital gains.
“But the yield!” you may say. Well, in this case 1% or even 2% better rental yield on the cheaper property would not make up the difference.
<ul>
<li>Outer regions can outpace price growth of the inner ring properties over a short period and price growth in those regions generally lag the metropolitan region – which presents an opportunity for late comers who missed out on the “city boom”, including first home buyers.</li>
</ul>
However, since timing of the purchase plays a crucial role in catching the maximum price movement, investment in regional properties should be viewed as rather opportunistic (not to say speculative) and therefore as suitable for only more adventurous investors or buyers who are prepared to stick to their decision for a long time.
Zooming In For More Details
We know now that the inner ring offers the best opportunity for price growth but it has to be acknowledged that not all locations within the region perform equally well over time.
The following table summarises change in median prices in the last 10 and 20 years for LGAs located in the inner ring.
 <img src="/images/2014/07/15/Table2_change_in_median_prices_Inner_Sydney.png" alt="" style="line-height: 1.3em;">
Some locations are better for non-strata dwellings – <a href="/news">Marrickville</a> for example did quite well with median price increase of almost 4.5 times over 20 years, while other are more favourable for strata properties, like <a href="/news">Waverley </a>which increased by a similar proportion.
The map below highlights where the largest change in median prices was for strata dwellings over 20 year period [Click image to launch interactive map]:
<a href="https://www.propertyobserver.com.au/https://mapdeck.com/250" target="_blank"><img src="/images/2014/07/15/Sydney_LGA_20yr_price_change_strata.png" alt=""></a>
View all maps, <a href="https://mapdeck.com/?deck_id=22" target="_blank">click here</a>.
This illustrates that choice of location and compatible property type are very important considerations in making purchase decisions.
Another observation worth mentioning is that even the worst performing locations in the inner ring did better for strata and non-strata dwellings than the worst regional locations. This should give confidence to the first time buyers or novice investors that buying in the inner ring can compensate to some degree for less than optimal choice of specific location.
End Note
As a prospective buyer – whether investor, upgrader or first home buyer – you are facing three fundamental questions: What to buy?  Where to buy?  When to buy?
Each of these questions can have quite a complex answer, which I will continue to explore on Property Observer with detailed analysis as well as via regular features, like my monthly <a href="/expert-insights/buying/growth-slowing-but-no-sign-that-cycle-has-peaked-june-state-of-the-market-analysis">State of the Market reports</a>.
However, in the end, it all boils down to a simple, frankly quite boring but well proven formula – location, location, location! One cannot go wrong following this simple advice.
Arek Drozda is an independent property market analyst.
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Inner ring the best bet in Sydney and here's why

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GUEST OBSERVATION
Market Outlook: downgraded to neutral
<ul>
<li>Renting has just become more attractive accommodation option than buying (as at June 2014).</li>
<li>Purchase affordability is at a historically high level but the downward trend is now apparent (as at March 2014).</li>
<li>Confidence in the economy has just turned negative (as at June 2014).</li>
<li>Housing credit impulse is still growing, indicating continued demand for residential real estate (as at June 2014).</li>
<li>Actual prices are above what could be expected based on housing credit growth but only marginally (as at April 2014).</li>
</ul>
National Real Estate Price Forecast
Growing pessimism about the state of the economy has the potential to start impacting on demand.
We can therefore expect a period of slower growth, or even stabilisation, in property prices in June and September 2014 quarters.
There is no indication as yet that the prices have peaked in the current cycle so, the slowdown may only be temporary.
Detailed Analysis
#1 optimal accommodation choice: renting more attractive than buying
<img src="/images/2014/06/23/BRI_June2014.png" alt=""> 
The Buy-Rent Indicator (BRI) identifies how cost of buying is changing in relation to cost of renting.
BRI bottomed in June 2012 (indicating the lowest point in the current cycle) and it has been rising consistently since then. The indicator has just crossed the equilibrium line.
This indicator is constructed based on a simple concept that renting and buying are substitute accommodation options, hence the optimal choice depends on which cost is rising in relation to the other. The practical use of this indicator is for identifying market cycles and for timing purchase and sale decisions.
The crossing of the indicator from buy to rent zone gives a signal that buying costs are starting to rise faster than rental costs.
In the market where property prices are rising, this marks the point in time when opportunities to purchase a property at attractive prices may be all but exhausted in the current cycle. Prices are expected to continue on the upward trajectory from this point onwards which will cause buying costs to rise further in relation to rental costs.
#2 purchase affordability: at a historically high level but declining
 <img src="/images/2014/06/23/PAI_June2014.png" alt="">
The Purchase Affordability Indicator (PAI) compares changes in the annual cost of buying to changes in average full time adult income, therefore it identifies how purchase affordability has changed over time.
PAI is at historically high level, comparable to that reached in 2009 or 1994, but is steadily declining from a peak reached in September 2013.
This indicator explains that, relative to incomes of Australians working full time, property prices are still very affordable. In the past 30 years purchase affordability was only better between September 1996 and December 2002.
Prices have still a lot of room to move before they can be considered unaffordable.
Article continues on the next page. Please click below.
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#3 perceptions about economy: have just turned negative
 <img src="/images/2014/06/23/EWI_June2014.png" alt="">
The Economic Wellbeing Index (EWI) is designed to reflect general perceptions of Australians about the current economic conditions.
The EWI is falling since June 2013. June 2014 estimate has crossed over into the negative territory. A more volatile raw measure is slightly up comparing to May 2014 but is still well within the negative territory.
The key premise behind this indicator is that people are generally less inclined to make big purchases when they are worried about the state of the economy.
EWI crossing a neutral line indicates that perceptions of Australians about the state of economy deteriorated to the point that can now be considered negative. In the past this coincided with a rapid slowdown in price growth (with one exception in late 2005) or even with price falls (as it happened in 2008 and 2010). If there is no strong rebound in the indicator, growing pessimism will soon start to affect demand and prices of Australian properties.
#4 demand: still strong and well underpinned with housing credit growth
 <img src="/images/2014/06/23/PHCI_June2014.png" alt="">
The Private Housing Credit Impulse (PHCI) provides an indication of the level of buyer activity in the residential property market in Australia, hence it reflects underlying demand for properties.
The June 2014 PHCI estimate is positive and the value of the indicator is at its highest since December 2011.
The June value of PHCI is subject to revision over the next two months but it would take a significant decline in growth of housing credit to reverse the current trend.
The practical use of this indicator is to provide early warning about impending changes in housing credit uptake, and hence, changes in the underlying demand for residential property.
Positive and rising value of the indicator reflects continued strong demand for residential property. Consequently, despite reports of recent falls in daily property price index, actual prices on a national level are not expected to decline in June quarter and the likelihood of falls in September quarter is also very minimal at this stage.
#5 property price expectation: growth to slow or possibly even flatten
 <img src="/images/2014/06/23/PPG_June2014.png" alt="">
The Property Prices Gauge (PPG) is a proxy of a property price index. It becomes a leading indicator when combined with House Price Index (HPI).
PPG has risen in April 2014 however, the rate of growth is slowing. Actual prices (March 2014 House Price Index) are above of what could be expected based on housing credit growth but the gap between PPG and HPI is narrowing.
Although the current price level appears to be well supported, weaker PPG growth points to softer property prices in the coming months. In other words, prices may stabilise for a while or, if they keep growing, the rate of growth should be more modest than in the last few quarters. 
Caveat
The information is provided in good faith and does not constitute financial advice. Use with caution and at own risk.
Background information
For more extended description of individual measures and how to apply this information please refer to the first report in this series: <a href="/expert-insights/buying/buying-more-advantageous-than-renting-yet-change-imminent-april-2014-state-of-the-market-analysis">State of the Property Market, April 2014</a>. 
Arek Drozda is an independent property market analyst.
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Growth slowing but no sign that cycle has peaked: June state of the market analysis

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GUEST OBSERVATION
Summary
Market outlook: unchanged - positive with negative bias
<ul>
<li>Buying and renting costs are changing at the same pace giving no preference to either option (as at March 2014).</li>
<li>Purchase affordability is at a historically high level but the downward trend is now apparent (as at March 2014).</li>
<li>Confidence in the economy has deteriorated further and is close to crossing into negative territory (as at May 2014).</li>
<li>Housing credit is growing strongly, indicating healthy demand (as at March 2014).</li>
<li>Actual prices are above of what could be expected based on housing credit growth but margin is reasonable (as at March 2014).</li>
</ul>
National Real Estate Price Forecast
Unchanged: conditions are supportive of further growth in prices in June 2014 quarter and beyond, however declining optimism about the economy indicates a possible slowdown in the pace of that growth.
#1 optimal accommodation choice: buying and renting costs are balanced
 <img src="/images/2014/05/20/BRI_May2014.png" alt="">
The Buy-Rent Indicator (BRI) identifies how cost of buying is changing in relation to cost of renting.
BRI bottomed in June ’12 (indicating the lowest point in the current cycle) and it has been rising consistently since then. The indicator has now reached the equilibrium line.
This indicator is constructed based on a simple concept that renting and buying are substitute accommodation options, hence the optimal choice depends on which cost is rising in relation to the other. The practical use of this indicator is for identifying market cycles and for timing purchase and sale decisions.
The crossing of the indicator from buy to rent zone gives a signal that buying costs are starting to rise faster than rental costs.
In the market where property prices are rising, this marks the point in time when opportunities to purchase a property at attractive prices may be all but exhausted in the current cycle. Prices are expected to continue on the upward trajectory from this point onwards which will cause buying costs to rise further.
#2 purchase affordability: at historically high level but declining 
 <img src="/images/2014/05/20/PAI_May2014.png" alt="">
The Purchase Affordability Indicator (PAI) compares changes in the annual cost of buying to changes in average full time adult income, therefore it identifies how purchase affordability has changed over time.
PAI is at historically high level, comparable to that reached in 2009 or 1994, but is steadily declining from a peak reached in September 2013.
This indicator explains that, relative to incomes of Australians working full time, property prices are still very affordable. In the past 30 years purchase affordability was only better between September 1996 and December 2002.
Prices have still a lot of room to move before they can be considered unaffordable.
Article continues on next page. Please click below.
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#3 perceptions about economy: conditions are deteriorating
<img src="/images/2014/05/20/EWI_May2014.png" alt=""> 
The Economic Wellbeing Index (EWI) is designed to reflect general perceptions of Australians about the current economic conditions.
The EWI is falling since June 2013 and has almost reached a crossover line.
The key premise behind this indicator is that people are generally less inclined to make big purchases when they are worried about the state of the economy.
EWI fallings towards neutral line indicates that perceptions of Australians about the state of economy are deteriorating but have not yet turned negative. Increased uncertainty about the economy can result in more sluggish demand for residential properties.
#4 demand: housing credit continue to grow
 <img src="/images/2014/05/20/PHCI_May2014.png" alt="">
The Private Housing Credit Impulse (PHCI) provides an indication of the level of buyer activity in the residential property market in Australia, hence it reflects underlying demand for properties.
The preliminary March 2014 PHCI is positive and reached its highest value since December 2011. Consequently, property prices continue to record higher values.
The practical use of this indicator is to provide early warning about impending changes in housing credit uptake, and hence, changes in the underlying demand for residential property.
Positive and rising value of the indicator reflects continued strong demand for residential property.
#5 property price expectation: values are rising and are close to the level of actual prices
<img src="/images/2014/05/20/PPG_May2014.png" alt="">
The Property Prices Gauge (PPG) is a proxy of a property price index. It becomes a leading indicator when combined with House Price Index (HPI).
PPG continues on the upward trajectory after a temporary slowdown between March and July 2013. The value of the indicator is close to the value of establish house price index.
Actual prices are above of what could be expected based on housing credit growth but not too far ahead. Therefore, current price level is well supported. 
For more extended description of individual measures and how to apply this information please refer to the first report in this series: <a href="/expert-insights/buying/buying-more-advantageous-than-renting-yet-change-imminent-april-2014-state-of-the-market-analysis">State of the Property Market, April 2014</a>. 
Caveat: The information is provided in good faith and does not constitute financial advice. Use with caution and at own risk.
AREK DROZDA is an independent analyst who has worked in the public and private sectors for over 20 years in business development, data analysis and in building geographic information systems. 
You can read more of Arek Drozda's pieces here.
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Further price growth likely, though pace may slow: May 2014 state of the market analysis

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GUEST OBSERVATION
Residential property is <a href="https://www.propertyobserver.com.au/residential/a-roof-over-your-head-or-the-biggest-investment-you-ll-ever-make-how-should-we-treat-residential-property/2014020967655" target="_blank">considered an investment class</a> and, as such, it is subject to market cycles where prices fluctuate over time.
Being aware of the stage of the market cycle can help in timing purchase and sale decisions.
However, it is rather difficult to gauge the state of the market and its future direction by examining only historical prices, even if these are reported on a daily basis - as is the case with RP Data's Home Value Index. Periods of rises and falls in prices are of different durations and subsequent movements can have very different magnitudes.
Frankly speaking, the dynamics of the Australian real estate market are very little understood despite its value exceeding more than threefold the capitalisation of all companies listed on the Australian Securities Exchange. Financial institutions are not investing in it directly hence long term research on performance and cycles is almost non-existent, or at least not available to the public. 
True, we do have various, raw measures of price movement, reports on auction clearance rates, vacancy rates, intentions to buy, asking prices, or various affordability indexes but these were developed primarily in support of valuation or risk management activities of lenders and insurers, or for the purpose of economic modelling, and not necessarily to help in decision making by individuals. Besides, each of these measures on its own gives only a partial picture of the market.
Traders in shares, bonds, currencies and similar financial instruments have developed a myriad of secondary “technical indicators” to aid in recognition of prevailing market cycles and trends. There are no such indicators available for buyers and sellers of residential properties.
The only thing that comes close to a true market gauge is the concept of a “property clock” but it tends to be very subjective and readings often differ from one commentator to another. In other words, we are missing a truly analytical perspective on the state of the property market.
To address the lack of consistent, long term analytical measures that help understand the state of property market in Australia, I have compiled a set of unique indicators which I would like to share with you on a regular basis.
The aim of this first set of indicators is to provide a broad perspective on the national property market as a whole. Peculiarities of local markets will be assessed with another set of indicators which I intend to publish at a later date.
About the Indicators
The first two indicators in the set (buy-rent indicator and purchase affordability indicator) provide objective measures of relative attractiveness of residential real estate to prospective buyers. In other words, whether there is a potential incentive, “value” if you like, for prospective buyers to consider buying a property or not.
The third indicator, economic wellbeing indicator, reflects perceptions of Australians about the economy. Since people are more inclined to commit to a substantial purchase if they have a positive outlook on the economy, this indicator evaluates the likelihood of people committing to property purchases.
The fourth indicator, private housing credit impulse, measures what people are actually doing. That is, whether perceptions about the value of owning a property and outlook on the economy translate to actual purchases or not.
The fifth indicator, property prices gauge, aims to forecast how the collective actions of buyers will likely impact property prices and whether actual change in prices is proportionate to the volume of money flowing into the property market at any given time.
Actual prices feed back into the value proposition, as reflected in the first two indicators, which closes the information loop. This is the minimum set of indicators that allows drawing a definite conclusion on the overall state of the property market now and in the recent past.
The indicators are calculated back to mid 1980’s and where possible I publish them with a reference to the change in prices of established houses (as reported by the Australian Bureau of Statistics) to show how well they reflect the reality over time. I will provide my interpretation of the latest results, a bit more extensively than usual in this first edition, but please feel free to derive and share your own conclusions via comments.
A short explanation of some conventions to help in interpreting the information:
<ul>
<li>
Market outlook can be: positive, positive with negative bias, neutral with positive bias, neutral, neutral with negative bias, negative with positive bias and negative 
</li>
<li>
Charts are labelled as:
</li>
</ul>
Estimate – if data estimates are used in calculations of the latest measure,
Preliminary – if mix of actual and estimated data is used to calculate the current measure, and
Final – where all inputs are actual data.
Caveat
The information is provided in good faith and does not constitute financial advice. Use with caution and at own risk.
Arek's April state of the market summary is on the following pages. Please click below. 
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Summary
Market outlook: positive with negative bias
 
<ul>
<li>Current conditions favour purchasing over renting but change in trend is imminent (as at December 2013) </li>
<li>Purchase affordability is at a historically high level and has most likely reached its peak (as at December 2013) </li>
<li>Confidence in the economy has started to deteriorate in recent months but is still positive (as at March 2014) </li>
<li>Housing credit is growing strongly, indicating healthy demand (as at March 2014) </li>
<li>Actual prices are slightly ahead of what could be expected based on housing credit growth (as at February 2014)</li>
</ul>
 
National real estate price forecast
Conditions are supportive of further growth in prices in June 2014 quarter and beyond, however increasing pessimism about the economy indicates a possible slowdown in the pace of that growth.
#1 Optimal accommodation choice: Buying more advantageous than renting
<img src="/images/2014/04/28/BRI_April2014.png" alt="">
The Buy-Rent Indicator (BRI) identifies how cost of buying is changing in relation to cost of renting.
BRI bottomed in June 2012 (indicating the lowest point in the current cycle) and it has been rising consistently since then. Although still in buy-territory, the indicator is fast approaching the equilibrium line.
This indicator is constructed based on a simple concept that renting and buying are substitute accommodation options, hence the optimal choice depends on which cost is rising in relation to the other.
BRI in “buy zone” implies that the cost of buying a property has either declined more or risen less, in percentage terms, than cost of renting, therefore making this accommodation option more attractive.
The practical use of this indicator is for identifying market cycles and for timing purchase and sale decisions. In particular, market cycles can be determined by identifying peaks or troughs on the graph (for example, the last two peaks were in March 2008 and June 2010 - and coincide with peaks in national property price indexes).
The crossing of the indicator from rent to buy zone gives a signal that costs of buying started to decline, or at least are rising less than costs of renting.
For those intending to buy in the current cycle the optimal point for making a purchase is when the indicator crosses into buy territory, if the decline is driven by falling interest rates. However, if the fall is caused primarily by falling prices the optimal point is when the indicator turns up, confirming that purchasing costs have bottomed in the current cycle.
The crossing of the indicator from buy to rent zone (which is now approaching) gives a signal that buying costs are rising faster than rental costs.
In the market where property prices are rising, this marks the point in time when opportunities to purchase a property at attractive prices may be all but exhausted in the current cycle. Prices are expected to continue on the upward trajectory from this point onwards which will cause buying costs to rise further.
For those intending to sell in the current cycle, the crossover marks the optimal point if costs of buying are rising due to changes in interest rates. If buying costs are rising primarily due to price increases, the optimal point for selling will be when the indicator peaks, which should coincide with a peak in property prices.
Please note, this indicator can be calculated only on a quarterly basis and is therefore lagging (the latest reading is for December 2013). That is, the confirmation of the cycle peak or trough can be delayed for up to six months.
#2 Purchase affordability: At historically high level, started to decline 
 <img src="/images/2014/04/28/PAI_April2014.png" alt="">
The Purchase Affordability Indicator (PAI) compares changes in the annual cost of buying to changes in average full time adult income, therefore it identifies how purchase affordability has changed over time.
PAI is at historically high level, comparable to that reached in 2009 or 1994, but has recorded a decline in December 2013 from a peak reached in September 2013.
This indicator explains the reason why prices have been growing so strongly. That is, relative to incomes of Australians working full-time, property prices are still very affordable (in the past 30 years purchase affordability was only better between September 1996 and December 2002).
PAI is a lagging indicator and the latest available reading is for December 2013. This indicator will continue to decline if cost of buying grows faster than adult full time incomes. However, prices have still a lot of room to move before they reach an overpriced territory.
Article continues on next page. Please click below.
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#3 Perceptions about economy: Outlook is positive but conditions are deteriorating
<img src="/images/2014/04/28/EWI_April2014.png" alt=""> 
The Economic Wellbeing Index (EWI) is designed to reflect general perceptions of Australians about the current economic conditions.
The EWI is in positive territory but has been declining since June 2013.
A more volatile raw measure of the index is trending up again but only after it recorded significant falls in the previous four months and crossed over into the negative territory.
Declining EWI indicates that perception of Australians about the state of economy started to change to less upbeat since mid-2013 but overall, it is still positive.
The key premise behind this indicator is that people are generally less inclined to make big purchases when they are worried about the state of the economy. This has certainly been a pattern in the past – every time the index crossed into the negative territory, property prices either declined or reduced the rate of growth.
The index is still positive so there should be still plenty of positively thinking buyers and property prices are not likely to decline however, increased uncertainty should take some heat off the market.
The EWI is updated monthly and therefore it offers quite timely insight into the perceptions about the state of economy.
#4 Demand: Housing credit continue to grow
 <img src="/images/2014/04/28/PHCI_April2014.png" alt="">
The Private Housing Credit Impulse (PHCI) provides an indication of the level of buyer activity in the residential property market in Australia, hence it reflects underlying demand for properties.
The March 2014 estimate is positive and reached its highest value since December 2011.
Positive and rising value of the indicator reflects continued strong demand for residential property.
The practical use of this indicator is to provide early warning about impending changes in housing credit uptake, and hence, changes in the underlying demand for residential property.
The most significant signals are when the indicator turns up after bottoming in the negative territory or when it turns down after peaking in a positive territory - since these indicate major trend reversal points.
PHCI bottomed in December 2011 when the decline in the rate of quarterly growth in mortgage finance reached the lowest level and started to improve (i.e. when mortgage finance started accelerating again). This trend was immediately reflected by the reduction in the rate of declines in property prices.
As more money started to flow into the property market, it coincided with a pick up in residential property prices from December 2012 onwards. The demand for property has been rising ever since, with a minor slowdown in June 2013 quarter.
The indicator is currently close to a level at which it turned down on two previous occasions - the September 2006 peak, after which credit declined significantly in a lead up to the Global Financial Crisis (which also coincided with a period of severe purchase unaffordability), and in June 2010 when property prices reached another peak, induced by post GFC stimulus.
In contrast to those previous occasions, property is now much more affordable than in 2006 and demand for residential property seems to be real (rather than induced with incentives, as in 2010), so there is a strong momentum for mortgage credit to continue to rise. However, there could be a temporary slowdown in the strength of that rise as a result of self-imposed credit restraints due to economic uncertainty.
It is important to note that, although this indicator is reported in quarterly intervals, it is derived on a monthly basis. In other words, it is initially calculated based on estimated values which are subject to subsequent revision once actual data becomes available. Hence, the latest quarterly reading can change from one month to the next.
#5 Property price expectation: Values are rising and are close to the level of actual prices
 <img src="/images/2014/04/28/PPG_April2014.png" alt="">
The Property Prices Gauge (PPG) is a proxy of a property price index. It becomes a leading indicator when combined with House Price Index (HPI).
PPG continues on the upward trajectory after a temporary slowdown between March and July 2013. The value of the indicator is close to the value of establish house price index.
Expected and actual prices are relatively close now, although were at variance for a while. This indicates that recent price rises are now in line with underlying demand and are not the result of a mad rush to buy.
PPG is calculated from credit related statistics and is not dependent on any reported property price data. It provides a good indication of the magnitude and future direction of the actual price movement.
The most significant signals from this indicator are when it diverges from actual prices - it points to either underlying strength or weakness of the market.
For example, it provided ample warning about 2008 price falls - almost a year in advance, and then signalled strength of a subsequent recovery. Post-June 2010, it provided evidence that the market was stronger than actual price falls indicated and again, signalled market recovery since March 2012.
The index is calculated on a monthly basis but house price data can only be updated in quarterly intervals.
You can read more of Arek Drozda's pieces here.
AREK DROZDA is an independent analyst who has worked in the public and private sectors for over 20 years in business development, data analysis and in building geographic information systems. 
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Buying more advantageous than renting, yet change imminent: April 2014 state of the market analysis

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GUEST OBSERVATION
The following comment echoes a dilemma of many potential first home buyers in Australia: 
“I am in late 20s, early 30s, $150,000 household income, $200,000 in savings - what should I do? Do I buy a property and risk my cash on an asset which is said to fall in value, or do I rent and invest my money into shares?”
The numbers may differ from person to person but the concern is the same.
I dealt with the issue of property prices in Australia and <a href="https://www.propertyobserver.com.au/residential/australian-property-prices-in-2014-and-beyond-a-peek-into-the-future/2014013167457" target="_blank">what will happen in the future</a>, so instead I would like to focus on the issue of confidence.
If we analyse Australia's current economic situation objectively, we have a <a href="https://www.propertyobserver.com.au/residential/a-roof-over-your-head-or-the-biggest-investment-you-ll-ever-make-how-should-we-treat-residential-property/2014020967655" target="_blank">six decades long history of strong growth in property prices</a>, historically low interest rates, a low unemployment level and an economic growth rate which is the envy of other developed nations. Also, it is relatively easier to finance property purchases nowadays than it was 20 years ago. In addition, there are ample examples of research demonstrating that residential property in Australia is <a href="https://www.asx.com.au/documents/resources/ASX_Report_2013.pdf" target="_blank">potentially the best investment class over the long-term</a>.
Yet, the fear of losing money, “because property prices are doomed to fall” and a pessimistic outlook are paralysing many to the extent that they are incapable of making a decision to buy a property.
Where does this fear come from? Why are we the biggest pessimists in the world despite surviving the global financial crisis quite well so far? We used to have severe recessions and other economic calamities before so, what’s different now? 
Let me digress for a moment and reflect on the “old times”, when things were viewed from another perspective.
How things used to be
Back then in the 1970s, 1980s or even 1990s, there was no talk about a possibility of property prices falling. The idea was to line up for a loan at the first opportunity and to get your first home as soon as you got your first full time job. It didn’t matter that the property had to be in a location on the city outskirts – you were buying what you could afford, and not your ultimate lifestyle.
The logic was that you pay your first property off as quickly as you can and then upgrade to something better and closer to city centre. Then do it again. And again. So that in the period of 15 to 20 years you could end up with something to enjoy for the rest of your life and which suited your lifestyle.
Your grandparents did it that way. Your parents did it that way. Everyone just followed the same routine. No questions asked. Everybody knew you cannot go wrong following this recipe.
I am generalising but it conveys the overall attitude of an older generation of Australians towards residential real estate. Now, let’s fast forward to present times.
How things are now
Parents and grandparents are no longer the role models and the primary source of wisdom. There is a new paradigm now.
Younger generations now take advice from media manufactured, faceless avatars and do-gooders on the Internet who create, either knowingly or unintentionally, the environment of fear, uncertainty and general misinformation.
This is not a criticism of a younger generation – quite the opposite. It is extremely difficult for anybody to make a decision with full confidence in such circumstances. The problem is more universal and relates to all generations living in present times. However, those of older age have those big decisions well and truly behind them while younger people have to face them now or in the near future.
The causes
It could be argued that it is the symptom of modern times that we are so overloaded with everyday tasks that are unable to find time to learn, discuss concepts and ideas with peers and elders we respect, analyse information and then make conscious decisions. Consequently, everything needs to be served on a plate for easy consumption where there is no need to exercise the brain too much.
As an example, we “do research” by skimming through news headlines and the more extreme and negative they are, the more attention they are likely to attract. We express our approval, opinions, or even protest, by clicking “Like”. And we tend to make only binary decisions: “Yes/No”, “Good/Bad”, etc. It seems there is very little time to ponder on “what if…” scenarios.
That is why media (traditional and social) and the internet in general have such a profound influence on what we think and do – they deliver snippets of information in chunks we are able to process without much effort.
The ease of dissemination of information in the digital age means there is a room for all sorts of views but what makes into a wider circulation is controversy and extreme cases.
So, we hear and read: “Property prices to fall 20%”, scratch that, 40% sounds more dramatic! But no one bothers to answer a fundamental question: "…and then what?"
Will they stay low or rebound? Is it likely that government would not intervene and would not try to prevent such a disaster? If there is intervention, what could be the impact on prices? Does this prediction have any merits after all?
It could be argued that there would be too much thinking involved to get these answers and in the fast paced digital media world there is no time for that because of editorial deadlines. The main game is headlines that attract the audience - not necessary the real story behind them.
And nobody bothers with putting caveats on such predictions either – by the following year the public will not remember “current scares” since focus will move onto the next extreme set of predictions.
A big part of the problem is how we interpret information published in the media – instead of treating those claims as a starting point for further investigation we tend to jump to a quick conclusion: “I saw it on TV so it must be right.”
<blockquote>
It is rather rare that a balanced and objective view of the state of affairs reaches wider audience via popular media channels – there is no incentive to publish such information simply because there is nothing sensational about it.
</blockquote>
Therefore, we are probably as much to blame for what is happening as the media. That is, we do not demand in-depth analysis behind the story simply because we don’t have the time to digest it. We just assume that someone must have done it diligently to come up with the conclusion, so the headlines will do just fine.
It is rather rare that a balanced and objective view of the state of affairs reaches wider audience via popular media channels – there is no incentive to publish such information simply because there is nothing sensational about it. Balanced views simply do not attract enough audience.
The effect is that only simplistic, negative, very often contentious, views propagate - leading to a widespread misinformation, like: “Property prices will fall in Australia because they have fallen everywhere else”; “We have affordability crisis because of negative gearing and speculators”; “Foreigners are causing property prices to rise”. There are a tonne of those around.
It should therefore come as no surprise that a significant proportion of would be buyers is put off making a decision.
Article continues on next page. Please click below.
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Some unexpected consequences
There is a number of quite ironic consequences resulting from all that doom, gloom and misinformation about the property market in Australia.
Firstly, it makes us vulnerable to exploitation by unscrupulous spruikers. In particular, on one hand it all leads to a perception that “property ownership is a dumb idea” (whether for living in it or earning income from it), that “everybody is losing money” and “everything is going to collapse very shortly anyway”.
On the other, it creates a fertile ground for those who claim to have a “secret formula” to “make it all magically work for us” and “to make the taxman pay for everything” - if we only spend $10,000 on a seminar and instructional videos, and some more on personal coaching.
There are plenty of people who fall for a magic of big numbers and a prospect of becoming a property mogul - despite the fact that there are no secrets to making money with property, just clever marketing.
The second consequence is that it led to emergence of new industries with a sole purpose of helping people to buy into property – from online discussion forums, dedicated blogs and property search portals profiting from advertising, through those selling specialised reports, smartphone apps, DIY property investment books and seminars, to buyer advocates and mortgage brokers offering information, tools and services for a fee. And now even financial advisers are getting on-board with advice on investment in property via self-managed superannuation funds.
<blockquote>
The overload of information and assistance, rather than helping in making decisions, has a totally opposite consequence – that is, more information tends to paralyse us rather than aid in making those hard decisions.
</blockquote>
Yet, it seems that, for many, it is harder than ever to make a decision. The overload of information and assistance, rather than helping in making decisions, has a totally opposite consequence – that is, more information tends to paralyse us rather than aid in making those hard decisions.
Not to mention that everybody demands a fair compensation for their work so, that assistance can add quite substantially to the overall cost of buying, making us even more apprehensive about making the decision.
Not many of these services existed 20 odd years ago and information was not so easy accessible either. So, the bulk of advice and assistance was coming from parents, relatives and your local bank manager – all for free.
The trust that young people had in older generations is no longer as strong for the current generation of young people. Maybe this is also due to the fact that the elders also have become confused and no longer have as strong a conviction about the merits of purchasing a property as they used to have in the past.
This is unfortunate because that trust was crucial in providing moral and emotional support for young people getting into debt for the first time. And it helped to positively reinforce the decision.
The perception that nothing can go wrong because “everybody is doing it this way”, created by decades of success stories by people they knew personally, was also very empowering.
In other words, it appears that the whole support structure that helped in making tough decisions is significantly weakened, if not entirely collapsed. There is really nobody that can be trusted anymore since those who offer assistance are there only to gain something from us (i.e. either clicks, patronage or real money for a service). The notion of “impartial advice” is somehow compromised in those circumstances as one can never be certain of true intentions behind provided information and advice. We are really on our own with those big decisions.
Social considerations that cannot be ignored
Then there are also social pressures impacting on the decision whether to buy a property or not. In the 21st century fun, globetrotting, gadgets, extreme sports, celebrity status, etc. “symbols of good and joyful life” are valued much higher than debt on a property located somewhere on the city's outskirts. Committing to owning a property early in life would mean sacrifices (i.e. less of the fun things) and would undermine rather than enhance the status of individuals in the eyes of their peers. So, at young age the choice is easy – don’t buy.
By the time people are ready to settle and start a family (which happens much later in life than in the past) they have already got used to the convenience of living in the city but they are overwhelmed by the amount of money required to continue that lifestyle as a family unit (either renting or buying, which requires taking on a substantial debt). This is when the anxiety about the future really kicks in.
The fact that Australia has not really experience economic hardship since early 1990s means that many of younger people also do not know what to expect when the hard times do come, adding to the anxiety and multiplying the fear factor (ie. because of the unknown).
This is a point in life when headlines like “property prices are overvalued by 40%” or “there is housing affordability crisis in Australia” are becoming a drawcard for this demographic group because it helps them to cope with the anxiety by reinforcing the fact they are not alone in this predicament.
However, these are not the real reasons why they are unable to buy - it is all primarily about the mindset.
A simple solution
The reality is that things are never black and white as they are over-simplified by media for the purpose of easy consumption. What we mostly hear in the media are opinions and not indisputable facts based on evidence – even those expressed by experts.
So, this fear is not substantiated with a valid reason. It is just a consequence of not knowing what to believe in, as well as not having the adequate knowledge to objectively assess what others are purporting to be the “ultimate truth”.
The only way to overcome this paralysis it is to get to know the facts. And this requires making the effort of starting to think for yourself.
The bottom line is that one cannot outsource thinking because there is a big price to pay at a later date. 
End note
I did use many generalisations in this article to emphasise the important issues underpinning the problem but, of course, there are many exceptions, as current property sales statistics show. There are many first home buyers that are making the decision to buy right now.
It all boils down to a mental state of having a confidence in the decision you make. It requires knowledge and conviction that this knowledge is not tainted.
It takes effort and lots of thinking before you can get into that mental state. So, taking time to think should be as important as attending the gym or undertaking other routine activities of your daily life. Sorting out finances to buy a property is the easy part.
There are no right or wrong decisions. However, since there are consequences of each decision, there will be those decisions that one can live with and those that will be regretted until the end of one’s life.
The key is to be mentally prepared to bear those unpleasant consequences when you make a decision which produces an outcome that is not in your favour.
This is the only secret one really needs to know to make a decision whether to buy or not to buy a property at present time. Affordability has nothing to do with it - it is all about the confidence.
Arek Drozda is an independent analyst who has worked in the public and private sectors for over 20 years in business development, data analysis and in building geographic information systems.
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Crisis of confidence or crisis of affordability?

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Anybody who follows the property market in <country-region>Australia</country-region> is familiar with Steve Keen, an economist who made a daring prediction that our property prices will fall as much as 40% sometime before 2023. How this prediction came about is subject to various interpretations, nevertheless, the “40% drop” forecast has been repeated so many times over the years, and by so many, that it has almost become a part of Australian folklore.
I have to admit that when I first came across Steve Keen’s prediction I treated it with a fair dose of scepticism since I could not find corroborating evidence for such a substantial fall in prices using indicators from my own analytical toolkit.
I had a particular issue with the somewhat overly simplistic assumption that 'whatever happened in the <country-region>US</country-region> has to happen here because we are no different'. I had an alternative perspective on this as, a decade or so earlier, I had undertaken some analysis of the 1980s housing crisis in the <country-region>US</country-region> and clearly, the events played out quite differently in <country-region>Australia</country-region>.
However, there was one bit of theory that underpinned Keen’s conclusions which attracted my further interest. In particular, at the core of Keen’s argument is a concept that “aggregate demand equals GDP plus the change in debt” (emphasis mine).
Since debt is equivalent to cash in your pocket and 'money makes the world go round', it therefore seems a logical proposition to look into changes in debt levels as a way of gauging what is happening in a wider economy.
Keen devised an indicator called the <a target="_blank" href="https://www.debtdeflation.com/blogs/2011/08/28/updated-credit-accelerators/">Credit Accelerator</a> to forecast the effect of changes in debt levels on GDP. It is conceptually similar to Credit Impulse proposed by Biggs, Myer, Pick in <a target="_blank" href="https://www.banccentraldecatalunya.ch/wordpress/wp-content/uploads/2013/Biblioteca_ERC/2013Oktober/11102013/BankOfNetherlands-Working%20paper%20218_tcm46-220409.pdf">their analytical paper</a> published in July 2009.
Briefly on Credit Impulse, as it is important for the interpretation of the graph presented below: the original theory was the result of an attempt to find a possible explanation for credit-less recoveries where GDP starts to grow with no growth in stock of credit. The authors found the evidence that a mere slowdown in the speed of debt reduction (i.e. in deleveraging) had a positive effect on the overall economy.
In simple terms, when the Credit Impulse indicator starts to point upwards while in negative territory, it is a positive sign that things are improving. The opposite should also hold true; that is, when it starts to point down while in positive territory - it is a negative sign meaning things are deteriorating.
So by substituting total debt with just housing debt, one can potentially gain insight specifically into the property market.
However, it is debatable whether Credit Impulse/ Credit Accelerator are still meaningful in this context. And there are also some issues with refinancing not being able to be isolated from the total value of housing debt which potentially clouds the picture. Nevertheless, a comparison of Credit Impulse (constructed with housing debt data) to the 12-month rate of change in the established house price index indicates quite a good correlation between the two data series, as illustrated on the following chart.
<img src="/images/stories/2014/02/17/arek_feb_1_7_one.png" width="470" height="320" alt="arek_feb_1_7_one">
Source: Based on ABS and RBA data
I am using an adaptation of the Biggs, Myer, Pick version of the algorithm, hence there may be discrepancies between Keen's and my version of the graph.
It is worth noting that correlation between the two data series is particularly strong over the last five years (for those statistically inclined, correlation coefficient is 0.88 but drops to 0.64 for the entire series). That would imply there is merit in using the Credit Impulse concept for monitoring the state of the property market in <country-region>Australia</country-region>.
The potential benefit of this indicator is twofold: it offers a timely insight into the dynamics of the property market – better than quarterly established house price data from the ABS. And secondly, perhaps more importantly, it can provide an early indication of impending changes in the direction of property prices.
As the above graph demonstrates, the theory behind Steve Keen’s original prediction appears sound - although it is not entirely clear to me whether Keen had actually been using his Credit Accelerator indicator when he made his prediction or not (Biggs, Myer, Pick paper was published much later). However, let’s examine how this indicator should have been interpreted if it was in existence.
Article continues on next page. Please click below.
 
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To be frank, it would have been a frightening experience to stare at this graph in 2007 and 2008, hearing about all the financial collapses happening throughout the world and not knowing the depth it could all fall to.
Based on these factors alone, a prediction of significant declines in house prices would have been well justified back then. However, since the magnitude of the likely decline cannot be derived directly from the Credit Impulse indicator, I assume there must have been other factors that allowed Keen to make the estimate of 40% drop in prices, because otherwise it would have been just a presumption.
By the same token, when the Credit Impulse started to point upwards in March 2009, and kept rising in the following quarters, it gave an indication that things were likely to improve. However, this message was not conveyed to the wider audience. So, again, one can only assume that there must have been other compelling factors that led Keen to persist with his earlier conclusion.
The whole situation repeated again in 2010 (i.e. in June Credit Impulse indicated a possible reversal in the growth of property prices) and in 2012 (when the Credit Impulse started to point upwards again, indicating the likely end to price decreases).
By then Keen had been regularly publishing commentary on his Credit Accelerator indicator, so the experience from the earlier 2008-2009 episode should have helped with a more accurate interpretation of what was happening. However, throughout that time, Keen had insisted that there were only two likely options for property prices: a US-like scenario where prices fall rapidly, or <a target="_blank" href="https://www.propertyobserver.com.au/residential/house-prices-will-fall-in-a-slow-bleed-fashion-steve-keen/2013060662034">Japan-like scenario of a “slow melt”</a> over the <a target="_blank" href="https://www.propertyobserver.com.au/residential/property-prices-to-fall-20-by-2013-year-s-end-steve-keen/2011101952000">next decade or so</a>.
Again, this call was made most likely because of other factors which, to my best knowledge, remain unspecified (that is, if we leave aside the two simplistic assumptions Steve Keen made that '<a target="_blank" href="https://www.debtdeflation.com/blogs/2012/01/28/economics-in-the-age-of-deleveraging/">Australian private debt is high and therefore it will deleverage</a>' and that 'Australia is like the US so the same has to happen here as well').
It was only much later, when a third scenario started to play out and property prices actually recorded some gains, that Steve conceded prices <a target="_blank" href="https://www.debtdeflation.com/blogs/2013/11/13/i-will-be-wrong-on-house-prices/">“may go up for a while”</a>. However, the media did not pick up on this comment with the same zeal as on the previous doom scenario. How unfortunate.
All in all, in 2008 Keen had an important message to tell and that message was broadcast to a wide audience. Media played a very important role in publicising his warning. That is how I and many others became aware of his views.
However, not many took the effort to understand what was really behind the “40% price drop” headline. The majority bought into this scenario without any further thought.
Many still hold to this view despite prices reaching new heights and despite the fact that the indicator that is at the core of the original prediction is showing that property prices will grow further. However, the positive message is not being reported by the media.
To be fair, there is a small possibility that the “40% price drop” prediction may come true in the next decade (the timeframe nominated by Steve Keen). We can only wait and see. However, if it happens, without additional evidence from Steve on what kept him convinced that the original scenario is still to play out, it will be difficult to accept that it was all <a target="_blank" href="https://www.propertyobserver.com.au/residential/australian-property-prices-in-2014-and-beyond-a-peek-into-the-future/2014013167457">predictable as far back as 2008</a>.
One thing is almost certain though. Based on the past performance, the Credit Impulse should give a warning when the current price trend is about to reverse. For now, let’s just enjoy the ride to the next top, however long, or short, it will be.
Arek Drozda is an independent analyst who has worked in the public and private sectors for over 20 years in business development, data analysis and in building geographic information systems.
UPDATE: In repsonse to this article Steve Keen wrote a reply, which you are able to view here: <a href="https://www.propertyobserver.com.au/economy/clarifying-my-40-drop-call-and-what-s-still-driving-housing-prices-up/2014021867863" target="_blank">Clarifying my 40% price drop call and the factors still driving housing prices up: Steve Keen</a>
 
 
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Revisiting Steve Keen’s 40% property price fall prediction

Buyers considering a residence at boutique Gordon townhouse development <a href="https://www.apartments.com.au/new-townhouses/lume-gordon-43-47-dumaresq-street-gordon-nsw-2072">Lume</a>&nbsp;now have another reason to bring forward their decision.

For a limited time, purchasers of a residence at Lume will receive a BMW iX3 50 electric SUV, valued at more than $120,000, as part of their purchase. The offer is designed to add value for buyers while complementing the lifestyle envisioned for the architecturally designed Upper North Shore development.

Scott Timmins, Development Manager at <a href="https://www.apartments.com.au/developers/winim">WINIM</a>, said the partnership was created to provide buyers with a compelling reason to act.

"In today's market, buyers need a compelling reason to act now, and the BMW partnership was designed to create that catalyst. We wanted to add genuine value for our future purchasers. Choosing the all-electric BMW iX3 50 also reflects the values behind LUME, forward-thinking design, innovation and a more sustainable way of living. It's a premium incentive that complements the lifestyle our buyers aspire to and rewards those who commit early."

[smartcode_project:default project_id=7354 project_image_fid=374893]

Delivered by WINIM in partnership with Burtonwood Investment Partners, Lume comprises 14 architecturally designed two, three and four-bedroom townhomes created for families seeking the space of a freestanding house with the ease of modern, low-maintenance living.

The three-storey residences, designed by award-winning architecture practice <a href="https://www.apartments.com.au/architects/rothelowman">Rothelowman</a>, have been tailored for families and multi-generational living, featuring private internal lifts, flexible lower-level spaces, generous open-plan living and entertaining areas, media rooms, and landscaped outdoor spaces with custom outdoor kitchens.&nbsp;

Inside, engineered oak flooring, bespoke dining joinery with integrated wine fridges and backlit bars, sculptural porcelain bathrooms, Parisi freestanding baths and Astra Walker tapware create interiors that balance functionality with refined finishes.

Each townhome has been designed to combine generous internal spaces with sustainability initiatives such as EV charging infrastructure, while <a href="https://www.apartments.com.au/landscape-architect/arcadia-landscape-architecture">Arcadia</a>'s landscaped communal areas, centred around a restored creek line and native planting, encourage residents to connect with nature and spend more time outdoors.

[smartcode_project:default project_id=7354 project_image_fid=269527]

Rothelowman's Gary Tsui said the architecture was conceived to respond carefully to its Upper North Shore setting.

"Our vision was to create elegant, uplifting homes that draw on and positively contribute to the local character through meticulously considered design and an interaction with the surroundings."

The communal landscape has been designed as more than an open space between homes. Arcadia's Ben Newell and Kate Phillips said the adjoining reserve provided an opportunity to create a distinctive natural retreat for residents.

"Just as waterways carve their way through Ku-ring-gai's landscape, a raised boardwalk weaves through the reserve, connecting the homes to this tranquil oasis."

[smartcode_project:default project_id=7354 project_image_fid=374892]

Located just 300 metres from <a href="https://www.apartments.com.au/developments/gordon-nsw-2072">Gordon</a> Village and Gordon railway station, Lume offers convenient access to Sydney's CBD while placing residents close to some of the North Shore's leading schools, including Ravenswood, Pymble Ladies' College and Knox Grammar. Lane Cove National Park, Gordon Golf Club and a range of cafés and restaurants further reinforce the family-focused lifestyle on offer, with the BMW iX3 50 complementing everything from local trips around Gordon to weekend drives and city commutes.

Construction is underway with completion expected in mid-2027.

[smartcode_project_cta:default project_id=7354]

Joel Robinson

Boutique Gordon townhomes now come with a BMW iX3 50

Two apartments have sold for more than $10 million at EADE Byron Bay, setting some of the highest apartment prices ever achieved in the coastal town and underlining the growing appetite for luxury beachfront apartments in Australia's most popular coastal locations.

The $210 million project by Vitale Property Group has now secured more than $70 million in sales, led by residences that changed hands for $12.75 million and $11.75 million.

The record-breaking transactions reinforce the shift occurring in Byron Bay's premium property market, where affluent downsizers and lifestyle buyers are increasingly opting for high-end apartments over large beachfront homes.

<a href="https://www.apartments.com.au/new-apartments/eade-byron-bay-29-shirley-street-byron-bay-nsw-2481">EADE Byron Bay</a> occupies a rare 6,000 sqm absolute beachfront site on the corner of Shirley and Milton Streets overlooking Main Beach and The Wreck surf break, just 350 metres from Byron Bay's town centre.

The 25-residence development is the first beachfront apartment project approved in Byron Bay in more than a decade and is currently under construction, with completion expected in May 2027.

[smartcode_project:default project_id=145590 project_image_fid=359521]

The project has attracted a mix of local Byron Shire residents downsizing from larger homes, alongside interstate buyers from Sydney, Melbourne and Brisbane seeking a permanent coastal lifestyle without compromising on space.

Designed by <a href="https://www.apartments.com.au/architects/hayball">Hayball</a> and with interiors by <a href="https://www.apartments.com.au/interior-designers/alexander-co">Alexander &amp; Co</a>, EADE comprises&nbsp;10 garden apartments ranging from 284 sqm to 622 sqm, nine with private pools, five full-floor apartments and 10 rooftop residences with private plunge pools, expansive outdoor entertaining areas and uninterrupted ocean views.

[smartcode_project:default project_id=145590 project_image_fid=359527]

<a href="https://www.apartments.com.au/developers/vitale-property-group">Vitale Property Group</a> Managing Partner Chris Vitale said the project's combination of scale, location and limited future supply was driving buyer demand.

"There isn't another beachfront holding in Byron Bay of this size and position that could be developed again," Vitale said.

"Buyers are responding to the scarcity and the irreplaceability of a site of this calibre and to floorplans they can't find elsewhere in the market.

"We are seeing buyers place significant value on quality, space, design, resort-style amenities and the rarity of the location. The sales achieved to date demonstrate that discerning purchasers recognise the long-term significance of what is being created at EADE Byron Bay.

"Many are coming from larger homes in the Byron region, or from Sydney, Melbourne and Brisbane, and are after the space, security and convenience, without the upkeep of a house."

&nbsp;

[smartcode_project:default project_id=145590 project_image_fid=359523]

The Byron Bay project follows Vitale Property Group's delivery of the Mondrian Hotel and Private Residences at Burleigh Heads, with EADE continuing the developer's focus on luxury coastal developments.

Residents will have access to a resort-style swimming pool, gymnasium, sauna, cold plunge pool, concierge services and dedicated workspaces, while the project is targeting an 8-Star Green Star rating.

EADE Byron Bay is being exclusively marketed by Projx Australia in conjunction with WHITEFOX Projects.

WHITEFOX National Projects Director Phillip Rand said demand had been driven predominantly by owner-occupiers.

"We are seeing buyers at EADE place significant value on quality, space, design, resort-style amenities and the rarity of this location," Rand says.

"The sales achieved to date demonstrate that purchasers at this level recognise the long-term significance of what is being created at EADE Byron Bay."

Residences at EADE Byron Bay are currently priced between $4.75 million and $15.95 million.

&nbsp;

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[smartcode_project_cta:default project_id=145590]

Vitale breaks Byron Bay records with EADE sales flurry 

When buying an apartment, most people compare the big-ticket items first. Floorplans. Kitchens. Balcony size. Natural light. The view.

But there's one everyday consideration that often doesn't come up until after moving in: how parcels are delivered.

As online shopping has become part of everyday life, parcel deliveries have shifted from an occasional event to a regular occurrence. Australians spent a record $82.6 billion shopping online in 2025, with almost one in every four retail dollars now spent digitally.

For apartment residents, that can present a challenge.

If nobody is home to accept a delivery, parcels may be redirected to a nearby Post Office, left in a building lobby or common area, or require building management to step in. In higher-density buildings, where dozens or even hundreds of residents may receive deliveries each day, parcel management has become an increasingly important part of everyday living.

That can create a range of frustrations. A missed delivery often means making time to collect a parcel elsewhere, while packages left unattended in foyers or mail areas can create clutter and increase the risk of theft. What seems like a minor inconvenience can quickly become a recurring issue for residents who shop online regularly.

It's one of those details that rarely features in a display suite but can have a noticeable impact once residents move in.

As a result, buyers are beginning to look beyond traditional apartment features and consider how a building supports day-to-day convenience, including whether there are secure options for receiving deliveries.

Australia Post's Parcel Lockers provide one solution.

<iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen="" frameborder="0" height="315" referrerpolicy="strict-origin-when-cross-origin" src="https://www.youtube.com/embed/CkF2oKmlACg?si=C50sDaoUUn2nuLmq" title="YouTube video player" width="560"></iframe>

Rather than having a parcel delivered directly to an apartment, eligible deliveries can be sent to a nominated Parcel Locker. Once the parcel arrives, residents receive a notification through the AusPost app or SMS and can collect it using a QR code or one-time PIN at a time that suits them.

The Parcel Locker network now includes more than 1,500 locations nationwide, with installations at Post Offices, shopping centres, transport hubs and an increasing number of residential developments. By providing a secure collection point, Parcel Lockers help reduce missed deliveries and avoid parcels being left unattended in common areas.

For developers, parcel infrastructure is becoming another way to improve the resident experience. Rather than relying on concierge staff or leaving parcels in communal spaces, secure collection points help streamline deliveries while preserving the presentation and functionality of shared areas.

For buyers, it's a reminder that the best apartment features aren't always the most obvious.

A generous floorplan or quality finishes might help narrow the shortlist, but the conveniences that simplify everyday life, whether that's EV charging, secure bike storage or reliable parcel delivery, often become the features residents appreciate most once they're living there.

The apartment feature many buyers don't think about, until their first missed delivery

<a href="https://www.apartments.com.au/developers/hg-developments">HG Developments</a> is doubling down on Maud Street in Newstead, filing plans for a new apartment tower just a few doors down from its under-construction Aire Newstead development.

Recently submitted to Brisbane City Council, the proposal is for an 18-storey building designed by bureau^proberts, which has drawn heavily on Brisbane's subtropical design principles while referencing the suburb's industrial heritage.

A total of 64 apartments are planned for the amalgamated 1,518 sqm site at <a href="https://www.apartments.com.au/new-apartments/17-21-maud-street-newstead-qld-4006">17–21 Maud Street</a>, a short walk from the Brisbane River and Newstead Riverwalk.

<img alt="First look: HG Developments plans 18-storey subtropical apartment tower for Newstead" data-entity-type="file" data-entity-uuid="a400c7fd-bd15-48f8-a63b-10ede92efe00" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Maud%20st%20bldg.png?VersionId=.0vPmjpbC7CNP7kqGWa6L7rGIwsNExaw" />

"The building is defined by a series of vaulted motifs that reinterpret the arches, colonnades and layered facades evident throughout Newstead's historic built fabric," the Urban Design Report states.

"Combined with recessed glazing and generous balconies, these elements create a layered building envelope that provides shade, weather protection and opportunities for natural ventilation whilst establishing a distinctive architectural identity."

The proposal comprises 64 two, three and four-bedroom apartments across 18 residential levels, positioning it alongside a growing number of taller residential projects transforming Newstead's northern precinct. The tower incorporates extensive subtropical landscaping, with cascading planter boxes, deep planting at street level and a landscaped rooftop recreation area.

<img alt="First look: HG Developments plans 18-storey subtropical apartment tower for Newstead" data-entity-type="file" data-entity-uuid="1d8140f4-8b98-45cd-b1b8-1efe8c8e266b" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Maud%20st%20podium.png?VersionId=VAZtbCoD44YCJ57N99fQCAKeSJx7ldZs" />

Bureau Proberts has prioritised passive environmental design throughout the project, with generous balconies, recessed glazing and operable façades helping reduce solar heat gain while maximising natural ventilation. River views become available from the upper levels, while the building has been orientated to capture prevailing breezes from both the Brisbane River and the west.

The architects say landscape is intended to be integral to the building rather than an applied element.

"Vertical greenery, cascading planter boxes and elevated gardens are woven throughout the architecture, softening the built form and strengthening the connection between residents and the subtropical environment."

"Through the integration of landscape, high-quality materials and passive design principles, the development delivers a refined residential address that celebrates Newstead's heritage character while contributing positively to Brisbane's evolving subtropical identity."

Newstead has remained one of Brisbane's most active apartment markets in recent years, with a number of developers continuing to back the inner-city suburb.

HG Developments is currently delivering the 40-apartment Aire Newstead at 25 Maud Street. Fortis recently launched the 65-apartment <a href="https://www.apartments.com.au/new-apartments/crest-walker-newstead-12-kyabra-street-newstead-qld-4006">Crest &amp; Walker</a> on Kyabra Street, while builder-developer BPG and Don O'Rorke's Consolidated Properties are both expected to launch their respective Newstead projects before the end of the year.

HG Developments doubles down in Newstead with second Maud Street apartment development

Walk past a new apartment development promoting its sustainability credentials and it's easy to picture rooftop gardens, mature trees, landscaped courtyards and residents surrounded by nature.

But in many cases, that's not actually what those sustainability ratings guarantee.

Australia's leading environmental rating tools have played a significant role in improving the energy efficiency and environmental performance of buildings. Yet despite their focus on reducing emissions, many don't require developers to include trees, biodiversity or meaningful green space.

In other words, a building can achieve one of the country's highest sustainability ratings while containing little more than concrete, glass and hard landscaping.

That disconnect has led to the emergence of a new movement across Australia's property industry: nature-based cities.

The concept goes beyond designing buildings that consume less energy. Instead, it encourages developers to treat nature as essential infrastructure, integrating biodiversity, tree canopy, living landscapes and green spaces into projects from the earliest stages of planning.

Research has consistently linked access to nature with better physical and mental health, cooler neighbourhoods, improved biodiversity, stronger climate resilience and more connected communities. As Australia's cities continue to become denser, advocates say those outcomes should be considered just as important as energy efficiency.

Nature Based Cities (NBC) was established in 2022 to help accelerate that shift.

Founded by Hamton Executive Chairman Paul Hameister OAM, the not-for-profit was created after research highlighted a significant gap in Australia's sustainability framework. While existing environmental rating tools rewarded energy performance and emissions reductions, they placed little emphasis on the inclusion of living landscapes.

"We've always wanted to do more, and we know other developers who want to do more, but the ESD rating tools just aren't there," Hameister says.

"In Australia, you can have a five-green-star rated building that's concrete and glass with not a blade of grass.

"The focus is on reducing emissions, which is laudable, but there hasn't been enough attention paid to protecting and re-establishing nature. We need both for the health of the environment and for communities."

Since its launch, NBC has developed independent design guidelines and accreditation frameworks that encourage developers to prioritise ecology, biodiversity, tree canopy, walkability and living landscapes alongside traditional sustainability measures. The organisation first focused on medium and high-density residential developments before recently expanding into precinct-scale communities and masterplanned neighbourhoods.

Jan Talacko, founder of sustainability consultancy Ark Resources and a member of the Nature Based Cities Advisory Council, says the initiative addresses an area that has largely been overlooked by the property industry.

"Throughout my 25 years of working collaboratively with all stakeholders in the property sector, I've always favoured a pragmatic approach to sustainable design which encourages initiatives that not only meet environmental expectations but also improve amenity," Talacko says.

"Whilst we are making steady progress in relation to energy and carbon emissions from buildings, there has been much less emphasis on encouraging biodiversity and tackling the urban heat island effect.

"The Nature Based Cities initiative responds to a gap in the suite of tools currently used by the property development sector, which don't provide sufficient incentive, or recognition, for the integration of landscaping and greenery."

For apartment buyers, the shift is also changing the questions worth asking.

Rather than assuming a sustainable building will naturally include abundant green space, buyers are increasingly being encouraged to look beyond environmental ratings and ask what nature is actually being delivered. How much tree canopy will the development create? Has biodiversity been considered? Are landscaped spaces designed for people as well as appearance?

As Australia's cities continue to grow upwards and outwards, the next generation of sustainability may not simply be measured by lower emissions, but by how successfully developments bring nature back into everyday urban life.

Arek Drozda

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