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I’ve written extensively regarding the various issues that adversely affect our home buying demographics.
Within the real estate industry itself, it’s not a popular subject - obviously time spent analysing concerns related to rising capital prices, which will eventually result an undesirable demographic shift in the makeup of our society, do little to promote a profit making business that reaps rewards from inflationary gains.
Any hint that the cost of accommodation may be unaffordable for a growing percentage of potential purchasers, usually results in an accusation that first time buyers are being picky or just plain unrealistic in their expectations. Whilst low rates may assist existing owners, the short-term frenzy of activity being felt in our largest capital cities is primarily being lead by little more than confidence and speculation, with 50% of Sydney and Melbourne’s current demand is coming from the investment sector alone.
Investors now prop up valuations in the lower price bracket and consequently first-time purchasers without some kind of family assistance to help with a deposit, or dual income, often find themselves forced into a rental trap.
Another reason housing affordability is an unpopular topic, is because it needs to be tackled on a number of fronts.  Hence, why it often seems like an insurmountable problem that successive governments find “too hard” to change within their short-term outlook, albeit, it’s not through lack of educated advice.
Reviews into tax policy, land constraints and development overlays, changes to existing models of funding and so on, have been analysed and researched extensively. However, if the trade-off risks lowering valuations for an asset class which is the retirement and income stream for a large proportion of Australians, it’s considered political suicide to do much outside of maintain the mantra to keep rates low and job security high.
Housing is evidently more about investment than ownership.  The vast majority of programs, publications, and commentary on the housing market, are focused firmly on the investment sector, coupled with plenty of free advice on the expanding array of mortgage products.
It’s a vehicle for making wealth – a valuable asset to tap into when approaching retirement – potentially less volatile than the stock market considering its illiquid nature, and one that when purchased, is held for the long-term, with a view to using the equity to leverage into future acquisitions.
Single first home buyers (if they can be found) need to seek accommodation outside capital city markets to purchase within budget.  Therefore, when you witness half a dozen bidders battling it out for small un-renovated 70s style apartment in an inner area of Melbourne or Sydney, and paying in excess of $500,000 or $800,000 respectfully for the privilege of doing so, with a rental return yielding little more than 4%, you have to wonder at the sanity of it all.
A large proportion of unproductive debt being pumped into a limited area of density, with investors (the supposed ‘unemotional buyer’) playing a game of musical chairs with aging stock, hoping consistent market demand from future speculators will keep valuations inflated, and provide the needed rise in capital to make the loss yielding investment worth the risk after maintenance costs, periods of vacancy, and inflation have all been accounted for.
Commentators often try and play down this influence in the Australian real estate market by stating that just one in seven households owns a single residential investment property.  However, it’s not so much the overall proportion of investment that matters, although this is a factor, but where the concentration is focused.
The percentage of investor-owned apartments in both Darwin and Brisbane for example falls close to 70% – and in the other capitals, it comes in between 60 and 70%. In Australia, investment property contributes 32% of Australian mortgages, compared to 20% in NZ and 12% in the UK.
Local buyers leverage this debt into established dwellings with the low grade, high-density apartments being primarily sold off-the-plan to offshore purchasers which due to cultural tendencies, often results in a significant proportion sitting vacant.
Considering my statement that housing is more to do with investment than occupation, it could be argued that there’s nothing wrong with this - except of course, we all need somewhere to live, and putting aside a small proportion of Australian’s who make the long term lifestyle choice of renting whilst investing elsewhere, most desire a secure place of residence, debt free, upon retirement.
Hence why affordability and increasing the supply of quality stock to provide a feasible entry point for low-income workers into an area that is not devoid of infrastructure, is primary.
Over the next 40 years, Melbourne’s population is set to expand to a projected eight million eventually putting the state in front of Sydney as the most populated.
Planning Minister Matthew Guy is currently responsible for shaping Melbourne and to be fair, he hasn’t got an easy job.
It’s going to be nigh on impossible to please everybody. Years of poor policy have already ensured we have sparse facilities to meet the demands of those who choose to live in fringe suburbs and consequently, the price of commuting frequently forgoes any benefit gained from paying a marginally lower price for the privilege of more space and accommodation further from the city.
The state government are taking a two pronged approach. Firstly, by deciding to enforce a permanent urban boundary to prevent further sprawl, whilst encouraging expansion of regional towns such as Bacchus Marsh, Warragul, Kilmore and Wonthaggi. And secondly, increasing the proportion of high-density accommodation by way of recent changes to residential zones.
So far, the main consensus of opinion on talk radio, television, and social media, has been virulently against all of the above - urban sprawl, increased density, and regional development, with neighbourhood voices speaking strongly against any change to their local landscape.
However, whilst heated emotions are understandable, ease of effective supply is an essential component when combating issues of affordability, and therefore, if this is what the state government intends - as spruiked in the various press releases, it must achieve the following:
<ol>
<li>Drive down land values </li>
<li>Ensure infrastructure is adequately financed </li>
<li>Keep speculative activity in check to make sure supply is suitably priced and attractive to lower income homebuyers and renters.</li>
</ol>
In light of the above, a few cautionary points should be highlighted in regard to Melbourne’s new plan.
When you place a band of restriction around any neighbourhood – with a ‘permanent urban growth boundary,’ you effectively make assumptions about future increases in population, and in doing so restrict the amount of developable land, resulting in a decrease not increase of supply over the longer term.
In addition, larger developers have a tendency to land bank the available plots reducing competition against smaller players who don’t have the financial capital to compete so far in advance of demand.
This inevitably leads to higher, not lower land prices for the predominant demographic this type of accommodation attracts – lower wage dual income buyers.
Families require houses (not apartments) gardens, green areas and local schools.  They need community facilities, a local doctor on hand, good public transport and nearby shopping centres – and they need it all at an affordable price.
Therefore, as much as idealists may not like sprawl, it’s not only important to make land readily available and free of restriction when population growth demands as such, it’s also important to implement a structured and timely plan to fund essential community infrastructure to attract consistent solid demand.
The specified areas closer to town set aside for intensive development of high-density apartment blocks will be immune from council or residential protest.
However, to date, the rush into apartment living has been anything but robust.  The elderly overwhelmingly downsize into medium density accommodation– and although younger generations in their 20s and 30s have a better propensity towards high density dwellings, figures still only peak at around 14% at the age of 27 (as of 2011).
At the root of the problem lay a few issues. The relatively small one and two bedroom units featured as 'affordable' tend to fall into the investment sector of the market, not just because of tight lending restrictions banks impose on first home buyers for this type of accommodation, but also due to high owners’ corporation fees set aside to service the lifts and other security features.
The standard of accommodation is typically low grade and developers are pressured to pay vastly inflated commissions to achieve the pre-sale targets set out by the banking system in order to acquire funding. Hence why such projects are often aggressively marketed to offshore purchasers.
In this regard, the avenue Melbourne is heading toward, is similar to the building initiatives employed in Ireland in the run up to the GFC.
In this region, when supply responded to demand, it was generally too late. Urban growth restrictions ensured new homes were built in locations far from existing amenities, and therefore not appealing to the home buying demographic whilst brownfill sites were filled with high-density poor quality unit stock more suited to investors than the needs of owner occupiers.
Subsequently, in the two years leading up to 2007, almost half of all new home purchases stemmed from the investment sector rather than a first home buyer demographic, and as a result, many of these homes are still sitting vacant whilst the lingering lack of ‘quality’ accommodation is once again starting to <a href="https://www.independent.ie/irish-news/city-housing-bubble-feared-as-prices-soar-by-3000-a-month-29614288">disproportionately inflate</a> as the economy shows slow signs of recovery.
If nothing else, the example proves aptly how supply shortages can still occur, even when building initiatives have been implemented.
Therefore, as admirable as the state government’s plans may seem on the surface, there’s every risk they won’t fulfil the objective intended.
In an excellent piece in The Australian a few days ago, Toby Hall, chief executive of Mission Australia made <a href="https://www.theaustralian.com.au/national-affairs/opinion/lets-put-cranes-over-cities-to-build-housing-for-vulnerable/story-e6frgd0x-1226735036870" target="_blank">comment;</a>
“Housing is part of our critical infrastructure and we should treat it as such. We (should) consider debt financing for major projects - bridges, roads, rail - and we should consider a housing bond backed by the commonwealth.”
Because of our current tax system the best-established property in our inner suburban market suited to the first home buying sector is currently a hotbed of investor demand.  Therefore, as vital as it is to consider finance initiatives to stimulate new projects, it is equally important to make sure the supply constructed is diverse enough to appeal and fulfil the needs of low income owner occupiers -including an increased provision of social housing - and therefore suitably targeted toward those who need it most.
 
<hr>
 Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
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Investors or owner-occupiers: Who are we really building housing for? Catherine Cashmore

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Despite the recent gains in dwelling values being fragmented across the states, it’s always interesting to chart the reaction when making the assertion that the rapid run up in values, occurring in areas such as Sydney and to some extent Melbourne, have been stimulated by little more than an investor lead rush to get in quick. Capital gains are visibly overshooting the mark, and cheap money coupled with a honeymoon period of post-election confidence, is forcing buyers to seek out any area of opportunity that can provide a better return on their dollar.  
However, for those who work in the commission driven residential sector and derive their living from Australia’s $600 billion property industry, any negative sentiment indicating potential instability is strictly taboo.  
Indeed, it’s easy times for agencies when the market is booming – investors come knocking buoyed on by recent gains, sales agents don't have to chase buyers in order to achieve the needed competition to exceed their vendor’s reserve, and as we start to witness a period of accelerated growth, the self perpetuating circle of certainty that keeps the ball of optimism rolling, is proof enough for all imagining there can be no end to the festivities.  
Those who work in the industry understand that it’s this type of confidence that underpins investor activity; therefore if prices are dropping opportunity knocks, and if they are rising it’s merely proof that markets always recover and values trend upwards. 
In other words, there’s never a bad time to buy property – to insinuate as such, would result in a personal conflict of interest.  
I received an auto-generated email this week from one commentator suggesting we have become a nation of so-called experts – people with opinions, but very little expertise.  
According to the theory set forth in the email, the criteria for expertise in our property market to enable impartial advice, is simply someone that walks the talk – a "successful property investor" with a large portfolio of dwellings.  
However, for those that entered the property market at the beginning of the lending boom, and benefitted from our golden decades of growth – becoming a successful property investor, wasn’t incredibly hard.  
The rise of dual income households, intermittent buyer grants, tax incentives aimed at investors, stronger wage growth buoyed on by a robust economy, poor planning for population growth (with both the monopoly and restriction of land stagnating effective and affordable supply), a propensity toward high loan to value ratios in the lead up to the GFC and a culture that veers disproportionately toward property investment as a vehicle for wealth creation ensured the baby boomer generations, who hold roughly 50% of Australia’s housing stock, didn’t need much more than a basic foundation of market knowledge to reap the resulting capital gains.  
Having never lived through a real estate crash, boomers matured in a market where the industry driven mantra dictated that nominal values double every seven-10 years or always goes up 7-10% per annum, as the wax and wane of a property cycle progresses.  
Some of the various stimulators that lead to these gains are not to be repeated, and whilst there will always be periods of inflation and deflation in any modern market economy, it’s important to have a good understanding of the dynamics fuelling those gains and the longevity of such, or you risk falling into the trap of thinking the good times will ultimately always outweigh the bad.  
Whilst the real estate profession differs little from any other sales industry, in so much that it has to maintain a positive narrative, it also promotes Australia’s largest domestic asset class with an aggregated value of over $4 trillion pinned to a banking sector, which has the highest exposure to residential mortgages in the world.  
Pumping the line that it’s always a good time to buy, with inflated capital prices simply an indicator of a “healthy economy”, can potentially hold serious consequences – If housing is going to be used as an investment vehicle, the advice being given requires strict regulation.  
As it stands, Sydney’s buying market is almost a 50/50 equal split between investors and upgraders, with first home buyers holding less than a 5 % share.  
Whether it is negative gearing, land banking or borrowing to purchase in a self-managed super fund, all such strategies are solely reliant on capital growth to compensate for the growing gap between price and yield. Therefore demand is overwhelmingly concentrated on a reducing pool of established property and the recent acceleration in prices represent this.  
The so-called fundamentals presented that are intended to calm any negative spirits into believing our economy faces no immediate danger, are startling similar to those projected in other countries immediately prior to the financial crisis.  
Whilst there’s no doubt in Australia we have a shortage of affordable and effective supply, to assume this alone will always generate nominal price gains, or even place a firm floor under current valuations, concludes we can keep playing a game of musical chairs with second hand stock, against a backdrop of rising unemployment, weak wage growth, an aging population and stubbornly high levels of personal debt.  
I’m referring in particular to arguments such as demand outstripping supply, population growth, a stable economy, and other indicators such as housing affordability measures. These maintain that capital increases aren’t negatively affecting first home buyers, because the proportion of income needed to service the loan is balanced in a low interest rate environment. And whilst I’m not suggesting we face an imminent crash, one thing all crises have in common is that the majority never see them coming.  
Ireland is one such example. In the lead up to the GFC, which wiped over 50% of the value off properties in markets such as Dublin, all available economic indicators were firmly pointed toward the positive.  
Since the middle of the 1990s, growth in real disposable income per head had been stronger than any other industrial country.  Residential demand was fuelled principally from robust net migration, coupled with trending fall in household size.  
By 2007, 75% of the population owned outright or were renting, and the proportion of buy to let investors had increased to 27%.  
The overwhelming mantra from the real estate sector fervently claimed a property crash was impossible. Strong GDP growth and low unemployment figures supported a feeling that the environment was protected, and average mortgage payments were estimated to be no more than 30% of household income.  
When supply did respond to demand, it was generally too late, and urban growth restrictions ensured new homes were built in locations far from existing amenities, and therefore not appealing to the home buying demographic.  
Brownfill sites were filled with low-grade high-density unit stock, and subsequently, in the two years leading up to 2007, almost half of all new home purchases stemmed from the investment sector rather than a first home buyer demographic.  
Following the crash, large swaths of these new properties sit vacant, and the lingering lack of quality supply has started to once again <a href="https://www.independent.ie/irish-news/city-housing-bubble-feared-as-prices-soar-by-3000-a-month-29614288" target="_blank">disproportionately inflate</a> established values as the economy starts to show slow signs of recovery.  
The rhetoric stemming from the media also played its part in underpinning the confidence. Various headlines from the Irish Times prove the point aptly: "Bricks and Mortar Unlikely to Lose Their Value" (December 11, 2002), "Prices to Rise as Equilibrium is Miles Away" (March 18, 2004), "House Prices 'Set for Soft Landing'" (November 22, 2005), "Property Market Unlikely to Collapse, Says Danske Chief" (February 2, 2006) and "House Prices Rising at Triple Last Year’s Rate" (June 29, 2006).  
Similarly, the UK was also suffering a housing shortage with data analysis given to parliament suggesting the UK needed "an overall total of 203,000 homes each year during the period 2001 to 2021 to keep pace with newly-arising household growth."  
Whilst it’s impossible to compare against every measure when drawing international comparisons, the spirit of certainty that keeps prices rocking along all too often masks underlying instabilities. Hence why so few see a crash looming.  
This is why it is vital and long overdue, for our politicians to work hard at establishing a political road map that will unpick the current distortions tying up the established market (such as tax incentives which encourage speculative activity and underutilisation of the existing stock), whilst at the same time lowering land prices and increasing effective and quality supply for buyers and renters.
Without action, potential rises in unemployment and future interest rate hikes will simply exacerbate the boom and bust cycles resulting in a slow and painful demographic shift, as an increasing wave of younger Australian’s find themselves in a position where they need to take on a greater and greater proportion of debt just to enter the market.  
It’s easy to palm off the risks by citing that only Sydney and Melbourne are experiencing heated activity – but somewhat foolhardy to think that this won’t have a broader impact as the RBA fight with the conundrum of balancing rates in a multi speed economy. 
Whilst we continue the bubble debate, and both the RBA and government sit on their hands and look sideways assuring us there’s nothing to worry about yet, a largely unregulated housing market, which in some areas is full of pent up demand from cheap money and speculation, has well and truly taken the bit.
 
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 Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
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Regulation and speculation, the self-perpetuating forces in Australia’s housing market: Catherine Cashmore

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I wrote a few weeks ago about <a target="_blank" href="https://www.propertyobserver.com.au/economy/are-we-in-a-dwelling-boom-a-rally-bubble-or-a-recovery-inside-our-bubble-mentality-catherine-cashmore/2013081864317">housing bubbles and the misconceptions commonly related to the term</a>.  A bubble is typically an illusion of economic strength which draws buyers in, whilst masking underlying fragilities - and in some areas of Australia, the recent investor lead rally in property prices from an already inflated base is concerning.
However, unlike other economic bubbles, housing markets have plenty of complexities which can delay a severe correction – not least the stimulus of easy monetary policy, incentives, and speculation buoyed on by tax policies that encourage heated investor activity in the established housing terrain around our most desirable capital city locations.
Even in markets where housing has suffered dearly from the 2008 financial crisis, such as the UK, and USA, there is a fragmented nature to the falls dependent on location and the openness to attract foreign speculation.
In the south-eastern regions of England for example, where foreign money has propped up London’s prime central market creating a ripple across the outer lying suburban towns, the falls in capital have been far less severe than the northern districts where the market has dipped some 20%, and in regional areas, even more.
Not that this has in anyway helped Briton’s younger population who are now commonly termed ‘generation rent,’ with the numbers of unemployed living in the family home almost doubling between 2008 to 2012, and the productive areas of economy failing to pick up fast enough to drive innovation and generate new sources of growth.
Although house prices in the UK have started to rise again with the help of various schemes such as ‘funding for lending,’– other areas of productivity aren’t fairing so well.  As UK regulator Lord Adair Turner pointed out in a recent speech to London’s central bankers and economists, only 15% of total financial flows in the UK have gone toward investment projects, the rest have instead been used to support unsecured personal finance or existing assets - significantly real estate.
However, do we really fair much better in Australia? Our low interest rate environment, coupled with a honeymoon period of post-election confidence, is predictably forcing investors to seek out any area of imagined opportunity that can provide a better return on their dollar.
This runs the risk of stimulating higher levels of household debt (currently at around 150%) directly tied to speculative behaviour.  And in the Australian culture which veers towards the perceived safety of bricks and mortar, based on the somewhat fool hardy view promoted widely in the industry that limited supply and rising population growth can forever prevent a sharp correction, you don’t need a second guess as to where a large proportion of undiversified debt is currently being allocated.
Some interesting research was released last week by Jonathan Mott of financial services firm UBS, highlighting the above point aptly;
“If we compare Australia, New Zealand and the UK, all three countries have similar cultures, demographics and home ownership. However, investment property contributes 32% of Australian mortgages, 20% of NZ mortgages and 12% of UK mortgages. ….57% of Australian landlords are leveraged (ATO data suggests this is closer to 81%) compared to 28% in NZ and just 13% in the UK”
This would be less of a concern if effective supply was keeping pace to soak up the overflow of demand, and thereby reduce volatility in values. However, in areas of limited supply, the bubbly nature of the price gains disproportionally advantages those with existing assets, at the expense of those struggling to get a foothold.
When viewed against a less than desirable economic backdrop of rising unemployment, an unwinding mining boom, and weak wage growth, with a rise in the cash rate at some future point inevitable, you’d be foolish to think the current trend can continue without some correction.
Notwithstanding, our politicians continue to miss the point, as Tony Abbot said on 3AW last week;
“Don’t forget … if housing prices go up, sure that makes it harder to get into the market, but it also means that everyone who is in the market has a more valuable asset,”
What a sad world it is, when the most essential item young and old aspire to alike, for both their health and continued well being, gradually becomes less affordable over time, requiring a greater level of debt to be serviced despite the somewhat falsely perceived advantage, that low interest rates somehow make the buying environment and purchase of property easier.
And yet as a direct consequence, we have falling rates of ownership – particularly in the younger generations, an increase in overcrowding of accommodation, rising waiting lists for social housing, and the average age of ownership for those not benefitting from a gifted deposit, pushing closer to 40 years.
The housing market no longer revolves around promoting home ownership for the sake of personal well being, it’s Australia’s largest domestic asset class with an aggregated value of over $4 trillion, and understandably it’s now suggested that ASIC should recognise it as such.
Countless hours can be spent arguing what the term ‘bubble’ actually means – definitions are numerous. Equations are done regularly comparing price to rent, debt to GDP, price to wages (a somewhat skewed calculation due to the inclusion of compulsory super,) however do we really need a meteorologist to tell us what the weather’s like outside?
Whether you call it a bubble matters not, Australian house prices have been pumped up with many ingredients over the decades to get to such elevated levels.  As a result, we have a market that is both overpriced and undersupplied, with the first home buyers' share of new home loans sitting at its lowest point in a decade.
Monetary policy alone is a blunt instrument, and whilst Governments can allocate at their discretion where to spend our tax dollars, they have limited influence on where cheap credit is spent, or for which asset it is lent into the economy.
Nor do they currently have the ability to direct it into areas where it’s needed most – which in terms of housing would principally be construction. Hence why the sector continues to call out desperately for another rate cut.
Instead buyers are punting a lot of unproductive dollars on second hand houses, and the proportion of cheap money finding its way into a limited pool of dwellings, should not be brushed aside as merely part of a typical property cycle, when we have a number of economic and social factors combining, which left unregulated, have the potential to create the perfect storm.
<a target="_blank" href="https://www.afr.com/p/blogs/christopher_joye/why_we_should_be_worried_about_australia_9gqc2CPE2hrAcikkRvyOGM">Much commentary has been written on this matter of late</a>, and it’s not isolated to Australia. The Bank of England this week voiced how it was watching the UK market “closely” as price rises in London reached 10% in the year to July, warning “that if risks to the stability of the financial system were to emerge from the housing market, both it and the micro prudential regulators had a range of tools available to address those risks."
However, the RBA continue to sit on their hands, not wanting to pull a regulatory lever, instead taking on a stern expression and wagging a finger at investors whilst pleading with them to employ caution, as if they will all fall into line like a bunch of secondary school kids in a playground.
This idea that investors will employ a sense of rationality is ambitious in a market that has corporate regulator ASIC, once again warning against the propensity of spruikers.
But even without these spruikers buyers face difficulties - fed daily with house price statistics from RP Data. Closely comparable sales data is not readily available – computer generated “estimates” are a guess and more often than not, hopelessly inaccurate.
Furthermore, there are plenty of other variables that need to be assessed prior to investing in any residential listing.  Prospected development projects which may spike the stock being taken to market, thereby diminishing the level of capital growth being assumed based on a cursorily look at historical data.
Local vacancy rates, the time on market you can expect your rental property to reasonably sit before finding a tenant, the predominant area demographic any said property will appeal to in order to attract and maintain consistent buyer demand - the list continues.
I mention this, because the broader implication of a large proportion of inexperienced buyers making unwise acquisitions without educated due diligence, is a worry unto itself. However, the number of real estate investors is set to rise. Although presently, only a relatively small proportion of total investment in the property market stems from SMSFs, it’s going to rapidly increase.
As mentioned in the AFR this week, the most mobile pot of cash is in the self-managed super system. About one third of the $500 billion in SMSFs is held in cash, or about $150 billion.
On the back of this, there is a theory that self-managed super will have a mean reversion to normal cash weightings of about 10%. If that proves accurate, about $100 billion in cash will move – leading to the question –where will it move?
As it stands, only 23% of investment into residential property comes from SMSFs, against 77% invested in commercial.  Albeit, when the direction of that percentage is into established areas suffering an elastic band of restricted supply, the recent boom in Sydney for example, against the backdrop of slow credit growth - will have no doubt been exaggerated by SMSF demand.
However, banking regulation aside, our politicians should be moving to restrict policies that encourage disproportionate speculation, such as the tax treatment of negative gearing (which should be phased out) and capital gains, or implementing a transition toward a broad based land tax system which is long over due.
My only comment to those with short-term spectacles on who think the recent boom is good news - enjoy it whilst it lasts, because I suspect it won’t end without unpleasant consequences.

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Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
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Enjoy the housing boom while it lasts, it won't end without unpleasant consequences: Catherine Cashmore

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I was fortunate enough to attend the SQM seminar last week as Louis Christopher – one of the most well respected voices in the real estate industry for his balanced assessment of market data – presented a state by state rundown of projected activity over 2014.
<a target="_blank" href="#https://www.sqmresearch.com.au/capitalcitiesreports.php">Louis predicts</a> Sydney’s established housing market will see a 15-20% ‘rapid rise’ over the course of 2014, highlighting the middle suburbs in particular to capture the overflow of demand, as inner city development constraints force consumers outwards.  
There’s been plenty of talk regarding housing affordability and the very real risk associated with an unsustainable boom in values, with some claiming – based in part on our low interest rate environment – that any mention of a concern is a mere myth.  
When asked from an audience member at the seminar if first home buyers were being crowded out of Sydney, Louis concluded they were – and indeed it would be hard to deny.  
Investor activity has dominated the Australian property market over the last 12 months or so.  Banks are bidding for buyers in a highly competitive environment, and the lion’s share of mortgage demand is being eaten up between investors and upgraders.  
A third of all new loans are with loan to value ratios of more than 80%, and 40% are on interest only terms.  Clearly investors are speculating on a continued pattern of price gains from an already high plateau – an ambitious projection.  
Under the existing financial system, inevitably, it’s none other than rising debt that fuels accelerated growth.  However, <a target="_blank" href="#https://www.macrobusiness.com.au/2013/09/charting-the-australian-first-home-buyer-retreat/">since March 2009</a>, whilst the average first homebuyer mortgage has increased by only 1.4%, the mortgage for the market as a whole has grown by 7.9%.  
Meanwhile, first home buyers have seen their savings eroded, and as the latest ABS housing finance data outlines, wishful thinking that rising yields are pushing greater numbers into the market, has had scant effect.  
According to research by <a target="_blank" href="https://www.ratecity.com.au/">Rate City</a>, “first home buyers now account for just 11% of home loan commitments. This is below the 20 year average of 15% and has not been this low since 2004.” And whilst interest rates on their own can have little impact on price rises or falls in the near term – a long period of low rates and the dependency it invokes, can be dangerous in inelastic areas of limited supply.  
Current competition coupled with pent up demand, has done little more than push values further out of reach of a genuine entry buyer demographic.  And as complex as it may be to slowly unpick the current distortions that tie up the established market and hamper construction, the implications of not doing so, are potentially worst over the longer term.  
No one should be fooled by the rhetoric from various industry commentators concluding current inflationary gains are of no concern. Hence why we are seeing a conundrum in central banks across the globe employing "precautionary policy activism” in an attempt to cool asset inflation without hampering the broader economy by raising rates.  
<a target="_blank" href="https://www.propertyobserver.com.au/news/new-zealand-rba-announces-restrictions-on-mortgage-lending-for-borrowers-with-less-than-a-20-deposit/2013082064388">In New Zealand in particular it’s a point of concern</a> and not just a localised issue. House prices currently sit at record highs, with the government property valuer ‘QV’ residential index showing gains of 8.5% in the 12-month period ending August 30.  
As reporter for real estate news on Sky Business 602, Iggy Damiani pointed out to me last week that Australian banks' ownership of New Zealand’s 'big four', place them in a precarious position - currently having the highest exposure to residential mortgages in the world. Therefore asset gains, which outpace both wage growth and inflation, must be addressed.  
Even assuming low rates are assisting first home buyers, saving a deposit and sourcing a suitably affordable property is no easy task for a demographic who are often burdened with a hangover of student debt, and, in many cases, can’t conceivably buy in until they partner with a second income earner.  
With this in mind, it must be pondered what the effect will be when rates do inevitably rise, considering our household debt to income ratio remains stubbornly high, at around 148%.  
Property to some extent connects together like a flowchart. Supply is fed in from the bottom to allow those upgrading (and then downsizing) a ready market to sell into in order to make the move.  
However, when investors predominantly negatively gear into the asset class most favoured by first home buyers – inevitably resulting in inflated established property values – and the state government fails to come to the party with feasible affordable alternatives, our property wheel of upgrading and downsizing risks stagnation.  
In the near term, heated investor activity may keep everyone dancing, however over the longer term we’re losing a valuable demographic of property buyer, which will no doubt have a flow-on effect across the property chain as a whole.  
As these changes push through the generation gap, it’s fair to assess, increasing numbers will retire whist still factoring as short-term renters.  
Investors tend to hold property for extended periods of time in order to build equity – many choose to invest as part of their self-managed super funds and subsequently do not sell until retirement. Therefore the ready supply, which usually comes from initial homebuyers selling and upgrading, will start to slow.  
 
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Additionally, we have the first world problem of an aging population creating future headwinds across the economy, with <a target="_blank" href="https://archive.treasury.gov.au/igr/igr2010/report/pdf/IGR_2010.pdf">government intergenerational reports</a> forecasting the already reducing workforce participation rate, to drop to around 60% by 2050.  
Considering the predominant home buying activity takes place within the ages of 22-44, it seems reasonable to assume that there’ll eventually be proportionally greater demand from those downsizing as we progress through these buyer type changes.  
However, if the flow-on home buyer effect doesn’t follow through, the mismatch of household size comparable to property type will continue to stagnate our property buying and selling terrain, further tying down supply in the areas most want and need to reside – areas within easy commutable distance to city suburbs, jobs and essential amenities such as schools, hospitals, doctors, public transport systems and so forth.  
Therefore, the last thing we should be doing, is advocating the spruik that rising property prices are somehow good for the economy having a supposed flow on effect into retail spending, which in itself is currently not producing the desired result.  First home buyers may head out to purchase white goods and furniture for their new abode, but our investment sector certainly won’t.  
Additionally, choices are limited in a market that has been turned into a speculative terrain.  
If we were building homes that were viable for first home buyers to gain a foothold which would not only maintain consistent market demand in order to upgrade, but also provide feasible accommodation for this demographic to settle for an adequate period of time, then having an investor-dominated inner-city terrain could perhaps be balanced somewhat so as not to affect the stagnated flow of the home buyer chain.  
However, the new home options are either limited to outer-suburban estates lacking in infrastructure, which is an essential component needed at the start of each project if we’re to lure home buyers outwards, or alternatively, inner-city high-density low grade developments.  
Our census data already demonstrates that most lone person households are tottering around in accommodation that’s far too big for their requirements. Building an abundance of one-bedroom apartments therefore won’t suffice; only 14% of the total single person households of all ages opt for one-bedroom units.  We instead need a wider diversity of options, in particular, accommodation suited to families - with the decrease of ownership for this demographic showing a fall from 79.5% in 2006 to 77.2% in 2011.  
<a target="_blank" href="https://www.propertyobserver.com.au/residential/why-investor-activity-is-causing-our-property-markets-to-stagnate-catherine-cashmore/2013021759370">As I’ve mentioned previously</a>, the percentage of investor-owned apartments in both Darwin and Brisbane falls close to 70% – and in the other capitals, it comes in between 60 and 70%.  
And whilst this generation of existing investors may continue to enjoy short-term speculative gains of the oft quoted property cycle, since when did the future of the first home buyer market become ours to erode?  
I’ve assisted numerous first home buyers and renters over the past few years, and it’s no exaggeration many perceive the capital price of property and the risks associated with taking on a greater proportion of debt a potential liability. For those who argue based on textbook analysis that property is not over priced, I suggest they change their frame of reference. There may be historical logic behind the long-term growth in values, but this doesn’t change the consequence; it is both over priced and under supplied.  
Therefore, pressure on the rental market is unlikely to ease in the near to far future, with ABS data showing almost two-thirds of new residents from overseas are long-term property renters along with half new residents from within Australia who also class themselves within the same bracket.  
Furthermore, economic conditions such as wage growth, unemployment, consumer confidence and frequent changes of work placements all reduce the likelihood of a strengthening owner-occupier market over the next decade.  
Current policy is built around the general assumption that renting is a step on the road to ownership. However, unless the trend takes an about turn, tomorrow’s generation will hold a growing percentage of residents for which renting is for life, and as such, we also need to consider their welfare.  
Policy should be steered towards the creation of a fairer partnership between owner and renter.  This would include longer terms of tenancy, protection from exorbitant rent rises coupled with enforcement of basic standards of accommodation in both the private and public sector.  
As it stands, in the rental market, and the property buying/selling market short termism dominates.  No surprise, as we’re governed by those who derive personal and political benefit from the existing system, polling for the popular vote from home owners and investors; pinned to our flawed debt based financial system that relies on an ever inflating future to under-pin existing gains.  
 
<hr>
 Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
     
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The future of the first home buyer should not be ours to erode: Catherine Cashmore

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Australia has a completely blindsided view when it comes to property, and never more so than in those sectors that profit from it directly.

The fool hardly assumption that increasing values in the established arena, which outpace both wage growth and inflation over a period of years, is somehow good for the economy, as buyers play a generational game of musical chairs for a limited number of second hand dwellings, gives little attention to the broader social and productive economic impact this mindset inspires, as rental affordability worsens and construction fails to meet the effective rate of demand.

Whilst there is overwhelming advocacy for keeping basic essentials such as food prices low – crunching farmers profits with $1 dollar litres of milk, and shipping cheap materials from markets in Indonesia and China, to fuel a consumer passion for all things at marginal cost. We seem happy to let our established house prices inflate away on the back of unrestrained credit expansion by the all too willing to lend private banking sector. Devoid of strong policies to ensure there are feasible and affordable alternatives, for a younger generation of buyers who increasingly have to rely on donations from family or friends to assist with a deposit, battle rising yields or harbour student debt, and find themselves part of the ballooning house price story as they compete at an investor dominated price point.

The latest housing finance data from the Australian Bureau of Statistics shows the value of investor finance commitments is currently 30.6% higher than at the same time last year. As a proportion, first-home buyers now account for a mere 8.8% of the buying market. This is their lowest proportion of market activity since June 2004 – yet for investors it’s the highest.

As I discussed in <a href="/news">my column last week</a>, we have a trend of falling home ownership in Australia which chief economist for Bank of America – Merril Lynch Australia, Saul Eslake, made note of in his <a href="https://www.prosper.org.au/2013/09/03/saul-eslake-50-years-of-housing-failure/" target="_blank">speech at the 122nd annual Henry George commemorative dinner</a>, is further pronounced when you look through the effects of our aging population.  In other words, an increasing proportion of home owners are understandably in the older age groups.

And whilst the statistic cited above can be in part attributed to lifestyle factors (labour mobility, getting married later in life, etc) thereby producing a downward shift in the measured rate of home ownership—but not in the lifetime rate of home ownership – you cannot take affordability out of the equation.

For example, the increase of cheap credit, deregulation, supply shortages, and duel income households that has over a period of decades, inflated the capital cost of the underlying asset in areas where most owner occupiers need to locate for work purposes, has ensured the level of Australia’s private household debt-to-income ratio remains stubbornly high at 147.3%.  And despite low lending rates assisting mortgage serviceability somewhat, this is offset by rising prices – increasing the total debt the buyer has to service, and the liability banks hold.

<a href="https://www.propertyobserver.com.au/australian-capital-territory/australia-facing-most-serious-housing-market-crash-in-75-years-christopher-joye/2013091265002" target="_parent">As Christopher Joye noted</a> in his AFR column last week, relatively sharp increases in median values evidenced in particular in Sydney, coupled with our dependency on a long term low interest rates, is a point of concern.

History attests, when property prices visibly rise, increased confidence from both borrowers and lenders tends create a sense of euphoria that the party will forever continue. However, there should be a strong warning to purchasers about over stretching against a macro backdrop which presents a number of headwinds.

Not least, the August labour market report reflects ongoing weaknesses, with the largest contraction in monthly trend employment in more than a decade, a fourth consecutive fall in full-time positions, a rise in the unemployment rate, falling participation and a lift in the underutilisation rate to its highest level since February 2002. Therefore, you have to question how long the rally we’re currently seeing in the established sector can reasonably continue before things start to unwind.

Accordingly, APRA has <a href="https://www.apra.gov.au/Insight/Documents/Insight%20Issue%202%202013_Web.pdf" target="_blank">released a report</a> warning the banking sector not to let lending standards slip, noting:

“Almost 15% of all approvals are now for borrowers with deposits of less than 10%...It’s also noteworthy that a large proportion of the lending would appear to be investors on interest-only terms,” clearly demonstrating the dangerous speculative nature of our current buying market.

New Zealand regulators have already moved to place limits on loan-to-value ratios banks can hold on mortgages – aiming to restrict new loans to an LVR of no more than 80%. However, inevitably the action will place a squeeze on first home buyers, rather than the speculative investment sector that have existing assets to leverage against.

Other areas of the globe are also suffering a similar conundrum. In Sweden, private debt levels have reached record highs and there’s talk of forcing households to start amortizing their mortgages, with <a href="https://topics.bloomberg.com/martin-andersson/" target="_blank">Martin Andersson</a>, director-general at the Swedish Financial Supervisory Authority, Finansinspektionen, commenting “if household debt accelerates, as we’ve seen before, well, then we must do something.”

This brings me briefly to issues of supply. When the question arises over how we can make housing more affordable, the argument tends to get little further than simply advocating the need for construction of a lot more dwellings. However, there are a number of complexities that need to be addressed to ensure the supply built, meets the wants of those who need it most.

The reversing decline in the number of individuals per household in census data, showing household size has increased from 2.4 people per dwelling to 2.66 in the five interim, is another cultural shift of which affordability plays its part.

This figure is used to calculate underlying housing demand; therefore, even a small change of 0.01% can result in a needed reduction of almost 30,000 dwellings, so it’s important we assess the cause of the shift correctly when planning the supply of additional stock.

Indeed, it’s the figure the National Housing Supply Council grapples with yearly, as they try and equate shortage of dwellings relative to the underlying demand – currently estimated to be of the order of 228,000.

As an offside to this, it is also to be acknowledged we have a widespread underutilisation of our current housing stock. For example, at 44% the typical Aussie home still has three bedrooms, with the majority only occupied by only one or two residents.

In fact, only 14% of lone-person households live in one-bedroom dwellings, and there’s been a big increase in the number of four-bedroom homes, which now make up almost a third of the housing stock.

I’ve argued before, that increasing supply per-se is not going to assist low-income households if it is not tailored specifically to their needs.  And to date, in a market where developers are pressured to provide 100% debt security, all but guaranteeing they design and sell to an international arena, a proportion of which let the stock sit vacant for extended periods, rather than fulfil the needs of an Australian demographic, we’re not making effective headway. However, this problem is one with multiple layers.

For example, stamp duty causes existing housing supply to stagnate as it imposes a direct transaction cost on top of property prices.  Yet reform to a land tax system as advocated in the Henry tax review, would over the long term discourage the hording and land banking of homes that often sit vacant for lengthy periods of time.

A study in this field was most recently taken by AHURI - the Australian Housing and Urban Research Institute - in their evidence review entitled “<a href="https://www.google.com.au/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=1&amp;cad=rja&amp;ved=0CCwQFjAA&amp;url=http%3A%2F%2Fwww.ahuri.edu.au%2Fhousing_information%2Freview%2Fevrev031&amp;ei=KT02UofHG-O1iAfL8IDgAw&amp;usg=AFQjCNGUKYtcolxWnuvQ1sSRUsymeq5odQ&amp;bvm=bv.52164340,d.aGc" target="_blank">Why tax policy is housing policy.”</a>

The paper researched the effects of replacing stamp duty with an annual land tax and showed that in doing so, it encouraged a more efficient utilisation of the amenity.  Additionally, the modelling also showed that <a title="Go to Final Report 182, p.2" href="/Remove Link" target="_blank">falls in house prices would exceed the value of land tax payments</a> “leading to more affordable housing for both owner-occupiers, and rental tenants.”

I recommend reading the paper, which answers many of the questions, such as how to transition from our current stamp duty system to a land tax based model.

Notwithstanding, if we could combine this reform with ideas of which economist Leith Van Onselen is at the forefront, when he suggests raising money through bond financing and recouping it from ratepayers over a period of 30 years - or similar initiatives such as those found in Houston Texas, in which a successful expansion of their city boarders is funded with policies such as MUD – a deductable municipal utility district tax – in which a panel of property owners sit on a government appointed board, to oversee utility and infrastructure distribution in the area. We would inevitably create a better mix of housing stock aptly suited to a range of demographics.

For example, most properties built on the fringe are McMansion style house and land packages, because it is perceived that families will only move outwards if there is due compensation of a shiny estate sized home to compensate for the relative commutable distance from city centres.

In these areas, lack of recreational recourses encourages most entertainment to take place within the constraints of the house – and this is what feeds a reputation of Australian’s desire for large dwellings.

However, with decentralisation and an increase of basic area amenity – units along with smaller subdivisions would be in demand, thereby providing a very attractive price point for first-home buyers and renters.

Obviously there is plenty more to discuss when it comes to policy reform – albeit, to sit back and do nothing aside from keep interest rates low and job security high, as advocated by our current government In their pre-election housing affordability spiel – not only indicates a lack vision, coupled with a short term mindset, but ensures we continue to kick the can down the road, snowballing the problem for future generations to come.

As if to demonstrate the foolhardy nature of the oft-quoted phrase by Einstein, “we cannot solve our problems with the same thinking we used when we created them,” it’s clear policy reforms to date, have done little to assist the makeup and vision of a country that champions a fair go for all, and highly regards the famous speech ‘it’s time’, which inspirationally points out:

“The land is the basic property of the Australian people. It is the people's land, and we will fight for the right of all Australian people to have access to it,” as words that have subsequently proven to be little more than fancy rhetoric.

Years of failed first home ownership schemes and tax policies that encourage speculation in the established arena, have done nothing to increase long term vacancy rates which consistently sit below 5% – and In some established areas, less than 2%.

The consequence of this has forced a social divide and exacerbates the very real reality that more Australians will reach retirement paying their mortgage or servicing high yields, with whatever superannuation they have used to fund the difference.

It’s time we campaigned for change.


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Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.  
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Australia has blinkers on when it comes to housing policy: Catherine Cashmore

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The debate over the supply of affordable housing and the policies surrounding the framework is a topic that rightly inspires heated emotions – particularly in respect of the lead up we had to Saturday’s federal election and the thundering silence from either major political party, outside of a commitment to keep rates low and job security high.
However, what we really lack in Australia is a realistic vision of how our housing market should appear.
There are too many conflicting voices smothering the debate – from an ingrained cultural mindset looking to profit from rising values in the established sector, hoping to outpace inflation and enable retirement on a pot of property gold, to consumer organisations struggling to address the growing need of citizens requiring public housing or rental assistance.
Obviously vested interests across the real estate and finance industry as a whole, mitigates the commentary somewhat, concluding - based on a narrow contextual view of low interest rates alone - that affordability has in no way worsened, but rather improved – whilst at the same time applauding the recent recovery in prices.
Sydney, in particular is outperforming other states, and whilst there are differences to the macro back drop compared to 2007, it’s bounded into spring as the best (and consequently most expensive) performing capital city in Australia, with clearance rates (the curve of which prices typically follow) mirroring boom peaks, and AFG (Australia’s largest mortgage broker) reporting an 49.5% unprecedented level of home loans written for investors coupled with the comment:
“This is the highest level of investor activity the company has ever recorded for any state.”
RP Data have Sydney prices up +5.4% for the quarter, and although the information is subject to revision, it leads the annual growth rate to its fastest pace since 2010.
So where do we stand on issues of affordability?
I’ve written previously on the <a href="https://www.propertyobserver.com.au/auctions/heat-of-the-moment-the-mentality-of-auction-bidding-fervour-catherine-cashmore/2013090164693" target="_blank">various war stories witnessed on the ground</a>, as auction results exceed reserves by some 10/15% – and on occasion, reach a level, which defies all rationality.
In this respect, any benefit derived from lower interest rates is somewhat offset by the inflationary pressure placed on prices.
Indeed - you’d be hard pushed to find a first-home buyer shopping in our largest capital cities, who has not been outbid by an investor through the course of this year. Investors understandably have a stronger financial arm.
Albeit - at least for existing owners - the relative cost of servicing a mortgage has reduced considerably.
This influence is evident in the latest “Housing Occupancy and Costs” survey from the Australian Bureau of Statistics, which calculates affordability to be at the same level it was some 17/18 years ago from the date of which the survey relates.
According to the findings, in 2011-2012 owners with a mortgage and private renters spent roughly the same proportion of income servicing the repayments, as they did back in 1994-1995, despite the fact that the capital price of housing has more than tripled over the corresponding period and the subsequent duration of mortgages lengthened.
Those paying down a home loan were assessed to spend 18% of their income servicing the payments, with private renters just a fraction above this figure, at 20% of income.
It is this, and other indexes such as the Adelaide Bank/REIA housing affordability report, released last week, claiming affordability is at its “best level since 2003,” that encourages commentators to stamp and seal further discussion of the issue, with a dismissive waft of the hand to would be buyers, accusing them of being both spoilt and picky in their expectations, if complaints about the cost of accommodation are voiced, or any suggest that first-home buyers are locked out.
Neither is there any comment on the inevitable future consequence of rate rises.
However, any release of statistical data, always needs to be assessed in context.  A little like median prices, which bear scant relation to individual house prices, and often require an additional understanding of distortions such as stock on market, the shadow effect of buyer grants and incentives, and a full appreciation of how the data is stratified prior to making a surface assumption of the material at hand.
As ABC’s online business reporter <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2013-08-30/janda-home-ownership-and-future-aged-underclass/4924862" target="_blank">Michael Janda</a> points out in his own balanced assessment of the ABS release, there are some distinctive trends worthy of appreciation prior to drawing a conclusion that housing has never been more affordable.
Firstly, home ownership is falling.  In 1994-1995, 71% of Australian’s owned – or were servicing a mortgage – and the proportion of households renting - 18%.
By 2011-2012 the ownership rate had dropped to 67% with a relatively steep rise in the number renting at 25%.
Families with children (one of our biggest demographic of buyers) in particular seem to be suffering.  The decrease of ownership for this demographic has fallen over the latest census period from 79.5% in 2006 to 77.2% in 2011.
There are a number of factors that have played into the percentile changes. Firstly on issues of supply - restrictive growth boundaries, hefty development overlays in new estates, along with a woeful lack of planning for population growth and the consequential reluctance of home buyers to move outwards, has produced a downward slide in the number of new dwellings completed per annum, and further inflated the capital price of the stock marketed.
For many first home buyers, the choice, price and location of accommodation offered in these areas, where commute times are inflated as infrastructure development fails to keep pace - gives no incentive to buy in outside of various government grants - and based on historical data, it’s fair to conclude if they do purchase a house and land package, the growth of the underlying asset base of their investment in the new estates, will unlikely improve much past the rate of inflation – hamstringing the ability to progress or upgrade when desired.
When older generations purchased – the outer suburbs were some 10/15 kilometres from established job and commercial hubs, not the 40 plus kilometres we see today, and financial deregulation, the emergence of duel income households, and the very real realities of our golden decades of growth, assisted their steps up the property tree to the current environment in which baby boomers hold roughly half of Australia’s housing stock – a mix of owner-occupied dwellings and investments – many relying on the value of their properties to fund retirement.
Another direct consequence of our now inflated values, buoyed further by restrictive supply, and policies such as negative gearing - which encourage investors to speculate in the established arena, thereby inflating the value of second hand stock - is a national rise of 49.2% in yields over the five year census period (not accounting subsequent increases) – which outpaced growth in home loan repayments for the same duration.
Other trends indicating affordability pressures – (although agreed cultural tendencies also play a hand) – is between the 2006 census and the 2011 census, the single-person household was no longer the fastest rising demographic.
In the 2011 results, lone-person households dropped from 24.4% to 24.3% - this was the first decrease in this statistic since the census was initially conducted in 1911 – over 100 years – and therefore requires attention.
Against this group households (those sharing accommodation) jumped from 3.9% to 4.1%.
Crowded houses – with three or more families sharing accommodation, also rose nationally by 64% to 48,499, and other data from the ABS shows that over 40% of renter households receive some form of housing assistance - once again emphasising the growing crisis in this sector of our community.
With the decreasing proportion of first-home buyers as a share of the active buying market, commitments of which are down 10.6% year on year, along with reports that significant numbers are now initially entering into their first purchase at the age of <a href="https://www.news.com.au/realestate/firsthome-buyers-in-their-forties-are-a-growing-breed/story-fncq3era-1226708852405">post 40 years</a>, you have to question the stubborn refusal from market commentators to recognise we have a problem worthy of attention.
The AFG data I cited above also notes the drop in the proportion of first time buyers, and is no doubt mirrored by other lenders.
According to their figures, the share is down to 11.3% nationally from 15.9% at the same time last year – and although various state grants and incentives play into the peaks and troughs, the percentage drop in New South Wales is appalling – down from 13.1% in August 2012, to 4.3% as recorded last month.
Another mistake made when assessing affordability, is to concentrate only on the principle cost of the home and the percentage of income needed to service the repayments.
However I sometimes think a better assessment would be to take into account what’s left over post housing costs, and whether it’s enough to afford the actual non consumer price index cost of living.
It’s not only commodity prices that have spiked, for example gas and electricity, but an overload of other essentials such as insurance premiums, housing maintenance costs or owner corporation fees, school fees and child care for working mothers, medical and dental expenses and so forth – transport costs are substantial for those commuting daily as are the needs of a modern generation who enter commission/performance based jobs which expect them to have 24 hour access to mobile phones and email.
A privilege I have in my job, is meeting, assisting and talking to current first-home buyers (usually couples – singles are all but priced out) looking to get a foot hold. It’s a pleasurable aspect of my work due to the excitement expressed when a successful purchase is achieved.
Albeit, the conversations I have with both first home buyers and renters, keep my feet firmly on the ground in relation to the difficulties achieving the oft quoted dream of ownership – it is also what inflames my anger when I read reports such as that offered by <a href="/news">Terry Ryder</a> last week – questioning so called false perceptions that Australia’s housing is unaffordable.
I suspect we see things from a different frame of reference.
For this reason, and others, I attended the 122nd annual Henry George commemorative dinner at the Royal Society of Victoria, Melbourne – to listen to respected economist Saul Eslake give a excellently orated speech, entitled <a href="https://www.prosper.org.au/2013/09/03/saul-eslake-50-years-of-housing-failure/" target="_blank">“50 Years of Housing Policy Failure.”</a>
As well as his role as chief economist for Bank of America – Merrill Lynch Australia, Eslake is also deputy chair for the National Housing Supply Council – set up by the Australian government to “improve housing supply and affordability” for both home buyers and renters.
He is therefore suitably qualified to provide a detailed assessment the data which is all but ignored by those mentioned above.
As Eslake comments:
“..the decline in home ownership has been even more pronounced when one ‘looks through’ the effects of the ageing of the population, which (among other things) means that an increasing proportion of the population is within age groups where home ownership rates are always (and for obvious reasons) higher than in younger age cohorts.”
The transcript and slides of Eslake’s speech can be found <a href="https://www.prosper.org.au/2013/09/03/saul-eslake-50-years-of-housing-failure/" target="_blank">here</a> - an absolute must read.
Our affordability issues cannot be solved over night.  The distortions in the market need to be slowly unpicked and the various suggestions by Eslake regarding supply and tax reform, implemented.
However, as <a href="https://www.propertyobserver.com.au/economy/are-we-in-a-dwelling-boom-a-rally-bubble-or-a-recovery-inside-our-bubble-mentality-catherine-cashmore/2013081864317" target="_blank">I’ve written previously</a> – the reason we have asset bubbles is a direct consequence of our current debt-based monetary system, and in this respect, I hold the opinion that you cannot tackle the health of the housing market without also addressing the disease that funds it.
 
<hr>
 Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
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Is Australia’s housing market unaffordable? Catherine Cashmore

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There’s no denying that Melbourne is the auction capital of Australia – at time of writing - year to date there have been over 18,291 auction sales, which according to REIV figures, is an increase of 13% on this time last year.
As a proportion, auctions only account for around 20% of total sales; the vast majority of transactions take place behind closed doors via private treaty negotiation.  However, for the bulk of buyers focused on sourcing properties in the middle, and particularity inner ring localities of Melbourne (followed by Sydney) – a large proportion of which are investors - for sale by auction tends to be the preferred method of marketing. Therefore, at some point attendance on a Saturday auctionfor a game of deepest pockets wins is all but inevitable.
Whilst auction transactions only capture a relatively small sample of sales, they can be a good indicator to the current heat of consumer sentiment toward the purchase of residential real estate (particularly in the investment sector.) And in a country which has effectively hamstrung development outwards with inelastic supply side levers, ensuring we’re all squashed in a doughnut like shape around the affluent capital city established localities – the concentration given over to the clearance rate each weekend is somewhat understandable - even if it does irk the larger proportion of agencies that work in outer suburban non auction locations.
For an inexperienced buyer in a hot speculative fuelled market, auctions can present a pit fall of dangers.  The typical four week campaign – three weekends of opens with the auction taking place on the fourth – is designed to act as a stimulant, effectively putting a end by date on the period of time they have to conduct any needed due diligence.
And as clearance rates rise (the curve of which prices typically follow) the chance of a listing attracting enough attention to sell prior also increases – shortening the marketing period further still.
Added to this is the general confusion over auction price quotes. 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.
Everyone understands real estate is a negotiated asset, however, the verbal game playing that now surrounds a proportion of the sales industry is laughable.
Responses to a price enquiry range from a paraphrase of “we won’t know until buyers have told’ us” to a general comment such as “properties in the area are selling in the $400,000s and $500,000s” – effectively giving any said purchaser $200K bracket in which to work it out.
It’s part of the market insanity that surrounds our residential real estate sector. 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, closely comparable sales data is not always readily available - computer-generated estimates, are, more often than not, hopelessly inaccurate. Suburb reports are equally unhelpful, and while median data will give an indication of the dollars the majority market is spending, it’s no help when evaluating individual property prices.
In Victoria published auction sales often result in undisclosed blank figures and private sales are just that – private. The street name will be listed, but the other relevant and essential data is missing.
It’s one reason I advocate a requirement for vendors to take responsibility for their own (typically) vendor paid advertising campaigns, and ensure reserves – or ranges in which they’re prepared to negotiate – are published at the outset.
Whilst you can argue one way or another at the lunacy that often surrounds Australia’s addiction to all things real estate, we’re not talking about an item on eBay – we’re talking about the biggest financial transaction most make in a lifetime.
Hence why we need transparency in the real estate sector – information should be openly available to enable buyers to make informed decisions without the need to play guessing games and risk poor financial decisions that can have a broader impact on the economic landscape.
According to RPData, Australia’s property market is worth an estimated $4.86 trillion, which is three and a half times the value of Australia’s stock market and combined superannuation funds.
Assessment by Moody’s, shows Australian banks are way ahead of global counterparts in their exposure to property – with two-thirds of their lending tied to the residential sector.
 <img src="/images/stories/2013/08/cashmore_aug_30_graph.jpg" width="470" height="313" alt="cashmore_aug_30_graph">
And as we start to tick into what most assess to be a relative boom of activity in various states – with auction rates once again approaching record highs, and analysts carefully assessing sharp price rises in the <a href="https://www.smh.com.au/business/auction-rates-signal-boom-at-hand-20130818-2s528" target="_blank">established sector</a> - yet sitting a long way from a point at which the RBA can pull the traditional rate rising lever to offset a dangerously overheated market – we remain in a precarious position.
 
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To argue that this is in anyway good news or to suggest as RBA board member John Edwards did last week in A WSJ interview that <a href="https://www.macrobusiness.com.au/2013/08/rba-house-prices-a-long-way-from-being-a-problem/" target="_blank">“we’re a long way from it being a problem,”</a> – in an environment as Michael Matusik pointed out in his blog, is set against a construction sector currently <a href="https://matusikmissive.com.au/2013/08/27/350000-but-falling/" target="_blank">on its knees</a> - with first home buyers reducing significantly in key markets such as NSW in which they are down from 14.2% in 2011, to a current 7.3%, the lowest share on record – (illustrating aptly the failure of initiatives such as the first home buyers grant) – would be a sharp disconnect from a country that also champions the motto of a fair gofor all.
No matter where you sit in the world’s rat race we all have a core requirement for secure accommodation – a place of residence which is safe, clean, and warm enough to rest at night – it’s the compass that navigates our wellbeing and performance both in and out of work. Therefore, it’s no surprise that the health of our property market dominates conversations across all demographics and remains at the top of concern for voters.
As I said last week, whilst the current rally seems set to last into 2014, the prospect of higher rates coupled with higher unemployment will in my opinion, pull up any lengthy capital city market boom – however in the meantime, we’re in overdrive and the sales industry is predictably doing everything in its nature to add fuel to the fire.
Agents are deriving auction campaigns that last as little as <a href="https://news.domain.com.au/domain/blogs/talking-property/speed-marketing-auction-time-to-shrink-20130827-2smp5" target="_blank">two or three weeks</a> with comments from Sydney agents highlighting:
"There are so many buyers ...we don't need to wait four weeks to identify the likely buyers, two to three weeks would be plenty.”
Reports show homes selling 15-20% above their reserve which is typically derived from a mix of recent comparable sales combined with current interest - and even allowing for emotion, gives way to jaw dropping results as war stories filter in from varying pockets within our capital city markets.
In this atmosphere, auction sales ignite the problem further.  Allowing for the odd exception, I’ve yet to meet a buyer who likes bidding at an auction – and for that matter, I’ve yet to meet a vendor who doesn’t dread their day in the sun as it’s so often termed by sales agents, which in most instances for a purchaser, will result in a battle of sorts, with a group of people guaranteed to lose all sense of rationality if heated bidding happens to occur – which in the current atmosphere holds high probability.
And whilst in a downward market, I would fully agree with advocates such as Neil Jenman who campaign against auctions as a method of sale claiming better results can be achieved via private negotiation - the opposite is the case when the market turns and we start to see mini rallies within certain pockets of the city.
When buyers see properties openly selling above their pre-conceived perception of market value (something that generally doesn’t happen when the sale is conducted via negotiation) it provides very visible reality that the market’s moving and the effects on the mindset act like a kind of contagion.
There’s no doubt a winning bidder will only ever be one step above the under bidder – and in that sense, it could be argued the highest price is never achieved. However, having spent years working with buyers, I can confirm - without shadow of a doubt - that during a rapid moving auction, buyers spend far less time thinking about exceeding budget constraints than they do when, in a rational pre auction moment, they take time to discuss  where to draw a sensible limit for the property in question.
It’s rare to find an agent with the sharp negotiation skills to achieve similar results in private sale scenario.
There have been plenty of <a href="https://fisher.osu.edu/~muhanna_1/pdf/Do%20AuctionWin-jcr07.pdf" target="_blank">academic papers</a> outlining why auctions can achieve significantly higher prices in competitive markets compared to other methods of sale.  The effects broadly fall under the title of a pseudo-endowment effect.
Without going into too much intricate detail, as buyers bid for a property, there is a feeling of partial possession in those who take part.
If the bidding starts low – as it tends to at most auctions – the multiple bids and length of time needed to get the price to its reserve creates momentum and in addition, fuels the emotional attachment and sense of ownership the participants gain towards the property.
The results of the many scientific experiments conducted on auction sales show a strong propensity for buyers to re-assess their pre-estimate of value upwards which stimulates a win or lose mind set, in which the main focus is to beat the competition, above and beyond simply purchasing a home.
To put it another way – when buyers bid at auction, they bid to win and in the process, lose connection to the initial goal of achieving a purchase within a predetermined budgetary limit.
With a talented auctioneer doing all in his power to convince bidders to buy their weekends back with just one more shot – it doesn’t take much for an inexperienced buyer to stretch past his comfort level and lose it.
Smaller increments and repeated bidding can magnify these results.  Hence why you’ll often see buyer advocates attempt to nip the momentum in the bud, with an initial high bid or by using what’s known as a snip technique – coming in right at the end an giving the impression to already stretched buyers, that there’s plenty more in the tank.
And whilst it can be very successful in gaining the vendor an outstanding result – it has little advantage for a buyer, who can end up with a healthy dose of remorse once the initial fervour has worn off.
I attend at least four to six auctions on any said weekend and have witnessed the effect this method of sale has in both downward and upward cycles.
In Melbourne, it plays an active part in driving our boom and bust mentality.  And whilst you can argue on the advantages and disadvantages in comparison to other sales techniques, in the current environment, the bidding wars erupting in both Sydney and Melbourne, are doing a good job at pushing prices into unsustainable territory.
If you’re a buyer – be warned.
 
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 Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
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Heat of the moment, the mentality of auction bidding fervour: Catherine Cashmore

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When discussing issues of housing affordability, the conversation is often weighted toward our first-home buyer demographic – principally those locked on the ladder of rising rents.
However, last week ABC Radio National’s ‘Background Briefing’ report focused on the new face of homelessness – with a quarter of a million older Australians approaching retirement with little super, and no house to call their own – importantly – many only a couple of rent payments away from homelessness.
I’ve commented previously on our <a href="https://www.propertyobserver.com.au/residential/ageing-population-poses-serious-challenges-to-australia-s-future-economy-catherine-cashmore/2013062362530" target="_blank">ageing headwind of retirees</a>, who hold roughly half of Australia’s housing stock as their principal retirement fund, and the potential consequences resulting from any downturn in home values or dwindling activity from a first-home buyer demographic, who are currently outbid by demand from a higher percentage of investors focused on the established sector.
However, as highlighted in the program - a growing demographic of older working Australians, are facing dire financial straits as they reach retirement.
Some of the most venerable victims are women, who having worked hard, and raised children, due to divorce or circumstance, are now finishing employment with less super than their male counterparts, (some with no more than $40,000 in a fund) and finding themselves once again as tenants, paying more than 50% of their income in rent.
Within the report, Ludo McFerran – from the University of New South Wales and national director of the Safe at Home, Safe at Work project stressed the urgency of the problem;
‘This problem of ageing and gender and homelessness is so big the reality is it will swamp all previous expectations or discussions or plans.’
Her comments are insightful, because as I’ve pointed out on many an occasion, the accommodation we’re currently building (which many argue is in undersupply) is neither affordable nor suitable for average single workers or elderly downsizers – being predominantly McMansions on the sparsely facilitated fringe locations, far away from our inner and middle suburban job hubs or low grade over-priced apartments with high owners corporation fees, which offer little more than a roof and four walls.
It’s a sobering reality, because if you think the numbers are significant now – without immediate action, the story’s set to get worst.
The traditional model of an ageing population who have in the past, purchased a house, enjoyed tax free capital gains and when the children have left home, sold it onto the next generation, not only starts to break down as the dependency ratio (the proportion of workers to non workers) falls from peak – but with more demands on the tax payer dollar, coupled with a lower growth environment as we face the challenges of a tighter macro economy than previously experienced, the trend indicates a reducing number of first-home buyers who purchase later in life, marry later in life, start their family later in life and significantly, tap into their housing equity to fund the rising cost of living, earlier in life.
The bias is a significant one, because parents often find themselves digging into their own retirement equity stream to assist their children onto what’s too often termed ‘the property ladder’ – as if it’s something to be conquered.
 
 
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Importantly, for those who don’t partner and cannot harness the power of a duel income or do not have funds to draw upon from relatives - retiring whilst still renting, is a very real possibility.
 
The issues were also highlighted in last week’s AFR in which Simon Kelly – author of a CPA Australia study entitled <a href="https://www.cpaaustralia.com.au/cps/rde/xbcr/cpa-site/household-savings-retirement-report.pdf" target="_blank">‘Household Savings and Retirement – where has all my super gone?’</a> makes comment;
“People approaching the age of 65 have considerably higher debt than in the past. Mortgage averages and other property loans have more than doubled since 2002 and credit card debt has increased 70%. Superannuation is clearly being used to reduce debt.” 
The report goes on to highlight how:
“People approaching retirement age are using the equity in the family home as a source of funds to assist their children into homeownership.”
Considering we’re in the second half run up to the federal election, it’s hard not to take further opportunity to highlight such concerns which have to date been ignored by our two major contenders - hence Peter Chittendon’s comments in Property Observer last week that <a href="/news">the “elephant in the room” is “housing policy.”</a>
Whilst our two major political contenders are busy focusing on a stronger Australia – promoting economic growth a return to surplus all coupled with reduced cost of living - which as highlighted by St Vincent de Paul in their recent campaign for a <a href="https://www.theaustralian.com.au/news/nation/call-for-overhaul-of-living-index/story-e6frg6nf-1226697408053" target="_blank">relative price index</a>, bears little relation to official CPI measures. By far and away the biggest financial cost most Australian’s face is that of accommodation.
As <a href="https://housingstressed.org.au/" target="_blank">Australians for Affordable Housing</a> correctly point out, – between 2003-04 and 2009-10 the amount households spent on housing has outpaced other expenses - increasing by 55%. Therefore any policy debate with cost of living on the agenda should have this top of list.
Needless to say, the first question on ABC’s Q&amp;A debate between Joe Hockey and Chris Bowen last week, was precisely this, as a young professional living in Western Sydney expressed her dismay at the now near impossible dream of becoming a home owner.
As I’ve written previously – it’s an unfortunate reality that neither political party can see past burdening buyers with cheap credit by way of grants, low interest rates and incentives, in a vain effort to mask the rising cost of accommodation under the false premise that they’re doing something.
As Chris Bowen commented that “there (are) two big things that we can do to help with housing affordability. That's keep unemployment as low as possible. Because you have got a job, that's the best thing you can do to get into the housing market. And also to keep interest rates low and interest rates are as low as they’ve ever been in Australia”
However,  in answer to his first point - Australia faces challenges ahead - with a falling participation rate due in part to an aging population, fewer full time positions coupled with a rise in part time work inflating the underemployment figures – it’s clear job creation is not keeping pace with increases in our working age population. Whilst moves are underway to improve the situation, the role of private debt is overlooked in favour of paying down government debt; hence consumers are weighted toward saving rather than spending money into the economy.
As for low interest rates, they have done little more than inflate established property prices and speculation on financial markets which is scant benefit to those facing rising yields, or paying an inflated cost to secure a property at the offset.
Joe Hockey’s comments took a similar stance – except he did touch on the issue of supply;
“The fact is you've got to increase the supply. I mean it’s a market. There is plenty of demand and increasing demand but what are we going to do for supply? I have some plans on that which we’ll be talking about before the end of the election.”
However, releasing more land and building more supply is not the answer when the land is neither affordable, or the supply desirable enough to attract the surplus of buyers forced to live within commutable distance from essential facilities. 
In this respect, any plans for new supply need to be specifically targeted to combat both issues – let’s hope this is the case.
 
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It also doesn’t touch upon the difficulties developers have gaining funding without a large proportion of pre-sales - generally only possible to the foreign market – and I mentioned last week, due to cultural tendencies, a significant proportion of these apartments often remain empty once sold - which once again has an impact on measuring the true effectiveness of any increase in underlying supply.
With the rise of the internet and the ability of those searching for answers to delve a little deeper than they perhaps would have done before the world became a mirror of reflections - it can only be hoped, that a majority, not minority, are taking opportunity to look past the frivolity of what I think most would agree, (whether by design or purpose) have been fairly meaningless debates – particularly if their searching for answers on housing policy.
Indeed, the home ownership dream - which resulted in prices trebling between 1997 – 2007 in the UK - and performing a similar feat in Australia, was not built on the fundamentals so often advocated - that of a rising population’s demands for a home – although of course, supply/demand constraints do a good job of exaggerating the figures when inelastic policies hamstring development.
Rather a great inflation in property prices was the direct result of the dramatic increase of mortgage debt built on the back of a housing market which had fast progressed into what Faisal Islam comments in his new book <a href="https://www.theguardian.com/business/video/2013/aug/16/faisal-islam-default-line-video" target="_blank">‘The Default Line’</a> “a multi faceted investment vehicle financed through an unrestrained system of credit and deposit creation.”
<a href="https://www.propertyobserver.com.au/economy/are-we-in-a-dwelling-boom-a-rally-bubble-or-a-recovery-inside-our-bubble-mentality-catherine-cashmore/2013081864317" target="_blank">As I said last week</a> – in this respect, it’s not the health of the housing market that needs to be tacked, it’s the disease, hence why a growing number of influential economists are pushing for monetary reform – importantly, regaining control of the money supply and the dictates of where that supply is allocated, as a basic prerequisite for coming to grips with the banking and financial system.
What cannot be argued is the conditions that took values to their 2010 peak following our golden decades of growth, will not be replicated as we enter a very different and challenging decade than previously experienced – therefore all LNP comments that start with under the Howard era as evidence for their management of employment figures and surpluses, bear little relevance to our new reality.
As it stands, the environment in various capital city pockets has gone into overdrive and among others, AMP have now weighed into the debate commenting “Australian houses are 7% overvalued based on long- term trends” referencing how “home prices rose last quarter at the fastest pace in more than three years, and sales of dwellings reached the highest since 2011 in June, government and industry data show.”
Whilst the current rally seems set to last into 2014, the prospect of higher rates coupled with higher unemployment, should temper the gains and therefore, I expect we’ll see shorter durations to the traditional boom and bust market cycle.
As Christopher Joye aptly commented in a recent AFR column “ride the housing and equities wave for as long as you can. But remember... You are not surfing a swell in Bali.”
 
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 Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
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Empty apartments and demographic headwinds need constant investor surveillance: Catherine Cashmore

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The jury’s out on whether Australia is entering the ‘mother of all dwelling booms’ as Robert Gottliebsen took note to warn in Business Spectator last week.

And whilst the construction sector continues to fall short of expectation, the established housing market, most notably in Sydney although also reflected in other states – has moved.
War stories are emerging from buying and selling agents of auctions attended where the prices have exceeded the reserve by 10-20%. 
In turn, vendors are reassessing their expectation of value based on neighbouring results – and with more talk of prospected drops to the cash rate, purchasers are shopping lenders to see how far their budget will stretch.
When prices start to rise – in some areas quite dramatically so – there is always heated debate over whether it’s a bubble.  The term itself is somewhat over used perhaps because of the image it invokes.
A bubble gives the impression the market is a flimsy airless balloon which – like a row of standing dominoes – will quite suddenly, irreversibly and dramatically ‘pop’ falling into an endless abyss. 
For some commentators – the very fact that this hasn’t yet occurred in Australia is enough to demonstrate the theory incorrect. In other words, you can only define a true bubble whilst viewing the devastating aftermath.
However, a bubble does not have to fall into the definition posed above. They are not always easily deflated, and there are plenty of different particularities between the policies and lending requirements that have played into the house price ‘corrections’ other countries have already experienced post GFC, that differ from those we have in Australia.
Furthermore, in economies highly exposed to the residential sector, where central banks and governments have the ability to manipulate policy and the amount of cheap credit that flows into mortgage lending, it’s possible to ‘prop’ and temporarily prevent falling house prices that would otherwise occur in line with a challenging macro outlook.
In Australia this would include, rising unemployment, lower prospects for wage growth, an aging headwind of retirees lowering the participation rate, and the gradual winding down in the mining sector – to name but a few. 
And whilst this will bear relevance in moderating the level of price appreciation long term, there are plenty of ingredients in the pot to ignite the current environment which is causing a range of voices to warn of bubble like conditions in fragmented areas of our established capital city terrains.
The main force behind the buying market is a mix of investors and up-graders, who in turn are boosting the premium housing sector using funds from the sale of lower priced properties to then leverage up, which coupled with lower rates reduces the size of their loan – distorting the forward analysis of the lending data in relation to price growth somewhat.
In contrast demand from first-home buyers has weakened significantly – waxing and waning only on the back of various grants and incentives.
Each are buying for different reasons, and as we know, in this sense, the environment has been nicely manipulated by supply side constraints which keep Australia in a donut like geographical outlook.
However, as <a href="https://www.propertyobserver.com.au/news/robert-gottliebsen-forecasts-mother-of-all-dwelling-booms-driven-by-property-investors/2013081864307?utm_source=po&amp;utm_medium=aida&amp;utm_campaign=news" target="_blank">Robert Gottliebsen points out in his column</a>, and <a href="/news">as I mentioned last week</a> – a very low interest rate environment is once such condition that encourages investors to pull back on saving in favour of a spend/borrow mentality.  
 
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In our property obsessed culture – following years of woeful planning for population growth, most of this pent up demand is being fed into the second hand housing sector.
Price rises are more often than not fuelled by speculation that the next generation will pay double for the second hand house in – how does it go – eight or so years time?
Whilst population growth can push demand, actual house price appreciation more directly stems from a higher proportion of mortgage holders, not necessarily home buyers, shopping within an area of limited supply.
In this respect, the money governments have donated through tax breaks alone to encourage investment into the established residential real estate sector, with policies such as negative gearing which has disproportionately inflated existing property values and created a growing gap between rental yield – rises of which cannot keep pace – is another area of significance which has propped up the prices.
It’s also one of many policy measures that should be addressed if affordability were really an issue of concern for our competing political parties.
And whilst there may be heated debate over the recognition of a bubble, in every instance speculation is a significant driving force in the pace of any said increases – which rings nicely with US economist Robert Shiller’s analysis when in his book “Irrational Exuberance” he defined a bubble as:
“a situation in which news of price increases spurs investor enthusiasm – spreading by psychological contagion from person to person, in the process amplifying stories that might justify the price increase attracting a larger and larger class of investors, who, despite doubts about the real value of the investment, are drawn to it partly through envy of others’ successes and partly through a gambler’s excitement.”
This mentality is evident when we enter what is so often termed the recovery phase of our market cycle – usually after a period in which home values have declined in real terms.
It’s an interesting turn of phrase, giving the impression to the uninitiated that prices have dropped so low they needed to heal like a sick patient.
However, seeing prices overshoot the mark as greed along with expectation of another boom inevitably takes a force on investor mentality, is a common feature of this part of the cyclic psychology.
The effects are often amplified in areas where auctions sales predominate.  When buyers see properties openly selling above their pre-conceived perception of market value (something that generally doesn’t happen when the sale is conducted via private negotiation) it provides very visible reality that the market’s appreciating and the effects on the mindset act like a kind of contagion.
Interestingly enough, the reverse is the case when a larger proportion of properties pass in at auction – leaving buyers with the worrying impression the market’s tanking.
During a competitive auction buyers spend far less time thinking about exceeding budget constraints than they do when – in a rational pre-auction moment, they take time to discuss (usually with their partner) where to draw a sensible limit for the property in question.
In truth, when the market is buoyant and competition evident, buyers don’t bid for the property – they simply bid to win – something I witness weekly.
And of course, whenever rising prices openly occur, stock inevitably reduces.
After all, who wants to sell an asset that’s increasing in value, when the observation prevails that a vendor can get more if they hold and wait for further gains to come?  Especially as additional rate cuts are still widely predicted.
 
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The other issue which Robert Gottliebsen touches upon is foreign acquisition. The falling Aussie dollar has given Asian property investors an opening to look favourably once again upon dwelling investment in our capital city markets.
As reported in the Australian Financial Review last week, a Sydney property developer sold 90 off-the-plan apartments at the opening of a new tower in Bondi Junction in five hours and whilst a large proportion of funds will be fed into off-the-plan construction, assisting developers in the approval process somewhat, it’s arguable as to how many of these new apartments will actually make it onto the rental market.  
With limited options for investment, real estate acts like a magnate for Chinese buyers – who are not averse to purchasing speculatively whilst leaving apartments sitting empty.
There will be plenty of argument yet to come as to the level of the current boom and its longevity.
But what cannot be argued is the conditions that took values to their 2010 peak following our golden decades of growth, will not be replicated as we enter a very different and challenging macro environment than previously experienced – hence why I hold the opinion that we’ll see shorter durations to the traditional boom and bust market cycle.
Furthermore – whilst rising established house prices may be perceived as positive – particularly for those who want to downsize or tap into the equity – is worth remembering that it’s doing little for the productive areas of our economy such as manufacturing, small business or job creation.
The oft quoted perception that the feel good factor from rising house prices stimulates consumption has been disputed in several studies – the most recent of which can be found <a href="https://www.res.org.uk/details/mediabrief/4743221/BOOSTING-THE-HOUSING-MARKET-IS-NOT-THE-WAY-OUT-OF-A-CRISIS" target="_blank">here</a>.
And whilst those who purchased early in the 2000s have seen their assets boom the consequences have forced a social divide as purchasers priced out are forced into areas where schools, transport and local amenities have not been funded to keep up with the flood of lower and middle income households in search of affordable options.
Rising yields ensure renters find it particularly hard to locate close to work hubs, not to mention the pressure it puts on students battling for a university qualification. Unless we face up to the non-voter friendly challenges that prevent sustainable solutions and reduce unwarranted inflation in the established sector at the expense of construction, nothing will change.
New Zealand – which is experiencing its own property boom principally in Auckland – has released details of plans to moderate mortgage demand through <a href="https://www.macrobusiness.com.au/2013/08/rbnz-refines-lvr-cap-but-will-it-work/">‘speed limits’</a> on high loan to value lending.
However, it’s widely acknowledged that without effective polices to enable home building over a wider footprint of land, first-home buyers will suffer inevitable pain, and debate circulates as to whether it will lower prices in the long term or just produce a blip on the radar.
Even if it were possible to effectively implement and audit similar restrictions,  thereby tapering the flow of money into mortgage debt, it won’t necessarily stimulate lending for productive purposes.
Furthermore, although in real terms, values remain below peak, the property market chills at the thought of prices adjusting downward materially – yet not at the bank controlled credit creation process that inflated the huge increase in the first place. Banks create money every time they make a loan, and then decide where the bulk of lending is directed – building up the price of their preferred assets at their own discretion.
It’s not the health of the housing market that needs to be tacked, it’s the disease.
Lastly on interest rates – since November 2011 we’ve been on a downward rate cycle – some of which was only passed on in part by the banks.
Yet it took until mid 2012 for any marginal improvement in median values to emerge (boosted by consumer confidence), and only fairly recently have we seen a significant uptick.
The building industry is not picking up enough pace to compensate for the tapering of construction in the mining cycle and we’re a long way from a point at which the RBA can start raising rates to offset any unwelcome boom in established asset prices.
For the time being, existing owners and investors will continue to fuel demand, and despite loan service affordability costs improving – those looking to enter the housing market will continue to compete with a challenging heated environment.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
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Are we in a dwelling boom, a rally, bubble or a recovery? Inside our bubble mentality: Catherine Cashmore

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There’s an ongoing discussion between our politicians as to whether low interest rates indicate good or bad economic management, with Joe Hockey warning – correctly – that a further cut indicates a slowing, if not struggling, economy and Kevin Rudd shoring up his corner with the backhanded comment that this merely implies the opposition think high interest rates must be a good thing.
The last time the RBA moved interest rates so close to an election was back in August 2007, just prior to John Howard’s demise from office – except of course, at that point the cash rate was lifted +0.25% to 6.75% with the comment from Governor Glenn Steven’s that:
“The world economy is still expected to grow at an above-average pace” and noting the need to contain medium term inflation.
After Kevin Rudd entered office, house prices were at a peak and two further increases in both February and March took cash rate to 7.25%, after which the contagion of the GFC resulted in a swift six consecutive rate cut cycle as we felt the worldly repercussions of a highly interconnected financial system regulated by fear and greed, teetering on the brink of economic collapse.
The swift reversal which sent us right back into a rate hike cycle occurred in line with the Rudd stimulus packages, including the first home owner boost which applied to contracts entered into between 14th October 2008 and 31st December 2009. Consequently, swathes of easy credit entered the housing market creating a short term price multiplier effect across all ranges and arresting the downward decline in household debt growth.
The party could only last so long and in response to the high Aussie dollar, subdued credit growth, declining asset prices and continued underperformance in the construction sector, the current rate easing cycle which commenced November 2 2011, has now been going on for 18 months.
The resulting eight cuts which leave us with the lowest cash rate in at least 50 years have been successful in taking some of the air out the Aussie dollar, albeit newly revised forecasts from Government indicate a worrying trend in rising unemployment.
Cautionary words are emerging from the RBA as Governor Glenn Steven’s evaluates that:
“One's assessment of prospects for consumption will be driven mainly by one's assessment of the outlook for income, but will also be affected by expectations about asset values and in particular one's view on whether housing prices are overvalued.”
Job ads fell by 1.1% in July – the fifth consecutive monthly decline and a cumulative 19% over the past 12 months.
Business confidence is waning with conditions at a four-year low, household income dynamics worsening and considering we have a tightly contested Federal election on the door step, there is little prospect of improvement in the near-term.
With the above in mind, it seems a sensible move to pull the one economic lever the RBA have to hand, and provide relief to interest-sensitive spending and asset values.
However, since the global economic crisis the world’s banks have been concentrated on lowering rates in order to boost growth.
The textbook model indicates the atmosphere will motivate an increase in lending for such items as homes, goods and services.
 
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Monetary policy is at best a blunt instrument and whilst Governments can allocate at their discretion where to spend our tax dollars and pressure the banks to pay forward the rate cuts gifted,  they have limited influence on where cheap credit is spent (or for which asset it is lent) into the economy, or to direct it into areas where it’s needed most – which in terms of housing would principally be construction.
Relying on interest rates to stimulate demand in new home building is akin to banging your head against a brick wall and hoping the pain will subside.
I happened to catch the Sunday morning Financial Review show on Channel 9 last week, to witness the interview with <a href="https://www.afr.com/p/business/sunday/full_interview_meriton_group_harry_rccn4dCeNqLmrLrBRJ0eAM" target="_blank">Harry Triguboff</a> – chief of Merriton – who happily concluded that the reason demand from Australian buyers for his high rise apartment blocks was so low, was directly correlated to the RBA’s monetary policy.
To paraphrase, his comments: "They should have dropped rates earlier... I don't know how many more drops they need to do... they just need to keep dropping untill Australian's start buying my high rise apartments again."
Whilst a drop in rates may assist the construction industry to some extent, unless it goes hand in hand with policies to sustainably finance the provision of essential infrastructure such as public transport arterials to ease the cost of commuting to fringe localities, tackling planning constraints, reducing hefty tax overlays, or assisting finance for development of ‘quality’ accommodation, consumer demand will remain subdued. Nothing will change outside of intermittent first-home buyer new build incentives and the issue will remain a topic of discussion.
The other problem with a long-term low interest rate environment is the air of dependency it creates as economies struggle to ‘repair’ whilst desperately trying to encourage consumers back into a spend/borrow mentality.
This is never more evident that the current circumstance in the UK.  Whilst a proportion of home owners will take advantage of lower rates to pay down outstanding debt, there is no shortage of borrowers living week to week who would topple over if rates were to moderately rise.
In the south east of England where, not unlike Australia, rates of home ownership are elevated, house prices haven’t ‘corrected’ perhaps quite as far as they should have done considering the underlying and ‘high unemployment’ economic challenges the UK faces.
This is partly related to foreign ownership of prime London real estate – which makes over 50% of the buyer market – but also a dramatic increase in investor activity which now accounts for more than one in ten mortgages.
Add to this the newly introduced 'help to buy' scheme allowing first-timers to purchase houses with as little as a 5% deposit, whilst the tax payer foots an underwritten Government guarantee for 15% of the capital value should the buyer default, you have an inevitably bubbly environment devised and costed on the assumption interest rates will remain close to zero for the foreseeable future.
The UK is far more interconnected with the US than we are in Australia and therefore the hint a few weeks ago from Ben Bernanke indicating FED may begin to slowly unwind its era of quantitative easing, which would inevitably put upward pressure on rates, provoked a response from the new Governor of the Bank of England, Mark Carney.  
Carney swiftly inaugurated what’s been termed a new policymaking revolution of forward guidance,  guaranteeing to keep interest rates at their low of 0.5% until the unemployment rate falls to at least 7%.
Understandably savers are up in arms – which isn’t so different to the atmosphere we’re now experiencing in Australia – albeit, our economic prospectus differs considerably.
 
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Pushing interest rates lower discourages saving and predictably forces people to seek out any area of speculation that can provide a better return on their dollar as cost of living pressures slowly inflate it away.
And in our all things property obsessed culture, coupled with policies such as negative gearing and the increasing trend to buy real estate as part of a self managed super fund, a large proportion of mum and dad investors are pooling their funds into the second hand housing market,usually with a budget that competes directly against the slow decline of our first-home buying sector.
Break the data down and as pointed out <a href="https://www.macrobusiness.com.au/2013/08/charting-the-first-home-buyer-retreat/" target="_blank">here</a>, it’s clear that the larger share of mortgage demand is investor lead; “Since March 2009, the average FHB mortgage has grown by only 1.8%, whereas the average mortgage for the market as a whole has grown by 9.6%.”
The pent up demand and as we suffer the consequence of another interest rate cut and the supply of easy cash bubbles the air, comes with a warning from UBS analyst <a href="https://www.afr.com/p/national/rba_risks_house_price_bubble_msTaCxp5WxDtcy0xPJz2LM" target="_blank">Jonathan Mott</a> indicating:
 the “ingredients are now in place for another bout of sustained house price inflation in Australia and Sydney in particular,” remarking “given Aussie housing is already expensive by most metrics we see this as undesirable and dangerous.”
Housing finance approvals rose solidly in June ahead of expectation, with ABS figures showing a seasonally adjusted 2.7% increase in owner-occupied finance commitments, which are now tracking 7% above the five year moving average and with the series up +14.2% on the same time last year.
Loan sizes also increased – up 0.7% for the month and 0.9% for the year (a marked improvement from the beginning of the year) with the value of investor finance commitments up 18% over the year.
ABS housing data shows nationally prices have exceeded their 2010 peak – primarily lead by Darwin, Perth and Sydney, with the other states still playing a game of catch up in median terms.
And <a href="/news">as I explained last week</a>, for those of us who work on the ground assisting purchasers, to describe the atmosphere as challenging would be an understatement of terms.
In a recent conversation with a contact of mine who runs a buyer advocacy agency in Sydney, he spelt out clearly the difficulties purchasers are now facing with the comment:
“Definitely already a seller's market here in Sydney. Auction clearance over 80% in many suburbs. Saw a property where after just two  opens, the agent had 25+ contracts out. Price guide revised immediately after first open from 1.2m-1.3m to now 1.4m-1.5m. Tough market to buy in!” 
And although Victoria faces stronger headwinds it’s not so anecdotally different in Melbourne.
As property once again ramps up in capital value, becoming more expensive in a domain riddled with speculative behaviour - supply side constraints prevent any sustainable recovery in the construction sector.
As commented in a discussion on housing affordability during last week’s ABC1 Q&amp;A, political parties refuse to touch negative gearing or make the tough decisions that might just prevent an increase of cheap credit being fed directly into boosting second-hand home prices  - instead trying to solve with their right hand the problems created with their left. We’re effectively washing away any efforts to assist our young home buying generation.
In this respect, Australia is remarkably similar to the UK and Canada, and also parts of the USA. House prices rising against the gravity of the broader macro environment, with all who have a hand in manipulating the situation, imagining the story will somehow have a happy ending.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
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Australia's low interest rates could trigger UK and Canada style housing price bubble: 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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