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This is the first time since November last year that optimists have outnumbered pessimists and represents the highest level of the Index since October last year.
Consistent reports of an improving global economy may have been a factor behind this lift in confidence. It is also likely that concerns about rising interest rates associated with overheated housing markets have eased.
Ongoing improvements in the labour market are also boosting confidence. Confidence showed stronger gains amongst those employed as tradies, ‘paraprofessionals’ (typically in the health and education sectors), or labourers. The rise in confidence was particularly strong for ‘trade’ workers, up 22% in the month, suggesting the continued strength in residential building was a positive factor.
However, confidence is still not particularly strong, with views on family finances a clear weak spot. Whereas the overall Index is down 1% on a year ago respondents’ assessments of their own finances relative to a year ago have fallen by 6.1% and the outlook for finances over the next 12 months is down by 2.6%. Offsetting that ongoing weakness in respondents’ assessments of their own finances is a lift in the 12 month economic outlook of 6.9% relative to last October.
All sub-indexes recorded a lift in October.
The ‘economic conditions, next 12 months’ sub-index posted the strongest gain, rising 7.1% to a four year high. Some of this likely stems from consistent coverage of the continuing improvement in the global economy with, in particular, improved confidence in the US growth outlook. Longer term economic prospects showed a more muted rise. The ‘economic outlook over the next 5years’ sub-index rose just 1.4%.
Consumers’ views on family finances also improved but the gains were more mixed with readings still weak overall. The sub-index tracking expectations for ‘finances over the next 12 months’ posted a solid 4.2% gain. An easing in concerns about potential interest rate rises was a likely factor. The ‘finances vs a year ago’ sub-index posted a more muted 1% rise.
Consumers were more positive about making major purchases, the ‘time to buy a major household item’ sub-index rose 3.5% in October after a 2.1% lift in September. However, the sub-index remains well below its long run average (down 2.9% over the year), suggesting that the sluggish spending evident through most of 2017 is likely to extend into year-end. Expectations for the labour market continue to improve. The Westpac Melbourne Institute Unemployment Expectations Index fell 3.3% to 129.2 in October, marking the lowest reading since June 2011 (recall that lower reads mean more consumers expect unemployment to fall in the year ahead).
The Westpac Melbourne Institute Index of Consumer Sentiment rose 3.6% to 101.4 in October from 97.9 in September. The move is broadly based with expectations improving across all the major states.
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<img src="https://www.urban.com.au/images/2017/10/11/WestpacIndex1.png" alt="">
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<img src="https://www.urban.com.au/images/2017/10/11/WestpacIndex2.png" alt="">
Consumer views around housing remained downbeat. The ‘time to buy a dwelling’ index dipped 0.2% to 95.1, well below the long run average of 120. State indexes continue to vary widely, ranging from very weak reads in NSW (77) and Vic (88) to a strongly positive result in WA (135.4).
Consumer expectations for house prices also softened in the month. The Westpac Melbourne Institute Index of House Price Expectations dipped 1% to 140.5. The index still shows positive price expectations nationally although the state breakdown showed a sharp 8% decline in New South Wales (to the lowest level since June last year) partially offset by stronger price expectations in Queensland and Western Australia. Evidence that house price expectations in the overheated Sydney market are cooling is likely to be encouraging for policymakers.
The Reserve Bank Board next meets on November 7. The Board is certain to keep rates on hold. In fact Westpac does not expect rates to rise at all over the next year despite market pricing and general commentary.
The key to the interest rate outlook remains the consumer and the housing market. While today’s report shows a welcome boost in consumer confidence most of the strength is centred on the one year economic outlook. Respondents remain concerned about their own finances despite an expectation that the economy over all will improve. As we saw in the data for retail sales in August, consumer assessments of family finances, which have been downbeat for some time, are likely to be a more reliable indicator of actual spending than their views on the general economic outlook.
Furthermore, the survey continues to point to an easing in sentiment in the housing markets in the major states. Interest rate increases aimed at cooling over heated housing markets appear to be becoming unnecessary as macro prudential policy tools are achieving the same purpose.
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House price expectations cooling: Bill Evans

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GUEST OBSERVER
As expected, the Reserve Bank Board decided to leave the cash rate unchanged at 1.50%.
Relative to the last meeting in September, there were no significant changes in the Governor’s associated statement. On balance however, it is reasonable to conclude that the statement is a little more optimistic than we saw last month.
In particular, the commentary around non-mining business investment strengthened. In September, he noted “the outlook for non-mining investment has improved recently”. This time, “consistent signs that non-mining business investment is picking up"; “capacity utilisation has risen” and “a large pipeline of infrastructure investment is also supporting the outlook”. Curiously,  prospects for the residential housing investment cycle have dimmed further in the last month, yet, whereas in September he notes “little further growth is expected”, there is no discussion about this cycle in the October statement.
Significantly, the key drag on the economy from our perspective – a constrained household sector – still bothers the RBA, “slow growth in real wages and high levels of household debt are likely to constrain growth in household spending”.
The Bank, while noting recent strong employment growth, remains cautious about the unemployment rate, noting “the unemployment rate is expected to decline only gradually over the next couple of years”.
As expected, despite the fall in the Australian dollar from around USD 0.80 to USD 0.782 since the last meeting, the commentary around the AUD is unchanged, “the higher exchange rate… is weighing on the outlook for output and employment”.
Recently, RBA speakers have been emphasising their concern around the buoyant housing market as relating to housing debt outpacing growth in household incomes. In the paragraph on the housing market, the Governor’s statement leads with that concern, whereas in previous statements he has led with a discussion on  housing market conditions. The statement emphasises that recent macroprudential policies introduced by the regulator APRA are targeted at the medium-term risks associated with rising household debt. Having noted that, he does confirm that the signs that conditions were easing in Sydney which he noted in September have intensified – “further signs that conditions are easing”.
It remains our view that the RBA and APRA (the regulator) will continue to target macroprudential policies at the household debt issue rather than use interest rates in the context of a fragile economy.
Conclusion
As we have consistently argued, it appears that the Bank is expecting to raise rates sometime in 2018. With conditions in the housing market easing, and inflation and growth remaining sub-trend, there is no immediate urgency to move any sooner. However, we expect that as 2018 unfolds, the Bank will deem it necessary to revise down its growth assessments and continue to rely upon macroprudential policies to contain any further lift in the household debt to income ratio.
We continue to expect that rates will remain on hold in 2018 and 2019.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>. 
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RBA keeps rates on hold - asserts that recent developments are in line with outlook

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GUEST OBSERVER
As expected, the minutes of the monetary policy meeting of the Reserve Bank Board showed that the Bank has been somewhat encouraged by recent developments in the economy.
In particular, conditions in the labour market have continued to improve with employment growth being described as “broadly based across the states”.
Solid employment growth is expected to continue given the current forward indicators in the labour market, although “spare capacity remains”.
On the other hand, the Board continues to be concerned about wages.
Wage growth is described as stable at a low rate, and the forecast is for “growth in wages to remain low for some time, before picking up gradually in response to a strengthening labour market”.
Evidence to support that view is that those industries with stronger employment growth are showing higher wage outcomes.
Another encouraging sign is around non-mining business investment, where forward looking indicators such as capacity utilisation and investment intentions from business surveys suggest a further pick-up.
The Bank is reasonably cautious on this, forecasting that non-mining investment will “strengthen gradually”.
It notes that non-residential investment is also improving although the data from the capex survey still pointed to modest growth at best, with sectors not covered by capex such as education and health looking stronger.
The dark side of the construction cycle centres around residential construction.
The Bank appears to be considerably more optimistic here than Westpac.
It accepts that construction has passed its peak but is still expecting a strong pipeline while continuing to note that “a considerable number of new apartments were scheduled to be completed in the period ahead”.
In the Governor’s statement following this board meeting, he pointed out that conditions in the housing market had eased, notably in Sydney.
The minutes flesh out this point, and in particular note that conditions “had remained strong in Melbourne”.
Overall, the minutes indicate a less comfortable assessment of developments in the housing market than was implied in the statement.
The issue of concern for the Bank is growth in housing debt continuing to outpace income growth.
That summarises why the Bank is most concerned about wages, employment and house price growth.
As with the Governor’s statement, there is no attempt to “jawbone” the Australian dollar.
It is accepted that weakness in the US dollar is a key contributor to AUD strength, but it also noted that the rise in the AUD “was weighing on domestic growth and contributing to subdued inflationary pressure”.
The warning from the minutes in August is repeated, “a further appreciation of the Australian dollar would be expected to result in a slower pick-up in growth and inflation”.
The discussion on international economic conditions once again centres on China.
It appears apparent that the Bank expects growth in the Chinese economy to slow over the course of the next few years, with the key challenge being balancing a commitment to short-term growth targets with the need to address high debt levels.
The implication is that Australia’s commodity prices can be expected to fall over the course of the next few years.
Commentary around the US Federal Reserve has changed somewhat.
In previous minutes, the Board seemed to accept that the Federal Reserve would continue its tightening program.
In these minutes, market pricing is noted to indicate that a rate hike was not expected until the second half of 2018.
Given the Bank’s clear comfort with a lower AUD, this observation might indicate recognition of AUD holding higher for longer than had been anticipated previously.
The minutes are not quite as upbeat as the Governor’s statement indicated.
The improved labour market conditions are recognised but clearly qualified by an expected slow response from wages and ongoing spare capacity.
Improving prospects for non-mining investment are noted, but the peak in the residential construction cycle has been reached, and prospects for non-residential investment are mixed.
The easing of conditions in the housing market, especially in Sydney, are noted, but the qualification that the Melbourne market remains strong is added.
The policy conundrum of rising household debt in an environment of low inflation is emphasised.
While, the commentary notes that financial markets are giving “some expectation of an increase in the cash rate by mid-2018”, there is no signal in these minutes to suggest that the Board sees any urgency around interest rates.
Westpac expects that concerns with weak income growth weighing on consumer spending and eventually the jobs market will dominate the policy debate in 2018.
The sustained application of macro-prudential policies is likely to continue to ease conditions in housing markets precluding any need for the Bank to raise rates next year.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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Housing debt continuing to outpace income growth: Bill Evans

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GUEST OBSERVER
The Westpac Melbourne Institute Index of Consumer Sentiment rose 2.5% to 97.9 in September from 95.5 in August. 
The consumer mood remains downbeat with September marking the tenth consecutive month that pessimists have outnumbered optimists.
Pressures on family finances, concerns around interest rates, deteriorating housing affordability and rising energy prices have all weighed on confidence in 2017. These factors are more than offsetting the boost from an improved outlook for jobs particularly when a stronger labour market has not been associated with increased wages growth.
The survey detail shows family finances remain a key area of concern. The ‘finances vs a year ago’ sub-index rose 6.1% but was coming from a very weak read in August (a three year low). Meanwhile the sub-index tracking expectations for ‘finances over the next 12 months’ fell 2.1%, reversing all of last month’s gain.
<a href="https://www.propertyobserver.com.au/images/2017/09/13/Screen%20Shot%202017-09-13%20at%2011.02.45%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/13/Screen%20Shot%202017-09-13%20at%2011.02.45%20AM.png" alt="">
Consumer expectations for the economy showed more consistent gains. The ‘economic conditions, next 12 months’ sub-index rose 2.7% and the ‘economic conditions, next 5 years’ sub-index posted a robust 5.1% gain.
While both are still in pessimistic territory below 100 they are now marginally above long run average levels. The improved but still ‘lukewarm’ sentiment towards the economy likely reflects the somewhat mixed picture from recent data including the June quarter national accounts which showed a reasonably solid 0.8% gain in GDP but subdued annual growth and notable areas of weakness around household incomes and consumer spending.
Consumers were slightly more positive towards major purchases, the ‘time to buy major a household item’ sub-index rising 2.1% in September. However again the rise was small and, coming off a weak August read, the sub-index remains well below its long run average.
The September survey included additional questions on news recall that provide further insight into the factors shaping sentiment. Interestingly, recall levels have fallen significantly over the last three years suggesting consumers may be getting less exposure to news in general.
In September the topic areas with the highest recall were ‘economic conditions’ (21%); ‘budget and taxation’ (17%); interest rates (16%); inflation (16%); jobs (15%); and international conditions (12%). While news on all fronts was viewed as unfavourable, consumers rated news on inflation and international conditions as much more negative than three months ago – likely reflecting sharp increases in energy costs and developments around North Korea. The only material improvement was around jobs where news was viewed much less negatively than in June.
The improved labour market situation was also broadly apparent in the Westpac Melbourne Institute Unemployment Expectations Index. Although the index edged up 0.9% in the month, at 133.6 it is still down 4.8% from its June level and the second lowest reading since 2011 (recall that lower reads mean more consumers expect unemployment to fall in the year ahead).
Consumer views around housing were mixed in September. The ‘time to buy a dwelling’ index rose 0.8% but at 95.2 remains at very low levels by historical standards. State indexes continue to vary widely, ranging from a very weak read in NSW (81.3) to a strongly positive result in WA (130.4). Consistent falls in prices in WA over recent years may be finally restoring affordability to attractive levels.
The Westpac Melbourne Institute Index of House Price Expectations dipped 2.8% but at 141.5 remains high overall. Of those consumers with a view, 57% expect prices to rise in the year ahead, 31% expect no change and 12% expect prices to decline.
Responses to additional questions on the ‘wisest place for savings’ continued to indicate risk aversion. Nearly two thirds of consumers still favour safe options – deposits, superannuation or paying down debt – with only 10.5% nominating real estate, a new 40 year low, and 9% nominating shares. More consumers favour ‘pay down debt’ (23.5%) than real estate and shares combined.
<a href="https://www.propertyobserver.com.au/images/2017/09/13/Screen%20Shot%202017-09-13%20at%2011.18.40%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/13/Screen%20Shot%202017-09-13%20at%2011.18.40%20AM.png" alt="">
The Reserve Bank Board next meets on October 3. There is no doubt that the Board will continue to leave the cash rate on hold.
Of more interest is the medium term outlook for interest rates. While those commentators favouring rate hikes next year point to record business conditions we are starting to see a considerable gap open up between business conditions and business confidence. Persistent weak consumer sentiment, consistent with weak consumer demand, may be worrying businesses around the sustainability of current strong conditions.
From our perspective prospects for consumer spending and residential construction appear soft. We do not expect that economic conditions in Australia in 2018 will be consistent with the need for the Bank to raise rates. 
 
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BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>. 
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Time to buy a dwelling index up, still at very low levels: Bill Evans

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GUEST OBSERVER
As expected, the Reserve Bank Board decided to leave the cash rate unchanged at 1.50 percent.
The Governor’s statement indicates that the Bank is feeling a little more comfortable with the outlook. Growth prospects have improved and the heat seems to be coming out of the housing market.
Evidence to support a more confident growth outlook is the following:
Whereas in August, the Bank referred to “the central forecast is for the economy to grow at an annual rate of around 3%”, the September statement confirms the expectation that “growth will gradually pick up over the coming year”. Note that the Bank’s current forecast for GDP growth in 2017 is 2.5%, lifting to 3.25% in 2018, and 3.5% in 2019.
The recent capex survey pointed to a lift in services investment. Our estimate is that the growth in services investment intentions in 2017/18 increased from 6% in May to 10% in August. The Governor responded by noting that “the outlook for non-mining investment has improved recently”. That confident statement compares with the milder “some pick-up in non-mining business investment is expected” (August).
The outlook for employment growth is described as “solid” (September) compared to “continued growth” in August.
While sentiment towards wages growth remains cautious, the Governor felt emboldened to predict “some lift in wages growth over time”. In August there was no reference to the outlook for wages, only the concerns around the impact of slow growth in real wages and high levels of household debt (a sentiment repeated in September).
Commentary around the Australian Dollar is unchanged. This is hardly surprising given that the AUD remains in that USD 0.79-80 range (although in TWI terms, the AUD is around 1% lower than we saw at the August meeting). The commentary refers to “an appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast”. This approach is more realistic than attempting to “jawbone” the AUD given that markets are almost certain that the Bank would neither cut rates nor intervene. The language implies that further increases in the exchange rate would threaten growth and inflation.
To compound the good news, the Governor seemed more confident that housing conditions are easing. In August, he noted “some signs that these conditions are starting to ease”, whereas in September he indicates that “there are signs that conditions are easing, especially in Sydney”. Observations( in August) that prices are declining in some markets; additional supply of apartments is scheduled to come on stream; investors are facing higher interest rates; and credit conditions have tightened were repeated in the September statement.
Comments around the global economy are unchanged. The Governor continues to expect that Australia’s terms of trade will decline over coming years and to see the Federal Reserve further increasing interest rates. This may imply that he expects the AUD to ease, although the Bank does not make currency forecasts.
Conclusion
We cannot deny that the partial data has generally been constructive. That supports the Bank’s decision to be more optimistic about the growth outlook. We expect that will be further confirmed with the release of the June quarter GDP report where Westpac is forecasting a 1.0% increase, supported by strong consumer and government spending  and net export growth.
On the other hand, as indicated in the Governor’s statement, risks around the consumer associated with weak wages growth; ongoing spare capacity in the labour market; and high household debt still threaten the current growth momentum. Indeed, we expect that these factors along with a downturn in the construction cycle and net services exports are likely to slow momentum through 2018.
We do concur with the Bank’s observation that the heat is coming out of both the Sydney and Melbourne housing markets as credit conditions tighten under the weight of increased regulation.
Under these circumstances we do not support current market pricing which points to the beginning of the rate hike cycle in mid 2018. We continue to expect rates to remain on hold in 2018.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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RBA holds, more content with housing slowdown: Bill Evans

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GUEST OBSERVER
The minutes of the monetary policy meeting of the Reserve Bank Board on August 1 show a change in the balance of risks on which the Bank is clearly focussed.
In July, the key concluding paragraph noted “developments in the labour and housing markets continued to warrant careful monitoring”.
In August, “members regarded conditions in the housing market and household balance sheets as continuing to warrant careful monitoring”.
In addition, the August minutes refer to “the need to balance risks associated with higher household debt in a low inflation environment”.
A reasonable conclusion from this change in emphasis is that the Bank is certainly more comfortable with the outlook for the labour market - “indicators of labour demand have pointed to further employment growth”, and by the end of the forecast period, “the unemployment rate was expected to be just below 5 ½ per cent, slightly lower than forecast in May”.
There was also the hint of more confidence around a lift in wage inflation, “information from liaison indicated that some employers were finding it harder to attract workers with particular skills”.
On the other hand, commentary around inflation seemed to be more downbeat.
In particular, it was pointed out that” the Australian Bureau of Statistics intends to update the weights in the CPI in the December quarter 2017 CPI release … this was expected to lead to lower reported CPI inflation because the weights of items whose prices have fallen were likely to be higher”.
The additional commentary on inflation highlights the Bank’s dilemma with regards to achieving its underlying target.
“The inflation forecast partly reflected an expectation of a modest increase in wage growth … working in the opposite direction were the effects of additional competition in the retail industry; the dampening effect of housing supply on rents; and recent exchange rate appreciation”.
While we can be extremely confident about the three latter dampening factors, the expectation of rising wages is tenuous.
Even the minutes refer to international experience where labour markets with much less spare capacity than Australia have been unable to generate wage pressures.
As discussed, the minutes highlight household balance sheets as warranting careful monitoring.
It is pointed out that housing credit growth has been growing at a much faster pace than incomes, exacerbating this imbalance.
Whereas the July minutes indicated that the impact of the macroprudential policies were yet to have their full effect, the August minutes do not continue that theme.
Commentary on the Sydney and Melbourne housing markets pointed out that conditions have eased somewhat although price growth remained relatively strong, this was despite the observation that Banks had now broadly achieved the lending guidelines around interest-only loans that were announced earlier in the year.
It was not clear that the Bank expects a further softening in house prices in Sydney and Melbourne (and an associated slowdown in credit growth) given that the regulatory guidelines had now been enacted.
Sensibly, the Bank has not tried to “jawbone” the Australian Dollar.
That can only be effective if the market believes that the Bank is prepared to take some action.
Given concerns around household balance sheets and a well-known reluctance to intervene, markets are totally confident that the Bank will not take any action to deal with the high Australian Dollar.
We saw in the Statement on Monetary Policy that despite the 3% appreciation in the TWI between May and August, the Bank chose not to adjust its growth and inflation forecasts in 2018 and 2019.
However, it now specifically states in the minutes “a further appreciation of the exchange rate would be respected to result in a slower pick-up in inflation and economic activity than currently forecast”.
It is our view that the AUD will drift back down to USD 0.76 by the time of the next forecast review (November), so the AUD will not represent a risk to the forecasts.
On the other hand, if we are wrong, we should take this comment on face value and expect an even lower forecast for inflation and economic activity.
In particular, the current inflation forecast sits at 2% for 2018, the bottom of the target band.
Most central banks would be uncomfortable forecasting a further miss in the inflation target in 2018.
Commentary around the international economy is mainly pertinent for the Bank’s China view.
In that regard, despite better than expected conditions in 2017, the Bank continues to assert that “growth in China was expected to ease in 2018 and 2019 because of structural factors such as a declining working-age population as well as policies to address financial risks”.
These minutes contained a few more surprises than we had originally expected – a clear lift in confidence around the labour market but a stronger emphasis on the risks associated with household debt.
The extensive discussion around inflation also implies less certainty around the current view that inflation will lift through 2018 and 2019.
Key to much of this discussion is around wages growth.
This will impact incomes and potential household debt ratios; inflation conditions; and the capacity of the household sector to lift its spending, thereby signalling a better environment for businesses and lifting employment and investment.
Given the evidence overseas, for countries with less spare capacity in their labour markets than Australia, we are much more cautious about the wages outlook and therefore expect that the case for higher rates next year will gradually fade.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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Renewed concern around household debt as labour market gains more confidence: Bill Evans

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GUEST OBSERVER
The Westpac Melbourne Institute Index of Consumer Sentiment declined by 1.2 percent in August from 96.6 in July to 95.5 in August. 
The consumer mood has deteriorated over the last year with August marking the ninth consecutive month where pessimists are outnumbering optimists. We have not seen such a succession of weak reads since 2008.
The survey detail suggests increased pressures on family finances; concerns around interest rates; and housing affordability in NSW and Victoria are more than outweighing increased confidence around jobs.
The further weakening in consumer sentiment comes despite some positives leading into this month’s survey. The RBA again opted to leave interest rates unchanged at its August meeting while the Governor sent a clear signal in a recent speech that rates were on hold in the immediate future. Other positives include: a continued improvement in labour market conditions; lower petrol prices (average pump prices down 15c/litre nationally since early June) and a booming Australian dollar, which briefly touched USD 0.80.
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<img src="https://www.urban.com.au/images/2017/08/09/Screen%20Shot%202017-08-09%20at%2010.48.03%20AM.png" alt="">
The Index components point to clear pressure on family finances. The sub-index tracking views on ‘finances vs a year ago’ fell 5.1% to 78.1, the lowest level since June 2014, when consumers were shocked by the Abbott government’s first Budget. Much of the weakness is likely to reflect a mix of weak growth in wages; increases in key costs such as electricity and emerging concerns about rising interest rates.
Despite the bleak picture around current finances, consumer expectations are more upbeat. The sub-index tracking expectations for ‘finances over the next 12 months’ firmed 2.1% to 100.4 in August. A reading over 100 indicates that optimists slightly outnumber pessimists. Consumers were also a touch more positive on the economy: the ‘economic conditions, next 12 months’ sub-index nudged up 0.4%; and the ‘economic conditions, next 5 years’ sub-index posted a stronger 2.3% gain, though coming off a sharp 9.6% drop over the previous two months.
However the weak picture on current finances appears to be affecting consumer attitudes towards major purchases. The ‘time to buy major a household item’ sub-index fell 4.9%, unwinding most of the 6% improvement seen over June- July. Notably, the pull-back has come despite increasingly aggressive price discounting amongst retailers and a likely further improvement in purchasing power from a higher Australian dollar – up over 6c US from its low in May to nearly US 0.80.
Some of the softening in sentiment in August may be a delayed reaction to recent mortgage rate increases – the major banks raised rates on ‘interest only’ mortgages in  late June. After posting a surprisingly firm 4.7 percent rise in July, sentiment amongst consumers with a mortgage fell 6.3 percent in August. Note that despite the increase in ‘interest only’ rates, the average standard variable mortgage rate declined a little between June and August.
Perhaps more importantly, most consumers expect rates to move higher over the next year. Responses to an extra question this month around the outlook for mortgage rates show that, of those consumers with a view, 71 percent expect rates to be higher in 12 months; 27 percent expect rates to be steady; and just 2.6 percent expect further rate cuts. That compares to 60 percent expecting higher rates when the question was last run in February and just 37 percent this time last year.
The one relative bright spot for consumers continues to be around jobs. The Westpac Melbourne Institute Unemployment Expectations Index declined 2.6 percent to 132.5 in August  (recall that lower reads mean fewer consumers expect unemployment to rise in the year ahead). The Index is now at its lowest level since November 2011.
<a href="https://www.propertyobserver.com.au/images/2017/08/09/Screen%20Shot%202017-08-09%20at%2010.49.23%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/08/09/Screen%20Shot%202017-08-09%20at%2010.49.23%20AM.png" alt="">
Sentiment around housing improved slightly in August. The ‘time to buy a dwelling’ index edged 0.8% higher but remained at a low level by historical standards. The detail shows mixed moves across different regions with buyer sentiment falling towards very low levels in Sydney and Melbourne – where affordability pressures remain acute – but surging in Western Australia, where affordability has improved markedly.
Consumer expectations for house prices also firmed slightly overall. The Westpac Melbourne Institute Index of House Price Expectations rose 0.6%, extending last month’s 8.6% bounce. Expectations consolidated in the major eastern states but rose strongly in WA which posted its second strongest reading since late 2014.
The Reserve Bank Board next meets on September 5. There is no doubt that the Board will continue to leave the cash rate on hold. The more interesting question is whether, as expected by markets and signalled by consumers’ responses in this survey, the RBA will raise rates next year. High business confidence and improving employment conditions along with the Bank’s own upbeat growth forecasts support the case for higher rates. On the other hand we continue to see evidence of a downbeat consumer and signs that the housing markets are set to slow under the weight of stretched affordability.
Our view is that these factors will slow growth and, along with an inflation rate which remains stubbornly below the Bank’s target zone, will preclude the need for higher rates next year. 
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BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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Softer sentiment amongst consumers with a mortgage fall of 6.3 percent in August: Bill Evans

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GUEST OBSERVER
As expected, the Reserve Bank Board decided to leave the cash rate unchanged at 1.5%. 
Of most interest in the Governor’s statement was going to be the commentary around the recently sharply appreciating Australian Dollar. Recall that since the last Board meeting the AUD has appreciated from USD 0.76 (TWI 65) to USD 0.80 (TWI 67.3). Markets were reasonably speculating that the Governor would attempt to “jawbone” the AUD with comments as potentially extreme as “a depreciation is necessary”. That language was used when the AUD was falling between USD 0.80 and USD 0.75  in 2015. 
At the very least there was an expectation that the terminology used by Deputy Governor Debelle in a recent talk: “a lower AUD would be helpful”, would be repeated.
In the event, the Governor took a more realistic approach. The experience of “jawboning” in recent years has been that unless the Bank is prepared to support that sentiment with lower rates, the market tended to ignore it. Consequently, the comment “an appreciating exchange rate would complicate this adjustment” was excluded and it was simply stated that “an appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast”.
That statement is supplemented by; “over the next couple of years, the central forecast is for the economy to grow at an annual rate of around 3 per cent”. That compares with the statement in May that “growth is expected to increase gradually over the next couple of years to a little above 3 per cent”. Note that the Bank will release its revised growth and inflation forecasts on August 4 in its Statement on Monetary Policy. In the May forecasts, when the AUD was USD 0.74, growth in 2018 was forecast at 2 ¾ - 3 ¾ per cent, a mid-point of 3 ¼ per cent.
It now seems likely that this growth forecast will be lowered to 2 ½ - 3 ½ per cent.( mid- point of 3 %) That is still a quarter of a per cent above trend growth but does send a more tentative signal about the Bank’s confidence in the growth outlook.
Caution in the growth outlook is also signalled in other parts of the Governor’s statement with a more uncertain view around consumption “one source of uncertainty for the domestic economy is the outlook for consumption”.  That compared with the commentary in May of “growth in consumption is expected to remain moderate and broadly in line with incomes”. Further supporting a more cautious approach to the growth outlook is the decision to highlight the expected slowdown in residential construction – something that has not been discussed in recent statements.
The other area of considerable interest around the upcoming forecasts is whether as a result of the much higher exchange rate to be used in the forecasts (recall that at the time of the May forecasts the AUD was USD 0.74 and TWI 64), the forecast for underlying inflation which currently stands at 1 ½ - 2 ½ per cent (mid-point of 2 per cent, the bottom of the target zone) will be lowered. That would be a most unfortunate development from the perspective of the Bank’s credibility and is unlikely to happen despite the commentary around “the appreciating exchange rate”.
In previous Board minutes, it has been emphasised that the labour market and the housing market are the key areas of interest for the Bank. (With the recent appreciation of the currency, the AUD must be added to that list).
The commentary around the labour market is still somewhat cautious despite consistently strong employment numbers. That is because concerns around wages growth remain, with the damaging feedback loop from low wages growth to weak consumption and business investment being of paramount concern.
Despite some very recent reports that housing markets particularly in Melbourne may be heating up again, probably supported by generous state government subsidies to first home buyers, the Governor chooses to repeat the commentary in July that “there are some signs that these conditions are starting to ease”.
On the international front, the Bank remains cautious around China. It accepts that growth has “picked up a little” but still highlights the high debt levels presenting medium term risks.
In that regard, the Governor has chanced his arm at forecasting commodity prices by noting “commodity prices have generally risen recently, although Australia’s terms of trade are still expected to decline over the period ahead”. He also sounds a note of confidence that the Federal Reserve will continue raising rates - “Federal Reserve expects to increase rates further”.
Those two points combined imply that the Bank is anticipating a lower Australian Dollar, however it has consistently maintained the methodology of assuming that the current level of the Australian Dollar will hold for the full forecast period, which will now be out to the end of 2019.
Conclusion
Despite the Governor stating “the Bank’s forecasts for the Australian economy are largely unchanged”, it appears clear to us that it will revise down its growth forecast for 2018 from 3 ¼ to 3 per cent in response to the rise in the AUD. That number is still well in excess of our own forecast of 2 ½ per cent. We have arrived at that number despite our underlying assumption that the AUD will fall to USD 0.65 by the end of 2018. If we were forced to use an AUD of USD 0.80, we would  see the need to further lower our growth forecast.
I am a little surprised that the Bank is likely to take this step given generally positive developments around the world economy, the labour market and business confidence since May. It would have been strategically tempting to maintain the 3 ¼ per cent forecast  despite the higher AUD and the accepted forecasted methodology.
This does emphasise how concerned the Bank is likely to have become with the recently stronger Australian Dollar.
Until now, we were clearly of the view that with the expectation that growth would reach 3 ¼ per cent in 2018, the Bank was expecting that rates would need to be increased some time in that year. Whilst aware of that, we maintained our view that rates would remain on hold in 2018 given that as 2018 developed,we expected that the Bank would accept that growth was likely to remain below trend precluding the need to raise rates.
We remain comfortable with our on hold call, and can only conclude from the Governor’s statement that the Bank is not as resigned to a rate hike in 2018 as may have been the case a month ago.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
 
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RBA less inclined to raise rates as it resists temptation to “jawbone” AUD: Bill Evans

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GUEST OBSERVER
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The Reserve Bank Board next meets on August 1.
Of course, the Board will keep rates on hold as clearly signalled by important speeches from both the Governor and Deputy Governor over the last week.
Therefore the interest directly associated with the Board meeting will be with the Governor’s associated Statement.
No doubt the Governor will continue to “call out” the labour market and the housing markets as the key areas of interest. In that regard the sentiment in the July Board Minutes and the Governor’s July Statement is likely to be repeated.
On housing, “Conditions varied considerably across the country. Housing prices have been rising briskly in some markets, although there are some signs that these conditions are starting to ease ....”
On the labour market, the commentary is likely to be along the lines of the Minutes, “Labour market conditions had improved ...forward indicators had remained positive.......The strength of recent labour market data had removed some of the downside risk to the Bank’s forecast of wage growth.”
However on that latter point the Governor’s speech on July 26 indicated that there was limited confidence in the call that wage rates would gradually increase over the course of the forecast period.
And then, of course, there is the Australian dollar. Since the last Board meeting the AUD has increased from USD 0.76 and a TWI of 65 to USD 0.795 and TWI of 67.
Even at USD0.76 the Governor repeated his consistent call that “an appreciating exchange rate would complicate this adjustment.” The language is likely to strengthen at USD 0.795. In his speech on July 21 the Deputy Governor noted: “a lower AUD would be helpful.”
In mid-2015, when the AUD was adjusting, the “path” from USD 0.80 to USD 0.75 was consistently associated with: “Further depreciation is likely/necessary.”
It seems likely that the “commentary” on the AUD in the Governor’s Statement will be stronger than we have seen recently but we cannot be sure that a new “terminology” will be adopted.
Be clear that even though the move in the AUD is associated with higher commodity prices the RBA is uncomfortable. The clear offset to services; manufacturing; and agricultural exports that we might expect from higher commodity prices is not materialising. Cashed up mining companies are not reinvesting and are not lifting employment in this cycle largely because they are not convinced of the sustainability of the current increases. As such the higher AUD is a “challenge” for both growth and inflation.
In that regard the second RBA report for the week will be more significant. The Statement on Monetary Policy will be released on August 4 and will contain the Bank’s revised growth and inflation forecasts.
These forecasts will be provided out to end calendar 2019, extending from June 2019 currently.
Recall the convention for the assumptions behind the forecasts. The rate profile is that indicated by market pricing and the AUD profile assumes the current level of the AUD.
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<div>
When the last forecasts were released in May the rate outlook was flat while the AUD was at USD 0.74 and TWI 64.
Today markets are pricing in a 0.25% rate hike by the second half of 2018 while the AUD is likely to be assessed at USD0.80 or TWI 67.
The issue is whether the Bank will change its forecasts on the basis of the new “assumptions”.
The key forecasts from a policy perspective are GDP growth in 2018 and underlying inflation in 2018 and 2019.
In May, GDP growth in December 2018 was forecast at 2.75%-3.75% and underlying inflation at 1.5-2.5% in 2018 and 2-3% in June 2019.
We are not aware of the Bank’s specific modelling methodology and of course any potential “subjective” adjustments that might be applied to the modelling before the final results are released.
However we can assess some historical “form”.
In November 2016, when AUD was at USD 0.77 and the TWI at 65, growth in 2018 was forecast at 3-4% and underlying inflation at 1.5- 2.5%.
In May 2017, when AUD was at USD 0.74 and the TWI at 64, growth in 2018 was forecast at 2.75%-3.75% and underlying inflation at 1.5- 2.5%.
You can see that between November and May there was a US 3 cents move in the AUD yet no significant changes were made in the forecasts. In fact a lower AUD was associated with a modest downward revision in the growth rate.
Elsewhere, the positive global back drop, with upgrades to world growth, and domestically the surprisingly strong employment figures, buoyant business confidence surveys and expansionary public investment would have boosted the Bank’s confidence in their above trend growth forecast for 2018 (with trend growth estimated at 2.75%). Those developments would support the Bank’s inclinations to keep their growth forecasts intact.
For 2019, consistent with the above, the RBA is likely to restate their 3.25% growth forecast for June 2019 and to also forecast 3.25% for December 2019, which rolls into the forecast horizon.
Certainly there seems little chance that the Bank would react to the AUD developments by lowering its underlying inflation forecast for 2018 which already sits at the bottom of the 2-3% target band.
No doubt there will be considerable angst at the Bank around the growth forecast.
For me, rigid adherence to the assumption of an AUD holding at USD0.80 over the next 3 years with a resulting change to the confident “above trend” growth story in 2018 would be an unattractive option for the Bank.
Consequently, despite the sharp short term move in the AUD, I expect the RBA to retain its “above trend” growth forecast when it releases its forecasts in the Statement on Monetary Policy on August 4. 
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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RBA to keep rates on hold: Westpac's Bill Evans

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GUEST OBSERVER
The most important result from the minutes of the monetary policy meeting of the RBA Board was to finally nominate the Bank’s estimate of the “new neutral real interest rate for Australia”.
In other countries it has been recognised for some time that the neutral rate has fallen particularly since the global financial crisis in 2007.
Prior to that, it had generally been accepted that the neutral nominal cash rate was around 5%.
The minutes highlight that the Bank now believes that the neutral nominal cash rate is around 3.5% indicating a neutral real rate of 1% on the basis that medium term inflation expectations are around 2.5%.
Consequently any move back to neutral would involve around 200 basis points in tightening.
Note that the analysis refers to the “neutral nominal cash rate”.
So, for instance, the increases in mortgage rates that we have recently seen (average of 0.28% across the whole book including 0.76% for interest-only investors) would not be taken into account as part of the 200 basis points in tightening.
If the mortgage rate increased by a further 200bps, the evidence of 2011 suggests that house prices would likely fall – hardly what one might assess as a neutral policy stance.
Overall, in the current circumstances, this neutral rate, looks too high.
Arguably, the discussion around the neutral rate can be interpreted as laying the foundation for a tightening cycle.
However with uncertainty around wages and inflation; the consumer; and, of course, the labour market and housing it would be inappropriate to over interpret this signal.
Our specific  interest in the minutes is around the revised assessment of the housing market; the labour market and possibly the exchange rate.
Certainly the final paragraph in the “Considerations for Monetary Policy” section notes that “nevertheless they assess that current economic conditions in Australia and the outlook for growth and inflation meant that developments in the labour and housing markets continued to warrant careful monitoring”.
The commentary around the labour market is definitely more confident.
Not only do the minutes refer to “employment growth had been strong in May for the third consecutive month” but it is also noted that “forward looking indicators of labour demand … had remained positive and generally consistent with the patterns of employment across states and industries”.
This commentary suggests that the Board is reasonably comfortable that the recent upswing in employment can be sustained.
The only note of caution around the recent developments is that “the underemployment rate … had remained elevated”.
We are aware that subdued wages growth is a significant concern for the Bank.
That remains a consideration.
However, the minutes did point out that the recent Fair Work Commission decision to increase award wages and the national minimum wage by 3.3% (affecting around 40% of workers) was markedly higher than the 2.4% awarded in 2016.
Commentary around the housing market continued to note that conditions vary across the country, although the “auction clearance rates in Sydney and Melbourne had softened recently suggesting that conditions in these markets had eased somewhat”.
It was also noted that the impact of the prudential supervision measures were yet to have their full effect.
At the time of the board meeting, the Australian Dollar was trading at around USD 0.76.
Not surprisingly, the minutes therefore retain the standard terminology “an appreciating exchange rate would complicate this adjustment”.
With the currency now at USD 0.78, the Board is likely to be more concerned about its impact on the rebalancing process.
As the minutes point out, financial market pricing for RBA policy has “shifted to indicate some probability of an increase in the cash rate by mid-2018”.
The most important development behind this outlook is the improved conditions in the labour market.
As noted, the Bank is encouraged that lead indicators continue to point to further improvements in conditions.
The unemployment rate is now only 0.5% above the generally accepted full employment rate for Australia.
A sustained move towards 5% would certainly encourage the Bank to consider higher rates.
However, there would need to be some evidence that wage pressures were also responding since underlying inflation remains anchored below 2%.
The implications for policy from the housing market are less clear.
The macroprudential policies have already resulted in higher mortgage rates, and as noted in the minutes, pressures in the housing market appear to be easing.
However, until the full impact of the macroprudential policies can be assessed, raising interest rates might prove to be premature.
Recall that the Bank’s current forecasts for GDP growth in 2018 are an above trend 3.25%. That contrasts with our own forecast of only 2.5%.
Our forecasts envisage ongoing caution from the consumer; no significant recovery in non-mining investment and detraction in growth from housing construction.
Today’s minutes do not really indicate that the Bank is sufficiently confident that this profile will be averted .It will need a lot more time to confidently make that assessment.
Furthermore, the growth profile which we described is unlikely to be consistent with sustained improvement in the labour market.
While the short-term outlook may be positive, we expect that the unemployment rate will edge back towards 6% over the course of 2018.
The Bank will be cautious to confirm its positive outlook before the need to raise rates.
Despite a more confident Bank and its decision to set out its new so-called “neutral target”, our forecasts remain consistent with the cash rate staying on hold throughout 2017 and 2018.
Bill Evans is the chief economist at <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
<a href="https://www.rba.gov.au/monetary-policy/rba-board-minutes/2017/2017-07-04" target="_blank">Link to minutes</a>
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Reserve Bank's estimate of the 'new neutral real interest rate for Australia': Bill Evans

<a href="https://www.apartments.com.au/developments/broadbeach-qld-4218">Broadbeach</a> offers plenty of reasons to live vertically, but moving from a substantial family home into an apartment can expose the compromises of high-density living. Privacy, room for guests and usable living space tend to matter more when an apartment is intended as a permanent home rather than an occasional coastal base.

A typical residential floor at <a href="https://www.apartments.com.au/new-apartments/the-eveleigh-broadbeach-7-9-surf-parade-broadbeach-qld-4218">The Eveleigh</a>, on Surf Parade,&nbsp;contains just four apartments. The 94-residence development by <a href="https://www.apartments.com.au/developers/hirsch-faigen">Hirsch &amp; Faigen</a> is predominantly made up of expansive three-bedroom homes, with a limited collection of half-floor penthouses above.

Across the apartment floors, <a href="https://www.apartments.com.au/architects/rothelowman">Rothelowman</a> has used the relatively limited number of residences to give each home greater access to natural light and outlook. Living spaces extend towards full-height glazing, while a series of bay windows frame selected views across the Pacific Ocean, city and hinterland rather than treating the building edge as a continuous wall of glass.

&nbsp;

[smartcode_project:default project_id=149670 project_image_fid=360965]

“The apartment floors deliver a collection of homes that embrace controlled outlook via a series of bay windows deliberately framing moments of view,” Rothelowman Director Kim Lowman said.

From outside, those projecting forms contribute to the tower’s faceted profile. Strong horizontal and vertical elements establish its proportions, while the changing position of the sun alters the light, shadow and reflection across the façade throughout the day.

The same attention moves inside the apartments, where the material palette combines warm timber, natural stone, metallic detailing and softer curved forms. Kitchens sit within the main living zone, with stone island benches, integrated joinery and European appliances, before the living areas extend towards the glazing and the outlook.

&nbsp;

[smartcode_project:default project_id=149670 project_image_fid=360981]

Three genuine bedrooms provide room to accommodate family and guests, while two secure car spaces and storage address some of the practical considerations that can become more noticeable when moving from a larger home. Feedback from the display suite has centred on the warmth and restraint of the interiors, with buyers commenting that the residences feel like homes rather than conventional coastal apartments.

A limited collection of half-floor penthouses occupies the upper levels, increasing the scale of the living spaces and adding private balconies and elevated finishes. From this position, the outlook extends between the ocean and hinterland.

Outside the private residences, The Eveleigh separates its shared spaces between the podium and rooftop. The podium is centred on wellness, with subtropical landscaping surrounding a swimming pool and pool terrace, yoga garden, private gymnasium, sauna and hot and cold plunge facilities. Landscaped retreats and pavilions provide additional places to sit away from the main recreation areas.

&nbsp;

[smartcode_project:default project_id=149670 project_image_fid=360966]

Higher in the building, a rooftop pavilion and private dining suite sit alongside resident lounge, barbecue and outdoor dining areas, opening towards panoramic views across the ocean, city and hinterland.

“Buyers are no longer just looking for an apartment, but a lifestyle where they can relax, reset, and enjoy a balanced way of living,” Hirsch &amp; Faigen Director of Sales Matt George said.

Interest to date has come from established owner-occupiers and interstate lifestyle purchasers, including buyers planning a future move to the Gold Coast. Many are coming from larger homes and want to reduce ongoing maintenance without giving up space for family and guests, privacy, two car spaces or the ability to entertain at home.

&nbsp;

[smartcode_project:default project_id=149670 project_image_fid=360969]

Much of that daily life can also take place beyond the building without requiring a drive. Kurrawa Beach and Pratten Park are an easy walk from Surf Parade, while Pacific Fair, Oracle Boulevard, The Oasis, restaurants, cafés, entertainment and public transport are also within walking distance.

The Eveleigh is Hirsch &amp; Faigen's fourth Gold Coast development since entering the market in 2021, following The Hemingway at Palm Beach, The Emerson at Kirra and Yves at Mermaid Beach. Each of the preceding projects sold out before completion.

“Broadbeach had been on our radar throughout our time operating on the Gold Coast,” the developer said. “Following our projects in Palm Beach, Kirra and Mermaid Beach, Broadbeach represented the natural next step for the business.”

The Surf Parade site brought together proximity to the beach, protected coastal outlooks and walkability to dining, shopping and recreation. Hirsch &amp; Faigen also identified the street as an emerging premium residential address, with enough separation from Broadbeach's busier destinations to retain a quieter environment at home.

The Eveleigh is now under construction by Maxcon, with completion forecast for mid-2028. Three-bedroom residences are currently available from $2.87 million.

[smartcode_project_cta:default project_id=149670]

Joel Robinson

The Eveleigh brings house-like apartments to Broadbeach

A long-stalled Campbelltown development site is back in play, with new plans for 139 apartments set to supersede a mixed-use scheme approved almost a decade ago but never built.

The new proposal for 28 Cordeaux Street would deliver 116 market and 23 affordable apartments in a part 14-storey building, bringing a substantial new project into a Campbelltown market where new apartment supply remains limited.

Plans have been filed over the 3,092 sqm corner site at Moore-Oxley Street, around 600 metres from Campbelltown Railway Station and the city-centre retail core.

The site already carries a mixed-use residential approval dating to 2016. Doroch Architects has now been engaged on a larger replacement scheme, which is progressing as a State Significant Development Application following a Housing Delivery Authority determination in August 2025.

The apartment mix comprises 39 one-bedroom, 72 two-bedroom and 28 three-bedroom residences. Two-bedroom apartments make up just over half of the project, while three-bedroom homes account for 20 per cent.

<img alt="First look: New 139-apartment plans revive long-stalled Campbelltown city centre site" data-entity-type="file" data-entity-uuid="136dd5b9-3791-4da6-9e31-76f533f5b4de" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Campbelltown%20da2.png?VersionId=LgOSy9nwf5u.MGswBBwaGGxuX8QpHSl_" />

Of the 139 apartments, 23 will be delivered as affordable housing under the in-fill affordable housing provisions of the Housing SEPP. The affordable component represents 15 per cent of the residential gross floor area and will be managed by a registered Community Housing Provider.

Doroch has sought to break the scale of the building into two distinct elements, with a masonry podium of around four storeys establishing the street edge before the residential tower steps back above.

The corner position has shaped that approach. Cordeaux Street faces toward the commercial and civic centre, while Moore-Oxley Street leads into the lower-scale residential neighbourhood to the south, and the design verification report describes the site as "bridging the commercial core to the north and established residential areas to the south."

The podium will be expressed predominantly in face brick, while the upper levels shift to brushed and grooved concrete cladding with darker metal detailing. Recessed sections, deep balcony edges and landscaping break down the upper form, with an approximately 11.8-metre setback to the northern boundary addressing the adjoining St Peters Anglican School.

<img alt="First look: New 139-apartment plans revive long-stalled Campbelltown city centre site" data-entity-type="file" data-entity-uuid="c8b3d2d3-c561-4bfc-a5d9-a68c0c10dac1" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Campbelltown%20da1.png?VersionId=AeAEyJU02Gk2k5noUj2StziCvdQ7fW4B" />

Campbelltown has been starved of new residential developments in the last decade.

The only other notable development set to come to market this year is ALAND's Queen Square, a mixed-use precinct on over two hectares that will comprise apartments above a vibrant ground-level retail and hospitality dining precinct.

First look: New 139-apartment plans revive long-stalled Campbelltown city centre site

First Look: Sherlock Construction pitches apartments for low-rise Deception Bay

Queensland builder-developer MAYD has revealed the first look at its major North Kirra beachfront development, lodging amended plans that reduce the number of apartments and increase the proportion of larger residences.

The project is planned across a substantial 4,742 sqm amalgamated site spanning seven lots at <a href="https://www.apartments.com.au/new-apartments/2-6-pacific-parade-bilinga-qld-4225">2-6 Pacific Parade</a> and 27-33 Golden Four Drive in Bilin​ga, directly opposite Nor​th Kirra Beach.

<a href="https://www.apartments.com.au/developers/mayd-group">MAYD</a> secured the site for $32.5 million in 2025, in what was one of the Gold Coast's largest property transactions of the year.

The development will be delivered across two stages, with the first stage carrying an estimated gross realisation value of around $360 million.

The latest amendments seek to reduce the overall apartment count and shift the project further toward the owner-occupier market, with larger residences designed for buyers wanting considerably more space than traditionally offered in a beachfront apartment.

The residential mix will include townhomes, oversized two-bedroom apartments, substantial three-bedroom residences and four-bedroom homes.

MAYD has appointed Cera Stribley to lead the architecture and interiors, with the Melbourne-based design practice drawing on the beachfront setting through a series of ocean-facing terraces and heavily landscaped balconies.

Strong horizontal forms and curved balconies will define the exterior, with subtropical landscaping integrated throughout the building to soften the built form and increase the connection between the residences and the beachfront.

The project will also include an extensive collection of resident wellness and lifestyle facilities, continuing the broader shift across the Gold Coast's luxury apartment market toward larger homes supported by resort-style amenity.

<img alt="MAYD" data-entity-type="file" data-entity-uuid="d1bcbb05-e659-4b47-8bd4-1e595315e2ad" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-27%20at%202.05.03%E2%80%AFPM.png?VersionId=jj0XEud1X1DuLt7_KyElhjMdZGOXmLHP" />

MAYD Founder Todd Mould said North Kirra was increasingly appealing to buyers attracted to the more established, lower-density character of the southern Gold Coast.

"North Kirra presents one of the most compelling luxury residential opportunities currently emerging in Australia, combining absolute beachfront with the character and authenticity that buyers are increasingly seeking, and the same sense of tight-knit community that defined Burleigh and Currumbin perhaps 10 or 15 years ago," Mould said.

"With Gold Coast Airport on its doorstep, it also offers a level of accessibility that broadens its appeal across almost every market demographic."

The project comes as the southern Gold Coast continues to attract an increasing share of high-end apartment development and buyer activity.

Kirra in particular has emerged as one of the region's more tightly held beachfront markets, with its relatively low-density character, established surf and hospitality scene and proximity to Gold Coast Airport differentiating it from the higher-density markets further north.

Mould said those characteristics had informed the approach MAYD and Cera Stribley had taken to the project.

"We've worked closely with Cera Stribley to create a vision that is deeply connected to its surroundings," he said.

"Inspired by the coastline itself, the architecture has been shaped around space, privacy and resort-style living, creating a collection of homes that reflects the next generation of luxury on the southern Gold Coast."

MOTIV Managing Director Carly Cottam, who has been appointed to market the project, said buyer attention had continued to move south along the Gold Coast.

"Purchasers who may once have defaulted to Broadbeach, Main Beach or Surfers Paradise are increasingly recognising the value of a genuine beachfront location that offers lower density, strong amenity and a more established sense of community," Cottam said.

"Kirra has a powerful combination of growing demand and genuine scarcity. Beachfront supply is inherently constrained, the area remains relatively low density, and buyers are increasingly placing a premium on locations that feel established, uncrowded and authentic rather than heavily developed."

Cottam said the proximity to Gold Coast Airport was also proving increasingly important for interstate and second-home buyers.

"Being minutes from Gold Coast Airport makes it particularly compelling for interstate buyers, frequent travellers and second-home purchasers who can access an authentic coastal lifestyle almost immediately after stepping off a flight."

The acquisition takes MAYD's active development portfolio to more than $500 million, with the North Kirra project representing one of its largest undertakings to date.

MAYD is targeting an early 2027 launch.

First look at MAYD's North Kirra mixed-use precinct

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Castle Hill, the longtime hub of the Hills District, has been one of the major beneficiaries of Sydney's Metro expansion, with improved connectivity helping drive continued population growth, development and buyer demand across the Hills District.

But despite that growth, the suburb has seen relatively few major new apartment projects brought to market over the past 18 months.

Hills District developer Reve Group is looking to fill that gap with <a href="https://www.apartments.com.au/new-apartments/nova-r-ve-castle-hill-2-garthowen-crescent-castle-hill-nsw-2154">Nova Rêve</a>, a major new mixed-use precinct on the corner of Garthowen Crescent and Old Castle Hill Road, a short walk from Castle Hill Metro Station and Castle Towers.

[smartcode_project:default project_id=152737 project_image_fid=377679]

The project will comprise three residential towers alongside a hotel, restaurants, cafes and a skybar, more than 1,600 sqm of ground-floor retail and almost an acre of landscaped gardens.

It represents the largest project undertaken by Reve Group, the development arm of the Kassis family, which has been building across the Hills District for more than 30 years through Kassis Homes.

[smartcode_project:default project_id=152737 project_image_fid=377675]

Nova Rêve also represents a significant step up from the family's first apartment development, Grand Rêve, which was delivered nearby on Garthowen Crescent.

Grand Rêve introduced larger, house-like apartment layouts and premium inclusions including Wolf and Sub-Zero appliances to the Castle Hill market.

Nova Rêve takes that approach to a precinct scale, combining the residential component with hospitality, retail and substantial public and resident landscaping.

[smartcode_project:default project_id=152737 project_image_fid=377685]

Reve Group Managing Director Sam Kassis said the project reflected the family's three decades of building in the Hills, which has evolved from trophy homes on quarter-acre blocks to larger-scale apartment development.

"Grand Rêve was our first apartment project here and it showed us what this pocket of Castle Hill could be. Nova Rêve is the refinement of that idea: not just apartments, but a place the whole suburb can use," Kassis said.

A key part of that approach is the hotel, which has been designed to operate as an amenity for the wider Castle Hill community rather than solely hotel guests.

It will include restaurants, cafes, skybars and all-day dining, alongside conference and event facilities catering to business functions, community groups and private events.

At ground level, more than 1,600 sqm of shops and cafes will open onto the surrounding streets and landscaped areas.

Almost an acre of gardens designed by Land and Form Studios will run through the precinct, incorporating pathways, seating, barbecue areas and children's play spaces.

[smartcode_project:default project_id=152737 project_image_fid=377680]

Reve Group's Romio Georges said creating an active ground plane had been central to the planning of Nova Rêve.

"There are gardens with pathways, barbecues, seating and play areas, shops and cafes opening onto the street, and a hotel with restaurants and a skybar that anyone in Castle Hill can walk into," Georges said.

The project's elevated position on one of Sydney's highest ridgelines will also provide apartments with outlooks toward the Sydney skyline, surrounding parkland and the Blue Mountains.

More than 80 per cent of the apartments will occupy corner positions, with Turner responsible for both the architecture and interiors.

&nbsp;

[smartcode_project_cta:default project_id=152737]

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Bill Evans

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Developments

New apartments

New townhouses

News