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 We need a sensible conversation on how we want the housing market to look in ten to twenty year’s time, which isn’t dependant on pointless pot shots between bulls and bears.
Language is an important tool in the real estate sector and skewing data to either the positive or negative is a well honed skill which, as I explained <a href="https://www.propertyobserver.com.au/economy/the-property-industry-s-game-of-dodgy-economics-catherine-cashmore/2013072863587?utm_source=po&amp;utm_medium=aida&amp;utm_campaign=mostread" target="_blank">last week</a>, more often than not masks the underlying trends actually taking place.
However, when it comes to property, there are no words more inflammatory, and drama inducing than bubble or bust.
Flag a headline which suggests either, and it will evoke a barrage of abuse from market speculators; hint that we have a pending housing crisis in Australia citing affordability concerns which are voiced loudly and clearly across a number of sectors, and you’re promptly labelled a doomsayer, laughably predicting an instant 40% market crash.
Try and have a sensible discussion on the matter and it’s marred with vested interests.
In the case of politicians, it’s the need to lobby for votes from the majority, above and beyond the need to improve the home buying environment for a small, but increasing non owning minority.
As I suggested a <a href="https://www.propertyobserver.com.au/economy/the-failed-politics-of-housing-affordability-catherine-cashmore/2013072163429" target="_blank">few weeks ago</a> – woe unto any politician who suggests capital values may fall, thereby reducing the entry level of borrowing a new home buyer needs to fund.
And for anyone who has even a basic grasp of how the world’s debt based monetary system works, which provokes a continuous consumer driven need for spending and growth, you’ll understand precisely why there is little concentration on policies to reduce debt and instead a greater concentration on how to make higher capital prices more affordable, with low interest rates, tax incentives, grants, and arguably failed attempts to boost supply.
However, Australia is heading into prevailing headwinds which will have an inevitable impact on our younger generations as we navigate our way into what’s undeniably an environment of weaker economic growth.
All the conditions that were at play during the golden years of capital gains in which household incomes were rising strongly, and the commodity boom was impacting the overall size of the Australian economy are slowing.
We have a growing in-balance of the proportion of working age individuals relative to retirees which will bear heavily on the percentage of Government funding (the tax payers back-pocket) over the next 40 years or so.
In 2009-2010 financial year 26% of the government’s budget was directed towards age related services (health, age related pensions, and aged care) – however, according to treasury projections, this figure’s expected to increase substantially over the next 40 years <a href="https://archive.treasury.gov.au/igr/igr2010/report/pdf/IGR_2010.pdf" target="_blank">“pushing the share of spending to almost half.”</a>
In response, a range of tax concessions currently enjoyed by Australian’s will need to be re-addressed and judging by the reaction to the abolition of the statutory formula for valuing fringe benefits on employer provided cars, it will be far from palatable, albeit, an unavoidable necessity.
I would expect at some future/future point, the current claims on negative gearing will also inevitably fall into question – not an opinion that meets wide agreement, however time will tell.
Income growth is slowing – as chief economist of Macro Business, <a href="https://www.macrobusiness.com.au/2013/07/household-income-growth-evaporates/" target="_blank">Leith Van Onselen</a> recently pointed out in relation to the latest ABS “Biannual Household Income and Income Distribution report“ covering the 2011-12 financial year:
“An examination of biannual income growth since 1996 shows that average real inflation-adjusted household income (pre-tax) has essentially flat-lined since 2008 when measured on a equivalised basis" (i.e. adjusted for household size and composition.)
Full time job growth is weak, with both hours worked and levels of underutilisation deteriorating.  Even NAB have come onboard with a recent research release highlighting Australia’s "ongoing sources of weak domestic demand" and in relation to the overall outlook for Australia’s economy make the rather startling, albeit sobering comment: "We are not optimistic."
Significantly, they picked up on comments offered by RBA Governor Glen Stevens in suggesting that Australia cannot rely on housing and consumption to plug the growth hole – bringing into line an almost certain August interest rate drop – further eroding savings.
However, whilst this may assist lowering the Aussie dollar, which will have a positive impact in the longer term, GDP growth is slowing and as we’ve seen over the past 12 months, as a tool, interest rates are limited in their effectiveness to stimulate those sectors of the economy most in need.
For example, in relation to housing, the marginal upward trend in building approvals evident since the low of 2011, has been moderated with the latest ABS figures showing new houses and apartments falling -6.9% over June (seasonally adjusted) – posting their third large fall in the past four months.
Even allowing for the usual volatility of short term data, this is low by historical standards and falls short of RBA forecasts.   In contrast the established market is enjoying an investor lead rally as funds are increasingly shifted from cash into residential real estate with 36% of loans going to this sector alone.
 
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In May of this year, 18.4 billion worth of housing finance for investment purposes was committed to – the highest level since January 2008. 
Prices in Sydney, Perth and Canberra are now reportedly back to their previous peaks and with the cash rate set for a further fall to 2.5%, it could be argued that we haven’t even started to touch the surface. 
As reported a couple of weeks ago from the new “SMSF Professional’s Association of Australia and Macquarie Bank” according to the ATO, between 2006 and 2013, SMSF property assets grew in value by 230% – "a higher growth rate than any other asset class."
Ahead of the hugely popular auction episode of The Block, the REIV commented that the result could not be taken as a reflection of the current market. 
However, I attended the auctions on the day and the buoyant competition that was clearly evident from those bidding, was not at all at odds with what we’re currently seeing on the ground in inner and middle ring Melbourne localities.
If you have a sensible head on your shoulders, and think it somewhat bizarre that a buyer would pay around $1.5 million for a three bedroom apartment that has four bathrooms, five toilets - with some hefty owners corporation fees thrown in for good measure, along with fixtures and fittings which are arguably dramatically overcapitalized for the property type - when the same dollars could purchase a renovated period terrace in one of the better streets of Albert Park, Middle Park or South Melbourne, then you get a small sense of some of some of the  crazy activity I’ve witnessed of late.
 
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Most recently, the price of a 2 bedroom apartment in Melbourne’s bay-side suburb of Elwood, which achieved $830,000, yet an exact – or at least a very comparable - replica in the same block sold just two months prior for $715,000.
Or another from a local Woodard’s agency, who sold a three bedroom period home in Prahran with a reserve of $950,000, yet with approximately 200 in the crowd and six bidders, delivered a result of $1,325,000 with no recent comparable to suggest a price even moderately close to this level.
There is nothing particularly outstanding or unusual about these properties - neither in each circumstance are the results driven by home buyers looking for their dream dwelling and therefore, to some extent, a justifiable balance between price and desire for the one.
I could sight off the top of my head at least a dozen similar examples of investors overpaying for real estate, despite figures being somewhat inflated by lowering levels of stock.
Conversations with colleagues in Sydney, Perth and certain areas of Brisbane are full of similar tales of sheer amazement. Yet, as anyone who has an active interest in property or shares will tell you, markets run on fear and greed.
Or as Schiller said in his book irrational exuberance:
A “speculative bubble,” is “a situation in which news of price increases spurs investor enthusiasm, which spreads by psychological contagion from person to person, in the process amplifying stories that might justify the price increase.”
And although they were written with the USA housing market in mind, they’re words which aren’t wholly irrelevant when it comes to Australia’s current buying terrain.
As for first home buyers, the news is less joyous.
The latest ABS housing finance commitments note that first home buyers continue to play a long term decreasing role in the purchase of property accounting for only 14.6% of Australia’s buying market – which year on year is down -10.6%, with movements in percentages only fluctuating on the back of various grants an incentives.
Compare this with the 31.4% share during the 2009 boom – invoked by the first home buyer boost - and you’ll get the idea.
And whilst it can be argued that this figure is manipulated by the proportion of buyers who bought forward plans to buy under the Rudd stimulus, the longer term trend is particularly noticeable when looking at census data, with a sharp decrease in ownership between 1975 and 2010 for the age groups between 25-34 and 35-44 which has fallen from a peak of 61% to ‘around and about’ 45% currently.
Whilst demographic and lifestyle changes will inevitably result in a proportion delaying a purchase until later in life, it’s prospected a significant and growing percentage will remain trapped in the rental or social housing sector.
Rental rates have inflated strongly since 2007, RPData estimate a cumulative rise of 32.1%.
Any non-home owner locked in a ‘Catch 22’ of being employed in one of the capital city job hubsof Australia, will be hamstrung as they try to make headway against the escalating cost of accommodation.
So, when does affordability become an issue?
It’s wonderfully easy to create well worded speeches about halving the rate of homelessness with emotive sound bites filtered in for effect.
However, wishing a better life for the disadvantaged, who perhaps haven’t had the good fortune of inheriting the rewards of our golden years of growth, remains a charitable gesture without hard hitting policies which would inevitably impact the level of growth existing home owners could expect to achieve.
Albeit - unless we do so, Australia’s political powers are merely searching for answers with their right hand to problems they created with their left.
Instead, we need a sensible conversation on how we want the housing market to look in 10 to 20 year’s time, which isn’t dependent on pointless pot shots between bulls and bears.
If you listen to some market commentators, it will be an environment in which median prices in capital city localities will sit over a million in <a href="https://www.heraldsun.com.au/news/melbourne-homes-to-hit-1m-in-decade/story-e6frf7jo-1225821383815" target="_blank">10 year’s</a> time (a misguided prediction that has been lingering for some years – here’s another example <a href="https://www.propertyobserver.com.au/https://www.smh.com.au/articles/2003/07/05/1057179204746" target="_blank">written in 2003</a>) - so how about listening to the voices of those who have a degree of concern about their children’s future in an environment, is not prospected to be quite such an easy ride.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
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catherinecashmore-6LXia3pPQj

Australia needs a sensible and honest discussion about housing affordability

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The REIV have released their June quarterly statistics which show a seasonally adjusted 2.4% rise in the median house price with the comment
“The release of the REIV's June quarter median prices should help encourage a few more sellers into the market over spring as it shows the price falls recorded in 2011 have been recovered.”
This takes Melbourne’s median house price from a ‘revised’ $549,000 in the March quarter of this year which – (as <a target="_blank" href="https://www.propertyobserver.com.au/victoria/the-reiv-s-strongest-march-quarter-in-over-a-decade-for-melbourne-never-actually-existed-terry-ryder/2013072263466">Terry Ryder also noted Tuesday last wee</a><a target="_blank" href="https://www.propertyobserver.com.au/victoria/the-reiv-s-strongest-march-quarter-in-over-a-decade-for-melbourne-never-actually-existed-terry-ryder/2013072263466">k</a> and <a target="_blank" href="https://www.streetnews.com.au/why-are-melbourne-median-prices-different-between-data-providers/">myself on Monday last week</a>) - is a ‘not so insignificant’ drop of - 2.23% decrease to the figure the REIV initially published in April of $561,500 – to the now ‘seasonally adjusted’ June median of $562,000.
In other words, had the numbers been taken on face value, without subsequent revision, Melbourne would have simply been treading water.
All of this means little to the average buyer who simply reads the headlines and has little time to dig into the detail – however at the time, the REIV heralded the first quarter of 2013 to be the ‘strongest March quarter in a decade’ which was somewhat surprising considering the ‘unadjusted’ March median actually dropped -0.9%.
Of course, the only reason it could be stated as such, was because their December 2012 median had also been ‘seasonally adjusted’ &amp; revised from $555,000 to $534,000 – a drop of -3.7%.
The REIV only started seasonally adjusting figures at the start of this year, therefore the December adjustment was made ‘post’ the initial release in which the REIV claimed a 7.8% jump in the median house price under the headline: "<a target="_blank" 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.reiv.com.au%2FNews_Publications%2FNews%2520Archive.aspx%3FnewsID%3D%257B7C295CB9-9FB6-42D9-83E9-7DFFA0F00AEB%257D%26title%3DGrowth%2520returns%2520to%2520Melbourne%2520housing%2520market%2520in%2520December%2520quarter&amp;ei=4gzyUeiPEai9iAfxp4HgDg&amp;usg=AFQjCNHoXM0aphL1NtAO4TG5vZqeylmJ4Q&amp;bvm=bv.49784469,d.aGc">Growth returns to Melbourne housing market</a>."
I remember this well, because it prompted a joyful remark I overheard one agent relay to his ‘investor’ client, that this would equate to more than “30% capital growth for Melbourne over the following 12 month period if it maintained pace” - thankfully a comment that will remain pure fiction.
As a general rule, seasonal adjustments are calculated by looking at the ‘average’ seasonal shift during the same quarter over a lengthy time scale.
The information is then used to calculate the amount to either add, or subtract, from the raw data.
Whilst it can be useful from a trend perspective (smoothing out the bumps), there is scant information on the REIV website to explain how a drop of -0.9% can be converted into in to a somewhat robust ‘rise’ of 5.1% in a market which, although improving, was certainly not doing as well these numbers would indicate.
 
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 The reason figures are revised, is because all data providers suffer from a lag in reported results.
These typically filter in over the 3 month period ‘post’ the quarterly release from valuer general data – the most authoritative and comprehensive source of sales information we have.
Therefore, the median price home buyers and investors are reading for this quarter, and the emphasis that is put on it as newspapers go to town with boom or bust headlines, is likely to alter significantly when the next release is due. Therefore, it is arguably a misleading ‘quarterly’ indicator of true market movements. 
In other words – any ‘newly’ released quarterly data needs to be taken with a pinch of salt.
With this in mind, it makes the daily index – which is neither seasonally adjusted and would also miss a wide proportion of lagging results - laughable.
Investors are often fixated on median prices. 
The major investment magazines have extensive tables of figures and percentages covering the back pages. Agents use them to their own ends with comments such as "prices have increased 10% year on year over the past 5/10 years for such and such a suburb."
However whilst the median figure may have increased – the ‘middle’ figure of all cited sales – individual property prices, and the changes a property may go through in terms of renovation and extension, which would therefore warrant a higher capital price outside of natural increases, is not always represented in the information provided.
It should also be noted that each provider uses a slightly different methodology when collating their statistics.
For example, the REIV record a ‘seasonally adjusted’ 8.4% rise to the median from this time last year which seems to suggest Melbourne is coming on leaps and bounds. 
However, the ABS show an increase of just 1.1% (to March 2013) - APM: 6.1% (to June 2013) and RP Data: 3.3% (to June 2013) making the REIV’s median figures higher that of every other data provider.
 
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But, the REIV are not the only culprits when it comes to publishing data misnomers.
As economist <a target="_blank" href="https://www.macrobusiness.com.au/leith-van-onselen/">Leith Van Onselen</a> pointed out to me in a conversation we had regarding APM’s results:
“In its March quarter release, APM reported that Melbourne house prices led the nation, rising by 3.6% over the quarter to $538,922. What was not mentioned in their commentary, however, was that some of Melbourne’s reported strong price growth was caused by a -1.1% downward revision to the December quarter......And in their June quarter results, APM once again reported that Melbourne led the nation, recording 5.0% growth over the quarter and 6.1% growth over the year. However, part of this strong quarterly rise was caused by a downward revision to March's median house price to $527,245, without which Melbourne would have recorded 2.7% growth."
As Leith points out, without the subsequent revisions “ Melbourne's annual price growth would have come in at a more moderate 4.2%.”
One indication towards the stark contrast in REIV statistics is because unlike the other indexes, they do not stratify their median figures to reflect different aspects of each housing type outside of the broad description of units and houses.
This creates significant problems for those using the information as a source of market analysis.
In REIV terms, a unit could be a small villa on a subdivided block of typically six to eight free standing or attached dwellings - a one or two bedroom apartment or flat, in either a low rise or high rise block , a high spec townhouse on a ‘side by side’ subdivision, or a bedsit. 
Obviously, this can create distortions when assessing the information.
The same is the case for housing, median house prices cover detached houses, terraced houses, semi-detached houses, residential warehouse conversions, holiday houses and duplexes. Because the REIV don’t distinctly classify their results, we also see big differences in individual suburb changes.
 
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For example, according to the June stats, Hawthorn’s unit median has increased 20% from the last quarter.
However, there should be no confusion here – individual unit prices in Hawthorn have not increased 20% – this is median data, and without stratified statistics, the median price can easily be boosted with different property types being lumped under the ‘unit’ banner.
To publicize these figures, with full knowledge of the reaction it will create, should be an area of concern, yet one which is ignored in the mainstream press.
Albeit, from an anecdotal perspective, property prices in Melbourne have increased throughout the course of 2013.
As an example, a unit which based on comparable data from late 2012 and early 2013, would be worth anything in the region of $420,000-$440,000 – under current competition, often ends up selling 2-3% higher.
This is an effect which is primarily noted in the inner and middle ring established suburbs of the city where auction sales predominate and an intense level of investor and speculative activity is evident.
Most results are staying broadly within these parameters; however, I’ve seen some crazy activity of late as mini bidding wars in various pockets have rippled across all price brackets
This can have quite a dramatic impact on both vendor expectation (as owners see neighbouring properties sell above their pre-estimate of value) and buyer physiology. Property shoppers realise they need to ‘up the budget’ to exceed what is perceived to be some kind of boom time terrain, producing gains that cannot be sustained over the resulting period – and in the current economic environment – will most likely eventuate to be nothing much more than a short term rally.
As most sales across Melbourne are conducted private treaty, the effects on the median data across the board would be minimal, and really only feed into inner city figures where auctions are the preferred method of sale.
In truth – from a macro perspective, as the latest RPData report highlights, “In five and a half years, growth in capital city home values has not increased at a rate higher than inflation”.
It should be noted that Australia is facing some significant headwinds which will have an impact on the property market in the months and years ahead.
Full time jobs growth is weak and both hours worked along with levels of underutilisation are deteriorating. 
As the mining construction boom unwinds, non mining industries underperform, and we pull in our belts with fiscal consolidation, it’s likely we’ll see little change over the months ahead. The short term data is volatile and somewhat unreliable albeit, the long term trend is clear.
We’re entering an era of slow growth and it’s yet to be seen if it will be stable growth.
In this respect, when you lift the blanket on unemployment data the trends are concerning and certainly not as good as the headline rate suggests.
Outside of keeping interest rates low, or offering grants for new homes to enable buyers to take on a larger proportion of capital debt, <a href="https://www.propertyobserver.com.au/economy/the-failed-politics-of-housing-affordability-catherine-cashmore/2013072163429" target="_blank">there are no long term sustainable solutions offered from either side of politics. </a>
The speculative behaviour we’re currently seeing in various pockets of capital city markets as investors lead the widely spruiked ‘housing recovery,’ neatly packaged under the words ‘typical market cycle’ as different states go through their own ‘wax and wane’ periods of supply/demand activity.
This will have far wider impacts for our younger and future population of buyers than is fully recognised across the broader population that already own a home, or are paying off a mortgage.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
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The property industry's game of dodgy economics figures: Catherine Cashmore

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Housing affordability has been the name of the game this week.
We’re coming up to a general election and ‘lo and behold,’ much to the distaste of those who deny Australia has a housing affordability crisis – and first-home buyers are just being spoilt and picky – research by ‘Auspoll’ has revealed that 84% of Australian’s put housing affordability top of the charts when rating election issues by areas of importance.
The <a href="https://www.heraldsun.com.au/news/housing-affordability-crisis-set-to-hit-labor-where-it-hurts-in-western-sydney/story-fnii5s3y-1226679197545" target="_blank">article</a> which appeared last week across various ‘News Corp’ publications, focused on key electorates in which ‘housing affordability’ came streets ahead of other hot topics such as ‘education’ or ‘border control’ – accompanied with case studies in which 50% or more of family income is going towards mortgage or rental payments alone.
Cited within the report was a 2007 comment by the then Opposition leader Kevin Rudd, who in an attempt to boost his popular vote, told former Prime Minister John Howard that:
"Housing affordability is the barbecue stopper right across Australia." 
It’s interesting to chart the political narrative regarding housing matters – because after years of lousy half-hearted initiatives, which have done nothing to markedly advantage the two most venerable demographics of our market – principally first-home buyers and renters – we have no sustainable interventions in place to affordably accommodate a rapidly expanding population, all of whom will need some form of shelter.
Australia has sailed the ship of good fortune, sheltered within a resource rich environment. Most families have adjusted their lifestyles to suit their income and never feel particularly ‘well off’, even when earning substantially more than the median income.
For those working at, or falling below the median, the cost of accommodation is an increasing drain on the economy and well being of our society, resulting in areas of socio-economic advantage and disadvantage in an English-style cultural or class divide.
 
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Since 1974 during which Gough Whitlam aroused passions in his ‘It’s Time’ speech by pointing 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”,
political advocates from both sides of the playing field have weighed into the debate.
Policies such as the NRAS, the first-home buyer’s savers account and spruiked initiatives to increase infrastructure have all failed to make significant or sustainable inroads to either supply based concerns, vacancy rates, or first-home buyer percentages.
A few decades on and it seems whilst everyone wants to be popular and ensure housing is ‘affordable,’ - years of easy capital gains and tapping into the housing equity ATM machine, have made any contemplation that prices should drop - or even stabilise for a lengthy period of time - downright out of the question.
As John Howard worded it during prime minister’s question time approaching the end of our 2007 housing boom;
“A true housing crisis in this country is when there is a sustained fall in the value of our homes and in house prices”
It’s worth mentioning that Howard’s response was in reply to a question challenging the plight of first-home buyers from soon to be elected Kevin Rudd – who upon taking office less than 12 months later - promptly inflated the market three-fold with his first-home buyers ‘boost,’ which bore the consequence of leaving our most inexperienced buying demographic in subsequent negative equity once it was stripped away.
 
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Earlier this year, the question of housing affordability once again raised its political head, however this time it was in the form of ‘point-scoring.’
In a television program back in May, Joe Hockey made the call that house prices in Canberra would lose capital value under a Coalition Government:
"There is a golden rule for real estate in Canberra – you buy Liberal and you sell Labor". The response from Kevin Rudd – the then 'former-PM' - who ‘championed’ the cause of first-home buyers with his ‘vendor boost’ (as Professor Keen aptly named it) was:
"Can I just say, Joe, I'm not sure that will go down well with all the voters in Canberra," Labor politician Andrew Leigh, who represents the Canberra seat of Fraser, was not slow to weigh in on the debate:
''When the Liberals came to office in 1996, they wiped $25,000 off the price of a Canberra home....Today, Joe Hockey proudly jokes about how he'll do it the same again.”
A comment that was promptly disputed by ACT Liberal Senate candidate Zed Seselja, who – whilst paddling frantically against any suggestion that prices might drop under a Liberal Government, cited the ‘moving annual median house price’ from the Real Estate Institute of Australia with the comment:
‘‘Prices dropped more in last two years of the Keating Government than they did under Howard’s first 1.5 years, and to its lowest point.’’
Woe unto any politician who suggests market prices may actually fall. 
Far better it seems to burden buyers with cheap credit by way of grants, low interest rates and incentives, in a vain effort to mask rising costs under the false premise that residential real estate is getting ever more affordable – particularly in light of a construction industry that’s struggling to make any headway.
(hat tip @bullionbarron)
“Improving housing affordability does not mean reducing the value of existing homes, which are usually the primary asset of any individual or family,” said Labor's 2007 policy statement.
 
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The policy of negative gearing, which was introduced and subsequently advocated to assist the lowly renter and reputedly ease the burden on social housing (waiting lists of which are increasing), coupled with the capital gains tax discount of 50% introduced by John Howard in 1999, resulted in a 30% increase in investment activity alone.
 It’s been by far and away the best incentive for the individual investor, fuelling speculation into the real estate sector and consequently creating a massive bubble of undiversified private debt.
Whilst I am not against investment in the residential real estate market, it makes little sense to extensively encourage it from a policy perspective if it doesn’t achieve:
<ol>
<li>An improvement in housing affordability and supply;</li>
<li>An increase in vacancy rates;</li>
<li>A substantial boost to new housing and consequently infrastructure in ‘growth’ suburbs; and</li>
<li>Lower rents for the most venerable in our society</li>
</ol>
<ol></ol>
All of which negative gearing has failed to do.
As I pointed out in <a href="https://www.propertyobserver.com.au/economy/property-investors-should-not-be-blamed-for-the-housing-unaffordability-catherine-cashmore/2013071463275" target="_blank">my column last week</a>, whist it would be unfair to condemn individual investors for taking advantage of various tax incentives, any Government that puts in place policies to fuel speculation and subsequently inflate prices, is a Government creating a difficult paradox: how to advantage those who entered at the beginning of the lending boom (during which capital price to income was lower), compared to those who find themselves at the sticky end of housing’s historical journey in which mortgage debt has inflated fourfold.
 
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Now we have a situation where household debt to income sits close to 150% with ‘<a href="https://www.moodysanalytics.com/" target="_blank">Moody’s Analytics</a>’ in a paper entitled “Trends in Australian consumer lending” demonstrating how Australian banks have the highest exposure to residential mortgages in the world.
It was years of dizzy speculation into the established real estate market which resulted in prices escalating to their current heights, with banks only too eager to create credit through the extension of mortgage lending which in the ten years to the GFC, increased in-excess of 450%.
And despite the innocent impression some try to imprint suggesting we have a stable and responsible banking sector. 
Global measures to date, which aim to ensure a similar GFC crisis does not occur again, do not go far enough in ensuring financial institutions fund their investments with substantially more equity than current regulations dictate.
As Moody's Analytics managing director Tony Hughes and senior economist Daniel Melser suggest;
"Irrespective of the complacency of local analysts, who sound a lot like many US housing cheerleaders circa 2006, this exposure (to home loans) represents a major concentration risk for banks and the Aussie economy," comments not to be taken lightly. 
The influence of investment into the property sector was noted as far back as 2003 in a Productivity Commission Inquiry on <a href="https://www.rba.gov.au/publications/submissions/prod-comm-frst-home.pdf">first-home Ownership</a> submitted by the RBA.
The study concerned itself with the effect of “strong and rising house prices which were burdening new home owners.” And noted
“The most sensible area to look for moderation of demand is among investors.”.. “In particular, the following areas appear worthy of further study by the Productivity Commission”
The report noted some key investor incentives which in light of the comments above, could be moderated:
1.)          “The ability to negatively gear an investment property when there is little prospect of the property being cash-flow positive for many years;”
2.)            “The benefit that investors receive by virtue of the fact that when property depreciation allowances are 'clawed back' through the capital gains tax, the rate of tax is lower than the rate that applied when depreciation was allowed in the first place.”
3.)            “The general treatment of property depreciation, including the ability to claim depreciation on loss-making investments.”
<ol></ol>
This was 10 years ago – and without putting too blunter note on it – we’re no further forward.
In addition – for those who continually suggest house prices are as high as they are simply because we have a ’shortage’ of accommodation, the same report highlights:
“At the macro level there is not much evidence to suggest that the growth in house prices has been due to a persistent shortage of supply of houses relative to underlying demand for new housing.”
 
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There are plenty of initiatives which can be employed to ease affordability – albeit an active attempt to gradually ease investor demand in our established housing sector, whilst facilitating the construction sector.
A few days ago I read an interesting blog by <a href="https://blog.rpdata.com/2013/07/the-key-differences-between-the-current-housing-market-growth-cycle-and-the-previous-cycle-in-200910/" target="_blank">R P Data</a> investigating why the current upward cycle may be different and more tapered to the last.
The comment was made that first-home buyers ‘tend to push prices higher…. because their behavior can be more emotional than other segments of the market’ whilst investors are ‘more clinical’ when acquiring real estate.
It may seem a sensible assumption to conclude, as is often the case when assessing behavioral economics, that the reality can sit some distance away from the broadly held perception.
There has without doubt been a push in home prices from first-time buyers in periods during which easy credit has been offered on a plate by way of incentives and grants to the inexperienced proportion of our buying market.
However, without these dynamics, investors play (and have played) a far bigger contribution to price rises in Australia’s real estate market.
From my own anecdotal experience, seeing an investor pay over and above what a property is worth, (based on an educated assessment of recent comparable data,) is a work related Saturday pastime.
Compared to last year, all states are experiencing an investor lead boom.
Victoria’s numbers are up 11.3%, Queensland 4.3%, South Australia 8.3%, Tasmania a more modest 1.5%, ACT is up 11.1%, the Northern Territory up 28.5% with the outright winner Sydney, up 35%.
You don’t have to be Einstein to work out where all this is heading.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
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The failed politics of housing affordability: Catherine Cashmore

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You’d be hard pushed to find a first home buyer shopping in our largest capital cities, who had not been outbid by an investor over recent times.
The ABC has been running an interesting and somewhat anecdotal study on the <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2013-07-08/cost-of-living-weighs-on-minds-of-australians/4804728">cost of living</a> pressures for a range of ‘typical’ household types across Australia, assessing how they perceive and experience the current headwinds facing our population, in what’s broadly considered to be one of the most expensive countries to live in the world.
According to the IMF, we sit within the top ten of per capita GDP data and PPP (purchasing power parity) data making us officially ‘very well off’ – and whilst both are pretty poor in appraising what’s really happening compared to the perceived on paper analysis which dictates what we should be feeling, ask any economist and they’ll relate a similar story.
Ben Phillips from the National Centre for Social and Economic Modelling (NATSEM), has been studying cost of living pressures over the last decade and concluded Australian households are doing exceptionally well, and any poll boosting political speak suggesting we’ve never had it tougher is a furphy.
His analysis is based on our golden years of growth during which strong and growing incomes have outpaced the official inflation data which has stayed within the RBAs preferred range of 2 to 3 per cent over the past 10 or 20 years, leaving Australian’s ‘a long way ahead of their cost of living’ – which is a lot different from the rhetoric we commonly hear expressed, he concludes.
According to the study, we just ‘think’ the cost of living has increased. 
And here’s the Roy Morgan graph <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2013-07-08/household-expenses-graph/4802030">to prove it</a>.  
No doubt, for a proportion of Australians this is a reality.
However, it’s more likely to be the proportion of our population that entered the property market early and have subsequently offloaded much of their housing costs whilst still earning and investing - or higher wage family units living within their means.
Because, not surprisingly, by far the largest complaint from the ABC study and other such reports assessing similar concerns, is the escalating cost of accommodation and the lack of suitable well located options for those who have a view to entering the property market should they be able to achieve the relatively mammoth task of saving a deposit on the median disposable household income which is around $43,000 for a single person.
(For those wanting a deeper analysis of typical household incomes, I highly recommend Mat Cowgill’s blog <a href="https://mattcowgill.wordpress.com/2013/05/13/what-is-the-typical-australians-income-in-2013/">What is the typical Australian’s income in 2013?</a> or <a href="https://grogsgamut.blogspot.com.au/2013/04/what-is-median-australian-income">Grog’s Gamut</a> which follows a similar line and sheds light on the broadening gap between the different income percentiles.)
One mistake made when assessing affordability, is to concentrate only on the principle cost of the home – calculating the percentage of income needed to service the repayments – which is usually appraised next the widely considered 30 per cent of disposable income manageable bench mark.
 
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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 which all would agree has escalated considerably.
It’s not only commodity prices that have spiked such as 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.
Obviously, for a lower income individual, there’s far less in the pot once the 30 per cent has been extracted than would be the case for higher income workers. But once the bank has taken their share of principle and/or interest repayments, or tenants have paid their rent, which the ABS assess to be a similar percentile income proportion to accommodation costs serviced by mortgage holders, it’s the remainder that’s needed to service the other ‘not so cheap’ requirements of modern day living that’s an increasing area of concern, as cited by organisations such as <a href="https://www.shelter.org.au/">Shelter.</a>
For duel income households, the expenses can be shared, however single buyers would need at least $350,000/$360,000 to purchase within commutable distance of our major capitals – the job hubs of Australia, and even in our current low interest rate environment with variable rates around 5.5 per cent, on a median income of around $40,000, buyers are priced out unless they have additional assistance from friends or family.
From the participants surveyed as part of the ABC report, a range of comments reflected these concerns, yet one prominent cry which I hear expressed from many first home buyers, is resentment towards investors – or as the ABC case study put it, “people” that;
“have three or four homes who are going into that market because they're earning money and getting a lot more profit on it..” leaving a “lot of my friends say(ing) that they think 'I'll never own a house, I'll never be a home owner, it's too expensive”
If you ask any non home owner if they would like own a property, 9 out of 10 would say yes – yet most accept they will need a period of renting prior to purchasing, so you could ask – Why the resentment against the investor, the majority of which, only own one or two investment properties, not the 3 or 4 cited above?
To answer the question, we need to assess whether investment into the property market has aided the first home buyer, or hampered their journey into ownership – the latter of which is this demographics’ majority view.
To date, house price increases have been primarily fuelled by households taking on an increasing proportion of mortgage debt – debt which outpaced both wage rises and inflation for the same period.  
At the same time investment into property was broadly encouraged through various government incentives, such as negative gearing and reductions in capital gains tax – and most recently, the ability to borrow and buy real estate as part of a SMSF.
Currently, investors make up a little over 40 per cent of Australia’s buying market with scant information on the percentage of foreign acquisitions.
The number of landlords lodging a tax return in 1991 was 750,000 – compared to the latest data of 1.8 million in 2011.
The increase in outstanding investor mortgage credit since May 1993 is 1970% compared to 837% for owner occupied housing (Macro Business.)
Yet with all our initiatives to boost the share of private investment into the property market under the misleading concept that it would somehow lower demands for social housing and provide a greater array of options for renters, the shameful fact remains that it has done little - if anything - to increase supply.
Loans to investors for the purchase of new property come in at less than 5 per cent – which essentially means, the vast majority of Australia’s buying market – over 90% - competes for a reducing pool of second hand dwellings.
Apartments are generally considered the ‘foot through the door’ property type that attracts a younger ‘first home buyer’ demographic. However, the bulk of inner city established unit and apartment stock is investor owned, (close to 70% in some localities.) Therefore, both typically compete for the same property types within a similar price bracket.
 
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Most investors are speculating on capital gains and employing a negative gearing strategy which promotes speculation into established terrains and a ‘hold for the long term’ mentality.  As a consequence, unit holding periods over the past decade have increased 39 per cent (RP Data) which further promotes a ‘bottle neck’ of demand.
And we’re not alone, a recent study in the UK by the <a href="https://www.strategicsociety.org.uk/">Strategic Society Centre</a> notes similar figures - with the number of private landlords as a proportion of the population more than doubling between 1991 and 2008.
The study has caused an outcry due to the large disparity between owners and renters, which they cite as an ‘enormous financial gulf’ with calls for a massive increase in additional supply to attract new owners.
Unfortunately, the only option considered has been an injection of easy credit by way of the UK’s Help to Buy scheme which will produce inflationary elements into the market and further hamper affordability.
First home buyers in the USA are also struggling, with reports of cash only investors soaking up large swathes of affordable family homes in city locations.
As just one example, close to a third of all homes purchased in LA during the first quarter of 2013 went to cash only buyers, compared to just 7% in 2007. First home buyers and families simply can’t compete.
In Sydney, investors make up roughly 50% of the buying market – and with the level of residential property listings falling to 2009 lows which accounts for a 23.1% yearly decrease in stock (SQM), it’s no wonder that the proportion of first home buyers in NSW sits below 5% – a shameful statistic.
I still regularly hear industry professionals talking up property investment to their clients, speculating on an 8% to 10% annual return as was the case for those that purchased prior to the spending spree which spurred accommodation costs to an all time 2010 peak.
However to continue on such a trajectory would take the average nominal apartment price in our two major capitals close to, and over a million. If you think getting a foot into the housing market is tough now – it will be nigh on impossible if the wishes of those benefitting from swelling property prices get their way.  In all honesty – if anyone spruiks this mantra to you – walk the other way.
Of course it’s not just investment into property that has played a part in prices being as high as they currently remain – a comprehensive study would bring many other issues to light, with significance given to reducing the inflationary elements around the limited supply of established accommodation whilst at the same time, exploring new ideas to massively boost infrastructure investment into regional and fringe locations which would aid an increase of demand in the construction sector.
Yet it remains, that the capital cost of property for initial owners in areas where they are feasibly able to live whilst servicing a combination of other essential necessities is out of bounds for a significant proportion and as far as perceptions go, you’d be hard pushed to find a first home buyer shopping in our largest capital cities, who had not been ‘outbid’ by an investor over recent times.
Despite the higher interest rates, for those who purchased in the late 90s or start of the 2000s, a cheaper capital cost although not easier to service, allowed the principle to be paid down at a faster rate than the longer mortgage terms required for the higher nominal capital prices which sit at peaks in today’s market and over the course of the loan, require the borrower to pay back substantially more.
The risks of taking on a higher proportion of private debt despite our low interest rate environment should not be discounted simply because the serviceability of those expenses is assessed to be ‘affordable’ – yet to get into the market, this is precisely what we are asking first home buyers to do.
Investors are an important sector of any residential property market – and should not be blamed for making efforts to secure their financial future.  Instead, we need to look towards our Governing powers that have the political clout to level the playing field.
As those who have their heads out the sand are aware – Australia faces some significant headwinds over the next decade and even with modest improvement of first home buyer figures in the latest ABS finance data – no doubt buoyed by the rush to enter prior to grant withdrawals – it remains to be seen whether we can start producing any long term sustainable solutions for this sector.
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Property investors should not be blamed for the housing unaffordability: Catherine Cashmore

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As most people are aware Australia’s population has now tipped the 23 million mark.
Coming originally from the UK, where over 60 million individuals reside in a land area which could be fit into Australia more than 58 times over, the 4.25 million living in my home town of Melbourne and its surrounding suburban sprawl, feels noticeably different.
Victoria has exceeded all states in the population stakes. According to the ABS, over the year to 2012, we welcomed an additional 99,548 new residents.  Of that number, 56.4% were overseas migrants, 41.8% from births, and only 1.7% from interstate migration.
As demographer Mark McCrindle recently reported, the number of people residing in Australia has increased by 8% over the past 5 years and (under current forecasts) Melbourne is set to eclipse Sydney as Australia’s largest city by the middle of this century.
However, whenever population statistics are released, it inevitably follows that we get a host of articles directly aligning population density to rising house prices. While it’s not unreasonable to assume that an increase in the resident population will swell demand for home sales, its far harder to directly align the statistic to burgeoning house prices.
This is especially the case when you consider that, despite Victoria’s booming population, Melbourne currently sits about 15% below the five year average in total annual sales turnover, and throughout 2011/2012, was tracking at levels not seen since the late 1990s.
Turnover is an important figure in real estate – more important than median price rises.  Strong sales turnover keeps the industry, along with its retail offshoots, ticking along.
Without a good supply of buyers and sellers agreeing on property transactions, the market becomes somewhat stagnated and the resulting consequences can be felt across the broader economy.
However, whilst a higher sales turnover in any area where both land and supply is limited can result in rising median values, it isn’t necessarily correlated with increased population density; rather it generally relates to the amount of debt taken on by mortgage borrowers, a good proportion of which will be investors.
Investigating the potential for a surge in housing values involves a lot more than following population increases.  If you were to follow the population in Melbourne, for example, you’d be including locations such as South Morang, Tarneit and Dallas.
Median house prices in these areas haven’t done much – in fact over recent times they’ve been falling despite an increasing population.
The last significant price rises in many of these regions was during 2009 – when some suburbs rocketed by 20% or more.
 
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However, it’s important to understand that population growth didn’t fuel that surge - rather it was credit growth.
The post GFC boom which took us to the ‘peak’ of October/September 2010 was stimulated initially by the first home buyer boost (reflecting the Rudd governments attempt to ward off a GFC inspired slowdown by injecting easy credit into a number of economic sectors).
This resulted in a price multiplier effect across the market as generous amounts of cash were wafted in front of inexperienced buyers – many of whom took the additional dollars offered for new accommodation.
Once again, it shows the futility of first home buyer grants as a savings mechanism, further establishing the fact that the more money you pump into the market, the higher house and unit prices inevitably become.
Significantly, our fringe locations have an abundance of land along with ample off the plan packages waiting to be snapped up for those willing to pay the relatively high prices.
There is certainly no shortage of supply in our fringe suburbs, meaning that any increased demand from home buyers is most unlikely to result in the same ‘pent up demand’ which can trigger price surges typical of inner suburban markets.
Furthermore, these areas sit in what is commonly referred to as the ‘mortgage belt’ regions - areas which – according to a recent <a href="https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=711556" target="_blank">Fitch report</a> – remain venerable to delinquencies.
In contrast, the more affluent inner city regions – areas such as Boroondara in Victoria’s inner east for example – where it’s impossible to secure housing below the metro median, have lower delinquency rates and a far higher proportion of residents employed as professionals and managers.
Evidently, costly house prices in these vicinities are stimulated by above average median incomes in occupations most likely to have benefitted from strong historical salary growth, facilitating greater debt serviceability as well as the ability to leverage off existing assets.
But even this doesn’t mean that increased population density capital city suburbs, which seemingly have no room left to swing a cat, is directly correlated to price rises.  It’s not. For example, over 60% of the apartment stock in the larger capitals is investor owned.
 
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Obviously, it increases demand from renters – a large proportion of which are priced out – but the investors evidently reside elsewhere.
Of course, as mentioned above, supply is a significant factor, and in our current high density culture (where historical development limits have been stretched), the inner suburban regions are not immune.
Over recent years Melbourne has experienced a high density boom with CBD high density development and inner suburban towers producing a significant over supply of one type of accommodation – relatively small one and two bedroom apartments, primarily suited to the student market.
The buyers for this type of accommodation typically don’t reflect an increasing local population.
For example, when Melbourne’s Docklands were established the apartments were swiftly offloaded by sales agents – taking a generous cut directly from the developers - predominantly to off shore investors.
However, supply was never tight enough, or the developments attractive enough, to ensure ongoing demand.  Subsequently the rental guarantees expired, prices stagnated and dropped, and despite its close proximity to the city, vacancy rates in the suburb remain close to 10%.
The housing shortage debate is one that gains regular media traction yet is rarely understood. If the supply equation is a simple case of putting every newly prospective household in our country into a new home, then the short answer is yes, we have a housing shortage – we’re not building enough.
But demand for housing comes from consumers, and the real shortage is for affordable accommodation that meets the current needs of our modern home buying demographic - young couples most likely at the stage of their life where they are planning (either immediately or in the near future) on forming a family.
First home buyers as a proportion of the buying market have been diminishing – and currently make up only 14% of the market.  The rise in prices is being fuelled by up-graders and investors – not new purchasers.
Put simply, the properties we are currently building are not attracting a greater proportion of local buyers, who quite clearly prefer established properties over new development for a variety of reasons - which can be summed up somewhat under the heading inelastic short sighted development policies.
This is why residential construction is currently experiencing its ‘longest trend decline in post-war <a href="https://www.brokernews.com.au/news/breaking-news/housing-affordability-is-everyones-problem-176842.aspx" target="_blank">history</a>.’
Take Sydney for example. Significantly more expensive than any other capital city in Australia, by the year 2000, affordability levels were at a crisis point. However, from around 2003 the market remained stagnant and, despite continued population growth, it didn’t renew its’ upward trajectory till 2009.
A shortage of supply and solid demand may have prevented prices falling – however population density was not the main driver of them subsequently rising.
Significantly, Sydney’s buying market is comprised of almost 50% investors - all borrowing to take advantage of well spruiked prospective gains, as an increasing number speculate on the market in an attempt to pump their savings into anything that ‘promises’ a better return than the stock market or a long term deposit account.
And let’s not forget foreign investment and the impact this can have.  London is a good example. The scream for housing in the UK, and London particularly, due to ‘shortages’ and rapidly rising prices, is because over 50% of prime London land and property is owned by offshore buyers and developers who have no interest in building ‘affordable’ accommodation to fulfil ‘real’ home buyer demand from middle income workers.
The gains are coming from those who have hundreds of thousands to invest in what’s perceived to be a relatively safe haven, and to date it’s been channelled into the premium housing sector.
 
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The recently imposed UK mansion tax may impact on these statistics, however there is no doubt England’s “help to buy” scheme will do a fair job of propping up the lower end of the market as, once again, the ‘proof’ of rising prices comes policies facilitating increased debt access and take up.
We all know the reality behind our golden years of growth.  The 250%+ increase in house prices over the last decade has been fuelled by increasing debt, financial deregulation, duel income households, first home owner’s grants, and a rapid increase in the purchase of investment properties.
People were able to borrow more to fulfil their desire to not only own their own castle and add an extension (further inflating median values,) but also to leverage the accrued equity and “invest” over the duration (usually in more real estate), with banks emerging as the real winners.
The rapid increase in house prices over the period has had little to do with population density per se, but everything to do with credit growth – and you’ll find similar stories repeated across the globe.
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? But whilst population growth certainly is a factor, and will push demand, actual house price appreciation more directly stems from from a higher proportion of mortgage holders shopping within an area of limited supply, rather than  a higher population density. It’s an important distinction.
We may be consistently told that house prices are as high as they are because we’re not building enough supply, but the reality is, house prices have been pushed up in line with the banking system’s ability to lend and the consumer’s appetite to borrow, and considering banks favour lending against existing collateral over and above productive investment, it should come as no surprise that the vast majority of bank lending (about 60%) has been towards the purchase of ‘bricks and mortar’ – with the only constraint on the amount of money ‘created’ being mortgagees ability to service the debt.
For those who got in at the beginning of the lending boom, the party continues.
However this is in many ways inherently unstable and the only way to stop the whole system collapsing is to prop up the debt levels we’ve already created, and find new ways to pump cheap credit into the system.
For those renting and facing the challenge of their first purchase, this means continuing to be saddled with high capital prices which they are expected to service for ever longer periods – now sometimes extending out though mortgages of 30 years or more – and a continuous low interest rate environment, or shared equity schemes and other funding innovations all pitched to maintain the perception that housing has never been more ‘affordable.’
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
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The myth about population density and house prices: Catherine Cashmore

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You have to question the pure insanity that surrounds Australian real estate – you have to live here and experience it to truly believe it, because I’d challenge you to find another country where the subject receives the same intense level of pre-occupation.
Firstly, the obsessive and hugely popular renovation shows that populate our screens almost every evening – at peak viewing times – where contestants plot against each other to try and produce a product that will attract a storm of buyers when time comes to ‘flip.’ In this case, I’m talking The Block.
Whole episodes are often devoted to mindless discussions as to whether spending an extra few hundred on a 3D television would really reap a benefit. And whilst it may be the deal breaker enabling contestants to win a room ‘reveal’ prize, it certainly won’t make much difference to the end sale price.
Marketing a furnished property intended for owner occupation, or rent has its difficulties - albeit, this is ‘entertainment’ real estate style and judging by the ratings, viewers love it. The first apartment to go <a href="https://www.realestate.com.au/property-apartment-vic-south+melbourne-114124839" target="_blank">online</a> (now followed by others) has been marketed at $1.2 - $1.4 million with a depreciation schedule of around $1,000,000 over 10 years.
Perhaps my only caution at this stage to potential buyers of The Block would be to pull their eyes away from the interior styling and check instead for nearby completed planning approvals - which hold potential to change the landscape, natural light, or views...   Always concentrate on what you can’t change, before you pay attention to the fixtures and fittings you can change. In previous series’, buyers have been tripped up by this very issue.
Then the other week The Living Room on Channel Ten chipped in with some handy ‘auction advice’ for a couple of first-home buyers.
After encouraging them to spend money on a valuation which would not have taken into account any discussion with the agent of the level of buyer interest or vendor expectation – two vital bits of information required when negotiating a property purchase - and clearly without the budget to beat the evident competition surrounding the home, they were given the helpful advice to bid strong from the onset with an “odd” final number.
They lost of course – but never mind eh?  As the program told us – apparently, you have to ‘typically’ fail at seven auctions (upping your budget along the way) before you graduate to be the lucky purchaser.  Information I wasn’t aware of.
And meanwhile, we’re fed ‘daily’ with house price statistics from RP Data – which could be somewhat relevant if we were monitoring petrol prices – but in the daily index, real estate can ‘boom and bust’ all within a couple of months.
RP Data <a href="https://news.domain.com.au/domain/real-estate-news/are-house-prices-rising-or-falling-20130603-2nlqd" target="_blank">“ring up agents</a>” to get collect their information, which would be a mammoth task considering most agents are highly unlikely to prioritise the reporting of private treaty sales information as soon as a contract is signed – if at all.
And yet this is what the accuracy of daily index relies upon – prompt agent reporting.  Without it, the results lag until the official ‘settled’ sales data filters through from the government (some three months ‘plus’ later) - hence why there is a large ‘pinch of salt’ feeling surrounding their media releases.
Realestate.com.au is another carnivorous operator trying to secure a great proportion of the obsessive property industry pie. As the national number one property website (albeit not in all states) regular rises in advertising costs are all but guaranteed.
Compared to the other portals, REA’s fees are extreme, with a model that now requires agencies to pay a subscription fee plus an additional cost for each and every new listing uploaded – this obviously impacts the smaller and regional agencies fighting to get market share.
Of course, the dollar’s rise further for various feature highlights – which essentially equate to a few frills such as a fancy border surrounding the advertisement which will supposedly stay at the top of the list when searching on a ‘default’ setting – or special ‘emailed’ brochures.
All of the above is typically funded by ‘vendor paid advertising’ and passed on as such by the larger proportion of metropolitan real estate agencies, who recognise the need to run an effective ‘online’ campaign in order to maximise potential demand.
 
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As the old saying goes – ‘you can’t sell a secret!’ However, the anger surrounding the dominance of REA – a company which collects and uses real estate agency data effectively free of charge, has caused outrage in various corners of the industry – and rightly so.
Property advertising is not realestate.com.au’s only inroad into the media landscape.
Their latest innovation is an attempt to promote a ‘twitter’ craze called #propchat – the hash-tag of which was recently run as a ‘paid promotion’ launching it onto the top of the worldwide ‘trending’ table inspiring questions such as
‘what the $%^%$ is #propchat!?!’ - from far off regions.
#propchat has – until now – only been picked up by in any significant proportion by various industry professionals wanting to ‘spruik’ their wares and joins various other social media campaigns such as ‘HOUSENET’ which markets itself as ‘facebook for real estate.’
We’ve had auction tipping models running for some time – such as ‘Property Tycoon’ for which you can ‘guess’ the price of a house or apartment for the grand prize of $1000 for he who gets ‘nearest the pin.’
Louis Christopher at SQM recently bought to light "Centrebet" who have begun taking bets on the direction in property prices are heading, and now Sportsbet have chimed in giving ‘odds’ on the weekly clearance rates across the <a href="https://www.macrobusiness.com.au/2013/06/aussies-to-gamble-on-auction-clearance-rates/" target="_blank">capitals</a>. Pure insanity.
It’s somewhat amusing because there’s widespread distrust surrounding reported clearance rates. Firstly – a result listed as ‘sold at auction’ makes no distinction between what sells ‘under the hammer’ with heated competition, or what is negotiated on the same day ‘post auction’ (either from a buyer attending the auction, or a participant making a post auction enquiry.)
The auction reporting guidelines state that anything sold in the ‘non cooling off’ period following, should be listed as ‘sold after.’ Those negotiated before the auction are evidently, listed as ‘sold prior’– but importantly, all of the above counts towards the reported clearance rate causing some angst in real estate circles. This is but one of many reasons we have so many ‘unreported’ results lingering on a Saturday evening.
The broad perception remains that ‘sold at auction’ should be an ‘out in the open’ sale for all to see with all other variables being listed as ‘by negotiation’ - and it’s an important distinction.
Whilst a sale ‘under the hammer’ would typically have a similar buyer who - just missing out - was prepared to pay $1,000 less for the home, a good auctioneer can often get more than a few thousand above the reserve when negotiating with the ‘highest bidder’ post ‘pass in.’
This is important particularly from a valuation perspective; therefore I’m of the opinion that whilst agent reporting can’t be completely relied upon, the clearance rate should be comprised of sales that have been ‘knocked down’ only. And if this were to the case – depending on the current ‘cycle’ we could have clearance rates as low as 30 per cent.
But if we’re really talking insanity the biggest miss conception is that high and rising house prices are somehow <a href="https://www.theage.com.au/business/the-hidden-victims-of-affordable-housing-20130620-2okkg" target="_blank">‘good for the economy’</a> – without which ‘small business’ would be unable to operate – as over the years, reliance on using the house as an equity ‘ATM’ became somewhat of a dangerous ‘card tower’ speculative pre-occupation.
Putting aside for a moment the widespread misunderstanding of how banks work or why prices have inflated as high as they currently remain, the shortage of affordable property in Australia in areas of our country where most need to live in order to make a living – in other words, not set in far off un-facilitated nether lands - can have far reaching impacts.
High prices and restrictive development policies put the squeeze on economic growth as existing infrastructure fails to cope with additional demand - local businesses feel the pain as costs inevitably rise - and workers face restrictions on where they are able to move in order to advance their employment ‘career’ – all of which paint just a small fragment of the problem.
 
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A recent study was conducted in London where residents have been forced out due to ‘shockingly high’ accommodation costs resulting in skills shortages with larger companies such as Vodafone who are finding it hard to source staff.  Considering 50% of prime London real estate – the capital of a debt laden struggling economy - is foreign owned it’s scant surprise.
However, we face similar issues here – low vacancy rates, inflated yields, and reports that students are facing periods of <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2013-06-24/anglicare-canberra-university-student-report/4775166" target="_blank">homelessness</a> during their studies are shameful. Not to mention the impact foreign investment has on our shores with recent analysis from <a href="https://online.wsj.com/article/SB10001424127887324328204578568960003796852" target="_blank">Citigroup</a> demonstrating the large impact Chinese immigration is having on Australian property values.
Whilst those who purchased early in the 2000’s have seen their assets ‘boom’ the consequences have forced a social divide as those 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.
Below is a map from the REIV which illustrates the median house price by suburb, relative to the metro median at the end of 2012 which was recorded at $555,000.
The colours coded with the darkest blue indicate house prices which are more than double the metro median, and orange - house prices more than 25% below the metro median.  The white spaces are areas for which there is insufficient data, They also map very closely to the colours exhibited on recently released ABS data which ranks geographic areas across Australia in terms of their relative socio-economic <a href="https://www.abs.gov.au/ausstats/abs@.nsf/Lookup/by%20Subject/2033.0.55.001~2011~Main%20Features~Main%20Page~1" target="_blank">advantage and disadvantage</a>.  The point is aptly made.
<img alt="cashmorejuly1one" src="/images/stories/2013/07/cashmorejuly1one.jpg" width="470" height="273">
Source: <a href="https://reiv.com.au/" target="_blank">REIV</a>
<img alt="cashmorejuly1two" src="/images/stories/2013/07/cashmorejuly1two.jpg" width="470" height="324">
Source: ABS
Realistically, a well developed city, which has policies flexible enough to meet the demands of its home buying demographic, should see prices rise track the rate of inflation with growth in household incomes somewhat influential for those areas in greater demand.
Not the well spruiked figures of 9%-plus per annum we experienced in some cities prior to the GFC – or figures outpacing both wage growth and inflation.
Across Australia, every city faces its own intrinsic economic challenges for which housing policies need to be flexible enough to adhere, local resident voices need to be heard, and councils need to have the freedom to respond.
However, if the only options we offer first-home buyers are candy style incentives in a low interest rate environment which must stay at rock bottom levels in order to support the inflated levels of debt it encourages – then over the longer term – our real estate obsession from which so many feed will become a noose provoking far wider concerns.  And that’s insanity.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
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Crazy attitudes underpin our relationship with real estate: Catherine Cashmore

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There has been plenty of subject matter on our ageing population and it's clear Australia faces challenges ahead.
Allowing for a few fluctuations - since 1907 to present day, the fertility rate has fallen from around four newborns per woman, to 1.88 (a little above the record low of 1.73 in 2001.)  Significantly, this figure is below ‘replacement level’ which is considered to be 2.1 babies per female.
According to the United Nations, life expectancy in Australia is equal fourth in the world – coming in alongside Switzerland for the same recorded period (2005-2010) – and from most recent ABS data, a man and woman can be expected to live well into their eighties with one in five Australians expected to last into their nineties.
It’s worth noting, the proportion of overseas born Australian residents has also added significantly to our age weighted demographic with a median age - as of 2010 - of 44.7 years – a figure attributed to the large number of migrants who inundated Australia’s shores as post-war ‘boat people’ when the last major call went out to ‘populate or perish.’
The number of older Australians aged 85 years and over has doubled over the past 20 years and is expected to increase as a proportion of the population, to 18% in 2036.
Add to this the stark reality that in 2012, 250,000 Australians reached retirement age with an estimated 5000 reaching the age 65 weekly – and it’s clear Australia’s capacity to fund its population’s needs as the number of working aged individuals decreases, is being severely stretched.
In this respect, when you lift the blanket on unemployment data the trends are concerning and certainly not as good as the headline rate suggests.
Full time job growth is weak and both hours worked along with levels of underutilisation are deteriorating.  As the mining construction boom unwinds, non mining industries underperform, and we pull in our belts with fiscal consolidation, it’s likely we’ll see little change over the months ahead. The short term data is volatile and somewhat unreliable albeit, the long term trend is clear.
In 2009-2010 financial year 26% of the government’s budget was directed towards age related services (health, age related pensions, and aged care) – however, according to treasury projections, this figure’s expected to increase substantially over the next 40 years <a target="_blank" href="https://archive.treasury.gov.au/igr/igr2010/report/pdf/IGR_2010.pdf">“pushing the share of spending to almost half.”</a>
<img src="/images/stories/2013/06/cashmorejune24one.png" width="470" height="310" alt="cashmorejune24one">
As a result, each and every policy decision Australia makes in the years ahead will be – or rather should be – influenced by the necessity to fund an ageing demographic.
For those currently reaching retirement, it’s hoped most will be able to provide for their own needs through a combination of superannuation, working past the age of 65, and tapping into their assets – the biggest of which is housing.
Some will downsize, some will look towards various financial products, such as a reverse equity loan for example – but a majority will have the good fortune of doing so in a house free of debt.
There’s no doubt baby boomers worked as hard as any modern first-time buyer to purchase their principal place of residence.  They made significant sacrifices in a high interest rate environment often working, more than one job to achieve the dream of ownership – and in this respect, it’s never been easy.
However, they were lucky enough to get in at the beginning of the lending boom.
 
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Over the years - financial deregulation, the emergence of duel income households, and the very real realities of our ‘golden decade’ of growth – which essentially gave purchasers a ‘get out of jail free’ card, knowing they could sell into a rising market if the going got tough - provided a layer of protection against loss of equity.
The outer suburbs were some 10km outside of established job and commercial hubs, not the 40km+ we see today – and as the population went through various phases of rapid expansion and different financial products were created, the number of buyers increased and mortgage lenders reaped the benefits.
However, the family home was not the only property acquisition from which this demographic drew benefit.  By 2009-2010 the total value of investment housing owned by our baby boomer generation was 57% – a majority no doubt purchased with the tax advantage of negative gearing.
Baby boomers hold roughly half of Australia’s housing stock – a mix of owner-occupied dwellings and investments.  If Australia was to experience any significant downturn in house prices – or demand, it’s the generations heading toward retirement that would suffer most.
Thus far, population growth has somewhat supported the economy – however, due to woeful planning on both the part of state and federal governments, we’ve evolved into a country gripped to its capital cities which play host to the highest accommodation prices in the country.
Furthermore, our environment has changed considerably.  From an atmosphere where a job was for life and family units were formed early, to a set of differing cultural conditions with fairly fluid fluctuation between periods of ownership and tenancy as buyers and renters migrate through various stages of their ‘employment’ career.
As a result, first-home buyers purchase later in life, marry later in life, start their family later in life, and significantly, tap into their housing equity to fund rising costs of living and lifestyle, earlier in life.
An increasing number of first-home buyers are rummaging into mum and dad’s equity pot - reducing the retirement income stream of the current middle aged populous, and evidently - as census results project - it’s now expected future generations will reach retirement still paying down this principal debt with superannuation used to fund the difference.  Subsequently, the age at which most folk can easily retire, will extend well into the seventies.
It’s all very well making the call to ‘populate or perish’ as some of our industry commentators regularly do however, it is notoriously difficult to predict changes in both natural and migrant fluctuations in growth.
In an excellent study by Jessica Brown and Oliver Hartwich entitled “Modelling Australia’s Demographic Future” it was found that increased migration on its own could not provide a viable solution to our ageing population – significantly, it’s our falling fertility rates that are the biggest cause for concern.
As the paper points out, the current European Union average is 1.5 children per female – and if we were to match it with the downward trend in fertility rates, under the best case scenario (with continued high migration growth) the median age today – currently 37 years - will rise close to 46 years with the number 80 year olds set to reach around 2 million by 2050.
Furthermore, as mining investment scales down – unless there’s a considerable uptick in other areas of our economy – a scenario which is looking increasingly dire as manufacturing struggles and job losses continue to filter in from in various regions, it’s highly likely we’ll see a drop in net migration which will exacerbate the problem.
 
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All in all – is it doesn’t matter what we do – whether we throw open our boarders (unlikely under current political opinion) or take a sustainable ‘steady as she goes’ rhetoric – which in essence means little, because even with a strict migration policy and a further fall in the birth rate, Australia’s population would still lead to over 29 million bodies by 2050 – we’re heading toward an ageing tsunami.
Evidently, this presents significant challenges.  In years when house prices were booming, it followed that the level of consumer spending increased and credit growth was strong.
In a study by Australian Housing and Urban Research institute in 2007 (the height of the boom) it was found for every $100,000 increase in housing wealth, there was a bounce back in consumer consumption of $1000 to $1500 per annum.
It was all going swimmingly whilst the market remained rampant.  However, following the backdrop of GFC, households are saving more – spending less – and a marked proportion of those who purchased at the ‘peak’ of 2010 remain in negative equity.  As it stands, national turnover of sales remains weak.
The reducing number of first home buyers as a percentage of the buying market is significant.  As noted from a recent <a target="_blank" href="/news">QBE LMI survey</a> – and certainly shared by my own anecdotal evidence – first home buyers perceive prices ‘too high.’ Their budget is typically around $300,000 which will barely purchase a one bedroom inner city apartment in either Sydney or Melbourne, and is less than the average ‘new’ house price on the fringe ($400,000.) 
They also recognise they will need to hold their properties for a longer period of time to advantage from an increase in equity. In other words – it will take longer, before an ‘upgrade’ is possible.
For those looking to downsize, the challenges are also evident.  Retirees don’t generally look at the apartment market when <a target="_blank" href="https://www.propertyobserver.com.au/residential/there-s-little-evidence-to-suggest-a-downsizing-rush-catherine-cashmore/2013041460355">downsizing</a>. Evidence shows most preference low maintenance single level, independent units, close to transport, shops, doctors and hospitals, ideally with space enough to hold the lifetime’s worth of accumulated memories.
However, the majority stock currently being developed consists of high density ‘squeeze as many on the block as possible’ apartments, double story townhouses – or new house and land packages – hence why the tendency to remain in their principal place of residence is strong.
It’s clear the property needs of home buyers must be addressed by urban planners if we’re to free up the market stagnation which will increasingly affect city dwellers as the population expands.
Adequately funding infrastructure for our fringe suburbs to boost the construction sector as well as reducing hefty development overlays which are passed onto the buyer, addressing policies to constrain investor and foreign acquisition into the established sector which does little to increase supply, not to mention the recent trend of land banking vacant blocks which could be subdivided into homes ideally suited to both the downsizer and young family buying demographic - all need addressing.
But the bottom line remains that politicians are not going to be able to control the inevitable - in the future the dependency ratio (the relationship between the working age and non working age) is projected to be roughly 60% – therefore we need to foster improvements to workforce participation if we stand any chance of offsetting this imbalance.
Demands on the taxpayer will be immense, and with one in seven Australians a property investor, and one in ten, negatively geared it remains a key drain on revenue.
It won’t be politically popular, but this – along with other poor tax strategies – should be reviewed if we’re to survive the inevitable.
All in all – we’re playing ‘catch up’ as we head toward our ageing headwind.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
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Ageing population poses serious challenges to Australia's future economy: Catherine Cashmore

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Once again, Melbourne is producing ‘healthy’ results with the clearance rate now residing at 70% for the year to date (up from 68% in April) and the latest REIV house price index posting a 1.4% increase for the month of May.
According to the REIV, this is the eighth consecutive month of house price increases, with unit prices also showing a moderate boost - up 0.9% for the month – which is the third consecutive monthly rise.
Not surprisingly, the biggest gains have been recorded in the inner and middle regions of the city – principally, the ‘auction-dominated’ terrains – with the outer suburbs remaining stable.
Most sales in Melbourne are conducted private treaty with a rough 80/20 percentage split – 80% being private sales and 20% for sale by auction and although as a percentage of total sales, the share of auction transactions is down on this time last year, in raw numbers we are marginally ahead. When I last checked, year to date there have been approximately 11,719 auctions, compared to 10,742 for the same time in 2012.
When confidence improves and auction results start to ‘openly’ surpass their reserve, the number of vendors opting to sell using this method increases. As reported by the REIV - by the end of June approximately 3,175 auctions will have been held. Only once in the past decade (2010) have there been more auctions in June, and in the inner and middle ring suburbs there is no perceptible sign of the market weakening, if anything the reverse is occurring.
Evidently, the majority of auctions I watch are selling under the hammer. However, it should be noted I filter the auctions I attend, concentrating primarily on listings which attract a wider buying market due to location and type - albeit, in some instances, those sales are exceeding reserve by as much as 10%, and on occasion more.  As we’ve seen previously, this cannot be sustained over the longer term.
It’s not quite the rampant atmosphere experienced in 2007 during which the ‘lending frenzy’ leading up to the GFC was pushing excessive amounts of easy credit into the market. Prices are still well below their peak and results patchy.
Albeit, whilst the aggregated data shows only moderate gains, in areas where auction sales predominate (such as Bentleigh, Hawthorn, Glen Iris for example) a number of economic and social factors have combined to push it well and truly into a sellers' domain.
The somewhat robust turnaround has produced a point of confusion in recent media articles.  Confidence is still waxing and waning, with the Westpac-Melbourne Institute Index down 7% in May to 97.6 – below the ‘critical’ 100 point bench mark - and although a bounce back in June was welcomed, we’re still on a rough equal split between those who think the cup is half full, or empty.
Also, news of job losses have been filtering in over the past few months, initially from Ford and Holden and most recently Target – not to mention some of Victoria’s fruit growing regions following cutbacks by SPC Ardmona.  All of this will produce a drag on Victoria’s employment data over the months to come, with unemployment currently sitting at around 5.6% (in trend terms.)
The recent drop in the cash rate, provided buyers will a little more spending power, however the 70% year to date clearance rate with overall turnover increasing and prices swinging past the reserve, is more to do with the effect public auctions have on buyer confidence than anything else.
 
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I have written about the chain reaction this method of sale has on the market as a whole previously. The last time we had an auction rally was back in 2010 during which clearance rates were in the 80s.  I’m still coming across buyers who, to date, having bought at ‘peak’ under competition, three years later, cannot sell for purchase price.
In other words, regardless of low interest rates and ‘improved affordability’, their property sits in negative equity with new data from Melbourne Institute’s federally-funded Household, Income and Labour Dynamics in Australia survey backing it up. It shows one in every 40 families with a mortgage in 2010 owed the bank more than their home was worth, with senior economist Shane Garrett commenting that negative equity rates were likely to be the same now as in 2010.
Is it ever OK to say it’s not a good time to buy? Quite clearly, yes!
The physiological impact when bidding against competition for an emotional asset has been well documented - and when confidence improves, this method of sale does result in higher prices – prices which would be extremely difficult to negotiate in a private sale scenario during which there would be no undisputed evidence to the leading buyer that a competitor is willing to pay more.
Not unlike sports gambling, a well-staged auction actively encourages buyers to lose a sense of considered rationality, with a trained auctioneer pushing the ‘players’ to stretch their budgets past their pre-established limit, which when combined with a strong desire to 'win' at all costs, can result in a potentially dangerous set of circumstances.
Without adequate knowledge of where we started, taking full advantage of sales data for the duration of the ‘to-date’ 12-month time span, the possibility of overpaying on the back of a short term auction ‘rally’ is ever prevalent and the resulting rise in vendor’s expectation as they see neighbouring properties sell at a higher price, is not quickly corrected.
Furthermore, in some of these key regions stock is dropping – particularity good stock – which is fairly typical of a rising market.  After all, who wants to sell when the perception remains that a vendor can get more if they hold and wait for further gains? Especially as additional rate cuts are still widely anticipated.
Therefore, considering the clear reality that the market shows no current sign of weakening, it’s somewhat of a surprise to find RP Data’s daily index for the month of May posting a -4.4% drop in Melbourne unit prices whilst at the same time, there has been a 3.7% rise in house prices for the same period. Overall, RP Data’s recorded monthly drop for Melbourne is -2.1% and in light of the information above, it should be questioned.
It’s not the only surprise to be found in RP Data’s monthly index. Take Canberra for example – according to RP Data, dwellings were up 3.8% for the March quarter – yet just two months in to the second quarter they have dropped by -1.5%.
Hobart’s unit market has all but ‘crashed’ with prices -8.5% – whilst on the other hand; the housing market has posted a rather ‘healthy’ rise of 3.4%.
 
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Overall, the combined capital city index declined 1.2% over the month of May after falling by 0.5% in April.  In other words, we’re on a downward slope with Rismark’s CEO Ben Skilbeck commenting that it could be “driven by vendors reducing their initial expectations in order to meet buyer offers.”
However, to come to this conclusion, you need to do more than simply theorise on the results as they’re set out on a spreadsheet.
I’ve had the advantage of negotiating with vendor’s over the past six months, and can quite confidently confirm, there has been no such decline in expectation – unless the property is compromised by location or interior design, most are enjoying a relative windfall in relation to last year’s expectations. And according to <a href="https://www.sqmresearch.com.au/graph_median_weeks.php?region=vic%3A%3AMelbourne&amp;type=c&amp;t=1" target="_blank">SQM’s weekly “vendor sentiment index,”</a> asking prices are – if anything – trending upwards which once again suggests there is demand in the market currently meeting expectation.
I’ve cautioned previously about this short term approach to statistics and I’m by no means alone in doing so. There has been plenty of criticism aimed at RP Data’s daily index for the apparent ‘mis match’ with other market indicators.
It seems the general consensus of opinion revolves around ‘lagging’ results which are collected and shuffled into the index at a later date.  This would make sense in light of the strong gains that were posted in the first quarter, but not immediately evident ‘on the ground’ – and it should be remembered that the ‘daily index’ is not seasonally adjusted, so data can be ‘noisy.’
RP Data have recently claimed they <a href="https://news.domain.com.au/domain/real-estate-news/are-house-prices-rising-or-falling-20130603-2nlqd" target="_blank">“ring up agents</a>” to get information of private sales, which would be a mammoth task considering most agents are highly unlikely to prioritise the reporting of private treaty sales information as soon as a contract is signed – if at all.  And yet this is what the accuracy of daily index relies upon – prompt agent reporting.  Without it, the results lag until the official ‘settled’ sales data filters through from the government (some three months ‘plus’ later.)
With this in mind, the degree of concentration given over to the index should be questioned.  Furthermore, until missing results have been collected, correlated and adjusted for seasonal distortions, it’s clearly not a reliable or timely indicator.
However, it’s fair to suggest the underlying fundamentals of our “to date” ‘market recovery’ are at best - weak. Credit growth has been hobbling along (in part due to the trend to ‘pay down’ debt) and although ABS April data shows the highest monthly uptake of home loans since November 2009, Westpac best summed it up best when they suggested the gains to be ‘underwhelming,’ commenting on the 0.7% decline (excluding refinancing) for owner occupiers, albeit year to date, they are up 11.4% (not a great result in light of the current low interest rate environment.)
Data from the Department of Sustainability &amp; Environment shows more mortgages in Victoria are being discharged than lodged and turnover – although moderately up with <a target="_blank" href="https://www.macrobusiness.com.au/2013/06/vic-transfers-mortgage-demand-still-depressed/">168,029 transfers taking place in the year to May 2013, up from the record low 167,200 transfers in the year to March 2013</a> –remains 13% below the decade average.
So what’s the fuel pushing both clearance rates and prices past reserve? Well – in a word (or two) – primarily speculation and a rush to invest anywhere that provides a greater return than stashing cash in a long term deposit account.
It’s clear, investors remain the most active demographic, with the value of investor finance commitments up by 1% in April, and 18% over the year - the highest level since January 2008, which would have a beneficial roll over effect for those relying on sales to ‘upgrade’ (which it should be noted, increases spending power without the need to increase borrowing levels.)
In a recent survey conducted by Mortgage Choice of a sample 1000 mortgage holders, 83% (roughly four out of five) voiced consideration to use the equity in their principle place of residence to purchase an investment property – the trend is strong.
With this in mind, you have to wonder how long the current ‘recovery’ in Melbourne (and for that matter some of our other states) will last – especially as questions of oversupply still hang on the horizon. Or perhaps Steve Keen best summed it up when he termed it a ‘suckers' rally?’
All in all let’s face it, as it stands, the market is imbalanced, with a proportionally lower percentage of first-home buyers, a desperate bid from investors for advantage from short term gains, and a construction industry calling out - somewhat desperately - for another rate cut.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
 
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Despite recent signs of recovery the Melbourne property market remains imbalanced: Catherine Cashmore

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This week I read with interest Melbourne’s newly released discussion paper, produced by the City of Melbourne, entitled ‘Future Living.’  
Once past the holiday brochure-inspired pictures designed to give the impression that a diverse range of attractive multicultural individuals are happily enjoying life in their rather ‘grand’ looking inner city studio apartments, <a href="https://www.melbourne.vic.gov.au/BuildingandPlanning/FutureGrowth/Documents/future_living_discussion_paper.pdf" target="_blank">the 'vision' is set forth</a>.  
Lord Mayor Robert Doyle opens with a commendable statement:  
“As Melbourne continues to evolve and attract more residents, good quality homes will be crucial.”  
The phrase ‘good quality’ deserves to be emphasised – as does ‘homes’ – as these are two areas of importance which have arguably been ignored in recent years.  
He goes on:  
“Our aspiration is for an inner city where housing is affordable, well-designed and meets the diverse needs of our residents. New housing must also be well planned and developed in ways that create safe and welcoming neighbourhoods, close to where people work.”  
You’d be hard pushed to argue with the noble intentions stated above.  Despite my many criticisms of Melbourne’s development projects, we remain an enviable ‘walkable’ city in the eyes of those who visit either locally or overseas.  
However, it has been clear for some time that Melbourne is undergoing a growth spurt which threatens exceed what both housing and services are able to comfortably deliver. And in response to an ageing population’s needs, the city is under pressure to provide a broad range of additional services to shelter a forecasted increase in the municipality’s population, from a current 100,000 to an estimated 180,000 by 2031.  
The paper invites discussion and should be applauded for the detail contained within its chapters.  It addresses issues such as minimum sizes for apartments, needed storage space for an average couple or individual (a big issue for apartment dwellers), parking facilities for a resident populous unwilling or unable to give up their vehicles. It also makes mention of critical points I have directed at current high-rise projects in previous columns, principally the difference between designing for investors/student renters, and home buyers.  
In my opinion, this is an important requirement.  For too long, the ‘squeeze as many on the block as possible’ mantra has dominated our skylines.  I doubt Melbourne's Lord Mayor has the time or opportunity to visit many of the completed high-rise blocks created to address the much spruiked housing shortage in which quality is often lacking. For want of a better term, much of it is ‘overpriced rubbish.’  
I've walked through many of the new developments, and from an owner-occupier perspective, unless the purchase is for one of the “luxury” units designed with the professional city worker in mind, the relatively small one and two bedroom apartments 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 - rather high owners’ corporation fees set aside to service the lifts and other security features, a lack of natural light, poorly thought out floor plans, and low quality appliances, place the units currently being updated by the rookie renovators on The Block, a far more desirable proposition.
 
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Therefore it's no surprise to find many are sold off plan to overseas buyers who are never required to set foot on the premises.
And as the paper points out, it's likely we're going to see ‘more of the same,’ as the new growth will be predominantly apartments, which have already accounted for 93% of the builds in the municipality over the past six years.
With any city plan, it's important to get the ingredients right, because one of the reasons vacancy rates are so high in many of the already established buildings in the Docklands or Southbank (as an example,) is due to a significant number of buyers who find the current standard of accommodation, neither desirable, nor affordable. Put simply, our consumer market doesn’t want to buy it – or rent it, and therefore the exercise so far, has failed to fulfil its purpose.  
Design and raising the standards of our inner city developments to ensure they last decades not years – employing good natural light, adequate private outdoor space, quality assured safety standards (something I have addressed previously,) and the ability to live side by side without fear of waking in the middle of the night to hear the next door neighbour’s television ‘insomniac’ watching activities, is very important.  
Various <a href="https://www.nber.org/mtopublic/" target="_blank">social studies</a> have shown, even without a change in financial status, an upgrade in living standards provided primarily through wise and well thought-out development which in principal, shouldn’t increase the capital cost, is enough to improve the health and wellbeing of residents, lowering the propensity for depression and other related illnesses.
And it’s fair to suggest, we’ll be seeing a greater proportion of renters opting for apartment living not only represented by a falling share of first-home buyers who have been termed ‘generation rent,’ but also home owners who are finding work related activities require periods of tenancy as excessive stamp duty charges deter any feasibility of a quick ‘profitable’ move. In other words, we also have a growing demographic of ‘generation invest’ - those who own, whilst renting their principle place of residence.  
However, at present, no matter how many apartments are built, there is no getting away from the fact, that home owners prefer low density – it’s been shown the elderly overwhelmingly downsize into medium density accommodation thereby avoiding high density developments – in fact latest figures show the proportion of elderly residents living in high density housing is on the decline.  Currently 5.6 per cent of our population reside in high density accommodation, however, only a meagre 4.1 per cent of those aged over 65, and there’s nothing to show a change is underway – if anything, the reverse is the case.  
Younger generations in their 20s and 30s have a better propensity towards high density housing and the proportion is increasing; however figures still only peak at around 14% at the age of 27 and the trend across all age groups is marginal, with only 1 in 20 choosing this form of accommodation nationwide (as of 2011.)  
This issue isn’t just a symptom of inner city development.  I’ve written previously about the need to establish quality housing for a larger proportion of buyers who will accept townhouse living, but reject high density developments and it is possible to accommodate an equal number of residents in medium density dwellings without building to the skies as movements such as <a target="_blank" href="https://www.policyexchange.org.uk/images/publications/create%20streets.pdf">Create Streets</a> in the UK, and Robert Dalziel - the London-based architect for Rational House, who visited nine cities around the world, including Mexico City, Shanghai and Berlin, to examine how to make high-density living agreeable for a broad demographic of home buyers, has shown in his book – commissioned and published the Royal Institute of British Architects: entitled <a target="_blank" href="https://www.propertyobserver.com.au/https://www.amazon.com/House-In-The-City-Architecture/dp/1859464521">A House in the City — Home Truths in Urban Architecture.</a>
 
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I’d suggest the construction industry would improve two-fold if we placed the same level of intelligence and innovation in Australia’s future design. However, at present, there’s little hope because it’s far more ‘profitable’ to build apartment blocks or multi-story dwellings, aimed at investors and housed by student renters, than it is to increase the supply of new accommodation for our home-buying demographic. And herein lays the problem.  
Architectural design is something that is often missed in the race to develop.  Too often it’s been claimed that planning departments sit in the pockets of developers who are under pressure to cut all possible corners in an effort to maximise profit.  
It also needs to be understood that whilst a push to increase underling supply is top of mind for city planners, developers are currently having tremendous difficulty financing proposed projects – there has been plenty of suggestion that banks won’t lend for a site, unless there is 100% debt cover – and in certain cases even more.  
In light of this, developers are pressured to pay vastly inflated commissions to achieve the pre-sale targets set out by the banking system – which as we’re all aware, lacks competition and is limited to just four major avenues.  
And therefore, even with a fancy research paper such as Melbourne’s ‘Future Living,’ investigating a ‘wish list’ of ‘wants,’ as far as a developer is concerned, if requirements become inflexible, producing an increase in the capital cost thereby resulting in a stagnation of sales for which they are unable to profit, it will have a roll on effect to supply.  
There are ways to solve the conundrum – but once again, it means thinking outside the square, attacking the system on a number of fronts (easier access to funding being one area of importance), and perhaps taking a clue from international markets which are centuries down the line in terms of inner city innovation.  
For example, as well as the ‘low density’ frameworks I cited above, there is method employed in Argentina in which architects construct apartment buildings funded directly from the ‘clients’ which rather than being a single developer, are a consortium of home buyers/investors who often end up being the eventual occupiers.  The method employs a “Fideicomiso” legal trust and works well in medium density projects on sites in which larger developers often overlook as being unprofitable – allowing smaller architects a leading edge in this field.  
One person at the forefront of the research is <a href="https://www.eliasredstone.com/about/" target="_blank">Elias Redstone</a> – editor-in-chief and co founder of the ‘London Architecture Diary,’ – therefore there is <a href="https://blog.britishcouncil.org/2013/04/26/fideicomiso-uk-argentina-architecture/" target="_blank">plenty of information</a> already available on the popular ‘self build’ model which can potentially help to increase ‘quality’ supply where there is already an existing problem of in-completed projects.  
I said above, in Sydney, where standards are arguably better, the market is under-supplied due to increased capital cost and a stricter enforcement of regulations. In Melbourne, the CBD is over-supplied with an arguable abundance of low grade ‘rubbish’ – therefore planning successfully for a larger population (fulfilling the wish list of future residents) and thereby ensuring developments are sold and remain fully occupied, is not going to happen under the current model of thinking. We need to explore other avenues.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
 
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Melbourne's future plan has admirable goals but new strategies are needed to achieve them: Catherine Cashmore

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Like many others, I was somewhat taken aback by the comments put forward by Margaret Lomas last week in relation to negative gearing – significantly, the suggestion that any change from the current status quo would lead to ‘600,000’ homeless individuals and an ‘investor exodus.’
The comment attracted a range of responses - some humourous in particular, Fairfax Media reporter Chris Vedelago who suggested rather accurately on Twitter, that Margaret Lomas had derived her research from the ‘Magic Stat Tree.’
And whilst I agree that a sudden and complete retraction of the policy would be foolish – favouring a slow wind-down whilst other policies are implemented – in particular strategies to aid development and increase supply - the notion that touching the ‘golden egg’ of negatively geared property assets in a way which may dissuade buyers from ‘banking’ on the established market to fund their retirement would be disastrous - seems to be one that’s culturally ingrained in the real estate fraternity.
I won’t go into detail on why I feel the policy of negative gearing needs to be altered; it’s an issue I have detailed in previous columns and therefore feel I’ve made my opinion clear.
However, I do feel it is worth touching upon the obsessive preoccupation with real estate investment in general, which has played a prime role in pushing the price of property to ever escalating levels, resulting in the yearly assessment made by a number of publications – most recently <a href="https://www.propertyobserver.com.au/news/australia-moves-up-to-fourth-most-overvalued-housing-market-but-bubble-risk-subsides-the-economist/2013051761451" target="_blank">The Economist</a> – that Australia’s property market is ‘overvalued’ - with many off shore and local analysts speculating a fall in prices will eventuate in either the near - or distant ‘post mining’ future.
Even the RBA, which recently gave a speech entitled <a href="https://www.rba.gov.au/speeches/2013/sp-so-230413" target="_blank">“Housing and Mortgage Markets: The Long Run, the Short Run and the Uncertainty in Between”</a> have not ruled out a ‘major housing downturn’ at some distant point - stating:
“We certainly can’t rule out the possibility of a major housing downturn in the longer-term future. It is hard to know exactly what the outcome would be because it depends on how we got to that point.”
The paper makes an interesting read, because it highlights just how ‘uncertain’ the RBA are of... well, ...anything much at all:
“We don't have a strong view about whether the ratio of prices to income should be mildly rising, falling or constant from here”... “we think it is very unlikely to return to its 1970s levels, or to rise rapidly once again.”
Leading one to speculate that if the sophisticates at the RBA are so unsure about the longer term future of Australia’s housing market in a lending environment of which they have marginal control – so much less the rest of us.
And it’s easy to look at the sub-prime crisis in the USA – wag a finger – and preach the safety of our arguably ‘regulated’ Aussie banks.  However, whilst the sub-prime crisis played a role in the great American property bubble – it was not the cause.
The rapid escalation in both prices and private debt was born from a culture of expectation that the future would look like the present or as Alan Greenspan, an American economist who served as Chairman of the Federal Reserve from 1987 to 2006, put it in the publication of his 2007 book The Age of Turbulence:
“'Flippers' – speculators in places like Las Vegas and Miami.. would use easy credit to load up on five or six new condos aiming to sell them at a large profit even before the apartments were built.”
Albeit, for readers feeling a little nervous at the above revelations, a few sentences later he provides at least some reassurance:
“I would tell audiences that we were facing not a bubble but a froth – lots of small, local bubbles that never grew to a scale that could threaten the health of the overall economy”.
And as we’ve seen in Australia – irrespective of lending rates which reached close to 9% in the lead up to the onset of the GFC – when such an attitude takes hold, it is remarkably difficult to break or 'deflate'.
For example in China, despite strict measures such as preventing unmarried couples purchasing more than one residence, or requiring higher deposits for second homes coupled with an increase in the capital gains tax when selling, it has done little to suck air out of a country which has few investment options for individuals outside of real estate.
And in Australia – regardless of the recent comparative blip to property prices since the peak of 2010 (when compared to Europe or the USA) – we remain a nation completely obsessed with housing.
You only have to turn on the TV to be bombarded with programs from The Living Room to The Block, which make everyone feel like a rookie renovator able to ‘tap into’ the wealth of their property investments with a quick makeover or fuel the perception that you can pick up a good property ‘below its intrinsic value’ and ‘add value.’
 
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And yet bubbles when/if identified are undoubtedly unhealthy from the broader perspective of society, leaving a widening gap between owners and renters as speculation pushes prices northwards which, following decades of poor planning for population growth, leave governments firing shots at the market in the form of short term first-home buyer grants as the only ammunition they have to reverse the trend – which of course leads to the intended side effect of pushing the market higher still.
As John Howard declared back in 2007 during prime minister’s question time (and good on him for being honest because without exception, I would think most other politicians from all sides of the table would view a ‘crisis’ in similar terms):
"A true housing crisis in this country is when there is a sustained fall in the value of our homes and in house prices”.
And perhaps it’s worth mentioning that Howard’s response was in reply to a question challenging the plight of first-home buyers from soon to be elected Kevin Rudd – who upon taking office less than 12 months later promptly inflated the market three fold with his first-home buyers ‘boost,’ which had the consequence of leaving many new owners in subsequent negative equity once it was stripped away.
And indeed it is a conundrum.  Considering the levels of private debt – mostly leveraged against housing, and the long term acceleration in the investment sector, which currently makes up around 44% of Australia’s buying market, prices are once again moving northwards as a number of social and economic factors collide.
Increased confidence, availability of cheap credit (such as our current low interest rate environment) and more importantly, the continuation of a cultural illusion that forgoes any financial prudence as investors pull their finances out of savings accounts before it’s purchasing power is diminished completely – in an attempt to beat the well contained genie of inflation and shore up future security in an environment where basic living costs are high and growing.
There are no quick fixes to the housing affordability conundrum. In light of our high private debt ratios it would be extremely damaging to the economy if there were a crash. High levels of debt, when followed by downturn in house prices, generally result in a greater reduction of economic growth and subsequently an increase in unemployment.
And yet, negatively geared investors, mortgage lenders, leveraged home owners, future state and federal budgets are all counting on rising house prices for future spending needs and long term security.
So the question remains, how much higher can prices possibly go at the expense of a new generation of renters (or as they put it in the UK ‘Generation Rent’) who have long given up on the Australian dream?
It can’t be solved with short term thinking, however, neither are we sitting in a revolving chorus of ‘There’s a Hole in my Bucket’ –  our economy is strong and there are plenty of sustainable long term policy decisions that would benefit a structured plan to allow a greater number to take ownership and contain inner city inflation.
The key of course is to slowly unpick the current distortions that tie up the established market such as negative gearing as one example, and first-home buyers grants as a second, whilst at the same time employing policies to increase supply and raise the dollars needed to fund essential infrastructure through (as suggested by economist Leith Van Onselen) bonds, or encouraging large superannuation funds, <a href="https://www.heraldsun.com.au/news/victoria/ted-baillieu-urged-to-use-super-funds-to-deliver-major-transport-projects/story-e6frf7kx-1226553107681" target="_blank">who are clearly open to the idea</a>, to fast track some of our major projects.
What we can’t afford to do is kick the can down the road and continue with the same obsessive lines of limited thinking.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
 
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There are no quick fixes to the housing affordability conundrum: Catherine Cashmore

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

Joel Robinson

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

The enormity of delivering a true skyscraper in Australia's new development market is often overlooked.

It has taken the best part of a decade since plans for Chevron One were first unveiled, but the 52-storey tower is now complete, with residents collecting their keys and moving into what has become one of the Gold Coast's most recognisable new landmarks.

Rising 127 metres above Chevron Island, Chevron One stands almost twice as high as any other building on the island. Its scale places it alongside the trio of towers at Jewel, arguably the last truly significant addition to the central Gold Coast skyline when they were completed around six years ago.

While there are several developments underway around a similar height to Chevron One, they are more concentrated within clusters of the highest towers in the city. The fact Chevron One sits within a developing precinct, looking back at the other high-rise developments in Surfers Paradise and Broadbeach, makes it a different proposition altogether. It will certainly become a reference point on the Gold Coast skyline.

[smartcode_project:default project_id=6515 project_image_fid=68833]

Developer Bensons Property Group is behind the 52-storey tower, which has just shy of 250 apartments, along with an exhaustive list of resident amenity spread across what is the largest development site ever assembled on Chevron Island.

The tower has been the talk of the town for years, says Ray White Projects Gold Coast agent Caitlin Rosenboom, who is selling the remaining apartments.

"People have been watching Chevron One go up for years," Rosenboom says, adding that many prospective buyers have been surprised by the scale of the views once they step inside.

"It's only when they walk through a completed apartment that they truly understand the position of the building," Rosenboom says.

"The views are jaw-dropping. Whether you're looking east over the ocean, across Surfers Paradise, along the river systems or out to the hinterland, every level offers something different but equally impressive."

[smartcode_project:default project_id=6515 project_image_fid=360215]

One of Chevron One's defining advantages is its location on the eastern side of Chevron Island on Stanhill Drive, a position which protects the views forever.

"There's only one row of houses between Chevron One and the water, and the height restrictions along the river means views from Chevron One can never be built out,"&nbsp;Rosenboom says.

While new apartment developments continue to emerge across the Gold Coast, Rosenboom says opportunities to secure a completed apartment with this level of outlook are becoming increasingly rare.

"The size of the site is something that would be incredibly difficult to replicate today," she says.

"That's allowed Chevron One to deliver the sort of amenity, open space and resident facilities that very few projects can offer. There are not many completed apartment buildings on the Gold Coast right now that can compete with the combination of scale, quality and amenity."

[smartcode_project:default project_id=6515 project_image_fid=68839]

There's around 2,000 sqm of amenity solely for the use of residents of Chevron One. Club One features a uniquely shaped swimming pool that mirrors the footprint of the building itself, set within a extensively landscaped gardens. There's also an indoor pool and spa, a fully equipped gym with a Pilates room, a yoga garden, a bookable private dining area and lounge that can host up to 30 people, and a 24-hour concierge service.

As for the buyers, Rosenboom is fielding enquiry from everywhere: Sydneysiders and Melburnians looking at the new and off-the-plan market following the changes in the Federal Budget, as well as those looking to relocate, through to South East Queenslanders seeking either a permanent home or a weekender bolthole.

"The Gold Coast lifestyle continues to resonate with people relocating from the southern states, and when they see the views and the quality of what's been delivered at Chevron One, it becomes very easy for them to understand the appeal," Rosenboom says.

A diverse mix of one, two and three-bedroom apartments remain available, with each offering "something a little different", be it the orientation and views, configuration, or level, to suit a wide variety of buyers.

The remaining apartments are ready to inspect in person, by appointment.

[smartcode_project_cta:default project_id=6515]

A decade in the making: Residents to move into Chevron One as construction wraps up

A general rule of thumb in new apartment developments is that the penthouses get the rooftop.

It's a formula that's become commonplace across Australia's apartment market. Residents might have access to a pool, gym or barbecue facilities on a dedicated lower level, but the most desirable outdoor spaces are typically reserved for the highest-priced homes at the top of the building.

<a href="https://www.apartments.com.au/developers/sherpa-property-group">Sherpa Property Group</a> has taken the opposite approach.

Rather than dedicating the rooftop to a handful of buyers, the Gold Coast developer has made it the centrepiece of its Flourish collection, creating expansive shared spaces from the best vantage point in the building.

The philosophy has reached its most ambitious expression at <a href="https://www.apartments.com.au/new-apartments/flourish-soleira-palm-beach-1150-1160-gold-coast-highway-palm-beach-qld-4221">Flourish Soleira</a> in Palm Beach, where two rooftop precincts connected by a skybridge will deliver one of the most extensive lifestyle offerings seen in a residential apartment project on the Gold Coast.

[smartcode_project:default project_id=150017 project_image_fid=374053]

"We're seeing a clear move toward developments that offer more than just an apartment," Sherpa Group founder Christie Leet said.

"People want spaces that support how they actually live, whether that's working from home, staying active, or spending time with family and friends.

"That's where amenity becomes critical. It's not just about what's included, but how those spaces are designed to be used every day."

[smartcode_project:default project_id=150017 project_image_fid=374052]

The breadth of amenity has already attracted buyers across multiple demographics. Younger first home buyers have been drawn to Soleira's one-bedroom apartments, a product rarely delivered in Palm Beach, while families have responded to practical inclusions such as the shallow children's pool adjoining the main lap pool and the extensive communal recreation areas.

Instead of a single rooftop, Soleira delivers two distinct lifestyle zones.

[smartcode_project:default project_id=150017 project_image_fid=372547]

The southern rooftop has been dedicated to wellness, featuring a gym, yoga and Pilates studio, work-from-home facilities, a wellness centre, spa, and hot and cold plunge pools.

The northern rooftop focuses on recreation and entertaining, incorporating a heated resort-style pool, private dining rooms, pizza ovens, barbecues, a golf simulator, children's recreation areas, and what is expected to be the Gold Coast's first rooftop basketball court, which will also double as a squash court.

[smartcode_project:default project_id=150017 project_image_fid=374054]

Beyond the rooftops, Soleira will introduce 1,500 sqm of curated retail beneath the towers, creating one of Palm Beach's first genuinely mixed-use lifestyle precincts where cafés, restaurants and convenience retail become part of residents' everyday lives.

Sherpa has also retained management rights across the development, allowing it to oversee the long-term operation of the building through a 24-hour concierge model. The developer is also exploring additional revenue streams within the precinct aimed at helping offset ongoing body corporate costs for residents.

[smartcode_project:default project_id=150017 project_image_fid=370962]

While Soleira is the largest project Sherpa has delivered, the rooftop-first philosophy has been evolving for several years.

It began with <a href="https://www.apartments.com.au/new-apartments/amargo-6-12-sixth-avenue-palm-beach-qld-4221">Flourish Amargo</a>, the first project released under the Flourish brand. Rather than competing at the ultra-luxury end of the market with oversized half-floor and full-floor residences, Sherpa focused on creating lifestyle-driven apartments supported by resort-style shared spaces.

Amargo introduced more than 800 sqm of rooftop amenity, combining wellness facilities, heated pools, entertaining areas, cabanas, pizza ovens and private dining spaces into what was designed as an extension of residents' homes rather than a facility used only occasionally.

[smartcode_project:default project_id=146527 project_image_fid=366550]

That approach continued with Flourish Oasis, where the same amenity-led philosophy was refined into a more boutique development. Strong demand from Sherpa's growing VIP database saw much of the project sold before it reached the broader market, reinforcing buyer appetite for apartment communities centred around shared lifestyle experiences.

Flourish Amargo is slated for completion mid-way-through next year, with Oasis to be delivered by late 2027. Flourish Soleira is expected to complete in 2030.

[smartcode_project_cta:default project_id=150017]

Sherpa takes amenity to the sky as Flourish Soleira captures booming Palm Beach demand

As apartment living continues to evolve across Sydney's growth corridors, the quality and distribution of shared spaces is increasingly shaping how residents experience home. Rather than functioning as add-ons, amenities are being embedded into the daily rhythm of a building, supporting everything from quiet retreat to social interaction, often within a single vertical community.

At <a href="https://www.apartments.com.au/new-apartments/aeris-melrose-park-nursery-street-melrose-park-nsw-2114">Aeris</a> in Melrose Park, this approach is resolved through a layered amenity offering that unfolds from ground level through to its upper podium. Developed by <a href="https://www.apartments.com.au/developers/sekisui-house-australia">Sekisui House Australia</a> in partnership with Hankyu Hanshin Properties, the project introduces 468 apartments across two towers and a mid-rise building, positioned at the highest point of the broader masterplan.

[smartcode_project:default project_id=426 project_image_fid=359199]

The amenity experience begins at street level, where two courtyards sit within a landscaped setting that connects residents to the wider network of parks and green spaces. These green spaces are not isolated pockets but part of a wider pedestrian network that links Aeris to the surrounding <a href="https://www.apartments.com.au/developments/melrose-park-nsw-2114">Melrose Park</a> precinct, including Central Park, future schools, and the Town Centre opening in July 2026. The result is a transition that moves from public to private without abrupt boundaries, allowing residents to pass through shaded, tree-lined environments before reaching the building itself.

Moving upward, the focus shifts to the level five podium, where the primary communal facilities are concentrated. This space brings together a 16-metre swimming pool, outdoor seating areas, and a communal BBQ zone arranged to take advantage of elevated outlooks. Seating is positioned beneath pergolas, creating pockets of shade that extend the usability of the space throughout the day. The pool edge aligns with views toward the wider district, reinforcing the sense of elevation that defines the project’s positioning.

In the adjacent building, this is complemented by quieter, more contemplative spaces, including an outdoor cinema set within the same level. Positioned to operate primarily in the evening, it introduces a different tempo to the shared environment, shifting from daytime activity to after-hours use without requiring separate zones.

[smartcode_project:default project_id=426 project_image_fid=360299]

The podium also accommodates an intimate private resident gym. Located on the lower levels, it gives residents convenient access to fitness facilities without leaving the building.

Above, the elevated podium sky deck extends the amenity offering, providing additional open-air spaces with elevated outlooks across the surrounding landscape. While more restrained in program, this upper level reinforces the project’s vertical progression, from ground-level greenery to elevated outlook, allowing residents to move between distinct spatial conditions within a single address.

This distribution of amenities reflects a deliberate response to how residents use space across the day. Sekisui House Australia Sales and Marketing Director Peter Kalaf points to the role these shared areas play in shaping buyer demand. Aeris has been conceived as more than a collection of apartments, with the podium pool, gym and outdoor cinema forming part of a broader lifestyle offering that extends the home beyond each individual residence.

[smartcode_project:default project_id=426 project_image_fid=360300]

What distinguishes Aeris is not the inclusion of these elements individually, but how they are arranged in relation to one another. Active, social, and passive spaces are layered vertically rather than separated, allowing residents to choose between them without leaving the building or moving far from their apartment. This proximity supports both routine use, such as a morning swim or evening workout, and more occasional gatherings, whether around the BBQ area or within the cinema setting.

The amenity design also sits within a broader framework of connectivity across Melrose Park. The Melrose Park Town Centre, anchored by Coles and Dan Murphys, features a mix of retail, dining, health and lifestyle offerings, bringing everyday convenience closer to residents. By the end of the year, more than five hectares of parks and open space, equivalent to around seven football fields of green space on residents' doorstep, will further enhance the precinct, allowing the internal facilities at Aeris to operate as an extension of the wider neighbourhood rather than a substitute for it.

Construction at Aeris continues to gather momentum, with ground floor slabs expected to be completed in late 2026 before the first sections of the buildings begin to rise above ground.

[smartcode_project_cta:default project_id=426]

Elevated amenity anchors daily life at Aeris, Melrose Park

Repeat buyers are one of the strongest measures of confidence in any apartment development.

At <a href="https://www.apartments.com.au/new-apartments/era-newcastle-west-124-126-bull-street-newcastle-west-nsw-2302">ERA</a> in Newcastle West, some purchasers are returning to <a href="https://www.apartments.com.au/developers/gwh">GWH</a> after living at the developer's One Apartments. Their decision to purchase again was driven by the quality of life they found after moving into their first GWH home.

Keith Wilton had spent years living in a house in East Maitland before deciding it was time for a change. Apartment living had always been on his radar, but he was selective about what he wanted.

<iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen="" frameborder="0" height="315" referrerpolicy="strict-origin-when-cross-origin" src="https://www.youtube.com/embed/FH_1EzB-1vs?si=XScVlP1ERsTDJoME" title="YouTube video player" width="560"></iframe>

"I had some boxes I wanted to tick," he says.

Keith points to the open-plan design, generous outdoor areas and considered inclusions as key reasons One Apartments worked for him.

“One of those things was a nice indoor open plan area, but also I wanted a nice outdoor open area that I could entertain on in summer or Christmases or birthdays,” he says.

He also found value in the smaller details, from integrated appliances to shared resident spaces including the pool, cinema and rooftop areas.

[smartcode_project:default project_id=135096 project_image_fid=356818]

After comparing several developments, he chose One Apartments because of GWH's longstanding local reputation and his own experience working with the developer on a commercial project more than a decade earlier.

"I knew that they were local, that the quality of the build was going to be up there. I'd looked at other apartment complexes around and close by, and I just knew that here was a better decision location wise."

Today, Keith says the move has completely changed how he experiences Newcastle.

"I enjoy living in this location because it's more of a lifestyle change. That Newcastle city living where you can walk to restaurants and bars and even beaches and parks and even shopping across the road."

[smartcode_project:default project_id=135096 project_image_fid=356828]

Beyond the location, he says it's the sense of community that has surprised him most.

"Everyone loves living here because they chose to live here, but everyone looks out for each other. It's a real great community feel here."

For Aimee and Lyle Goodman, the journey started almost by chance.

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The couple happened to be having coffee in Newcastle when they noticed the site where One Apartments was about to begin construction.

"We were aware GWH was planning a development," Aimee says. "We made one phone call and things moved pretty quickly after that."

As busy business owners, they initially thought apartment living would simply reduce the maintenance that came with larger homes. Instead, it fundamentally changed how they spent time together.

"We actually catch up more as a family now," Aimee says.

"We've had homes with big yards and lots of space, but everyone ended up in different rooms. Here we'll have dinner together, the kids can play, and we spend far more quality time together."

[smartcode_project:default project_id=135096 project_image_fid=356829]

Lyle says their confidence came from GWH's reputation within Newcastle's building industry.

"I know people who've worked across different apartment projects, and whenever GWH came up the feedback was always the same. They're rock solid. They're quality."

That confidence only grew throughout the buying process.

"One of the things that really impressed us with GWH was the whole process, was the communication," Lyle says. "It was consistent, it was regular, there was no problem if we had some weird questions, there was no problems in getting answers."

[smartcode_project:default project_id=135096 project_image_fid=351104]

Aimee says one moment stood out.

"The project actually finished on time. We realised we needed to hurry up and sell our house because everything was happening exactly when they said it would."

The positive experience at One Apartments ultimately gave all three buyers the confidence to purchase again with GWH, this time at ERA.

Their confidence reflects what many buyers are seeking in today's apartment market. Location remains important, but so too does certainty around delivery, quality and long-term liveability.

[smartcode_project:default project_id=135096 project_image_fid=356822]

ERA builds on those foundations with 280 one, two and three-bedroom apartments across two landmark towers in <a href="https://www.apartments.com.au/developments/newcastle-west-nsw-2302">Newcastle West</a>.&nbsp;

Designed by <a href="https://www.apartments.com.au/architects/fk-australia">Fender Katsalidis</a>, the project will include more than 2,000 square metres of resident amenities, including a resort-style pool, gym, sauna, private cinema and rooftop entertaining spaces overlooking the harbour and coastline.&nbsp;

The development is also within walking distance of the Newcastle Interchange, Honeysuckle, Darby Street, the harbour foreshore, restaurants, retail and the city’s beaches, continuing the walkable lifestyle that existing GWH buyers say has transformed how they live.

[smartcode_project:default project_id=135096 project_image_fid=356826]

For Keith, the appeal remains straightforward.

"You feel at home even before you've moved into your home."

For Aimee, the change is measured in time.

“I just felt like I had more time,” she says.

[smartcode_project:default project_id=135096 project_image_fid=351102]

Construction at ERA is now underway, with more than half of the residences already sold and limited two and three-bedroom apartments remaining in the East Tower release. Priced from $980,000 for two-bedroom residences and $1.46 million for three-bedroom residences, buyers can secure an apartment with a 10 per cent deposit, with premium homes offering ocean views from Level 8 and harbour views from Level 10.

ERA is also backed by Resilience Insurance's 10-year Latent Defects Insurance policy, providing protection against structural or waterproofing defects for 10 years after completion. The project is anticipated to be completed in early 2028.

[smartcode_project_cta:default project_id=135096]

Catherine Cashmore

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