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I read an interesting column this week penned by Madeleine Morris – a Melbourne based journalist and writer for the BBC.
The focus of her piece was our ‘lucky country' status and the inevitable costs that accompany that title’s privilege.
After starting her piece lamenting the inflated cost of limes – pointing out with an outlandish splutter that limes cost $2.25 each (in the UK they’re roughly $0.49c each) and consequently "storming out of the shop limeless" – I had to have some sympathy.
For every dollar of wealth we’ve gained as a nation, it’s been speedily called upon to pay for the rising costs of essentials such as food, water, electricity, and housing – all of which are stretching the limits of any supposed wage growth which for certain sectors of the community has been woefully inadequate.
Madeleine has been living in the UK for the past 12 years, so the recent price rises were more than a nasty shock.  When commenting on the insanity of paying over $2 for a single lime, the response from her father was as follows:
"Darling, look around. People here are rolling in money. We live in an unbelievably wealthy nation."
In case that statement caused you to splutter over your cup of coffee – wondering where your slice of the pie has disappeared to, it should have perhaps been framed a little better. The money we’re rolling in isn’t falling out of back pockets. In fact, an overwhelmingly large proportion of our national wealth – roughly 70% of it – is locked up in housing.
It’s certainly not a desirable situation. I’ve read more than enough property articles cutting and pasting ABS ‘wage growth’ graphs along with international comparisons – using them alongside housing inflation charts, with an abstract wave of the han, to brush away any concept that our residential real estate is overpriced.
Worse still are those which reference ‘property cycles’ without any qualifying data to show the ‘whys’ behind their research and the reason a future Australian profile may not be quite so sunny.
All stress the ‘underlying fundamentals’ of our market – supply, demand, population growth, so called ‘responsible’ lending practices, lower rates of interest, dual-income families – in an attempt to waylay any fears which may be induced by the oft-quoted property bears who commonly stress their case underneath lofty headlines of a ‘housing crash’.
However, it would be hard to protest that such large excesses of wealth, sitting in one comparably ‘illiquid’ asset class is favourable to a more balanced portfolio. Especially as the purchase of prime residential property in part of a self-managed super fund has outstripped growth of other SMSF investments by 50% over the previous four years and looks set to continue along this path.
Put simply, a larger proportion of Australians are relying on the increasing value of residential real estate to fund their retirement – hanging their hats on the old mantra that ‘property always goes up’ with little to qualify the data or paint the broader picture in real terms.
Furthermore, recent insecurities over prospected changes to current superannuation rules have encouraged a greater proportion to look towards an improving housing market as a relatively safe environment to park funds.
It’s all well and good whilst values are increasing, however thus far in Australia, those increases have been primarily inflated through careful – some would say intentional – market manipulation.
Decades of poor planning for population growth has ensured land values and the slowly reducing pool of established dwellings – favoured by most negatively geared and SMSF property investors as well as the vast majority of home buyers – inflate disproportionately under growing demand from the larger proportion of people who want to park themselves – and their investments – in our established capital city residential market.
A very real victim to come out of this is the construction industry. The overwhelming consensus amongst investors and home buyers – buoyed on through the heady experience of a decade’s worth of capital growth which has been arguably and “unsustainably” forged through periods during which it has outpaced the rate of inflation – is that 'established' is better than 'new.'
We're not effectively developing, planning or building infrastructure to lure demand away from this sector and it’s resulting in a construction industry that is dying on its foundations. Even with the recent ABS release of New Home Sales data, which saw a modest rise of 4% for houses and 4.9% for units over the month of January – it follows a long declining spiral in which the industry suffered its biggest job losses throughout the course of last year.
 
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Outside of the carrot-and-stick approach of FHO grants or artificially low interest rates, new property remains a hard sell and, consequently, we have an increasing number of buyers fighting for a decreasing pool of ‘established’ second-hand property.
We’re effectively sentencing large swathes of home buyers to the relative 'Aussie' equivalent prices of London and New York, principally because we’re not producing a large enough recourse of ‘new’ alternative options which have the essential elements to attract the attention of home buyers and consequently ease demand.
When land is released in fringe locations, prices are artificially inflated with needless taxes and development overlays.  Furthermore, a woeful lack of infrastructure to facilitate the new estates – which every ‘Joe’ on the street recognises is needed at the start of a project, not 20-plus years down the line if we’re to lure buyers outwards - leaves many developers struggling to offload stock to a dwindling market which 'booms and busts' on the back of cash grants and ‘would you like an extra bedroom with that’ special offers.
The other 'alternative' is 'tower blocks' which, as I point out <a href="https://www.propertyobserver.com.au/residential/why-high-rise-accommodation-will-not-solve-our-housing-shortage-catherine-cashmore/2013021059249?utm_source=po&amp;utm_medium=aida&amp;utm_campaign=observers" target="_blank">here</a>, are hardly suitable.
It should concern us all that construction lives in a state of relative stagnation – hobbling along despite the low-interest-rate environment – especially if we’re not going to start unravelling demand from established real estate sector and ease supply.
Building a portfolio of real estate investments and locking up wealth in property is all well and good for one generation – but not so good for the one following – unless we’re providing feasible alternatives.
Furthermore, a reducing pool of first home buyers entering the real estate market also isn’t so good for the mortgage-free 60-plus individuals looking to tap into their pool of equity and downsize.
Pyramids need the beavers at the bottom to keep the top pumped, and at the moment in our capital city established terrain, the beavers are coming from an increasing pool of investors which jolly along on the back of that unpredictable thing called consumer sentiment. I’d argue that it’s not the best foundation for a healthy real estate environment, which should ideally be built around the needs of its community.
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 – if the worst happens, relaxing rules on foreign investment and providing a boost of cash grants as we did during 2008 – is effective enough.
Needless to say, the best investment any economy can manipulate is to look after the newer generations who will face their own fight to build enough wealth for retirement. The last thing we should aim to do is burden them with an increasing cost of residential housing.  In this scenario, what one generation gains is a shot in the foot for a large proportion of those not inheriting the ‘goodies.’
As it is, there is a limit to the tax deduction you can claim against super, however there is no limit to the tax deduction you can claim against negative gearing. It has been the best policy imaginable for property investment – that is investment into the established real estate market – but a largely dysfunctional policy to buoy up the new home market or assist the needs of younger residential home buyers.
Ideally, home buyers should be the core focus of any real estate market as it’s home buyers who bring true investment into a country – buy a piece of land and the propensity to 'settle’ and contribute to the local community, environment, and neighbourhood culture, provide the foundation blocks often only ownership can inspire.
However, for the inner-city areas where most want to live, the biggest furphy going is that it’s not possible to cope with a population squeeze without building a host of ‘rising oracles’ in the order of 100 metres or more.
A movement entitled <a href="https://www.policyexchange.org.uk/images/publications/create%20streets.pdf" target="_blank">Create Streets</a> in the UK is one such report that has forged inroads into the case for low-rise accommodation – rightly claiming the exact same number of residents currently situated in the aging tower blocks can be accommodated in low-rise dwellings taking up no extra space.
Another such figure to take note of is Robert Dalziel, the London-based architect for Rational House. He has visited nine cities around the world, including Mexico City, Shanghai and Berlin, to examine how to make high-density living agreeable for a broad demographic of home buyers – with author Sheila Quershi, he’s detailed his findings in a book – commissioned and published the Royal Institute of British Architects: entitled <a href="https://www.propertyobserver.com.au/https://www.amazon.com/House-In-The-City-Architecture/dp/1859464521" target="_blank">A House in the City — Home Truths in Urban Architecture.</a>
I’d suggest the construction industry would improve two-fold if we placed the same level of intelligence and innovation in Australia’s future design. However, at present, there’s little hope because it’s far more 'profitable' to build apartment blocks or multi-story dwellings, aimed at investors and housed by student renters, than it is to increase the supply of new accommodation for our home-buying demographic.
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Home buyers should be the core focus of any real estate market: Catherine Cashmore

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I must have missed when price quotes became a state secret because – barring a few exceptions – they used to be listed on just about every property advertisement for sale.
Anyone in Victoria who has searched though one of the online real estate websites recently will understand what I’m talking about –and judging from Australia’s real estate obsession with property and wealth building it would no doubt be a fair few million.
Putting a price on a real estate, particularly with homes offered as private treaty, is not difficult.
Ideally, an assessment of the property is undertaken by the sales agent – one familiar with market sales in the immediate locality – and in conjunction with the vendor, a price is set that produces a happy balance between both vendor expectation and local comparable sales.
If interest is lagging in the two weeks following, the agent can negotiate with the vendor to reduce the range.
If sales enquiry is healthy – or an offer in excess of the range is achieved and subsequently rejected – the agent has the ability and ethical responsibility (in conjunction with their vendor) to change the quoted range to reflect the heightened level of interest.
For a proportion of agents acting within their “reasonable” duty of service, this still is the norm.
However, now it seems – in Melbourne at least – every second advertisement you click upon, whether auction or private treaty, has “contact agent” in bold letters underneath the subheading “price”.
An enquiry then produces a roundabout of guessing games with somewhat wishy-washy lines totted out, such as “it’s too early to tell”.
In other words, the agent is indicating he has no idea where to place his price quote, because Joe Blogs hasn’t yet walked through and in some occurrence of pure fiction (which I have yet to see with my own eyes) stopped to tell the agent exactly what he’s prepared to offer.
While we all agree in part that a market can only be valued on what a buyer is prepared to pay, this is precisely why sales agents appraise property against recent comparable market sales in the first place.
When combined with good local knowledge, a market appraisal will give the agent a very good indication of buyer demand – at least to the degree of being able to publish a negotiable price range that falls in line with vendor expectation at the outset.
I should pre-empt before going further that a proportion of agents I speak to will give me a realistic idea of vendor expectation upon enquiry – however, after years of complaints within the industry regarding those who still choose to lowball their price ranges or quote using a ‘+’ price that can mean anything from 5-30% – it seems the practice has now moved into the verbal domain, allowing a number of agencies to continue their lines of deceit with no fear of reprimand.
It’s time we valued the ethical side of our sales industry with a little more seriousness than pricing an auction on e-bay. The continual problem with different methods of quoting – or lack thereof – runs to the very base of mistrust most buyers have against the real estate industry as a whole - and it’s a brush that tars us all.
Furthermore, considering the current atmosphere, in which Victoria has been through roughly two years of minimal movement in actual house prices with the market barely shifting week to week (that is, unless you’re following the “daily house price index”, which seems to bump along, offering its own short-term interpretation of price growth). No agent can use the excuse that he’s been caught out by any dramatic shift in market movements or buyer sentiment. Most homes are selling at their comparable appraised value, and they have been doing so for an extended period of time.
It seems silly to point out the obvious, but no buyer likes to play guessing games when it comes to putting a price on an advertised listing – and neither should they have to. Everyone understands real estate is a negotiated asset, however, the verbal game playing that now surrounds the sales industry in Victoria is often laughable – ranging from “we don’t know yet” to “properties in the area are selling in the $400,000 and $500,000 range” – an insulting response at best.
 
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If we were operating in an ideal world, buyers would ignore price quotes altogether and do their own research to establish market value prior to spending hundreds on a pest and building inspections or solicitor fees chasing an unobtainable dream. However, closely comparable sales data is not readily available for buyers.
Computer-generated “estimates”, <a href="https://www.propertyobserver.com.au/industry-news/friday-feb-15-observer-why-you-should-not-rely-on-property-data-reports-patrick-bright/2013021459354" target="_blank">as Patrick Bright pointed out last week </a>– are, more often than not, hopelessly inaccurate.
Suburb reports are equally unhelpful, and while median data will give an indication of the dollars the majority market is spending, it’s no help when evaluating individual property prices.
In Victoria auctions often result in “undeclared” results, and private sales are just that – private. The street name will be listed, but the other relevant and essential data is missing.
Using a buyer advocate who has access to such information combined with the market knowledge to offer an educated opinion is one option – however, unless we’re going to place a rule of law that every single buyer should pay a few thousand for such a service, it’s reasonable to suggest buyers deserve a “hint” of vendor expectation by way of an accurate price quote before wasting time and money chasing a dream.
A handful of agencies dealing with the more volatile luxury end of the market, in which interest is discretionary, understandably choose to sell via expressions of interest. However, the decision to drop the quoted range all together from a large percentage of real estate advertisements seems, in a good number of cases, to have been employed as “self-protection” from accusations of “underquoting” – a feature of which results in the price published bearing no relation whatsoever to the vendor’s reserve.
Vendor expectation can often be inflated.  It’s made worst by the commission based competition that rages between real estate agents and their respective agencies – it unfortunately promotes the need to buy a listing or risk missing out to a competitor who promises more. There then follows a process called vendor education – where high expectations are hopefully modified.
In Victoria, if the vendor does not disclose the reserve on the documentation, quoting below the written estimate of market value on the authority is officially “underquoting”. With no reserve written, the written estimate does not necessarily need to reflect vendor expectation.
It may not be admitted as such, but when agents list a property it is common practice to encourage the vendor to withhold their reserve price. This enables a conservative estimate of value – as either a verbal or published quote range – to glean as much buyer enquiry as possible.
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 healthier bank accounts to step in at the end.
Without the lower budget bidders, auctions can pull up short without the usual frenzy that has in our boom eras of growth significantly contributed in pushing prices to unsustainable levels.
Needless to say, by the time the auction occurs any gaping hole between the quote and reserve can be waved off with the excuse that the vendor changed his mind – or ‘upped’ expectation.  Hence why it is so easy to get away with purposefully placing the price range below the level at which you know the vendor will sell – when the price range is verbal, it’s even easier to manipulate the figures.
To suggest that a vendor’s expectations fluctuate to such an extent as to not be represented in the price quote is highly questionable. Having worked as a sales agent in previous years, I can categorically say there was never a time where I didn’t know my vendor’s approximate reserve well enough in advance of the auction to place a reasonable quoted range on a listing from day one.
Furthermore, vendors are not without blame. Assuming the price quote is a estimate based on “recent comparable sales” and the vendor isn’t in the dark when it comes to the price quoted on his or her vendor-paid advertising campaign, why would he or she agree to list the property and quote at a level he or she would not be willing to sell in the first place?
In such instances, I would suggest this is a pretty good example of a lowball quoting – conservative at best, deceitful at worst.
This weekend I’ll be bidding on a property quoted at $430,000-$470,000. I already know from my own research of comparable data it will sell closer to $550,000 – I also know from my conversations with the agent, that over 160 groups have inspected the home and he now has “the low $500,000s covered”. The price quote has not changed throughout the campaign.
It’s time vendors took responsibility for their own paid advertising campaigns and ensured their reserves – or ranges in which they’re prepared to negotiate – are published at the outset. If minds are changed, quotes should be changed, but leaving such a large question mark for buyers who are increasingly growing frustrated at having their time, money, and energy wasted is damaging for all concerned.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
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When did agent price quotes become a state secret? Catherine Cashmore

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Investor activity has dominated the Australian property market over the last 12 months, which is no surprise; banks are “bidding” for buyers in a highly competitive market, reducing interest rates principally on fixed-term loans outside of the RBA’s cash rate cycle, and if the right property is sourced, current rental yields are also offering attractive returns.
However, first-home buyers have seen their savings eroded, and as the latest ABS finance data outlines, intermittent first-home buyer “cash injections” or the oft-quoted myth that rising yields are pushing greater numbers into the market are having scant effect. Saving a deposit and sourcing a suitably affordable property is no easy task.
It’s not being sensationalist to emphasise that despite all our statements regarding improved housing ‘affordability,’ and half-hearted attempts from both state and federal governments to inflate the market with incentives that fail to offer long-term solutions, the results for initial buyers are overwhelmingly clear and will consequently bear an effect on the future of both our real estate market and economy as a whole.
The latest figures from the ABS show the number of first-home buyer loans in December 2012 fell to 14.9%. It’s the fourth consecutive month that this segment of the market has been in decline.  Further information from RP Data’s latest media release indicates housing finance activity by first time buyers is 17% below the average figures recorded over the previous 11 years leading to 2012.
A further drop in variable rates currently being offered by a proportion of lenders may inspire a bit of latent activity – however they are all short-term fixes, and you have to wonder what effect will result when rates eventually rise – especially if wage growth doesn’t match pace.
According the RP Data’s calculation of annual price changes (which is based on six months of statistics) – house prices are already rising “faster than wages and disposable household income growth”. Any help first-home buyers get on the borrowing side they’ll inevitably lose on the other.
We’re losing a valuable demographic of property buyer, which will have a flow-on effect across the property chain as a whole. As the changes push through the generation gap, increasing numbers will retire while still factoring as short-term renters.
In lieu of first-home buyer participation, the predominant activity in the inner-city affordable sector of the apartment market is being fed by investors.
Certainly most off-the-plan and new unit developments are sidelined for this demographic (usually via offshore funding); however, investors also dominate the established apartment market, which would otherwise be favoured by first-home.
The percentage of investor-owned apartments in both Darwin and Brisbane falls close to 70% – and in the other capitals, it comes in between 60 and 70%.
As we’re all aware, property to some extent connects together like a flowchart. Supply is fed in from the bottom to allow those upgrading (and then downsizing) a ready market to sell into in order to make the move.
However, when investors predominantly negatively gear into the asset class most favoured by first-home buyers – which results in inflated property values – and the state government fails to come to the party with feasible affordable alternatives, our property wheel of upgrading and downsizing becomes somewhat stagnated.
Investors tend to hold property for extended periods of time in order to build equity – many choose to invest as part of their self-managed super funds and subsequently do not sell until retirement. Therefore the ready supply which would usually come from initial home buyers selling and upgrading inevitably starts to slow.
It’s clear from the 2011 census data that greater numbers of first-home buyers are being forced onto the rental ladder and subsequently getting stuck in the yoyo of rising yields and a lack of affordable inner-city options until they either meet someone with whom to combine wages or gain access to the “mum and dad” equity pot.
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 last 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).
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Considering the predominant home buying activity takes place within the ages of 22-44, it seems reasonable to assume that there’ll eventually be proportionally greater demand from those downsizing as we progress through these buyer type changes.
However, if the flow-on home buyer effect doesn’t follow through, the mismatch of household size comparable to property type will continue to stagnate our property buying and selling terrain and further tie down supply in the areas most want and need to reside – areas within easy commutable distance to city suburbs, jobs and essential amenities (schools, hospitals, doctors, public transport systems and so forth).
Our census data already demonstrates that most lone person households are tottering around in accommodation that’s far too big for their requirements. Building an abundance of one bedroom apartments won’t suffice – only 14% of the total single person households (of all ages) opt for one-bedroom units. We therefore need a wider diversity of options (something I’ll expand upon in another column).
If we were building homes that were viable for first home buyers to gain a foothold that would not only maintain consistent market demand in order to build equity for those wanting to upgrade after seven or so years, but also provide feasible accommodation for this demographic to settle for an adequate period of time – then having an investor-dominated inner-city terrain could perhaps be balanced somewhat so as not to affect the flow of our home buyer property chain.
However, as we all know, the new home options are either limited to outer-suburban estates lacking in infrastructure, which every Joe on the street recognises is an essential component needed at the start of each project if we’re to lure home buyers outwards, or alternatively, <a target="_blank" href="https://www.propertyobserver.com.au/residential/why-high-rise-accommodation-will-not-solve-our-housing-shortage-catherine-cashmore/2013021059249?utm_source=po&amp;utm_medium=aida&amp;utm_campaign=observers">inner-city high-rise ‘rabbit hutches</a>.
The lack of feasible and affordable new alternatives and the consequential property stagnation is all producing a ripple effect of unfortunate consequences.
The financial burden of fostering a rental nation in terms of tightening vacancy rates and competitive rising yields is obviously unwise in terms of our national wellbeing; however, there is no one golden answer to solving the home buyer property crisis.
A number options should be considered – including reserving a proportion of high-quality new inner-city accommodation for our home buyer demographic alone, reducing the heat in the investment sector by way of tightening negative gearing incentives on multiple purchases, and considering changes to stamp duty as outlined in the Henry Review.
One thing we should not do is ignore the problem, or try and solve it by way of easy inflationary credit.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
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Why investor activity is causing our property markets to stagnate

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When I first arrived in Australia from a relatively small town in the UK, the high-rise developments that were starting to dominate the inner-CBD skyline provoked a sense of excitement. The thought of residing in one evoked pictures of sweeping views, a kind of modern-day luxury “hotel” with a concierge and rooftop gym. I was still coming to terms with the local real estate landscape, and my concept of what created an ideal ‘home’ for an Australian buyer was biased in the extreme.
I had numerous preconceived ideas formed by my experience of the UK housing market – one of which was the difficulty in adapting to the thought of living in a weatherboard house. To my UK “cold climate” brain, living in a house made of wood was a concept that should have died out with the war. I now deal with a proportion of property buyers who will only consider a weatherboard dwelling – no doubt tying it in with their own concept of what makes a “home” – usually envisioning an attractive Californian bungalow or single-fronted Victorian.
My first ‘real’ experience of high-rise accommodation didn’t disappoint. It was the Royal Domain development in Melbourne – one of the upmarket dwellings close to the top floor, and I was granted a private inspection. The apartment itself was fairly ordinary – had I walked through at ground level and been given the asking price, I’d have baulked at the offer. The fittings and fixtures were lacking in quality for the buying demographic it aimed to attract – not that you would have noticed, the main attraction was the view. I joked to the agent at the time that should I live there, I wouldn’t bother with a TV – I’d buy a good pair of binoculars instead. It promised to be far better entertainment.
The million-dollar-plus price tag was one thing, the owners’ corporation fees another. Some $18,000 a year – clearly to be expected, considering the block size and additional onsite features – but despite the agent spruiking the development’s “investment potential” it didn’t require real estate experience to assess it was about as good an “investment” as a retirement home.
The apartment above sat vacant – it had been purchased by an offshore businessman from China who only occupied it for events such as the grand final or Melbourne’s spring racing carinval. The market for this particular type of property was discretionary at best, and anything but consistent.
I’ve written numerous columns addressing the inadequacies of our high-rise culture in addressing the need for affordable accommodation. The reason I do so today is in response to a debate I had with the ACTU’s <a target="_blank" href="https://mattcowgill.wordpress.com/2013/02/06/housing-policy-its-all-connected/">Matt Cowgill</a>, who took up the challenge to express the broadly shared logic that increasing supply per se is the answer to a growing demand for affordable, well-located, accommodation.
Matt used different priced potatoes to demonstrate his well established economic theory of ‘supply vs demand”.
“There are three types of potatoes: kipfler, desiree and regular. Kipflers are expensive and not that common, whereas regular potatoes are cheap and plentiful. Desirees are somewhere in the middle.
“What would happen if some kind of bug struck the supply of kipflers, halving it overnight?”
Matt pondered, and in doing so, demonstrated that potato lovers would turn their demand to the closest equivalent – whether it be settling for a ‘regular’ type or moving from a ‘kipfler’ potato consumer to a ‘desiree’ potato consumer.
Needless to say, Matt’s theory is that property markets are connected and therefore fulfilling the needs of the “affluent” will reduce competition at the lower end of our market arena, making sure supply is readily available for the intended price demographic. In this particular discussion, we were using the abundance of new tower blocks in Melbourne as the proposed property type.
The theory when used with potatoes is sound – if I were shopping in my local supermarket and a certain brand of vegetable I needed for my evening meal were unavailable, I would settle for the next best thing – whether higher or lower priced – and make do. If a good supply were available I might choose a more expensive brand, thereby leaving a greater supply of the ‘regular’ type for those shopping with a lower budget. My choices, if consistent enough and mirrored for a long enough period of time by a large enough demographic of consumers, would evidently bear an effect on the price – the assumption is more supply equates to lower demand and a lower price.
Why doesn’t the theory hold with our current CBD high-rise supply of property? And more importantly, why are a large proportion of our towers sitting empty, with vacancy rates in the region of 8% to 10 % (SQM) and rents that hardly offer “affordable” value when compared with the established terrain?
Let me offer my own analogy: If a devastating tornado hit my local neighbourhood and I found myself without a roof over head I would also ‘make do’ – however, that’s not the reality of our buying market. Most home buyers work devilishly hard to save an initial deposit and therefore expect to see their somewhat pre-conceived idea of value represented in their purchase.
Whether you think a property buyer’s demands are unrealistic or not is irrelevant – we’re talking about a consumer market, not desperate homeless individuals who are prepared to bid on any old thing just because it fits into their budget. Therefore, if additional property is going to fulfil the needs of home buyers (or, for that matter, renters – assuming renters are also looking for a ‘home’), it needs to be done with that intention initially.
I’ve since inspected numerous high-rise/high-density developments, both in the CBD and the inner-and middle-ring suburbs where new apartment blocks are commonly five stories or more. Some are impressive in design – however, the majority are a huge disappointment. The quality of construction often shows “cracks”, and has clearly been developed to a strict “squeeze as many in as possible” budget.
 
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The reason I’ve walked through so many is because I deal with clients from all ranges of the property buying spectrum – covering budgets of $300,000 to more than $3 million and spanning a broad range of individual buyer types. The overwhelming conclusion remains that this type of property was not built with the home buyer in mind, and due to the lack of diversity in supply, fails to attract many local investors, either – a point I’ll expand upon below.
A proportion of buyers come to me with high rise (and a view) solidly envisioned, however even if they have a discretionary budget to allow a purchase in one of the better-quality developments, once presented with the alternatives their finance will allow – such as a period terrace or townhouse – along with an assessment of the fees and drawbacks high-density apartment living necessitates, their initial preference pales in comparison.
Obviously, most local home buyers prefer houses to apartments – and for the high-rise price tag of a two-bedroom apartment, there’s far more bang for buck in established accommodation that doesn’t come with the additional risks of the view being built out, a queue to get out the car park during peak-hour traffic, the extortionate owners’ corporation fees and 150 immediate neighbours, the majority of whom are renters.
For lower-budget buyers, our older established apartments seem to have been built with the home buyer in mind and are therefore more attractive – usually offering larger floor plans in smaller block sizes. Therefore when home buyer apartment shopping does occur, this is the type of accommodation that’s generally preferenced. Home buyers can get better bang for their buck.
As for first-home buyers shopping with a budget in the $300,000s – let me quote from one such buyer who had a vision of her first home being in an inner-city high-rise or high-density development due to her desire to situate in the CBD.
“The latest trend in Melbourne is to build tiny New York-style apartments and then charge amazingly high prices for them. Most of the places advertised in or near the city for $350,000 or less are in student housing buildings and boast two small cupboards that might just accommodate a single bed each, and a slim hallway which doubles as a kitchen and living area... In this sub-$400,000 price range, a L-A-R-G-E two-bedroom apartment is considered to be 44.5 square metres, which would make an excellent studio apartment or a reasonable one-bedroom apartment.”
The author is now fully aware that $350,000 for the “new” (or even 10 year old) supply on offer is not value for money – yet a few suburbs out, in a different market all together, she can afford an established comparatively larger apartment with good proximity to shops and train station, with the substantial cash advantage of avoiding the high owner corporation fees that fund a swimming pool she’d have probably have been too busy to use. It just required a little guidance to open her eyes to established alternatives she is prepared to settle for.
If by chance she had found a high density ‘L-A-R-G-E’ apartment suited to her lifestyle, she may have come down with a bump when trying to acquire finance – it’s well known banks have strict lending criteria for first-home buyers trying to purchase small apartments in high-density accommodation. Each lender has its own restrictions relating to internal floor space, and most require a larger deposit to offset the risk.  Clearly the banks recognise high-density accommodation is not always easy to offload in a default situation.
Well, as I pointed out last week – individuals who can afford to invest in property are hardly leaving lower priced stock for the home buyers on a compromised budget. Because of our current negative gearing tax benefits – the best established property in our inner suburban market that does appeal to the first-home buyer demographic is a hotbed of investor demand, with over 90% opting to place their dollars in this sector. Investors understand, if they purchase properties home buyers also desire, the value of their property is likely to attract interest throughout all stages of the “property cycle” and therefore speculation is rife. First-home buyers are caught out at every inner-city hurdle – they face restrictions for new, and somewhat unequal ‘deepest pockets wins’ competition for established.
So who is benefiting from the abundance of new and proposed high-density developments? Well, the typical investor of new accommodation is the foreign demographic who face no restrictions when purchasing off the plan. In China – unlike Australia – older developments are poorly constructed and undesirable for home buyers; however the newer developments are highly.
Investors of these developments are seeking a good yield – however, a percentage of foreign investors also allow their property to sit vacant – once again it’s a cultural bias with the mindset of keeping the interior in ‘as-new’ condition for a future sale.
If someone can explain to me how building apartment blocks which are nether affordable or desirable for a large proportion of home buyers – and despite our tight rental market, contain a large proportion of units left to sit vacant – can bring down the cost of accommodation. I’d be the first marching the streets in favour of the plan.
As it is, it seems they were never built for home buyers in the first place. A couple of years ago when the boom of Melbourne’s’ high-rise construction kicked in, the City of Melbourne’s website described the new developments as being “relatively small one- and two-bedroom apartments largely targeted at the student market and owned by investors.” So has high-rise combated affordability for a diverse property shopping demographic? No – because it was never built with the intention of doing so.  Our property market is no longer about home buyers – it’s a money-making wheel, with every Tom Dick and Harry hoping to make a buck in the process.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
 
 
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Why high-rise accommodation will not solve our housing shortage

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It’s always interesting to see the outrage provoked in the real estate industry by housing affordability reports – whether they come from the Annual Demographica survey or publications in magazines such as The Economist that analyse the relationship between house prices and rental income.
If nothing else, it’s the opposite reaction to that provoked when median increases in capital city values are released. Such data is immediately celebrated, along with an inaccurate assumption that the increase has produced an equivalent dollar-by-dollar rise in individual house prices. There is rarely clarification as to what the figures actually mean.
The former publications somewhat agree with the suggestion that Australian housing is unsustainably overpriced – or to express it in more general terms, ‘unaffordable.’
Sensationalist headlines they may be, but no matter how exaggerated you perceive the claims, the crunch remains that we need as a community to provide housing for a growing population of low-income earners – and therefore affordability and supply are understandably red hot topics of concern.
In response, Australian property agents and economists dig out graphs along with various ABS and RBA statistics to prove that when compared with other “comparable” international markets we’re not so bad after-all – no bubble fear here!
“Australia is now broadly in line with other comparable countries, having risen relative to other countries since 1980 when it was at the lower end,” states the RBA in its latest study of house price to income ratios. And I’m sure many have grown tired of being lectured on the many viable reasons why we’ve seen prices and subsequently household debt increase. Reasons such as the inflation of dual-income households, ease of lending, lower borrowing rates, wage and population growth to name but a few.
These “comparable countries” include the UK, New Zealand, Denmark, the Netherlands, Canada etc. – and while it may be contextually useful to find some kind of affordability barometer on an international scale, I fail to see why it should result in the swept under the carpet conclusion that this makes our own levels of inner-suburban unaffordability somehow OK. This is a conclusion based in part on the principle that consistent demand from a dominant buyer demographic and a relatively stable job terrain mean we’re not in line for a ‘crash’ anytime soon.
Or – to put it another way – if the sky’s not falling in, forget sustainability, we can throw a few home buyer grants at the bottom end of the market as a temporary Band-Aid, waft a dismissive hand in the direction of some outer suburban nether land, and carry on ad infinitum with our ‘it’s all right Jack’, prop up the market housing policies.
 
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Furthermore, it’s hardly complementary to compare ourselves to international terrains that – having been through somewhat harder lessons than our own – are also battling to induce first-home buyers out from underneath their rental blankets. They may look similar – but shamefully so!
As readers will be all too aware, one of the major problems with which Australia has to grapple is our need to be centrally located in and around the major capital cities. For this reason, we’ve effectively sentenced large swathes of home buyers into the equivalently priced markets of London and Paris, and the comparison isn’t pretty.
In UK, for example, despite the relative ‘crash’ in countrywide prices, prime real estate in London has continued to outperform fuelled in large on the attraction it holds for foreign investors. There are no restrictions on foreign ownership in the UK, which has of course helped fuel an investor-induced ‘rush to market’ into what many perceive to be a ‘safe haven’ to buffer against other more volatile assets.
Over 50% of property acquisitions around the ‘average’ London house price are sold to overseas buyers – and while foreign investment is freely permissible, I have no doubt this will remain the case.
A similar occurrence has happened in New York. It too is deemed a relative ‘safe haven’ for investors – hence why we’re now seeing 35-square-metre apartments for sale to combat the ‘housing crisis’ in a country renowned for its love of big houses.
Singapore, Hong Kong, China and Canada are all suffering inflated property prices in urban centres, once again fuelled by the investment sector. Singapore, for instance, has imposed temporary limitations on the number of properties investors are permitted to acquire and moved to increase taxes on ‘speculative’ sales. However, the measures are deemed temporary and therefore hardly sustainable over the long term.
New Zealand faces similar issues – it’s now been suggested that by 2040, only approximately 30% of NZ households will be able to afford a house over $400,000. It’s a worrying statistic.
All in all, few will counter that first-home buyers in the all the above markets are living on Struggle Street, with the outcry from this sector coming in loud and clear through various media outlets and social forums. However, for an industry focused on profits, the first-home buyer sector isn’t all that important.
Oh yes, you’ll hear the arguments about the need for first-home buyers to provide a ‘leg up’ for the second-home buyer market – in other words, activity at the bottom of the ‘property tree’ aids the offshoots at the top.
However, growth isn’t waning at the bottom of our real estate tree – it’s by all respects flourishing! This is because established ‘affordable’ property in the most desired urban capital city estates is a ‘hotbed’ of investor demand.
Investors make up roughly 35% of the active buying market in Australia; however they are not doing much to aid the supply of affordable accommodation – 92% of them purchase into the established market, and is it any wonder? They’ve been buoyed on by a boom decade of median price growth, indicating 10%-plus per annum capital gains for this type of accommodation.
Neither are they soaking up ‘luxury’ properties – an investment trend in some of our ‘comparable country’ markets. Most local investors have their focus primarily on property most suited to the first-home buyer demographic – the low-maintenance, easy-to-rent ‘affordable’ inner-suburban apartment market with prices ranging from $300,000 upwards.
Australia-wide, 58% of apartments are owned by investors. Break this down to a state-by-state capital city level and the investor-owned percentage of inner-city apartments is closer to 70% and in some areas exceeds even this.
 
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Back in 2003 the RBA recognised the problem and advocated a moderation of demand in the property market amongst investors, by way of (prepare to take cover) tightening current negative gearing rules.
Figures from the ATO and RBA highlight the scale of demand – around 2 million Australians claim deductions for net rent, and around one-quarter of all household credit is there for the purpose of holding an investment property. Over 1.1 million investors are negatively geared, and growing numbers are taking advantage of changes in policy that allow investment property to be purchased as part of a self-managed super fund.  There is a whole sales industry built to cater solely for demand resulting from this sector.
Investors play an important role in all housing markets, they are needed and should be valued; however, at present, our models of investment – whether it is negative gearing, land banking or borrowing to purchase in a self-managed super fund – are solely reliant on capital growth and therefore demand is overwhelmingly concentrated on a reducing pool of established property. Hence why vacancy rates remain at historical lows.
Furthermore, don’t be fooled by the idea that any of the above assists in providing our rental sector with ‘affordable’ accommodation. Taxation benefits or interest rate drops are not passed across and we remain comparable in yield terms to our international counterparts that don’t facilitate such generous gearing rules.
If the intention is to increase the provision of affordable opportunities for the first-home buying sector, as well as increasing the vacancy rate for renters, we can only do so by increasing the supply of well-facilitated ‘quality’ real estate and reducing the ‘heat’ surrounding our city-based established real estate market.
Unfortunately, it can only be done through government policy, and seeing as we’re in an election year, the subject rightfully deserves attention.
In short, it makes no sense to encourage investment if it doesn’t achieve
<ol style="list-style-type: upper-alpha;">
<li>An improvement in housing affordability and supply;</li>
<li>An increase in vacancy rates;</li>
<li>A substantial boost to new housing and consequently infrastructure in ‘growth’ suburbs; and</li>
<li>Lower rents for the most venerable in our society</li>
</ol>
Current policy has failed to do this, are any of our politicians prepared to rock the boat and consider major reforms which could do so?
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
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Property investors are hurting the affordable property market, and negative gearing must be abolished

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So is Australia’s housing market “unaffordable” or not?
What we really lack in Australia is a realistic vision of how our housing market should appear. There are too many conflicting voices smothering the debate – from a myriad investors looking to profit from rising prices, hoping they’ll outpace inflation to enable retirement on a pot of ‘property gold’ to consumer organisations struggling to address the growing mountain of citizens requiring public housing or rental assistance.
Even with the peak-to-trough fall in house prices over recent years, with the median dropping nationally a little in excess of 6% coupled with an easing of lending rates to a little over their post-GFC record low, residential property prices in Australia still remain far too high for a large proportion of first-home buyers – the majority of whom don’t stand a chance unless they benefit from a deposit cash injection gifted by family or friends.
The  Annual Demographia Housing Affordability index, which generates the same media headlines year in year out, has once again highlighted what it claims is the “severely unaffordable” nature of our housing. However, last week its findings were disputed by APM senior economist <a target="_blank" href="https://www.propertyobserver.com.au/news/australian-housing-market-not-as-unaffordable-as-demographia-claims-andrew-wilson/2013012158795">Andrew Wilson</a>, who suggested because there were buyers ‘buying’ property, housing couldn’t be all that unaffordable, could it? After all, suggested Wilson, prices were rising in Sydney, banks were lending, and there has been “activity” in the marketplace of late.
As Wilson is well aware, the reason prices continue to rise in Sydney (and other metropolitan areas) can be directly attributed to decades of poor planning for population growth by both state and federal governments, which have ensured a majority of buyers remain well and truly hamstrung to the inner and middle suburbs of our capital city locations.
In this respect, Sydney is no different to New York and London – these cities are also on an upward trajectory due to shortages of affordable supply (despite the woeful economic climate both countries face).
To some extent this places a ‘floor’ underneath the cost of metropolitan housing in the highly sought-after areas of our capitals and hence, investors can still be fooled into thinking there’s no ‘ceiling’ to price inflation. Despite low consumer confidence and our new aversion to debt, the crystal ball predictions of annual 10%-plus rises in house values continue.
However, this does not mean our housing falls under the definition of “affordable”. Household debt to disposable income in Australia stands a little below 150% – high by historical standards and certainly not healthy. We’ve borrowed more in order to pay more.
As for any perceived “activity” in the marketplace – putting aside the woefully low transaction figures of late, which although stabilising, are at levels not seen since the late 1990s, and a construction sector that is struggling to recover from an 18-month low – it seems the remaining buyers  active in the market arena are investors and second-home buyers – because as far as first-home buyers are concerned, the latest home loan data from the ABS shows a significant fall in the sector nationally (down to 15.8% in November 2012 from the 18.7% high recorded in October). It couldn’t paint a clearer picture.
Outside of the “carrot and stick” approach of grants and incentives, which disproportionally spike housing costs and activity, thereby forgoing any perceived benefit while the grants remain in place – first-home buyers are not showing any great enthusiasm to buy into the Aussie dream. Notwithstanding, if you took a national survey, the majority would tell you in no uncertain terms and probably not quite so polity as expressed here, Australian real estate is both inflated and unaffordable.
Exaggerating the problem is the long-term trend, and overwhelming preference from this demographic when they do step in is for established dwellings over new.
This should come as no surprise – new houses are generally located in outer suburbia away from family, friends and any hint of an adequate supply of social amenities. High-rise dwellings are built on the mantra of “squeeze as many in as possible” and better resemble a rabbit hutch than an abode to call home.
Buyers who do move outwards tend to be families upsizing to larger four- and five-bedroom properties and therefore make the choice to compensate distance (and the cost of a commute) for an increase in accommodation. First-home buyers on the other hand would rather take a smaller property to purchase closer to the hub and bub of city amenities – thereby favouring apartments.
Herein lays a further problem. Banks don’t like lending to first-home buyers finance for high-rise dwellings – so any suggestion to build as many as possible to ease supply is of little benefit to this sector. Furthermore, construction (as I point out <a href="https://www.propertyobserver.com.au/developments/high-rise-accommodation-must-be-done-right-catherine-cashmore/2012111257776" target="_blank">here</a>) has often proven to be overwhelmingly poor, owners’ corporation fees high, and purchase prices simply do not represent value for money.
 
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On the other hand, established dwellings hint of an era when property was built with the home buyer in mind. Unlike new dwellings, which come with a “wow” premium on the initial price, older properties offer the potential to buy in at a lower cost and renovate. The floor plans in apartments are generally more spacious and the low-rise facade is in keeping with the predominant street aspect.
Living in a smaller block with an owners’ corporation of 12 occupiers is highly preferable to a high-rise monstrosity that contains 150 offshore investors who won’t be so actively motivated to pay future levies for long-term building improvements and general upkeep. It’s no wonder first-home buyers prefer the option.
Of course, local investors under our current system of negative gearing also prefer established over ‘new’ and therefore, considering our current terrain low fixed interest rates, and rising yields, it should come as no surprise that when a first-home buyer does come across an attractive property seemingly priced within their allocated budget, when faced with competition from an investor, the first-home buyer won’t be the one leaving the property with a signed contract in hand.
Research from RateCity suggests it takes an average single income wage earner on $70,000 per annum five years to save a deposit– with more than half of buyers in their 20s receiving help from family and friends.
Other analysis based on ABS borrowing figures places a single-income first-home buyer’s budget around the $300,000 mark.  To purchase something larger than a one-bedroom apartment at that price in Victoria, you need to head some 25 kilometres outside the city to areas such as Melton and Werribee – is it any wonder our ‘new’ buyer market is diminishing?
As for the Demographica study, comparing property markets across the world is difficult due to the way statistics are collated, with some markets substantially less transparent than others and each having its own unique demographic and structural requirements.
Australia and Hong Kong are both classed as ‘severely unaffordable’ – however I’d guess that you’ll find far more attractive living options in Australia for $350,000 than Hong Kong, where most are confined to an apartment in the sky.
The survey rates each selected country by dividing the median house price by the annual median pre-tax wage. This places Sydney’s ‘median multiple’ at 8.3 and Melbourne’s ‘median multiple’ at 7.5
I’m not a fan of the methodology – comparative ‘medians’ are a poor way to analyse effective cost.  However the result of the survey speaks volumes for a growing demographic of first-home buyers wanting more than a dead duck of a property in outer suburbia, or a boxed-sized room in the clouds.  As far as this demographic is concerned, Australia’s real estate – at least the options worth buying – is ‘severely unaffordable.’
It doesn’t have to be this way – there are many things both government and planning authorities can do to increase the supply of both affordable and quality accommodation. For example, if you dig down deeper into one of the previous International Housing Affordability surveys, there is an interesting picture painted comparing Sydney and Melbourne with Dallas-Fort Worth and Atlanta in America.
In 1981 both cities in the USA were a similar size to our biggest capitals with similar rates of projected population growth, however, unlike Melbourne and Sydney, authorities in Dallas and Atlanta ensured cheap land was made available on the outskirts of their cities and more importantly, Dallas and Atlanta expanded their train lines into the new suburbs as part of the plan.
Consequently, neither city suffered the same level of price inflation we’ve experienced in Melbourne and Sydney, and Dallas now boasts the largest light rail system in the United States, with further plans to expand into the outer-suburban locations as part of its 2030 plan.
But let’s face it. The property market in its current capacity has little interest in the ethics of providing shelter or affordable accommodation – it’s a money-making vehicle, and as long as someone out there is willing to pay in excess of a $500,000 for a modest one-bedroom apartment with the mindset that it will be worth a lot more when they sell – regardless of their means to fund the purchase – the debate over whether our market is ‘unaffordable’ will fall on deaf ears within both the property industry itself and the political domain.
As such, the addiction to ‘building wealth the property way’ will continue to the determent of increasing numbers of individuals who will struggle to rent, let alone buy.  Looks like we’ll need to hurl straight into the iceberg ahead in order to learn a ‘better way.’
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
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Australia's housing prices remain far too high for first-home buyers: Catherine Cashmore

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Australia has a growing generation of residents who can not only not afford to buy, but cannot afford to rent, either.  They’re the oft-forgotten ‘rental sector’ lost amid an abundance of market commentary devoted to the ‘good news’ on falling interest rates for mortgage holders, endless ‘forecasts’ of growth for potential property investors, and renovation mania that is set to hit the country once again  as we enter the year’s annual ratings war full of obsessive real estate reality shows.
Despite reports assuring buyers that housing affordability has improved and the persistent and poorly assessed claim that it’s cheaper to buy than rent in an increasing number of suburbs, (the methodology of which I argue against <a href="https://www.propertyobserver.com.au/residential/room-for-debate-is-it-really-cheaper-to-buy-than-rent-in-some-suburbs/2012110857623" target="_blank">here</a>), the percentage of people requiring rental accommodation is fast gaining pace, and for the past five years or so, yields have been rising at phenomenal rates – by and large outpacing both wage growth and inflation for the same period.
The insistence from various commentators that the steep rise in rental prices will push increasing numbers back into ownership fails to consider that inflated yields coupled with erosion of interest on long-term deposit accounts has all but cancelled out any perceived benefit for a large proportion of ‘would-be owners’. Consequently, they often have no choice but to lodge with family or friends as they transition through the various stages of job changes and property moves.
Currently, roughly 30% of Australia’s housing market is made up of renters.  The 2011 census data indicated median rises in rental prices rose sharply over the five-year interim, with Western Australia tipping the scales with an increase of 76% over the corresponding period.
The number of owner-occupiers has been slowly diminishing, and the proportion of renters priced out all together is increasing.
Australia’s owner-occupancy rate, which once sat at 71.4% in the mid to late 1990s, is now at 67%  and forms part of a slow decline in which families with children in particular seem to be suffering.  The decrease of ownership for this demographic has fallen from 79.5% (2006) to 77.2% in 2011 – and considering the low activity in the market of late, it’s fair to suggest the downward trend is set to continue.
Other reports presented late last year suggest that had ownership percentages stayed at the same level as that recorded in the 2006 census, we’d have welcomed  an additional 34,000 into the property market.  As it is, despite the 6.1% ‘peak to trough’ fall in the national median house price and flat prices in most capital city markets throughout 2012, sales turnover over the past two years has been woefully low – back at levels not seen since the late 1990s.
It’s easy to palm off the figures as a result of low consumer confidence, however as the latest Fitch ratings report  on residential mortgages pointed out, Australia is still the “least affordable housing” worldwide – and it’s nothing to be proud of.
 
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The trend is not localised. In the UK the owner-occupancy rate is at its lowest level  since 1988, with 64.7% of the population now classified as ‘owner-occupiers’ and the proportion of people renting rising from 31 to 36% over the preceding 10 years.  This is despite a recent British Social Studies Survey that indicates 86% of tenants (social included) still foster a strong desire to “own their own home.”
In light of its financial woes the US is of course no different – their owner-occupancy rate is at a 15-year low. with roughly 65% of the population now classified as owner-occupiers and a rental sector that is straining under the pressure of inflated yields and increased demand in capital city locations.
In fact, across all property markets that have historically boasted high owner-occupancy rates, the rise in the number of homeless people is strengthening as the vicious circle of trying to save for a deposit in a fiscal environment while servicing high rental prices keeps residents well and truly ‘stuck’ – often in accommodation that  is not adequately suited to their family’s needs.
A comment (one of many) from a would-be home buyer on Australians for Affordable Housing’s Facebook site last week summed it up perfectly:
“Well I can't afford to rent let alone buy (and the) stress ... is literally [a]ffecting my health”.
A closer look at exactly what it costs to rent a modest apartment within commutable proximity to our capital cities is truly eye-opening for anyone who may have been out of touch with the market of late.
In the most recent quarterly bulletin wrapping up the year for 2012, RP Data noted that Perth in particular is feeling the strain. with an increase in yields of 12.8% for houses and 10.6% for units, with vacancy rates as low as 1.6%. According to APM, this is an increase of $70 per week over the 12-month period, leading Premier Colin Barnett to single out rental prices as the “biggest cost-of-living pressure facing Western Australians.”
As was noted in another report, Darwin currently has only two rental properties listed on realestate.com.au for <a href="https://www.ntnews.com.au/article/2013/01/07/316453_realestate" target="_blank">under $300 per week –</a> one of which is a rusty old corrugated iron shack that would look more at home in a ‘shantytown.’  The median rent in Darwin is $600 per week.
Students in Queensland have described the market under $300 ‘war like’ and as for Melbourne and Sydney, and it all comes down to the standard of accommodation you want to call "home".
In Melbourne, if you’re halfway fussy – perhaps requiring good proximity to transport, a modest balcony, or internal floor space over 40 square metres, you’ll be hard pushed to get a one-bedroom apartment in original un-renovated condition under a minimum of $350 per week.  In Sydney, the equivalent will cost between $450 and $500 per week – which is hefty chunk for any average wage earner.
To give some idea of the condition of apartments currently for rent at the above prices, this is an interior snapshot of the kitchen in one such apartment I inspected last week in an inner suburb of Melbourne. I think it paints the picture perfectly.
<img alt="cashkitchen" height="320" width="240" src="/images/stories/2013/01/cashkitchen.png">
Students, singles and childless couples can often make do with less space to compensate for the luxury of being close to the city or walkable distance to both transport and shops.  However single mothers, low-wage families, retirees or disabled tenants understandably require something a little more substantial than a one-bedroom flat to adequately fulfil their basic needs.
As such, they’d be hard pushed to find anything suitable for less than $500 per week unless they move to the outskirts of the capital city.  And due to poor public transport facilities in many fringe locations, such a move simply isn’t feasible for a large majority of renters – though many are forced in that direction.
 
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Is it any wonder, reports of ‘crowded houses’ – with three or more families sharing accommodation – rose nationally by 64% to 48,499 in the last census? Furthermore, other data from the ABS shows from 2009-10, 42% of renter households received some form of housing assistance, once again emphasising the growing crisis in this sector of our marketplace.
Pressure on the rental market is unlikely to ease in the near to far future.  The ABS estimates almost two-thirds of ‘new residents from overseas’ are long-term property renters – this is compared with half new residents from ‘within Australia’ who now class themselves in the same bracket – which is a robust figure in itself.
Economic conditions such as wage growth, unemployment, consumer confidence and frequent changes of work placements all reduce the likelihood of a strong owner-occupier market over the next decade.  Current policy is built around the general assumption that renting is a ‘step’ on the road to ownership – however  it’s fair to suggest, unless the trend takes an about turn,  tomorrow’s generation will hold a growing percentage of residents for which renting is ‘for life’ and as such, we need to consider their welfare.
No one should be fooled into thinking private rental accommodation is affordable accommodation; residential investors are looking for strong yields and solid returns.  In a heated market, vendors will understandably go for as much rent as they can achieve (regardless of tax benefits and lower interest rates, which are rarely passed onto the tenant.)
The NRAS (National Rental Affordability Scheme), which was designed to go some way in bridging the ‘affordability gap’ for low income workers sitting on the rental ladder is also flawed in its design – a subject I’ll expand upon at a later date.  When the scheme was first initiated in 2010, the AHURI analysed the project to assess the overall impact in easing affordability. The findings revealed only 40 per cent of applicants using the accommodation had fallen below the 30 per cent ‘housing stress benchmark.
In the meantime, it’s vital we start to steer policy towards the creation of a fairer partnership between owner and renter.  This would include longer terms of tenancy, protection from exorbitant rent rises, enforcement of basic standards of accommodation (in both the private and public sector) throughout Australia, and a greater partnership between tenant and owner – which could even envisage the tenant taking on more responsibility for the basic maintenance of their ‘home’ in return for a secure rental plan ensuring a longer term of permanent tenancy (five to 10 years) for which rent does not outpace the growth of inflation.  Other models of assistance, including housing co-operatives, should also be assessed.
The benefit an investor can gain from a happy tenant should not be underestimated. Property – even when maintained through an experienced property manager – is not a hands-off experience.  Unlike a share certificate you can file away and forget about – the value of any residential property (whether letting or selling) derives from its lasting appeal as a ‘home.’  Ensuring there’s enough money left over from the initial acquisition for ongoing maintenance is vital – and a long-term happy tenant should never be undervalued.
There is much that needs to be done to assist the ownership of affordable accommodation; however, creating a stable market terrain for tenants is equally important and needs an overhaul of current policy if we’re to do so.
Without it, the number of people seeking government-assisted accommodation will escalate to greater proportions, and the untapped potential of a growing number of residents struggling to make ends meet will hamper advancement of the overall economy.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
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Growing generations of Australians squeezed out of even rental market by diminishing housing affordability: Catherine Cashmore

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Speculation has been rising in the housing industry since the RBA made its last 0.25-percentage-point cut to the cash rate, bringing the official figure to the post-GFC 2009 "emergency" level of 3%.  Now with rumours the banks may move outside of the central bank’s cycle and make ‘self-initiated’ rate cuts of their own, industry professionals are declaring a better year ahead for property prices than experienced over the previous two – and thus we start the crystal ball gazing.
However, as has been broadly noted, the standard variable mortgage rate remains some 0.6 to 0.8 percentage points above that of 2009, when it was sitting at 5.55% and prices were rising sharply.  Additionally, the strong Aussie dollar is still affecting our terms of trade, and although unemployment data has improved of late (falling to 5.2% in November 2012 from 5.4% in October – although this week's figures may reverse the trend), Victoria’s results aren’t so positive.
In Victoria, a series of job cuts announced by building products maker Boral, which shed 90 positions in its plant near Geelong a number of weeks ago, most recently BlueScope Steel, which announced a further cut of  170 jobs from its Western Port facility in Hastings, and additionally from major companies such as Qantas, which announced the loss of 263 positions from its Avalon base late last year, increased Victoria’s jobless rate to 5.5% from a previous 5.4% – a figure that will go some way in restraining any potential house market gains in this region throughout 2013.
Additionally, Australia-wide economists are warning of ‘softer conditions’ for the rest of the year, which could potentially push the national unemployment rate to 5.7% by December 2013 with the most alarming reports showing <a href="https://www.theage.com.au/data-point/job-losses-retraining-snags-blamed-as-those-at-peak-claim-allowances-20130102-2c5nd" target="_blank">“those aged 25 to 34 and 35 to 44”</a> are the two biggest groups currently receiving Newstart payments – a point of serious concern.
Taking this into account, along with the consideration it’s an election year, which never inspires market gains, I suspect there’ll be little change to our current environment of ‘debt-adverse’ investor sentiment for much of the year – and along with that,  little change in house prices.
In fact, regardless of the constant spruik on the effect of low interest rates on house market prices that is broadly assumed by  many armchair commentators within the property industry, a look at the long-term data shows the connection is in fact pretty weak – a point that has been noted in several academic papers and can be clearly assessed from previous boom and bust cycles (something I may delve into further in a future column).
In other words, you would be hard pushed to find any long-term historical correlation between growth in ‘nominal’ house prices and the change in interest rates – and as for ‘real’ house prices (which accounts for inflation) movements tend to be in the ‘same’ direction rather than the opposing direction as some would expect – meaning as rates, rise so do prices.
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 housing market terrain by any significant degree.
When interest rates are low and more significantly falling, it stands to reason, expected growth in the economy is waning, which doesn’t inspire anyone to take a punt on growth assets considering the low inflationary environment.
Conversely, interest rates rise in response to a ‘flourishing’ economy during which a period of wage growth and healthy employment data underpins investor confidence (hence why periods of rate rises often accompany housing price rises.)
In such an atmosphere, it’s often the panic invested ‘rush to buy’ before prices escalate out of reach, that fuels a boom cycle outside of any change to the cash rate – thereby providing the bullish atmosphere many buyers unfortunately require in order make their move.
As a typical reaction, it takes a series of sharp upward movements in the cash rate in an attempt to defuse the bubble before it overheats – (as was witnessed in 2009-10) –  and even then, prices typically plateau for a period before other factors come into play and a notable ‘correction’ is observed.
 
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Currently, regardless of falling rates, other economic data provides little promise of broad-based asset growth (setting aside the obvious disclaimer that certain micro markets are likely to buck the trend). Therefore, understandably, many investors are looking elsewhere for profit, and the competition needed to initiate property prices is simply not prevalent without further economic changes (which are not at this stage anywhere on the horizon.)
Furthermore – as was seen throughout the year, despite buyer activity remaining woefully low, home owners unwilling or unable to sell their properties tend to withdraw from the market rather than drop prices further, preferring to wait for better times ahead than respond to market demands.  This could be another reason the change in house prices this year has been lower than last leading many to assume we’ve reached six on the property clock – (a position I suspect we will retail for a while yet).
There are however always winners, and in the current atmosphere it’s obviously the mortgage holders.  In Victoria October was the fourth consecutive month and longest period to date during which more mortgages were discharged than lodged as vendors took advantage of competitive lending rates to reduce their debt.  This brings the annual decrease of mortgages to 1,998, which when compared to 2011, is an increase of 726 discharges.
The results are mirrored elsewhere, with national data showing the preference among consumers remains firmly in the ‘safety zone’ of paying down debt and saving – a seemingly sensible environment that has thus far upset the RBA, which is all but counting on property investment to take up any slack from a post-peak downturn in mining – not to mention the government, with a 2013 surplus well and truly off the agenda.
As Glenn Stevens noted in an interview published in a recent edition of the Australian Financial Review ,it’s “most surprising” that the property sector has thus far not reacted (to lower rates) as expected.
Is it really? Surely it should be clear as daylight considering the other market indicators shadowing Australia’s investors – and even with further cuts to interest rates broadly assumed by the majority of economists, the level of uncertainly regarding the performance of the housing market continues.
Forecasts for the year ranging from 3 to 5% by Australian Property Monitors,  4 to 5% by AMP Capital, a more bullish 6% and 8% for Sydney and Brisbane respectively from BIS Shrapnel (which emphasises the changes will “jump” following the federal election – as if property purchasers are all going to suddenly let their hair down in and end of year buying spree).
And a remarkably ‘bullish” prediction of 10% (!) from <a href="https://gulfnews.com/business/property/international/australia-home-prices-seen-rising-10-on-rate-cuts-1.1128423" target="_blank">Janu Chan</a>, a Sydney-based economist at St George Bank – who I suspect may have purchased his crystal ball at a discounted price – and most notably Stephen Koukoula,s who bases his assumption on an additional ingredient  “that house prices in the first 10 days of 2013 have already risen by 0.6%”.
(I argue against the foolishness of relying on a “daily house price index” to reliably predict ongoing trends here)
The weeks leading up to Christmas are generally the busiest of the year in the property market.  Yuletide provides a natural deadline for home buyers desperate to make their move prior to the January break (during which the real estate industry and various offshoots take their annual breather).
Post-Christmas, most are still recovering from too much food, drink and weighty credit card debt to pay the property market much attention – a figure usually reflected in the first quarterly results, which on the face of it typically show weakening conditions.
Speculation that growth in the economy will fall to 2.5% during the year ahead – well below the usual trend of 3-3.25% – is why many are ‘assuming’ a further 25- to 50-basis-point drop is needed if we’re to stimulate the ‘non-mining sectors’ of our economy into a positive environment.
Should this occur and the banks ‘pay it forward’, it will take lending rates low enough to provide a greater incentive for potential property investors to make their move (especially considering long-term deposit accounts will no longer  provide a viable alternative option.) I’d advise any property buyer to err on the side of caution and keep a long-sighted view on the term of any investment they venture into.
As has been noted, it’s an election year, and it can’t be denied that property and politics have close ties. Changes to policy such as inflationary grants and tax incentives, for example, are the best weapons against the housing market, do bear influence on market prices.
Of course, in any market there are always losers – and in this market, it’s without doubt the oft-ignored renters who face erosion to their savings, rising yields, and a market that isn’t providing enough suitable and affordable accommodation in which to secure long-term tenancy. This is an issue I’ll address in my next column.
For the time being I’d take any crystal ball prediction with a pinch of salt – there are quite simply far too many resounding uncertainties looming ahead to make any assumptions.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
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Interest rates do little to influence Australian property prices

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The internet’s done some wonderful things for us. Google is now the brain of the universe – any question can be plugged in and answered (albeit with a hefty disclaimer along the lines of ‘react at your own risk’). However, it’s also fragmented the time we take to digest information that, in a pre-internet age, caused many to devour a newspaper cover to cover on a Sunday afternoon and come out feeling at least partially educated.
Now some of our most important markets are analysed by a myriad voices all desperate to be the first to break the news via a Twitter link or a hastily written column under a flashy headline, which –when coupled with the pressure to publish at breakneck speed and grab the top Google ranking – can be both misleading and conflicting in the information provided.
In addition, the frequency at which data and statistics are produced from a range of different providers evokes microscopic media analysis, which can prevent any sensible overview until there’s enough distance to look back and take stock – a situation that doesn’t usually evolve until the end of either the financial or calendar year.
As a case in point, RP Data’s daily house price index is ideal fodder for trigger-happy attention grabbers, and often has me humming that old classic Those Magnificent Men in their Flying Machines with the lyrics “Up, down, flying around, looping the loop and defying the ground”  – Because if ever there were a roller coaster of irresistible headline capturing sensationalism, the fuel for it could be found in the “daily house price index” – for which media releases hit my inbox both weekly and monthly.
In any one week, property prices can be up, down, or flat depending on which way you look – north, south-east or west, and in some cases, which day of the week you choose to concentrate on.
As a case in point, early in the year, Melbourne readers had been informed that the market was in a state of permanent demise, with <a target="_blank" href="/news">“values in Melbourne declining fairly quickly”</a>and no hope of recovery on the horizon for the remainder of 2012.
By March, however, the daily house price index had been ‘formally’ released and relief was only moments away.
In any one week, property prices can be up, down, or flat depending on which way you look – north, south-east or west, and in some cases, which day of the week you choose to concentrate on.
As a case in point, early in the year, Melbourne readers had been informed that the market was in a state of permanent demise, with <a href="/news">“values in Melbourne declining fairly quickly”</a>and no hope of recovery on the horizon for the remainder of 2012.
By March, however, the daily house price index had been ‘formally’ released and relief was only moments away.
June’s data showed Melbourne’s housing market was up a whole 1%!  And after a period during which we nourished ourselves on housing collapse headlines, arrayed with pictures of downward pointing arrows and “more bleak times ahead” news reports, RP Data’s figures provided a welcome ray of sunlight compounded with media reports of housing market recovery!
According to RP Data “After reaching a trough on the 11 June” (note: not the 10th OR the 12th for that matter), “Melbourne dwelling values have now recovered by an impressive 1.7%.” All was not lost, and the media reflected as such.
July’s daily house price index informed that rises were “not as broad-based” as the June results.  However, in Melbourne, excitement prevailed when vendors were informed values had risen a booming 1.4% over the four weeks to July 31.  <a target="_blank" href="https://www.propertyobserver.com.au/news/melbourne-leads-housing-market-up-06-in-july-consolidating-june-gains-with-sydney-also-strong-rp-data-rismark/2012080155807">“Melbourne was the strongest-performing capital city housing market over July</a>.” It really seemed too good to be true.
And then came August. August flagged concerns because values had flat lined with only a 0.2% rise for the month.  Could rises be sustained, asked R P Data’s Tim Lawless – we all waited in anticipation as the “daily” results continued to filter through.
But along came September with a reassuring stomp!  A 1.4% increase in September had Melbourne once again rising from the ashes like a glorious phoenix of hope, especially when Lawless informed that values in our most “livable capital” had recorded a 4% surge since the month of May, “which is the largest recovery so far across all the capital cities.”  Hooray!
Any hope of celebrating through to Christmas was put to bed in October, during which the index recorded a relatively huge whack in the form of a 1.1% drop, which was followed in November by a second 1% drop, and Melburnians were informed that their city was the “only capital market” to suffer a slide on the national barometer.
The headlines once again went to town with their downward-pointing arrows, however the data confirmed what most of us in the housing industry knew already (even if we weren’t going to admit it in front of a Saturday afternoon auction crowd) that house prices – in Melbourne at least –really haven’t moved from woe to go.
Despite minuscule changes in the median data, in reality, they’ve been flat as a pancake for the entire year.  Hopefully it won’t come as a shock to any imagining house prices have been changing, that when analysing data to provide a market appraisal of any said listing, my eyes will filter as far back as June if necessary for a comparable sale – despite the somewhat bumpy daily index road of media sensationalism.
Along with the seemingly relative inadequacy of the daily house price index in assessing forthcoming trends, RP Data also released a long list of suburbs earlier in the year for which it was supposedly cheaper to buy than rent.  The inaccuracy of the report was easy to see through – as I pointed out <a target="_blank" href="https://www.propertyobserver.com.au/residential/room-for-debate-is-it-really-cheaper-to-buy-than-rent-in-some-suburbs/2012110857623">here</a> – however it didn’t stop the media going to town with little time to assess the reality behind the analysis.
Even without any on-the-ground assessment, if it were really cheaper to buy than rent, we wouldn’t have rising numbers sitting on public housing lists or seeking rental assistance (as all welfare agencies will readily attest,) first-home buyer numbers falling, household sizes increasing, and young people “choosing” to stay in the family home well into their 30s.
 
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It’s as hard – if not harder – to find affordable accommodation in locations most need to live (close to work hubs and transport) particularly for single income units - and figures from the latest census data stack up as such, with the largest jump in the number of individuals sharing accommodation.
Furthermore, although housing affordability has show some improvement, rising rental prices and erosion to the interest rates for long-term deposit accounts all but cancel out the benefit.
And while Wayne Swan is once again reaching to pat himself on the back for keeping rates “lower than the last government” –Joe Hockey is doing the media rounds to tell us how awful Australia’s economy is performing, obviously hoping the news will help Julia Gillard fall on her sword when the long-promised stimulus fails to eventuate (at least without serious fiddling of the books.)  All I can say is it’s a good job Kate Middleton is pregnant – or from where would our good news come?!
It’s commonly stated that the RBA takes careful note of RP Data’s daily house price index, and from the following media releases, I’d asses the RBA is just as confused as the rest of us as to whether housing prices are improving or not.
Following this year’s first interest rate cut in May, the media release from the RBA read:
“Housing prices have shown some signs of stabilising recently,” which was a verbatim repeat of April’s statement.
In June it was noted:
“Housing prices had shown some signs of stabilising around the turn of the year, but have recently declined again.”
In July it was noted:
“The housing market remains subdued.”
But by August:
“Dwelling prices have firmed a little...”
The same ‘firming’ statement was repeated in September’s media however by October dwelling prices were once again
“Subdued.”
November seemed more positive, as the RPA reported:
“the housing market has strengthened”
And most recently following December’s cut of 0.25 percentage points governor Glenn Stevens noted that:
“there are indications of a prospective improvement in dwelling investment.”
However, throwing forward-thinking terms such as “prospective improvement” and other wishy-washy statements such as those noted above are no reassurance from the experts – with the best and most reliable data at hand – that the market is either “subdued” or “firming.”
In fact the RBA seem no better informed than the rest of us on such matters – jumping on each tiny notion of movement, which may (or may not) hint of a forthcoming ‘trend.’
The pick-up in housing as we approach the end of the year is – in part – a seasonal expectation.  As December nears its end, there is always a last-minute rush of buyers as they try to tie up deals before the real estate world takes its annual Christmas breather.
Post-Christmas most are recovering from too much champagne, turkey and weighty credit card debt to pay the property market much attention, with one exception – investors.
As the latest ABS data attests, the erosion of interest rates on long-term credit accounts is clearly luring this demographic back into what they probably assess to be their best long-term bet among a range of low-performing sectors.
Speculation that growth in the economy will fall to 2.5% during the year ahead – well below the usual trend of 3-3.25% – is why many are assuming a further 25- to 50-basis-point drop in the cash rate is needed if we’re to stimulate the ‘non-mining sectors’ of our economy.
Should this occur, and the banks pay it forward, it will take lending rates low enough to provide a greater incentive for potential property shoppers to make their move.
However, consumer sentiment plays a far stronger hand in dictating future movements in our economy – and this is one area of influence even the best crystal ball readers fail to either predict or dictate.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
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Melbourne house prices have been flat as a pancake all year: Catherine Cashmore

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Two articles that caught my attention last week were <a href="https://m.smh.com.au/victoria/warnings-as-outer-suburbs-property-market-teeters-20121128-2aefh" target="_blank">Chris Vedelago’s</a> excellent piece on Melbourne’s outer-suburban estates where buyers who previously committed to a house-and-land purchase using a “holding deposit” of some $500 to $1,000 (or in some cases 5%) were cutting their loses and cancelling projects following an inability to gain finance as a result of the post-boom slump – an inevitable consequence of short-term first-home buyer grants and incentives.
The other was Roz Hansen’s excellent speech – originally delivered at The Sambell Oration to the <a target="_blank" href="https://www.bsl.org.au/">Brotherhood of St Laurence</a> ” entitled “A Tale of Two Melbournes? The Disparities of Place and How to Bridge The Divide” and <a href="https://www.propertyobserver.com.au/victoria/melbourne-must-plan-for-its-future-growth-of-outer-suburbs-or-social-economic-and-environmental-problems-will-escalate-roz-hansen/2012112858154" target="_blank">printed in Property Observer last week.</a>
Vedelago’s article pointed out the harsh consequence an inevitable rush to market induces when foolhardy first-home buyer grants are introduced and subsequently scrapped in an attempt to boost new home sales.
According to the report (in which the research was derived from the “specialised urban research organisation” Research4), developers have had nearly 1,800 lots returned this year as plans to build new homes were scrapped.
Other data from Research4 indicates that a drop in Melbourne’s land sales accounted for an 83% overall fall in the national number of land transactions from the peak of the second quarter 2010 to first quarter of 2012.
On the face of it, the data is shocking, however it’s not surprising. The 2009-10 boom in land sales was driven wholly by a rollerball of acquisitions induced principally by first-home owners taking advantage of increased state grants and the additional federal first-home owner boost –not to mention the low interest rate environment.
The effect subsequently inflated Melton’s population by some 7,535 new residents and increased the median lot price by a lofty 60%, which, according to ‘Research4’, made it the “fifth most expensive land market out of 33 submarkets across Australia”.
The foolhardy nature of inducing so many residents to move into a sparsely facilitated suburbs, lacking in essential infrastructure – and subsequently abandoning them in “never never land” as grants are scrapped, causing land prices to fall sharply, seems to be of no consequence to state governments, which are busy introducing yet another round of incentives to stimulate (prop up) the construction industry in outer suburbia.
Hansen voiced thoughts I have shared in many of my columns for Property Observer – principally the poor planning and failed “infrastructure” promises that equate to municipalities where residents are more likely to suffer health issues such as eating disorders and depression accumulating from inadequately integrated and facilitated communities.
As I have previously mentioned, unless we address the core issues behind our new greenfield estates, recent history will keep repeating itself and the outer suburbs will (for want of a better word) become the relative ‘ghettos’  of Melbourne town.
It would be far more sensible to build up already facilitated satellite towns such as Geelong and Ballarat in Victoria as an example, and continue to extend our train and public transport amenities, than create new suburbs of sprawling Mc Mansions where the trade-off of a bigger house is of little consequence once you step outside the front door.
 
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Perhaps Australia wasn’t hit hard enough by the GFC to learn valuable lessons in community innovation and sustainability?  Instead governments seem to concentrate their efforts on how to continually prod and poke the housing market under the misguided hope a jump in construction and resurgence of pre-GFC booms are the economic drivers that could rescue state and federal balance sheets as we enter 2013.
The HIA (which understandably are not unbiased in its commentary) on the one hand screams how ‘affordable’ housing is, with its ‘housing affordability index’ showing levels are back to the early 2000s.  And yet, at the same time the HIA informs us that “The RBA must cut interest rates to bolster the chances of a housing recovery in 2013.”
What the HIA fails to address is how home owners will survive when rates finally rise and the incentives that the industry advocates ad infinitum are once again withdrawn.
First-home owner’s grants and low interest rates are of no long-term help to a failing construction industry.  All they do is provoke an endless series of relatively short-term boom and bust cycles – hurting construction workers and home buyers over the long term and providing a great example of Einstein’s beautiful definition of Insanity – “doing the same thing over and over again and expecting different results“.
Hansen mentions that landlocked residents need to turn to “buses, walking and cycling”.  However, in a  recent study prepared by” Adelaide thinkers in residence”, it was noted that in the absence of train lines,  “when driving is the only option for travel – then walking and biking are abandoned”. In other words, they are not preferred modes of transport for our 21st-century generation outside of recreational activities.
For outer suburbia, we need train lines – firstly because people need a fast way of commuting to existing workplaces and inner-city amenities, and secondly, because factories and additional jobs will not “up sticks” and move outwards if the only option they have to recruit staff is in a local neighbourhood of falling land sales and poor infrastructure facilities.
Research4 also made comment that “Melbourne’s first-home buyers could soon be priced out of the new homes market unless the state government returns a $13,000 grant scrapped in June”.
It bases its research on the stark reality that outside of an incentive-fuelled environment,  in which buyers have an uninfluenced period of time to think about their purchase, a large majority  opt not to buy in outer suburbia for profoundly obvious reasons.  Reasons that must be addressed before a construction boom can adequately address both housing affordability and population growth.
 
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Melbourne’s market in particular is a concern because an unprecedented decade of growth has led to a housing market that is clearly overpriced for a growing minority of buyers. Even an uplift in transaction levels as we finish the year with a Christmas rush of bumper auction activity hasn’t spurred values with RP Data recording a 1% fall in dwelling medians for the month of November and a 2.5% drop for the year to date.
A lack of first-home buyer activity has been noted by a number of players.  In a recent article that recognised “the lower interest rates are not causing [first-home buyers] to rush into new dwellings,” Meriton’s Harry Triguboff commented that the Reserve Bank would need to drop rates more than a “quarter or even half a per cent” to boost spending.
Obviously Triguboff is looking for a quick solution best served to his own interests – principally boosting sales of his high-rise developments.
However, issues of affordability can only be addressed by rectifying the disparities in the type of accommodation available for the first-home buyer demographic and ensuring it is “foot through the door” affordable.
Currently the only choices on offer are either a) out of price reach - especially for single-wage purchasers, b) not in a location that provides a viable trade-off between the cost of commuting and purchasing, or c) in accommodation that first-home buyers are prevented from purchasing due to restrictions from various lending institutions.
As a case in point, back in 2011 when Melbourne’s Fishermans Bend (”Australia’s first inner-city growth corridor”) was mooted, Planning Minister Matthew Guy stressed the project would focus on affordable housing.   However, he was either misleading the public or ignorant of the core drivers that boost buyer activity, because as a number of commentators and planners pointed out at the time, in order for the suburb to work  and not become another Docklands, there would need to be a mix of low-density housing well suited families and first-home buyers .
However, it’s now revealed Melbourne’s new CBD zoning has all but ensured the area will be dominated by high-rise developments fitted out to appeal to the predominant market for high-rise accommodation – principally Asian investors, who (when compared with Aussie home buyers) have cash to burn, value high-spec accommodation and are certainly not in the market to offer rental rates for less than premium returns.
Hansen ends her speech stressing that she is ‘optimistic’ about the fate of Melbourne, although she hopes futures aspirations will not be ‘business as usual’ - however, I am less optimistic.  Successful long-term planning policies require a fundamental change in the way both town planners and ministers think about housing.  In essence this means looking up from the budget books and enforcing a much stronger collaboration between both state and local community.
However, if the scheduled council meetings and calls for public opinion are then followed by the same old course of action regardless of local opinion, 20 years down the line and Einstein’s theory of insanity will once again reach fulfilment.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
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Building more outer Melbourne suburbs without infrastructure a foolhardy move

<a href="https://www.apartments.com.au/developments/broadbeach-qld-4218">Broadbeach</a> offers plenty of reasons to live vertically, but moving from a substantial family home into an apartment can expose the compromises of high-density living. Privacy, room for guests and usable living space tend to matter more when an apartment is intended as a permanent home rather than an occasional coastal base.

A typical residential floor at <a href="https://www.apartments.com.au/new-apartments/the-eveleigh-broadbeach-7-9-surf-parade-broadbeach-qld-4218">The Eveleigh</a>, on Surf Parade,&nbsp;contains just four apartments. The 94-residence development by <a href="https://www.apartments.com.au/developers/hirsch-faigen">Hirsch &amp; Faigen</a> is predominantly made up of expansive three-bedroom homes, with a limited collection of half-floor penthouses above.

Across the apartment floors, <a href="https://www.apartments.com.au/architects/rothelowman">Rothelowman</a> has used the relatively limited number of residences to give each home greater access to natural light and outlook. Living spaces extend towards full-height glazing, while a series of bay windows frame selected views across the Pacific Ocean, city and hinterland rather than treating the building edge as a continuous wall of glass.

&nbsp;

[smartcode_project:default project_id=149670 project_image_fid=360965]

“The apartment floors deliver a collection of homes that embrace controlled outlook via a series of bay windows deliberately framing moments of view,” Rothelowman Director Kim Lowman said.

From outside, those projecting forms contribute to the tower’s faceted profile. Strong horizontal and vertical elements establish its proportions, while the changing position of the sun alters the light, shadow and reflection across the façade throughout the day.

The same attention moves inside the apartments, where the material palette combines warm timber, natural stone, metallic detailing and softer curved forms. Kitchens sit within the main living zone, with stone island benches, integrated joinery and European appliances, before the living areas extend towards the glazing and the outlook.

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[smartcode_project:default project_id=149670 project_image_fid=360981]

Three genuine bedrooms provide room to accommodate family and guests, while two secure car spaces and storage address some of the practical considerations that can become more noticeable when moving from a larger home. Feedback from the display suite has centred on the warmth and restraint of the interiors, with buyers commenting that the residences feel like homes rather than conventional coastal apartments.

A limited collection of half-floor penthouses occupies the upper levels, increasing the scale of the living spaces and adding private balconies and elevated finishes. From this position, the outlook extends between the ocean and hinterland.

Outside the private residences, The Eveleigh separates its shared spaces between the podium and rooftop. The podium is centred on wellness, with subtropical landscaping surrounding a swimming pool and pool terrace, yoga garden, private gymnasium, sauna and hot and cold plunge facilities. Landscaped retreats and pavilions provide additional places to sit away from the main recreation areas.

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[smartcode_project:default project_id=149670 project_image_fid=360966]

Higher in the building, a rooftop pavilion and private dining suite sit alongside resident lounge, barbecue and outdoor dining areas, opening towards panoramic views across the ocean, city and hinterland.

“Buyers are no longer just looking for an apartment, but a lifestyle where they can relax, reset, and enjoy a balanced way of living,” Hirsch &amp; Faigen Director of Sales Matt George said.

Interest to date has come from established owner-occupiers and interstate lifestyle purchasers, including buyers planning a future move to the Gold Coast. Many are coming from larger homes and want to reduce ongoing maintenance without giving up space for family and guests, privacy, two car spaces or the ability to entertain at home.

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[smartcode_project:default project_id=149670 project_image_fid=360969]

Much of that daily life can also take place beyond the building without requiring a drive. Kurrawa Beach and Pratten Park are an easy walk from Surf Parade, while Pacific Fair, Oracle Boulevard, The Oasis, restaurants, cafés, entertainment and public transport are also within walking distance.

The Eveleigh is Hirsch &amp; Faigen's fourth Gold Coast development since entering the market in 2021, following The Hemingway at Palm Beach, The Emerson at Kirra and Yves at Mermaid Beach. Each of the preceding projects sold out before completion.

“Broadbeach had been on our radar throughout our time operating on the Gold Coast,” the developer said. “Following our projects in Palm Beach, Kirra and Mermaid Beach, Broadbeach represented the natural next step for the business.”

The Surf Parade site brought together proximity to the beach, protected coastal outlooks and walkability to dining, shopping and recreation. Hirsch &amp; Faigen also identified the street as an emerging premium residential address, with enough separation from Broadbeach's busier destinations to retain a quieter environment at home.

The Eveleigh is now under construction by Maxcon, with completion forecast for mid-2028. Three-bedroom residences are currently available from $2.87 million.

[smartcode_project_cta:default project_id=149670]

Joel Robinson

The Eveleigh brings house-like apartments to Broadbeach

A long-stalled Campbelltown development site is back in play, with new plans for 139 apartments set to supersede a mixed-use scheme approved almost a decade ago but never built.

The new proposal for 28 Cordeaux Street would deliver 116 market and 23 affordable apartments in a part 14-storey building, bringing a substantial new project into a Campbelltown market where new apartment supply remains limited.

Plans have been filed over the 3,092 sqm corner site at Moore-Oxley Street, around 600 metres from Campbelltown Railway Station and the city-centre retail core.

The site already carries a mixed-use residential approval dating to 2016. Doroch Architects has now been engaged on a larger replacement scheme, which is progressing as a State Significant Development Application following a Housing Delivery Authority determination in August 2025.

The apartment mix comprises 39 one-bedroom, 72 two-bedroom and 28 three-bedroom residences. Two-bedroom apartments make up just over half of the project, while three-bedroom homes account for 20 per cent.

<img alt="First look: New 139-apartment plans revive long-stalled Campbelltown city centre site" data-entity-type="file" data-entity-uuid="136dd5b9-3791-4da6-9e31-76f533f5b4de" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Campbelltown%20da2.png?VersionId=LgOSy9nwf5u.MGswBBwaGGxuX8QpHSl_" />

Of the 139 apartments, 23 will be delivered as affordable housing under the in-fill affordable housing provisions of the Housing SEPP. The affordable component represents 15 per cent of the residential gross floor area and will be managed by a registered Community Housing Provider.

Doroch has sought to break the scale of the building into two distinct elements, with a masonry podium of around four storeys establishing the street edge before the residential tower steps back above.

The corner position has shaped that approach. Cordeaux Street faces toward the commercial and civic centre, while Moore-Oxley Street leads into the lower-scale residential neighbourhood to the south, and the design verification report describes the site as "bridging the commercial core to the north and established residential areas to the south."

The podium will be expressed predominantly in face brick, while the upper levels shift to brushed and grooved concrete cladding with darker metal detailing. Recessed sections, deep balcony edges and landscaping break down the upper form, with an approximately 11.8-metre setback to the northern boundary addressing the adjoining St Peters Anglican School.

<img alt="First look: New 139-apartment plans revive long-stalled Campbelltown city centre site" data-entity-type="file" data-entity-uuid="c8b3d2d3-c561-4bfc-a5d9-a68c0c10dac1" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Campbelltown%20da1.png?VersionId=AeAEyJU02Gk2k5noUj2StziCvdQ7fW4B" />

Campbelltown has been starved of new residential developments in the last decade.

The only other notable development set to come to market this year is ALAND's Queen Square, a mixed-use precinct on over two hectares that will comprise apartments above a vibrant ground-level retail and hospitality dining precinct.

First look: New 139-apartment plans revive long-stalled Campbelltown city centre site

First Look: Sherlock Construction pitches apartments for low-rise Deception Bay

Queensland builder-developer MAYD has revealed the first look at its major North Kirra beachfront development, lodging amended plans that reduce the number of apartments and increase the proportion of larger residences.

The project is planned across a substantial 4,742 sqm amalgamated site spanning seven lots at <a href="https://www.apartments.com.au/new-apartments/2-6-pacific-parade-bilinga-qld-4225">2-6 Pacific Parade</a> and 27-33 Golden Four Drive in Bilin​ga, directly opposite Nor​th Kirra Beach.

<a href="https://www.apartments.com.au/developers/mayd-group">MAYD</a> secured the site for $32.5 million in 2025, in what was one of the Gold Coast's largest property transactions of the year.

The development will be delivered across two stages, with the first stage carrying an estimated gross realisation value of around $360 million.

The latest amendments seek to reduce the overall apartment count and shift the project further toward the owner-occupier market, with larger residences designed for buyers wanting considerably more space than traditionally offered in a beachfront apartment.

The residential mix will include townhomes, oversized two-bedroom apartments, substantial three-bedroom residences and four-bedroom homes.

MAYD has appointed Cera Stribley to lead the architecture and interiors, with the Melbourne-based design practice drawing on the beachfront setting through a series of ocean-facing terraces and heavily landscaped balconies.

Strong horizontal forms and curved balconies will define the exterior, with subtropical landscaping integrated throughout the building to soften the built form and increase the connection between the residences and the beachfront.

The project will also include an extensive collection of resident wellness and lifestyle facilities, continuing the broader shift across the Gold Coast's luxury apartment market toward larger homes supported by resort-style amenity.

<img alt="MAYD" data-entity-type="file" data-entity-uuid="d1bcbb05-e659-4b47-8bd4-1e595315e2ad" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-27%20at%202.05.03%E2%80%AFPM.png?VersionId=jj0XEud1X1DuLt7_KyElhjMdZGOXmLHP" />

MAYD Founder Todd Mould said North Kirra was increasingly appealing to buyers attracted to the more established, lower-density character of the southern Gold Coast.

"North Kirra presents one of the most compelling luxury residential opportunities currently emerging in Australia, combining absolute beachfront with the character and authenticity that buyers are increasingly seeking, and the same sense of tight-knit community that defined Burleigh and Currumbin perhaps 10 or 15 years ago," Mould said.

"With Gold Coast Airport on its doorstep, it also offers a level of accessibility that broadens its appeal across almost every market demographic."

The project comes as the southern Gold Coast continues to attract an increasing share of high-end apartment development and buyer activity.

Kirra in particular has emerged as one of the region's more tightly held beachfront markets, with its relatively low-density character, established surf and hospitality scene and proximity to Gold Coast Airport differentiating it from the higher-density markets further north.

Mould said those characteristics had informed the approach MAYD and Cera Stribley had taken to the project.

"We've worked closely with Cera Stribley to create a vision that is deeply connected to its surroundings," he said.

"Inspired by the coastline itself, the architecture has been shaped around space, privacy and resort-style living, creating a collection of homes that reflects the next generation of luxury on the southern Gold Coast."

MOTIV Managing Director Carly Cottam, who has been appointed to market the project, said buyer attention had continued to move south along the Gold Coast.

"Purchasers who may once have defaulted to Broadbeach, Main Beach or Surfers Paradise are increasingly recognising the value of a genuine beachfront location that offers lower density, strong amenity and a more established sense of community," Cottam said.

"Kirra has a powerful combination of growing demand and genuine scarcity. Beachfront supply is inherently constrained, the area remains relatively low density, and buyers are increasingly placing a premium on locations that feel established, uncrowded and authentic rather than heavily developed."

Cottam said the proximity to Gold Coast Airport was also proving increasingly important for interstate and second-home buyers.

"Being minutes from Gold Coast Airport makes it particularly compelling for interstate buyers, frequent travellers and second-home purchasers who can access an authentic coastal lifestyle almost immediately after stepping off a flight."

The acquisition takes MAYD's active development portfolio to more than $500 million, with the North Kirra project representing one of its largest undertakings to date.

MAYD is targeting an early 2027 launch.

First look at MAYD's North Kirra mixed-use precinct

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Castle Hill, the longtime hub of the Hills District, has been one of the major beneficiaries of Sydney's Metro expansion, with improved connectivity helping drive continued population growth, development and buyer demand across the Hills District.

But despite that growth, the suburb has seen relatively few major new apartment projects brought to market over the past 18 months.

Hills District developer Reve Group is looking to fill that gap with <a href="https://www.apartments.com.au/new-apartments/nova-r-ve-castle-hill-2-garthowen-crescent-castle-hill-nsw-2154">Nova Rêve</a>, a major new mixed-use precinct on the corner of Garthowen Crescent and Old Castle Hill Road, a short walk from Castle Hill Metro Station and Castle Towers.

[smartcode_project:default project_id=152737 project_image_fid=377679]

The project will comprise three residential towers alongside a hotel, restaurants, cafes and a skybar, more than 1,600 sqm of ground-floor retail and almost an acre of landscaped gardens.

It represents the largest project undertaken by Reve Group, the development arm of the Kassis family, which has been building across the Hills District for more than 30 years through Kassis Homes.

[smartcode_project:default project_id=152737 project_image_fid=377675]

Nova Rêve also represents a significant step up from the family's first apartment development, Grand Rêve, which was delivered nearby on Garthowen Crescent.

Grand Rêve introduced larger, house-like apartment layouts and premium inclusions including Wolf and Sub-Zero appliances to the Castle Hill market.

Nova Rêve takes that approach to a precinct scale, combining the residential component with hospitality, retail and substantial public and resident landscaping.

[smartcode_project:default project_id=152737 project_image_fid=377685]

Reve Group Managing Director Sam Kassis said the project reflected the family's three decades of building in the Hills, which has evolved from trophy homes on quarter-acre blocks to larger-scale apartment development.

"Grand Rêve was our first apartment project here and it showed us what this pocket of Castle Hill could be. Nova Rêve is the refinement of that idea: not just apartments, but a place the whole suburb can use," Kassis said.

A key part of that approach is the hotel, which has been designed to operate as an amenity for the wider Castle Hill community rather than solely hotel guests.

It will include restaurants, cafes, skybars and all-day dining, alongside conference and event facilities catering to business functions, community groups and private events.

At ground level, more than 1,600 sqm of shops and cafes will open onto the surrounding streets and landscaped areas.

Almost an acre of gardens designed by Land and Form Studios will run through the precinct, incorporating pathways, seating, barbecue areas and children's play spaces.

[smartcode_project:default project_id=152737 project_image_fid=377680]

Reve Group's Romio Georges said creating an active ground plane had been central to the planning of Nova Rêve.

"There are gardens with pathways, barbecues, seating and play areas, shops and cafes opening onto the street, and a hotel with restaurants and a skybar that anyone in Castle Hill can walk into," Georges said.

The project's elevated position on one of Sydney's highest ridgelines will also provide apartments with outlooks toward the Sydney skyline, surrounding parkland and the Blue Mountains.

More than 80 per cent of the apartments will occupy corner positions, with Turner responsible for both the architecture and interiors.

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[smartcode_project_cta:default project_id=152737]

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Catherine Cashmore

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