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Last week the House of Representatives Standing Committee on Economics released their recommendations following their investigation into Australia’s foreign investment framework as it applies to residential real estate. 
The Committee tabled 12 recommendations:
<ol>
<li>The current foreign investment applying to foreign purchases of residential real estate be retained in its current form, utilising the existing legislated prohibitions and restrictions on purchases of established dwellings, and encouraging foreign investment to increase Australia’s supply of new housing. </li>
<li>The Foreign Investment Review Board (FIRB) and the Foreign Investment and Trade Policy Division of Treasury put in place appropriate processes for the purpose of audit, compliance and enforcement of the foreign investment framework.  Such processes must accurately capture audit, compliance and enforcement data for the purpose of oversight of the FIRB and the Australian Treasury. </li>
<li>The government apply a modest administrative fee to the current screening of all foreign purchases of residential real estate, including purchases by temporary residents.  Fees collected should be hypothecated to the Treasury’s Foreign Investment and Trade Policy Division for the purpose of funding audit, compliance and enforcement activities. </li>
<li>
The Government introduce a civil penalty regime for breaches of the foreign investment framework as it applies to residential real estate, with the following features: • Pecuniary penalty orders imposed under this penalty regime to be calculated as a percentage of the property value to act as an effective deterrent; and • The regime to apply to foreign investors and any third party who knowingly assists a foreign investor to breach the framework. Pecuniary penalty orders collected should be hypothecated to the Treasury’s Foreign Investment and Trade Policy Division for the purpose of funding audit, compliance and enforcement activities. 
</li>
<li>The government amend the Foreign Acquisitions and Takeovers Act 1975 to provide that criminal penalties for breaching the foreign investment framework as it applies to residential real estate, apply equally to any third party who knowingly assists a foreign investor in residential real estate to breach the foreign investment framework. </li>
<li>In any instance where a foreign owner divests an illegally held established property, any capital gain from the sale of that property be retained by the government.  Funds collected by this measure should be hypothecated to the Treasury’s Foreign Investment and Trade Policy Division for the purpose of funding audit, compliance and enforcement activities. </li>
<li>Australia’s Foreign Investment Policy be amended to explicitly require a temporary resident to divest an established property within three months if it ceases to be their primary residence. </li>
<li>The government, in conjunction with the states and territories, establish a national register of land title transfers that records the citizenship and residency status of all purchasers of Australian real estate.  This information should be accessible by relevant agencies from a single database. </li>
<li>
The government establish an alert system for the expiry of temporary visas that can be used by the Treasury to issue property divestment orders in cases of non-compliance: • By amending the Migration Act 1958 so that the Department of Immigration and Border Protection must inform the FIRB when a temporary resident departs Australia upon expiry of their visa; and • By establishing effective and timely internal processes at the Treasury to receive and cross-check this information against its property databases to screen for compliance with the foreign investment framework. 
</li>
<li>The government amend the Foreign Acquisitions and Takeovers ACT 1975 to provide that residential property sold under off-the-plan certificates that is marketed for sales overseas, must be marketed in Australia for the same period of time.  Breaches of this requirement should be subject to sanctions under the Act ranging from fines to the cancellation of a sale. </li>
<li>In light of the expected finalisation of the statutory review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 in early 2015, the Committee recommends that the government consider the purchase of residential property by foreign investors as a a possible area of investigation when considering amendments to the legislation. </li>
<li>Treasury’s Foreign Investment and Trade Policy Division make greater use of the databases held by AUSTRAC, and also of other relevant federal and state government databases, to assist the FIRB in its duties and responsibilities. </li>
</ol>
Overall the recommendations are largely within the framework that currently exists, ensuring that foreign buyers only purchase homes which are newly constructed. There are some concerns that the additional administrative fee to screen foreign buyers will act as a disincentive to investment however, reports suggest the fee will only be $1,500. 
In our opinion it is unlikely that such a nominal fee on such a high cost purchase will make a difference.  The introductions for penalties not only for those that purchase non-compliant properties, but also to those that aid such a purchase is also a good step. Any measure that can help to reduce the occurrence of such fraud should be encouraged. 
With the increasing cooperation of state land registries and the development of a national e-conveyancing platform over recent years, the development of a national register of land title transfers that records the citizenship and residency status of all purchasers of Australian real estate is a welcome, important and achievable initiative in order provide increased transparency in relation to foreign investment in real estate through the provision of timely, accurate and reliable data. 
The proposed application of a more severe civil penalty regime to third parties who ‘knowingly assist a foreign investor to breach the framework’ has broad potential application and will be a closely watched development.
It has the potential to extend to real estate agents, banks facilitating the flow of purchase monies from offshore, banks providing mortgage finance and even conveyancers and legal professionals. 
Importantly, the recommendations in the report should not be viewed as a deterrent to continued foreign investment in the Australian housing market, with residential construction activity being a key contributor to Australia’s economic growth, with housing starts in in 2014 now approaching 190,000 units.  
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Foreign buyer review recommendations won't deter investment

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The Australian Prudential Regulation Authority (APRA) released their quarterly Authorised Deposit-taking Institution (ADI) Property Exposures data for September 2014 last week. 
The data always provides a valuable insight into current and historic mortgage lending by domestic ADIs and this quarter’s release was no different.
<img class="aligncenter size-full wp-image-4041" src="https://blog.corelogic.com.au/wp-content/uploads/2014/11/Chart-11.jpg" alt="Chart 1" width="500" height="180">
Based on the value of all outstanding mortgages by households to Australian ADI’s, there was $825.0 billion outstanding to owner occupiers (66.0% of all housing loans) at the end of September 2014 and $425.4 billion to investors (34.0%). 
Over the 12 months to September 2014, the total value of outstanding mortgages to owner occupiers has increased by 7.6% compared to an 11.9% rise in outstanding credit to investors.  This represents the greatest annual increase in owner occupier lending since June 2012 and the greatest rise in investor lending since December 2010. 
Much like other data received more regularly, the chart indicates that there is significantly more momentum in the investor lending space than that for owner occupiers where growth is more moderate.
<img class="aligncenter size-full wp-image-4042" src="https://blog.corelogic.com.au/wp-content/uploads/2014/11/Chart-21.jpg" alt="Chart 2" width="500" height="182">
At the end of September 2014, a record high 36.8% of loans outstanding had an offset facility, up from 34.2% a year earlier.  Also a record high was the 36.8% of all outstanding mortgages which were interest-only, up from 34.6% a year earlier. 
Just 0.2% of all outstanding mortgages were reverse mortgages and 2.7% were low documentation which was down from 3.6% a year earlier and at a record low proportion.  Other non-standard loans accounted for just 0.1% of all outstanding mortgages. 
It seems that more and more mortgagees are accessing offset accounts in order to reduce the interest payable on their mortgages and maximise repayments of the principal while interest rates are so low.  The data also indicates that a high proportion of lenders are accessing interest-only mortgages which seems somewhat counterintuitive at a time when interest rates are so low.
<img class="aligncenter size-full wp-image-4043" src="https://blog.corelogic.com.au/wp-content/uploads/2014/11/Chart-31.jpg" alt="Chart 3" width="500" height="181">
The average balance on all outstanding mortgages at the end of September 2014 was $238,700.  The average balance has increased by 3.0% over the past year. 
Loans with an offset facility ($284,600) and interest-only mortgages ($308,400) have much higher average outstanding loan balances. 
It is interesting to note that the annual growth in average outstanding loan balances has been much more moderate for mortgages with an offset and interest-only mortgages at 2.0% and 2.1% respectively. 
Encouragingly, the data also indicates that outstanding balances are reducing for low documentation and other non-standard loans as they become less common.  Over the past year the average balance has fallen by -3.1% for low-documentation loans and by -6.5% for other non-standard loans. 
With mortgage rates low and fewer of these loan types being written it seems those that have these types of loans are continuing to pay down these mortgages.
<img class="aligncenter size-full wp-image-4044" src="https://blog.corelogic.com.au/wp-content/uploads/2014/11/Chart-41.jpg" alt="Chart 4" width="500" height="179">
Turning the focus to new loans written over the September quarter, 62.6% of the total value of new lending was to owner occupiers and 37.4% was to investors. The proportion of new lending to investors has fallen from a record high of 37.9% in the June 2014 quarter. 
Based on this data it suggests that growth in demand for both owner occupier and investment lending may have peaked. 
Although after having trended lower over the previous two quarters, the annual change in new owner occupier and investment lending bounced in September, recorded at 6.9% and 21.4% respectively.
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<img class="aligncenter size-full wp-image-4045" src="https://blog.corelogic.com.au/wp-content/uploads/2014/11/Chart-51.jpg" alt="Chart 5" width="500" height="181">
Over the September 2014 quarter, 0.7% of new loans approved were low-documentation, 42.5% were interest-only, 0.1% were other non-standard loans, 43.2% were third party originated loans and 3.5% were loans approved outside of serviceability. The 42.5% of new loans which were interest only was down from a record high of 44.0% over the previous quarter. 
 The data also seems to reflect the slowing of growth in investment demand, remember that interest only loans tend to be (but not always) reflective of lending for investment purposes.  
The ADIs seem to be increasing the usage of their broker channels with the 43.2% of loans originated by third parties the highest proportion since June 2008.  
With 3.5% of new mortgages approved outside of serviceability over the September 2014 quarter, this was down from a record high 3.7% over the previous quarter.
<img class="aligncenter size-full wp-image-4046" src="https://blog.corelogic.com.au/wp-content/uploads/2014/11/Chart-6.jpg" alt="Chart 6" width="500" height="180">
Looking at the loan to value ratios (LVR) of loans written over the September 2014 quarter,  25.2% of new loans had an LVR of less than 60%, 41.8% of loans had an LVR of between 60% and 80%, 20.9% had an LVR of between 80% and 90% and 12.1% had an LVR of 90% or more. 
The 12.5% of new loans with an LVR of more than 90% is the lowest proportion since June 2011.  The 25.2% of mortgages with an LVR lower than 60% was the highest proportion in a year. 
This falling proportion of loans above 90% LVR suggests there are proportionally less high-risk mortgages being written.
The data indicates that overall interest-only lending is continuing to rise however, new lending of this type has eased of late. 
Investment lending remains high and continues to ramp-up however, the rate of growth in new lending to investors does appear to have slowed.  Keep in mind that the December data will probably tell us much more given it encapsulates more of the spring selling season. 
Furthermore, after the RBA flagged that they and other regulators are looking at ways to cool investor exuberance with an announcement expected in December we may actually see a run on investor lending over the coming quarter.
It is of course important to remember that although investment lending has ramped up sharply over the past year, there is little to suggest that lending to investors is more risky than lending to owner occupiers.  Bill Evans provided some insight into Westpac’s investment lending late last week.  He noted:
<ul>
<li>Compared to owner–occupier applicants, investment applicants are older (75% over 35 years); have higher incomes and higher credit scores.</li>
<li>65% of investment loan customers are ahead on their repayments and 90+ days delinquencies are 0.37% compared to 0.47% for the full housing portfolio.</li>
<li>Westpac has an interest rate buffer approach to lending linking loan approvals to serviceability at a rate at least 180 basis points above the standard mortgage rate (5%).</li>
<li>All investment loans are full recourse and specific policies apply to holiday apartments and single industry towns.</li>
</ul>
<img class="aligncenter size-full wp-image-4047" src="https://blog.corelogic.com.au/wp-content/uploads/2014/11/Chart-7.jpg" alt="Chart 7" width="500" height="315">
Our concern about the high level of investment lending remains over the fact that investors are targeting the residential property asset class because of its superior returns.  While these returns remain superior demand is likely to persist. 
The concern then arises when other investment classes start to show superior returns will these owners exit the residential property class or remain in it for the long-term? 
As the above chart shows, investor activity is heavily concentrated within the capital city inner-city unit market.  Were many investors to exit the market at a similar time in search of superior returns that could have some serious repercussions for the inner city unit market and potentially the wider housing market too.
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Will investors desert residential property when returns start to dry up?

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Australia’s property market has experienced a significant shift in lower-end priced properties. The selection for properties under the $400,000 mark is diminishing.  
Rising capital city dwelling values has meant that homes selling at a price below $400,000 has declined and is now down to 39.7% of all sales from 44.1% a year earlier.  
<img src="/images/2014/11/28/kiusher-nov-28-one.jpg" alt="">
Over the 12 months to August 2014, 37.3% of houses and 45.7% of units sold for less than $400,000.  At the same time a year earlier, 42.3% of houses and 48.5% of units sold for less than $400,000.  
Until 2004 the proportion of sales below $400,000 was fairly similar between houses and units.  Since that time the proportion of sales below $400,000 has trended lower however, the rate of decline has been greater for houses than for units.  
<img src="/images/2014/11/28/kiusher-nov-28-two.jpg" alt="">
This significant divergence in individual capital city home values and growth over recent years has also meant a large difference in the proportion of homes selling below $400,000.
Over the past year, the proportion of all house sales occurring below $400,000 has been recorded at: 
<ul>
<li>12.1% in Sydney;</li>
<li>25.1% in Melbourne;</li>
<li>32.4% in Brisbane;</li>
<li>47.9% in Adelaide;</li>
<li>15.3% in Perth;</li>
<li>62.8% in Hobart;</li>
<li>18.5% in Darwin;</li>
<li>7.5% in Canberra.    </li>
</ul>
20 years ago, more than nine out of every 10 house sales across each capital city were below $400,000. Of course over that time wages have increased, interest rates have tended to be much lower and credit has become much more freely available. Nevertheless, the drop in affordable housing across most capital cities has been substantial.  
Across the capital cities, the proportion of total unit sales below $400,000 over the past 12 months was: 
<ul>
<li>23.5% in Sydney;</li>
<li>37.3% in Melbourne;</li>
<li>53.8% in Brisbane;</li>
<li>67.8% in Adelaide;</li>
<li>38.2% in Perth;</li>
<li>82.9% in Hobart;</li>
<li>32.0% in Darwin;</li>
<li>39.0% in Canberra.    </li>
</ul>
Again 20 years ago almost every unit sold was less than $400,000.  While there has been a decline in unit sales under $400,000 across the board it has been markedly larger in markets like Sydney, Melbourne, Darwin and Canberra.  
Dwelling sales data produced by CoreLogic RP Data showed that over time, houses continued to outnumber units. This is the reason why house sales have a bigger influence on the overall result.    
Options for affordable housing supply, particularly in cities such as Sydney, Melbourne, Perth, Darwin and Canberra have sharply reduced over the past two decades.
<img src="/images/2014/11/28/kiusher-nov-28-three.jpg" alt="">
 
Although borrowing for a mortgage has become easier and wages have grown, the supply of lower priced homes drives many lower income earners out of ownership in these cities.
As an example, current figures to the 12 months to August 2014 indicate there has been just 16,345 homes sold below $400,000 in Sydney compared to 97,982 home sales in total. 
With home values continuing to rise in Sydney and Melbourne, we would expect even fewer sales below $400,000 over the coming 12 months. 
<img src="/images/2014/11/28/kiusher-nov-28-four.jpg" alt="">
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Pool of affordable housing in capital cities continues to evaporate

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According to the CoreLogic RP Data Home Value Index results in October 2014, combined capital city home values have increased by 8.9% over the past year. 
The rate of growth is now decelerating after reaching a peak annual growth rate of 11.5% in April 2014.  The two cities which have been the real driver of value growth, Sydney and Melbourne, are also now seeing the rate of value growth slowing.
The RBA has previously stated that as the economy transitions away from mining investment that it was specifically looking for a pick-up in residential property.  To date there has been a pick-up, in buyer demand, as well as home values and dwelling construction however, with value growth having peaked and dwelling approvals now -15% lower than their recent monthly peak will the pick-up in the residential segment of the economy be enough to offset mining?  It is beginning to look increasingly unlikely.
As we have showed, the residential housing sector is still quite strong but is slowing from its peak.  Although approvals have dropped there remains a strong pipeline of housing construction which should continue over the coming years however, the spike in construction could be somewhat short-lived overall.  If we look at the other sectors of the economy, economic data appears to be increasingly turning more negative than positive.
According to Westpac and the Melbourne Institute, consumer sentiment has been mired in higher levels of pessimism than optimism for the past nine months.  The last time pessimism had outweighed optimism for this long was in the middle of the financial crisis.
Last week we learned that wage growth remains benign.  According to the Australian Bureau of Statistics (ABS) the wage price index has increased by just 2.6% over the year to September 2014.  With inflation recorded at 2.3% there is very little real growth in wages at the moment.
With wage growth so low, we are also seeing the highest unemployment rate the country has seen in more than decade.  According to ABS data, the unemployment rate was recorded at 6.2% in October and sits at a level not seen since early 2003.  If employees can’t negotiate a decent pay rise it is not as if businesses are actively seeking employees.
Commodities, which were previously a key driver of the Australian economy have seen prices drop significantly over the past year.  According to the Reserve Bank’s (RBA) monthly index of commodity prices, Australian commodity prices are -16.9% lower over the past year and -38% lower than their July 2011 peak.
Earlier this year Australia had recorded international trade surpluses for three consecutive months.  The monthly trade surplus reached as much $1.4 trillion however, in September the trade deficit had sunk to $2.3 trillion.  This $2.3 trillion figure was the largest monthly trade deficit since November 2012.
According to the National Australia Bank, business conditions have improved sharply.  Their index of business conditions rose by an all-time high 12 points in October to reach its highest level since February 2008.  Although business conditions may be up, confidence across the business sector continues to fall.  In October business confidence fell by a point to its lowest level since August of last year.
Retail trade recorded a somewhat surprising bounce of 1.2% in September.  Although this was the strongest monthly increase since February last year it comes following relatively light increases of 0.7%, 0.4% and 0.1% over the previous three months.  One wonders if it is an outlier. 
In fact, Westpac and the Melbourne Institute asked respondents to their consumer sentiment survey about their spending intentions this Christmas.  The survey results indicated that 38% of respondents were going to spend less and 50% were going to spend the same.  Westpac reported that the net balance (more minus less) of -26% was the worst since 2008 in the middle of the financial crisis.
The latest read on population growth shows that population growth is slowing.  Although growth in the number of new Australians remains strong, population growth over the year to March 2014 was at its lowest level since the year to June 2012. 
Furthermore, the more up-to-date overseas arrivals and departures shows that net long-term and permanent arrivals over the 12 months to September 2014 were at their lowest level since the 12 months to October 2011.  This data would indicate a further slowing of net overseas migration, particularly within the mining states where the slowdown in both overseas and interstate migration has been the most substantial.
The strong rate of population growth has been a significant driver of gross domestic product.  Over the 12 months to June 2014, the Australian economy grew by a quite healthy 3.1%.  Although this headline figure is quite good, on a per capita basis the economy grew by a much lower 1.6%. With population growth slowing we would expect GDP per capital to also slow.
While there are a lot of negatives here, one of the positives recently has been the declining Australian dollar.  At the end of October 2014 the exchange rate with the $US was 88 cents which is much lower than it has been of late.  A lower Australian dollar should help our manufacturers, exporters and tourism however, that will take a while to flow through.
With the housing market and housing approvals seemingly topping out we need some other industries to help with the heavy lifting as commodity prices remain low and the pipeline of larger infrastructure projects related to the resources sector continue to taper away. 
We aren’t sure who or what these industries are but a further devaluation of the Australian dollar would certainly help some of the prime candidates such as tourism, manufacturing and education for overseas students. 
The Reserve Bank has stated that monetary policy has largely done all it can to assist and now it’s up to the government to manage fiscal policy in such a way that can assist the transitioning economy. 
In my mind this can’t come quick enough because the economy is softening and the housing market needs help to manage this transition.
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The economy needs more than a housing market recovery

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The Australian Bureau of Statistics (ABS) published housing finance data for September earlier this week. The data showed that the proportion of lending to investors hit a record high in September. 
t the same time the data indicates that demand from owner occupiers is starting to slow.
<img class="aligncenter size-full wp-image-3959" src="https://blog.rpdata.com/wp-content/uploads/2014/11/Chart-1.jpg" alt="Chart 1" width="500" height="181">
Over recent years the data on the value of housing finance commitment has, to my mind, become much more important to focus on.  The main reason being that this is the only data from the ABS that tracks the level of investment lending. 
The above chart uses raw (not seasonally adjusted) data and uses a 12 month average to smooth the volatility of the data.  Nevertheless you can see the ongoing decline in demand from owner occupier first home buyers and more recently a dip in commitments by owner occupiers that already own a home. 
Across the four borrower types listed you can see that investors now account for the greatest proportion of borrowings from Australian Authorised Deposit-taking Institutions (ADIs).
<img class="aligncenter size-full wp-image-3960" src="https://blog.rpdata.com/wp-content/uploads/2014/11/Chart-2.jpg" alt="Chart 2" width="500" height="183">
Seasonally adjusted data for September 2014 showed that the value of owner occupier refinance commitments was 0.6%, owner occupier commitments (excluding refinances) rose 1.8% and investor commitments were 3.7% higher. 
Year on year, owner occupier refinance commitments are 13.7% higher, owner occupier commitments (excluding refinances) are 3.4% higher and investor finance commitments are 25.4% higher. 
The above chart highlights a couple of important things.  Firstly, while owner occupier refinances and new loans (those excluding refinances) have flattened over recent months it seems as if there has been a resurgence in investor demand.  Secondly, this is the first time ever that the value of monthly investment loans ($11.9 billion) has been greater than the value of owner occupier new loans ($11.8 billion).
<img class="aligncenter size-full wp-image-3961" src="https://blog.rpdata.com/wp-content/uploads/2014/11/Chart-3.jpg" alt="Chart 3" width="500" height="182">
The seasonally-adjusted data for September showed that investor finance commitments accounted for an all-time high proportion of lending by Australian ADIs. 
Comparing lending to investors against owner occupier refinances and owner occupier new loans investors accounted for 41.4% of lending, owner occupier new loans were 40.8% and owner occupier refinances were 17.9%. 
The proportion of lending to investors is at a record high while the proportion of lending for owner occupier new loans is at a record low. 
Of course, there is only a certain amount that can be borrowed each month but it is clear demand is strongest from the investment segment.  In fact, if you exclude refinances, a record high 50.2% of new loans written are to investors.
<img class="aligncenter size-full wp-image-3962" src="https://blog.rpdata.com/wp-content/uploads/2014/11/Chart-4.jpg" alt="Chart 4" width="500" height="182">
The headline result that gets reported on each month is the number of owner occupier loans.  Although it is a very valuable statistic, it should be read with caution because it is missing a significant proportion of the market, those represented by investors. 
Over the month, there were 51,465 owner occupier housing finance commitments, the lowest number since January 2014. 
Month on month the number of loans for refinancing of established dwellings was -2.9% lower while non-refinances increased by 0.5%.  Like the value growth chart presented earlier, the above chart indicates that the number of loans to owner occupiers has flattened over recent months.
<img class="aligncenter size-full wp-image-3963" src="https://blog.rpdata.com/wp-content/uploads/2014/11/Chart-5.jpg" alt="Chart 5" width="500" height="180">
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As investor activity has risen, there has been a sharp drop-off in the number of loans to first home buyers. 
Although there is no data to support it there are plenty of anecdotal suggestions that many first home buyers are choosing to purchase investment properties rather than homes for owner occupation. 
Unfortunately, the ABS data only captures those homes purchased by first home buyers for owner occupation.  Owner occupier first home buyer numbers continue to languish at near record low levels. 
In September, first home buyers accounted for 12% of all owner occupier finance commitments however the number of loans actually rose by 4.7%. 
As mentioned earlier, the value of investment loans is at a record high, the previous peak was October 2003 and at that time investors accounted for a slightly higher 13.6% of all owner occupier housing finance commitments. 
What is more alarming is the drop off in volumes over recent years with that 13.6% actually being 8,481 finance commitments.
The Reserve Bank (RBA) has already highlighted a number of times that they have some concerns with the heightened level of investment activity, particularly in Sydney and Melbourne.  With the proportion of loans to investors hitting a new record high in September it will further re-iterate those concerns.
The RBA has already flagged that themselves along with other regulators are already looking at ways to curb the level of investment however, they flagged in early September that any announcement would likely come by December. 
In the meantime, it looks like investor finance commitments have got another leg up and over the coming months we may see a further flurry of activity as investors look to enter the market prior to the implementation of any macroprudential curbs.
With investor focus t -date very much on Sydney and Melbourne, it will be interesting to see if this remains the case when the lending finance data for September is released on Wednesday.  If so, you do have to ask yourself what some of these investors are thinking. 
The housing markets in Sydney and Melbourne have been recording value growth since June 2012 and over that time value have increased by 29.8% and 20.7% respectively.  Gross rental yields have fallen from 4.5% to 3.7% in Sydney and from 3.8% to 3.3% in Melbourne.  
I understand that investors need a return and aren’t getting that from keeping their cash in the bank but after almost two and a half years of value growth and a significant compression of rental yields you wonder how much value growth is left in these markets. 
Furthermore, with yields so low if there is little or no growth investors will be left with an asset that provides very little rental return.
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Proportion of investment lending hits record high in September

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Balancing an economy is undoubtedly a tough ask.
Our inflation targeting Reserve Bank looks to maintain inflation within a range of 2% to 3% on an annual basis over the cycle.  Too much inflation is not ideal, nor is deflation, so the RBA tries to tweak monetary policy to stimulate the economy in order to see some inflation but not too much. 
If inflation runs too high consumption slows down as consumers simply can’t afford to purchase goods and services because they don’t have enough buying power.  If deflation occurs consumers are also likely to stop spending because the value of any debt they have increases (as opposed to reduces when there is inflation).
Consumer buying power may increase during times of deflation; however the weak economic conditions that have caused prices to deflate are likely to also result in higher unemployment, a contraction in the number of jobs and a pessimistic consumer mindset.
With the currently high levels of inflation in housing prices, it stands to reason that the purchasing power of many consumers has diminished.  When you think about the Australian housing market as a whole I don’t think anyone could argue that shelter in Australia is particularly affordable. 
In fact over the last two decades home values have increased at a rate much higher than inflation meaning that some in the community don’t have enough buying power to purchase shelter.  As a result, many of these people are likely to rent.
I am constantly surprised about articles and comments which seem to believe that a significant decline in Australian home values would be the preferred cure to housing affordability and a good outcome for the economy. If we look purely at the inflation and deflation argument some people would say we have had too much inflation of home values however, the solution to that problem is not to aim for deflating current home values.
The Australian Bureau of Statistics (ABS) estimated that as at June 2014, the total value of Australia’s dwelling stock was $5.2 trillion and there were an estimated 9,366,800 dwellings across the country (note that RP Data we estimate the total value of residential dwellings to be somewhat higher at $5.5 trillion as at June 2014). 
To put this $5.2 trillion in dwellings into perspective, over the 12 months to June 2014, GDP, or the total output of the national economy, was recorded at $1.57 trillion.  What this means is that the value of residential dwellings was more than three times greater than the annual output of the economy.
According to data released by the Australian Prudential Regulation Authority (APRA), Australian authorised deposit-taking institutions (ADIs) held $1.225 trillion in loans against these dwellings across 5,079,800 mortgages. 
So what do these figures tell us?
54.2% of dwellings across Australia have a mortgage to an Australian ADI and 23.6% of the total value of Australian dwellings is outstanding to Australian ADIs. 
The ratio of debt held against the total value of the housing asset class is very low however, this ratio includes all dwellings (not just those where a mortgage is held).  In the event of a downturn those with high leverage are likely to be much more significantly impacted. 
It also probably reflects that quite a lot of dwellings have no mortgage (the 2011 Census indicated that roughly one third of Australia dwellings were owned outright) while a proportion will also have mortgages sourced from non ADI lenders or offshore banks.
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Australians choose to hold a large proportion of their wealth in residential property; this is highlighted by the $5.2 trillion total value of residential dwellings. 
Data published quarterly by the Reserve Bank shows that while the typical household’s ratio of housing debt to disposable income in 137.1%, the typical household’s ratio of housing assets to disposable income is a much larger 433.6% making up 54% of the typical households assets.
Over the past couple of decades Australian ADIs have shown a preference for lending to housing as opposed to lending for personal loans or to business.
Of course, the ADIs have had good reason to preference housing lending; it has generally performed well with low mortgage arrears, the return on equity is strong, earnings from mortgages are consistent, higher risk loans are generally insured via lender’s mortgage insurance (LMI), home values have generally trended higher and Australian’s tend to prioritise repayments of their mortgage. 
But this does not mean that home owners and the economy could withstand a significant deflation in home values.  Nor does it mean that a significant deflation in housing values would be a tonic for those that can’t afford to own a house to finally achieve home ownership. 
Why would deflation in an asset which is more than three times larger than the annual output of the economy play out any better than deflation in an economic sense? 
In fact, were home values to deflate it could be argued that the whole economy would suffer as consumers stopped consuming.  As consumers stop spending unemployment would likely rise, ADIs would stop lending and there is a high likelihood the Australian economy would enter a recession.
Remember, it isn’t only those with a mortgage which would face the prospect of unemployment, so too would all those people who are yet to purchase a home waiting for the collapse to enter into the market at rock bottom prices.
A more desirable solution to improve housing affordability in my opinion is to look for a more moderate level of growth in home values while improving both the supply and demand side of the equations.  A sustained period in which home values grow at a rate below inflation would be an ideal way in which to improve affordability rather than a large-scale bust. 
Interestingly, as <a href="/expert-insights/buying/inflation-adjusted-home-values-put-housing-markets-into-context">we showed last week</a>, a number of cities have recorded value growth below the rate of inflation over a number of years now (although this hasn’t been the case in Sydney and Melbourne).
Housing booms make it harder for prospective home owners to enter into home ownership, however I would argue that busts are much worse. 
Furthermore the level of exposure to the housing market by ADIs and residents would mean a housing bust has much more far reaching repercussions for the economy.  Although stress tests indicate that most ADIs could cope with a significant decline in home values the impact on households and the Australian economy as a whole would likely send Australian into a recession. 
This is why rapid deflation in home values is just as, if not more undesirable than rapid inflation and why the goal should be moderate growth in home values with a growth rate that broadly trends in line with household income growth over the cycle. 
If we want to reduce the cost of housing from its current level with minimal overall economic damage, home value appreciation below the rate of inflation for a number of years is what I see as an ideal solution. 
Of course achieving this means that governments need to address the factors that drive a high level of housing demand and those which constrain the overall supply of housing and drive the cost of this new supply higher.
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Deflating house prices is not the solution to affordability

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Capital city rental performance data shows that across Australia’s combined capital cities rents are rising at a pace slower than inflation and recorded an annual growth rate of 1.8%.
With rental yields at such low levels it seems investors are firmly focussed on capital growth.
RP Data’s monthly combined capital city rental market analysis for the past 12 months, confirmed that this result was the slowest annual rate of rental growth since August 2003.  
The rate of rental growth is easing on the back of a large rise in capital city home values and a strong rise in the supply of new homes being built. Added to this is the impact of record level investor buying which ultimately affects overall rental market supply. Slow rental growth rates have a knock on effect for rental yields.
Around the capital cities:
<ul>
<li>Sydney rental rates increased by 3.5% over the past year while home values are up 13.1%.  Subsequently yields are recorded at 3.7% the lowest reading since August 2005; </li>
<li>Melbourne home values are 8.9% higher over the year while rents have increased by a much lower 2.5%.  Gross rental yields are recorded at 3.3% which is the lowest gross yield across the capitals and equivalent to the lowest yield on record; </li>
<li>With a gross rental yield of 4.5%, yields in Brisbane are at their lowest level since September 2011.  Brisbane rents have increased by just 1.3% over the past year compared to home value growth of 5.6%; </li>
<li>Adelaide home values have increased by 4.3% over the past year while rental rates have increased by 1.5%. Rental yields currently sit at 4.2%, their lowest level since September 2012; </li>
<li>Rental rates in Perth have fallen by -3.1% over the past year while home value have increased by 3.4%. As a result, rental yields are recorded at 4.1% their lowest level since January 2012; </li>
<li>Hobart rental yields currently sit at 5.4% their highest level since November 2013.  Over the past year Hobart rents have increased by 2.4% and home values are 4.4% higher; </li>
<li>Darwin home values increased by 5.0% over the past year while rents fell by -0.1%.  As a result, yields have been relatively steady at 5.9% over recent months; </li>
<li>Canberra rental rates have fallen by -4.9% over the past year while home values have increased by 0.9%.  Gross rental yields in Canberra increased over the month to 4.2%.</li>
</ul>
<img src="/images/2014/11/06/kusher-nov-6-one.jpg" alt="">
<img src="/images/2014/11/06/kusher-nov-6-two.jpg" alt="">
Looking at all dwelling results at a combined capital city level, gross rental yields were recorded at 3.8% in October 2014 which is the lowest reading since January 2011.  
With the rate of capital gains outpacing rental growth we are seeing rental returns reduce across all capital cities. In fact, over the past year gross rental yields have fallen across each capital city.
RP Data research suggests that a surge in building approvals over the past 18 months is a likely contributor to slower rental growth rates.
<blockquote>
With rental yields at such low levels it seems investors are firmly focussed on capital growth.
</blockquote>
With the number of home sales rising as a result of new supply, more investor-owned properties and population growth slowing, renters now have comparatively more choice when it comes to housing options and as result the owners of investment properties have less scope to increase weekly rents given the large supply of alternate accommodation options.
With a larger supply of new housing and low interest rates likely to drive further growth in home values we anticipate that rental growth will remain subdued over the coming year.  In fact we may see the rate of rental growth slow further as renters see more and more accommodation options being built.  
With such tepid growth in rents and such a high level of investment activity it is clear that most investors are buying residential property with a view to capital growth rather than rental returns.
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Capital city rental rate growth the slowest in over a decade

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As at the week ended 26 October 2014, there were, 51,081 unique new properties advertised for sale and 195,655 unique re-listed properties across the country while the number of new listings were at their highest level since the four weeks ending 23 March 2014. 
Meanwhile, the number of re-listed properties was at its highest level since the four weeks ended 24 August 2014.
We are seeing a ramp-up in new listings at a national level while spring progresses while total listings have risen a little, they are much lower than over recent years.
<img src="/images/2014/10/30/kush-oct-30-three.jpg" alt="">
Across the combined capital cities, the trends are quite similar. Over the four weeks to 26 October 2014, there were 32,706 unique new properties listed for sale and 73,189 unique re-listed properties. Capital city new listings account for 64% of total new listings nationally while capital city re-listings account for just 37% of all re-listings nationally.  
This highlights that capital city stock is being absorbed much quicker than stock in non-capital city regions. As a result the number of re-listed properties is much higher across the regional areas of the country.
Excluding Darwin, new listings increased over recent weeks in all capital cities. The total number of properties advertised for sale also increased over this period in all cities and highlighted an increase in the amount of residential property available for sale.
On a city-by-city basis, RP Data’s latest listings results show that there are many variations and differing trends emerging.  
An ongoing rise in home values in Sydney is being partially fuelled by low stock levels and low mortgage rates. 
Around the remainder of the country:
<ul>
<li>•Melbourne stock levels are quite high. This potentially suggests that the rise in values is perhaps more driven by speculation than a shortage of effective supply levels;  </li>
<li>•Brisbane stock levels are trending lower and in line with a moderate rise in sales and values;</li>
<li>•Adelaide stock levels have reduced, however, the results show a sharp rise over recent weeks;  </li>
<li>•Perth stock levels have been relatively stable now for a number of years;  </li>
<li>•Stock in Hobart is falling as sales volumes rise.  </li>
<li>•Darwin is experiencing a trend towards higher levels of stock available for sale;</li>
<li>•Canberra stock levels are also now rising as the market slows.</li>
</ul>
The number of properties available for sale is likely to broadly continue to rise over the coming weeks, before we see the inevitable slowdown late in December and throughout January as vendors pause their listing activity.  
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Property listings continue to rise as spring progresses

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Earlier this month the Australian Bureau of Statistics (ABS) released its quarterly Consumer Price Index (CPI) or inflation figures.  
The data showed that over the September 2014 quarter, inflation was recorded at 0.5% and over the 12 months to September 2014 it was recorded at 2.3%.  The Reserve Bank has a target range for annual inflation of 2% to 3% and inflation is currently at the lower end of this range. 
It is important to note that inflation appears to be slowing, recorded at an annualised rate of just 1.8% over the past six months.
<img class="aligncenter size-full wp-image-3916" src="https://blog.rpdata.com/wp-content/uploads/2014/10/Chart-11.jpg" alt="Chart 1" width="500" height="180">
With the release of CPI data we can also get a picture of what is happening with home values when adjusted for the effects of inflation. 
Over the 12 months to September 2014, combined capital city home values have increased by 9.3% in nominal terms according to the RP Data CoreLogic Home Value Index, in ‘real’ terms home values have risen by 6.8% over the past 12 months. 
The impact of inflation is important to consider, as you will note from the above chart.  For example in nominal terms home values recorded no annualised falls from September 1998 until December 2008. 
In real terms, values were falling from December 2004 to December 2005.  Of course when you adjust for inflation, real growth in home values is more moderate than in nominal terms.
<img class="aligncenter size-full wp-image-3917" src="https://blog.rpdata.com/wp-content/uploads/2014/10/Chart-21.jpg" alt="Chart 2" width="500" height="180">
Across the combined capital cities, home values have increased by 9.3% over the past year, 3.8% per annum over the past five years, 4.7% per annum over the past decade and 7.4% per annum over the past 15 years in nominal terms. 
Adjusting for inflation shows that real gains have been significantly lower.  Over the past year real capital city home values are 6.8% higher, over the past five years they are 1.2% per annum, over the decade they have risen by 1.9% per annum and over the past 15 years they are up 4.3% per annum. 
Home values rose at a rate well above inflation between 1999 and 2004 and again over the past 12 months however over the past five and 10 years overall home value growth has been less than 2% greater than the rate of inflation.
<img class="aligncenter size-full wp-image-3918" src="https://blog.rpdata.com/wp-content/uploads/2014/10/Chart-31.jpg" alt="Chart 3" width="500" height="181">
Sydney and Melbourne have been the strongest capital cities for value growth over the past year and consistently over recent years. In nominal terms, values have increased by 14.3% and 8.1% respectively over the past year. 
As the above chart shows, when you adjust the growth in values for the effects of inflation, the level of growth is lower. Note that real home values have still increased in each capital city except for Canberra over the past year.  Although, outside of Sydney, Melbourne and Darwin the rate of growth has been 4.0% or less in all cities.
<img class="aligncenter size-full wp-image-3919" src="https://blog.rpdata.com/wp-content/uploads/2014/10/Chart-41.jpg" alt="Chart 4" width="500" height="184">
As we have already highlighted, real home value falls are much more frequent than falls in nominal terms. 
This is also the case across the individual capital city markets.  As you can note from the chart below, outside of Sydney and Melbourne, real increases in home values over the past two years have been minor.
<img class="aligncenter size-full wp-image-3920" src="https://blog.rpdata.com/wp-content/uploads/2014/10/Chart-51.jpg" alt="Chart 5" width="500" height="180">
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Combined capital city home values began to recover from the financial crisis at the beginning of 2009 after reaching a low point in December 2008. 
Since that time, nominal home values have increased by 34.0% across the combined capitals, largely driven by increases of 51.2% in Sydney and 44.9% in Melbourne.  Notably, Brisbane (6.0%), Adelaide (10.9%), Perth (14.5%) and Hobart (-1.6%) have all recorded nominal gains of less than 15% since December 2008. 
In real terms, between December 2008 and September 2014, combined capital city home values have increased by a much lower 16.5%. Across the individual capital cities, real changes in home values between December 2008 and September 2014 have been recorded at: 31.6% in Sydney, 26.1% in Melbourne, -8.0% in Brisbane, -3.7% in Adelaide, -0.6% in Perth, -14.7% in Hobart, 11.0% in Canberra and 5.1% in Darwin.
The next time you hear someone talk of the booming national housing market remember these statistics.  
Yes combined capital city home values are rising and this is due to the influence of the Sydney and Melbourne housing markets where values are rising.  Real home values in Brisbane, Adelaide, Perth and Hobart are still lower than they were before the financial crisis and have seen no real growth in more than six years.
The data also seemingly indicates that low interest rates are not necessarily the driving factor behind the current growth in the housing market.  If this was the case we would more than likely be seeing a more broad-based rise in home values.  The growth in home values has been contained to Sydney and Melbourne and to a lesser degree Darwin and Canberra. 
No wonder the Reserve Bank has flagged that monetary policy has largely done all it can and now fiscal policy has to do some of the heavy lifting.
Lower interest rates have encouraged rises in values in Sydney and Melbourne accompanied by a substantial lift in activity by investors.  However, outside of Sydney and Melbourne the housing market response, in terms of value growth, has been quite muted. 
Supply is responding across most cities which is certainly a desirable outcome. Yet despite real value falls over a number of years in Brisbane, Adelaide, Perth and Hobart, low mortgage rates and increasing new supply has not yet resulted in an ongoing rise in home values.  Of course this is not necessarily a bad thing but is somewhat surprising given the experience in Sydney and Melbourne.
I think what we are seeing is a case whereby our largest capital cities are further separating themselves from the rest of the pack. 
Sydney has pretty much always been the most expensive capital city market and this remains the case but we are now also seeing Melbourne separate itself from the remaining cities. 
Another factor driving the rising demand are potentially a greater number of overseas buyers investing in our two largest cities (unfortunately data capture is such that we don’t really know for sure). Furthermore both New South Wales and Victoria are experiencing a much lower outflow of residents to other states than they have in the past. 
Finally, the economies of Sydney and Melbourne are much more diversified economies than those of the other capital cities which tend to be much more narrowly focussed.  This is likely to be a key driver of higher housing demand and stronger value growth in these cities compared to the other capitals with a greater variety of job options available in these cities.
As home values continue to rise in Sydney and Melbourne lower income families and first home buyers may find it more difficult to enter the market.  This may result in some buyers looking to other capital cities in which to purchase homes. 
Of course, if the purchase is for owner occupation, the narrower economies may make it more difficult for these home owners to find appropriate employment in their new cities.
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Inflation adjusted home values put housing markets into context

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The Australian Bureau of Statistics (ABS) released building approvals data for August 2014 earlier this month.
At a headline level, dwelling approvals were 3.0% higher over the month and are now 14.5% year on year. With 16,810 approvals over the month there is clearly a strong level of residential development activity with monthly approvals just -5.0% lower than their recent peak.
<img src="/images/2014/10/8/Chart-1.jpg" alt="">
Of the 16,810 dwelling approvals in recorded over the month of August, 9,401 were for houses and the remaining 7,409 were mulit-unit dwellings (typically apartments).
Over the month, house approvals fell by -1.4% while unit approvals rose by 9.2%. Year-on-year, house approvals are 12.6% higher while unit approvals are up 17.1%. 
As the chart above shows, the six month trend indicates a slowing of dwelling approval numbers and it also shows that monthly movements in unit approvals tend to be much more volatile. Also remember that a multi-unit development is more risky than developing a single house and ultimately less likely to ultimately be constructed.
<img src="/images/2014/10/8/Chart-2.jpg" alt="">
Focussing on dwelling approvals on an annual basis we have seen more house and unit approvals than ever before over the 12 months to August 2014. Over the 12 month period there were 197,571 dwelling approvals, of which 111,020 were for houses and 86,552 were units. The annual number of approvals has increased by 19.2% over the past year.
Although approvals have surged, as the chart shows it is largely due to a significant lift in unit approvals. Although the number of unit approvals over the past year was at a record high, house approvals are still -6.8% lower than their previous peak over the year to July 2010 and -21.2% lower than their all-time high of 140,832 over the year to April 1989.
Historically, units have been much less likely to move from approval to construction. Units also tend to be much more likely to be owned by investors than houses. 
With the Reserve Bank flagging that deliberations are ongoing into the introduction of macroprudential policies to slow the level of investor activity in the housing market, there is potentially an even bigger than normal risk that these units won't make it to completion.
<img src="/images/2014/10/8/Chart-3.jpg" alt="">
Across the combined capital cities, there was an all-time high of 147,122 dwellings approved for construction over the 12 months to August 2014. The number of capital city dwelling approvals has increased by 21.9% over the past year. 
Over the year there were, 71,662 approvals for houses and 75,460 unit approvals with house approvals up 20.6% and unit approvals 23.2% higher.
Much like the national results you can see that unit approvals are at their higher levels while house approvals are only just approaching their previous peak levels.
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<img src="/images/2014/10/8/Chart-4.jpg" alt="">
Across the individual capital cities, Brisbane has recorded the greatest increase in dwelling approvals over the year (41.8%) followed by: Perth (24.9%), Adelaide (24.0%) and Sydney (23.3%). Dwelling approvals are lower over the year in Darwin (-6.8%) and Canberra (-6.4%) while Melbourne (16.3%) and Hobart (19.4%) have recorded only moderate rises in dwelling approvals. 
Despite certain cities recording significant rises in dwelling approvals, Sydney and Melbourne have accounted for more than 57% of all capital city dwelling approvals over the past year. With 26,123 dwelling approvals over the past year, approvals in Perth are at a record high while Brisbane approvals are just shy of their record high.
<img src="/images/2014/10/8/Chart-5.jpg" alt="">
A key driver of the overall increase in dwelling approvals has been the rising prominence of the unit market. Over the past year, the increase in unit approvals has been greater than the increase in house approvals in Sydney, Brisbane, Adelaide and Perth.  Although unit approvals have recorded greater increases in these cities, there has been a substantial decline in unit approvals across Hobart and falls in both Darwin and Canberra.
<img src="/images/2014/10/8/Chart-6.jpg" alt="">
With more than half of all capital city dwelling approvals for units as opposed to houses, all individual capital cities except for Adelaide (31.8%), Perth (25.9%) and Hobart (7.0%) are seeing a majority of approvals for units. In Sydney, 67.7% of dwelling approvals were for units over the past year, elsewhere 53.0% were for units in Melbourne, 55.9% in Brisbane, 63.2% in Darwin and 57.9% in Canberra.
Sydney has consistently approved more units than houses since 1993 and Darwin has consistently approved more units than houses since 2003, while across the other cities it is a relatively new phenomenon.  
Melbourne has only been approving more units than houses since mid-2012, in Brisbane it has occurred since mid-2013 and in Canberra since mid-2010. Of course, there is an increasing level of demand for units, but particularly in Melbourne and Brisbane the number of units in the pipeline is largely untested in the market. 
Furthermore, units tend to be more appealing to the investor market rather than owner occupiers. While demand may currently be strong it remains to be seen whether there is enough investor demand to satisfy all of the supply in the pipeline.
Dwelling approvals remain at a very high level and with the rate of population growth slowing it is encouraging to see that supply is finally responding.  With their lower price point compared to houses and superior rental returns no doubt we are seeing a rising level of demand for units, particularly in inner city markets. 
Of course, the Reserve Bank of Australia has raised concerns about the level of investment lending which is most prominent for inner city units.
If controls are introduced to slow the level of investment there may be an adverse impact on demand and subsequently values of inner city units, particularly new inner city units which are a strong target from the investment segment of the market.
 
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Units are driving dwelling approvals, but will they get built?

The new <a href="https://www.apartments.com.au/new-apartments/yarraville-green-42-stephen-street-yarraville-vic-3013">Yarraville Green</a> development in Melbourne's inner west is showing that landscaping can be just as influential as architecture, with buyers responding strongly to the garden-first approach adopted from the outset by developer Excelon Projects and the project's design team.

Excelon appointed Six Degrees Architects and landscape architects SBLA to work collaboratively on the development, with a brief to create "a sustainable, design-led building with a focus on community."

That approach has resonated with buyers. According to Next Chapter Director Tom Hirini, who is leading the sales campaign, the landscaped communal garden has become one of the project's defining features, alongside its boutique scale and European-inspired cluster housing concept.

Local downsizers, right-sizers and established families already living in Yarraville and surrounding suburbs have accounted for the majority of purchasers.

[smartcode_project:default project_id=144913 project_image_fid=297740]

Yarraville Green will comprise 53 homes, including apartments and townhomes, arranged around the shared central garden to maximise connections to the landscaped open space. Parking has been moved underground, allowing the ground plane to be dedicated to greenery, pedestrian movement and communal spaces.

The landscape extends well beyond passive planting. Productive garden beds, a pergola, communal gathering spaces, garden sheds and a pet wash have all been integrated into the masterplan, creating spaces designed to encourage everyday interaction between residents.

[smartcode_project:default project_id=144913 project_image_fid=297741]

The interiors continue Excelon's focus on craftsmanship, incorporating bespoke elements by Melbourne artisans including leadlight detailing by Adadaz, hand-turned timber hardware by Auburn Woodturning and blown-glass lighting by Ruth Allen.

Sustainability has also been embedded throughout the project, with Yarraville Green targeting an average 7-star NatHERS energy rating through passive design principles, rooftop solar servicing common areas and rainwater harvesting for landscape irrigation.

[smartcode_project:default project_id=144913 project_image_fid=297735]

Construction continues to progress at Yarraville Green, with structural works well underway and framing works approaching completion under builder Balmain &amp; Co. The project remains on track for completion in mid-2027.

Apartments at Yarraville Green are currently priced from $625,000, while townhomes start from $1.4 million.

[smartcode_project_cta:default project_id=144913]

Joel Robinson

Garden-led design drives buyer demand at Yarraville Green

National diversified developer Fortis has officially launched Crest &amp; Walker, its latest Brisbane apartment development, with construction now underway on the 20-storey Newstead project.

Award-winning builder BINAH has commenced construction on the Bureau^Proberts-designed building, which will deliver a limited collection of 65 two and three-bedroom apartments on Kyabra Street.

[smartcode_project:default project_id=145922 project_image_fid=373556]

The project marks Fortis' fourth active residential development in Brisbane, following River House, which is nearing completion, alongside projects in New Farm and Hamilton as the national developer continues to expand its South East Queensland pipeline.

Fortis General Manager – Development Queensland Dan Boman said Crest &amp; Walker reflects the developer's long-term commitment to delivering design-led residential projects in Brisbane's established inner-city suburbs.

"We're proud to be strengthening our presence in Brisbane with Crest &amp; Walker, particularly in such a sought-after lifestyle destination as Newstead," Boman said.

"Every Fortis project is shaped by its context, and we approach each one with the respect and care it deserves.

"Our focus is always on creating places that feel connected to their neighbourhood and elevate the everyday experience for residents. Newstead continues to evolve as one of Brisbane's most sought-after urban communities, and Crest &amp; Walker reflects our ambition to contribute meaningfully to that story."

[smartcode_project:default project_id=145922 project_image_fid=373559]

Positioned between Gasworks Plaza and James Street, <a href="https://www.apartments.com.au/new-apartments/crest-walker-newstead-12-kyabra-street-newstead-qld-4006">Crest &amp; Walker</a> has been designed as a boutique residential address offering privacy and generous living spaces within one of Brisbane's most established lifestyle precincts.

The building features a contemporary brick podium softened by integrated landscaping, while the upper levels are characterised by restrained architecture and enduring materiality. Interiors have been designed to maximise natural light, acoustic performance and long-term liveability.

[smartcode_project:default project_id=145922 project_image_fid=373583]

Residences comprise spacious two and three-bedroom floorplans, with two-bedroom apartments priced from $1.55 million and three-bedroom, half-floor residences from $3.95 million.

Residents will have access to a wellness-focused rooftop featuring a swimming pool, sauna, steam room, landscaped dining spaces and outdoor lounge areas overlooking Newstead and the Brisbane CBD.

[smartcode_project:default project_id=145922 project_image_fid=373571]

Sales are being managed by Slaite Projects, with Fortis expecting strong demand from owner-occupiers seeking a high-quality, design-focused apartment in one of Brisbane's most tightly held inner-city suburbs.

Completion of Crest &amp; Walker is slated for late 2028.

[smartcode_project_cta:default project_id=145922]

Fortis expands Brisbane pipeline with launch of Crest & Walker in Newstead

The enormity of delivering a true skyscraper in Australia's new development market is often overlooked.

It has taken the best part of a decade since plans for Chevron One were first unveiled, but the 41-storey tower is now complete, with residents collecting their keys and moving into what has become one of the Gold Coast's most recognisable new landmarks.

Rising 127 metres above Chevron Island, Chevron One stands almost twice as high as any other building on the island. Its scale places it alongside the trio of towers at Jewel, arguably the last truly significant addition to the central Gold Coast skyline when they were completed around six years ago.

While there are several developments underway around a similar height to Chevron One, they are more concentrated within clusters of the highest towers in the city. The fact Chevron One sits within a developing precinct, looking back at the other high-rise developments in Surfers Paradise and Broadbeach, makes it a different proposition altogether. It will certainly become a reference point on the Gold Coast skyline.

[smartcode_project:default project_id=6515 project_image_fid=68833]

Developer Bensons Property Group is behind the 41-storey tower, which has 229 apartments, along with an exhaustive list of resident amenity spread across what is the largest development site ever assembled on Chevron Island.

The tower has been the talk of the town for years, says Ray White Projects Gold Coast agent Caitlin Rosenboom, who is selling the remaining apartments.

"People have been watching Chevron One go up for years," Rosenboom says, adding that many prospective buyers have been surprised by the scale of the views once they step inside.

"It's only when they walk through a completed apartment that they truly understand the position of the building," Rosenboom says.

"The views are jaw-dropping. Whether you're looking east over the ocean, across Surfers Paradise, along the river systems or out to the hinterland, every level offers something different but equally impressive."

[smartcode_project:default project_id=6515 project_image_fid=360215]

One of Chevron One's defining advantages is its location on the eastern side of Chevron Island on Stanhill Drive, a position which protects the views forever.

"There's only one row of houses between Chevron One and the water, and the height restrictions along the river means views from Chevron One can never be built out,"&nbsp;Rosenboom says.

While new apartment developments continue to emerge across the Gold Coast, Rosenboom says opportunities to secure a completed apartment with this level of outlook are becoming increasingly rare.

"The size of the site is something that would be incredibly difficult to replicate today," she says.

"That's allowed Chevron One to deliver the sort of amenity, open space and resident facilities that very few projects can offer. There are not many completed apartment buildings on the Gold Coast right now that can compete with the combination of scale, quality and amenity."

[smartcode_project:default project_id=6515 project_image_fid=68839]

There's around 2,000 sqm of amenity solely for the use of residents of Chevron One. Club One features a uniquely shaped swimming pool that mirrors the footprint of the building itself, set within a extensively landscaped gardens. There's also an indoor pool and spa, a fully equipped gym with a Pilates room, a yoga garden, a bookable private dining area and lounge that can host up to 30 people, and a 24-hour concierge service.

As for the buyers, Rosenboom is fielding enquiry from everywhere: Sydneysiders and Melburnians looking at the new and off-the-plan market following the changes in the Federal Budget, as well as those looking to relocate, through to South East Queenslanders seeking either a permanent home or a weekender bolthole.

"The Gold Coast lifestyle continues to resonate with people relocating from the southern states, and when they see the views and the quality of what's been delivered at Chevron One, it becomes very easy for them to understand the appeal," Rosenboom says.

A diverse mix of one, two and three-bedroom apartments remain available, with each offering "something a little different", be it the orientation and views, configuration, or level, to suit a wide variety of buyers.

The remaining apartments are ready to inspect in person, by appointment.

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A decade in the making: Residents to move into Chevron One as construction wraps up

A general rule of thumb in new apartment developments is that the penthouses get the rooftop.

It's a formula that's become commonplace across Australia's apartment market. Residents might have access to a pool, gym or barbecue facilities on a dedicated lower level, but the most desirable outdoor spaces are typically reserved for the highest-priced homes at the top of the building.

<a href="https://www.apartments.com.au/developers/sherpa-property-group">Sherpa Property Group</a> has taken the opposite approach.

Rather than dedicating the rooftop to a handful of buyers, the Gold Coast developer has made it the centrepiece of its Flourish collection, creating expansive shared spaces from the best vantage point in the building.

The philosophy has reached its most ambitious expression at <a href="https://www.apartments.com.au/new-apartments/flourish-soleira-palm-beach-1150-1160-gold-coast-highway-palm-beach-qld-4221">Flourish Soleira</a> in Palm Beach, where two rooftop precincts connected by a skybridge will deliver one of the most extensive lifestyle offerings seen in a residential apartment project on the Gold Coast.

[smartcode_project:default project_id=150017 project_image_fid=374053]

"We're seeing a clear move toward developments that offer more than just an apartment," Sherpa Group founder Christie Leet said.

"People want spaces that support how they actually live, whether that's working from home, staying active, or spending time with family and friends.

"That's where amenity becomes critical. It's not just about what's included, but how those spaces are designed to be used every day."

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The breadth of amenity has already attracted buyers across multiple demographics. Younger first home buyers have been drawn to Soleira's one-bedroom apartments, a product rarely delivered in Palm Beach, while families have responded to practical inclusions such as the shallow children's pool adjoining the main lap pool and the extensive communal recreation areas.

Instead of a single rooftop, Soleira delivers two distinct lifestyle zones.

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The southern rooftop has been dedicated to wellness, featuring a gym, yoga and Pilates studio, work-from-home facilities, a wellness centre, spa, and hot and cold plunge pools.

The northern rooftop focuses on recreation and entertaining, incorporating a heated resort-style pool, private dining rooms, pizza ovens, barbecues, a golf simulator, children's recreation areas, and what is expected to be the Gold Coast's first rooftop basketball court, which will also double as a squash court.

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Beyond the rooftops, Soleira will introduce 1,500 sqm of curated retail beneath the towers, creating one of Palm Beach's first genuinely mixed-use lifestyle precincts where cafés, restaurants and convenience retail become part of residents' everyday lives.

Sherpa has also retained management rights across the development, allowing it to oversee the long-term operation of the building through a 24-hour concierge model. The developer is also exploring additional revenue streams within the precinct aimed at helping offset ongoing body corporate costs for residents.

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While Soleira is the largest project Sherpa has delivered, the rooftop-first philosophy has been evolving for several years.

It began with <a href="https://www.apartments.com.au/new-apartments/amargo-6-12-sixth-avenue-palm-beach-qld-4221">Flourish Amargo</a>, the first project released under the Flourish brand. Rather than competing at the ultra-luxury end of the market with oversized half-floor and full-floor residences, Sherpa focused on creating lifestyle-driven apartments supported by resort-style shared spaces.

Amargo introduced more than 800 sqm of rooftop amenity, combining wellness facilities, heated pools, entertaining areas, cabanas, pizza ovens and private dining spaces into what was designed as an extension of residents' homes rather than a facility used only occasionally.

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That approach continued with Flourish Oasis, where the same amenity-led philosophy was refined into a more boutique development. Strong demand from Sherpa's growing VIP database saw much of the project sold before it reached the broader market, reinforcing buyer appetite for apartment communities centred around shared lifestyle experiences.

Flourish Amargo is slated for completion mid-way-through next year, with Oasis to be delivered by late 2027. Flourish Soleira is expected to complete in 2030.

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Sherpa takes amenity to the sky as Flourish Soleira captures booming Palm Beach demand

As apartment living continues to evolve across Sydney's growth corridors, the quality and distribution of shared spaces is increasingly shaping how residents experience home. Rather than functioning as add-ons, amenities are being embedded into the daily rhythm of a building, supporting everything from quiet retreat to social interaction, often within a single vertical community.

At <a href="https://www.apartments.com.au/new-apartments/aeris-melrose-park-nursery-street-melrose-park-nsw-2114">Aeris</a> in Melrose Park, this approach is resolved through a layered amenity offering that unfolds from ground level through to its upper podium. Developed by <a href="https://www.apartments.com.au/developers/sekisui-house-australia">Sekisui House Australia</a> in partnership with Hankyu Hanshin Properties, the project introduces 468 apartments across two towers and a mid-rise building, positioned at the highest point of the broader masterplan.

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The amenity experience begins at street level, where two courtyards sit within a landscaped setting that connects residents to the wider network of parks and green spaces. These green spaces are not isolated pockets but part of a wider pedestrian network that links Aeris to the surrounding <a href="https://www.apartments.com.au/developments/melrose-park-nsw-2114">Melrose Park</a> precinct, including Central Park, future schools, and the Town Centre opening in July 2026. The result is a transition that moves from public to private without abrupt boundaries, allowing residents to pass through shaded, tree-lined environments before reaching the building itself.

Moving upward, the focus shifts to the level five podium, where the primary communal facilities are concentrated. This space brings together a 16-metre swimming pool, outdoor seating areas, and a communal BBQ zone arranged to take advantage of elevated outlooks. Seating is positioned beneath pergolas, creating pockets of shade that extend the usability of the space throughout the day. The pool edge aligns with views toward the wider district, reinforcing the sense of elevation that defines the project’s positioning.

In the adjacent building, this is complemented by quieter, more contemplative spaces, including an outdoor cinema set within the same level. Positioned to operate primarily in the evening, it introduces a different tempo to the shared environment, shifting from daytime activity to after-hours use without requiring separate zones.

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The podium also accommodates an intimate private resident gym. Located on the lower levels, it gives residents convenient access to fitness facilities without leaving the building.

Above, the elevated podium sky deck extends the amenity offering, providing additional open-air spaces with elevated outlooks across the surrounding landscape. While more restrained in program, this upper level reinforces the project’s vertical progression, from ground-level greenery to elevated outlook, allowing residents to move between distinct spatial conditions within a single address.

This distribution of amenities reflects a deliberate response to how residents use space across the day. Sekisui House Australia Sales and Marketing Director Peter Kalaf points to the role these shared areas play in shaping buyer demand. Aeris has been conceived as more than a collection of apartments, with the podium pool, gym and outdoor cinema forming part of a broader lifestyle offering that extends the home beyond each individual residence.

[smartcode_project:default project_id=426 project_image_fid=360300]

What distinguishes Aeris is not the inclusion of these elements individually, but how they are arranged in relation to one another. Active, social, and passive spaces are layered vertically rather than separated, allowing residents to choose between them without leaving the building or moving far from their apartment. This proximity supports both routine use, such as a morning swim or evening workout, and more occasional gatherings, whether around the BBQ area or within the cinema setting.

The amenity design also sits within a broader framework of connectivity across Melrose Park. The Melrose Park Town Centre, anchored by Coles and Dan Murphys, features a mix of retail, dining, health and lifestyle offerings, bringing everyday convenience closer to residents. By the end of the year, more than five hectares of parks and open space, equivalent to around seven football fields of green space on residents' doorstep, will further enhance the precinct, allowing the internal facilities at Aeris to operate as an extension of the wider neighbourhood rather than a substitute for it.

Construction at Aeris continues to gather momentum, with ground floor slabs expected to be completed in late 2026 before the first sections of the buildings begin to rise above ground.

[smartcode_project_cta:default project_id=426]

Cameron Kusher

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