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Since the onset of the global financial crisis, migration between Australia’s states and territories has slowed.  
Demographic data released by the Australian Bureau of Statistics (ABS) shows that overseas migrants arriving in the country’s mining states is easing, with most preferring to settle in New South Wales and Victoria.
Over the 12 months to December 2013, there were 235,797 net overseas migrants to Australia while the rate of natural increase was recorded at 160,357.  At a national level, interstate migration cancels itself however, looking at each state you can see that over recent years there are far fewer people moving between the states and territories.
By way of net migration, New South Wales continues to lose residents at a slower rate, while Victoria is the only state where there is a significant rise in the cross border inflow of residents.  
The mining states of Queensland and Western Australia have each seen a fall in both net interstate and net overseas migration over the year. This is a flow on from the slowdown in mining construction activity where activity on these projects move from construction to production which is resulting in lower worker demand.
New South Wales is still seeing a net outflow of residents from the state with a net 11,219 residents leaving the state in 2013.  Over the past 20 years, the outflow of residents has averaged a much higher 18,391 persons.  While the state is seeing some outflow to other states it is well and truly making up for it via the 71,446 net overseas migrants over the year.
<img src="/images/2014/07/31/kusher-july-31-one.gif" alt=""> 
Victoria has recorded an annual average net loss of citizens to other state and territories of 2,278 residents over the past 20 years. Victoria is now attracting a record number of net interstate migrants, with 7,528 new residents moving from other states last year.  Victoria also attracts a significant 62,337 net overseas migrants.
<img src="/images/2014/07/31/kusher-july-31-two.gif" alt=""> 
In Queensland the net inflow of residents from other states and territories is close to a record low. During 2013, Queensland’s net interstate migration was recorded at 6,897 persons compared to a 20 year average of 22,743 per annum. Although Queensland attracted 37,355 net overseas migrants, it is a sharp fall from the 46,161 at the same time in 2012.
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South Australia has historically shown a much more stable level of population growth. Over the 2013 calendar year, South Australia lost a net figure of 3,994 residents to other states which was slightly higher than the average net loss of 3,263 residents over the past 20 years. Over the 12 months to December 2013, South Australia recorded net overseas migration of 11,872 residents which was slightly higher than the 11,203 over the same period the previous year.
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Western Australia has seen a downturn in both net interstate and net overseas migration over the past year. Compared to the 20 year average net interstate migration, WA migration is still above average however; it has fallen by -56% over the year to 4,800 persons in 2013. Net overseas migration has also fallen from 56,580 in December 2012 to 45,401 persons in December 2013. 
<img src="/images/2014/07/31/kusher-july-31-five.gif" alt="">
Historically, residents have migrated from New South Wales and Victoria to Queensland and to a lesser degree Western Australia. Since the onset of the financial crisis the outflow of citizens to Queensland and Western Australia has slowed with fewer residents leaving New South Wales and Victoria.  
The sea change phenomenon was a big driver of this migration before the financial crisis. It now seems that when someone has secure employment, particularly in New South Wales and Victoria, they are less inclined to trade that in and move interstate.
With unemployment rising nationally and demand for workers in the resources sector slowing we would expect this trend to continue over the coming year.  In fact the net loss of residents from New South Wales may reduce further and the net gain of residents in Victoria may increase.
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Interstate movements remain low, but Victoria attracting a record number of interstate migrants

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According to the RP Data-Rismark Home Value Index, combined capital city home values fell by -0.2% over the second quarter of 2014. 
With the Australian Bureau of Statistics (ABS) releasing their Consumer Price Index (CPI) data last week, we can see that in ‘real’ terms home values across the combined capitals fell by -0.7% over the second quarter of the year.
CPI is important to consider because raw or nominal figures don’t adjust for the impact of inflation. At a headline level, combined capital city home values have increased by 10.1% over the 2013/14 financial year.  The latest CPI data showed that inflation was recorded at 0.5% over the second quarter and at an annual rate of 3.0% throughout the 2013/14 financial year.
<img class="aligncenter size-full wp-image-3530" src="https://blog.rpdata.com/wp-content/uploads/2014/07/Chart-13.jpg" alt="Chart 1" width="500" height="176">
Focusing on the ‘real’ home value growth across individual capital cities we can see some significant variation in value growth, with values actually falling over the year in some cities. 
The above chart details the annual change in capital city home values both in terms of raw change and inflation-adjusted changes.  Although according to the RP Data-Rismark Home Value Index, dwelling values have risen over the year across all cities, when you adjust for inflation values are lower in real terms in Adelaide, Hobart and Canberra.  Not to mention that growth in most other cities starts to look a lot more moderate.
<img class="aligncenter size-full wp-image-3531" src="https://blog.rpdata.com/wp-content/uploads/2014/07/Chart-23.jpg" alt="Chart 2" width="500" height="181">
Home values have been rising across the combined capital cities since June 2012 following falls over most of the previous two years.  Across the individual capital cities the timing and magnitude of the falls has varied greatly however, with values rising across the board, home values generally remain well below their previous peak (in real terms) across the capitals. 
In non-inflation adjusted terms home values are higher than their previous peak in: Sydney, Melbourne, Canberra and Perth.  Once you account for inflation, Sydney is the only city where values are currently higher than their previous peak.
<img class="aligncenter size-full wp-image-3532" src="https://blog.rpdata.com/wp-content/uploads/2014/07/Chart-34.jpg" alt="Chart 3" width="500" height="289">
The above table highlights the previous quarter in which home values peaked in inflation adjusted terms, the maximum falls in values and the difference in values from the previous peak to June 2014. As you can see, the previous peaks vary dramatically across each city.  
As already mentioned, Sydney is the only city where real values are now higher than their previous peak although it’s important to note that Sydney’s previous peak was all the way back in the first quarter of 2004.  Perth’s market peaked in September 2007 and values are still -9.9% lower, Hobart peaked in December 2007 and values are currently -18.8% lower and Brisbane peaked in March 2008 with values currently -14.5% lower than that level. Across all other capital cities values are below their peak however, the real peak in values occurred following the financial crisis.
It is important to consider the impact of inflation because it highlights the real purchasing power. 
In most cities, despite extremely low mortgage rates and value growth throughout the past two years, values still remain well below their peaks.  For home owners this means the real capital gain from residential property have been quite poor in recent years outside of Sydney and Melbourne.  For people who don’t yet own a home it means that you should be able to purchase relatively more for you money now than you could at the market peak.
The data also shows that interest rates are not necessarily the main driver of why values are currently rising.  If that were the case you would probably expect cities where values peaked much longer ago like Brisbane, Perth and Hobart to have recorded stronger levels of growth. 
Mortgage rates are but one consideration for the home buyer and obviously considerations such as employment, cost of living and housing demand driven through population growth are equal as important of a consideration as mortgage rates when considering whether to purchase or not.
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Inflation adjusted home values are still lower than their previous peak

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The Australian Bureau of Statistics (ABS) released housing finance data for May 2014 recently, with the data showing owner occupier housing finance commitments flat over the month.
The data also showed that the total value of housing finance commitments was -0.8% lower over the month.  Although this may be concerning, the number of housing finance commitments remain high and even if we have reached the summit, the RBA would probably be happy were commitments to remain at these current levels.
<img class="aligncenter size-full wp-image-3485" src="https://blog.rpdata.com/wp-content/uploads/2014/07/Chart-12.jpg" alt="Chart 1" width="500" height="181">
Over the month of May there were 52,092 owner occupier housing finance commitments, 17,463 of which were refinances and 34,630 which were non-refinances or new loans.
Refinance commitments were 2.1% higher over the month and are 10.1% higher year-on-year. New loan commitments were -1.0% lower in May and are only 2.0% higher over the month. 
Refinance commitments are at their highest level since April 2008 while new loan commitments are -2.5% lower than their recent peak in November 2013. Although owner occupier housing finance commitments are higher over the year they do seem to be at or very close to a peak.
<img class="aligncenter size-full wp-image-3486" src="https://blog.rpdata.com/wp-content/uploads/2014/07/Chart-22.jpg" alt="Chart 2" width="500" height="184">
In May, there was $27.5 billion worth of housing finance commitments which was slightly lower than the all-time peak of $27.7 billion the previous month. 
Over the month, owner occupier refinance commitments were up 0.8%, owner occupier new loans were -1.4% lower and investment finance commitments were -0.9% lower. 
Despite weaker results over the month, year on year there have been some significant increases with owner occupier refinances 17.7% higher, owner occupier new loans 8.3% higher and investment loans up 23.8%.  Again the rate of increase has definitely slowed of late potentially pointing to a peak.
<img class="aligncenter size-full wp-image-3487" src="https://blog.rpdata.com/wp-content/uploads/2014/07/Chart-33.jpg" alt="Chart 3" width="500" height="182">
Looking at how much housing lending each component is attracting, the data shows that in May 2014, 42.9% of lending was to owner occupiers for new loans, 18.0% was for refinances by owner occupiers and 39.1% is for investment purposes. 
As a proportion of total lending in May, owner occupier non-refinance commitments are at their lowest level on record while refinances are at their highest level since July 2013 and investment lending remains at around its highest level since late 2003.
The pick-up in investment and refinance lending has caused the proportional fall in owner occupier non-refinance lending.  If we exclude lending for refinances, 52.4% of lending over the month was for owner occupiers while 47.6% was for investors. This was equal to the second highest level of lending for investment purposes, behind the 49.0% of all loans to investors in October 2003.
<img class="aligncenter size-full wp-image-3489" src="https://blog.rpdata.com/wp-content/uploads/2014/07/Housing-investors-by-state.jpg" alt="Housing investors by state" width="500" height="185">
Lending finance data released by the ABS on Monday for May 2014 revealed that investor activity is significantly higher in New South Wales than in all other states. Nevertheless, New South Wales (29.9%), Victoria (22.5%), Queensland (7.8%) and South Australia (2.1%) have each recorded a year-on-year rise in investment lending. 
Investment housing finance commitments account for an historic high 46.9% of all housing finance commitments in New South Wales and elsewhere the proportions are recorded at: Victoria (39.1%), Queensland (34.4%), South Australia (31.5%), Western Australia (31.0%), Tasmania (13.8%), Northern Territory (40.2%) and the Australia Capital Territory (33.9%). 
The data shows that although investment levels are generally rising, it is much more exacerbated in New South Wales and Victoria which are of course proxies for rising investment in Sydney and Melbourne.
<img class="aligncenter size-full wp-image-3488" src="https://blog.rpdata.com/wp-content/uploads/2014/07/Chart-42.jpg" alt="Chart 4" width="500" height="184">
Interestingly when we track the annual change in the value of housing finance commitments, excluding refinances to reflect home sales we can see that it correlates closely with the annual change in combined capital city home values. 
The recent slower rate of growth in capital city home values is happening in concert with a slowdown in the growth in housing finance commitments.
<img class="aligncenter size-full wp-image-3490" src="https://blog.rpdata.com/wp-content/uploads/2014/07/Chart-52.jpg" alt="Chart 5" width="500" height="181">
The housing finance data also shows that first home buyers continue to play only a minor role in the housing market. 
In May, the number of owner occupier first home buyer commitments was up 17.1% over the month however, as a proportion of total owner occupier lending activity it remains quite low at just 12.6%.
<img class="aligncenter size-full wp-image-3491" src="https://blog.rpdata.com/wp-content/uploads/2014/07/Chart-63.jpg" alt="Chart 6" width="500" height="187">
Across the individual states, the level of activity by first home buyers remains very low in the three largest states (New South Wales, Victoria and Queensland).  Elsewhere the percentage of owner occupier housing finance commitments for first home buyers is lower now than at the same time last year except in Tasmania and the Northern Territory.
Looking ahead, the RP Data Mortgage Index (RMI) indicates a slowing of demand for mortgages in June.  With value growth seemingly having peaked and transaction volumes lower than they were late in 2013 we anticipate that demand for housing finance is likely to remain at fairly similar levels to those current over the coming months.  The real test from here will be throughout the spring selling season when housing demand typically escalates.
With affordability factors anticipated to slow the rate of value growth we may also see slightly lower levels of mortgage demand.  As we have noted plenty of times previously, rental yields are generally low which suggests that most investors are seeking capital growth.  This is further highlighted by the high levels of investment activity in New South Wales and Victoria with Sydney and Melbourne having recorded the greatest increases in home values across the capital cities over the past year. 
The test will be once the value growth in the market abates what then happens with all these investor owned properties?  Do they wait it out for the next growth phase or do they exit the market and move to a more liquid asset class? 
Only time will tell but it is certainly something which lenders and regulators should be considering with such a high level of investment lending currently taking place.
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NSW investment housing finance commitments at an historic high

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Last week I highlighted sales by price point across the capital cities. 
The data showed a shortening supply of homes selling at lower price points, in particular within some of our largest capital cities.  This week, I want to investigate what this means for those who don’t already own a home and in particular those that are on lower incomes.
The latest quarterly average weekly earnings data from the Australian Bureau of Statistics (ABS) to November 2013 shows that the average Australian earned $1,114.20 a week. Remember this is the average so plenty of people earn less than this figure which is the equivalent of almost $58,000 a year.
Compared to many other countries, Australia’s average wage is quite high however, so too is the cost of living in Australia and in particular the cost of housing as highlighted last week. With a combined capital city median house price of $580,000 and median unit price of $482,000 an average income is not going to go a long way.
But why is the capital city median price more relevant than the nationwide median which is $490,000 and $440,000 for houses and units respectively? Well it comes down to the fact that you generally need to be employed to secure a mortgage and work towards owning a home. 
The latest labour force data from the ABS shows that Australia had 11.578 million employed persons as at June 2014.  With a 6.0% unemployment rate the total size of the workforce, or to put it another way the number of people with employment or actively looking for employment, is 12.320 million.  
For myriad reasons a proportion of the population is not actively working or looking for work at any given time.  As at June 2014 the employment participation rate was 64.7% meaning that for whatever reason there are an estimated 4.349 million people over 15 years of age that are not actively working or looking for work.
The 2011 Census reported that at that time there were 21.504 million Australian’s living across the six states and NT and ACT. At that time, 65.6% of Australian’s (or 14.1 million) lived in a capital city.  A slightly higher 67.4% of persons reported as being in the workforce (working or actively looking for work) lived in a capital city.  In fact, 58.2% of people in the workforce lived in Sydney, Melbourne, Brisbane or Perth.
If we think how this impacts lower income earners and their prospects of entering into home ownership it’s not simply a case that they can move to another city where housing is more affordable. 
Unfortunately in Australia, jobs, particularly well-paying jobs, are largely located in a handful of major capital cities or on mining sites in the middle of nowhere.  The reality of moving to another capital city or to a regional area where housing is cheaper is not a realistic prospect for many low income earners.
There are still opportunities to purchase lower priced homes across the capital cities however, these opportunities are becoming fewer. If you look at where these lower priced sales are occurring, for houses they are typically located on the outskirts of the city.  Houses on the outskirts of cities, particularly the major capital cities, are inherently cheaper because they are often less desirable than those in well-established suburbs closer to the city centre (although not always). Although housing is cheaper in these areas the cost of doing day-to-day tasks is more expensive. 
If you work in the city, the cost of public transport is higher and if you choose to drive you lose hours in traffic, not to mention the additional cost of fuel and road tolls. Local amenities such as shops, schools and health care tend to not be as abundant in outer suburbs as they are closer to the city centre so it will take residents of these areas longer to access these amenities too. 
Although housing may be more affordable within the outer suburbs, it won’t necessarily make it easier for some lower income earners to afford a mortgage when they factor in all the additional costs of living in that location.
Lower priced housing stock is also available within the unit market however, this too has its shortcomings.  There are becoming fewer lower priced units available in areas closer to city centres.  Unit prices are still generally much lower than that of houses although, most of the newer stock comes with a relatively high price tag these days.  Of course units are also much smaller than a house and you tend to get less (in terms of area) for your money.  While a unit may be practical when your single, a couple or have young children, they become less practical if/when the situation changes and the size of the family grows.  Units also don’t offer the same level of freedom as a house with limitations generally in place with regard to what you can and can’t do both within and to your unit.  Although when you own a home you have to pay for upkeep, in a unit complex you have to contribute strata levies each quarter the cost of which can at times be exorbitant.
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So what realistic option does the person on a lower income have? 
Of course housing should be cheaper on the outskirts of the city (and it is) but even still a lot of lower income earners are not in a position to purchase.  This is partly because although housing is cheaper a mortgage is still going to swallow up a sizeable chunk of their income not to mention the other costs associated with living on the outskirts of the city. 
The commonly recommended solution is to remove urban growth boundaries and cut fees and charges on new developments which would theoretically increase supply and therefore bring down the cost of housing.  But I wonder by how much would it really reduce the cost and would it be significant enough to allow lower income earners to purchase.
I think possibly not and here’s why.
It’s not simply a case that we can fix housing affordability by building more and more homes, if that was the case, lower income earners could just move to a more affordable city.  The issue is more to do with employment and specifically where the jobs are located. Even on the outskirts of the capital cities the cost of public transport and fuel will still eat up a sizeable chunk of lower income earners salaries.
If residents on the outskirts still have to travel to get to their jobs (which often they will) they will often encounter a number of hurdles.  Firstly public transport is often woefully insufficient in these areas.  Anyone who has travelled overseas will know that public transport in our larger capital cities is not of a particularly high standard. The other thing with public transport is that it caters much better to those people living closer to the city centre and transport upgrades often benefit inner city dwellers much more than it benefits those on the outskirts of the city, the ones that need it the most. 
Secondly, the road network also tends to be insufficient on the outskirts of the cities unable to cope with the growing population.  This is due to the fact that governments tend to put the onus of building the roads on the developers and will often not provide the major roads to a new housing area until such time as it is absolutely critical.  Developing the roads before the housing would make these areas much more attractive and accessible.
If we can’t provide sufficient public transport and roads to the housing areas on the outskirts of the city, the greatest assistance we can provide when developing these areas is to accompany this residential development with local jobs for these workers. Travelling to work does not become such an issue for low income earners on the outskirts of a capital city if they can find employment locally.  Not to mention it is imperative to bring amenities such as shops, schools and health care closer by. 
If this were to occur, public transport and investment in new major roads becomes not as vital as it is currently when there are so few employment opportunities locally.
If lower income earners aren’t lumped with the additional burdens of significant public transport, fuel and road toll costs to get to their employment then the burden of a mortgage whilst still difficult does not become a virtual impossibility.
So yes, affordable housing is becoming harder to find in our capital cities and yes, increasing supply of housing will help to improve the opportunities to purchase homes at a lower price.
However, local employment drivers and amenities I believe are just as important, especially seeing as time and time again we have seen insufficient investment in public transport and road infrastructure on the outskirts of the cities. Not to mention that the cost of utilising public transport is extremely restrictive. 
Alternatively we should forget pie in the sky proposals such as fast trains between Brisbane and Melbourne and improve the rail network locally.  Each of Sydney, Melbourne and Brisbane could use a more expansive rail networks which includes more stations, better linkages to suburbs on the outskirts and faster connections between nearby cities. 
Investing in improving links and train speeds to the Central Coast, Newcastle, Wollongong, the Blue Mountains and Bathurst from Sydney, to Geelong, Ballarat and Bendigo from Melbourne and to the Gold and Sunshine Coasts and Toowoomba from Brisbane would no doubt be a much more worthwhile investment.
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Lower income earners' hopes of owning a home have faded

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There is likely to be a continued variance in performances from city to city and region to region.
Much of the growth over the year has occurred in Sydney, Melbourne and Darwin however, more recently the figures being reported for Brisbane suggests that value growth is experiencing a moderate pick up.
Existing property owners and investors are the main drivers of the market currently spurred by the low mortgage rate environment.
From an investor’s perspective the best opportunity to enter the Sydney, Melbourne or Perth markets has likely passed, especially considering the strong value growth over the past year and the now falling rental yields. It will be interesting to see whether investors start to turn their attention away from these cities and towards higher yielding markets that are much earlier in their value growth phase such as Brisbane and Adelaide where value growth is now becoming more evident. They could also potentially start looking at other asset classes.
<img src="/images/2014/07/10/kush-july-11-one.jpg" alt="">
RP Data anticipates that affordability constraints will start to impact on value growth in Sydney and Melbourne throughout 2014 as a proportion of potential buyers continue to be squeezed out of the market as values move higher. We have already seen a slowdown in the rate of value growth across Perth and it seems peak growth has now probably passed in both Sydney and Melbourne as well. Although all price segments of the combined capital city market are shifting higher we are seeing the greatest strength in the broad middle segment and comparatively weaker growth across the more affordable segment.
<img src="/images/2014/07/10/kush-july-11-two.jpg" alt="">
Source: RP Data
Despite the signs that the housing and construction sector is picking up as mining investment slows, it does not mean that the economic changeover will be without its challenges.
Globally, the US economy appears to be picking up and the Chinese economy appears to be experiencing a soft landing in terms of its moderation in economic growth however; there are currently a number of concerns around the Chinese housing market. Even the Eurozone’s prospects appear to be improving.
Federal Treasury is now forecasting that the unemployment rate will peak at 6.5%t and they have cut their economic growth forecast for this year from 2.75% to 2.5%. The anticipated jump in the unemployment rate is a potential risk for the housing market. If home owners start to suffer widespread job losses or potential buyers become concerned about job security this will potentially result in an increase in arrears rates and would likely dampen housing market activity.
Of course, if interest rates were to increase this would likely extinguish some of the current housing market exuberance. The low consumer sentiment reading is also likely to have an impact on the housing market; a more nervous consumer will be less inclined to spend many hundreds of thousands of dollars on a home. Furthermore the high level of investment activity is a further potential pitfall for the market.
If value growth slows or potentially falls there is a risk that many of these investors could look to exit the market at the same time, potentially creating downwards pressure on home values. 
<img src="/images/2014/07/10/kush-july-11-three.jpg" alt="">
Source: RP Data
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The best time to buy in Sydney and Melbourne has passed

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Not long before the Australian Bureau of Statistics (ABS) released building approvals data for May 2014, the Reserve Bank Governor (RBA) Glenn Stevens completed a presentation in Hobart.
Within that presentation Glenn Stevens stated: “It would in my opinion be good, for a range of reasons, if it did persist for a while. If the next couple of years saw an unremarkable performance on prices, and construction staying at the higher levels that will clearly be reached over the coming year, it would be an outcome that would contribute to a balanced growth path for the economy and to housing more people at manageable cost.”
This was made in the knowledge that home values rose by 10.1% over the 20-13/14 financial year and following three consecutive monthly falls in dwelling approvals between February and April 2014.  Luckily the May data which was released last week showed a 9.9% rise over the month.  Dwelling approvals are now 14.3% higher year on year.
<img class="aligncenter size-full wp-image-3440" src="https://blog.rpdata.com/wp-content/uploads/2014/07/Chart-1.jpg" alt="Chart 1" width="500" height="181">
After three consecutive monthly falls in dwelling approvals it was looking as if the much vaunted rebound in housing construction was running out of puff (approval is the initial step before construction can commence).
Of course, we don’t want to get too carried away with a one month bounce but it was encouraging to see that the fall in dwelling approvals has, at least for the moment, not continued. Total dwelling approvals in May were 14.3% higher than a year ago with house approvals 14.0% higher and unit approvals 14.5% higher.
<img class="aligncenter size-full wp-image-3441" src="https://blog.rpdata.com/wp-content/uploads/2014/07/Chart-2.jpg" alt="Chart 2" width="500" height="180">
The data is inherently volatile on a month to month basis so I like to also note the annual number of dwelling approvals. Over the 12 months to May 2014, there were 191,088 total dwelling approvals, 107,291 of which were for houses and 83,799 which were for units. 
The annual number of dwelling approvals is at their highest level since there were 192,614 dwelling approvals over the 12 months to December 1994.  Let’s not understate this, the rebound in dwelling approvals is strong and much needed after years of ongoing insufficient supply additions. 
The challenge from here will be what proportion of these approvals actually end up moving to construction and then ultimately completion.
<img class="aligncenter size-full wp-image-3443" src="https://blog.rpdata.com/wp-content/uploads/2014/07/Chart-31.jpg" alt="Chart 3" width="500" height="180">
Focussing on the capital cities, it is encouraging that there has been a significant rise in dwelling approvals across these areas where supply issues are generally most dire. 
On a rolling annual basis, there were 141,845 capital city dwelling approvals over the 12 months to May 2014.  Of these approvals, 68,455 were for houses while 73,390 were for units.  Note that at a national level dwelling approvals for houses still outnumber units however units outnumber houses in the capital cities highlighting the direction that new development is heading in most of our capital cities.
The annual number of capital city house approvals as at May 2014 was 19.6% higher than over the corresponding 12 month period in 2013. Capital city house approvals are at their highest level since the 12 months to February 2011 when 69,524 houses were approved.  
Capital city unit approvals are 23.4% higher than they were a year earlier and are only slightly lower than their record high level of 73,835 unit approvals over the 12 months to March 2014.
<img class="aligncenter size-full wp-image-3444" src="https://blog.rpdata.com/wp-content/uploads/2014/07/Chart-4.jpg" alt="Chart 4" width="500" height="183">
Across individual capital cities the annual number of dwelling approvals is higher across each city except for Darwin. The greatest annual lift in dwelling approvals has been recorded in Brisbane and Sydney. Anyone that has visited either of these cities recently would have seen plenty of residential construction taking place and it seems that there is a significant additional pipeline of residential construction to come.
<img class="aligncenter size-full wp-image-3445" src="https://blog.rpdata.com/wp-content/uploads/2014/07/Chart-5.jpg" alt="Chart 5" width="500" height="180">
As you can see from the above chart, across each of the major capital cities there has been an upswing in dwelling approvals.  The most significant upswing has occurred in Sydney and Brisbane however, the number of approvals remains much higher in Sydney and Melbourne than in all other cities. 
The number of dwellings approved for construction is at an all-time high currently in Perth, is very close to its record high in Sydney and at its highest level since the 12 months to June 2004 in Brisbane.
<img class="aligncenter size-full wp-image-3447" src="https://blog.rpdata.com/wp-content/uploads/2014/07/Chart-61.jpg" alt="Chart 6" width="500" height="180">
We mentioned earlier about the shift towards unit approvals as opposed to house approvals which is much more prominent in capital cities than nationwide. 
The above chart highlights the proportion of dwelling approvals which are for units as opposed to houses over time.  As already noted over the 12 months to May 2014, 51.7% of all capital city dwelling approvals were for units.  In Sydney (69.4%), Melbourne (52.4%), Brisbane (57.2%), Darwin (58.6%) and Canberra (62.9%) a majority of approvals are for units rather than houses. 
In the remaining three cities 31.1% of approvals are for units in Adelaide, 23.9% in Perth and 13.6% in Hobart. I have little doubt that particularly in Perth we will see a growing proportion of approvals for units rather than houses over the coming years.
The May dwelling approvals data showed an encouraging rebound following three consecutive monthly falls.  Keep in mind that Glenn Stevens wants to see higher construction levels over the next few years and that will be the real challenge. 
If consumer sentiment continues to languish and if and when home value growth slows there will be much less certainty around the viability of new residential developments.  Maintaining high levels of new residential approvals (and construction) over the next few years will be no easy feat.
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Encouraging rebound in dwelling approvals, but how many will end up being constructed?

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The recent release of the May 2014 national housing credit data by the Reserve Bank (RBA) confirmed that outstanding housing credit continued to increase at a moderate pace compared with the historic trend.
However, with housing credit aggregates and household debt also starting to rise, it may raise some alarm bells with the Reserve Bank.
The RBA’s financial aggregate statistics details the amount lent by domestic financial institutions. The latest data to May 2014, shows that outstanding credit grew by 0.4% over the month and is 4.7% higher over the year. The annual increase was comprised of a 6.2% rise in housing credit, a 0.3% increase in other personal credit and a 2.7% increase in business credit. Clearly, housing credit continues to be the main driver of the overall expansion in credit.
<img src="/images/2014/07/04/kusher-july-4-one.gif" alt="">
A breakdown of housing credit data over the 12 months to May 2014 shows that owner occupier housing credit increased by 5.2% and investor housing credit increased by a greater 8.3%. This was the greatest annual rise in owner occupier credit since March 2012 and for investor credit, the rise is the largest since August 2010. Historically, the level of credit expansion is quite low where over the past 20 years, the average annual increase in owner occupier housing credit was recorded at 11.3% and investor credit has averaged 16.0%.
The annual change in owner occupier housing credit reached a recent low of 3.9% between January and March of 2013, which indicates that the recent rise has been quite strong.
<img src="/images/2014/07/04/kusher-july-4-two.gif" alt="">
Investment housing credit troughed at an annual increase of 4.8% in January 2012 and has since increased to 8.3% annual growth. Growth in investment lending has been very strong over the past 18 months and in-line with the growth in home values which has been recorded since mid-2012.
The vast majority of outstanding credit to financial institutions is for housing as opposed to other personal or business loans. As at May 2014, the RBA data shows a record high 60.6% of all credit was for housing, a record low 33.2% was to business and 6.2% was for other personal credit provisions.
With only so much money available to be lent by Australian financial institutions, they are showing a clear preference for mortgage lending. In fact, lending for mortgages has been the preferred option for banks consistently since April 2001, right as the housing market started to boom.
<img src="/images/2014/07/04/kusher-july-4-three.gif" alt="">
The preferential treatment by institutions for mortgage lending over businesses is likely due to the ongoing strong performance of mortgages. The confidence around this is based on no recent long-term mass declines in home values and mortgage arrears rates have remained low.
Furthermore, mortgagees have seen equity in their homes increase and used this to fund alternate investment and in some instances, fund the start-up of small businesses.
Each quarter the RBA publishes data on the ratio of household debt to disposable income.The latest data to March 2014 shows that the ratio of total debt is 149.9% which is its highest since September 2010. The ratio of housing debt was recorded at 135.8% which is its highest on record. With home values rising and credit growing households are taking on additional housing debt.
One would think that this is the most problematic development for the RBA. Household debt levels are already high (much higher than public debt) and although household savings has increased over recent years there has been no significant reduction in household debt levels and they are now rising.
<img src="/images/2014/07/04/kusher-july-4-four.gif" alt="">
With a greater number of people looking to purchase homes we are seeing housing credit once again escalating which has now flowed through to a rise in household debt.
We have no doubt that both RBA and APRA will be keeping a close eye on household and housing debt levels as growth in national home values continues. If debt levels continue to rise it is likely to be a potential cause for concern with households becoming more indebted at a time when interest rates are so low. When interest rates inevitably rise in the future, some households may find it harder to repay that debt.
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Housing credit continues to expand as housing debt climbs

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There are many measures of affordability in the marketplace, sadly I believe that many of these measures fail to accurately depict the affordability or otherwise of housing in Australia.  
The main reason being that housing affordability is an extremely complex issue and many factors drive the affordability of housing. In my future posts I am going to investigate some of these factors and tell you what you should really be asking yourself about affordability when purchasing a home.
Can I start by stating that simplistic means of comparing property prices between countries I believe are ineffective. 
Due to different tax regimes, standards of housing and attitudes to property and wealth accumulation there may be perfectly good reasons why a household is prepared to spend more on housing in Australia for example than they are in the United States.  I think common measures such as the median multiple (ratio of household income to property prices) are not necessarily a good way to measure affordability or otherwise, there are a lot more factors at play.
Interest rates
Interest rates are obviously an important component in determining housing affordability.  When interest rates are lower, interest repayments on home loans are lower and as a result ‘affording’ the repayments on a mortgage should be easier.  Of course, as we are seeing at the moment, lower mortgage rates often encourage higher property values. 
So while it’s true that lower interest rates make housing relatively more affordable, if values are rising and sales increase then it can somewhat off-set the affordability benefit of lower mortgage rates.
Furthermore, the typical home loan in Australia is 25 years and the vast majority of home loans are on a variable rate.  As a result, as the Reserve Bank adjusts monetary policy there is virtually an instant effect on household budgets and balance sheets.  For example, at the moment the standard variable mortgage rate sits at 5.95% however, over the past 10 years the variable mortgage rate has averaged 7.27%, over the last 20 years it has averaged 7.45% and over the past 25 years (the typical home loan length) it has averaged 8.47%. Over the past 25 years, standard variable mortgage rates have been as high as 17.0% and as low as 5.75%.
The point is that interest rates can vary greatly over 25 years and over the life of the loan the current interest rate is not a great means of measuring the cost of a mortgage over its lifetime.
Wages / Income
If you are going to take out a mortgage on a home (as most purchasers do) you are going to need an income and you are going to need some savings.  In Australia there are a number of measures of wages/income and it is difficult to know exactly which one is best to use to measure housing affordability.
The National Accounts measure the ‘Real net national disposable income – chain volume’.  This measure does have a number of shortcomings in that it is not an individual measure and that it includes items that one can’t really spend such as superannuation.  Additionally this data is only available from a national standpoint. 
The Australian Bureau of Statistics (ABS) publishes its wage price index each quarter however, it measures wages only and doesn’t measure income captured from other sources.  The Census is undertaken each five years and does report on the median weekly household income however, the shortcoming here is that it is only updated every five years. 
We also have the Household Income Survey from the ABS however it is only undertaken bi-annually and takes a fairly macro view of household incomes
Unfortunately all of these measures have significant shortcomings which need to be considered when looking at any housing affordability measure.
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Labour force / unemployment
Paying off a mortgage eats up a significant portion of a family’s wage.  Undoubtedly if home values weren’t so high and mortgages weren’t so large disposable incomes would be much greater.  Although labour force data or unemployment statistics need not necessarily be an input into any housing affordability measure they are a key consideration for someone looking to purchase. 
The threat of unemployment means that despite the fact housing may seem affordable it is less likely someone would purchase. Obviously if you are unemployed it is going to be difficult to purchase a home.
Another factor to consider is although measures of income show that over recent years wages and disposable income have increased, what they don’t take into account is how many more women are working nowadays.  Labour force data shows that in May 2014, 54.1% of the workforce was male and 45.9% was female, 30 years ago 62.3% was male and 37.6% was female.  Today, 35.5% of full-time workers are female compared to 28.9% 30 years ago. 
The point here is that although household incomes have increased, a big proportion of the increase is due to the structural change associated with a greater number of women in the workforce.  
The rising prevalence of dual income households means that whereas 20 to 30 years ago couples could afford mortgage repayments on a single wage, today they largely require dual incomes.
Home values / prices
Most measures of housing affordability look at median prices or median values. 
The important thing to remember here is that a median is just the middle value so there are just as many homes worth more and less than that figure.  In fact the median price looks only at the middle value of properties which have sold over a period.
This obviously has significant shortcomings because what is predominately selling could be at the affordable or expensive end of the market and this could bias the median one way or another.  Remember that typically only 5% to 7% of total housing stock transacts in a given year.
Another important consideration here is that a national median measure doesn’t really tell you very much at a localised level.  In Australia, 66% of residents live in a capital city with around 55% in Sydney, Melbourne, Brisbane or Perth. 
Quite simply many residents don’t have a choice but to live in a capital city so if you are trying to determine affordability in Melbourne, the cost of housing in Mildura is of no valuable comparison whatsoever.
Rental rates
If you don’t own a home or pay-off a mortgage you have to live elsewhere, for the most part non-homeowners rent.  The cost of renting is an important consideration when trying to determine housing affordability.  If rents are increasing but home values are flat or falling purchasing a home may start to look a more attractive prospect. 
Once again the challenge with a measure which compares rents to house price (or mortgage repayments) is that it is not a localised analysis.  For example for the cost of renting in Paddington in Sydney you may actually be able to pay off a mortgage in Guildford but to the renter is the opportunity cost of owning their own home and being further away from the city centre, harbour and the beaches worthwhile? 
Who knows but for anyone looking to purchase these are the sorts of questions they need to be asking themselves.
The other key consideration is that the ongoing costs associated with owning a home as opposed to renting are difficult to determine, but they are much more than renting.  As a renter, the ongoing costs generally include: the rent, the bond, electricity, gas (if applicable), cleaning (if you move rentals) and the cost of moving if/when you move. 
As an owner of a home the costs incurred include: the mortgage, electricity, gas, council rates, stamp duty when you purchase, ongoing maintenance of the property, strata fees (if you own a unit) and agent fees if/when you decide to move.  The ongoing costs associated with owning a home are much greater than the ongoing costs of renting.
Who does housing affordability affect most?
Housing affordability affects everyone.  The high cost of housing acts as a disincentive for people to move to more appropriate locations, discourages people from upsizing and downsizing and discourages movement intra or interstate for employment.  The group most affected by housing affordability however is those who don’t as yet own a home.
Again if we think about many of the measures of affordability used they look at typical or median prices values and compare to interest rates and typical wages.  The problem with this approach is that very few people are actually typical.  As a generalisation, most people that rent are younger, starting out their careers. 
There is a high likelihood that their wage is currently lower than the median (although there is a good chance it will increase as they are promoted or move jobs).  If their wage is below the typical wage then they should not be looking to buy the typical (or median house).
Of course there are plenty of renters that earn above average wages but choose not to purchase as well but when trying to tackle the affordability question I think many of the measures that we look at are far too simplistic, but hamstrung by the quality and granularity of income data. 
Housing affordability is an individual thing and none of the measures really tell the true story about how affordable or unaffordable housing in Australia is.  When determining whether you can afford to buy a home I think the most important things to consider are:
<ol>
<li>What are current mortgage rates and at what higher level would I not be able to repay my mortgage?</li>
<li>How secure is my job and what would happen if I was to lose my job for an extended period?</li>
<li>Over the next few years what is the realistic expectations for my wage, will it rise and by how much?</li>
<li>What impact would it have if I found a partner or lost a partner on my ability to repay the mortgage?</li>
<li>If I plan to have children, children cost a lot what impact would that have on my ability to repay the mortgage?</li>
<li>Compared to my current rent and associated costs, how much more is paying off a mortgage and the other day-to day costs of home ownership really going to be and can I afford this?</li>
<li>What am I willing to sacrifice in order to buy a home; lifestyle, location, overseas travel etc?  What is the opportunity cost of buying a home?</li>
</ol>
I am sure there are many more questions to ask when looking to purchase but I think as a start these questions are essential.  I say that the measures of affordability which are readily available should be taken with a grain of sale. 
It’s more important to ask yourself some tough questions about whether or not you can really afford to be a home owner.  If you have any doubt you really need to consider whether it is worth the risk or not.
For what it’s worth, I think that housing affordability is a significant issue for young Australians, particularly those within our capital city markets.  he major problem is that most Australian’s choose to build wealth through property and 23 years of unabated economic growth has on exacerbated this. 
The challenge now is how can you deliver affordable housing for younger Australians without bringing down the cost of existing housing which politically and economically would be detrimental to the overall health of the Australian economy.
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Forget affordability measures and ask yourself some tough questions

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With property buyer competition intensifying as result of more than 12 months of buoyant property market conditions, on average, houses took 80 days to sell while units were taking 75 days over 12 months to March 2014.
For the same period in 2013, houses took 94 days to sell and units took 88 days. Although the typical selling time for both houses and units has reduced, at a national level it remains quite elevated.
Aacross the individual capital cities the annual average time on market has generally fallen over the year.
<img src="/images/2014/06/12/kusher-june-12-one.jpg" alt="">
The cities to record the shortest time on market for houses were Perth at 54 days and Sydney at 59 days. In contrast, the cities to record the longest days on market were Hobart with 90 days and Darwin with 86 days. For units, Sydney at 49 and Perth 56 recorded the shortest days on market, while Hobart and Darwin shared the longest days on market at 96.
At a broader level, council areas where of the top 25 listed for houses, Bassendean in Perth had the shortest average number of days on the market over the year at 32 days. Across each of the council areas listed there has been a fall in the average number of days on the market over the past year.
Turning the focus to the unit market, the trends are similar to those found across houses. All of the areas with the shortest average days on market are within a capital city and all of them are within Sydney, Melbourne or Perth.
<img src="/images/2014/06/12/kusher-june-12-two.jpg" alt="">
Once again, the Perth council area of Bassendean recorded the shortest average number of days on market for units with 27 days; a significant drop from 74 days at the same time a year ago. Across the capital cities, 18 of the 25 areas listed were in Sydney with one Melbourne region listed and the remaining six regions located within Perth.
The fall in average time on market at a national level is a clear sign that the amount of sales is picking up and sellers are becoming more empowered at the time of negotiation.
If there is less scope for negotiation and discounting, you will typically find that a property sells quicker which is the scenario currently at play.
Today’s time-on-market data release also highlights the geographic dispersion of the stronger housing market conditions where in particular, capital cities are generally experiencing a faster rate of sale. This is reflected in the data which shows that selling conditions have been much stronger in Sydney, Melbourne and Perth.
With mortgage rates tipped to remain low for some time yet it is reasonable to expect that we are likely to see a further lowering of the average days on market. There is evidence which suggests peak capital growth conditions have passed in Sydney, Melbourne and Perth so in 12 months’ time the list of fastest selling council areas could look quite different as buyers broaden their horizons and look for opportunities outside of these centres.
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Where are homes selling the quickest?

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Housing finance data for April 2014 was <a href="/expert-insights/finance/first-home-buyers-fall-back-to-record-lows">released this week</a> by the Australian Bureau of Statistics (ABS). 
The headline figure for the number of owner occupier housing finance commitments was flat over the month however, dig a little deeper and there are some differing trends emerging.
<img class="aligncenter size-full wp-image-3337" src="https://blog.rpdata.com/wp-content/uploads/2014/06/Chart-1.jpg" alt="Chart 1">
As mentioned, the number of owner occupier housing finance commitments was flat over the month following on from a -0.8% fall in March. This data is split into commitments for refinance purposes and commitments for non-refinances (or new loans). 
Refinance commitments rose by 0.6% compared to a -0.3% fall in non-refinance commitments.  Non-refinance commitments fell over consecutive months and it was the first time this has happened since December 2012. 
Given the number is a count it is important to look at the trend and it is clear from the first chart that the number of owner occupier commitments, whether it be for non-refinances or refinances is beginning to flatten. 
Year-on-year, refinance commitments are 8.6% higher compared to a 5.7% rise in non-refinance commitments.
<img class="aligncenter size-full wp-image-3338" src="https://blog.rpdata.com/wp-content/uploads/2014/06/Chart-2.jpg" alt="Chart 2" width="500" height="179">
The number of owner occupier housing finance commitments for the construction of new dwellings and the purchase of new dwellings have shown a strong rise recently however, as the above chart shows there has been some recent weakness in commitments for the purchase of new dwellings.
The number of commitments for construction of new is almost three times greater than the number for purchase of new nevertheless, the recent weakness is certainly something to keep track of.
<img class="aligncenter size-full wp-image-3339" src="https://blog.rpdata.com/wp-content/uploads/2014/06/Chart-3.jpg" alt="Chart 3" width="500" height="182">
The data on the number of commitments is important however it is narrow in its scope given it does not include investors. 
From a banking perspective, the value of the funds they are lending is arguably more important than the number of loans written. The total value of housing finance commitments (which includes investor commitments) increased by 1.7% in April and increased by the same amount if you remove refinance commitments.
Over the month, owner occupier refinance commitments were 1.6% higher, owner occupier non-refinance commitments were 1.3% higher and investment loan commitments increased by 2.3%.  As the above chart shows, investment and owner occupier lending is at record high levels whereas non-refinance loan commitments are still -5.7% lower than their previous peak. 
In terms of the value of finance commitments all three segments continue to record a rise and are trending higher. 
Article continues on next page. Please click below.
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Year-on-year the total value of housing finance commitments are 20.4% higher with owner occupier refinances up 19.1%, owner occupier non-refinances up 13.4% and investment loans 29.8% higher.
<img class="aligncenter size-full wp-image-3340" src="https://blog.rpdata.com/wp-content/uploads/2014/06/Chart-4.jpg" alt="Chart 4" width="500" height="179">
It’s also important to look at the make-up of lending across owner occupiers and investment loans. 
Over the month of April, 43.0% of all lending was to owner occupiers for non-refinances, 39.4% was to investors and 17.6% was to owner occupiers for refinances. As the above chart shows the proportion of lending to investors is high on an historical basis. 
In fact investment lending is sitting at levels not seen since late 2003. It is clear from the data that there is significant demand for housing from investment currently. 
The big question of course is how sustainable is that demand given there was a sharp slowdown in this segment of the market shortly thereafter lending last reached similar heights.
<img class="aligncenter size-full wp-image-3342" src="https://blog.rpdata.com/wp-content/uploads/2014/06/Chart-5.jpg" alt="Chart 5" width="500" height="182">
It is interesting to pair this data with recently released quarterly data from the Australian Prudential Regulatory Authority (APRA) about Authorised Deposit-taking Institutions’ (ADIs) exposure to property.  The latest data showed that interest-only loans accounted for 39.4% of all loans over the quarter (a similar proportion to these investor figures). 
However, the data also suggested that loans with a loan to value ratio (LVR) of more than 90% may be getting harder to find with 13.5% of new loans over the quarter with an LVR of more than 90% which was the lowest proportion since September 2011.
<img class="aligncenter size-full wp-image-3341" src="https://blog.rpdata.com/wp-content/uploads/2014/06/Chart-6.jpg" alt="Chart 6" width="500" height="183">
Focussing on lending to first home buyers, there were 6,074 housing finance commitments to first home buyers in April 2014.  This figure was -7.3% lower over the month and -12.7% lower year-on-year. 
As a proportion of all owner occupier housing finance commitments, first home buyers accounted for an equal record low of just 12.3% of the commitments over the month.
<img class="aligncenter size-full wp-image-3343" src="https://blog.rpdata.com/wp-content/uploads/2014/06/Chart-7.jpg" alt="Chart 7" width="500" height="264">
The RP Data Mortgage Index (RMI) which is an index of mortgage events across RP Data’s proprietary platforms has a strong correlation with housing finance data and is a weekly index.  The RMI predicted a softening of activity some six weeks ago and is indicating a sharp rebound in the housing finance data once the May data is released.  Note that the RMI data is correlated strongly to the raw housing finance data not the seasonally adjusted figures which are referred to elsewhere throughout this post.
The data seems to suggest that the growth in the number of new owner occupier housing finance commitments is starting to, or already has, topped out. There is still plenty of activity in the owner occupier refinance and investment segments of the market.  Of course our chief concern remains the high level of investment activity in the market. 
Total returns from residential property have been strong over the past 12 to 18 months however, we believe that the peak level of capital growth has now passed and rental yields continue to fall. 
Although total returns are still strong they are likely to diminish from here and where will that leave these investors especially if they were simply chasing the short-term value appreciation which has been particularly prevalent in Sydney and Melbourne over the past year. 
The good news is that the higher risk, high LVR loans are reducing however, there are still a lot of instances in which mortgagees are only paying back the interest component of the mortgage.
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Owner-occupier housing finance commitments topping out

Malaysian developer <a href="https://www.apartments.com.au/developers/s-p-setia">SP Setia</a> is the latest to jump into St Leonards booming Transport Oriented Development precinct.

The developer, which has previously delivered Sapphire by the Gardens apartment development in Melbourne, identified the Atchison Street site in 2023. It filed a Scoping Report around 12 months ago, and now has revealed the designs for the new&nbsp;40-storey mixed-use tower.

The State Significant Development Application covers <a href="https://next-portal.urban.com.au/projects/14650/summary">20-22 Atchison Street</a>, a 1,374 sqm site positioned between St Leonards Station and the new Crows Nest Metro station.

Designed by <a href="https://www.apartments.com.au/architects/cox-architecture">COX Architecture</a>, the project would deliver 181 apartments, above a four-storey commercial podium, five basement levels, and new public domain works along Mitchell Street. The apartment mix comprises 35 one-bedroom apartments, 39 one-bedroom-plus-study apartments, 85 two-bedroom apartments, and 22 three-bedroom residences.

The proposal has been lodged as a shop-top housing development under the NSW Government’s TOD planning pathway, which allows increased density around key transport infrastructure. The site sits within the recently rezoned Crows Nest Accelerated TOD Precinct.

<img alt="First look: SP Setia targets St Leonards skyline with 40-storey TOD tower" data-entity-type="file" data-entity-uuid="b799673d-48e2-46b0-801a-0e33a9330100" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/atchinson%20site.png?VersionId=dPh0UfwfaHpbFL1R7H1cbZNbIW0CHbCC" />

SP Setia acquired the Atchison Street site as part of its continued expansion into the Australian apartment market. In comments made to City &amp; Country (The Edge Malaysia) in 2023, SP Setia President and CEO Datuk Choong Kai Wai described the acquisition as “a strategic move” aligned with the group’s post-pandemic market recovery strategy.

“Our target for this exceptional development is local and overseas buyers, including first-home buyers, downsizers and investors,” Choong said.

The tower has been designed as a slender vertical form rising from a mixed-use podium, with COX Architecture positioning the development as a response to the evolving St Leonards and Crows Nest skyline.

“The purpose of the project is to facilitate the delivery of high-quality housing at a strategically located site and deliver a built tower outcome that is consistent with the desired future character of St Leonards and aligns with the TOD controls,” the design report stated.

<img alt="First look: SP Setia targets St Leonards skyline with 40-storey TOD tower" data-entity-type="file" data-entity-uuid="b1a85eee-76f7-436c-a6da-73ba827b9b13" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/atchinson%20entry.png?VersionId=dA9jHGPMcm.dDbwk4QfxqWiY5bfh3UVt" />

The podium would incorporate retail uses fronting Atchison Street, commercial tenancies, landscaped communal areas, and pedestrian improvements along Mitchell Street. Vehicle access and loading would be consolidated via Atchison Lane.

Residents would have access to more than 665 sqm of communal indoor and outdoor spaces, while the development proposes 96 parking spaces across five basement levels.

The proposal also includes a commitment for 10 per cent of residential floor space to be allocated toward affordable housing through a monetary contribution.

COX said the tower form responds directly to the emerging high-density character of the precinct while seeking to maximise solar access, cross ventilation, and outlook from apartments.

<img alt="First look: SP Setia targets St Leonards skyline with 40-storey TOD tower" data-entity-type="file" data-entity-uuid="2163f85c-f63b-4be3-aafa-f8763976cec5" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Article%20Feature%20Image%20%28Grid%29_5.png?VersionId=WiAmtIKJ6.ZQ41EtYEQ1fol7AeorKBlL" />

“The building is orientated towards north,” the Apartment Design Guide compliance report noted, adding that the tower’s slim form was driven by the constrained inner-urban site dimensions.

The design also incorporates landscaped setbacks and communal open space at podium level, intended to soften the interface with surrounding streets and improve pedestrian amenity.

The project adds to a growing wave of redevelopment proposals reshaping St Leonards and Crows Nest following the opening of the Sydney Metro City line and the NSW Government’s push for higher-density housing around major transport nodes.

Last week Stockland filed plans just down the road. They want to build a <a href="https://www.apartments.com.au/new-apartments/601-pacific-highway-st-leonards-nsw-2065">52-storey tower on Pacific Highway</a>.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/first-look-stockland-plans-52-storey-538-apartment-st-leonards-tower">First look: Stockland plans 52-storey, 538-apartment St Leonards tower&nbsp;</a>

Joel Robinson

First look: SP Setia targets St Leonards skyline with 40-storey TOD tower

<a href="https://www.apartments.com.au/developers/urban-property-group">Urban Property Group</a> has revealed plans for a new mixed-use tower at 10 Dangar Street, Wickham, advancing a proposal that would reshape the southern gateway to Newcastle’s city centre with one of the city’s tallest residential buildings.

The State Significant Development proposal, now on exhibition, seeks approval for a <a href="https://www.apartments.com.au/new-apartments/bowline-10-dangar-street-wickham-nsw-2293">43-storey tower</a> immediately adjacent to the Newcastle Interchange. The project would deliver around 200 apartments, including 42 affordable housing dwellings, alongside 99 co-living units, a 171-room hotel, retail space, and new public domain integrated through the site.

The scheme marks a significant escalation of plans previously approved for the site. Urban Property Group took over the prominent 2,904 sqm parcel, where excavation and demolition had already commenced under an earlier consent for a 14-storey mixed-use development.

<img alt="First look: Urban Property Group unveils Newcastle’s next supertower at Wickham interchange" data-entity-type="file" data-entity-uuid="58a96dd9-407f-4d20-86b4-94e4bfeef74b" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/wickham%20podium.png?VersionId=LGlf08pdFGAZDzvx_CXC4XakHNZRuEE0" />

Designed by <a href="https://www.apartments.com.au/architects/sjb-architects">SJB</a>, the tower has been conceived as a landmark transit-oriented development anchored to the Newcastle Interchange precinct. The proposal includes 245 build-to-sell apartments across a mix of one, two, and three-bedroom residences, as well as two penthouses. Fifteen apartments and one operational unit are earmarked for NDIS housing. The co-living component would add a further 99 units, while the podium would accommodate retail uses and hotel facilities.

SJB said the site presents “a valuable opportunity to anchor the precinct by setting the standard for design, active ground planes and character at the key southern gateway.”

The architecture responds directly to the site’s position beside major transport infrastructure and within one of Newcastle’s fastest-evolving urban renewal precincts. The tower form sits above a sculpted podium designed to frame new public spaces, including a through-site pedestrian link connecting Station Street to Hannell Street, landscaped plazas, and activated retail edges.

<img alt="First look: Urban Property Group unveils Newcastle’s next supertower at Wickham interchange" data-entity-type="file" data-entity-uuid="a7bd6ff0-f7db-4ce8-a6dc-ea56e72c6149" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/wickham%20lanne.png?VersionId=xzf39VADyhj7zBQY2I9fx9vI62u2tuSb" />

The design report describes the project as part of the broader transition of Wickham into “a vibrant, high-quality mixed-use urban precinct” that leverages proximity to the station, open space, and regional connectivity.

A detailed public art strategy has also been prepared for the development. The strategy positions the project as “a transit-oriented development of state significance at the gateway to Newcastle’s city centre” and outlines a series of integrated artworks responding to Newcastle’s industrial and transport heritage.

Creative Road’s curatorial framework for the project, titled Unveil, draws on “stratified surfaces, carved volumes, and light-filled apertures” while referencing Newcastle’s transformation from an industrial city into a contemporary education and technology hub.

<img alt="First look: Urban Property Group unveils Newcastle’s next supertower at Wickham interchange" data-entity-type="file" data-entity-uuid="77a882bb-14b1-4d28-99ff-9438e39508c0" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/wickham%20site.png?VersionId=cevgo_vN0eKPK78P8YcEu3mKPLkpFqE7" />

The proposal is being advanced through the NSW Housing Delivery Authority pathway after being declared State Significant Development in June 2025. The accompanying scoping report states the development aims to “maximise the site’s proximity to the Newcastle Interchange by delivering transit-oriented development” while increasing housing supply and affordable housing provision within the Newcastle LGA.

Urban Property Group’s plans align with the long-term strategic vision established under the Wickham Master Plan, which identified the interchange precinct as suitable for substantial uplift in height and density. The current proposal would significantly intensify that vision, positioning the tower among the tallest developments proposed for Newcastle.

The site sits immediately north of the Newcastle Interchange, bounded by Dangar Street, Hannell Street, and Charles Street. It is surrounded by a rapidly growing cluster of residential towers and mixed-use projects that have emerged following the completion of the light rail and transport interchange.

First look: Urban Property Group unveils Newcastle’s latest tower at Wickham interchange

Bottega House has completed settlement of a landmark riverfront site in Macquarie Street, St Lucia, representing its first major Brisbane development.&nbsp;

Positioned on the banks of the Brisbane River, the <a href="https://www.apartments.com.au/new-apartments/180-macquarie-street-st-lucia-qld-4067">premium site at 180 Macquarie Street</a> features uninterrupted river frontage in one of Brisbane’s most tightly held residential precincts.&nbsp;

The proposed development, currently under assessment with Brisbane City Council, has been designed by <a href="https://www.apartments.com.au/architects/plus-studio">Plus Studio</a> with interiors by <a href="https://www.apartments.com.au/interior-designers/mim-design">Mim Design</a> and will deliver a boutique collection of premium residences positioned specifically for owner occupiers and downsizers.&nbsp;

The residences are set to redefine luxury apartment living in the area, with a focus on architectural quality, refined finishes, landscape integration and elevated amenities including curated wellness facilities, resort-style pools and recreation spaces rarely seen in the local market.&nbsp;

Exclusive sales for the project will be led by Keenan &amp; Byrne, ahead of an anticipated launch later this year.&nbsp;

Bottega House Managing Director Nick Malloch said the project reflects the group’s ambition to deliver a highly curated residential offering within one of Brisbane’s most tightly held precincts.&nbsp;

“This is an incredibly rare riverfront opportunity and one we have approached with a long-term perspective,” Malloch said.&nbsp;

“Our vision from the outset was to create a boutique collection of residences that feel more like private homes than traditional apartments, with generous proportions, refined finishes and exceptional amenity throughout."

Malloch says there is a&nbsp;lack of premium owner-occupier stock of this quality in the market, particularly for downsizers wanting space, privacy and a true lifestyle offering without compromise.&nbsp;

"Demand is expected to be strong given the scarcity of premium riverfront opportunities of this nature within Brisbane’s inner-west."&nbsp;

Bottega House secures landmark riverfront site in St Lucia 

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The arrival of the first piling rig officially marks the commencement of construction at SIERA’s new beachside apartment development, Exhale, in Northcliffe.

<a href="https://www.apartments.com.au/new-apartments/exhale-surfers-paradise-8-enderley-avenue-surfers-paradise-qld-4217">Exhale</a>, a glass-encased tower featuring 54 large-scale apartments at 8 Enderley Avenue, is SIERA’s third Gold Coast development. It follows the recently completed PIPIS Bilinga beachfront project, which achieved suburb-record prices, and the soon-to-be-completed Chevron Island development, Tapestry.

[smartcode_project:default project_id=112661 project_image_fid=359603]

<a href="https://www.apartments.com.au/developers/siera">SIERA</a> Founder and Managing Director Brent Thompson said the arrival of the piling rig represented a significant milestone for the development, which is scheduled for completion in late 2028.

Over the next month, around 260 piles are expected to be installed as work progresses on the basement structure. The building is anticipated to rise above ground level early next year, before unveiling its sculptural glass curtain wall, developed in collaboration with specialist façade engineers.

“The façade was designed to maximise panoramic coastal views while creating a distinctive architectural identity,” Thompson said.

[smartcode_project:default project_id=112661 project_image_fid=355935]

Designed by BDA Architecture, Exhale will comprise just 54 two- and three-bedroom residences across 26 levels, a level of low-density living rarely delivered in this beachside pocket between Surfers Paradise and Broadbeach.

The project has been conceived as a resident-only building, with no short-stay accommodation permitted. SIERA says the model is intended to appeal to long-term owner-occupiers rather than transient holiday demand.

[smartcode_project:default project_id=112661 project_image_fid=361052]

Residences have been designed with large-format layouts and expansive glazing, with most apartments featuring more than 30 metres of glass frontage to maximise natural light and ocean views.

The amenity offering spans two levels and centres on wellness and lifestyle, including a heated magnesium pool, sauna, yoga and Pilates studio, gymnasium, private dining facilities, cinema lounge, and dedicated surfcraft storage.

[smartcode_project:default project_id=112661 project_image_fid=359607]

More than half of the apartments have already sold. SIERA has also opened a sales gallery for Exhale at its Chevron Island commercial premises, near its Tapestry tower and the site of its second Chevron Island apartment development, which is slated to launch in early 2027.
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SIERA kicks off construction at Northcliffe tower Exhale

Local Little Bay residents, along with buyers from premium postcodes across Sydney’s affluent Eastern Suburbs, have dominated purchases in developer-builder Urban Property Group’s first Eastern Suburbs apartment development, <a href="https://www.apartments.com.au/new-apartments/este-little-bay-jennifer-street-little-bay-nsw-2036">ESTE Little Bay</a>.

The $250 million coastal project, one of the first new developments in the area in several years, has proven particularly popular with downsizers, especially those from Coogee and Bondi. One Double Bay downsizer paid $4.7 million for a four-bedroom penthouse, setting a new local apartment price record in the process.

Buyers have been attracted to the combination of coastal tranquillity, premium design and amenity-rich neighbourhood living. The walkable village setting, along with proximity to three of Sydney’s leading golf courses, New South Wales Golf Club, St Michael’s Golf Club and The Coast Golf Club, has also been a key drawcard.

[smartcode_project:default project_id=112343 project_image_fid=352689]

Built across two low-rise buildings designed by <a href="https://www.apartments.com.au/architects/hill-thalis-architecture-urban-projects-pty-ltd">Hill Thalis</a> and set along a lush, landscaped green spine, designed by leading landscape architect <a href="https://www.apartments.com.au/landscape-architect/arcadia-landscape-architecture">Arcadia</a>, ESTE Little Bay offers a collection of one, two, three and four-bedroom residences with interiors by Richards Stanisich.

<a href="https://www.apartments.com.au/developers/urban-property-group">Urban Property Group</a> Sales Director, Tom McIvor said the response to ESTE has been "nothing short of extraordinary."

“Buyers have been quick to recognise ESTE as a rare opportunity to invest in a coastal sanctuary that offers both seclusion and connectivity to the heart of Sydney,” McIvor said.

[smartcode_project:default project_id=112343 project_image_fid=352687]

<a href="https://www.apartments.com.au/project-marketer/srm-residential">SRM Residential</a> Senior Director, <a href="https://www.apartments.com.au/project-marketer/srm-residential">Clayton Ross</a> said the local market has responded incredibly well, driven by ESTE’s exceptional location and the rarity it offers.

“We’ve seen strong interest from a variety of buyer groups, all of whom are drawn to the exclusivity and quality of the build and construction by the 4.5-star iCIRT-rated builder / developer, Urban Property Group. There’s truly nothing else like it along Sydney’s coastline.”

[smartcode_project:default project_id=112343 project_image_fid=352690]

The project also includes robust buyer protections, including Resilience Insurance’s Latent Defects Insurance, providing 10 years of structural cover, and an independent iCIRT-rating of the developer.

“The iCIRT-rating adds another layer of confidence,” Ross added. “Buyers see it as a safeguard for their investment and their lifestyle.” A highlight of ESTE’s offering is its exclusive wellness amenities, including a heated rooftop infinity pool and outdoor heated spa, a state-of-the-art Technogym fitness centre, and a sauna.

<a href="https://www.apartments.com.au/new-apartments/este-little-bay-jennifer-street-little-bay-nsw-2036">ESTE Little Bay</a> is topped out and is on track to complete towards the end of 2026, with residents moving in before Christmas.

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Cameron Kusher

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