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Melbourne is well known as the real estate auction capital of Australia – and possibly the world.
Year to date, over $4 billion homes have been sold via auction (compared to $2.9 billion for the same time last year), a number which would include properties sold ‘prior to’ and via a ‘passed in’ negotiation, all of which count towards the weekly clearance rate.
In the current atmosphere in which sentiment has improved, larger percentages are gaining enough competition to sell ‘under the hammer’ and this has certainly been so from an anecdotal perspective.
The auction process obviously thrives in an atmosphere where confidence predominates and most selling agents are well educated in the means of manipulation to inspire buyers to openly state their interest in front of a crowd of individuals on a Saturday morning.
If a couple of bidders are brave enough to commence the battle, others have their initial attraction to the property demonstrably ‘fed’ by the competition and join in – conversely, if no-one openly states an interest, the reverse can be the case, leaving potential buyers wondering ‘what’s wrong with the home?’
Each scenario – played out in the public arena – causes a roll-on effect across the market either boosting sentiment, or delaying the onset thereof; however, once confidence does take hold, the 'act now or miss out' frenzy is perpetuated, laying down the foundation for a typical boom bust cycle.
Auctions are marketed as a transparent way to sell real estate; however aside from the openness of the public event itself, the pre-sale process is anything but transparent.
Like a good retail sale, the key for the three week campaign preceding the auction is to get buyers through the home initially which in Melbourne, results in agents encouraging the vendor to withhold their reserve price to enable a “conservative” estimate of value – as either a verbal or published quote range – to glean as much buyer enquiry as possible.
In my own experience, I have seen these ‘conservative’ estimates as low as the nominal value the current vendor paid some six or so years ago – with a ‘+’ thrown in for good measure.
The idea is ‘sold’ to the vendor via explanation of the “buyer pyramid” – it works a little like step quoting – get the lower priced bidders to build momentum during the auction to fuel those bidding with ‘deeper pockets’ to step in at the end.
In reality, real expectation is often a good percentage above the quoted range with excuses such as “the vendor’s reserve can change” used to waylay future complaints.
Without the lower budget bidders, auctions can pull up short without the usual mania that has, in our boom eras of growth, significantly contributed in pushing prices to unsustainable levels.
In a market where auctions predominate, the price multiplier effect buoyed on through the physiological stimulant this method of selling promotes, results in prices gaining much stronger traction that would be possible in most private sale campaigns – something that has been <a target="_blank" href="https://www.sciencedirect.com/science/article/pii/S0749597804000925">well documented</a> in various scientific studies.
 
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Although other states have a larger percentage of private sales, the auction system, when used, is just as opaque. In Brisbane for example, it’s apparently <a target="_blank" href="https://matusikmissive.com.au/2013/05/15/auctions-and-why-the-agent-cant-answer-your-price-question/">‘the law’</a> to dodge any responsibility to give an accurate indication of vendor expectation - with an act that reportedly ‘limits’ what real estate agents are ‘allowed’ to disclose.
As if deliberately designed to confuse buyers – selling agents are ‘unable’ to indicate a likely selling range, any hint of a reserve, or an opinion of value.
I can see this methodology eking its way into Victoria if ever we get to the stage of national licensing, with many agents already using their own liberal interpretations of current published <a target="_blank" href="https://www.consumer.vic.gov.au/library/publications/businesses/estate-agents/guidelines-for-real-estate-salespeople-price-advertising-and-underquoting.pdf">‘guidelines’</a> – and whilst I’m sympathetic to the task an agent undertakes when selling a property, I hold the opinion that vendors – who foot the advertising bill - should take a greater responsibility and ensure published price ranges are updated to accurately reflect the range in which they are willing to negotiate.
I’ve commented previously that the “boom years” of capital growth in Australia’s property market – and in principle the inner and middle ring metropolitan areas of Melbourne (which sits at the top of the ‘boom’ chart see <a target="_blank" href="https://www.propertyobserver.com.au/trends/a-history-of-australian-property-values-in-charts-philip-soos/2013051361302?utm_source=po&amp;utm_medium=aida&amp;utm_campaign=trends">here</a>) – have not been lead by population growth as such, rather speculation, ease of credit, and a general expectation from investors (as well as home buyers), that prices will continue to rise.
This is evident from the amount of investor owned stock in the inner and middle ring city suburbs.  These areas contain a larger percentage of units and townhouses for which well over 50%, and in some states over 70%, is rented and owned typically by ‘mum and dad’ baby boomers buoyed on by the policy of negative gearing.
As mentioned previously, the success of negative gearing relies on speculation of capital increases, ensuring supply and vacancy rates sit at a lower percentage than would be the case if we instead concentrated on strategies to increase the supply of affordable ‘quality’ accommodation – (a subject I’ve explored at length before) – and a policy which goes some way in encouraging the ‘head to head’ investor battles I witness weekly, which significantly inflate the value second hand stock on the suburban streets of Melbourne.
And it’s not all that easy to directly align other market variables such as the unemployment rate, wage growth, or even rising rental prices which many assume in theory, will push a greater number of first home buyers onto the ‘ladder’ - with large movements in property prices.  When there’s a rush to invest, it’s more to do with the gold rush spread of optimism that seems to spread like some infectious disease.
It certainly wasn’t the above general market indicators that inspired four bidders (all investors) at an auction I attended last Saturday for an un-renovated house quoted at ‘$700,000 +’ sell $100,000 above the reserve, which due to the rapid pace of bidding, wasn’t announced on the market until $850,000 – albeit, I suspect had the bidding not been quite as frenetic, the reserve would have been ‘called’ at a lower level.
It was evident from the body language portrayed that the remaining two bidders had pushed far past their limit – based on comparable data, the house itself would have struggled to pass a valuation at the purchase price – yet for future sellers in the surrounding streets, the amount paid will set a new ‘benchmark’ and overall vendor expectation will rise – so too for buyers, who will see it as a comparable sale for a similar property of choice and raise budgets accordingly.
The prices achieved in heated auction markets are unsustainable in the long run, and yet the one thing all bidders have in common when caught up in the momentum of an auction, irrationally stretching their budgets - is a speculative ‘hope’ that at some future date, the next generation will be prepared to pay ‘more’ for the home than they did - enabling them to gain a profit over and above both outlay and inflation.
All are assumptions which work whilst the majority hold the same view and fail dismally when the ‘bubble’ of positive perceptions pops under the pressure of the opposing view – which is never completely absent.
The boom and bust cycle is evoked by the market dynamics of consumer sentiment, as those feeling ‘good’ borrow the ‘most’ possible to purchase with ‘positive’ thoughts in mind about rising prices, whilst the opposite reaction predominates when people avoid buying under the general perception that prices are going to keep falling – is something we were all witness to following the ‘peak’ of 2010 during which transaction levels were back to numbers not evidenced since the late 1990s despite other relatively good market indicators (low unemployment and the comforting ‘myth’ of a surplus – not to mention falling interest rates etc.)
 
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For this reason, the real estate industry as a whole makes strenuous endeavours to maintain the perception that prices always rise – or if prices are falling, it’s simply part of the ‘market cycle’ until they start on their upward profit making curve once again.
And they are not the only industry to do so. A vast amount of personal debt is tied up in the property market – not to mention the many retail offshoots that also benefit from rising property prices. Should there ever be a significant downturn – the economy would inevitably suffer as a result.
Therefore, if price rises in our major capital city markets have been primarily inflated through speculative investment, the positive mantra must be maintained to and at the expense of future generations who are going to find it increasingly hard to purchase.
I’ve listened to many an angry agent throw their hands up in pure exasperation at articles produced in the real estate section of The AGE (as one example,) openly remonstrating how any downbeat ‘vibes’ are directly responsible for declines in property prices. Funnily enough, they never complain when the reverse is the case.
And in the USA, where negative equity has affected the larger proportion of home owners, it’s been clearly demonstrated that even occupiers who are employed and own outright, and should arguably be unaffected by a loss in the capital value of their property, resist investing in the general upkeep of their home when values are dropping, spending around <a target="_blank" href="https://insight.kellogg.northwestern.edu/article/housings_albatross/">$200 less on maintenance and improvements</a> per quarter – favouring instead to buy only those items they can ‘take with them’ such as cars and furniture.
The concept that housing is the ‘best investment’ a person can make has been promoted widely throughout the developed world. In the years of boom growth, during which values rose in excess of 200 per cent, the total amount of money banks ‘lent’ into existence through the gradual easing of restrictions surrounding the mortgage lending market, was the core driver of increasing values, aptly benefited those who entered at the start of the lending boom, above those who are now tapping into the bank of ‘mum and dad’ or relying on joint ownership, grants, and a low interest rate environment to push their foot through the door.
The recovery we’re currently seeing is largely lead by the investment sector – with an equal perception that values will maintain their upward trajectory. Albeit, to do so, requires a new generation of bidders to buy into the same speculative mantra – more debt requiring more activity just to maintain the amount of money we have in circulation. Without it, we lose our jobs and our ability to service this growing supply of credit.
Whilst I’m a great advocate for home ownership – particularly for those establishing a family – and recognise the need for investment in the property sector with a long term mindset as part of a diversified portfolio - it’s clear we need to pour a far greater proportion of resources into structuring a plan for effective development, infrastructure being the key.
Albeit, with an historically reducing pool of first-home buyers, an increasing proportion of ‘interest only’ investors, and an ageing population which will provoke the big Australia advocates to hail ‘populate or perish’ - a bit like a doctor telling his patients they will never die, the real estate industry will maintain the myth that prices always rise.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
 
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Despite boom and bust cycle, real estate industry maintains myth that prices always rise: Catherine Cashmore

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Once again the drop in interest rates has been promoted widely as “good news” for the housing market, with Wayne Swan taking ample credit as he attempts to persuade public ears that record low rates are solely down to “responsible” fiscal policy.
To assume this is a reaction to a number of concerning economic indicators would be ‘grossly inaccurate’ we’re told - with Wayne Swan assuring the voting public that “Australia's economy is resilient.”
You could be forgiven for believing that we’re living in an environment similar to the old fable “The Emperor’s New Clothes” with only a few short months ago seemingly believable tales of an early return to surplus widely circulated until the pure nakedness of the situation, to the tune of $17 billion was revealed. 'Whoops!' Sorry about that.
And whilst a drop in rates may on the surface bode well for mortgage holders wanting to pay down debt, the bleak reality remains that for savers, many of whom are would-be first-home buyers, the news is not good at all.
Any long term downward direction in rates should always be considered a concern – they sit at the seat of a number of economic problems, and point firmly toward a trend of lower growth. Furthermore, a lengthy period of low rates is harder to reverse as consumers come to rely on cheap credit, unsustainable at higher levels should a ‘bubbly’ environment call for a reverse course of action.
As a tool, they are limited in their effectiveness for stimulating the economy pushing yield seekers into riskier assets. Since the global economic crisis, the world’s banks have been concentrated on lowering rates in order to boost growth. The textbook model indicates the atmosphere will motivate an increase in lending for such items as homes, goods and services; however monetary policy is a pretty blunt instrument and understandably in our post GFC environment, the appetite to reduce debt and accelerate payments on outstanding mortgages has been far greater than the push to consume.
In the UK, putting aside the London housing bubble inflated principally by foreign investment - the housing market has been broadly stagnant.  As with Australia, vendors – have chosen to hold, rather than sell for diminishing nominal returns.  Talk of lowering rates into negative territory and dangling carrots in front of first-home buyers by way of ‘help to buy’ equity schemes are all last ditch temporary measures to artificially prop up prices which critics emphasise will do little to address affordability in the long run, and artificially inflate prices in the near term. Yet akin to a doctor prescribing placebos, short term relief is better than a long term cure – particularly when approaching election.
As I mentioned previously, although it may seem logical to assume lending rates initiate price changes, other economic factors play a far greater influence, and unless the needed ingredients are combined, interest rates on their own can do little to change the terrain by any significant sustainable degree.
Furthermore, whilst governments can allocate at their discretion where to spend our tax dollars and pressure the banks to ‘pay forward’ the rate cuts gifted,  they have limited influence on where cheap credit is spent (or for which asset it is lent) into the economy or to direct it into areas where it’s needed most – principally construction.  The banks decide at their own discretion where to make their loans, the majority of which are directed towards the established real estate market, over and above other areas such as job-creating businesses.
Since November 2011 we’ve had seven drops to the cash rate – passed on ‘in part’ by the banks.  To date it’s failed to evoke any significant improvement to the construction industry with the latest data showing a 35 month consecutive contraction – the fastest rate since September 2012.
Established house prices have also been slow to respond– it took until mid 2012 for any marginal improvement in median values to emerge (principally boosted by consumer confidence,) and only recently have we seen any significant uptick. Albeit, throughout the period, growth in ‘private sector housing credit’ has remained weak and transaction levels low by historical standards.
 
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Melbourne recorded its strongest first quarter since 2010, however once adjusted for inflation we still sit -11.2% below peak values with a promised ‘softer’ second quarter. According to RP Data, capital city values in real terms have moved little since September 2007.
The new home market sits in a dismal glut.  Last week the HIA released 50 “action strategies” focusing on the economy, taxation, industrial relations and ‘red tape’ in an attempt to lobby government to allocate a greater proportion of the federal budget to addressing the issues which they assess are needed in order to advance ‘sustainable’ recovery.
Part of their campaign focuses on our ‘housing shortage’- and whilst there’s no doubt a growing population will require an increased surplus of accommodation, ‘population forecasting’ focuses on a number of ‘assumptions’ which are always subject to change.
For example, between 2001 and 2006, census data indicates we’ve reached a point where number of persons per household has stopped declining and is once again increasing – no doubt in part due to the rising costs of living and accommodation.
The results show how household size has increased from 2.4 people per dwelling to 2.66 in the five interim, and although a few 0.01 percentage points may seem insignificant, this figure is used to calculate ‘underlying’ housing demand, therefore, even a small shift of 0.01% can result in a ‘needed’ reduction of almost 30,000 dwellings.
Albeit, there is little point building a surplus of homes unless it can be assured the consumer (mortgage holder) will respond, and in this respect, the key issue to our shortage of housing lies in effective planning for population growth, which I’ve argued more than once, cannot be combated from simply building an excess of ‘roof space’ alone – or for that matter, dropping interest rates to historic lows.
To date, the only solution offered has been the channelling of first home buyer grants exclusively into the ‘new’ market – in other words, if no one else will buy it, throw smarties to our most price sensitive demographic and see if they will take the bait - an unsustainable irresponsible policy producing dismal results.
From a home buyer’s perspective, using their hard earned ‘deposit’ to purchase into a ‘new housing estate on the city fringe, where land is in abundance, is quite simply not worth the effort once travel costs and failed promises for the provision of infrastructure have been calculated. Nevertheless without recovery in construction, it remains that any surplus of credit will be poured into the established sector – principally lead by investors fighting over the same dwindling pot of existing dwellings.
Viewing housing as merely a tool to build wealth and drive the economy takes a fair amount of manipulation yet this is the reality. According to RP Data, tax revenue generated from property taxes alone, account for a collective 46% of total revenue for local and state government. In the recent Victorian state budget, it was revealed ambitious plans for a new east west link are in part reliant on an increase of 33% to 37% in property related taxes.
In a <a href="https://m.smh.com.au/victoria/banking-on-recoveries-in-housing-and-labour-20130507-2j58o" target="_blank">statement</a> to Fairfax Media, the property council of Australia warned "Any budget that relies on property taxes to pay for 40% of the bills is too dependent” – and it’s been noted that the prospected increase in transactions needed to fund Victoria’s bills is somewhat ambitious considering it was only a few weeks ago in the RBA’s  <a target="_blank" href="https://www.rba.gov.au/publications/fsr/2013/mar/pdf/0313.pdf">Financial Stability Review</a> that Melbourne’s property market was singled out with specific warnings of a ‘softer outlook’ ahead.
The long and short remains that Australia is pinning its future outlook on a robust housing market with both the RBA and Treasury looking towards the construction sector to fill any void from a slowdown in mining.  And whilst low interest rates can keep the mantra to first-home buyers going that ‘housing affordability is at its best level in a decade,’ despite prices continuing to rise, then the only way affordability can be sustained for those entering the market, is if the RBA hold down the cash rate over a lengthy period as seen in the UK and USA.
All things being equal, this option may sound feasible – however, equality in is not under the control of either the RBA or government when they cannot dictate where a larger supply of cheap credit is directed.
Without addressing the real issues causing weakness in the housing sector, it encourages central banks and investors to believe that market manipulation is the only feasible answer. Should a bubbly environment start to emerge in an atmosphere where low rates have become the norm, a favourable outcome will be far harder to wield than may be imagined.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
 
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Rate cuts bode well on the surface but long term downward trend is a concern: Catherine Cashmore

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Any regular reader of Property Observer will be well aware of the industry-wide aversion to first-home owner grants.
Steven Keen was one of the first to highlight their effect on the market when he aptly named them ‘vendor grants’, and last week Ray White chairman Brian White made a similar call when he termed the increased Victorian stimulus for first-home owners purchasing new accommodation, nothing more than a “builder’s incentive.”
Even the REIV, which has been broadly in favour of retaining first-home owner grants, has expressed frustration at the liberties state governments take when ‘manipulating’ the market through annual ‘tinkering’ with our most price sensitive demographic.
Treasurer Michael O'Brien has suggested “Victorian families (purchasing new accommodation) will be over $16,500 better off with the combination of the increased grant and stamp duty cuts” however; surely no one is under the false conception that this move has anything to do with easing affordability?
It's basic economics – if you channel an increased supply of money by way of ‘candy’ style incentives into any one sector, competition increases and so do prices. Any advantage the grant offers is quickly wiped away and buyers invariably end up paying ‘more’ rather than less.
As an example, in 2008/9 during which the first-home owners ‘boost’ was offering an extra $14,000 on top of State grant of $7,000 for anyone purchasing new accommodation. The rush of buyers to ‘get in quick’ before the grant was inevitably stripped away resulted in prices escalating in excess of 20 % in fringe suburbs such as Tarneit and Werribee South.
If you work out the dollar equivalent on the median house price in these localities, the ‘extra’ paid is in excess of $70,000 - so no saving there – and as with all smarty style incentives, as soon as they’re stripped away, first-home buyers who were encouraged to buy on a “whim” are left sitting on a nice pot of negative equity with no ‘rainbows’ on the horizon.
Of course, state governments are well aware of all these facts – so to openly mislead the public with affordability ‘sound bites’ is at worst, lying, and best insulting – they don’t deserve a seat.
Rather the policy takes advantage of the inexperienced property buyer luring them in with a seemingly ‘generous’ handout, in order to provide a much needed boost to the construction industry which, as indicated by the RBA – is expected to ‘buffer’ any void resulting from a slowdown in the mining sector, and in the near term, will assist in soaking up the oversupply of ‘new’ accommodation prospected to hinder growth in Victoria’s property market, as we traverse through the remainder of 2013.
All such grants which are primarily aimed at the new home market play their part in increasing demand – but they are temporary measures only.  Is it too much to ask for ‘real’ sustainable policies which address the hefty taxes, levies and fees currently making up what the HIA estimate to be 40% of the cost of a new home?
Or am I making the mistake once again of being brainwashed by “policy speak” - imagining our housing market is designed to provide the population with affordable shelter over and above a simple revenue raising tool?
 
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As every Joe on the street will tell you – if you really want to encourage the buying market to 'spread over the land', the simple answer is to raise the dollars needed to fund essential infrastructure – principally roads and public transport – at the start of the process not 20-plus years down the line.
In this regard, economist Leith Van Onselen is at the forefront of ‘good’ ideas when he suggests raising money through bond financing and recouping it from ratepayers over a period of 30 years.
Similar ideas can be found in Houston Texas in which a successful expansion of their city boarders is funded with policies such as ‘MUD’ – a ‘deductable’ Municipal Utility District tax – in which a panel of property owners sit on a government appointed board to oversee utility and infrastructure distribution in the area. The amenities are initially funded by a bond which the residents pay back proportionally over a lengthy period of time. It works as less of a disincentive to migrate outwards than an upfront fee which is piled onto the capital cost of their initial purchase, with residents openly active in allocating where and how the funds are distributed.
Buyers typically follow train lines – if they can commute to existing work places whilst living further afield, the increased population encourages small business and larger job centres away from the centre thus releasing cities from their ‘donut’ outlook.
However, currently, our outer suburbs are developing into what some term would term ‘ghettos’ – on the recently released ABS data which ranks geographic areas across Australia in terms of their relative socio-economic <a target="_blank" href="https://www.abs.gov.au/ausstats/abs@.nsf/Lookup/by%20Subject/2033.0.55.001~2011~Main%20Features~Main%20Page~1">advantage and disadvantage</a>.  A map can be constructed which highlights diversities such as incomes, education levels, occupations, rent and mortgage payments, family structure and unemployment.
<img height="327" width="470" src="/images/stories/2013/05/cashmoremay3one.jpg" alt="cashmoremay3one"> 
The ‘fringe’ suburbs are beetroot red and bright orange and sit well away from the affluent dark blue vicinities.  They are suburbs first-home buyers or families - supposedly ‘moaning’ about inner city house prices - are encouraged to “migrate” to and raise their children - areas without adequate schools, transport, and recreational facilities.
Throughout 2011-2012, the City of Wyndham in Victoria has experienced the biggest population growth of any municipality in Australia - attracting 12,822 people. Point Cook, a suburb of Wyndham which was expanded in line with Melbourne’s 2030 plan – was initially marketed as “A thriving neighbourhood … just 22 kilometres from Melbourne’s CBD” with “convenient access to established schools, shopping, recreational facilities and public transport.”
However, last year Bill Forrest – director of advocacy with the Wyndham City Council – painted the true picture when he was quoted saying "they [the state government] have not kept up with schools, they have not kept up with arterial roads, more than 50% of Point Cook is more than 400 metres from a bus stop."
In response to the long winded cries from residents situated in Melbourne’s outer west, $72 million is to be set aside in this week’s Victorian Budget to upgrade existing roads and infrastructure as the capital of Wyndham – Werribee - continues to expand into what is intended to be a major new ‘job hub’ - East Werribee.
Planning Minister Matthew Guy has stressed the “government is doing everything we can, within budget constraint, to invest in the west," however, whilst the funding is welcome, it’s quite honestly, too little too late. Notwithstanding, the blame sits as much on previous government’s shoulders as much as it does the current.
It’s all very well talking about further land releases – once again under the guise of ‘aiding’ affordability – however, without fixing the above issues we’re simply sitting on a merry-go-round of repeated mistakes. There’s little sense creating new suburbs of sprawling 'McMansions' where the trade-off of a bigger house is of little consequence once you step outside the front door.
 
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As for the inner suburban locations – our housing market is a private debt laden bubble riddled with a broad demographic of buyers and investors competing for the same golden nuggets of established real estate – typically in the lower to middle median price bracket.
Whilst Melbourne may be making headway in the lead to population supremacy, it’s not the growth that has inflated the cost of our established housing market – rather it’s policy that encourages credit expansion based on speculation. Sydney – which has made fewer inroads to effectively their increasing their housing stock in response to population growth sits in a worst position.
Reports released from the ATO show from the one in seven who own an investment property, whilst one in ten taxpayers’ are negatively geared.
It’s broadly assumed the policy of negative gearing subsidises renters. However, the offset of increased competition in the established market (which is further inflated through capital acquisitions in SMSFs) inflates the price of existing accommodation in a never ending game of musical chairs.
In this respect, negative gearing has done an excellent task of ensuring renters stay renters as lower and middle income individuals find themselves priced out all together – unable to save enough in the race to ‘keep apace.’
Considering the same report highlights a collective lost in excess of $13 billion over the 2010/11 financial year for those who employ the strategy, it’s no wonder the focus centres on the established market with the hope history will repeat itself and enable investors to compensate through the capital growth of their asset, without which there is little sense to the purchase.
Unfortunately, the latest media release from RP Data may disappoint those chasing an increase in the core value of their investment as it seems ‘real’ growth in the Australian property market is at a current or “similar level” to that recorded almost six years ago.
Or to quote RP Data’s research analyst, Cameron Kusher: “Although nominal values have risen over recent years, in real terms, capital city home values are currently at a similar level to what they were in September 2007.”
Once again, it emphasizes the need for investors to adopt a ‘low growth’ mindset as we move into an atmosphere which the RBA have termed in their “Housing and Mortgage market” outlook, to be the ‘new normal’ – principally, lower capital returns that typically track the rate of inflation.
All in all, we make nice puppets for our governing bodies. Bombarded with stats that suggest inflation is well contained, whilst in reality, the cost of living has rocketed with many still waiting for the wage rises for which ‘we’re told,’ have more than compensated.
If nothing else, let’s celebrate the freedom we have to make our distaste for current government policy evident. It’s a tad more satisfying than staring blankly at a ballot paper in September, knowing the next ruling party will no doubt provide more of the same.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
 
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Infrastucture investment must happen early to make new residential communities viable: Catherine Cashmore

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Balancing a real estate market is not an easy task.  Too much supply and prices fall – too little and they rise and in this respect, years of rapid population growth has played an influence on the Australian real estate terrain.
Additionally, various incentives – negative gearing, grants for first-home buyers, reduced stamp duty rates for off-the-plan sales and new homes, relaxed FIRB requirements - to name but a few - have been introduced, changed, and intermittently withdrawn by government “movers and shakers.”
All have the effect of falsely influencing consumer demand one way or another - sometimes it’s done in favour of the investor, sometimes the home buyer, however in all circumstances any so called improvement in ‘affordability’ invariably results in price increases, of which I have no doubt was the intention in the first place.
The housing boom has fed Australia’s obsession with real estate – and I can fully understand the emotions that surround the debate.  I attended a dinner over the weekend and enjoyed the company of a group of retirees who have all benefited nicely from rising property prices over our golden years of growth.
Most around the table owned a small portfolio of investments and once they discovered my current employment status, wasted no time recounting how investment in property – of which their parent’s generation had been unable or too cautious to explore – had paved the way into what was now, a relatively comfortable retirement.
When they purchased their first homes – Melbourne and Sydney were growing rapidly. Supply was good, low rise apartment blocks were popping up along local streets; there was massive investment in infrastructure – roads, schools hospitals, public transport etc. The then ‘outer suburbs’ were far more facilitated than our current comparable ‘fringe’ localities and the higher inflationary environment benefited their footsteps into property investment nicely.
However, the question all wanted answered was - ‘are we in a bubble’ and if yes, ‘will the housing market crash?’
It’s possibly the most common question I’ve been asked to date when talking about real estate – and understandably so. Prior to the GFC, following a global 'borrowing' shopping spree of cheap credit, Australia’s ‘too big to fail four’ were amongst the world’s most heavily exposed to the residential real estate market, with a grand total of 59% of loans offered to this sector alone.
Mortgage debt – the largest component of all debt in Australia, has ensured Australia’s banks are as ‘pinned’ in their reliance on the ever-expanding growth of our resident population’s desire to borrow and buy, as is everyone else who has a hand in the pie – aptly benefitting those who got in at the start of the ‘lending boom’ against those who now find themselves in a far more challenging environment.
 
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As Canstar’s Steve Mickenbecker recently commented during a <a target="_blank" href="https://au.finance.yahoo.com/video/reducing-private-health-premiums-023055241">video interview</a> on Yahoo Finance last week, Australian’s are “paying double what they were 10 years ago to get into the (property) market”, despite wages rising “by half that.”
Although property cycles are evident in all market economies, I’ve said previously that assessing the immediate future based on our long term past will not produce the desired result for those imagining that the property market can sustain an inflationary upward curve, in line with our previous ‘golden years of growth.’
Notwithstanding, RP Data have not been slow in suggesting a range of suburbs predicted to <a target="_blank" href="https://www.news.com.au/realestate/buying/time-to-buy-property-prices-to-double/story-fndban6l-1226626822141">double in value</a> over the next ten years.  Under such a suggestion, buyers could find themselves faced with a bill for close to $1Mil for a basic inner city second hand unit.  No wonder RP Data caution investors to view the ‘free’ report as a ‘starting point’ – general advice only in return for an email address.
Last week the RBA expressed concerns about growth expectation in an address to the Citibank Property Conference entitled <a target="_blank" href="https://www.rba.gov.au/speeches/2013/sp-so-230413">“Housing and Mortgage Markets: The Long Run, the Short Run and the Uncertainty in Between.”</a>
The speech was interesting, but perhaps should have just lead with the word ‘uncertainty’ because whilst they make it quite clear the future is not going to look like the past – for which they employ the term a ‘new normal’ – it’s also clear they have little concept of how this ‘new normal’ will look.
Understandably, they note a recent recovery in dwelling prices which they advocate ‘makes sense’ given the steady decline in interest rates. This is the one reason we’re being bombarded with ‘how affordable’ the market is at present.
However, it’s a funny old world where house prices can romp past the rate of inflation and wage growth ending at historic highs, and despite the recent ‘slump’ in transactions and values, which saw a fall of some 6 per cent nationally, be back on the road to recovery, with established metro prices romping on towards their 2010 peak.  Yet, at the same time, first time buyers are consistently told – it’s ‘never been more affordable to buy’ because ‘cheap credit’ is currently in abundance.
Of course, there’s no mention of what will happen to those homebuyers when rates do eventually rise – which, if not in the foreseeable future, they inevitably will.
The RBA have voiced little concern regarding our high personal debt levels (household debt to income ratio remains stubbornly at some 150 per cent) noting thus far, serviceability is well maintained.
However, the risk is ever present.  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.  In other words – the debt level is fine, as long as the party continues – but are there any rumblings on the horizon?
As referred earlier, one we approached any question of a ‘bubble’ the conversation I had round the table Saturday evening was an interesting one.  When the subject of lending standards arose, the general consensus of opinion reiterated was the ‘new’ prudent environment which all imagined went hand in hand with the assumption banks no longer lend ‘more’ than an individual’s income can service.  Or as the RBA termed it;
“Broadly speaking, mortgage lenders decide how much to lend to a household by working out the repayment they can reasonably make, given the household's income and other factors. For a given interest rate, this then backs out to a loan amount.”
 
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I only wish I had evidence of this to hand.  Whilst first-home buyers may find it challenging to gain finance for their initial purchase, and the environment is admittedly more ‘prudent’ - the last few conversations I’ve had with investors have revealed some concerning trends.  Even in our post GFC environment, most were offered loans far in excess of what they could comfortably service, yet understandably, all chose to accept less.  I readily admit this is only anecdotal evidence – however, clearly, for those who hold existing assets, lenders are unsurprisingly not averse to pushing the boundaries – with loan to value ratios still available at <a target="_blank" href="https://www.macrobusiness.com.au/2013/04/cba-pulls-back-mortgage-lvrs-sort-of/">95%</a>.
But as for the future predictions, it’s somewhat ironic that Luci Ellis – who holds the title ‘Head of Financial Stability Department’, can give what is essentially a speech full of 'unknowns' and a few well publicized <a target="_blank" href="https://www.macrobusiness.com.au/2013/04/rba-drops-the-ball-on-housing-supply-again/">inaccuracies</a>, which, if anything, it reads like a thesis of 'mights'..
“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”
“We don't know exactly what the saving ratio will do in the period ahead”
“We don't think it will necessarily return to the level in the 1960s and 1970s,” 
“We think it is very unlikely to return to its 1970s levels, or to rise rapidly once again”
They make the point that they don’t want “banks to ease their lending standards to make more loans and bring back the boom times. Nor would we want them to cut costs in a way that impinges on their risk-management capabilities.” As if wishing for some kind of ‘goldilocks’ outcome in an environment in which they have marginal control.
However, for my friends around the dinner table on Saturday evening, hotly debating a potential property bubble, the following comment from Ms Ellis would have perhaps been worth a mention.
“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. Institutions differ across countries, so we can't simply extrapolate from experience elsewhere. And there would need to be another boom first.”
In light of our personal debt levels, I don’t believe a drop in house prices need be pre-empted by another boom.   Albeit, keeping property prices afloat is no hard task in a country awash with policies that encourage investment into our limited established housing market.
We can argue the case for and against such policies with passion, citing old concerns that many first time buyers have ‘inflated expectations’ or an un-willingness to move into cheaper markets, however what cannot be argued, is the widening gap between existing owners and initial buyers which has slipped to the lowest ‘seasonally adjusted’ level since March 2004.
Viewing housing as merely a tool to build wealth and drive the economy takes a fair amount of manipulation.  It’s not hard to keep prices inflated – and if the worst happens, relaxing rules on foreign investment and providing a boost of cash grants as we did during 2008 would – based on recent history – be the accepted move.
Therefore, whilst there’s no doubt even in the collective mind of the RBA that property prices are sitting at a peak, there are plenty of variables to the questions of when, if, and how likely they are to drop.
Rather the question remains – how much higher can they possibly be pushed at the expense of a new generation of renters, who have long given up on the Australian dream?
Under the current system, we’re speedily widening the economic gap between the asset rich and asset poor. In this respect, the belief in giving the underdog a "fair go" as a key part of our collective culture – doesn’t quite extend across the socioeconomic boarders manipulated through high housing costs.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
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The certainties and uncertainties of Australia's housing market: Catherine Cashmore

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Julia Gillard has always been a passionate advocate for education and although there’s been heated debate over the Gonski reform package, there would be few to disagree that our education system needs a significant overhaul if we’re to successfully compete on an international arena.
As it stands, Australia pales in comparison to a host of other countries in basics such as reading and maths, and this must change.
Whilst I am largely in opposition to any proposal which suggests stripping funding from universities or converting scholarships into student loans, placing new graduates in a debt situation which - in the USA - has reached proportions oft compared to an unsustainable <a target="_blank" href="https://en.wikipedia.org/wiki/Higher_education_bubble">‘bubble’</a> on the scale of their pre-GFC housing crisis. The problem of providing children with a decent education also resonates across the housing market for our biggest home buying demographic – the family buyer.
No one is debating how lucky we are to live in a wealthy country which has thus far avoided the fate of Europe and America - in which youth unemployment is crippling the prospects for following generations.
However, if we’re to maintain a pool of talent essential for driving the necessary innovation to successfully navigate Australia into a post mining culture, as well as provide the necessary qualifications to enable the earning opportunities for younger generations struggling to ‘afford’ the affluent lifestyle Australia has forced upon its residents – (housing costs of which have been inflated through years of poor planning for population growth, ensuring most need to stay closely located to the capital city centres to secure adequate employment) - Education is a big part of the puzzle.
Yet it remains the case, that one of the substantial difficulties for families – or university students – fighting to gain a foothold into the best university or school suited to their needs - is locked in the cost and scarcity of accommodation.
Melbourne has experienced the largest population growth over the past decade and the subsequent squeeze has forced the greatest influx of residents into the outer suburban ‘growth regions’ – areas such as Caroline Springs, Point Cook and Melton for example, in which you can purchase a family home on a decent block of land for half the current metro median of $561,500.
Yet the advantage these regions offer in terms of affordability gets stripped away due a woeful inadequate supply of infrastructure which is always promised, but rarely delivered. This would include poor roads, nonexistent ‘fast’ public transport systems, and more importantly, oversubscribed, underfunded schools unable to cope with the massive boom of new residents – most of which are families.
Last year the Victorian government announced the development of six new fringe suburbs – Diggers Rest, Lockerbie, Lockerbie North, Manor Lakes, Merrifield West and Rockbank North – which are planned to accommodate no fewer than 100,000 new residents.  Planning Minister Mathew Guy made a point of stressing these suburbs would be adequately facilitated with appropriate infrastructure, and I don’t doubt the goodness of his intentions.  However, currently there are barely a handful of small local primary facilities servicing the area.  
Despite the continual tiresome argument by the HIA that cheap credit, by way of reducing rates, is the ‘only’ quick fix answer to encourage first time buyers to the new housing market.  Many of these first home buyers are young couples looking for suitable abode to raise a family; therefore getting adequate facilities into the regional growth areas is the only long term and ‘urgent’ solution to solving current construction crisis.
This infrastructure should include well facilitated and resourced schools – which I’d advocate is something that would provide a far greater level of encouragement to move ‘outwards’ than a rate cut.
 
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For families in the middle suburban regions of Melbourne, gaining a good education for their children is one of the main reasons many battle to stay centrally located, yet if you analyse the statistics, being in a school zone for one of the top 20 or so government schools in Melbourne can increase the price of properties in the area by at least 10 to 15% – and the smaller the zone, the greater the pain.
For example, the McKinnon Secondary College, located South East of Melbourne’s CBD is one of the best-performing non-selective government schools in Victoria, yet it only has a zone of around six square kilometres which spans over four suburbs.  
<img src="/images/stories/2013/04/cashmoreapril22one.jpg" width="470" height="204" alt="cashmoreapril22one"> Comparing a property on one side of a road outside the zone to the opposing side which falls inside the zone, can result in $100,000-plus difference in the sales price.  Therefore, whilst the school doesn’t discriminate on ability, it unwittingly reserves a place only for those able to afford the inflated accommodation costs.
Rental yields for family accommodation are also significantly inflated for properties located within a popular school zone, and due to consistent demand, capital growth tends to provide better than average returns, therefore, it’s no surprise investors and developers are another demographic who target the localities.
Neither is it unheard of for an old property within the neighbourhood to be rented by a desperate family never intending to move in, but simply using the address to meet the criteria for enrolment into year 7.
I’ve even heard of school principals camping out early mornings and late into the evening, checking letter boxes and electricity usage to assess the level of activity in a property “suspected” of sitting vacant while the family lives elsewhere.
It’s also follows that housing within a popular school zone tends to be held for longer periods – periods lasting at least the length of a child’s secondary education and often beyond.  Issues of supply are therefore at the forefront of concern for families hoping to move in and get a bite of the educational cherry.
It was reported early last year that 229 government schools in Victoria turned students away due to pressures of capacity – the urgency of reform to ensure good teachers and educational facilities meet a certain standard across the board cannot be overstated.
The unfortunate bubble effect on real estate prices in well-established popular and restrictive school boundaries is an issue of concern for all hoping to provide their child with a good education. This is especially the case when school zones are either reduced or extended based on under- or over-capacity.
Therefore, should a property suddenly fall outside the zone, it results in an instant loss of equity. The same would result if a school moved or for some reason closed – something we saw happening with relative frequency in Victoria last year.
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 indicates 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.)  
 
<img src="/images/stories/2013/04/cashmoreapril22two.jpg" width="470" height="273" alt="cashmoreapril22two">
<img src="/images/stories/2013/04/cashmoreapril22three.jpg" width="470" height="324" alt="cashmoreapril22three">
Source: <a href="https://reiv.com.au" target="_blank">REIV</a>
Not surprisingly, all areas surrounding the ‘good’ government schools which reportedly provide the “best” educational facilities Victoria has on offer, are a shade of blue or deep blue indicating inflated house prices. 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 orange areas are the ‘fringe’ suburbs where first home buyers or families - supposedly ‘moaning’ about inner city house prices - are encouraged to “migrate” and raise their children.
 
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As mentioned earlier – until we can get a reasonable level of infrastructure into these localities to provide a comparable educational advantage – or fast train services to enable students and quality teachers to commute outside their immediate area – the colours are not set to change and they will continue to suffer a social disadvantage.
University students don’t find it any easier.  We all read the story earlier this year in which contained an example of a young graduate <a href="https://smh.domain.com.au/real-estate-news/theres-also-a-random-guy-that-lives-in-our-laundry-man-rents-newtown-balcony-for-215-a-week-20130319-2gc7m" target="_blank">renting out a balcony</a> in Sydney for $215 per week.  It’s little better in Melbourne, where student accommodation can often equate to a three-bedroom house being converted into a seven-bedroom model (as below) and marketed to a potential investor offering ‘huge rental returns.’
<img src="/images/stories/2013/04/cashmoreapril22five.jpg" width="400" height="559" alt="cashmoreapril22five">
Whilst most students expect to live in ‘sub-par’ accommodation whilst gaining their degree, it should be understood that the price, standard and supply of housing facilities is one of the major aggravations a young graduate will have to endure.
The adequate provision of secure accommodation obviously plays a significant part in the success or failure of their studies.  Expecting students to foot a larger proportion of the bill to support their term at university – as suggested in the Gillard Government reform package – will inevitably feed into the problems mentioned above in regard to overcrowded accommodation.
It will be years until we see the significant effects of increased education funding, and the issues above pose additional questions – do we do away with school zones all together? Pour a higher proportion of any funding package to the disadvantaged suburbs to level the playing field by way of providing comparable alternatives?
There does seem to be a case for highlighting the unfortunate social divide between accessing quality education and the consequential “bubble” in accommodation costs which plays into issues of relative inequality.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
 
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School zones inflate real estate prices and maintain a social divide: Catherine Cashmore

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The idea that demographically we’re becoming a nation of downsizers is somewhat debatable.
Certainly, affordability constraints are having an effect on the property choice for young home-buying couples, but it doesn’t stop the flow of regular articles suggesting “families are increasingly flocking to high-rise apartments” which was all but stated as fact in a recent ‘ibisword’ newsletter – not to mention mainstream columns regularly delivered through the national press assuring readers we’re all becoming a nation of ‘happy strata dwellers.’
Whilst there’s no doubt we’ll see a future shift into apartment living as density in the capital cities continues to increase, the demographic most are concentrated on are our elderly downsizers. This is the great 'tsunami' many expect will tip not only the Australian property market over the edge with a flood of supply, but also that of the UK and USA – marring any recovery they’ve had to date.
We’re told our baby boomer retirees will all be downsizing en masse - so it’s worth investigating if this is correct, and if so, asking if the relative boom of inner city apartment stock currently being constructed in our inner suburban localities – the majority of which consist of four stories or more and are principally located in both Melbourne and Sydney – is going to suit their needs?
Proportionally we’re growing older as a nation – census data tells us the number of 20 to 44-year-olds has expanded on average by 4.6% per year in the five-year period leading up to the census – however by 2020 it’s expected to slow to 1.2% per annum (a trend clearly demonstrated by the United Nations World Population pyramid which extrapolates the data out to 2050.)
<img alt="cashmoreapril15one" height="238" width="470" src="/images/stories/2013/04/cashmoreapril15one.jpg">
By the time we get to 2051 the elderly population over 65 will have doubled from the figures recorded in 2004, and over 85 year olds will have quadrupled. These are the ‘baby boomers’ who hold roughly half of Australia’s housing stock – a mix of owner-occupied dwellings and investments.
The first group of 65-year-old “baby boomers” started their retirement in 2011 and over the next 20 years, the others will follow suit.  It’s broadly assumed by property commentators and urban policy makers that most will be looking to downsize. With unit and apartment approvals running at an all time high it’s taken for granted that our elderly downsizers will increasingly migrate towards these inner city developments becoming part of the ‘happy strata dwellers’ I cite above.
It’s perhaps worthwhile looking at the definition of downsizing before investigating where the bulk of the next decade’s retirees will head. Whilst moving to a smaller dwelling is what most assume as the definition of downsizing, it can equally encapsulate the demographic that simply locate into cheaper accommodation - perhaps not negotiating on interior space, but moving to an area where they can purchase a similar sized home for less expense.
The only commonality between the two seems to be ‘land size’ – few are able to maintain lavish gardens and therefore opt for ‘low maintenance.’
Late last year the <a href="https://www.ahuri.edu.au/" target="_blank">Australian Housing and Urban Research Institute</a> produced a paper entitled ‘Downsizing amongst older Australians’ – which attempted to address preliminary questions that hang over the accommodation needs of older Australians through an number of surveys, lengthy interviews, community meetings and ‘clues’ contained in ABS data.
Whilst they were able to recognise some broad trends contained in the census results, the research noted a severe lack of ABS information from which to assess the lifestyle needs of downsizers - therefore, despite the growing urgency on urban policy makers to provide adequate accommodation to meet ‘expected’ demand, we have scant details regarding preference of property type, price, and location an elderly retiree would require to successfully navigate the process. Hence why there are now calls for the census questionnaire to address the topic in detail.
Albeit, it was unsurprisingly noted from the ABS data available, that increasing numbers are leaning towards lower density dwellings as they move into their twilight years, and there is also evidence to suggest most retirees who moved in the five-year census interim stayed in the same SD area.  However, without deeper analysis there’s little to suggest apartment living is the preferable option.
The preliminary results from the AHURI survey were presented by Bruce Judd, Catherine Bridge, Hazel Easthope and Edgar Liu at the Australian Housing Researchers Conference in Fremantle earlier this year – the full power point is available <a href="https://www.be.unsw.edu.au/sites/default/files/upload/pdf/cityfutures/publications/presentations/Judd_AHRC_Perth.pdf" target="_blank">here</a> – however I’ll outline the results below.
 
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From the 2815 ‘older people’ surveyed, only 43% had ‘downsized’ and although it’s generally assumed the predominant reason for downsizing would be monetary their survey revealed the biggest motivation for a move later in life is a ‘life event’ such as illness or the children leaving home. Financial gain as a motivator lagged behind ‘death of a partner,’ and this falls in line with previous literature which notes a ‘reluctance to release capital unless ‘non housing wealth’ was close to being exhausted.’  (Faulkner, 2007).
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With this in mind, it’s no surprise that their preliminary research paper also outlines a common trend for older residents to ‘stay put’ indicating many don’t want to move if they can avoid it.
Downsizing from a four-bedroom house to a two-bedroom unit, for example, would not just compromise living space, but also force the mover to ‘downsize’ their possessions – some items of which no doubt have sentimental attachment and a lifetime’s worth of memories attached.
Furthermore, in a three-bedroom home, children and visitors can come to stay – in a unit, it’s harder to entertain – not to mention negative financial and psychological stress that dissuades older families from upping sticks – such as stamp duty costs and selling fees and the general physical effort.  For these reasons (and others,) it’s well recognised that the majority of older people continue to live in suburban dwellings with three or more bedrooms.
In line with the issues of unexpected expense, one of the participants surveyed commented:
“There are other expenses in selling houses – (Stamp) Duty, Agent’s fees and so on – and then removal fees. ... I paid a monthly fee while the furniture was in storage. So, than was another cost..I wasn’t really prepared for.” (Male, 60-64, single, owner, regional, NSW)
From those who had downsized, there was certainly evidence of a proportional move into apartments – albeit, the larger proportion continue to reside in a separate house.
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From those who did downsize, the predominant difficulty seemed to be sourcing appropriate accommodation – with comments such as:
“We're not alone in saying, well where's this suitable smaller place? …That type of dwelling…that's being built within retirement villages where they're two or three bedrooms; they're really quite well set up and…well designed. But their problem is, that's where they are, in a retirement village often on edges of suburbs.” (Female, 60-64, couple, owner, urban, VIC)
And:
“…We'd been looking for about 10 years… for…a block about this size, a dwelling rather like this that we could buy on our own. We couldn't find such a thing. Doesn't exist. We looked as far up the central coast. So…what this retirement village offers was the next best thing.” 
The above data falls in line with my own experience working with elderly downsizers. Most are understandably fussy in their accommodation needs – affordability is a factor – modern apartment owner corporation fees are not modest by any means, and most I deal with, would prefer a small villa unit or town residence to an apartment.
Evidently, in our ‘squeeze as many on the block as possible’ culture, properties fitting the description above are not readily available.  Inner city suburbs lack the space, and outer suburban localities where more appropriate accommodation exists, often lack public transport and adequate infrastructure to meet demand.
Therefore, although it’s assumed there’ll be a downsizer tsunami into the apartment market – there is little evidence to suggest as such – and for those who do downsize, finding suitable stock can present significant difficulties. It’s probably for this reason that high-rise apartments continue to experience inflated vacancy rates coupled with a large proportion of student renters, whilst elderly ‘empty nesters’ choose to stay put.
The AHURI research outlined that between the five-year census interim period, only “one quarter of older Australians 65+ moved,” only 43% of the survey respondents who had moved since turning 50 had downsized, most moved to detached dwellings, with only 24% moving into flat’s or apartments.
Meanwhile, the home  buyer duel income property shoppers, who make up Australia’s largest buyer demographic would no doubt appreciate an extra supply of inner and middle suburban three and four-bedroom houses which are held by the downsizing population – just as first-home buyers would benefit from an increased supply of ‘starter’ one and two-bedroom low-rise established apartments, which unlike high-rise dwellings give a first-home buyer an increased ability to obtain financial approval with lower owners corporation fees, but which have been largely ‘soaked up’ by investors taking advantage of negative gearing tax benefits or purchasing as part of a diversified SMSF portfolio.
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 of the above have played their part in disproportionally inflating inner and middle ring house prices, stagnating the market and reducing the options for first home buyers who are told to migrate some 30km from the CBD into a ‘nether nether land’ in order to purchase a house in which they can settle for a period of time and adequately raise a family.
Until such a time, we can expect more pain ahead in a property market that fails to cater for home buyers and largely benefits investors.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
 
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There's little evidence to suggest a downsizing rush

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The ‘feel good’ furore surrounding Australia’s real estate market continues to grow.
In Melbourne, news that overall turnover is some 15% above that recorded this time last year and a collective year-to-date clearance rate of 69% has been welcome news for those that work in the real estate industry and make their money from promoting the ‘buy now’ mantra – a phrase that doesn’t carry as much weight when prices are flat or falling.
In annual terms, both owner-occupation and <a target="_blank" href="/?option=com_googlesearch_cse&amp;q=investment%20lending">investment lending</a> in Victoria have increased by 2.5% and 18.6% respectively – proving the attraction real estate continues to hold as an ‘appreciating’ asset.
We’re once again witnessing increased competition around favoured stock that motivates the old angst amongst buyers, of ‘get in quick before it’s too late’ – a feeling Melburnians are all too used to seeing in a heated auction atmosphere which, out of all the states, Victoria rules.
However, whilst the positive data has provided an interesting ‘told you so’ moment from some of our popular property commentators (who are again trying to convince us that property can continually go up in value and effectively double in a time span of  anywhere between 7 – 10 years, depending on their stance) there is plenty of data that should pose a warning for those thinking we’re simply back in the same cyclical atmosphere which leads us through the ebb and flow of the oft-quoted ‘property clock’ where growth can forever outpace the rate of inflation.
John Edwards from Residex was one voice to highlight that sales transactions remain very low nationally, with January and February’s data <a target="_blank" href="/#more-3121">“the lowest seen on an Australia-wide basis since 1999.”</a>
This is a concern, because whilst the population continues to expand and new households inevitably form, we once again have to yearn for an improvement in the construction sector for any indication that the trend of demand to live and invest in established urban areas – which has played a part in disproportionately inflating capital city values – can be moderated through de-centralisation, the process of which is hopelessly hamstrung due to lack of investment in outer suburban infrastructure and ‘inelastic’ policy responses to demand/supply factors.
Notwithstanding, considering our relatively short-term existence, it’s easy to view Australia’s recent inflationary history as the ‘norm’ – imagining the patterns witnessed over a lifespan can repeat ‘forever more.’
Such is the claim of property investors who have ‘lived’ through 2 or 3 ‘cycles’ and foresee a future not much different from their immediate past.
However, if you delve back into the long-term history of house prices, it’s clear how the past 50 years is completely new in relation to the decades that preceded the hearty capital gains we’ve grown accustomed to achieving – gains which hit their peak in 2010 and are once again on the road to recovery – and gains which have shown a disproportionate inflationary trend which could never have eventuated from population growth alone.
Rather our recent historical gains have been primarily fuelled through a massive burden of private debt conjured up through the ‘magic money tree’ of liberal bank lending – far outside of the fabled deposit ratios we were fooled into believing in high-school economics.
I’ve previously written about the <a href="https://www.propertyobserver.com.au/residential/the-centuries-old-crystal-ball-that-proves-australia-s-housing-price-growth-cannot-outpace-inflation-forever/2012111957939/Page-2?utm_campaign=observers&amp;utm_medium=aida&amp;utm_source=po" target="_blank">Herengracht</a> index which charts a 360 year history of house and rent growth along an established strip of prime real estate in Amsterdam; the results of which concluded that outside periodic market volatility caused by wars, famines, and population factors - prices didn’t stray far from the rate of inflation – in real terms, they remained broadly unchanged.
Once completed, the study prompted respected analyst Robert Shiller to conduct his own long-term analysis of USA house prices, after which he stated – pre-GFC (2006) – that we can’t use the past 20 years to predict the future 20 years – a longer time frame is necessary if we’re to establish how sustainable our inflationary environment really is. In 2006 Shiller commented:
“The news is not good for homeowners. According to our data, homeowners face substantial risk of much lower prices that could stay low for a long time after.”
 
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Whilst Robert Shiller’s prophecy is currently playing out in the USA – although exaggerated due to their irresponsible and unregulated system of sub-prime lending, we’ve yet to see any significant or comparable effect on prices in Australia, outside of a relatively short-term blip in median data, amidst various government-imposed measures to keep stimulating (propping up) prices.
Notwithstanding, the trend that Eichholtz’s study on the Herengracht index and Shiller’s of USA prices highlighted, is consistent with other long-term data – most notably data collected and analysed by Nigel Stapledon from The Australian School of Business, who in 2010 put together a detailed paper charting the history of house prices in Australia between <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1711224">1880-2010</a>.
Stapledon gathered the information for his study from various sources – including early advertised price ranges in print media during periods in which more detailed information was unavailable.
He then spliced this together with more recent house price indexes, producing a paper which clearly highlights how unprecedented – on a broader time scale – the comparatively recent, and for the most part unbroken, price hikes in residential real estate outside the rate of CPI inflation, has been.
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Stapledon points out a series of seven ‘major economic cycles’ which include the two great depressions of the 1890s and 1930s, the gold rushes in the 1850s and 1860s, along with various and significant fluctuations in population growth throughout the analysed time scale.
Each played a part in the consequential boom and bust cycles to 1970, however when smoothed out, price growth to this date broadly tracked the rate of inflation changing little in real terms.
Even from 1970 to the most recent boom, prices stayed relatively stable, rising on average only 3% per annum.
However, the latest boom, which peaked in 2010, has dwarfed anything seen prior or since, and in this respect it’s worth quoting Stapledon in full:
“While much has been written about the excesses of the 1880s boom, in terms of magnitude of cyclical upswings in house prices, the price rises of the 1880s pale next to those of the last cycle starting in the 1990s. This last cycle has seen house prices rise by 111% in real terms versus, by comparison, a modest 33% in the 1880s.”
Yes – over the past 20 years, we’ve had the “mother of all property booms” in residential real estate and consequently, we have an asset class well suited to rampant speculation.
Property currently makes up 15% of the total value of assets held by Australian SMSFs and with the government threatening to dip its sticky fingers into super funds, along with evidence that median values are once again on the up, an increased move towards negative gearing is inevitable.
 
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As the Reserve Bank’s assistant governor Christopher Kent recently noted in his speech “Recent Developments in the Australian Housing Market”, investors need no longer fear any capital loss – effectively waving a 'go ahead, green flag' of encouragement to any still sitting on the sidelines whilst at the same time noting recent rises have been driven by “repeat-buyer owner-occupiers as well as investors.”
Potential first-home buyers suffer the unfortunate haphazard consequence of being born too late to enjoy the leverage party with <a href="https://www.google.com.au/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=1&amp;cad=rja&amp;ved=0CEQQFjAA&amp;url=http%3A%2F%2Fwww.ratecity.com.au%2F&amp;ei=sS1eUY33G4Ghige1h4HYDg&amp;usg=AFQjCNGV8GPQJDyl6LzJtOHvOE6ic--M-A&amp;bvm=bv.44770516,d.aGc" target="_blank">RateCity</a> noting the average first-home buyer’s loan size has not only doubled in the past decade, but now sits almost three times higher than the level borrowed 15 years ago - a figure which is apparently 82% above the inflation-adjusted average loan size.
However, those thinking the past 20 years is a good enough cycle on which to base the next 20, best of luck to you because despite our buffers and to some extent fair economic management through a GFC environment, to expect the real price of residential real estate to continually rise outside the rate of inflation has its fate in a shaky end, as history will attest.
It’s easy to look across the expanse of ocean that separates us from both Europe and the USA and come up with a fairly academic case as to why ‘Australia is different’.  We have the mining sector, low unemployment, population growth, supply constraints, wage growth… all of which is used as evidence to calm would-be investors against any thought that we could suffer the same fate. The premise is, whilst we can continue to pay our debts and prop up consumer spending, it’s ‘all alright Jack’… or is it?
Prior to the GFC, any talk of regulation in banking was effectively brushed aside under the concept that policy was well equipped to deal with the resulting consequences.
However, changes which have been ushered in during the post-GFC environment are no buffer against price rises and arguably only offer limited security against a future which must by definition forever be bigger than the past in order to ensure continued capital growth (a needed reality to our current system of banking).
As Giovannu Dell’Ariccia – an advisor in the research department at the IMF – wrote last year, in a detailed paper entitled <a target="_blank" href="https://www.rba.gov.au/publications/confs/2012/dellariccia.pdf">“Property Prices and Bank Risk-taking”</a>, discussing the effectiveness of policy changes in light of the GFC:
“We should recognise at the onset that there is no silver bullet. Each policy entails costs and distortions. And effectiveness is limited by loopholes and implementation problems. Broad-reaching measures (such as a change in the monetary policy rate) are more difficult to circumvent but they typically involve greater costs. More targeted measures (such as maximum LTV ratios) may have more limited costs but they are challenged by loopholes, which may jeopardise their efficacy.”
His analysis is worth reading in full – primarily because it outlines how difficult it is to restrain credit when there is no “unifying theory of how banks behave over the business cycle and react to changes in asset prices, much less a theory about how banks react specifically to real estate market developments”.
Therefore, at the risk of being called a ‘nervous nelly’ – or worse still – a ‘doomsayer,’ reading recent reports that evidence a return to <a target="_blank" href="https://www.brokernews.com.au/news/breaking-news/are-we-witnessing-the-death-of-the-5-deposit-174052.aspx">‘no deposit’</a> lending and suggestions that <a target="_blank" href="https://www.brokernews.com.au/news/breaking-news/hypocrisy-in-loan-application-requirements-has-broker-fuming-174104.aspx?p=1">‘shonky’</a> practices still sit relatively ‘comfortably’ in our newly ‘regulated’ environment should cause concern.
Therefore, whilst increased confidence and rising medians along with ‘on the face of it’ good economic data can calm worries of an imminent crash, we are in no way immune. Retiring with a debt-free roof overhead is preferable. However, when it comes to investment, take my advice and remain well diversified.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
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Don't be made complacent by good recent economic data

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There seems to be a perceptible sigh of relief across Australia now that spending has started once again. As RBA deputy governor Philip Lowe pointed out in a speech last week:
“Nationwide measures of house prices have increased by around 4% since mid last year, after having declined for around 18 months. Home lending approvals and auction clearance rates have both risen. Equity prices are up over 20% since the middle of last year. And the level of consumer confidence is now well above its long-run average level. Despite what one often hears, households do appear to be feeling better about both their finances as well as Australia’s medium-term prospects.”
Mr Lowe is correct in his assessment of the housing market: conditions have improved and people are once again out and about leveraging against existing assets, and pooling their savings into bricks and mortar.
In Melbourne, according to the REIV, the overall value of residential sales at auction has increased substantially compared to this time last year. Transactions sold at auction over the first few months of 2013 currently total $1.8 billion, compared to $1.5 billion in March 2012 - and the value of private sales has also risen from $3.9 billion to $4.5 billion. It’s a remarkable improvement considering overall turnover last year was back at levels not seen since 1996 as we limped through 12 months of no perceptible growth, aside from a slight ‘uplift’ in the numbers attending both auctions and ‘open for inspections’ in December.
So is it back to business as usual? Well, for the time being maybe – except of course for first home buyers who are struggling to join the party in any significant proportion – a segment that seems to be discounted amongst those calling ‘recovery.’  Albeit, it’s clear from the Governors speech that the post GFC period, during which we’ve been encouraged to save and pay down debt, is drawing nigh.
I suspect, outside of the daily grind most endure to keep their mortgage repayments under control whilst squirreling away funds for retirement, scant thought is given to the broad concept of ‘money’ – or indeed where money essentially comes from.
Whenever we hear a speech on the housing market from the RBA, it’s accompanied by a short history lesson on the major influences that have lead to our fortuitous years of ‘boom’ appreciation, during which we’ve seen median house prices balloon some 200% – outpacing both wage growth and inflation over the same period.
For example, in one of their most recent publications cautioning on a lower growth atmosphere, we were educated thus:
“Over the past 20 years or so, upturns in the housing market have been accompanied by an increase in the growth rate of credit. But those years were also a period of structural change as the economy moved to a higher level of household indebtedness. Generations of households yet to buy their first home, or still wanting to trade up, were taking advantage of easier access to credit, which among other things had been facilitated by the shift to lower inflation and lower interest rates in the early 1990s.”
It’s a seemingly fitting non-emotional explanation to explain away the dramatic increase in prices – albeit it doesn’t quite paint the full picture of where this supply of money actually originated from.
The economist JK Galbraith coined what is perhaps the best explanation of our monetary system when he said "the process by which banks create money is so simple that the mind is repelled. When something so important is involved, a deeper mystery seems only decent."
I’m sure some reading this that will be well educated in the dynamics of debt creation – it’s no hidden secret, just rarely discussed.
However, there will be a good proportion who have yet to be initiated into the remarkable system of monetary supply that has allowed the majority of our currency – some 95% of it – to be created out of thin air through the process of bank lending.
In fact the story behind this great supply of money would make a fitting accompaniment to the unfolding plot in the film Oz The Great and Powerful. As long as we ‘believe’ it doesn’t really matter what’s occurring behind the scenes – processes which in arguably ‘less responsible’ hands ultimately lead the world to the brink of economic collapse.
And as countries around us wake up to the devastating repercussions of what can happen when ‘things go awry’ – <a href="https://www.positivemoney.org/" target="_blank">organisations</a> campaigning for a better way are slowly gaining traction.
If you have an innocent understanding of economics, you may still be under the illusion that banks make their profits by leveraging against depositors funds and thus, charging interest on the loans they advance through a process called ‘reserve ratio’ or ‘the money multiplier’ – keeping a proportion of the balance safely aside whilst extending the rest to a borrower as credit.
However, whilst no one would disagree that economics is a complex subject in its own right – this myth was debunked a long time ago – although perhaps more publicly so since the on-set of the GFC.
Importantly, the central bank doesn’t control the amount of money circulation – commercial banks do – based on their own models of risk assessment, which are arguably developed and manipulated behind closed doors.
You see, when a bank extends a loan, the figures typed into your loan account are just that – simply numbers put there on the premise that the bank has assessed you a credit-worthy individual who will honour the terms of their contract.
In the simplest sense, this loan (the figures typed into your bank account created from ‘nothing’) are counted as a ‘deposit’ – money you owe to the bank, and therefore instant ‘wealth’ upon which the bank can extend further credit into the economy.
Banks don’t have to limit themselves to lending out this somewhat fictional money based on any ratio set by the RBA – or the funds they receive from depositors. In other words, it’s commercial banks that control the level of ‘money’ (debt) which circulates in the system.
Consequently, almost all the currency out there is money which has been created and expanded through an increasing variety of financial models. Money ‘loaned’ into existence with interest attached – for which additional funds are required to service the extra repayments. As the money supply increases, so does inflation, but principally on the goods that it ‘funds’: real estate.
 
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Let me briefly recap. In almost all modern countries operating under the same system, only 3-5% of ‘real’ money originates from the government-owned mints, the rest is conjured up with the words ‘I believe’ when a bank makes a loan.
As Adair Turner, Chairman of the FSA, eloquently put it in a speech ‘Credit Creation and Social Optimality’ following the GFC in Sept 2011:
“The banking system can thus create credit and create spending power – a reality not well captured by many apparently common sense descriptions of the functions which banks perform.  Banks it is often said take deposits from savers (for instance households) and lend it to borrowers (for instance businesses) with the quality of this credit allocation process a key driver of allocative efficiency within the economy.  But in fact they don’t just allocate pre-existing savings, collectively they create both credit and the deposit money which appears to finance that credit.”
Considering banks favour lending against existing collateral over and above the support of say small business and enterprise, it should come as no surprise that the vast majority of bank lending has been towards the purchase of ‘bricks and mortar’ – and whilst the only constraint on the amount of money ‘created’ is people’s ability to service the debt – we should not be under any illusion that the RBA wouldn’t welcome a return to ‘business as usual’ in our revolving system of finance.
According to RP Data, Australia’s property market is worth an estimated $4.86 trillion, which is three-and-a-half times the value of Australia’s stock market and combined superannuation funds. Therefore, it’s no surprise that the health of our property market dominates the conversations of both those in and out of the real estate industry – an asset class towards which banks are highly exposed.
Without going into further detail, the one problem with our economic model is the requirement for boundless growth – more debt requiring more activity just to maintain the amount of money we have in circulation. Without it, we lose our jobs and our ability to service this growing supply of credit.
Collectively, we’re all in debt – and for those who aren’t, the remainder pick up the slack.  And although its broadly recognised that the initial boom in borrowing which occurred in the decades leading up to the GFC is unlikely to continue at such a rapid pace, you would be foolish not to recognise the risks associated with an economy which has its foundations pinned on a future which has to forever ‘be bigger’ in order to stay afloat.
I came across a cartoon the other day with the wording:
“Oh, The World is $40 Trillion in Debt?”
“Please, tell me who the world is in debt to?”
The answer of course, is the banks. Albeit, whilst we’re rocking along under the protection of the mother of all mining booms, underpinned with increasing demand from China, and in the throes of relatively rapid population growth, the party can seemingly continue ad infinitum.
Albeit, make no mistake - the rocky foundations are there - a younger generation slowly ‘priced out’ – for which the government can only assist through the extension of a further allowance of ‘cheap’ credit, which thus far has not produced any lasting effect.
Not to mention an ageing population who will eventually outnumber the workers, leading the ‘big Australia’ advocates yelling ‘populate or perish!’
The game of checkmate won’t change until the system changes, and the system won’t change until its hand is forced.
With these thoughts in mind, perhaps it’s time to remind ourselves what Citi's Global Head of Credit Strategy, <a target="_blank" href="https://www.businessinsider.com/matt-kings-most-depressing-slide-ever-2012-12">Matt King</a>, cited late last year as “'The Most Depressing slide” he had ever created.
“In almost every country you look at, the peak in real estate prices has coincided – give or take literally a couple of years – with the peak in the inverse dependency ratio (the proportion of population of working age relative to old and young).
In the past, we all levered up, bought a big house, enjoyed capital gains tax-free, lived in the thing, and then, when the kids grew up and left home, we sold it to someone in our children's generation. Unfortunately, that doesn't work so well when there start to be more pensioners than workers.”
Click to enlarge
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Food for thought is it not?
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
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The need for boundless growth is a problem: Catherine Cashmore

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I wrote a few weeks ago regarding the potential stagnation that is likely to affect our property markets into the future, due to an increasing number of first-home buyers failing to enter onto the initial rung of the property ladder - and the evidence continues to mount.
Despite the widely spruiked improvement in ‘affordability’ (which comes on the back of continually low lending rates and renewed optimism from investors, in turn helping transaction figures increase from a very low base), first-home buyers are simply not responding.
As <a href="/news">Larry Schlesinger</a> reported on Property Observer last week, overall numbers for this demographic have fallen to a near eight-year low with the latest ABS data showing a drop of 11% in mortgage commitments between December 2012 and January 2013.
It paints a woeful picture buried in an economy which remains the envy of our Western counterparts, and has subsequently left some wondering: can it continue to rise without a consistent contribution from the first-home buyer sector?
Recent research from RP Data is also emphasising the potential side effects of our stagnated home-buyer market, with the average length of ownership for both houses and units now sitting at 9.3 and 8.2 years respectively.
Cameron Kusher from RP Data assessed the increased holding periods in light of an overall lower volume of transactions. He concluded that high property prices, along with inflated agent commissions and stamp duty charges, were acting as a disincentive for owners wanting to sell.
However, considering there’s been such a marked increase in the length of time property owners choose to ‘stay put’ – periods which have jumped well over 30% on those recorded 10 years ago – I’d suggest deeper concerns are playing into the equation.
For units, the rise in the relative holding period over this ten-year period is even more so than that of houses – pushing towards a 39% increase. As apartments are generally considered the ‘foot through the door’ property type that attracts a younger first-home buyer demographic, and a forthcoming supply of new unit developments has been fairly robust across the major capitals, you could be forgiven for expecting the turnover of home buyers upgrading to larger dwellings to be evidenced by a shorter holding period rather than longer as shown.
However, the vast majority of inner city established unit and apartment stock is investor-owned (close to 70% in some localities), therefore it’s fair to assess the ‘buy and hold for the long term’ mindset is bearing a significant influence in restricting supply for the lower-priced sector of the market. This results in a bottleneck of demand and longer holding periods; demand that a proportion of first-home buyers struggles to compete against.
As I previously pointed out, property to some extent connects together like a flowchart. Supply is fed in from the bottom to allow those upgrading (and then downsizing) a ready market to sell to in order to make the move.
When this flow is intercepted and holding periods subsequently increase, a growing minority of low-income workers find themselves sandwiched between rising rental prices and scant opportunity to exit the merry-go-round of funding someone else’s investment.
It has puzzled some that, regardless of this first-home buyer lull, there’s been a marked improvement in most markets across Australia. The latest RP Data mortgage index is also showing a strong surge in the number of loans advanced over the eight weeks to March 10, reaching “the highest reading since August 2009.”
The question remains whether the upsurge in price growth can be sustained without the first-home buyer sector; can it produce the annual 10% rise for 2013 many ‘economists’ are now all but assuming based on barely three months of daily and somewhat bumpy data?
This would once again push median values past both inflation and wage growth – good for those who already have a property and for the real estate industry as a whole – but increasingly painful for a younger generation who will no choice but to take out increasing levels of ‘debt’ to fund their accommodation.
As the champaigne corks are being popped, a few moderating voices have come to the fore. David Llewellyn-Smith in his piece <a target="_blank" href="https://www.smh.com.au/business/is-australian-property-worth-the-risk-20130308-2fpgd">‘Is Australian Property worth the Risk?’</a> was one such voice to provide a balance to some of the bullish commentary we’ve seen of late - commentary which on the one hand happily informs how ‘affordable’ property is, whilst blithely high-fiving an onward return to ‘peak’ prices with the other.
David suggested that due to APRA enforcing banks to lend dollar for dollar against deposit growth (“growing at 7% per annum and falling”), credit availability was bound to be constrained.
It’s a fair point, although I often wonder exactly what APRA is doing to ‘constrain’ lending, considering individual bank risk models are arguably developed and manipulated behind closed doors.
This aside - inflation to some extent has less to do with the overall money circulating in the system, and more to do with where the current supply of money is being channelled.
In other words, although constrained lending has an impact (particularly for first-time buyers), and GDP data highlights a fall in disposable household incomes by approximately 0.2% over the past year, Australians are still saving more, and aiming to shore-up these remaining funds into ‘safer’ long term assets.
Therefore, as housing acquisition continues to be the preferred model of investment for around 42% of our current buying market – even with constrained lending – inflation can be expected, at least for the short term.
 
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In essence, it’s the investor demographic that is primarily placing a floor under the ‘affordable’ bracket of our “estimated $4.86 trillion” (RPData) housing market, thereby preventing any setback in price growth resulting from a lack of first home buyer participation.
Last week <a target="_blank" href="https://propertyupdate.com.au/property-investors-blamed-for-housing-affordability-woes/">Michael Yardney</a> defended investors against any suggestion that large numbers choosing to invest in inner city terrains were adversely affecting first home buyers.  Michael Matusik was another voice that came to the fore suggesting first-home buyer expectations are ‘out of whack’ considering 60% of those purchasing last year chose properties with four bedrooms or more.
In light of the low percentage of first home buyers overall, and taking into account that most take loans around the $300,000 level, I’d suggest those purchasing 4 bedrooms or more are likely to be couples taking advantage of various stimulus grants to purchase in fringe localities - the price point of which is often comparable to a small inner city unit.
Albeit, this should not overshadow core trends which hold the potential to lock up ownership between a reducing number of owners and investors, who in turn have to provide accommodation for an ‘increasing’ number of renters.
To sit on the sidelines and argue that a growing percentage of investors have not played a substantial part in the dramatic growth of capital city property values and consequently placed a strain on first-home buyer numbers is lunacy in light of the data we have to hand.
It’s not a case of labelling individual property investors as ‘greedy’ – the majority are not – they are simply responding to, and taking advantage of, current government policy which assists using property to provide an income stream into retirement - an issue we all need to attend to through the course of our working lives.
It’s also important to understand that as a proportion of any property market, investors are absolutely essential.
However, a report by the National Housing Supply Council titled <a target="_blank" href="https://www.nhsc.org.au/content/publications/housing_supply_affordability_2013/default">‘Housing Supply and Affordability’</a>, released last week, states:
“Couples, both with and without children, have experienced the largest falls in home ownership. There has also been an increase in the share of those approaching retirement age that still have a mortgage. Many of these changes are likely to have been at least partly driven by the increase in house prices over the decade, making it harder for people to get onto the housing ladder and taking out proportionately larger mortgages when they do.”
Surely everyone with an interest in the health and wellbeing of their children and grandchildren should be actively seeking solutions to problems which threaten to adversely affect their future, at the expense of pumping up prices and labouring them with an ever-increasing mountain of debt.
In the UK, there has been a focus on forcing better use of existing homes with policies such as a ‘bedroom’ tax and ‘mansion’ tax – however taxing people who choose to pay more to live in larger properties, or assessing a single individuals ‘need’ for ‘2’ bedrooms rather than ‘1’ without an understanding of their personal circumstances is not the solution.
Rather, the answer lays in making sure lower priced stock that comes to market is directed towards the ‘buying’ demographic most in need – and currently, this is not the investor, it’s the first home buyer.
Under current policy, we’ve managed to lock the established housing market up in a hotbed of ‘speculative’ demand, producing a weak construction sector which is further impacted by years of poor planning for population growth.  This has consequently resulted in an increasing number of ‘potential’ first home buyers pushed into a rental market of rising yields.
Only through a number of changes to current government policy is it possible to slowly reduce inflation in the established sector and open up the potential to provide feasible and affordable ‘new opportunities’ in both inner and outer suburban regions. However, if we sit back and do nothing, then warnings coming from organisations such as The National Housing Supply Council, or McKell institute, will increasingly come to fruition.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
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FHBs still struggling to enter the market: Catherine Cashmore

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Last week Michael Yardney re-published his rundown of Australia’s market cycles from the 1980s onwards.  The premise was to calm any ‘would-be’ property investors into recognising the various historical trends that traditionally affect the ‘ebb and flow’ of Australia’s real estate market.
If you’re a regular reader of Property Observer, you will have no doubt had your fill of where each individual state sits on the ‘property clock.’ It’s an arguably overused term to provide a fairly limited theory for our frequent ‘boom and bust’ cycles.
Question why property prices are so high and you’ll receive a basic lesson in real estate agent property economics – the top of which will be supply vs demand. 'We have a growing population and not enough homes'... and on and on it goes.
Indeed, various commentators have already extrapolated out two months worth of housing data to ‘conclude’ a rise of '10%-plus' over the course of 2013.
Certainly, if you want to ignite an emotional debate, housing is right up there with politics and religion.  Since history began, it has remained an integral part of the most valuable asset man desired, fought over, possessed and in many cases died for: land.
Whether it be a means to make a living through effective cultivation, a form of wielding control over a resident population, a place to build the modern-day castle, or simply a speculative investment, it’s the most valuable commodity mankind owns – a valuable and finite commodity that becomes ever more so as the population expands.
Indeed, property rights are a foundational component of a capitalist economy, and under our current system of ownership, governments profit nicely from the advantage.  In Australia, state government revenues from property-related taxes alone equate to around 23% of the total balance sheet – hence why ‘stamp duty addiction’ and the consequential need to incentivise buyers to keep transaction figures high has such a strong hold.
However, no-one should be under the impression that property prices are high due to demand factors from home buyers. Prior to the GFC, following a global 'borrowing' shopping spree of cheap credit, Australia’s ‘too big to fail four’ were amongst the world’s most heavily exposed to the residential real estate market, with a grand total of 59% of loans offered to this sector alone.
Australia’s banks are as ‘pinned’ in their reliance on the ever-expanding growth of our resident population’s desire to borrow and buy, as is everyone else who has a hand in the pie.
In this ‘boom and bust’ merry-go-round culture, we’ve simply borrowed more to pay more, the vast majority of which has gone into residential housing – inflating prices disproportionately.
It’s a somewhat inevitable conclusion – made all the worse due to restrictive planning laws which have failed to accommodate for substantial capital city population growth – that the ease of credit has advantaged those at the beginning of its issuance, to the expense of those at the end.
Baby boomers who got in at the start of the ‘lending boom’ have certainly profited over those who are now at the ‘sticky’ peak, where prices have already had their ‘golden years’ of growth and the big profits have been made.
Mortgage debt – the largest component of all debt in Australia – is aptly living up to its original French meaning for the first-time buyers paying inflated prices, that being a “death contract.” However, as long as those purchasing are able to meet their repayments, the banks can continue to create money ‘selling’ their loans - backed up by overly generous wholesale funding guarantees – and there’s little incentive to improve the situation for a growing minority sitting at the bottom of the pile.
Albeit, there’s no doubt the property market has once again started to simmer – most agencies are reporting a spike of active enquiry – some declaring levels equal to those seen back in 2009 during which the federal first-home-owner boost was fuelling a post-GFC boom.
 
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RBA governor Glenn Stevens also conceded as such, stating that residential investment seems to be “slowly increasing (Australia wide), with higher dwelling prices and rental yields.”
Share markets have trended higher, and there’s been a marginal uplift in retail spending, all of which filters through to the property market. Confidence that we’re on the ‘up and up’ again, combined with ‘cheap credit’ simply adds fuel to the fire.
AFG is once again reporting a ‘record’ month of borrowing with their February figures up 5.3% on this time last year (albeit with ‘subdued’ first-home buyer activity). Australia’s largest mortgage broker was reporting increasing activity as far back as <a target="_blank" href="/news">February 2012</a>, fuelled by a strong investment sector (which currently makes up roughly 42% of the residential market).
As Michael Matusik pointed out a few days ago, "Australian’s borrowed $200 billion to buy residential property last year – 7% less than the market peak in 07/08."
In Melbourne, clearance rates are up, the auction market is bubbling – and if ever there was an ‘out on the street’ example of the ‘boom and bust’ physiology in motion, it can be viewed in the inner suburban streets of Melbourne on any bumper ‘super Saturday.’
By their very nature, auction sales have played a significant part in igniting golden periods of rapid inflation in the established residential sector. Bidders evidently have their confidence underpinned when they see others competing for the same property – budgets tend to be pushed, and the under-bidder who walks away with that gut-wrenching feeling of empty disappointment is the one who’ll stretch their finances for the next auction they attend.
As buyers see prices go past expectation in an open and arguably transparent atmosphere, there is a feeling of ‘act now or miss out’ – it’s a feature of any rising market, whether stocks or property, and the build in intensity is rapid.
As an example, if two buyers are going head to head during an auction – and the winning bidder exceeds by just $1,000 – there is another buyer - the under-bidder - who has a similar budget and, with a determination not to lose twice, needs little persuasion to bid to the same level (or higher) on another property.
If you want a really good demonstration of this scenario, congregate around ‘investment-grade’ properties in the popular markets of Elwood and St Kilda (as an example). Whilst the general consensus remains that emotional home buyers push the market, they don’t shine a light to a couple of investors going ‘head-to-head’ for a negatively-geared asset, which will produce a fairly robust rental income and decent depreciation schedule to boot.
Albeit – do not mistake this for a market recovery – once again, it’s all confined to the established sector. Everyone is effectively fighting over the same pool of existing dwellings in a never ending game of 'musical chairs.' We’re simply paying higher prices for an ageing stock of second hand homes.
Indeed, there’ll be no housing recovery until we have a construction recovery. As the first ABS building approvals update for 2013 indicated, approvals in January fell for a second consecutive month, lingering back below the 13,000 mark.
Spokesperson for the HIA, Harley Dale, commented that even with a rise of 3.3% in detached house approval, overall approvals for this sector are still down by 1% over the three months to January 2013.
Fletcher Building LTD is also flagging the weight of the issue, stressing that the ongoing weakness in Australia's new housing sector is likely to last until the end of the year. Along with the others, they are crying for lower rates and a return of incentives for first-home buyers.
Last week, the federal government’s housing supply council revealed the nation faces an "an impending very substantial fall in home ownership". The report goes onto state that “baby boomers will be the last generation to live the home-ownership dream”, with the so called ‘trend’ towards renting a “natural response to higher house prices.”
A younger generation are now being told the only way they can get into the market is by either tapping into mum and dad’s equity, or living in the family home longer and perhaps getting a foot through the door as an investor, rather than an owner-occupier.
All in all, so long as the profits keep rolling in, there is no incentive whatsoever to address these concerns. The powers that be can keep their ears covered, whilst singing loudly to any forthcoming pain which may be experienced by a future generation that 'no longer can'.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
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There will be no housing recovery until there is a construction recovery: Catherine Cashmore

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

Joel Robinson

Garden-led design drives buyer demand at Yarraville Green

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

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

The enormity of delivering a true skyscraper in Australia's new development market is often overlooked.

It has taken the best part of a decade since plans for Chevron One were first unveiled, but the 40-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 40-storey tower, which has just shy of 230 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]

Catherine Cashmore

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