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Anyone in who has searched though one of the online real estate websites recently, will understand the frustration experienced when price quotes are missing – and judging from Australia’s real estate obsession, it’s no meaningless amount. The REA group alone claim to get “8.8 million unique visitors each month”.
Putting a price on real estate, particularly with homes offered as private treaty, is not difficult.
Ideally, an assessment of the property is undertaken by the sales agent – one familiar with market sales in the immediate locality – and in conjunction with the vendor, a price is set that produces a happy balance between both vendor expectation and local comparable sales.
If interest is lagging in the two weeks following, the agent can negotiate with the vendor to reduce the range.
If sales enquiry is healthy – or an offer in excess of the range is achieved and subsequently rejected – the agent has the ability and ethical responsibility (in conjunction with their vendor) to change the quoted range to reflect the heightened level of interest.
For a proportion of agents acting within their “reasonable” duty of service, this still is the norm.
However, now it seems every second advertisement you click upon, whether auction or private treaty has “contact agent” or a similar term listed underneath the subheading “price”.
An enquiry then produces a roundabout of guessing games with somewhat wishy-washy lines totted out, such as “it’s too early to tell”.
In other words, the agent is indicating he has no idea where to place his price quote, because Joe Blogs buyer hasn’t yet walked through and in some occurrence of pure fiction, stopped to tell the agent exactly what he’s prepared to offer.
Whilst we all agree –in a free market - real estate can only be valued on what a willing buyer is prepared to pay; this is precisely why real estate agents appraise a property against recent comparable market sales in the first place.
When combined with good local knowledge, a market appraisal (not to be confused with a valuation,) will give the agent a very good indication of buyer demand – at least to the degree of being able to publish a negotiable price range that falls in line with vendor expectation at the outset.
I should pre-empt before going further that a proportion of agents I speak to will give me a realistic idea of vendor expectation upon enquiry – however, after years of complaints within the industry regarding those who still choose to lowball their ranges, or quote using a ‘plus’ price, (which in today’s terms, can mean anything from 5-30%) – there continues to be an overall lack of transparency within the sector, allowing a number of agencies (particularly when advertising for auction) to continue selling buyers “false hope” with no fear of reprimand.
To give an example, I recently attended an auction in the Balwyn High School zone.  The property was quoted at $700,000 plus, and later revised to $750,000 plus in the final week of the campaign.
A call to the agent indicated vendor expectation was “very reasonable,” they “hoped” to get over $800,000 I was told, but “who knows?” 
The comparable data told a different story.  A price in excess of $850,000 should have been expected.  This selling agent – (an expert in the area) – would have known this, and the auction merely confirmed it.
The opening bid was $800,000 - $50,000 above the price quote. 
The property did not reach its reserve until $900,000 - $150,000 above the price quote. 
With competition from seven bidders, it finally sold for $1,011,000 – but not before a neighbour I’d been casually chatting to, leaned across and revealed the ‘wish’ price, when she whispered: “I know the vendor, and she wants a million.”
It’s time we valued the ethical side of our sales industry with a little more seriousness than pricing an item on e-bay – with a “quote ‘em low, watch ‘em go” mantra.
The continual problem with different methods of quoting – or lack thereof – runs to the very base of mistrust most buyers have against the real estate industry as a whole - and it’s a brush that tars us all.
<blockquote>
It’s time vendors were required to take shared responsibility with the agency for their own paid advertising campaigns and ensured their reserves are published at the outset.
</blockquote>
Even in a buoyant market, recent data will give a good pinpoint of expectation for the agent to advise their vendor’s of an appropriate reserve at the outset – should market forces take over once the property has reached that reserve, so be it – it doesn’t change what should be a simple exercise.
It seems silly to point out the obvious, but no buyer likes to play guessing games when it comes to putting a price on an advertised listing – and neither should they have to.
Everyone understands real estate is a negotiated asset, however, the verbal game playing that now surrounds the sales industry is often laughable – ranging from “we don’t know yet” to “properties in the area are selling in the $400,000 and $500,000 range” – information a simple internet search could reveal.
When an enquiry is made regarding price, the one bit of information buyers require, is an accurate ‘ball park’ indication of vendor expectation. 
Whether it’s too high, or at a reasonable level for market demand doesn’t matter – the vendor is signing the contract and therefore interested buyers need evaluate if it falls in line with their own budget constraints.
As for an assessment of value - if we were operating in an ideal world, buyers would ignore price quotes altogether and do their own research to establish market value, prior to spending hundreds on a pest and building inspections or solicitor fees chasing an unobtainable dream. However, despite recent improvements, closely comparable sales data is not always readily available.  In Victoria, many are still listed with undisclosed prices.  
Computer-generated “estimates,” are just that - and more often than not, hopelessly inaccurate at providing the depth of information buyers require for effective negotiation.
Suburb reports are equally unhelpful, and while median data will give a clue of the dollars the majority market is spending, they are no help when evaluating individual property prices.
Using a buyer agent who has access to such information is all well and good – however, agents should not have a monopoly on data, and it’s reasonable to suggest buyers deserve a “hint” of vendor expectation by way of an accurate price quote before wasting time and money chasing a dream.
A handful of agencies dealing with the more volatile luxury end of the market, in which interest is discretionary, understandably choose to sell via ‘expressions of interest’. However, the decision to drop the quoted range all together, from a large percentage of real estate advertisements seems, in a good number of cases, to have been employed as “self-protection” from accusations of “underquoting” – a policy designed to protect the sales agent – and not one that’s necessarily in the best interests of their client.
Vendor expectation can often be inflated.  It’s made worst by the commission-based competition between real estate agents and their respective agencies – which can promote the need to “buy” a listing through selling false hope, or risk missing out to a competitor who promises they can achieve more.
Quoting low ‘legally’ is not difficult. In Victoria – which has fallen under more scrutiny that any other state - if the vendor does not disclose the reserve on the sales authority when assigning their listing to an agent, (which is the general practice and advised by most) the quote does not need to reflect vendor expectation.
Instead, an agent must provide a written estimate of market value, which if a range, should be no more than a 10%.  This range is theoretically based on comparable data, but finding near by results to establish a lower price is not difficult - should that be the intention.
For example, in the story I highlighted above – comparables on nearby streets outside the schools catchment area would have placed the listing closer to the quoted range.
Similar applies within the suburb - if you’re not familiar with the good and bad streets, which attract different levels of demand, the price differences can be stark.
Albeit only by quoting below the agents written estimate of market value on the authority is officially “underquoting”. Therefore, under current legislation, the written estimate does not necessarily need to reflect vendor expectation.
It may not be admitted as such, but when agents list a property it is common practice to encourage the vendor to withhold their reserve price. This enables a conservative estimate of value – as either a verbal or published quote range – to glean as much buyer enquiry as possible.
Once again I stress, that each agent has different ethics. I am talking generally across the industry – and unfortunately, there is enough evidence of the above practices to pollute an overall impression of the whole.
Furthermore, if one agent quotes low, and another in the same suburb quotes at a level more reflective of reality – guess which listing gathers the greatest enquiry? A catch- 22 for agents working to turn over business, in a very competitive commission based sector.
The only time an agent is required to adjust the range higher, is if a written offer in excess of the published figure is received. However, what typically happens in this scenario, is the number – (should there be one) – is removed altogether.
The above process of ‘quoting low,’ is sold to the vendor via an explanation of the “buyer pyramid” – it works a little like step quoting – get the lower priced bidders to build momentum during the auction, to fuel those bidding with healthier bank accounts to step in at the end.
In this scenario, during which emotions are strong, buyers tend to bid to win, rather than bid to buy. In a heated market, rational thinking is generally not employed, especially when competition is fierce and ‘fear of missing out’ ensues.
Without the lower budget bidders, auctions can pull up short lacking the usual frenzy that has - in our boom eras of growth - significantly contributed to pushing medians to unsustainable levels and exacerbating upward swings in the market cycle.
Furthermore, any gaping hole between the quote and reserve can be waved off with the excuse that the vendor ‘changed their mind’ – or ‘upped’ expectation.  Hence why it is so easy to get away with purposefully placing the price range below the level at which the vendor will sell – and when that quote is verbal, it’s arguably easier still.
To suggest that a property owner’s expectations fluctuate to such an extent so as to not be represented in the price quote is highly questionable. Having worked as a sales agent in previous years, I can categorically say there was never a time where I didn’t know my vendor’s approximate reserve well enough in advance of the auction, to place a reasonable quoted range on a listing from day one.
Furthermore, vendors are not without blame. Assuming the price quote is a estimate based on “recent comparable sales” and the vendor isn’t in the dark when it comes to the price quoted on his or her vendor-paid advertising, why would he or she agree to list the property and quote at a level they would not be willing to sell for in the first place?
In such instances, I would suggest this is a pretty good example of what should officially be termed “underquoting” – conservative at best, deceitful at worst.
There are many solutions to this puzzle, which would not be difficult to legislate. 
Some states have suggested banning quotes altogether – either verbal or otherwise - but this does not take us closer to an effective solution for buyers. Additionally, it makes it very hard for a good sales agent to interact with buyers to enable them to modify their vendor’s expectation as the campaign progresses.
With this in mind, I would suggest, it’s time vendors were required to take shared responsibility (with the agency) for their own paid advertising campaigns and ensured their reserves – or ranges in which they’re prepared to negotiate within – are published at the outset and provide an accurate indication of a price they are willing to consider.
If minds are changed, quotes should be changed, but leaving such a large question mark for buyers, who are increasingly frustrated at having their time, money, and energy wasted, is damaging for all concerned. 
Follow Catherine on <a href="https://twitter.com/CCASHMORE_BUYER" target="_blank">Twitter</a> or via her <a href="https://catherinecashmore.wordpress.com/" target="_blank">Blog</a>.
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catherinecashmore-6LXia3pPQj

Legally underquoting?  How agents get away with it  

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The protests that washed across major cities and towns a few days ago covered a wide variety of issues, yet underlying them all is dissatisfaction with both sides of politics and the frustration in the community that voices are going unheard.
We’ve been used to seeing similar demonstrations across the austerity-ridden countries of Europe and the USA and political clashes such as those in Russia and most recently Ukraine.
Yet since the fall out of the last economic crisis, a concentrated outcry of public anger has penetrated democratic society and it’s not limited by cause or segregated by age and status, but generated by the incredible impact of social media enabling a wide array of ordinary citizens to vent their concerns outside of sporadic government polls and the headline sensationalism of mainstream media.   
The natural limitation of government is the inability to please all.  In a democratic society, they’re elected to enact on the policies campaigned upon – asked to lead rather than follow and ensure citizens achieve a platform that assists in advancing equitable outcomes. 
Albeit, it’s a brave government that turns its head away from large vocal demonstrations, especially in an age where - through the connectedness of social media - they can be arranged at the drop of the hat, bypassing the usual bureaucratic process of writing to a local MP to highlight community disquiets, or publishing a letter in the local paper.
<blockquote>
The recent national protests were about community and social justice, of which housing forms an indivisible part.
</blockquote>
You can argue back and forth about the issues surrounding this latest public protest. Express outrage at the inconvenience incurred to the daily commute. Or even question its relevance considering we have not long elected the Coalition into power.  But when a wide makeup of individuals, from all sides of the political spectrum, takes to the streets – not on one agenda alone - but an array of disgruntlements.  It is no longer merely representative of a minority that sits on the fringes of society; it signifies a clear message of distrust - a potentially destabilising force.
Cone of silence
Tony Abbot’s government made it clear upon election, that they intended to control the flow of information available for public discussion. 
It wasn’t only displayed in the media restriction detailing daily boat arrivals, but in a large array of research undertaken by the previous administration, which has now been firmly locked into ‘archive’ status.
This would include two I’ve mentioned in recent columns – the National Housing Supply Council, and the year long study that formed the white paper into the “Asian Century”, which, outside of general criticism, remains a useful tool of reference for Australia’s future demographic makeup.
So you could say that listening to the public voice isn’t the current government’s priority – but then, neither was it for the last.
Little if anything came from those reports.  The were good on content, but lacking in <a href="/expert-insights/buying/the-real-question-the-senate-inquiry-must-ask-will-the-government-allow-land-prices-to-decrease">action</a> and much like the “2020” summit in 2008, the results can be summed up neatly by words from biographer, Nicholas Stuart in <a href="https://scribepublications.com.au/books-authors/title/rudd-s-way/" target="_blank">Rudd’s Way</a> – November 2007 – June 2010:
“His rhetoric inspired and enthused voters. And yet .... and yet .... nothing happened.” 
“Nothing happened” – because governments too often bend the knee to those with the ability to influence political leadership and public opinion, rather than acting democratically for all. 
Housing policy alone aptly demonstrates this. 
<ul>
<li>The tax and transfer system values <a href="https://grattan.edu.au/publications/reports/post/renovating-housing-policy/" target="_blank">owners over renters</a>;</li>
<li>Encourages and rewards those who use the land as a speculative investment for personal gain;</li>
<li>Advantages giant corporations over independent businesses;</li>
<li>Widens the ‘<a href="/expert-insights/buying/the-widening-inequality-and-economic-growth-gap-what-does-this-mean-for-housing">wealth</a>’ gap between rich and poor;</li>
<li>And hampers timely development of affordable housing; (to name only a few).</li>
</ul>
When concerns are raised, our leaders spend a few wasted millions on comprehensive enquiries to ask ‘why?’- like some clueless high school student.
“What do we want?”
These protests, whilst not directly about land prices, were about community and social justice, of which housing forms an indivisible part.
The list includes education – and as I’ve pointed out previously, high land prices directly contribute to what’s assessed to be the most <a href="/expert-insights/buying/the-tale-of-one-auction-what-it-really-says-about-australias-welfare-state">segregated schooling</a> system out of all members of the OECD countries. 
Some of the highest land values are found in the best government funded school catchment bands, and as an auctioneer proclaimed during his pre-amble in the McKinnon High School zone last week:
“There is no ceiling for house prices in this area!”  
A bullish spruik if ever you heard one - but not far from truth.  
Record prices continue to be regularly broken, affluent buyers continue to pay a premium.  Yet the price is effectively ‘free’, because as the zone’s future vendor’s ‘speculate’ – if they hold onto the family home long enough - they are likely to receive a windfall in unearned capital gains. 
Social justice? Hardly.
Unwonted robbery?  
The community produces the gains through the tax-funded facilities. Whilst market forces drive prices higher, the unearned profit does not flow back to maintaining or upgrading those services – which is where it arguably belongs. 
Instead it is privately capitalize, soaked into what is an irreplaceable, illiquid and unproductive asset, thereby giving free leave for mounting property prices to continue, which, under the current system, grants a ‘tax free’ unearned reward to the owner occupier upon sale.
The sell-off of public services was also highlighted.  This too can also be associated with high land values, which have dictated what is assessed to be the more profitable offloading of the Millers Point public housing estate, rather than retaining its use for long standing residents, which, by definition, drives social polarization and housing inequality. 
It seems in the land of a ‘fair go,’ only the affluent are allowed to advantage from a Sydney Harbor view.
Are they listening?
Yet the indicators government uses to measure their performance whilst in power are meaningless to protesters, and in many respects, a 21st century economy.
They are no measure of happiness, or signal the worrying rise of mental illnesses such as depression.
Only by hearing community voices, gives a clue to that.
GDP – the total value of all products and services bought and sold, a basic measure of money changing hands, does not distinguish between;
<ul>
<li>Productive or destructive activities;</li>
<li>Show who’s getting the lion’s share of wage increases; Or</li>
<li>Assess where those increases are being invested (Which considering housing (land) is currently estimated to be 300% of Australia’s GDP, gives some indication).</li>
</ul>
Equally it gives no clue to the foundations of societal health – such as environmental concerns, access to education, or wealth inequality. 
Yet these are the issues community wants to address – because these are the barometers that directly impact our quality of living.
Whilst GDP is an excellent measure of the amount of arguably unneeded ‘stuff’ changing hands, it’s also not up to the task of adequately measuring intellectual property, innovation and invention for example – such as the creation of a free app. 
It may be concerned with the health of the economy, but as for the well-being of our 21st century community – it’s simply not up to the task.
Equally, unemployment figures are based on theoretical estimates, formulated by way of an extensive ABS survey, which aims to correlate the percentage of the labor force not actively employed, underemployed, or ‘participating.’ 
They are rolled out monthly, with the widely held ‘text book’ assumption (known as <a href="https://en.wikipedia.org/wiki/NAIRU" target="_blank">NAIRU</a>) that, regardless of how many actually want to work, should government pro actively attempt to lower the rate of unemployment below the desired level of “full employment” - which in Australia, is assessed to be and ‘unemployment rate’ of roughly 5% - it would unwontedly induce inflation and destroy price stability. 
A purported ‘fact’ that offers no comfort to those living on the poverty line of job seekers allowance.
This is also largely due to our flawed system of taxation – which places a levy on productivity (such as income and payroll taxes), unwontedly impeding the supply of goods and services, which in turn raises prices, feeding inflation and increasing the unemployment rate arguably required to lower wages sufficiently to stabilize inflation.
If we instead moved toward a system – and one, which was, at least in part, advocated by the Henry Tax review, and not withstanding, numerous other submissions from community advocates such as <a href="https://www.prosper.org.au/2014/02/27/the-senate-housing-affordability-inquiry-prospers-submission/" target="_blank">Prosper Australia</a>, or the <a href="https://blog.lvrg.org.au/" target="_blank">Land Values Research Group</a> to various senate enquiries over the years, and taxed the unearned gains from land rather than the earned gains from productivity.
It would (as has been proven <a href="/expert-insights/buying/is-a-land-value-tax-the-solution-to-our-housing-affordability-problem">historically</a>) influence:
<ul>
<li>A reduction of social polarization – and therefore inequality;</li>
<li>Remove the needed ‘sell off’ of public services due to high land values;</li>
<li>Boost productive investment, assisting the job market and advancing competitiveness for small business;</li>
<li>Reduce the speculative element that drives land prices ever higher;</li>
<li>Provide a steady base of revenue to invest in public services as well as affordable housing, and;</li>
<li>Ensure infrastructure is built for need – full utilization of land encouraged – and land banking reduced.</li>
</ul>
Productivity paradox
In light of all the above - it is remarkable that back in the 60s and 70s, discussion in the university lecture halls was centred on the ‘productivity paradox’ - correctly assuming it only a matter of time before all mankind’s basic needs could be largely fulfilled by robots.
Economists were deliberating what we’d do with all our leisure time when a full working week was no longer necessary!   
A stark change from the current mode of discussion, which is consumed with how long past the age of 65, individuals will need to work in order to retire mortgage free, with enough left in the pot to afford the basic necessities of life, which in most cases, is inadequately funded by superannuation alone. 
If it were possible to send the dog to work, we’d have already done so.
Community
Indeed our economy is not founded on the pillars of community and social justice, of which the protests are so concerned.
As admirable as numerous recommendations made to various senate inquiries into issues of inequality, affordability, finance, and environmental concerns have been, nothing has changed, because we have a lopsided economy, built on a $5.02 trillion housing market ($4.1 trillion of which is land) – and on this, and many other matters alone, a new generation of enlightened folk have clearly had enough.
High land values have played an important part in all the issues of social inequality highlighted above, of which I’ve provided ample evidence in previous columns. 
Our major cities now exhibit what’s considered to be a very ‘non-Australian’ style ‘English’ cultural class divide - as polarization between the asset rich and income poor expands.
The roll on effect impacts the environment, employment, education, and mental illness - as residents are forced into areas lacking in essential amenities – once again due to a flawed system of finance and housing policy.
To conclude…
And so, when you start to see what is so beautifully highlighted using the <a href="https://www.natsem.canberra.edu.au/publications/?publication=the-great-australian-dream-just-a-dream" target="_blank">maps below</a>, which show where the affordable property was located in 2001 for low and middle income buyers, compared to 2011 in our major capitals, which hold the lion’s share of population. 
(The yellow patches being affordable, and blue patches unaffordable.)  
 <img src="/images/2014/03/24/cashmore%20march%2024%20one.jpg" alt="">
<img src="/images/2014/03/24/cashmore%20march%2024%20two.png" alt="">
<img src="/images/2014/03/24/cashmore%20march%2024%20three.png" alt="">
And you read quotes from a long standing resident advocates, at the soon to be forced out Millers Point public housing facility, who rightly <a href="https://www.theguardian.com/world/2014/mar/20/millers-point-public-housing-residents-campaign-nsw-sell-off?CMP=soc_568">question</a>:
“The government says their core business is not housing. But surely their core business must be communities.”
Then you start to get a grip on the central issues this protests represents.
 <img src="/images/2014/03/24/cashmore%20march%2024%20two.jpg" alt="">
And I would suggest - (as expressed on their <a href="https://marchinmarch.com.au/">website</a>) – it really is “only the beginning”.
Follow Catherine on <a href="https://twitter.com/CCASHMORE_BUYER" target="_blank">Twitter</a> or via her <a href="https://catherinecashmore.wordpress.com/" style="line-height: 1.3em;">Blog</a>.
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Power (and housing) to the people

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Investment bank <a href="https://www.credit-suisse.com/au/">Credit Suisse</a> couldn’t have coined it better when they asserted:
"The marginal buyer of Sydney and Melbourne real estate has changed, as have the drivers of property prices."
The words are taken from their recent report on international investment into the Australian residential real estate sector, with the intention to highlight potential opportunities for future speculation. And the statement is correct.
Anyone, who is in the business of buying or selling property, is acutely aware how the push and pull of both supply and demand in our property markets, has been markedly shaped by both a change in the local demographics of our nation, along with international competiveness in recent years.
The roll over influence on values in concentrated regions of our largest capital cities has, in some cases, been significant. And whilst it remains the subject of much angst for those priced out, I have yet to meet a seller who did not welcome this increased competition.
However, heated debate in the mainstream media around what has long been known in the industry as little more than a ‘tick box’ formalit, designed to detract from what remains a largely unaudited system of ‘non-resident’ investment in Australian property – residential or otherwise - by the Foreign Investment Review Board, has been going on since 2008.
As property editor, Robert Harley recently pointed out in the <a href="https://www.afr.com/p/business/property/the_year_of_the_chinese_developer_KtqoIDtcggT8KGAMXv8OgKhttp:/www.afr.com/p/business/property/the_year_of_the_chinese_developer_KtqoIDtcggT8KGAMXv8OgK">AFR</a>;
“Even the ‘experts’ find the FIRB annual report.... tardy, lacking in meaningful detail and hard to reconcile with their own experience…”
And as the fictional character "<a href="https://news.domain.com.au/domain/nonexistent-man-granted-leave-to-buy-598000-house-20130327-2gu0p">Chodley Wontok</a>" discovered last year, claims in the foreign policy document that applications are reviewed against the “national interest,” on “a case-by-case” level, do not go so far as a mere passport or visa check!
However, the sheer hysteria around this subject needs to be bought under control.  And if we’re to make sure policies are correctly regulated and work in the national interest as ‘spruiked,’ the blame needs to be carefully targeted to areas of influence – namely, policy.
Something the government has to date, repeatedly failed to do.
A policy disaster
Following the 2008 crisis, Kevin Rudd decided to put in place measures to prevent any major deleveraging of household debt. One of these was to openly advertise ‘relaxed’ regulations around the acquisition of residential real estate for temporary residents, companies and developers selling solely to overseas buyers.
Whilst the wisdom of such a move was debateable, what followed was a truly disastrous state of affairs.
Attempts by Walkley Award winning journalist Chris Vedelago to obtain accurate data under the freedom of information act, to monitor the level of increased demand being widely asserted by industry advocates - was repeatedly frustrated.
According to the then Assistant Treasurer, Senator Nick Sherry, any effort to establish a greater understanding of the FIRB’s compliance system, was not in the <a href="https://theage.domain.com.au/home-investor-centre/blogs/domain-investor-centre-blog/secret-government-business-part-ii-20120202-1quse">public's</a> “best interest.”
Instead, the government, then panicking over the consequential effect to their ratings in the polls, came up with the incredibly smart idea of a ‘dob-in’ hotline. 
The hotline was designed to enable worried locals, to report those dubious looking foreign nationals, who were cleverly disguising themselves as local buyers and naughtily ‘bidding up’ neighbourhood prices. 
“That would put a stop to it!” thought Kevin.
Unsurprisingly, from the limited number of calls received (although, once again, probably not from those vendor’s who were happily selling their properties in the rapid run up to the market peak of 2010), most turned out to be Australian citizens and long standing permanent residents.  So, it did little - if anything - to stem the core of concern still prevalent within the community.
It is therefore of little surprise that anecdotal stories from agents, who maintain official figures that are under reported and rules are being flouted, continue to carry more weight. And a debate, which now walks a fine line between being termed racist or otherwise - continues unabated.
What’s going on?
Rising property prices - the product of the plot of land that sits underneath the structure - are unashamedly promoted in most modern economies as the key driver to boost the privatised wealth of its nation, with the hope the payoff effect will feed other areas of consumption.   
They are no longer just national affairs, but open to international speculation and investment, of which Australia is by no means immune.
When the federal government states in its policy document that it “welcomes foreign investment” which:
 “Has helped build Australia’s economy and will continue to enhance the wellbeing of Australians, by supporting economic growth and prosperity.”
You can assume toward the top of that list is the investment into the land market – residential or otherwise.  And as official figures <a href="https://www.firb.gov.au/content/Publications/AnnualReports/2012-2013/index.asp">show</a>, few – if any - applications are ever turned down and real estate captures the majority interest.
The recent recessions that have occurred in other countries as a result of their own residential speculative booms, have merely accentuated these international patterns of investment and migration.
For example, following the GFC, the number of foreign-born workers leaving Britain rose by nearly 30% as the government set about removing 300,000 skilled jobs from the list of positions open to workers from outside the European Union - evidently fearing political backlash from somewhat unsubstantiated claims, that this was significantly ‘harming’ British jobs and thus not aiding rising unemployment or the economy as a whole.
At the same time, distressed nations opened their doors to opportune investors from around the globe, who were encouraged to take advantage of now uniquely ‘cheap’ real estate markets, in a vain attempt to kick off a recovery in their own local terrains.  
It was only a few years ago, stories were littering the main stream media highlighting the surge of demand for USA properties, as spruikers made benefit of our strong Aussie dollar to lure local investors to purchase previously owner-occupied foreclosures and instead turn them into investor owned speculative rentals.  
None of this has assisted the home buying sector in America’s property market. 
Ownership rates continue to fall and local buyers remain priced out.
But the government cares little – the gains in property are the silver lining Obama needs to maintain popularity. And he had no hesitation in boasting as such when he <a href="https://blogs.wsj.com/washwire/2013/08/06/text-of-obama-speech-on-homeownership/">recently</a> stated:
”Today, our housing market is healing!” (Healing!) “Home prices are rising at the fastest pace in seven years.”
Faster even than incomes it seems, with first home buyers at their lowest level since the crisis began.
Premium localities in the cities of New York and London are openly marketed as ‘safe havens’ for the internationally wealthy.  Isolated from the local economy as local workers are forced out and rumours of homes laying vacant for much of year provoke neighbourhood outrage.
It’s now reported that in London for every <a href="https://www.ft.com/intl/cms/s/2/aeb87918-e560-11e2-ad1a-00144feabdc0">minute</a> you spend on the three Underground stops between Earls Court and Sloane Square, property prices rise by £96,647.
However (as with Australia), outside of half-hearted central bank ‘don’t spend too much’ warnings, there is little rush to limit the inflationary rises. 
This pattern is always the same.  It’s allowable to let productivity and industry fail whilst small businesses suffer, but woe to the government who allows the privatised wealth fund of its aging population endure any such demise.
Australia’s changing landscape
Australia is internationally marketed as the ‘lucky country’, an economic star on the world stage from which we derive much benefit. 
Population growth throughout the GFC was barely dented – and like every other country, we tow away the poor, whilst targeting skilled migrants, or those with dollars to invest.
Over the last census period alone, Melbourne’s population expanded by nearly 355,000 new residents and continues to grow at pace of roughly 2% per year.
Additionally, its population has grown in diversity, with the traditional European migrants of Greece and Italy falling as a proportion, whilst the growing number to our shores now comes from both China and India.
 <img src="/images/2014/03/17/cashmore-march-17-one.jpg" width="460">
Note: Settlers = skilled and family reunion migrants, along with humanitarian visas and refugees
The same trend is mirrored in NSW – projected to reach 8.4 million by 2060. Migrations to the harbour town also come increasingly from both China and India, as demonstrated below.  
<img src="/images/2014/03/17/cashmore%20march%2017%20two.jpg" width="460">
When, under Julia Gillard, the Government commissioned a white paper on ‘The Asian Century’ designed to:
“Generate a set of general propositions to guide policy development over the long-term.”
The importance and potential magnitude of Asia’s dominance on the world stage was emphasised, by Julia Gillard when in a speech she asserted:
“We are now seeing the most profound rebalancing of global wealth and power in the period since the United States emerged as a major power in the world.”
No kidding!
Indeed, it would be hard to over-estimate the economic force Asia holds for our local economy.
It will shape the most important social, cultural, business, domestic and foreign policy implications we will face in the decades to come.
By 2025 the Asian region will account for almost half of the world’s output and also be the world’s largest consumer – and if we play our cards right, Australia is best placed to advantage.
It’s not just the 1% of billionaires seeking out safe havens abroad in what’s been termed the “largest and most rapid wealth migrations of our time.” But the rise of China’s consumer class – middle income individuals, discretionary spenders, whose wealth goes largely under-reported in a  “grey economy” of illegal and quasi-legal activities.
If trend continues, in a few years, China will become the world’s richest country, and India won’t be far in its wake.
The number of Asian students studying on our shores is at record highs.
Trade flows, research and business development, education, tourism, and increased levels of migration have benefitted us significantly in recent years - and the potential to capitalise on the productive sectors of our economy remain.
Whilst the Gillard government’s white paper - now firmly locked into <a href="https://asiancentury.dpmc.gov.au/">“archive status,”</a> - remains a useful form of reference.  It was widely criticised at the time, for its vague approach as yet another study, which like a PHD paper is good in content, but lacks any hint of direct action.
It claimed that Australian manufacturing was expected to ‘grow,’ with wishy-washy advice on how firms must:
 “Adapt by anticipating changes in their markets, building the talents of their people and constantly innovating and lifting their productivity.”
Claims which now seem laughable.
We allowed the profits from the ‘once in a century’ mining boom to fall into private hands.
As Sydney Morning Herald's economics editor <a href="https://www.smh.com.au/business/comment-and-analysis/whos-taxing-who-and-who-pays-the-rent-20140228-33rb1">Ross Griffiths</a> recently clarified in his commentary on Abbott’s efforts to remove the mining tax: 
“There is a lot of ‘unearned’ economic rent associated with the exploitation of limited mineral deposits,” and countries like Australia would be “mugs not to tax much of that rent rather than letting largely foreign companies walk away with most of it.”
‘Mugs’ we are.
But what about land?
Asia’s influence is marketed as positive news; however, the one area that receives the most overwhelming negativity is its influence on our real estate market, precisely because of the some of the issues hinted in the paragraph above.
We have little, if any, understanding of the accumulated wealth is brought into the country and recent settlers have little experience with the local market, or misleading practices surrounding real estate price quoting.
This lack of transparency and education within the industry itself needs addressing; however, it’s a subject I’ll explore further in another column.
The geographical location of land is fixed and limited in supply. Therefore we can’t all benefit from economic advantage gained from ownership of the best seats in town without effective taxation of the resource.
A correctly administered broad based land value tax (as explained <a href="https://www.macrobusiness.com.au/2013/11/land-tax-must-kill-negative-gearing-stamp-duty/">here</a> – reducing taxes on productivity) would not only encourage the good utilisation of land, but if handled efficiently, gains could be fed back into the community to assist increased investment into infrastructure and social services.
This would further aid both the expansion and development of our cities, with the flow on effect ideally taking the speculative element out of the housing market and assist in reducing its destructive influence on prices. 
This alone, would go a long way to reducing the wealth <a href="https://www.macrobusiness.com.au/2014/02/housing-and-the-inequality-divide/">inequality</a> currently experienced in our big cities.
Presently, we’re doing a great job of building an abundance of cheap, high density, and no so inexpensive apartment blocks, full of small one and two bedroom flats, often no more than 60 square metres inside. Great for student renters - but do little to meet the needs of our biggest residential sector – family buyers with children. 
Therefore, the above issues need to be tackled from ground up policy reform – significantly on the <a href="https://www.macrobusiness.com.au/2013/11/urban-zoning-and-affordable-housing-are-opposites/">supply side</a>.
Offshore investment must be solely channelled into creating new supply – and audited to ensure the conditions stated in current laws are being adhered to.  
I’m not holding my breath, but hopefully some of these will be explored in detail and ‘maybe’ go so far as being implemented following the Senate inquiry later this year.     
We can’t – and wouldn’t want to - stop migration.  But we can ensure wealth invested in our established real estate market, is utilised effectively.
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We need to direct foreign investment in real estate effectively - not stop it

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By any comparative measure, the Australian economy has performed remarkably well over the last two decades.  
We’ve had strong gains in the labor force throughout the 1990s, rapid population growth and a surge in the value of key commodity exports through the 2000s.  
Resilient wage inflation duly capitalised into rising property prices, by way of a dramatic and accelerated run up of household debt in the lead up to the GFC.  All of which was buffered and prevented from any significant deleveraging, by the Rudd administration in 2008, when he threw sizeable cash handouts to families along with infrastructure investment to avoid plunging Australia into a technical ‘recession’.  
From this alone, our economic platform deserves the title “The world’s star performer”.  
However, whilst we may stand out in the wealth stakes, we’re not a happier nation for it.  
Last week <a target="_blank" href="https://www.abc.net.au/tv/qanda/txt/s3938479.htm">Q&amp;A</a> featured a question from a young Australian and recent school leaver which touched on the sensitive subject of depression asking: “What can the government do to “fix it?”  
Like every other Western nation, Australia has experienced a sharp rise in the number of people suffering depressive illness over the last decade, with the average onset of the disease moving downwards in terms of age since the 1990s.  
Organisations such as <a target="_blank" href="https://www.beyondblue.org.au/">Beyond Blue</a> report that more than one in five Australian’s experienced depression, anxiety, or both, over last past year, and as the gentleman stressed, he was no exception.  
The comments that followed were sensitive in nature – focusing primarily on individual treatment and prevention within the health system. And whilst the cause of depression is both complex and varied, the first acknowledgement on what the government could do ‘collectively,’ came from Clive Palmer:  
“We need to have some sort of vision,” said Mr. Palmer “Create an environment that makes people realise the world is not as bad as we think it is… if you cut things, if you cut budgets, if you take things from people, you make them more worried about the future, and more uncertain.”  
This was reiterated by Ged Kearny, President of the Australian Council of Trade Unions:  
“I get very concerned when I hear about cuts to public health… they're just another barrier to person, particularly a young person, getting help.”  
They are appropriate observations considering our rising population, skewed toward an aging demographic, which by its very nature will necessitate additional funding over the next decade into both health and education.  
So, it was somewhat unfortunate, at the same time panellists were discussing cuts, Prime Minister Tony Abbot was giving a speech to the <a target="_blank" href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2014-02-25/abbott-flags-spending-growth-cuts-health-education/5281606">Australian-Canada Economic Leadership Forum</a> in Melbourne, hinting at just this – as summarised bluntly by Christopher Pyne, Minister for Education:  
"[The Prime Minister] said that the current growth in education and health expenditure was unsustainable, and that is true.”  
What’s Tony Abbot’s vision for economic growth?  
“You can’t spend money until you’ve earned it! – Or until you have the means to pay it back!”  
Was the <a target="_blank" href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2014-02-25/abbott-flags-spending-growth-cuts-health-education/5281606">cautionary opening statement</a> Mr Abbot posed.  
It’s a somewhat startling assertion considering it comes from the ‘issuers’ of our monetary supply, offset through taxing those who do have to earn dollars before they can spend it - whilst our government ‘earns’ nothing. Rather it is elected, and charged, to balance the budget in the best interests of its working population to promote economic growth – for which education and health are vital pillars.  
Abbot goes onto say - the best way to build a stronger economy is for Australia to once again to: “Enjoy a surplus.”  
Which may lead you (like me) to wonder how exactly the average private household will enjoy this surplus, considering we have the highest unemployment rate since 2003, along with an increase in those registering as “long-term” unemployed, up 13.5% since January 2013, and more part time jobs being created than full time?  
In Victoria, where manufacturing industries are concentrated, unemployment is at its worst level since 2002, whilst youth unemployment, which represents the demographic driving the future of our economy, has reached a <a target="_parent" href="https://www.theage.com.au/victoria/youth-unemployment-reaches-crisis-point-says-brotherhood-of-st-laurence-20140223-33aks">‘crisis’</a> point.  
Just over 12% of young people between the ages of 15 and 24 are currently out of work.  
Regional localities reflect the worst - 20% in Cairns and Tasmania, 18% to 19% in north Adelaide, 17% in Western Sydney, the Illawarra, parts of Melbourne and regional Victoria – with the trade off being the increased cost of metropolitan accommodation for those “job seeking” in capital cities.  
Additionally, the latest “ABS labour price index” records wage growth at its lowest level on record – climbing just below the rate of inflation for the last calendar year - whilst the cost for ‘essentials’ such as health, childcare, utility services, and petrol, in some areas, has reached record highs.  
Considering our household debt to disposable income has barely deleveraged since property prices hit their peak in 2010 – the very talk of reaching a surplus within three years, particularly by way of cuts to essential services, or even the increased number relying on job seekers allowance - is foolhardy,  
When the government tightens its belt, the private sector picks up the slack. Therefore, “repairing the [government] budget” with the claim that it’s putting Australia “back on the right track”, is not putting the fate of Australians on the right track.  
Austerity, at a time of rising unemployment, does not lead to productive economic growth.  And from depression and unemployment statistics alone, it seems Australian’s are not enjoying a return to surplus.  
They’re are working longer, retiring later and in the face of rising unemployment, the only ‘vision’ the working population seemingly have to hold to is more of the same.  
So what are we left with?  
After 30 years of demise, the manufacturing industry is in the depths of <a target="_blank" href="https://www.macrobusiness.com.au/2014/02/the-extinction-of-australian-manufacturing/">recession</a>.  
Retail is losing the battle to the World Wide Web and residential construction is still struggling to pick up the cyclical slack created by the mining sector.  
Abbot’s “infrastructure promise" to speed up the flow of money from Canberra into the states, to upgrade road and rail projects, is positive news and sorely needed, however, <a target="_blank" href="https://www.macrobusiness.com.au/2014/02/one-auction-and-its-impact-on-the-welfare-state/">remember</a> where those gains will be most acutely felt.  
Without effective <a target="_blank" href="https://www.macrobusiness.com.au/2013/11/land-tax-must-kill-negative-gearing-stamp-duty/">land value taxation</a>, the investment creates the ‘future speculative hotspots,’ where the improvements will be capitalised into rising land values, rather than fed back into servicing, maintaining, and further extending essential community facilities.  
Land is an absolute necessity to all commercial and personal needs, therefore as land values rise; it will affect a continued strain on business and <a target="_blank" href="https://www.macrobusiness.com.au/2014/02/its-housing-thats-killing-productivity/">productivity</a>, and once again, we’re stimulating the cost of irreplaceable fixed assets, rather than the employment sectors needed to underpin a longer trajectory of economic growth.  
But this is what Australia is remarkably good at – creating a booming land market.  We’re right up there with the world’s best performers.  
Article continues on next page. Please click below.
                                  
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The housing bubble success story
Following a rapid 12-month cyclical upswing of housing inflation, residential real estate prices are once again reaching their 2010 peak.  
Outside of normal ‘corrective’ downturns, we’re continually lectured by an overcrowded mass of vested industry commentary that our housing market can ‘never fail’. Or at least not to the extent suggested by personalities such as Harry Dent or respected Australian economist Professor Steve Keen, who are quickly bundled into the same category and labelled as nothing more than irresponsible fear mongers for implying as such.  
Our commentators waste no time offering their own economic analysis of property cycles, which unfortunately missed any prediction of the subprime crisis.  
Albeit, housing affordability for both renters and home buyers, has rarely escaped headline news since before the last election and whilst to a limited extent we seemed to have progressed past the point in which rising prices are marketed as overwhelming positive news, it certainly hasn’t destroyed the myth that they’re somehow ‘good’ for the long-term health of our nation, as owners leverage off the so-called ‘wealth effect’ – relying on the unearned equity in their housing investments to fund both lifestyle and commercial activities.  
Australia’s biggest employer – aged related care (the health and social assistance industries) – derives a large percentage of its funding from people selling their housing, which their children additionally hope to inherit to assist their own journey onto the ladder and the perpetual fear of any downturn in established values has painted the government into a corner.  
Is the housing market on Rocky Roots?  
Yet, fear mongering or not, we know from the above statistics alone, the estimated $5 trillion worth of wealth contained in the house and land market is sitting on rocky roots.  
It’s no longer supported by the boom of productive activity and wage growth that assisted in generating the inflation during the 1990s and 2000s – producing the ‘strong’ monopolised banking sector which capitalised on the mortgage market as a population of buyers and speculative investors rapidly expanded.  
Outside of future prospected wage increases, significant gains are only achievable by manipulating demand side stimulants, tapping into foreign investment, (currently <a target="_blank" href="https://www.theage.com.au/victoria/everestlike-growth-in-melbournes-residential-towers-20140228-33r9x">driving</a> the inner city apartment and development market), whilst limiting effective and feasible <a target="_blank" href="https://www.macrobusiness.com.au/2013/11/rethinking-urban-growth-boundaries/">‘cheap’</a> supply - which the government has successfully achieved to date, by way of policies such as negative gearing, first home buyer grants, and a truly diabolical record of supply side reform.  
As mentioned in one of the most recent <a target="_blank" href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Affordable_housing_2013/Submissions">submissions</a> to the Senate’s housing affordability enquiry, by Prosper Australia: “It took forty years from 1950 to 1990 for housing prices to double, but only fifteen years between 1996 and 2010 to double again.”  
Whilst most will agree growth may be more subdued as we continue, it’s imperative we highlight the destructive nature of this system, which isn’t assisting making us a happy nation, and for a moment, stand back and take stock.  
Ask yourself a question  
Just for the moment, forget the raft of industry commentary and the prospected dates for the next ‘crash’ predicted and ask yourself a question:  
What will the next decade bring?  
If through manipulation alone, Australia manages to achieve more of the same and keep the housing boat afloat:  
<ul>
<li>
What will the consequential effect be on small business and industry?
</li>
</ul>
<ul>
<li>
Who will benefit most?
</li>
</ul>
<ul>
<li>
Will it be your children who have to save even longer to get on the ladder?
</li>
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<li>
Or their children who will need to save longer still?
</li>
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  Remember if we were to have a crash, it’s not the wealthy that will suffer and it’s ordinary working families who are then left in a position where they’re unable to borrow to take advantage of lower prices.
 
Is the future, long-term wealth inequality?
 
The boom/bust land cycle, which we’re told by industry advocates is the best way to build the individual wealth of its nation, is a system which derives its very existence from a long drawn out speculative process. This ultimately accentuates inequality, under utilises land, always marginalizing those at the bottom of the income stream, whilst advantaging those at the top – as I explained <a target="_blank" href="https://www.macrobusiness.com.au/2014/02/housing-and-the-inequality-divide/">here</a>.  
Nowhere is the divide between rich and poor more evident than the land market which results in a slow process of social polarisation. In Australia, it has given us a segregated schooling system where social disadvantage in education is stronger here than <a target="_blank" href="https://crawford.anu.edu.au/public_policy_community/content/doc/Australia_Inequality-and-Prosperity_final-15-March-13.pdf">any other</a> comparable western nation.  
Whilst inequality in wages and business activity can be equalised through competitive activity, land – by its very nature – is fixed in supply and therefore the only cure to rising prices in a soft economic environment, is the produce of additional supply.  
Meeting that demand by extending upwards is a challenge. Land values in the inner suburbs are already high and although it can assist the needs of apartment dwellers, investors, student renters, and to a degree, downsizers, family buyers (our largest home buying demographic) have no option but to head to the fringe if it’s affordability they’re after.  
But, due to ineffective land tax and supply policy, the fringe suburbs, which capture the bulk of our city’s population growth, do not have the funding needed to facilitate urban sprawl, hence the process of <a target="_blank" href="https://www.macrobusiness.com.au/2014/02/housing-and-the-inequality-divide/">social polarisation</a>.  
They have the highest concentration of mental illness, such as obesity and depression, and prices are further manipulated by larger developers who drip feed their stock onto the market, of which the government currently has no control.  
Not politically sellable?  
From the time a child learns to enjoy a family game of Monopoly, Australians are nurtured on a system that teaches the key to building wealth that is through the leverage and speculation of capital growth in land values. Therefore, none of this is easy to change.  
To do so, requires complete structural reform of land value taxation and housing supply <a href="https://www.macrobusiness.com.au/2013/11/urban-zoning-and-affordable-housing-are-opposites/">policy</a> - therefore we’re told it’s not politically sellable.  
The most solid prediction of the year  
The most most solid prediction of 2014 to date, is the one that will result from the Senate’s housing affordability enquiry.  
After the numerous submissions have been tabled and discussed. The <a target="_blank" href="https://www.macrobusiness.com.au/2014/02/the-housing-question-that-the-senate-must-address/">question</a> I stressed in my own submission will remain unanswered;  
“Will the government allow land values to drop?”  
Assuming this is correct, then Prime Minister Tony Abbott has a care of duty to explain to the public directly how propping up the current status quo will continue to erode the opportunities of future generations.  
He must explain how the government’s failure to provide effective land value taxation and supply side reform to lower land prices, will lock them into longer mortgages, a life times worth of double income debt, push more into long-term tenancy and additionally point out how the current system <a target="_blank" href="https://www.macrobusiness.com.au/2014/02/housing-and-the-inequality-divide/">enhances</a> poor education and health outcomes, social polarisation, and places a strain on core productivity.  
Your choice!  
Ultimately the choice lay with the voting population and in a country that holds to the motto of a fair go, I expect clearly evidencing the consequences of our current housing market will be a lot less ‘sellable’ than educating how we can establish a sustainable approach. <a target="_blank" href="https://www.macrobusiness.com.au/2013/11/land-tax-must-kill-negative-gearing-stamp-duty/">If handled correctly</a> reducing taxes on productivity will ultimately make each and every one of us better off.  
It’s time we allowed Australians to make an educated choice.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
                                                     
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Australia - an economic star performer, but are we any better off for it?

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A few weeks ago, I attended an auction in a popular suburb of Melbourne’s inner east.  
The home was an attractive four-bedroom townhouse on roughly 260 square metres of land, and initially quoted at $700,000 ‘plus’ - very typical of the type of accommodation featured in the area.  
As is commonly the case in Melbourne, the quote was ‘stepped up’ in the final week of the campaign to ‘$750,000 ‘plus’ – albeit, the listing agent informed me more than once he had $800,000 “covered”.  A mere blink at recent comparable sales indicated a price well in excess of $850,000, or even $900,000, considering the level of demand and lack of comparable listings being marketed.  
This was confirmed during the auction, when a neighbour I’d casually interacted with leaned over and in little more than a whisper told me: “I know the vendor – she wants $1 million”. Considering the property didn’t reach its reserve until $900,000, I suspect she was correct.  
With competition from nine bidders, the property sold in front of a crowd of 100 or so for $1,011,000, and the agent, delighted with the result, wasted no time swooping in on the ones who missed out, to share information of ‘similar’ listings currently for sale.  
Needless to say, it’s a story that drives many Australians irate, with the focus inevitably aimed at the misleading way in which it was quoted. However, this isn’t what should drive our sense of injustice to kick into gear.  
The undeserving poor  
Debate is currently rife in Australia surrounding the relentless costs of our welfare system, with Social Services Minister <a target="_blank" href="https://www.crikey.com.au/2014/01/24/kevin-andrews-dont-pick-on-the-disabled-and-those-on-the-dole/">Kevin Andrews heralding it ‘unsustainable’</a>, whilst looking for ways the government can cut entitlements to the undeserving poor.  
The review has concentrated primarily on disability payments, and Newstart job seekers allowance, which keeps the ‘income-less’ in relative poverty.  
“Work is the best form of welfare!” was the statement Andrews used. Considering the uptick in unemployment, with industries such as Ford, Alcoa, Qantas, SPC, Sensis, Telstra, Shell and Toyota moving jobs and business offshore, a fall in the participation rate – due in part, to an asset rich, income poor retiring population – and a rise in part time and casual positions over full time positions, concerns are warranted.  
In the 2013-14 federal budget, the government correctly stated that “Australians value a fair society” and underlined its commitment to a tax system that provides a strong and stable funding stream for important public services, such as “health, education and disability care”, while “rewarding innovation and productivity” for economic growth.  On an international scale, our tax-transfer system is perceived as comparatively generous.  
According to the <a target="_blank" href="https://www.oecd.org/">OECD</a>, Australia’s ‘Robin Hood’ economy redistributes more to the poorest 5% of the population than any other member country, whilst the much-criticised policies of middle class welfare are seemingly the lowest.  
We’re deemed to have the most 'unique' and 'target efficient' social security benefits in the OECD, apparently yielding 'significant gains' to both the economy and society. And when compared to the USA, which has the highest income inequality among the ‘rich’ nations by some significant degree, we look comparatively healthy.  
Yet, despite its many reforms, and varying degrees of success, shaped in part by demographic changes (more women entering the labour force, for example) and a small reduction in high end salaries during the GFC, widening disparities between incomes have continued unabated since the mid-1990s. As the labour market struggles, there’s nothing to suggest the trend will stop.  
Mind the gap  
There are all sorts of reasons to narrow the gap between the rich and poor and prevent an ever-widening chasm -one of which is the way that income is invested into the economy and the roll over effect to society.  
Income inequality and economic growth can only work hand in hand when individuals are enabled to strive for greater heights from a foundation of equal opportunity – the basis of which is education.  
As economist and inequality expert Andrew Leigh commented late last <a target="_blank" href="https://www.abc.net.au/worldtoday/content/2013/s3793059.htm">year</a>:  
“Education is the greatest force that we've developed, not only for boosting productivity, but also for making Australia more equal,” ensuring “the circumstances in which you're born don't determine the circumstances in which you die.”  
Yet our schooling system is becoming increasingly segregated. The correlation between poor performance and social disadvantage is stronger here than <a target="_blank" href="https://crawford.anu.edu.au/public_policy_community/content/doc/Australia_Inequality-and-Prosperity_final-15-March-13.pdf">any other</a> comparable Western nation.  If our tax and transfer system were meant to offset this, you’d have to assess its been an abject failure.  
Why?  
Australia has enjoyed a period of economic prosperity, which over the last 23 years has been nothing short of remarkable.  According to Credit Suisse’s Annual Global Wealth Report, we’re the “richest people in the world,” with a median wealth each of US$219,500.  
Over the past year alone, Australia added an estimated 21,000 millionaires to the population. Yet, contrary to what the textbook version of economic theory would have you believe, household savings reaped from an economy surfing the wave of a commodity boom have not flowed into business investment, or nurtured productivity and education standards in the young.  
As noted in the <a target="_blank" href="https://www.credit-suisse.com/ch/en/news-and-expertise/research/credit-suisse-research-institute/publications">Credit Suisse assessment</a>, our riches are "heavily skewed towards real assets” a manifestation of “high urban real estate prices”, acquired and generated through the destructive cyclical impacts of a property market. As I emphasised <a target="_blank" href="https://www.macrobusiness.com.au/2014/02/housing-and-the-inequality-divide/">last week</a>, the gains from income growth and investment flow directly back to the land.  
Both homeowner and speculator  
Home ownership is seen as one of the great pillars of our collective culture.  It’s assessed to improve health and school performance in children, activate social engagement as well as reduce local crime.  
However, the way we go about promoting ownership is to nurture a system that teaches rising land values – outside of any productive activity such as renovation or effective utilisation of the resource – is due reward for having saved hard and got onto the ‘ladder’ in the first place.  
Our tax system is skewed toward ownership, with policies, that according to last year’s <a target="_blank" href="https://grattan.edu.au/publications/reports/post/renovating-housing-policy/">Grattan report</a>, provides potential benefits to home owners worth $36 billion a year, or $6,100 on average per household through items such as capital gains and pensioner eligibility test exemptions. Investors (or those choosing to rent and invest) reap $7 billion a year, or $4,500 on average each, by way of negative gearing rules and the capital gains discount introduced in 1999. Whilst renters, one in four households, see no gain - unless their income is low enough to require welfare assistance.  
In effect, we’re an economy that relies on ever-rising values of irreplaceable fixed assets to fund the individual wealth of its nation – and this is only achievable if policies are in place to ensure values remain high and climbing, and debt levels ‘affordable’.  
Article continues on the next page. Please click below.
     
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Capital growth  
Speculation and investment are two sides of the same coin. When we assess a good business model for example, we speculate that the productive activity that flows from that investment, will build on a growing base of demand, and through competition and diversity, go onto produce a profit.  
Yet the capital growth in land values does not occur by way of some abject force of nature. Everything that makes our cities liveable comes from the collective investment of our taxpayer dollars to provide the social amenities needed to form the base from which we can all progress.  
This would include: community services such as, transport, parks, roads, trains, trams, medical facilities, and most importantly, schools.  
Yet, it is also these facilities that produce the needed demand for real estate that pushes values upwards.  Not through the efforts of the individual home owner, but the productive efforts of the taxpayer – renter, home owner and investor alike.  
Housing on its own is worth nothing without the infrastructure that surrounds it and rising land values are ‘reward’ for nothing other than unwontedly buying into a system that – under the current structure - promotes inequality and forces <a target="_blank" href="https://www.ahuri.edu.au/housing_information/review/evrev035">social polarisation</a>.  
Unlike our business model above, we can’t ‘make’ more land in a particular location to fulfil the demand produced from the facilities our tax system both funds and maintains.  Therefore effective utilisation of the resource is vital.  
However, the speculative process alone, along with the added impact of a tax system that impedes turnover by way of stamp duty at one end, and capital gains at the other, simply feeds a process of hording.  
This is because most advantage best from investment into housing through the process of “buy and hold” – leveraging the equity to produce needed funds, rather than selling. This is a system that drives underutilisation and ‘land banking’.  
But land is fixed in location; therefore we must always hop over it to find the next predicted hotspot to raise our families, until this too becomes out of reach through the process described above - like a cruel game of musical chairs.  
Back to the beginning  
Let’s go back to the case study I cited at the start of this article.  The reason the four bedroom townhouse attracted such strong demand in the first place, is because it’s located in a top government school zone.  
Only high-income earners can afford to live in this zone and no doubt they feel – through their income tax contributions alone – they pay their fair share toward facilitating the opportunity for their children to obtain that higher education. As the OECD said, our tax and transfer system is high progressive – the “rich” pay more.  Or do they?  
Allowing for stamp duty, the new owner who purchased the townhouse would have paid $1,066,605 yet despite two years of effectively stagnant growth in 2011/2012, the median price in the suburb has escalated close to 60% from $850,000 in December 2009, to $1,355,000, therefore they probably assess it a worthy investment.  
As for those who arrived early in the process, to paraphrase what one home owner relayed to me some time back, she has earned more from the capital growth of her home over the past 10 years or so, than she has in earnings.  
Outside of a market crash or the demise of the education facilities provided, there is nothing to suggest prices in this school zone will drop. From the tight zoning regulations alone and rising population of immigrants and local buyers looking to advance their children’s education, the very ingredients to attract a constant source of buyer demand are set in place – and rents will rise accordingly.  
The taxpayer continues to subsidise the school, whilst the gains are capitalised in rising land values, which flow directly to the individual home owner not the school or community, keeping values high and placing further pressure on the public purse to fund additional services. Meanwhile, underfunded schools in the over populated fringe suburbs, start to produce an English style education class divide.  
Under such a system, we are not subsidising the poor, we are paying the wealthy.  Yet, it’s clear, if we’re to navigate the structural changes ahead and keep unemployment low, whilst at the same time, reduce the projected burden on the ‘welfare state’, our economy is reliant on maintaining a highly skilled work force. For this to occur, an elevated level of tertiary education and business investment is vital.  
A better model of welfare  
Notwithstanding, the correct way to fund local schools would be via broad based and effectively administered <a target="_blank" href="https://www.macrobusiness.com.au/2013/11/land-tax-must-kill-negative-gearing-stamp-duty/">land value taxation</a>. In its purest form, as advocated by the classical economist, Henry George, it would result in a single tax on the unimproved value of land to replace all other taxes which hamper productivity, the most significant being income tax.  
George’s ideas won favour amongst many, including the great economist and author of Capitalism and Freedom, Milton Friedman as well as other influential figures including Winston Churchill, Adam Smith, and more recently chief economics commentator at the Financial Times, Martin Wolf, and author and economist Fred Harrison. Notwithstanding, a single tax would be unlikely to hold water in current political circles.  
The Henry Tax Review commissioned by the government under Kevin Rudd in 2008 concluded that “economic growth would be higher if governments raised more revenue from land and less revenue from other tax bases”, proposing that stamp duty (which is an inconsistent and unequitable source of revenue) be replaced by a broad based land tax, levied on a per-square-metre and per land holding basis, rather than retaining present land tax arrangements.  
Whilst arguments over school funding will likely continue, centred in the political battle over funding of the suggested <a target="_blank" href="https://www.igiveagonski.com.au/">Gonski</a> reforms. Unless we narrow the gap in education, we’ll never narrow the broadening gap in income and consequently, the growing burden on our welfare state.  
Therefore – when times comes that the chatter around affordability finally evolves into real action, a broad based LVT should form an important part of both the debate, and the solution.  
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
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The tale of one auction – what it really says about Australia's welfare state

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To a limited extent inequality and the ‘rich/poor’ gap is tolerated within society. Economists have historically seen it as a necessary platform to stimulate ‘economic progress’, or even activate a sense of competitiveness within individuals in order to elevate themselves up the social ladder.  
Certainly in the housing market this is evident.  Who hasn’t aspired to their ‘dream’ home – or visualized some improvement similar to that of their neighbours?  
It’s what the success of programs such as Grand Designs thrive upon - the emotional aspect of ‘wanting’ bigger and better - and a proportion of <a target="_blank" href="https://www.news.com.au/finance/real-estate/ing-first-homes-buyers-increasingly-spending-a-million-dollars/story-fncq3era-1226820981579">home owners</a> will stretch their budget in order to achieve their desired property of choice, taking on a larger mortgage to do so.  
However, whilst a degree of inequality may be tolerated as an inevitable consequence of the benefits offered in a capitalist society, a widening gap can become disabling to progress, or even dangerous if items of basic need are perceived to be increasingly out of reach.  
In their 2012 ‘Global Risks’ annual report, the <a target="_blank" href="https://www.weforum.org/">Word Economic Forum</a> put it like this;  
“When ambitious and industrious young people start to feel that, no matter how hard they work, their prospects are constrained, then feelings of powerlessness, disconnectedness and disengagement can take root. The social unrest that occurred in 2011, from the United States to the Middle East, demonstrated how governments everywhere need to address the causes of discontent before it becomes a violent, destabilizing force.”  
The comments build on research undertaken by Andrew Berg and Jonathon Ostry, two senior staff in the <a target="_blank" href="https://www.imf.org/external/pubs/ft/fandd/2011/09/berg.htm">IMF’s Research Department</a>, who found that once a country had entered a period of economic growth, the more equal the distribution of wealth over the ensuing period and the longer it lasted. They conclude that: “sustainable economic reform is possible only when its benefits are widely shared.”
 
Inequality in Housing  
The consequences of inequality in the housing market are painful and slow. The trend is increasingly evidenced over a lengthy period of years – not in the volatility of month to month first home buyer statistics - always marginalizing those at the bottom of the income stream, whilst advantaging those at the top.  
Effects include;
<ul>
<li>
<a target="_blank" href="https://www.ahuri.edu.au/housing_information/review/evrev035">Social polarization</a>,
</li>
<li>
A decrease in the number of <a target="_blank" href="https://www.ahuri.edu.au/housing_information/review/evrev014">low income buyers</a> obtaining ownership,
</li>
<li>
A drop in the number of affordable <a target="_blank" href="https://www.ahuri.edu.au/housing_information/review/evrev004">rental dwellings</a> with demand outstripping supply,
</li>
<li>
Greater requirements for <a target="_blank" href="https://www.ahuri.edu.au/housing_information/review/evrev008">public housing</a>,
</li>
<li>
A rise in <a target="_blank" href="https://www.ahuri.edu.au/publications/projects/p80516">homeless</a> percentages, and those who drift in and out of secure rental accommodation.
</li>
<li>
A rising percentage of <a target="_blank" href="https://web.archive.org/web/20130513194216/http:/nhsc.org.au/publications/">long term tenants</a>, and falling percentage of property owners, - across all demographics, – but particularly families with children.
</li>
<li>
Fewer Australians – across all demographics - owning their <a target="_blank" href="https://www.ahuri.edu.au/themes/home_ownership">homes outright</a>.
</li>
<li>
Evidence of <a target="_blank" href="https://web.archive.org/web/20130513194216/http:/nhsc.org.au/publications/">severely crowded</a> accommodation…. And so forth.
</li>
</ul>
  The list, which names only a few of the prevailing concerns, creates a growing body of evidence that we have more than an affordability issue in Australia which focuses overwhelmingly on first home buyer figures.  
We have a growing structural problem, which, if allowed to continue, with have a societal impact, chipping away at the future growth and stability of the property market, affecting the majority – not just a ‘few.’  
Why?  
The reason this has occurred is down to our property cycle – or perhaps better-termed a ‘land cycle’ – which has been further accentuated by poor housing policy, restrictive planning conditions and generous tax incentives, which are ultimately destructive.  
Rising prices and the expectation of such are initially seen as a ‘good’ thing, because they drive the economy, increasing consumption (the ‘wealth’ effect), stimulate economic growth, infrastructure investment, construction activity and demand for ‘durables’.  
This in turn flows through to wages – which advantage the workers at the top of the income stream, rather than the labourers at the bottom. Andrew Leigh’s <a target="_blank" href="https://www.blackincbooks.com/books/battlers-and-billionaires">Battlers and Billionaires: The Story of Inequality in Australia </a>(2013) points out that since the mid-1970s, earnings after inflation for the bottom tenth of the population has grown 15%, in comparison to 59% for the top tenth.  
The gains are subsequently capitalised into rising land values, as investors, buoyed on by inflationary expectations, easier lending conditions and ‘fear of missing out’, lead a bull market of speculative activity (such as we’re seeing in Sydney) - until reality eventually steps in and the trend inevitably turns.  
In other areas of the economy that suffer from inflation, some form of substitution can typically occur. However land - and the infrastructure that gives it its value - is fixed in supply and an absolute necessity to all business and personal needs. Therefore, as land values rise, there is an inevitable strain on <a target="_blank" href="https://press.anu.edu.au/wp-content/uploads/2011/06/14-1-A-4.pdf">productivity</a>, affecting job growth, private debt, small business, and unemployment (such as we’re seeing in Australia presently).  
Whilst monetary policy and the interest rate ‘lever’ are employed to moderate the damaging effects of a property cycle, at every step of the process, real estate has been used as collateral for further economic investment; a revenue generating machine for government; and ‘wealth’ fund for retirement. Therefore, whilst the aim is to prevent a ‘hard’ landing, the motivation is always bent on protecting existing values, rather than letting them fall.  
Hence why demand side subsidies are favoured as a ‘Band-Aid’ to affordability, rather than cure.  
The result  
Without direct political intervention to rectify the damage, the greater and more destabilising the divide becomes; not only placing pressure on the welfare system, but evidenced ‘vocally’ as rising numbers enter the housing market later, pay far more over the lifetime of their loan, and risk reaching retirement still servicing household debt – as is the case in Australia.  
This was noted back in 2012 in a CPA study entitled <a target="_blank" href="https://www.cpaaustralia.com.au/cps/rde/xbcr/cpa-site/household-savings-retirement-report.pdf">‘Household Savings and Retirement – where has all my super gone?’</a> And most recently by executive chairman of Yellow Brick Road, Mark Bouris, who ‘concerned’ about lump sum superannuation payments being used to pay off mortgages, made a submission to Joe Hockey’s parliamentary financial inquiry. He suggested we can ‘solve’ the above impacts, with additional tax breaks to allow people to pay down their housing debt faster.  
It doesn’t take much of an economist to understand that subsidies – no matter how attractive they may seem - are ultimately capitalised into prices, thereby raising the entry costs for first home ownership further and increasing the pain for the next generation of aspiring buyers.  
The self-perpetuating cycle  
To some extent, it's a self perpetuating cycle – after 30 years of mortgage repayments dedicated to paying off their principle place of residence, vendors obviously don't want to see the price of their biggest asset drop.  
Investors are similarly motivated; an <a target="_blank" href="https://www.ahuri.edu.au/">AHURI</a> study released in December 2013, identified the typical investor as one who expects their property to ‘double every 10 years’ as a strategy to finance retirement.  
Incidentally, the same study also noted that three-quarters of the investors surveyed, do not see negative gearing as a reason to purchase, but merely as 'an added bonus'.  This contrasts with the myth of an ‘investor lead exodus’ should the policy be scrapped.  
However a system that tries to both feed speculation, whist creating unaffordability through supply constraints, is ultimately set to fail, as low-income households are continually forced to the outskirts, whilst the higher income individuals get to purchase the front row seats.
Article continues on next page. Please click below.
 
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Social polarisation  
This results in social polarisation, which is clearly visible on the Melbourne map below, taken from the <a target="_blank" href="https://www.reiv.com.au/">REIV</a>, which illustrates the median house price by suburb, relative to the metro median.  
The colours coded with the darkest blue indicate house prices more than double the metro median, and orange, house prices that are more than 25% below the metro median (The white spaces are areas for which there is insufficient data).  
<img alt="cashmore_feb_14_one" height="477" width="470" src="/images/stories/2014/02/14/cashmore_feb_14_one.jpg">
Source: REIV
This aligns very closely to a map constructed using data from the <a target="_blank" href="https://www.abs.gov.au/websitedbs/censushome.nsf/home/seifa?opendocument&amp;navpos=260">ABS</a>, which ranks geographic areas in terms of their relative socio-economic advantage and disadvantage, highlighting diversities such as incomes, education levels, occupations, rent and mortgage payments, family structure and unemployment.  
Once again, the beetroot red and bright orange ‘fringe’ suburbs sit well away from the affluent dark blue vicinities, which contain the top schools, medical facilities, shopping strips, high paying jobs, train and tram networks, childcare centres, social amenities, and so forth - all of which our tax payer dollars collectively fund. Yet under the current structure, only the local home owners get to advantage.  
<img style="display: block; margin-left: auto; margin-right: auto;" alt="cashmore_feb_14_two" height="223" width="320" src="/images/stories/2014/02/14/cashmore_feb_14_two.png">
Source: ABS
This would include not just the various social benefits offered, but the additional on-flow of capital gains each property attracts from a squeeze of consistent market demand.  
The top performing government schools in Australia do not reserve places for those showing merit (with a few exceptions). Instead, the families both willing and able to pay the 20-50% premium are able to afford housing in a desirable school’s catchment zone.
In case you need further convincing, you can chart how the trend has evolved using the image below, which is taken from a previous <a target="_blank" href="https://www.ahuri.edu.au/housing_information/review/evrev014">AHURI</a> investigation, showing how the percentage of affordable dwellings available for low to moderate-income purchasers, has changed in Melbourne, between the years of 1981 and 2006.  
The darker areas are the ‘most’ affordable, whilst the white patches are the least.    
 <img alt="cashmore_feb_14_three" height="261" width="470" src="/images/stories/2014/02/14/cashmore_feb_14_three.jpg">
What of the ‘price’ ripple effect?  
Even heading 45 kilometres or so away from the CBD, low-income purchasers can only acquire affordable accommodation – in the range of $200,000 to $400,000 - if the lot size is much smaller than 600 square metres, which is still deemed ‘standard’ in many middle suburban regions of Melbourne.  
Further more, any hope of a game of backyard cricket is unlikely, as the new developments are littered with homes that have a footprint which extends to the boarders of each block.  
The graph below highlights why this is.  It was put together by a colleague, Steven Armstrong, using <a target="_blank" href="https://www.dtpli.vic.gov.au/property-and-land-titles/valuation/government-valuations/valuer-general-victoria">valuer general</a> statistics, and it charts the extraordinary rise in land values per square metre in Hume City - an outer metropolitan growth zone in north-western Melbourne – between the years 1983 to 2012.  
<img alt="cashmore_feb_14_four" height="241" width="470" src="/images/stories/2014/02/14/cashmore_feb_14_four.png">
Source: Steven Armstrong, Valuer-General Victoria
The remarkable escalation in prices had nothing to do with homeowners wanting the castle, when a modest suburban home would do. Rather the issues I outlined <a target="_blank" href="/news">last week</a> in regard to planning restrictions (false scarcity), tax and infrastructure overlays, land speculation (the underlying cause of ‘all’ bubbles), that are exasperated further by ineffective supply side policy.  
It’s important to make this point, because whilst most people assume the ‘price/ripple’ effect works outwards – under the current system, the causation works both ways.  
It’s the marginal price of land at the fringes of our capital cities that sets the ‘base’ value for the better-located plots further in.  
In other words - it’s not supply that ‘solves’ affordability for low income purchasers, but the cost at which that supply can be delivered to the home buyer (not speculator) market.  
Is property overvalued? A bubble? A concern?  
When I was recently <a target="_blank" href="https://www.propertyobserver.com.au/residential/is-australian-property-overvalued-the-experts-have-their-say/2014020667606">asked</a> comment on whether Australian real estate was overvalued or not, I sensed the intention was to take the traditional view and assess whether job growth, population expansion, demand for credit, housing turnover, wage growth, interest rates, mid-term supply were supportive of a future sustained increase.  
However, whilst the above data will give a mid-term indication over whether current process are ‘serviceable’ at existing rates, or if market turnover can maintain pace, it gives little indication as to the long-term effects I’ve highlighted above, which in my mind, present a far greater destabilizing force, as we bear witness to a slow generational shift, eating at the edges of home ownership in the months and years ahead.  
I’ll leave the reader to come to their own predictions on market movements as we traverse through 2014. Albeit, in light of the government’s response to previous housing ‘affordability’ enquiries, I think the above concerns will merely worsen rather than improve – and at some point, we’ll all feel the impact.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
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The widening inequality and economic growth gap: What does this mean for housing?

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As the deadline for the senate inquiry into housing affordability approaches, some notable submissions have thus far been made.  
Saul Eslake, one of Australia’s most respected economists and previous member of the now disbanded ‘National Housing Supply Council,’ has submitted the address he gave last year at the 122nd Annual Henry George Commemorative Dinner, in which he eloquently outlines <a href="https://www.prosper.org.au/2013/09/03/saul-eslake-50-years-of-housing-failure/" target="_blank">Australia’s “50 Years of Housing Failure.”</a>  
Eslake advocates the need to remove policies that stimulate demand, such as negative gearing, in favour of those that increase supply. He backs ‘rethinking’ infrastructure financing and removing stamp duty, in favour of a broad based tax system on the unimproved value of land, as was recommended in the 2009 Ken Henry tax review.  
Any detail Eslake misses on the supply side, is dutifully covered by Senator Bob Day.  
Senator for South Australia, a registered builder and founder of major construction companies, such as Homestead Homes and Home Australia. Day’s submission is his May 2013 policy paper - ‘<a href="https://www.bobday.com.au/PDF/Home-Truths-Revisited-May-2013.pdf" target="_blank">Home Truths Revisited</a>,’ - in which he shares an intricate understanding of the history and complexities of supply side policy, which have seen land prices increase more than ‘tenfold,’ in comparison to the cost of building, which has seen ‘virtually no increase at all.’  
Importantly, for my industry colleagues who write that price rises were simply down to the increase in demand stimulants (such as dual income households), Senator Day notes, “while influential bodies like the Productivity Commission and the Reserve Bank focused their attention on demand drivers, like capital gains tax treatment, negative gearing, interest rates, readily accessible finance, first home buyers' grants and high immigration rates… the real culprit, the real source of the problem, was the refusal of state governments and their land management agencies to provide an adequate and affordable supply of land for new housing stock to meet the demand.”  
Other notable submissions come from Grace Mutual Limited, a not-for-profit entity who “designs investment mechanisms to attract wholesale funding into the social sector” - in particular the National Rental Affordability Scheme.  
GML outline the ‘unduly complex’ regulations that have disadvantaged investors, noting; “Large numbers of NRAS incentives (at least 4,000) were awarded for the construction of student housing,” yet “There appears little evidence that this has any positive impact on the middle to low-income families that were the target of the original policy.”  
And the last two submissions to date (2/2/2014) come from “home loan experts,” who want to abolish negative gearing, but predictably think that the first home buyer grant should stay; as well as an anonymous paper, with an overview of the points made by both Saul Eslake and Bob Day, noting as I did back in <a href="https://www.macrobusiness.com.au/2013/12/what-must-the-senate-do-about-housing-affordability/" target="_blank">December 2013</a> that nothing has been done since the last Senate inquiry.  
Rinse and Repeat  
To emphasise - The 2008 Senate report, entitled <a href="https://www.propertyoz.com.au/library/A%20good%20house%20is%20hard%20to%20find%20report%20JUNE%202008.pdf">“A good house is hard to find: Housing affordability in Australia”</a> made the same points regarding:  
<ul>
<li>
Australia’s tax policies, such as capital gains tax and negative gearing, which impact affordability and market activity.
</li>
</ul>
<ul>
<li>
Each states planning laws, overviewing the construction industry's future skilled labour workforce, the impact of urban boundaries on land prices, and the funding of community infrastructure.
</li>
</ul>
<ul>
<li>
The need for a diverse range of accommodation suited to both young and old alike, advocating greater competition within the building industry.
</li>
</ul>
<ul>
<li>
Both the both the public and private sector, addressing tenancy laws, and renters rights.
</li>
</ul>
  It was both comprehensive and detailed in content, and yet - five years later - at every level - both state and federal government have failed.  
Failed to provide a ready surplus of ‘cheap land.’
Failed to overhaul infrastructure funding.
Failed to boost a sluggish construction sector in relation to population growth.
Failed to reign in speculation.
Failed to overhaul a system that results in too few rental properties for low-income households. And;
Failed to reduce the need for social housing or raise standards in the public sector.  
Instead, we’re left with a new record median house price, which sits close to $600,000 ($597,556 APM), following the highest quarterly rise for four years. This is built on the back of a diminishing first home buyer sector, which is instead supported by record numbers of investors, benefitting from a pace of growth in Sydney which all agree, is ‘unsustainable.’  
As far as affordability is concerned, we’re simply sitting on a merry-go-round of repeated mistakes.  
Housing affordability a mystery too complex?  
This is not due to any lack of understanding on the government’s part. There is no secret or mystery to housing affordability.  
The solutions are well understood;  
<ul>
<li>
They were discussed at length in the previous senate inquiry.
</li>
</ul>
<ul>
<li>
The RBA has outlined them in papers, as recently as the 2011 bulletin entitled ‘<a href="https://www.propertyobserver.com.au/https://www.rba.gov.au/publications/bulletin/2012/sep/2" target="_blank">supply side issues in the housing sector</a>.’
</li>
</ul>
<ul>
<li>
AHURI has repeatedly tacked both <a href="https://www.ahuri.edu.au/downloads/NRV3/AHURI_Final_Report_No105_Housing_affordability_a_21st_century_problem.pdf" target="_blank">supply</a> and <a href="https://www.ahuri.edu.au/downloads/publications/EvRevReports/AHURI_Final_Report_No182_The_spatial_and_distributional_impacts_of_the_Henry_Review_recommendations_on_stamp_duty_and_land_tax.pdf" target="_blank">tax </a> policy.
</li>
</ul>
<ul>
<li>
<a href="https://vcoss.org.au/" target="_blank">VCOSS</a>, <a href="https://www.shelter.org.au/" target="_blank">Shelter</a>, the <a href="https://www.tenantsunion.org.au/" target="_blank">Tenants Union</a>, the ‘<a href="https://www.demographia.com/dhi.pdf" target="_parent">Annual Demographica Housing Affordability Survey</a>’ and <a href="https://www.macrobusiness.com.au/leith-van-onselen/">Leith Van Onselen</a>, have all provided their own valuable contributions to the ‘solutions’ surrounding housing affordability.
</li>
</ul>
<ul>
<li>
And this senate inquiry will do the same.
</li>
</ul>
The recommendations fall in line with other countries and states that have successfully achieved a consistent correlation between gross median house price and income – and so to some degree of detail share the following two points in common:  
1) They have taxation system that discourages speculation, but encourages productivity. The most successful of which is well-administrated broad based land value taxation system. This system has been adopted in various cities in the US. Like Pennsylvania for example, where the tax on the unimproved value of land is heavier than that of property (a process of which I explain in full <a href="https://www.macrobusiness.com.au/2013/11/land-tax-must-kill-negative-gearing-stamp-duty/">here</a>).  Or as in Texas, where property is taxed, yet income isn’t; reducing the level of speculative demand.  
2) They have created an environment in which liberal supply side policies ensure ‘fringe’ land is sold close to its agricultural value, ensuring zoning laws do not impede development, and there remains strong competition within in the construction sector.  
Why we have failed.  
The reason countries like Australia, the UK and certain states in the USA for example, fail to successfully move away from the boom and bust cycle, was summed up neatly in a 2007 parliamentary report entitled <a href="https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22library%2Fpartypol%2F4ZLN6%22">‘New directions in affordable housing: Addressing the decline in housing affordability for Australian families: executive summary’</a> - in which it confidently stated; 
 
“Improving housing affordability does not (emphasis mine) mean reducing the value of existing homes, which are usually the primary asset of any individual or family.”  
It’s a comment that sits right up there along with ‘saving doesn’t mean spending less’ or ‘dieting doesn’t mean reducing calories.’  
If only it were so…!  
To create a sustainable and affordable housing market, in line with the majority of recommendations put forward in the senate inquiry, would inevitably have a dampening effect on existing house and land values, in particular sites which are banked for ‘idle’ speculation.  
Article continues on next page. Please click below.
 
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Is the fear over falling prices justified?  
The fear is understandable when you consider residential real estate is Australia’s largest domestic asset class; with an estimated aggregate value of over $4 trillion, pinned to a banking sector which has the highest exposure to residential mortgages in the world, in a country in which most are home owners.  
However, please don’t fall into the trap – as many of my industry colleagues do - of thinking that just because a large number of home owners in Australia own their own properties debt free, it prevents a potential ‘crash’ in prices.  
A huge portion of private debt for the appropriation of business and commerce is secured against residential real estate.  
A lack of active buyers in the market - (which produces an atmosphere in which price falls are inevitable) – stagnates turnover and prevents those who need to ‘fund’ their retirement through an equity release from doing so. It prevents those that need to move state to find employment elsewhere, from doing so. It locks people into their homes – unable to downsize or upsize – and the effects are felt across all demographics.  
Businesses which run into financial trouble are unable to reach into their house ‘ATM’ and secure additional funding. As a result, industries close, lay-offs are invoked, investment ceases - the list goes on.  
Importantly, it does not prevent a major economic crisis.  
It did not prevent it in Ireland, America, or other countries in Europe, which also had a large proportion of owners, who owned outright.  
We are not immune from a major downturn – no market, which exhibits land cycles is – and be assured, when it does happen, it won’t matter whether the banking system is ‘wiped out’ or not (as suggested as another reason we cant ‘crash’). The government will rush to their assistance – leaving ordinary people to suffer their debt consequences alone, as has been demonstrated repeatedly on an international scale.  
Rising house prices or a stable market?  
An economy that relies on high, rising house prices is one that’s ultimately set to fail.  It’s a symptom of poor housing policy and can only supported over the longer term, by making debt ‘ever more affordable.’  
Therefore the best protection is political reform, which ensures stability across gross price to income ratios - and if managed proficiently in line with the two points outlined above;  
<ul>
<li>
It would assist productivity,
</li>
<li>
Boost the construction sector,
</li>
<li>
Aid infrastructure financing,
</li>
<li>
Keep prices accessible for new homeowners and business – which need to buy or rent land to compete with established players.
</li>
<li>
Ensure tenants are not subject to ever increasing yields.
</li>
<li>
Weather the unwanted impact of real estate ‘booms and busts.’
</li>
<li>
Protect vendors from plummeting property values during an economic crisis - (whenever that point in Australia’s future is) – and;
</li>
<li>
Reduce inequality between the asset rich and income poor.
</li>
</ul>
  Land speculators would not advantage from it – but ordinary taxpayers would love it.  
What the Senate and government must agree to allow, prior to commencing its inquiry.  
Thankfully, we don’t need to have an initial debate with the senate over whether the market is or isn’t affordable – as has been the case with various commentators across the mainstream media.  
Instead, we need collaborative assurance from the government, that any outcome from yet another Senate inquiry, will allow land prices to reduce – the process of which would have a gradual roll-on effect across the established real estate sector.  
Once have an affirmative answer to that question can we begin the debate over how this could be achieved - and once we do, it must ensure the following:  
<ol>
<li>
That fringe land is immediately available for residential development, overriding existing urban boundaries and zoning requirements that render it otherwise, and ensure it remains close to its agricultural value.
</li>
<li>
Increase competition within the construction sector, simplifying the planning process, and eliminating upfront infrastructure costs.  Additionally, a review of the many hidden taxes such as development overlays, application fees, stamp duties and so forth, that are charged through the planning and development process, must be reduced to ensure they are ‘fair and transparent’ as advocated by the HIA.
</li>
<li>
The removal/phasing out of policies such as the first home buyer grant and tax incentives that reward speculation into the established sector, and those that rely on housing inflation to stimulate demand.
</li>
<li>
Reopen the discussion to abolish stamp duty; moving instead toward a broad based land value taxation system. Following practices across the world where it has been deployed <a href="https://www.propertyobserver.com.au/https://blog.p2pfoundation.net/successfull-examples-of-land-value-tax-reforms/2011/02/05" target="_blank">with success,</a> and noting that the ACT is adopting such measures, over a slow transitional <a target="_blank" href="https://www.canberraconnect.act.gov.au/app/answers/detail/a_id/1397/~/tax-reform">20 year</a> period. And;
</li>
<li>
Ensure we build for home buyers, not just investors; paying particular attention to the needs of an ageing population, for which downsizing into apartments is not the preferred, or readily adopted option.
</li>
</ol>
Additionally, the government should work closely with organisations such as Shelter and the Tenants Union, to satisfy that the quality, provision and standard, of both rental and public housing, is improved and maintained, along with an overhaul of tenancy laws for long-term tenants.  
However, if both state and federal government refuse to let land prices drop, acting reactively to affordability issues, rather than proactively, then I suggest you use whatever vote you have wisely. Ignore both major parties; instead, place it behind smaller players who act in the best interests of community and not just their back pockets.  
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
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The real question the Senate inquiry must ask: Will the government allow land prices to decrease?

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Australia Day traditionally flags the end of the real estate ‘vacation’ period, with the long weekend being the last chance most agents have to take a breather before the auctions begin and weekly clearance rates once again come under intense scrutiny.
Most predictions for 2015 conclude that the recent upward trajectory will continue – with particular focus on some of our largest capital cities: Sydney, Melbourne and Perth (with Sydney and Perth already past their previous peaks in non-inflationary terms).
The pace of growth will differ for each capital with a correction expected in 2015 – despite the talk of a sooner than expected rise in rates. The momentum that has built up throughout 2013 has come primarily from investors, largely driven by local speculation.
In Sydney, where supply has been hampered by stringent planning requirements allowing larger developers with a greater financial capacity to hold the upperhand, the shortage of stock to cater to the needs of a market share of over 50% investors, has resulted in a spike in prices. This has diverged considerably from other states and continues to drive the herd mentality.
Louis Christopher, managing director of SQM Research, suggests Sydney will have its strongest start to the year in more than 15 years. Even assuming the prediction is too bullish, it’s unlikely to be far from the mark.
The extra boom of apartment supply will assist in cooling demand and boosting the number of rental dwellings, but it will take more than one interest rate hike before we see the evidence translate into lower median values, hence why the run will last the duration.
Whether you celebrate or commiserate news of a continued increase in house prices will obviously depend on circumstance – with investors benefitting most. However, the higher entry cost will continue to impede first time buyers and low-income earners. With no immediate solution by way of structural reform to housing policy, the debate won’t move far from headlines.
I made clear in my <a href="/news">column last week</a>, why we have an affordability problem and how that translates across the different demographics.
In our most populous capital cities, house prices have gone from three times median income to nine times median income. The impact on low-income families – in particular those renting, or teetering on the edge of ownership due to divorce or job loss - is particularly disturbing. In Melbourne alone, from <a href="https://business.curtin.edu.au/local/docs/ahrc13/Conceptualising-housing-affordability-in-Melbourne.pdf" target="_blank">1991 to 2011</a>, metropolitan housing CPI rose by 50%, compared to 188% for rents across the LGA.
The swell of concern coming from the ground up is the best chance we have to push significant reform forward. It’s encouraging to see results from a recent Ipos poll, conclude that most Australian’s disagree that rising prices are a <a href="https://www.news.com.au/finance/money/most-australians-disagree-rising-house-prices-are-a-good-thing/story-e6frfmci-1226799251099" target="_blank">‘good thing.’</a>
Notwithstanding, a huge portion of private debt for the appropriation of business and commerce is secured against residential real estate. Its Australia’s largest domestic asset class with an estimated aggregated value of over $4 trillion, pinned to a banking sector, which has the highest exposure to residential mortgages in the world.
The sensitivity to maintain high prices is evident not only in the NIMBY-style practices that protest at all attempts to either increase density or assist development, but also in the inability of  politicians to move ahead with structural reform to housing policy.
Consequently, governments tend to treat affordability issues reactively rather than proactively.  Words always mean more than the actions.
Demand side policies are favoured and when supply is released it’s done in such a way that it feeds a monopolist culture – designed to maximise profit over the delivery of land at ‘affordable’ prices.
To illustrate the point – ‘economics 101’ suggests the most effective way to reduce prices is to simply increase supply. In Melbourne last week, Planning Minister Matthew Guy anno0unced that the city has “decades worth of land”; more than “400,000 potential house lots in growth areas”, of which five new precinct structure plans have been approved for development (amounting to 19,000 ‘potential’ bocks) and a “potential” 180,000 apartment blocks (more than enough keep all our offshore investors happy).
Clearly – we’ve got supply in spades!
Furthermore, broadly speaking, population growth in the outer suburbs of Greater Melbourne, predominantly in the newer greenfield developments, continues to be faster, and larger, than anywhere else in the greater Melbourne districts. So demand, in theory, should not be lacking.
But what Mr Guy fails to mention, is that in a five-year period from 2006 to 2010 the median land price in outer growth area suburbs jumped from $136,000 to $212,750, a difference of $76,750, according to Oliver Hume Real Estate Group. The typical starting price for a house and land package on a compact 450 square metre block of land is now transacting for a little over $400,000. Where is this cheap supply?
Of course, it all comes down to the development process. As soon as the urban boundary was implemented speculation began, existing landowners were able demand a premium for land now potentially available for residential purposes. Of those who decided to cash in, hectares were duly auctioned off to the highest bidder – resulting in a massive inflationary boom in values.
Precinct structure plans must be finalised before construction can commence – a process of which takes two to three years.
Funds for the provision of infrastructure - arterial roads, kindergartens, child health centres and so forth, are passed onto the buyer (initially the developer, who simply factors it into the final cost).
However, there is no timetable for the construction of this infrastructure. Councils can wait years for the funds to arrive because they are usually only payable upon subdivision. Notably land within PSPs can be held by landowners who have little incentive to bring it to market unless it’s financially beneficial to do so. The result is home owners pay for infrastructure which they may never receive.
Any areas of land a developer unwittingly acquires which is subject to ‘biodiversity conservation’ must be set aside.  10% of their land must be donated for ‘community open space’. Add to this GST, along with sales and marketing costs and you begin to get the idea of why supply does not immediately equate to lower prices.
Developers, with a desire to maximise profits, time their releases carefully. In other words, the state has auctioned away any chance of a plentiful supply of cheap fringe dwellings – and in light of the evidence Mr Guy is unable to claim otherwise.
Whilst inner city development may assist renters, the extent to which it does so is debatable. Investors seem undeterred by the higher vacancy rates in Melbourne, which have hovered around 3% for the past 12 months. We can see from work undertaken by Philip Soos at <a href="https://www.prosper.org.au/" target="_blank">‘Prosper Australia’</a> last year, that a percentage of newer units are allowed to sit vacant for much of the year – unclear whether they are being used for speculation, or as temporary vacation homes.
Building approvals data for apartments do not indicate commencement - the process of approval, to release (off plan pre-sales), and finally completion, takes a number of years.
<a href="https://www.charterkc.com.au/" target="_blank">Charter Keck Cramer</a> track each project from start to finish – and estimated back in July 2013 that 39,155 apartments will be added to the stock in Melbourne during the three year period of 2013 to 2015 (not including those for which subsequent planning approval has been granted).
To maximise yield and meet financial requirements, most apartments are small one and two bedroom dwellings (no more than 70 square metres in size). Unsurprisingly, they offer little attraction to the vast majority of local home buyers – being far more apt to meet the needs of student renters.
All in all, it’s an appalling state of affairs.
Australia is now entering its 23rd year of continuous GDP growth – the history of which is outlined briefly in HSBC’s recently released global research paper <a href="https://www.macrobusiness.com.au/wp-content/uploads/2014/01/2014.01.24-Australia-in-2014-Still-in-second-gear-PUBLIC-1.pdf">“Still in second gear”</a>. It should come as no surprise that land is always the eventual beneficiary from the wealth of a burgeoning economy.
As productivity increases, jobs are created, the population grows, infrastructure is built, areas gentrify, land values increase, and owners benefit. The uplift in values finances additional development and so the speculative process continues.
From the trough of 1996 to the peak in 2010 land values have roughly <a href="https://www.macrobusiness.com.au/2013/02/the-history-of-australian-property-values/" target="_blank">doubled</a> as a percentage of GDP – and the policies we have in place simply fuel the cycle.
In countries that have promoted home ownership both a means of ‘saving’ for retirement and a valuable asset to leverage against to accumulate additional assets – the eventual consequence is always the same. Tax strategies and inelastic supply side policies have encouraged speculation in rising land values with both the monopoly and restriction of the resource stagnating effective and affordable supply.
Until any sharp ‘correction’ is experienced (and eventually it will be), the advantage lies with those who hold the appreciating assets above those who don’t – particularly if acquisition was early on in the cycle as suburbs initially gentrified.
Whilst gains over the period wax and wane, spurred on by low rates or intermittent grants, the party can only continue whilst there is consistent demand at the entry level. This is why so much attention is focused on mortgage ‘serviceability’ rates, rather than the overall level of ‘affordability’ by way of calculating the gross amount borrowed.
It is possible to create a stable housing market that doesn’t subsist on ever rising prices. However, it can only be achieved by significant tax reform moving toward a broad based land tax - as was advocated in the Henry Tax Review - coupled with structural changes to the way we manage supply.
Without such reform, the social cost to our country and welfare system as a whole, will only worsen.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
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More supply does not immediately equate to lower prices

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Instead of productive advocacy into improving the housing market so it’s equitable for all - we’re left once again battling a ‘Looney Tunes’ debate over whether housing is, or isn’t affordable.  
I’m know I’m not alone in feeling an immense amount of frustration at the circular debate amongst commentators in the mainstream media, that surrounds our first home buyer demographic, and the question of affordability.  
Last week, the November 2013 housing finance data was released showing continued strong demand in the mortgage market, with owner-occupier commitments 15.3% higher than they were a year ago - their highest level since December 2009.  
Unsurprisingly, demand from investors continues to increase, rising 1.5% in November, and up by 35% over the course of the year - the highest level on record - whilst on the other hand, first home buyers remain at record lows, with a recorded market share of just 12.3%.  
Whichever side of the coin you sit, “first home buyers” like “housing bubbles” make a good headline. Therefore, instead of productive advocacy into improving the housing market so it’s equitable for all - we’re left once again battling a ‘Looney Tunes’ debate over whether housing is, or isn’t affordable.  
Denialists  
For those in denial all sorts of excuses are found – the most common of which is the accusation that first home buyers are just spoilt and picky – or as was sent to me in email last week by a fellow contributor on Property Observer - “you just have to save hard and start with a flat – isn't that how it's always been?”  
Well to some extent yes – when there’s a budget, compromises need to be made. But how it’s always been? No.  
Whilst in the late 1990’s a typical first home buyer’s budget would have secured a modest family home, in a reasonably facilitated suburb, for three times median income. Today you’d be hard pushed to find accommodation on the fringes of our capital cities for a similar expense.  
30 years ago the land component of a house and land package represented 20% of the total cost – today it is more like 60%.  
40 years ago, housing policy ensured land was ‘readily available at fair prices,’ with commonwealth funding provided for essential infrastructure. Today land prices have soared; unduly inflated constrictive <a target="_blank" href="https://www.macrobusiness.com.au/2013/11/urban-zoning-and-affordable-housing-are-opposites/">urban zoning policy</a>, with infrastructure prices, loaded onto the upfront cost.  
Furthermore, a CIE study commissioned by the HIA, demonstrated how imposed taxes on developments, when added together, come to 39% of the marketed house and land price.  
By the time you add “necessary” energy and safety standards, coupled with the cost of labour on top of already inflated land values, developers find it increasingly difficult to provide ‘affordable’ accommodation whilst still making a profit.  
Glenn Stephens, Governor of the RBA, summed it up best in 2011, when, he addressed a Parliamentary Committee and exclaimed how he could “not understand why a country as big as Australia seemingly had a shortage of land” and could therefore not provide ‘cheap’ housing.  
We don’t have a shortage of land – we have poor housing policy driven by vested interests to keep inner city land prices high.  I cannot find any other reasonable explanation.  
Asking first home buyers to purchase into a market where, capital city house prices have been artificially inflated, from three times median income to nine times, should not leave us scratching our heads wondering why they don’t feel OK about it. It’s perfectly understandable.  
Who is a first home buyer?
 
According to the ABS, the average age of a first homebuyer is between “31-33 years,” and due to high entry costs, “partnering often precedes home purchase” (the majority of which already have children).  
Therefore unsurprisingly, only a relatively small proportion (19%) make up single households, and outside of those who pit themselves against stronger financial arm of the investment sector, to purchase an apartment, the options we’re currently providing our first homebuyers, fall dismally short of where that main demand centres – demand which often calls for more than tiny apartment which will last no longer than a year or so before an upgrade is necessary.  
The data must be wrong…numbers can’t be this low?  
Others challenge the data, with various <a target="_blank" href="/news">claims</a> that first home buyer numbers are only ‘significantly’ reduced, because a percentage are ‘slipping through the net,’ perhaps entering ownership as ‘investors’ or – due to dated brokering software – not being entered as first timers, unless applying for a state based grant or incentive.  
On the latter point, I did speak to the ABS department of financial statistics directly about the notion that ‘significant’ numbers are missing, and further investigation is underway which I’ll follow up at a later date.  
Albeit, currently they deny the implication, claiming it doesn't accord with APRA's instructions to lenders when collecting statistics - which stresses that a first home buyer, must be one in which “none of the borrowing parties has previously borrowed housing finance for owner occupation” – making no distinction between an investor, or one who does, or does not, apply for the grant.  
Therefore, outside of colloquial evidence, the above ABS statistics are the most accurate ‘current’ indicator we have of a downward trend in first home buyer numbers – and for most ‘reasonable’ minds it should come as no surprise, considering we’re in an environment where the entry cost to obtain ownership is further impeded by rising prices, transaction taxes, and an uptick in unemployment raising concerns over job security.  
 
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Housing is ‘affordable’ because mortgage rates say so  
As <a target="_blank" href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2014-01-15/janda-the-illusion-of-housing-affordability/5200706">Michael Janda</a> pointed out in his excellent report last week - housing affordability should not be confused with mortgage serviceability.  
Mortgage rates are set up with different structures, dependant on circumstance, and subject to interest rate changes influenced by the macro environment.  
<ul>
<li>
They do not take into account the up front cost of a home and expenses incurred from associated utility costs.
</li>
</ul>
<ul>
<li>
They do not question rising rental prices, falling vacancy rates, wage growth, unemployment figures, or changes in household demographics and structure.
</li>
</ul>
<ul>
<li>
They make no distinction between the cost of building a home and the underlying value of land, or analyse constraints in supply, or make mention of the limited options available for low or single income households and families.
</li>
</ul>
  To assume on interest rates alone that housing is ‘affordable’ is lazy reporting and generally only applicable to existing owners.  
Those who fail to make the above distinction commonly come from the standpoint of vested interest – or entered ownership at the beginning of the lending boom (in the early 2000s or before,) and have benefitted considerably from a rapid period of inflation – which unsurprisingly enough, includes most of our politicians.  
Housing is affordable because data from other countries says so  
Neither is it complementary to compare ourselves to international terrains which – having been through somewhat harder lessons than our own – are also battling to induce first home buyers out from underneath their ‘rental’ blankets.  
Yet this is what Stephen Koukoulas <a target="_blank" href="https://www.businessspectator.com.au/article/2013/10/15/property/first-home-buyers-are-not-locked-out">attempted to do last week</a>  when he ‘favourably’ compared Australia to Norway, Canada, Sweden and New Zealand.  
All of these markets have suffered from large increases in levels of private debt whilst at the same time limits were placed on supply.  
In Norway, Sweden and New Zealand, central banks have recently employed capital constraints in an effort to moderate demand, and Canada, with a household debt to income ratio of 163.7%, is being watched closely, as investors and economists start to voice alarm.  
Letting house prices escalate, funded by a colossal amount of private mortgage debt, can be a dangerous game.  
As I pointed out <a target="_blank" href="https://catherinecashmore.com.au/wp/?p=431">last week</a> - in the USA prior to the sub-prime crisis, the median income in California was not enough to afford the average Californian home, or even a starter home.  Once the financial crisis hit, rapidly falling prices quickly eroded any equity homebuyers had achieved.  
Whilst on the other hand, states such as Texas, where house prices did not deviate from three times median income, values fell by only -2.5% (from the peak of 2007 to the trough of 2011,) and the state suffered far fewer foreclosures.  
The renters that Terry Ryder rudely labelled ‘<a href="https://www.propertyobserver.com.au/news/the-worst-writer-on-property-is-from-generation-rent/whine-terry-ryder/2014010867118">generation whine’</a>   
Renters, on the other hand, have not benefited directly from low interest rates. Roughly 33% of Australia’s housing market is made up of tenants and since, 2006, rises in the median cost of rental accommodation have outpaced both wage growth and inflation.  
In Sydney, where supply is particularly constrained, APM recorded a 5.4% yearly increase to the median rental price, and according to a new report compiled by the Northern Territory Council of Social Service (NTCOSS,) the average cost of rental housing in Darwin has risen by 7.9%.  
Before we get into a further debate over whether or not rents are ‘affordable,’ it’s worth turning to a previous report from the now disbanded <a target="_blank" href="https://web.archive.org/web/20130513194056/http:/nhsc.org.au/">National Housing Supply Council</a> to highlight the real impact demand side policies like negative gearing have, when coupled with a gradual erosion of supply.  
Reports highlight that the increase of rental accommodation in the private sector has not outweighed the decline in social housing – and from the stock added, most have rents outside of the affordable threshold for lower income households.  
To assesse this the NHSC broke income groups into deciles, and demonstrated of the affordable private accommodation available’ supply is quickly soaked up, leaving 60% of income groups, paying more than 30% of their income on rent, and 25% pay more than 50% of their income on rent.  
In conclusion
 
Gains from high land prices, do not trickle down they flow up. This is what the ‘National Housing Supply Council’ was trying to emphasise in their reports, and what I went to great pains to point out <a target="_blank" href="https://catherinecashmore.com.au/wp/?p=431">last week</a> in trying to answer the questions over what exactly a ‘housing shortage’ means.  
Our market is not just about buyers, it’s about renters too - and our governments are elected to ensure that the price of land is not unduly inflated by either the monopoly of this resource, or undue restrictions placed on its development.  
Worrying still – the arguments over affordability encourage us to lose sight of the real issue – which is not localised to the first home buyer sector, but the general crowding out of low income residents across all demographics – some of which drift in and out of ownership.  
Reform is never easy, but there is a way to break the cycle and ensure land is fully utilized for the purpose intended, without prices blowing out to levels that can only be sustained through keeping interest rates low, or household debt high.  
One way is through freeing the barriers hampering the type and supply of accommodation offered, and the other is through imposing a broad based tax on the underlying value land – of which I went into more detail <a target="_blank" href="https://www.macrobusiness.com.au/2013/11/land-tax-must-kill-negative-gearing-stamp-duty/">here</a>.  
The focus of attack should be not those individuals who have advantaged from the system, but on the law that allows the system to operate – and in response, the commentary should not focus on defending what is plainly obvious, but advocating the policies we need to fix it, and ensure our house and land market is equitable for all.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
 
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'Looney Tunes' debate taking the mickey out of housing affordability

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It’s a well spruiked ‘fact’ that Australia has a ‘housing shortage.’ I frame the word in italics because of the general misunderstanding that surrounds the concept.
People imagine a shortage of housing at an aggregate level, to mean not enough homes to meet the demands of an active buying market, and whilst this may be evident in various tightly held localities - in popular school zones for example - the evidence used to substantiate a national housing ‘shortage’ means nothing of the sort.
Last week the ABS released its dwelling approvals data for the month of November 2013, showing a modest fall of 1.5%, which follows a similar decline of 1.6% in October.
On a ‘trend’ basis, the overall direction of dwelling investments is positive - some 22% higher over the year - the highest level since September 1994. However, as <a href="https://www.businessspectator.com.au/article/2014/1/10/economy/dwelling-housing-growth-misguided">Callam Pickering</a> correctly asserts in Business Spectator, on a population-adjusted basis, approvals are, at best, weak.
For example, between 1947 and 1961, housing stock increased by 50% -compared to a 41% increase in Australia’s population, and between 1961 and 1976 there was a further increase of 46%, compared to a 33% increase in Australia’s population.
This was a continuing pattern until the early 1990s, after which the growth in dwellings started to slow, and since 2007; the former has outpaced the latter.
Did a shortage cause the rise in house/land prices?
1996 was the point at which land prices started to rise, and from 2001 onwards they skyrocketed. Whilst it’s hard to draw an exact correlation between the fall in stock and a rise in prices, supply, when produced, must be suited to need - being both affordable and well serviced with infrastructure. Get the ingredients wrong and a surplus can quickly amass. Therefore, it would be wrong to assume a shortage of effective supply means a shortage of ‘roof space’ – it doesn’t.
However, when evidence shows a gradual reduction of demand for new dwellings, during a period in which population growth and a resilient economy should have dictated otherwise, coupled with land values that have grown from three times the median income in the early 1990s, to their current six to nine times the median income in 2013 (dependant on location of course) alarm bells should be ringing in the offices of our housing ministers.
So what does the term ‘housing shortage’ mean and can it prevent a housing bubble? 
 
Read more over page
 
 
 
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Obviously, there cannot be more households than homes, and whilst, in the private sector, homes can only be constructed if there is demand from the consumer market, it is important to understand what a housing ‘shortage’ actually means.
Firstly, it covers total housing system, both private and public, therefore, it should not be used – as it so often is – as evidence Australia can’t suffer a significant downfall in prices, or produce a ‘bubble.’ It certainly can.
In fact, it should be fairly obvious that the effects of a housing crash are far more severe in areas where high levels of private debt have been used to service inflated home values, due to a shortage of affordable home buyer supply, coupled with heightened speculative activity - as is the case in the most populated areas of Australia.
To be clear - it’s not a shortage of homes that prevents a housing crash, but a shortage of buyers – buyers unwilling, or unable, to service high household debt due to broader economic conditions.
There are plenty of international examples of this - most recently in the USA, in states such as California and Los Angeles. Both areas had a ‘critical housing shortage’ in the early 2000s, with speculative demand and lack of affordable supply disproportionately inflating values in the lead up to the sub-prime crisis.
When the (unforeseen) bubble burst, rapidly falling prices quickly eroded any equity homebuyers had achieved, and for those with non-recourse loans, where the mortgage balance greatly exceeded value, there was little incentive to avoid foreclosure.
On the other hand, states such as <a href="https://www.dallasfed.org/assets/documents/research/swe/2013/swe1303b.pdf">Texas</a> where, despite rapid population growth, had structured housing and supply policy to maintain prices at no more than three times median income. Values fell by only 2.5% (from the peak of 2007 to the trough of 2011) and the state suffered far fewer foreclosures.
What was the role of the National Housing Supply Council and was it needed?
When Rudd established the National Housing Supply Council in May of 2008, just prior to the last Senate enquiry into housing affordability in June of the same year, it should have been a step in the right direction, however the council’s role was broadly misunderstood by many main stream commentators who often failed to read the reports in full.
(For those interested, thanks to the <a href="https://tunswblog.blogspot.com.au/">Brown Couch</a> blog, <a href="https://web.archive.org/web/20130513194422/http:/nhsc.org.au/faqs/">here's</a> a link to the archived website)
The council was given the role to assess the difference between supply and ‘underlying demand’ - in other words, the amount of extra housing needed per annum over the past decade, ‘if’ (using ABS data) Australia had continued to produce enough homes for a rapidly growing population of home buyers and renters, based on existing household composition figures.
Whilst the findings showed a dramatic shortfall of 228,000 dwellings (as of 30 June 2011) the figure was hotly debated and in many cases, concerns were justified. However, in the council’s defence, it should be noted that planning for population growth is not an easy task, it’s predictive in nature and makes many assumptions along the way.
Whether you agree or disagree with the methodology or the resulting recommendations contained within the report, it’s essential we undertake some type of detailed analysis, if only to chart demographic changes and readdress growing community needs.
This is no different to studies conducted in other countries suffering similar concerns. For example – the latest UK data shows 221,000 additional households are formed in England annually, yet only 108,000 homes were built in the year to September 2013.
If the goal is affordability - a vital part of which is supply side policy - we must address the reasons ‘why?’ Only in doing so, can we have a valid base for discussion on housing policy initiatives within the political arena.
However, supply wasn’t the NHSC’s only area of concern, it also instructed to produce a comprehensive evaluation of Australia’s affordability problems which included the status of those impacted most – homeless, renters, first homebuyers, low wage families, and tenants in the public and social housing system.
 
Read more over page
 
 
 
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For example, reports showed utility costs such as electricity, gas, water, and sewerage, have been increasing at more than 10 per cent per annum. They gave a good statistical overview to show a dramatic shortfall of affordable rental accommodation for low-income families – (details of which I’ll examine in another column) and clear evidence that our housing crisis is embedded within the fact that we don’t produce enough affordable and feasible options for low-income households across the sector – both public and private.
Despite this, the Abbot government - with the rather weak excuse that its role is ‘no longer needed’ - recently disbanded the NHSC along with their website and archived findings, and in doing so, have made it quite clear that affordable housing is not part of their political agenda.
Why do we have a shortage of affordable supply?
Issues surrounding housing affordability are at a peak predominantly because town planners, along with state and federal governments, have failed to adequately cater to the demands and needs of a rapidly increasing population.
If you didn’t know better, you’d be forgiven thinking there’s been a “vested” conspiracy to keep inner-city inflation high, with everything possible done to prevent a fall in established house prices by way of generous tax incentives for investors favouring old over new – or intermittent policies to inflate the prices of new housing by way of Mickey Mouse incentives.
Infrastructure sparse fringe land prices are inflated due to ‘false scarcity’ imposed by constrictive <a href="https://www.macrobusiness.com.au/2013/11/urban-zoning-and-affordable-housing-are-opposites/">urban zoning policy</a>.
However, it hasn’t always been this way - in the post-war population boom, the Commonwealth ‘State Housing agreement’ was concentrated on building rental accommodation and affordable housing for low-income families.
Under the Whitlam Government, land commissions were set up in each state and territory, and in agreement with the commonwealth, were instructed to ensure land and housing was ‘readily available at fair prices,’ with commonwealth funding provided for essential infrastructure.
However, in the 1990’s (the point at which demand for new housing started to diminish and prices began to balloon,) the game plan changed, key infrastructure agencies once corporatised were required to show “a return on investment.”
Stricter zoning regulations were imposed in the name of, ‘urban consolidation,’ land values increased, and larger developers needing to maximise profit, carefully controlled the timing of newly released plots in response to consumer demand (land banking).
I know sprawl is not a popular word with many Australian’s – however it should be understood, that to create affordable supply in inner city brownfield land, is extremely difficult when land values – already high – prompt the chase of profit over community need.
Hence why we have so many poorly constructed high-rise monstrosities, with 2 bedroom apartments, offering little more than 60sqm in floor area, with high vacancy rates (in excess of 10% in some cases) and banks unwilling to take a gamble and provide first home buyers with finance due to fears of oversupply. This is why they are generally marketed to investors fooled (by rental guarantees) into thinking they can get a positive yield.
Further more, they do nothing to produce affordable accommodation for our largest demographic of buyers, families with children who require 3 bedrooms and some resemblance of a private outdoor area. If anything, this is an appalling and inappropriate waste of valuable inner city land.
In the NHSC’s final report in 2012/2013 it stressed “Underpinning much of this work will be the understanding that tackling the housing shortage is not simply about increasing the number of homes being built; it is also important to build a diverse range of dwellings. Producing the right mix of homes contributes to developing sustainable communities that work for the population at large.”
As I’ve said previously – it’s not about creating endless sprawl, it’s about building communities and this can only be achieved with investment into infrastructure supported by long term funding measures, which include consideration of bond financing and a more equitable tax system that assists the cause.
The subject deserves deeper analysis, but the above touches on some of the issues that should be debated and acted upon. And it can only be hoped, that any future senate enquiry into housing affordability, endeavours to do so.
 
<hr>
 
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
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The ‘housing shortage’ debate – Do we have one?: Catherine Cashmore

Perth’s new apartment market recorded its strongest quarter of sales since Q4 2021, with 412 apartments sold in Q1 2026 and a record quarterly sold value of $537 million, according to Urbis’ latest Apartment Essentials results.

Urbis said the March quarter result reflects strong, highly product‑specific demand across both ends of the market, from more attainable projects delivering at scale, through to premium stock being absorbed by equity‑rich downsizers.&nbsp;

David Cresp, Partner at Urbis, said the key story in Perth is not demand, it is the market’s ability to convert demand into delivered housing.&nbsp;

“This is the strongest sales quarter since Q4 2021, and it reinforces that demand in Perth is real and it’s local,” David Cresp said. “But the task now is delivery, turning that demand into projects that can actually be built and completed.”&nbsp;

[smartcode_project:default project_id=110291 project_image_fid=302785]

<h2>Affordable product leads, premium demand remains resilient</h2>

Sales in Q1 were led by more affordable projects, with The Boulevard (SKS Group) recording 115 sales in the quarter, the presentation noting this is only the second time a single project has surpassed 100 quarterly sales. The project was able to offer more affordable housing product right next to a train station.&nbsp;

Palmyra West (Finbar) also delivered strong results with 28 sales in Q1, following 84 sales in Q4, with an average price of under $800,000, underscoring depth of demand for well‑located, attainable new stock.&nbsp;

At the premium end, Urbis said downsizer demand is continuing, with the results highlighting Romeo (Applecross, Finbar) recording 75 sales and reaching almost 50% sold in one quarter.

Jual (Shenton Park, Celsius Property) also posted a strong quarter with 28 sales, reaching 39% sold in one quarter.

Urbis noted that Perth apartment demand is not speculative, not investor‑led, and not uniform, describing it as localised, often equity‑driven and highly product‑specific, a pattern reflected in the polarisation between strong “attainable” performers and premium downsizer product.&nbsp;

[smartcode_project:default project_id=148957 project_image_fid=364102]

<h2>Prices underpinned by costs, and the delivery risk is growing</h2>

Urbis said pricing pressure is cost not demand‑driven: construction costs and delivery risk are now a central constraint, with the results noting build costs remain elevated and volatile, and that energy, fuel and labour uncertainty weigh on feasibility.

David Cresp said a growing challenge for private Build‑to‑Sell developers is simply securing a builder in the current environment.

“Developers are really feeling the pressure from a building market that was operating at capacity and securing a builder is challenging,” David Cresp said, adding that even where a builder can be secured, “trying to get to the price that makes the development financially viable is incredibly challenging in the current market.”&nbsp;

Urbis’ broader WA commentary also notes that industry remains at or above capacity with lot and housing creation, and that many builders are limiting new sales to manage stretched workforces and fixed‑price contract pressures, conditions that flow directly into apartment feasibility and delivery timing.

[smartcode_project:default project_id=108869 project_image_fid=317905]

<h2>Supply: improving later, but still constrained, and Perth lags eastern benchmarks</h2>

While near‑term supply remains constrained, Urbis’ forecast shows completions lifting “Supply is forecast to be back above 1,500 apartments per annum for the first time since 2019”, with 1,775 completions forecast for 2026, and volumes remaining above that level over the following years.&nbsp;

Looking further ahead, completions are forecast to reach 2,500 in 2028, with the report noting 32% of that total is social/affordable, reflecting the role of government‑supported delivery in rebuilding the pipeline.&nbsp;

However, Urbis said Perth remains behind comparable markets on pipeline scale. In a national comparison of projects under construction, the report shows under construction Perth Build‑to‑Sell (BTS) at 3,446 apartments versus the Gold Coast at 7,922. Mr Cresp said “The challenge for Perth is how to we grow the delivery pipeline”.

Urbis’ conclusion is that Perth’s market is increasingly defined by product discipline and delivery certainty, with the research identifying “delivery certainty is key” and calling out builder risk and procurement models as core success factors, alongside “timing and staging”.&nbsp;

Joel Robinson

Perth apartment sales hit strongest pace since late 2021 as builder capacity tightens

<a href="https://www.apartments.com.au/developers/sammut-developments">Sammut Group</a> has secured development approval for its latest Brisbane apartment project, marking the Sydney developer’s next step in expanding its Queensland pipeline following the success of its debut Gold Coast development, Coast.

The approved project at <a href="https://www.apartments.com.au/new-apartments/44-glen-road-toowong-qld-4066">44 Glen Road, </a><a href="https://www.apartments.com.au/developments/toowong-qld-4066">Toowong</a> will deliver a 15-storey riverfront apartment building with 42 residences, significantly increasing the scale of the site’s previous approval for a smaller luxury scheme. Designed by Bureau^proberts, the development will comprise a mix of predominantly four-bedroom and two-bedroom apartments positioned to maximise Brisbane River and city views.

Sammut Director Julian Sammut said the group had been actively searching Brisbane for several years before identifying Toowong as the right fit.

“Brisbane was the right step for Sammut,” Sammut said.

“With the success of Coast we thought we should definitely look to do more in Queensland alone. We then pushed up to look at Brisbane. We've been looking for I'd say two to three years actually and it was hard to find the right location.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screenshot%202025-12-23%20at%203.27.14%E2%80%AFPM.png?VersionId=dYAVIL7qdcGA8ojvkslSrLjczXFejSSx" />

Sammut said suburbs including New Farm and Teneriffe were considered before the group ultimately focused on Toowong due to its strong downsizer demographic and limited supply of developable riverfront land.

The site was acquired off-market after what Sammut described as a lengthy negotiation and planning process, with the developer pursuing an uplift to the original approval.

“We are DA approved now which is very exciting,” Sammut said.

“We've had our change approval come through and we've obviously doubled the height, 15 storeys plus rooftop. We've got 42 amazing apartments that are going to be coming to market soon.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-23%20at%203.27.26%E2%80%AFPM.png?VersionId=ohkRkY0dIZlqdfME2EZePsCQavRiBadE" />

Bureau^proberts said the design responds to Toowong’s evolving urban character, balancing contemporary apartment living with the area’s established residential identity.

“A place where traditional Queensland living has taken place for centuries; Toowong is seeing a shift of contemporary influence, commercial and retail hubs mixed with well-considered residential offerings – all the while maintaining its character and charm,” the architect noted in planning documents submitted to Brisbane City Council.

The architecture practice said the project’s form was shaped by its riverfront setting, flood considerations, neighbouring building scales, and view corridors.

“They said the mix of four and two-bedroom apartments capture the ‘fundamental qualities of Queenslander living,’ translated into the context of a contemporary subtropical building.”

The development sits just off Coronation Drive within walking distance of Toowong’s retail precinct and the upgraded Regatta ferry terminal, while also benefiting from proximity to the incoming green bridge connection to West End. Sammut said the accessibility and amenity offering were central to the site’s appeal.

The approval adds to growing residential activity along the Toowong riverfront, joining nearby projects including Consolidated Properties’ Monarch Residences and Spyre Group’s ARC Residences.

Sammut secures approval for debut Brisbane apartment development in Toowong

Developer Lanevick is heading back into Sydney’s apartment market after focusing more heavily on the luxury townhouse and terrace sector in recent years.

Lanevick, founded and directed by Steve Maroun, is expecting to receive approval in the coming months for a new apartment development in Gladesville, with the aim to launch it to the market later this year.

The 51-apartment project, designed by Studio Johnston, will comprise a mix of one-, two-, and three-bedroom apartments positioned toward the Hunters Hill downsizer market.

“Traditionally it’s been difficult for people in that market to downsize because there just hasn’t been the right product available,” Maroun said.

“We’re targeting buyers who might have 30 to 40 per cent of their house value sitting in the bank after downsizing.

“They still want good spacious entertaining areas, they still want quality design, but they also want flexibility and the ability to enjoy life a bit more after working hard for a long time.”

The project sits near Boronia Park and within close proximity to the Parramatta River foreshore, an area Maroun says offers more of a Hunters Hill lifestyle than a traditional apartment precinct.

“From a lifestyle perspective, it’s really more Hunters Hill than Gladesville,” Maroun said. “You’re close to the foreshore, close to parklands, and still connected back into the village precinct.”

From level four and above, apartments will capture water views&nbsp;toward Sydney Harbour. Communal amenity will include rooftop entertaining areas, wellness spaces, and a gym tailored toward owner-occupier buyers.

“We’ve really designed these apartments around that buyer coming from the Hunters Hill LGA and what they’re actually looking for in their next chapter.”

The proposed development has also been designed to respond to the changing character of the broader Gladesville town centre, where a growing number of mixed-use and residential proposals are expected to emerge over the coming years.

“Gladesville presented a rare opportunity to deliver a genuinely design-led residential project within an evolving lifestyle precinct, just moments from the growing Gladesville town centre, and we’ve approached the project with a strong focus on architecture, liveability and long-term community value,” Maroun said.

Maroun said Lanevick saw a first-mover advantage within the precinct as planning controls continue to evolve to accommodate greater housing density.

“We think there’s a real opportunity there that hasn’t really been serviced properly yet,” he said.

“There’s going to be a broader evolution of the whole Gladesville village precinct over time, particularly with more activation and mixed-use outcomes.”

The Venus Street proposal will include a commercial and retail component at ground level designed to contribute to that evolving streetscape activation.

“A big part of the thinking was how do you activate that area properly and create more vibrancy and amenity, which is what Hunters Hill has been looking for,” Maroun said.

Lanevick’s focus since 2020 has largely been on smaller-scale luxury townhouse and terrace developments. The developer recently completed Royale Randwick, also designed by Studio Johnston, where prices reached $3.65 million. The project was featured in the UDIA NSW 2026 Professional Development Prospectus and was also named a finalist for Development of the Year.

&nbsp;

Lanevick to cater for Hunters Hill downsizers with new Gladesville apartment development

Property developer One Living, backed by former Macquarie banker turned investment manager Chris Green’s investment firm, has unveiled plans to bring more institutional capital into housing to help address the national supply crisis.

The New York-based investor has focused his firm, GreenPoint Partners, on addressing the supply shortage hitting middle market housing in Australia.

It is backing the new One Living business to develop more than 1000 units along the eastern seaboard. The new firm is starting with a development on Mona Vale Road, on the border of Mona Vale and Pymble, in Sydney’s Northern Beaches, with around 140 apartments planned. They are eyeing off more sites across the city.

With cost pressures rising in the industry, One Living’s model is to be a vertically integrated developer-builder, so it can respond directly to the housing gap by removing the cost inefficiencies embedded in traditional residential delivery.

“We are building a platform designed to operate at scale and starting in a market where there’s a clear need for quality, attainable housing,” One Living joint managing director Joseph Scuderi said.

“It’s that missing middle – it’s that attainable end of housing… that’s what most Australians invest into and what Australians can actually afford.”

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="798dfa93-4941-4db6-a696-31e9dc18e81c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.31.50%E2%80%AFPM.png?VersionId=mKBqi5C_DmeiXS.AtJkcR8LQIxqCqmFi" />

GreenPoint Partners brings years of experience assembling and scaling real estate operating businesses across major markets. And Green sees a big opportunity in Australia.

“For its size, sophistication and importance to the community, Australia’s living sector has remained largely under-institutionalised, which represents significant opportunity,” Green said. “GreenPoint identified that gap, assembled the right team, and is backing One Living to build a platform that is aligned to market needs.”

Green said being a builder-developer would give the company the capacity and flexibility it required to deliver reasonably-priced homes.

“We want it to be at that attainable level; not super high end luxury but at that attainable level,” he said.

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="74a5344a-4b26-4d4a-ada3-056b1220be77" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.32.15%E2%80%AFPM.png?VersionId=vY8hXHO4reBMdO8ZXMWCNtGZJofUPQ3j" />

&nbsp;

One Living will undertake a component of affordable housing in its schemes, which it will own and operate, and it could also run build-to-rent on some sites.

Green praised local policy settings.

“The NSW government is being very supportive, strategic and pragmatic in terms of how do we generate more supply of housing,” he said. “We think it’s actually positive for development and the bit that’s been lacking at that attainable level is that it’s lots of relatively small private developers, whereas we want to create an institutional platform.”

One Living is also&nbsp;looking at high-density projects and could take on more institutional funding in the future.

“The way we will be able to achieve economies of scale is through size,” Green added.

One Living enters Sydney's new apartment market with Northern Beaches site acquisition

It's been several years since there's been an opportunity to buy a brand new townhome in Melbourne's coastal suburb of Mordialloc. Even apartment developments in recent times have been few and far between in the area.

Local developer LDS Property identified the gap in new housing, securing a site on White Street, directly opposite&nbsp;Woodlands Golf Club Mordialloc. They've recently launched&nbsp;<a href="https://www.apartments.com.au/new-townhouses/wm-residences-mordialloc-102-white-street-mordialloc-vic-3195">WM Residences</a>, just 13 townhouses which they have already started building.

Projects by Buxton Director Heath Thompson, who is selling WM Residences, says the townhouses x that perfect middle ground be

"Mordialloc residents have had limited options to downsize within the suburb, often forcing them to look elsewhere despite long-standing ties to the area," Thompson says.

"With very little comparable new supply coming to market, projects like WM Residences are well placed, particularly as buyers look to capitalise on current conditions amid constrained supply."

[smartcode_project:default project_id=134646 project_image_fid=6109]

The development, designed by regarded architecture firm&nbsp;<a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a>,&nbsp;adopts a deliberately restrained architectural approach, focusing on simplicity, durability and liveability rather than overt design gestures.

The boutique scale is central to the offering. With only 13 three-bedroom residences, each home is configured to prioritise functional layouts and everyday use, supported by private terraces and secure two-car garages.

Ewert Leaf’s design response leans into a calm, neutral material palette. Interiors are defined by oak flooring, white walls and soft finishes, creating a consistent and understated backdrop. The approach avoids trend-driven detailing in favour of longevity, with an emphasis on natural light and spatial clarity.

[smartcode_project:default project_id=134646 project_image_fid=6110]

Beyond aesthetics, the homes are designed to meet contemporary performance expectations. Each residence targets a minimum 6-star energy rating, incorporating double glazing, comprehensive insulation and all-electric Bosch appliances.

The project’s location supports a walkable coastal lifestyle, sitting within close proximity to Mordialloc’s foreshore, Main Street retail strip and the train station. Local cafés and dining venues, including Suburbia Deli and Hendriks Café, are within a short walk, reinforcing the area’s established neighbourhood character.

[smartcode_project:default project_id=134646 project_image_fid=6116]

While <a href="https://www.apartments.com.au/developments/mordialloc-vic-3195">Mordialloc</a> is often defined by its beach and pier, the project taps into other areas of day to day living, offering easy access to local food, casual dining and transport, rather than positioning itself purely as a lifestyle retreat.

WM Residences reflects a continued trend across Melbourne’s coastal suburbs towards smaller-scale, design-led townhouse developments, particularly on infill sites where proximity to amenity is already established.

With construction commenced prior to its market entry, the project aligns with a growing preference among buyers for developments with visible progress and defined delivery timeframes.

[smartcode_project_cta:default project_id=134646]

Catherine Cashmore

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