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It’s not been the easiest of times for the local high street real estate agency over the past two years.
Following a long period during which healthy transaction figures and 70%+ clearance rates were “the norm” – in the Melbourne market at least – the recent sharp downturn in revenue has caused many in the industry to struggle to make headway in a highly competitive and progressively difficult atmosphere.
IBISWorld – “Australia’s largest provider of industry-based research” – estimates revenue for the real estate agent industry will decrease some 4.3% through 2012-2013. Furthermore, according to the report, over the past five years, industry revenue has fallen by 1.6% and currently stands at an estimated $8.9 billion – revised downwards from a previous estimate of $9.61 billion.
Although there was a pickup in annual sales turnover in 2009-10 principally buoyed by various government stimulus packages such as the first-home buyer boost, 2011 and 2012 have hit the industry hard – taking the overall number of transactions back to levels not seen since the mid-1990s.  And although the trend is slowly improving as the year draws to an end, it’s still a bleak remnant of that achieved in the few years prior to the GFC.
The job listings promising potential sales agents commissions amounting to and in excess of $100,000 per year, which attracted so many into the industry while the market was bursting with confidence, would seem a distant dream to a number of less experienced employees who have recently left in search of riches elsewhere.
IBISWorld estimates an annualised drop of 1% in employee numbers as agents, not used to working in a harder market terrain, head for the hills.
It takes a lot of skill negotiating with a reluctant and unconfident buyer who will only show interest if the price is right. Sales success in the industry is often underestimated by those looking from the outside in, who tend to assume agents do little more than stand outside open for inspections handing out brochures.
Competition in some suburbs of Melbourne has caused commissions to be lowered to “flat rate” figures.  In Victoria it’s not uncommon to find some agents prepared to list a property at 1-1.5% (including or excluding GST) – or signing a general authority to share the listing with another agency.  It’s something I happen across at least once or twice a week.
Although it’s hoped – particularly by the government, which plans to replace a diminishing mining boom with another property boom – that investor confidence will return during 2013-14, spurring a new decade of growth, there are no such certainties in a world that is arguably struggling to recover from the brink of economic collapse.
It may not seem as such in Australia, however this was – and is – the continuing reality in many areas of Europe and the USA and we’re not immune.  At the very least, it alters the investor mindset.
As The Australian Mortgage Report 2013 by global consultancy Deloitte pointed out, growth in Australia’s mortgage lending market is slowing – particularity for the big four – and “property prices will remain either flat or (only) grow in the order of 1–5% into 2013”.
Future drops in the RBA cash rate are less likely to be passed on as banks struggle to protect existing margins, and although I’ve read more bullish reports in regard to property prices of late – as a whole, I expect the above prediction to fall closer to the mark.  We’ve entered a new era ruled by cautionary sentiment, and it’s not going to change overnight.
Other <a href="https://www.dailytelegraph.com.au/realestate/news/jump-in-debt-stacking/story-fncv6y42-1226522426290">reports</a> of households taking advantage of lower interest rates to stack more onto their mortgage is also a concern, with the OECD estimating our household debt to income ratio currently sits at a lofty <a href="https://www.propertyobserver.com.au/news/oecd-warns-of-further-australian-house-price-corrections-but-strong-overall-growth/2012052254801">183.7%</a>.
 
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We may have population issues and a widely accepted housing shortage, however this doesn’t mean growth in the industry or market prices is a foregone conclusion.  The elastic band of debt only stretches so far – especially when it is hamstrung by a reluctance to borrow through fears of further capital losses.
However, as with any industry, the need to pump the market and keep the dollars circulating under the premise that “everything’s rosy” is – as one agent expressed to me – “absolutely vital” – especially in a sector that’s heavily dependent on behavioural economics.  It’s one reason you’ll rarely hear a mortgage broker or industry professional tell you now is “not a good time to buy”.  It’s akin to a shop keeper advising his customer to leave their credit card at home – it’s simply not going to happen.
Aside from feeding the media with positive messages, another weapon sales agents have to inspire uplift to the real estate sector and improve overall revenue is by way of marketing initiatives such as broadening their affiliations with offshoots in the industry.
For example, it’s not unusual to see a brokerage within a high street agency or organisations offering “one stop shops” with a range of services including buyer advocacy, vendor advocacy, finance, renovation and property management all under one roof.
Other more innovative ideas have been by way of real estate apps, with the Commonwealth bank even developing a “property mogul“ Investorville  game, in which you can imagine your way to a multimillion-dollar real estate portfolio.
Obviously the idea is to inspire a feeling of confidence that a consumer with the ability to tap a screen and buy a fictional listing with monopoly like dollars can navigate the world of property acquisition with as much success as Donald Trump.  I’m doubtful it can translate into markedly higher transaction figures; however, ‘feel good’ motivation is clearly the idea.
 
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Recently a story hit the press of a type of <a href="https://www.heraldsun.com.au/realestate/facebook-for-property-obsessed-aussies/story-fnczi4hc-1226522067417">Facebook</a> site for real estate devotees marketed as ‘social media for real estate’.  The idea is to give buyers and sellers a forum to communicate with other like-minded people (including real estate professionals) along with the opportunity to list and sell their own properties.
However, whether Australia’s infamous house market obsession will develop into a viral atmosphere of ‘likes’ and ‘favourites’ is debateable.  After all, the last thing you want when listing a property is buyers discussing between themselves how much it’s worth and the potential downsides.  No one trusts a price quote – most have a well-accepted perception that real estate agents play games – and any sales patter, no matter how accurate, is seen as spruiking the market.  Therefore, I remain somewhat sceptical that social media is the ideal platform for a sales campaign.
However, in a few cases it has been successful. Earlier in the year individual vendors took the lead developing Twitter accounts for their homes – some of which turned out to be incredibly popular.  Agents have tried the same tactic – however it was the vendor’s love and emotional attachment to their property which translated ideally across the internet domain to produce a ‘feel good’ atmosphere for interested buyers.  They were able to create the perception of homely bliss, and unlike Facebook, where negative comments are displayed openly on the home page, Twitter conversations are somewhat less obvious.
Any social campaign can only be successful if it manages to personalise an inanimate object, thereby inspiring buyers to fall in love.  Think Thomas the Tank Engine or named number plates on cars, for example. It’s the same concept.
Time management and lack of market experience deters the majority of vendors from selling their own homes – and although I don’t see this changing any time soon, vendor marketing can clearly achieve something the all too often “despised” real estate agent – automatically labelled as “dodgy and dishonest” - can’t.  I often wonder what would happen if real estate agents had the same ‘feel good’ reputation they have in <a href="https://news.asiaone.com/News/Latest%2BNews/Singapore/Story/A1Story20121126-385786">Singapore</a>, where eight in 10 consumers expressed that they were ‘satisfied with the service’ from their local real estate agency.  Perception is such a powerful force in the world of finance – it really is a true demonstration of behavioural economics.
The game of perception is most clearly demonstrated at an auction.  Traditionally, auction sales push median prices higher than those sold by private sale, however this is generally only the case by any significant percentage when two buyers are openly demonstrating their ‘desire’ to purchase in a heated frenzy of testosterone induced activity.
If you attend an auction where buyers are waiting around for someone else to start the ball rolling only choosing to bid when it’s clear the home’s about to pass in, confidence in the worth of that property can fall like a stone.  Should it pass in without a bid, the most common question I get asked is “what’s wrong with it?”
It’s one reason agents will opt to sell prior to auction if they can negotiate to meet vendor expectation.  If the property fails to sell on the day, it’s far harder to achieve the vendor’s wish price.
So while the HIA may be spruiking that “Housing affordability has been improving on the back of steadily growing incomes, falling interest rates, and easing dwelling prices”, and is consequently back at levels “not seen since the early 2000s” – and we’re all busy telling potential purchasers that ‘now’s the time to buy!’ it’s doing little to inspire the consumer who is not motivated by indexes or charts.
For the purchaser who still feels in the midst of a rocky terrain, housing affordability may as well be back at the extremes of 2007 because the plain perception and stark reality prevails that housing is still “unaffordable” for a growing minority of renters and potential home buyers – and I expect it to remain as such for some time to come.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
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Real estate agents doing it tough amid economic woes and vendor-led marketing alternatives

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Christmas has come early to Melbourne this year – the Baillieu government has opened up a Melbourne sack of goodies and granted the promise of a new suburb in the wilderness of Werribee “East”.  In case you think it’s going to end up like one of those other outer-suburban zones, lacking the adequate infrastructure to support the 17,000 new residents, don’t worry!  Planning Minister Matthew Guy has promised 50,000 jobs and around $10 billion worth of investment into providing a “new freeway interchange, residential areas, and industry hubs”.
The idea is to move jobs out of the city – keeping them “local” – and a sterling idea it is.  All agree that we simply can’t keep everything centralised forever.
Families with children are Melbourne’s biggest buying demographic – they need houses (not apartments) gardens, green areas and local schools.  They need community facilities, a local doctor on hand, good public transport systems and nearby shopping centres – and they need it all at an “affordable” price range.  Could Werribee East be an answer, I wonder?
The Victorian government has got a lot on its plate at the moment.  Aside from Werribee East, it is in the process of developing the new Fishermans Bend precinct  – our new “high-rise” metropolis, which Guy assures will be more successful than the soulless <a href="/news">Docklands</a>, which apparently is still only “half completed”.
The initial rush of investors who bought into the Docklands developments when they were spruiked on the open market some 10 or so years ago were left sitting on a pot of negative equity and expired “rental guarantees”.  The suburb still maintains a high vacancy rate (currently 8.3%, according to SQM) and as a suburb lacking in family community facilities (schools, churches, and so forth) it only attracts a narrow demographic of professional couples and office workers, which is one key reason the location lacks “soul”.
The worrying part of Docklands was the way it was initially marketed.
Purchasers bought in buoyed by the promise of a new 220-hectare site made up of: “luxury waterfront living, cafes, restaurants, a state-of-the-art stadium, a high technology park, and many other attractions”.
Financial and property advisers pocketed healthy fees from developers who paid them to push unwitting local and foreign investors into speedy purchases.
It’s not an uncommon practice – many still work under the guise of giving “independent” property investment advice principally marketing off-the-plan and new units – the key difference being, if you’re not paying for the information, someone else is – usually the developer.  Hence why ASIC is currently ringing the <a href="/news">alarm bells</a> over a new rush of property acquisitions as part of self-managed super fund accounts which all but promise to ‘underperform.’
I don’t have to go into the details of why high-rise developments make poor investments – I have written enough in the past to make it abundantly clear.  As the City of Melbourne aptly described on its website back in 2011, most of proposed new blocks are “relatively small one- and two-bedroom apartments largely targeted at the student market and owned by investors”.
And judging from the high vacancy rate, they are doing little to provide affordable accommodation for the home buying or rental demographic.  However, in Guy’s own words, high rise is apparently good for the city, as “taller buildings ... are a symbol of a growing nation, a strong economy, and they do have the ability to define a city".
Of this there is no doubt – however, as with many tall buildings, the lights may be on, but all too often no one is home.
 
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Back to “Werribee East”, and the government states it will use the revenue from land sales to build the promised infrastructure.
No doubt this will be achieved via hefty development overlays that disproportionally inflate the underlying cost of the land for home buyers.  The success of the plan requires attracting a substantial round of investment into the area initially, and if history is the judge, by the time it gets to individual lot sales, it will be done via a range of incentives that will encourage home buyers to relocate buoyed up on promises that read like a holiday brochure of McMansion delights.
There is absolutely nothing wrong with the main thrust to the suburb – designed through a “vision” of residents working close to home with ample accessibility to their local town centre and community services (thereby avoiding a two-plus-hour commute in nose-to-nose traffic on inadequate road networks for an eight-hour slog in Melbourne town).
Nothing wrong at all – except, of course, it’s all been promised before.
In a report earlier this year issues such as respiratory problems, abuse of alcohol, depression and various other mental and physical diseases were highlighted as common problems in poorly designed “fringe” housing estates lacking in community facilities – facilities that were often sketched in on the initial “master plans” but failed to achieve the necessary funding to realise their potential.
Currently our outer-suburban new estates are amongst the fastest-growing suburbs in Australia. Areas such as <a target="_blank" href="/news">Wyndham </a>City and <a target="_blank" href="/news">Whittlesea North</a> in Victoria, along with <a target="_blank" href="/news">Ipswich</a> in Queensland, <a target="_blank" href="/news">Camden</a> in Sydney, and <a target="_blank" href="/news">Wanneroo </a>in Western Australia are just a few of the fringe localities that are all outperforming in the population stakes.
<a target="_blank" href="/news">Point Cook</a>, a suburb of Wyndham, was promised to be a “a thriving neighbourhood ... just 22 kilometres from Melbourne” with “convenient access to established schools, shopping, recreational facilities and public transport.”
However, fast forward to 2012 and Bill Forrest, director of advocacy with the Wyndham City Council, is now reporting ''They [the state government] have not kept up with schools, they have not kept up with arterial roads, more than 50T of Point Cook is more than 400 metres from a bus stop.''
Surely it would be a better investment to fix one suburb’s infrastructure woes before promising the same delights for “Werribee East?”
 
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According to reports, Werribee East will have new bus connections but no rail. Why would they need it? After all, as Matthew Guy comments, the idea is for everyone to have local jobs – so no need to travel into the city.
It will take years – if not decades – to attract significant investment to achieve the local employment dream for 17,000 new residents.
Furthermore, unless you want a gated community of residents without the diversification of young professionals who work in the city, a fast train link directly to Melbourne would be the one ingredient to attract additional demand overnight while the “local” job plan was evolving.
Furthermore, a train link to Melbourne opens up the freedom to attend football matches and experience inner-city day and nightlife and ensures outer-suburban home buyers remain connected to the wider Melbourne community.
Bus doesn’t work – it’s slower than taking the car and not a viable alternative unless it’s got the word “school” written in front of it.
Unfulfilled promises are a frustratingly common feature of politics. You would never get away with it in a business – the concept of which follows the premise of “promise less, deliver more”.
No so with our state governments – how many out there possess old Melways editions full of dotted lines where proposed train lines and roads had been promised?
Some of Melbourne’s non-existent train lines were initially mooted as far back as the 1890s – and following numerous feasibility reports that amount to millions of arguably wasted dollars, we may as well just watch re-runs of Thomas the Tank Engine for a little solace.
Possibility the biggest bone of Melbourne’s contention is lack of a direct rain link to Tullamarine airport, which – if reports in this week’s newspapers are anything to go by – is already planning a $500 million third runway.
However, once again, the proposed “east-west” runway has been ‘dotted’ in the Melways for over 10 years and if/when it does get built, passengers will disembark from the 900 km/h A380 only to be ushered into a queue to catch the local bus into the world’s most liveable city.
Apparently, a direct train link to Tullamarine is currently in the feasibility stage, and a proposed train link Melbourne’s Avalon airport is currently seeking a reported $250 million to reach fruition. Add this to the $30 billion required for Fishermans Bend, the $10 billion to “complete” Docklands, and the $10 billion for our new western “wilderness” capital – coupled with Victoria’s current economic outlook, which is suffering from a fall in construction and the high Aussie dollar – and any vision of thriving new neighbourhoods should probably be more correctly termed pipe dreams.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
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New Melbourne suburbs come with big promises, but will the infrastructure eventuate? 

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In Australia, thus far, we have avoided the sharp downward cycle experienced in the USA and areas of Europe during which the “pre-crash” environment was stimulated by low interest rates, unregulated credit booms, and to put no lighter word on it – greed.
Inevitably the market has reverted to what could be termed a more balanced atmosphere. Even with the best efforts from our state and federal governments, which are set on promoting growth in the housing sector to make up for a drop in projected mining and yearly profits, our current low interest rate environment and new rounds of swiftly introduced first-home buyer incentives are failing to produce the same level of enthusiasm witnessed during the 2009 buying spree – thus far, at least.
However, we’re reaching that time of year where real estate pundits will dust off the crystal ball and make some future predictions into 2013 – not that we haven’t had a fair few already.  Out will come the property clocks, and we’ll get a lesson in how to tell the house market time in order to assess exactly when “the right time to buy or sell” is.
To do so, most will take a look at lessons from history and evaluate market cycles – and to be fair, it would be foolhardy to ignore previous trends that form repeated patterns over time.
But it’s worth remembering the words of John Toland – a great American author and historian who used a single statement to neatly sum up “historical cycles” in his Pulitzer prize-winning book, The Rising Sun”:
“There are no simple lessons in history,” he commented.” It is human nature that repeats itself, not history.”
Human behaviour dictates historical cycles, not the other way round – hence why the consumer sentiment index is so important when assessing market cycles and can often act contrary to “on-paper” economic forecasts.
The trouble with the housing market is that we have had a decade-long boom in growth, during which median prices in many areas of Australia have more than doubled in nominal terms, and tools such as negative gearing and SMSF investment have been broadly adopted by many mum and dad investors. Reliance on the capital growth of the asset above and beyond inflation to fund retirement has further fuelled the established playing field and resulted in real estate becoming a speculators’ paradise. 
The market is spruiked, tweaked, evaluated, and analysed, and splits groups down the middle as if it were a game of politics.
We have monthly and now “daily” indexes to fixate and <a href="https://www.propertyobserver.com.au/residential/firm-pattern-of-recovery-in-australia-s-housing-markets-just-as-rp-data-rismark-data-showed-tim-lawless/2012111157738" target="_blank">argue over</a> – and with $12.6 billion in revenue set to be raised by state governments through stamp duty alone this financial year, real estate investors and property speculators are not the only ones hoping for “broad-based” market recovery in 2013 – proving once again values are on the up and punters are flocking to the market in an emotional driven foray.
The wealth of our real estate market has the ability to make or break Australia’s bank account, with some estimating its overall value around $4 trillion. It is especially significant as foreign and local real estate investment funds perceive the Australian housing market a relatively “safe” terrain counting on future prospective population growth to underpin prices for many years to come.
However, despite the growing populous, the RBA recently pointed out in its November speech that <a href="https://www.rba.gov.au/speeches/2012/sp-so-131112" target="_blank">“the outlook for dwelling investment”</a> is being negatively impacted by a number of factors, principally “the sharp increase in house prices from 1999 – 2003” along with broad-based development costs, “red tape”, and lack of infrastructure in outer-suburban areas, the cost of which – no longer funded by governments – is now passed onto the developer and consequently home buyer.
As such, new housing demand has fallen short of underlying demand, leaving many scratching their heads wondering why the much-spruiked “housing shortage” and strong population growth has not translated into sales.
It could be argued that even with a slight uplift in the number of seasonal transactions as we approach the end of 2012, a larger population of buyers have determined that the cost of housing is still too high and further corrections to market prices need to be in evidence before they read the property clock as a call to dust off the cheque book and head back out into the housing market terrain.
As if to underline how unaffordable housing is deemed to be on a historical time scale, households are no longer decreasing in size, children are leaving it later to leave the nest and the increase in the number of people sharing accommodation has accelerated.
Lifestyle factors aside, few would argue that affordability and the reluctance to take on debt is not a significant contributor to slowing of growth in local dwelling investment – and this is mirrored in the UK and US, where shared buying schemes are growing in popularity, and the rental market is once again feeling the strain, with groups such as Shelter UK calling for government action to reduce the cost of accommodation for struggling individuals and families.
For investors, housing has long been viewed as a hedge against inflation.  Since the mid-1990s to the peak in 2010 Australia’s housing market has enjoyed long periods during which prices have far exceeded the rate of inflation. However, as shown by some of the oldest housing indexes in the world, house prices that consistently exceed the rate of inflation typically undergo a period of “correction” and remain the same in real terms when viewed over the longer trajectory.
 
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One of the first economists to show this was Yale’s Robert Shiller in his UShouse price index dating back to 1890. Another index also worth mentioning is the oldest housing index in the world – the “Herengracht Index”, which dates back to the 17th century – starting in 1628.
Professor Piet Eichholtz of Real Estate Finance at Maastricht University has undertaken extensive research on the unique document, which follows the change in real estate values along a “prime strip” of the Herengracht Canal in Amsterdam – one that is lined with magnificent single- and double-fronted period terraces. The span of his study extends to the mid-1970s and is fascinating in its content.
Modern indexes are required to adjust for changes in housing stock. For example, as extensions are added or properties upgraded and replaced, keeping an accurate record of median price changes which stratify for the difference is a very real challenge.
In contrast, the Herngracht Index shows a series of repeat sales figures for a small but significant strip of real estate that is relatively stable in type and located in what has remained a premium pocket of Amsterdam.  Therefore the need to stratify is reduced – although, as Eichholtz points out in his extensive report, the original 614 lots have, over time, reduced to 487 properties as adjacent buildings merged to allow for a larger floor area. 
This aside, for the purpose of the study, Eichholtz only makes an allowance for one “hedonic” change – the use of office space, which has added a commercial element to some of the housing’s original residential purpose and obviously has an ongoing impact on price. 
The results are significant – in nominal terms the housing values increased “more than tenfold,” with a ‘bi-annual’ increase of “11.6%” for the period. This is not surprising; after all, the area of real estate under study contains the same local desire as a “golden mile” beach strip in Australia.
However, in real terms the increase in values are largely insignificant – after 345 years of “market cycles,” the inflation-adjusted cost of housing only increased 3.2% – leaving the “real” value broadly the same.
Eicholtz carried out a similar study in rent values for Amsterdam dating from 1550 to 1900.  Once again, the “real” change over the entire period remained at the same level at the end of the study as the beginning.  Despite growth in population, economy and changing vacancy rates, short-term volatility was overridden by long-term “inflation-tracking” stability.
Of course, this study covers a distinct period in history during which trade wars, “tulip mania”, occupation, depression, WW I, WW II and various waves of immigration spurred rapid volatility in boom and bust cycles.
It’s fair to say our region of the world is a tad more stable and as such, the index under study may not be all that relevant in current property investor’s eyes. Opponents to any forthcoming on the horizon Australian property crash cite our strong population growth, limits on land supply as well as good long-term credit, wage growth and somewhat disputable “well-regulated” lending practices as placing a floor beneath prices – and thus far, this has indeed been the case.
However, the post-1950s US market was also considered stable – with Richard Peak from the Federal Reserve Bank of New York confirming back in 2005 that “(house) prices are in line with economic conditions”. Two years later, and his assumptions were starting to show cracks.
Throughout every period of history, it’s been the norm to assume a rosy outlook and the exact timing of any significant or sudden fall in property prices has rarely been predicted with outstanding accuracy.
As I said above, its human behaviour that dictates cycles and on paper figures aside, it is abundantly clear from the low level of transactions throughout the year and reluctance to take on debt that our home buying psychology – at the very least – has changed.   
At the moment, most analysts are pointing towards an improvement in the housing market as we enter 2013 and thus far, this seems to be a fair proposition – however considering the current instability with job losses and some of our larger companies going into receivership, along with continued instability overseas in both Europe and the Middle East, and the RBA describing some of its  previous forecasts as no better than a <a href="https://www.rba.gov.au/publications/rdp/2012/pdf/rdp2012-07.pdf" target="_blank">‘random walk in the park’</a>, there are certainly no guarantees.
There is, however, plenty of solid evidence to show our housing market is unaffordable for a growing populous of young buyers, and crashes, bubbles and long-term housing indexes aside, the RBA, Treasury, and both state and federal governments should be concentrating on keeping prices stable for an extended period of time, rather than placing us back in a low interest rate, incentive driven inflationary environment.
With 2013 in sight and an expected continuation of somewhat tenuous economic conditions, the long-term health of our housing market cannot be sustained unless we seriously address the issues that have pushed house prices out of reach for a growing minority.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
<div style="position: absolute; left: -10000px; top: 0px; width: 1px; height: 1px; overflow: hidden;" id="_mcePaste" class="mcePaste">
However, we’re reaching that time of year where real estate pundits will dust off the crystal ball and make some future predictions into 2013 – not that we haven’t had a fair few already.  Out will come the property clocks, and we’ll get a lesson in how to tell the house market time in order to assess exactly when “the right time to buy or sell” is.
To do so, most will take a look at lessons from history and evaluate market cycles – and to be fair, it would be foolhardy to ignore previous trends that form repeated patterns over time. 
But it’s worth remembering the words of John Toland – a great American author and historian who used a single statement to neatly sum up “historical cycles” in his Pulitzer prize-winning book, The Rising Sun”: 
“<span style='font-size: 10.0pt; line-height: 115%; font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-fareast-font-family: "Times New Roman"; mso-hansi-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-theme-font: minor-bidi;'>There are no simple lessons in history,” <span style='font-size: 10.0pt; line-height: 115%; font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-fareast-font-family: "Times New Roman"; mso-hansi-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-theme-font: minor-bidi; font-style: normal; mso-bidi-font-style: italic;'>he commented.<span style='font-size: 10.0pt; line-height: 115%; font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-fareast-font-family: "Times New Roman"; mso-hansi-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-theme-font: minor-bidi;'>” It is human nature that repeats itself, not history.” <span style='font-size: 10.0pt; line-height: 115%; font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-fareast-font-family: "Times New Roman"; mso-hansi-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-theme-font: minor-bidi; font-style: normal; mso-bidi-font-style: italic;'> 
<span style='font-size: 10.0pt; line-height: 115%; font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-fareast-font-family: "Times New Roman"; mso-hansi-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-theme-font: minor-bidi; font-style: normal; mso-bidi-font-style: italic;'>Human behaviour dictates historical cycles, not the other way round – hence why the consumer sentiment index is so important when assessing market cycles and can often act contrary to “on-paper” economic forecasts.
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The centuries-old crystal ball that proves Australia's housing price growth cannot outpace inflation forever

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High-rise apartment blocks are already a dominant feature of our major capital city skylines.  It’s somewhat inevitable that an increased population will bring with it greater density in inner-city areas and skyscrapers will bear prominence. The recent announcement of the new “super tower” planned for Melbourne’s CBD – <a href="https://www.propertyobserver.com.au/victoria/australia-108-has-a-few-hurdles-to-overcome-before-its-the-southern-hemisphere-s-highest/2012111157754" target="_blank">the tallest skyscraper in the southern hemisphere</a> – reaffirms this.
Melbourne in particular has undergone a recent boom in unit construction, leading to record levels of supply in this sector of the market.  Most of the accommodation has been sold to foreign investors who have no restrictions when it comes to purchasing off the plan – and without knowledge of Australia’s housing market and our home buyer predominant preference for detached dwellings, or “boutique” apartment buildings, overseas buyers often see high-rises as an attractive investment venture.
From an owner-occupier perspective, unless the purchase is for one of the “luxury” units in a high-rise block, the relatively small one- and two-bedroom apartments featured as “affordable” tend to fall into the investment sector of the market due to tight lending restrictions banks impose on first-home buyers.
In addition, the high owners’ corporation fees set aside to service the lifts and other security features necessary in tall buildings tend to deter a large proportion of owner-occupiers from downsizing into high-rise accommodation rather than smaller apartment blocks or townhouses.
It’s therefore no surprise that much of the accommodation is set aside as serviced apartments or student rentals and as such, offers limited investment potential for capital growth-seeking buyers.
Anyone who follows my column will know I’m not a fan of high-rise accommodation – however, I concede there is a market for it – albeit a somewhat limited market. The restrictive provision of inner-city land supply necessitates we go up rather than out (although this needs to be balanced with an adequate supply of lower-density inner suburban developments to fulfil requirements from families).
However – if we are really to maintain our “liveable” status – particularly in Melbourne (currently holding top spot on most “best/liveable city” surveys) we must get it right.
 
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Planning Minister Matthew Guy is currently responsible for shaping Melbourne town and he certainly hasn’t resisted getting his hands dirty with some pretty hefty reforms.  To be fair, he hasn’t got an easy job – over the next 40 years, Melbourne’s population is set to expand to some 6.4 million – all of whom have to be accommodated.
In his current role as planning minister, it’s going to be nigh on impossible to please everybody. Years of poor policy have already ensured we have sparse facilities to attract significant numbers to “fringe” suburbs – the price of commuting forgoes any benefit gained from paying a lower price for the privilege of more space and accommodation further from the city.  However, the current reforms being debated are set to change Melbourne’s character dramatically – and it should concern every Australian who cares to maintain the unique attraction our cities hold on the world stage.
The current tabled proposal for Melbourne’s new planning laws will cause residential zone 1, 2 and 3 become “residential growth zone, general residential zone and neighbourhood residential zone”. For each suggested zone, the density restrictions alter.  You can go <a href="https://www.dpcd.vic.gov.au/planning/theplanningsystem/improving-the-system/new-zones-for-victoria">here</a> to find a full rundown of the changes – however, in most instances, planning controls are loser, maximum height restrictions have been removed or increased (with the proviso they can also be exceeded) – and the size of land needed for subdivisions reduced.
The plans indicate councils will have some degree of discretion over what they choose to allow, however this is debatable considering Port Philip Council was reportedly “furious” with Guy when he recently took over planning control for the Fishermans Bend renewal contract – an area that will soon be dominated with high-rise accommodation reputedly blocking out many residents’ views, which will diminish the value of their units considerably.
It can only be hoped Fishermans Bend will not be a repeat of Docklands – however at this stage, the prospect is not looking positive.
While I can see the dilemma from both sides of the table – and somewhat sympathise with the economic challenges our housing market present to the “powers that be” – I am increasingly frustrated with poor policy that fails to enforce necessary quality requirements on new accommodation, and more importantly fails to protect existing residents who have purchased their units, only to see an immediate loss of equity when supply is increased disproportionally.
It therefore interested me greatly when I listened to Radio National’s Background Briefing program on the 28th October, which told the woeful story of  the tallest residential apartment block in Australia – the Q1 building situated at Surfers Paradise south-east Queensland, which it seems, does not comply with Australian Fire Safety standards.
You can download the full program on the <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/radionational/programs/backgroundbriefing/2012-10-28/4326460">ABC website</a> – and it’s also worth logging on to see some of the reader comments in relation to the story.
For example – one viewer writes:
“I have carried out approximately 100 mechanical, i.e. stair pressurisation, air-conditioning shut down and fire mode operation inspections, in Queensland. In three years I have found only one building that complied with the Building Fire Safety Regulation.”
There are other comments from readers claiming to have direct experience of the “incompetence” surrounding Queensland Building Authority, which is worrying – especially when you consider Surfers Paradise is awash with high-rise accommodation and currently has over 1,200 units up for sale (including those off the plan).
If there is any suggestion that the design of any residential tower is “unsafe”, it should concern us all.  The ABC report mentions “a growing concern” in the fire protection industry over current standards and quotes technical director of Fire Protection Australia, Matthew Wright, commenting:
"At the end of the day someone needs to check that the design demonstrates compliance before construction commences." 
Clearly in the case of the Q1 tower this was not achieved and we have to ask, how many others have fallen short of the mark?
 
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Roughly 3 million people across Australia (estimated to be around one in eight) live in strata-titled accommodation.  Furthermore, contractors of new multi-storey (high-rise) buildings (anything over three levels) are not required to arrange home warranty insurance in respect of their work.  And when it comes to the much advocated “due diligence” of gaining an independent building inspection report prior to purchase, you can guarantee the inspector engaged to assess an individual unit will not be climbing on the roof, checking for cracks in exterior walls and making sure fire exits adhere to safety requirements.
It’s not just safety that should concern us, it is also design.  The exterior of a residential tower can be viewed from miles in all directions and needs to fit into the overall panoramic view of the city skyline.  Additionally, it’s also essential the accommodation provides a quality of lifestyle that lasts long after the initial shine has worn off and fits in with our environmental responsibility to build “green”. This means incorporating items such as solar power, rooftop gardens and ensuring each unit gets a daily proportion of natural light.
This is a challenge – and not one currently front of mind for developers cashing in on the high-rise craze.  Recently <a href="https://www.theage.com.au/victoria/the-land-dragons-20121020-27y74">The Age</a> featured an article that demonstrated the level of demand from Asian property developers, all with their sights well and truly fixed on transforming our cities in to Hong Kong-style metropolises.
In the report, Jeff Xu, a young Chinese developer, suggests Melbourne needs to learn the “Asian” approach and “enable high-density housing to bloom”. In this respect, he makes it clear that Docklands (our biggest “underperforming” high-rise suburb) doesn’t come close to the vision holds for the world’s most liveable city!  However, unlike China – where in some areas buildings of more than 30 storeys are completed on average one every 12 days – our population demands are comparatively insignificant.
As the report correctly pointed out, the Chinese buyers who reach our shores with property investment in mind easily outbid Australian developers who struggle to get finance and cannot match the wealth Asian investors currently sport.  Moreover, our current requirements for planning approval pale in comparison to some cities in China, which in order to do as Xu suggests and enable high-rise to “bloom” – demand each building obtains a standard number of hours sunlight in the winter months along with good “air” and/or a good view.
In Melbourne, the suggestion from one developer – which plans to build an apartment block just three metres from its next door high-rise neighbour, thereby causing the balconies opposite to fall into constant shadow – is to incorporate mirrors to reflect sunlight onto the windows.
This requires developers to incorporate it into their initial design and town planners to guarantee it will remain so when neighbouring buildings are constructed.
The developer obviously assumes this is an adequate solution, however, can you imagine how you would feel if you had purchased one of those units, which is set to have its once sunny outlook obscured and natural light beamed down via a leaf-shaped mirror?!
Hours of natural Aussie sunlight, air to breathe, a view of a little more than a neighbouring wall, and most importantly, safety, are standards a home buyer would consider basic when purchasing into a large development. However, when it comes to the nuts and bolts of providing or guaranteeing the above list, we are clearly falling short.
It’s important not to paint every developer that hits our shores in a bad light.  Some actually want to build what Australian’ home buyers wish to purchase – <a href="https://www.theaustralian.com.au/business/property/quality-key-to-couples-boutique-apartments/story-fn9656lz-1226502597333">smaller boutique blocks</a>, in which all the above requirements will be taken into account.
If we’re going to protect the “liveability” of our cities while making skyscrapers part of the solution for any proposed population boom, it’s vital we have the correct regulations in place to ensure eagerness from developers – which understandably want to fit as much accommodation as possible on small CBD sites – does not risk undermining the standard expectations of every Australian home buyer.
If we don’t get it right now, years down the line Melbourne and other Aussie capitals risk becoming residential ghost towns – plenty of office foot traffic during the day, but an abundance of poor-quality high-rise apartment blocks, which fail to attract anyone other than short-term renters.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
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High-rise accommodation must be done right

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RP Data’s Rent vs Buy report flew into my email box this week, and already bold claims are being made across the internet and in print media that it’s currently cheaper to buy in 388 suburbs for those servicing a principal plus interest home loan using a variable rate.
Hurray! I hear you all cry – with the joyous voices marginally overpowered by the stampede of renters’ feet as they rush into their local real estate agency, chequebook in hand.
RP Data claims to be “Australia’s leading property data and analytics company”, and for the most part, I enjoy their market insights, updates, and media releases – all of which provide a valuable service for those of us not privy to direct data collecting software.
However, once in a while, I dearly wish RP Data would spend a little time thinking about the headlines it is creating before jumping in with the bold claims made on this report.
Median values – while a good barometer of the price point the predominant buyer demographic in any one suburb is purchasing – should always be used with caution when assessing if an area is “affordable”. The median price is only the middle number of all properties sold within a single period and therefore not helpful when it comes to assessing individual property prices.
RP Data stratifies its median prices between units and houses – and when producing detailed reports, usually breaks this data down listing other relevant information such as the number of bedrooms and so forth.
However, for the purpose of this report, the median values are simply divided between the two major property types – unit and house – therefore median “unit” value could mean a one-bedroom apartment or semi-detached three-bedroom townhouse. There is no distinction.
In its last report, <a href="/news">RP Data pinpointed 238 suburbs or towns</a> where “the mortgage repayment is lower than the median rent, based on a principal and interest loan on a variable mortgage rate”. Obviously the list expands two-fold when assessing interest-only loans, and there are hefty disclaimers explaining how the research is pinned together. In the latest report, due to lower rates and flattening prices, more suburbs fall into the bracket they use for assessment.
The resulting calculations are derived from the “median” unit price (or house price depending on suburb) and median “weekly advertised rental price”, with the “buyer” purchasing on a 90% loan-to-value ratio at an initial 5.9% variable 30-year loan. (Other examples are calculated on terms of interest only; however the above example is most applicable to the classic first-home buyer profile). The results, however, assume a great deal – to take median values and use them as a barometer of affordability against a median rental price has significant flaws. For example, in Victoria’s list, you will find the popular suburb of Abbotsford – located a hop and a skip from Melbourne’s CBD.
Abbotsford is a favoured area for home buyers looking north of the city, so it may surprise readers that the median value is listed as $360,868. There is currently only a small handful of properties listed for sale online in <a href="/news">Abbotsford</a> that you could comfortably purchase for the RP Data median value (or less) of $360,868. One of the listings is a small one-bedroom flat (roughly 40 square metres) situated on a main road.
There is nothing wrong with the unit – it would suit a first-home buyer – however probably not on a 90% LVR variable home loan (the formula used by RP Data.) Due to its internal size the lender of choice would probably require a larger deposit – however, we’ll put this to one side and assume otherwise.
The median rent in Abbotsford according to RP Data’s Rent vs Buy report is $475 per week – yet in reality, this is the price you’d expect to pay for a small house in “original condition” – not a one-bedroom apartment!
If you’re a renter currently paying $475 per week for a one-bedroom flat, of course it’s cheaper to buy! Yet for the one-bedder that I used as an example, the rent would be roughly $270 per week – cheaper to buy? Not on your Nelly is it cheaper to buy – in fact it’s far cheaper to rent in Abbotsford than it is to buy.
 
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Let’s take another example –<a href="/news">Docklands </a>– Melbourne’s favourite underperforming high-rise metropolis. The median value is listed as $493,185 – the price will buy a standard two-bedroom apartment most likely servicing high owner’s corporation fees due to the high-density construction.
Furthermore, borrowing for high-rise accommodation would likely present problems for a first-home buyer who may encounter lending restrictions for this type of accommodation – especially if borrowing on a 90% LVR. However, once again for the sake of the analysis on this report, we’ll put this to one side.
The median weekly rent is listed as $963 per week – if any renter is paying over $900 per week for a two-bedroom apartment in Docklands I’d suggest they seek help. For roughly $900 per week, it’s possible to rent a fully furnished three-bedroom penthouse with views of the city and beyond! Is it cheaper to rent than buy? No! It’s not!
It may be advantageous for some in the industry to spread the rumours spruiked in the report and encourage buyers to make the move and go see a mortgage broker. Hopefully even those who don’t follow the market closely will be a tad more educated when assessing the analysis.
Rental prices in Australia have risen over 49% over the past five years, and the number of renters is up from 27.2% to 28.7%. Along with this outright ownership is down from 32.6% to 31% and of those figures, 34.5% of 30- to 39-year-olds now live in rented accommodation and clearly struggle to save a deposit while servicing rising rental costs.
Families with children in particular are suffering, recording a decrease in their ownership rates from 79.5% to 77.2%. If it were cheaper to buy than rent, these figures from the ABS census data would be – at best – questionable.
Although Australia may still possess a good proportion of owner-occupiers to renters – enabling some in the industry to close their eyes to distress calls coming from the increasing numbers locked out altogether – both state and federal governments would be foolhardy to ignore the downward trend in ownership and the reducing pool of first-home buyers. Meanwhile, any myth that it’s cheaper to buy rather than rent in some of our most desirable inner-city locations needs to be taken with a degree of mistrust until data can be analysed at a deeper level.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
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Is buying really cheaper than renting? Not so fast

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Buyers' agent Catherine Cashmore:
RP Data’s Rent vs Buy report flew into my email box this week, and already bold claims are being made across the internet and in print media that it’s currently cheaper to buy in 388 suburbs for those servicing a principal plus interest home loan using a variable rate.
Hurray! I hear you all cry – with the joyous voices marginally overpowered by the stampede of renters’ feet as they rush into their local real estate agency, chequebook in hand.
RP Data claims to be “Australia’s leading property data and analytics company”, and for the most part, I enjoy their market insights, updates, and media releases – all of which provide a valuable service for those of us not privy to direct data collecting software.
However, once in a while, I dearly wish RP Data would spend a little time thinking about the headlines it is creating before jumping in with the bold claims made on this report.
Median values – while a good barometer of the price point the predominant buyer demographic in any one suburb is purchasing – should always be used with caution when assessing if an area is “affordable”. The median price is only the middle number of all properties sold within a single period and therefore not helpful when it comes to assessing individual property prices.
RP Data stratifies its median prices between units and houses – and when producing detailed reports, usually breaks this data down listing other relevant information such as the number of bedrooms and so forth.
However, for the purpose of this report, the median values are simply divided between the two major property types – unit and house – therefore median “unit” value could mean a one-bedroom apartment or semi-detached three-bedroom townhouse. There is no distinction.
In its last report, <a target="_blank" href="/news">RP Data pinpointed 238 suburbs or towns</a> where “the mortgage repayment is lower than the median rent, based on a principal and interest loan on a variable mortgage rate”. Obviously the list expands two-fold when assessing interest-only loans, and there are hefty disclaimers explaining how the research is pinned together. In the latest report, due to lower rates and flattening prices, more suburbs fall into the bracket they use for assessment.
The resulting calculations are derived from the “median” unit price (or house price depending on suburb) and median “weekly advertised rental price”, with the “buyer” purchasing on a 90% loan-to-value ratio at an initial 5.9% variable 30-year loan. (Other examples are calculated on terms of interest only; however the above example is most applicable to the classic first-home buyer profile). The results, however, assume a great deal – to take median values and use them as a barometer of affordability against a median rental price has significant flaws. For example, in Victoria’s list, you will find the popular suburb of Abbotsford – located a hop and a skip from Melbourne’s CBD.
Abbotsford is a favoured area for home buyers looking north of the city, so it may surprise readers that the median value is listed as $360,868. There is currently only a small handful of properties listed for sale online in <a target="_blank" href="/news">Abbotsford</a> that you could comfortably purchase for the RP Data median value (or less) of $360,868. One of the listings is a small one-bedroom flat (roughly 40 square metres) situated on a main road.
There is nothing wrong with the unit – it would suit a first-home buyer – however probably not on a 90% LVR variable home loan (the formula used by RP Data.) Due to its internal size the lender of choice would probably require a larger deposit – however, we’ll put this to one side and assume otherwise.
The median rent in Abbotsford according to RP Data’s Rent vs Buy report is $475 per week – yet in reality, this is the price you’d expect to pay for a small house in “original condition” – not a one-bedroom apartment!
If you’re a renter currently paying $475 per week for a one-bedroom flat, of course it’s cheaper to buy! Yet for the one-bedder that I used as an example, the rent would be roughly $270 per week – cheaper to buy? Not on your Nelly is it cheaper to buy – in fact it’s far cheaper to rent in Abbotsford than it is to buy.
Let’s take another example –<a target="_blank" href="/news">Docklands </a>– Melbourne’s favourite underperforming high-rise metropolis. The median value is listed as $493,185 – the price will buy a standard two-bedroom apartment most likely servicing high owner’s corporation fees due to the high-density construction.
Furthermore, borrowing for high-rise accommodation would likely present problems for a first-home buyer who may encounter lending restrictions for this type of accommodation – especially if borrowing on a 90% LVR. However, once again for the sake of the analysis on this report, we’ll put this to one side.
The median weekly rent is listed as $963 per week – if any renter is paying over $900 per week for a two-bedroom apartment in Docklands I’d suggest they seek help. For roughly $900 per week, it’s possible to rent a fully furnished three-bedroom penthouse with views of the city and beyond! Is it cheaper to rent than buy? No! It’s not!
It may be advantageous for some in the industry to spread the rumours spruiked in the report and encourage buyers to make the move and go see a mortgage broker. Hopefully even those who don’t follow the market closely will be a tad more educated when assessing the analysis.
Rental prices in Australia have risen over 49% over the past five years, and the number of renters is up from 27.2% to 28.7%. Along with this outright ownership is down from 32.6% to 31% and of those figures, 34.5% of 30- to 39-year-olds now live in rented accommodation and clearly struggle to save a deposit while servicing rising rental costs.
Families with children in particular are suffering, recording a decrease in their ownership rates from 79.5% to 77.2%. If it were cheaper to buy than rent, these figures from the ABS census data would be – at best – questionable.
Although Australia may still possess a good proportion of owner-occupiers to renters – enabling some in the industry to close their eyes to distress calls coming from the increasing numbers locked out altogether – both state and federal governments would be foolhardy to ignore the downward trend in ownership and the reducing pool of first-home buyers. Meanwhile, any myth that it’s cheaper to buy rather than rent in some of our most desirable inner-city locations needs to be taken with a degree of mistrust until data can be analysed at a deeper level.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
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RP Data national research director Tim Lawless:
The Buy versus Rent analysis from RP Data is aimed at providing a guide to the difference between mortgage payments and rental payments at the suburb level.  The report is not positioned as a detailed property-by-property assessment of rental costs and loan repayments, although we would encourage prospective purchasers to undertake a more specific assessment of costs based on their individual circumstances.  As Catherine Cashmore points out, there is going to be some diversity in the findings for individual properties.
The article from Cashmore does make some valid points; RP Data has not gone into detail in the report, segmenting houses and units by the number of bedrooms and bathrooms.  This level of detail was not our intention; the report provides an ideal starting point for prospective buyers to embark on their own due diligence.
In saying that, there are some errors in her comments. Firstly, the analysis is based on an assessment of median values, not median prices. The difference may be subtle, essentially, the median value for houses or units within a suburb is much more representative than a median price, as it is not based on simply only those properties that have sold over a period.
RP Data estimates the value of virtually every residential property across the country, the median value for a suburb is based on all dwellings within the suburb, not just those that have sold. It provides a much more stable and representative estimate about what a typical house or unit within a suburb sells for.
Cashmore also suggests the report is rife with disclaimers; any reporting will have disclaimers, and RP Data’s are standard. I think Cashmore is referring to the assumptions outlined in the report.  We aim to be completely transparent in our analysis, and for this reason it is important to ensure readers are completely informed about what assumptions are behind the figures; interest rates, the loan to valuation ratio, the mortgage period, and the methodology behind the numbers is essential to that end.
Tim Lawless is national research director of <a href="https://www.myrp.com.au/" target="_blank">RP Data.</a>
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Room for Debate: Is it really cheaper to buy than rent in some suburbs?

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It’s now overwhelmingly clear the government is pinning its hopes on dwelling investment to fuel solid growth into 2014.  The declines in house prices since the peak of the boom in 2010 have obsessed property clock watchers for much of the interim – particularly as we now have a daily “home value index” monitoring “true value of movements” across individual housing markets.  And now the Treasury has weighed in and all but given a cart blanche guarantee that property is in “recovery mode”.
"In a world where mining investment doesn't contribute to growth any more, one of the obvious things is the housing market, given we think there is an under-supply. That's a natural and desirable development and we're seeing early signs of it." (David Gruen – head of the Treasury’s macro-economic division.)
Undersupply – I’m tired of hearing the word.  I’ve written previously, that the only ‘undersupply’ we have in our buying market is the availability of affordable, well-located accommodation – and by “well-located”, I don’t mean accommodation stuck on the fringes of our cities, where essential “infrastructure” extends no further than the single road in and out of the CBD.  The spruiked 25-minute drive buyers were sold when they purchased can now be a three-hour congested headache in peak hour traffic.
The housing shortage debate is one that gains regular media traction yet is rarely understood.  If it’s simply a case of putting every newly formed household prospected to enter the country into a new home, then the short answer is yes, we have a housing shortage – we’re not building enough.
The National Housing Supply Council claims there is a shortage of 230,000 homes based on future population estimates, which is all well and good, however, if you’re going to build more supply to sell to this expected population surge, you have to do so in an atmosphere where there is consumer demand – something both state and federal governments are now hoping to stimulate.
The housing shortage debate is one that gains regular media traction yet is rarely understood.  If it’s simply a case of putting every newly formed household prospected to enter the country into a new home, then the short answer is yes, we have a housing shortage – we’re not building enough.
It would be easy to formulate a long list of reasons why home buyers generally avoid new dwellings when searching for residential property in an incentive-less environment. Some would include the lack of amenities in the areas detached dwellings are located, or the quality of construction, which is overwhelmingly poor, not to mention the restrictive lending practices that deter first-home buyers purchasing high-rise accommodation.
However, the evidence generally underlines that owner-occupiers – and for that matter investors – prefer purchasing established over new, which goes a long way to underpinning prices in this sector of the marketplace.
Over the last decade to 2011, 92% of all borrowing by residential property investors was for established dwellings – slightly higher than the 82% of borrowing by owner-occupiers during the same period.
Obviously every market suffers from inevitable periods of low confidence and downward market cycles – therefore, to maintain underlying demand in the new home sector, it’s essential new homes attract a larger demographic of property buyers – principally family home buyers.  Sensibly speaking, there is only one way to do this – infrastructure in new estates needs to be funded and time lined at the start of a new project. At the moment, land prices are increased disproportionally by development and community costs, yet families moving into outer-suburban areas see little evidence of the ”promised” essential amenities to meet the growing surge in population.
Furthermore, because construction costs are disproportionately inflated, it’s impossible for developers to reduce the capital cost to entice cash-strapped home buyers who would perhaps be willing to compensate on location in order to purchase a bigger property.
As for affordability – well, you only need look at the overall number of home sales, which nationally are at their lowest levels in 25 years  (figures not seen since the late 1990s) to assess activity from buyers is sending a clear message that ‘affordable’ isn’t in abundance. In the new home sector, hefty development overlays and other imposed taxes all but ensure land prices remain above fair market value.
It’s not just a case of low confidence and debt aversion that is pushing greater numbers onto the rental ladder – especially considering our current environment of low rates and flat prices. We’ve all run out of steam, too busy paying down debt while coping with the rising cost of living – as recent surveys have underlined.  Even this weekend’s super Saturday results – which showed a marginal improvement on long-term trends – are still a long way from guaranteeing a period of solid growth in the established sector.
However, the Treasury is adamant – it is looking forward to a “pick-up in construction activity” to meet a prospected surplus, and by hook or crook the government is going to get us there. Of course, to achieve this aim, there has to be demand for new housing, and how does the old saying go?  You can lead a horse to water but you can’t make it drink. At the moment, developers are struggling to give house-and-land packages away – let alone sell them!
 
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As the ABS recently confirmed, the number of housing starts recorded for the June quarter was 13.4% lower than the 10-year average.  Therefore, if the housing market is going to save the government’s stubborn need for a 2013-14 surplus, fresh demand needs to be stimulated – and stimulated quickly. There’s only one way to do it, and that’s falling back onto the old tried and tested first-home owner grant formula.
Nationally construction has been dwindling since 2006 – except for Victoria, that is, which from the start of 2008 to March 2012 underwent a building boom, which accounted for one third of Australia’s total building starts for the same period. The majority of this new housing – 60% – was in the form of detached dwellings in the sparsely facilitated “fringe” locations, however, the boom happened to coincide with the federal and state government first-home buyer boost as well as historical low lending rates.
Consequently a large “interest-rate sensitive” demographic was encouraged to purchase “new” over established. A look back at the sales data during this period reveals that in November 2008 overall sales of new dwellings had increased by 1,764 to 11,695.  Melton, in Melbourne’s west, grew by 8.2%, equating to 7,535 new residents – an all-time high.
Other regions such as <a href="/news">Deer Park</a> (17 kilometres west of Melbourne’s CBD) recorded a 15% rise in its median value. And by January 2009 there had been 530 house sales recorded in <a href="/news">Tarneit</a> (25 kilometres south-west of Melbourne), with prices increasing 21%.
<a href="/news">Werribee</a> (32 kilometres southwest of Melbourne) and <a href="/news">Point Cook</a> (25 kilometres south of Melbourne) attracted the greatest number of grant recipients, with <a href="/news">Werribee South</a> recording a whopping 25% rise in its median house price, which was clearly unsustainable over the long term.
As with all first-home buyer incentives, once the grant was stripped away – prices retracted and demand fell away. First-home buyers encouraged to buy on a whim through short-term cash incentives were consequently stuck in limbo during the inevitable “correction” phase of the market.
The remaining 40% of building activity in Victoria during this period was principally in the form of high-rise dwellings in Melbourne’s CBD and immediate surrounds. As I’ve reported previously, I still come across first-home buyers who purchased during this period, with mortgages in excess of the current valuation on their apartments.
However, the solution remains that to date, the only sure way both state and federal government have been able to fuel an uplift in “new home” demand is by way of first-home buyer invectives, and previous lessons of negative equity and inevitable market retractions are not going to deter their plan to kick-start the second housing boom in a decade.
In Western Australia first-home buyer grants are at their highest levels since the federal boost ended in 2009, and according to information from the REIWA, first-home buyers have made up 30% of sales in Perth during the September quarter.
Other states are also coming to the party, with South Australia offering a $8,500 grant to anyone building a new home while at the same time, various construction companies are also adding on their own sweeteners to the deal.
South Australia plans to spend thousands on TV and print media advertising the incentives, aimed principally at first-home buyers who will see their grants double from $7,000 to $15,000 to sweeten the deal.  However, place a note in your diary for the inevitable market correction, which – if the predicted surge eventuates – should kick in by 2014, after which the grant will be culled completely.
Whether the uplift in demand fuels another bubble is debatable – it could be that the underlying and very fundamental change in consumer behaviour, which is encouraging cautionary sentiment, will continue to deter a majority from heeding the government’s call. With the RBA being “forced” to lower interest rates in an increasingly soft environment, expect housing busts and booms to remain a very real feature of our future housing and “new home” market.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
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Infrastructure investment the only way to stimulate the housing market

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While a drop in interest rates is promoted widely as being good news for the housing market, with Wayne Swan bouncing around as if he’s a personal Jiminy Cricket sitting on the shoulders of the board during RBA’s monthly meetings, the bleak reality remains that for savers, many of whom are would-be first-home buyers, the news is not good at all.
Since the beginning of May, cuts of between 65 and 75 basis points have been chopped from the big four’s base rates for online saving accounts, and for many renters balancing work, rental payments and other such necessities, the savings account is perhaps the only area capturing the crumbs in which to advance to ownership.
For property shoppers, it may seem a welcome relief to secure a little more purchasing power – except of course every other property buyer in the market place also benefits.  The resulting increased competition that predictably eventuates in upward pressure on median prices is of no benefit to buyers – only to vendors, who, if keeping up with previous repayments, watch their loans diminish faster and equity appreciate.
Investors fare a little better – they usually fix rates on interest-only terms, which at present are extremely favourable, sitting between 5.29% and 5.69% for two- to five-year terms. Therefore, the recent increase in yields and subsequent tightening of vacancy rates, coupled with the low cost of borrowing and numerous tax incentives, complements a portfolio nicely, making long-term investment in bricks and mortar ever more tempting.
So far, we’ve not seen any significant uplift in sentiment to signify a call to arms from property investors. A further reduction in the value of investment loans – which for the month of August dropped 0.8%(ABS) – also doesn’t indicate sentiment in this sector is improving – although it’s yet to be seen if more positive data emerges after the latest RBA cut in rates.
At the very least, the perception of low rates coupled with the fact that housing affordability is judged to be at its most favourable level since 2003 will force growth in some sectors of the market. The recent release from RP Data citing a national rise of close to 2% over the September quarter in median prices (the strongest quarterly increase since 2010) seems to underline this.
The RBA is all too conscious of the housing bubble risks so often associated with a low interest rate environment. Deputy governor Phillip Lowe said the central bank would be watching “very carefully” for resulting signs.  However, the Treasury have not been so prudish in its commentary, stating boldly it “<a href="https://www.afr.com/p/national/housing_to_the_rescue_as_boom_ends_xuljjEShgcOWBe9C8g70kJ">expects recent interest rate cuts, and the possibility of more, to kick-start the second housing boom in a decade</a>,” It would – Treasury says – be “a natural and desirable development” compensating for any future downturn in the commodity sector.
However, one direct consequence of the previous boom, which locked increasing numbers outside of the housing market, was a national rise of 49.2% in yields over the five-year period to 2011 – outpacing growth in home loan repayments for the same period.  Clearly for the vulnerable homeless sector of our community, another housing boom would not be viewed as both “natural and desirable”.
Recent data from Australian Property Monitors places the median rent for a house in <city>Sydney</city> at $520 a week (a record for the city) – and in <place>Darwin</place> at a lofty $700 per week. And, while property investors look set to reap the benefits, we have a growing rental affordability crisis on our hands.  It’s no wonder crowded houses – with three or more families sharing accommodation – rose nationally by 64% to 48,499 over the past five years.
News this past week that new home construction across the country has hit a 10-year low has inspired state governments to once again busy their hands devising new grants and incentives for the purchase of new property – principally aimed at the first-home buyer sector.
However, you only need glance back at the historical lessons associated with the first-home buyer grants to assess re-introduction, with no analysis of the underlying issues that deter buyers from purchasing new accommodation in grant-free environments, is poor short-term policy.
 
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Following the recent period of inevitable and painful house price correction resulting from the decade-long unsustainable boom, the 2008-09vendors who rushed to purchase using the last round of incentives are still sitting on a pot of <a href="https://www.theaustralian.com.au/news/houses-worth-less-than-loans-on-them/story-e6frg6n6-1226497332060">negative equity</a>.   The “retail sale” mentality that goes hand in hand with rate cuts and generous first-home buyer grants is easily offset by the hangover eventuating from the realisation that any savings were simply added onto the property’s purchase price and therefore, in retrospect, were not as much as perceived when purchased.
Meanwhile back in the camp of our renters and would-be home buyers, not only do they have to battle against the prospect of inevitable rising prices, also hampering any ability to save is the stark reality that Australia’s inching its way up in the “cost of living” ranks, which further compromises any perceived benefit from rate dropping affordability.
A recent survey by Mercer – an organisation claiming to “help clients around the world advance the health, wealth and performance of their most vital asset – their people” – paints a rather worrying outlook for struggling savers.
The index, entitled “Worldwide cost of Living Survey”, covers 214 cities across five continents measuring the comparative cost 200 items including “transport, food, clothing, entertainment” and of course, housing.
Australian cities rank high on the list, with Sydney moving from number 14 in 2011 to number 11 in 2012 and Melbourne moving from number 21 in 2011 to 15 in 2012.  The full breakdown can be viewed here – with the results making a trip to <city>London</city> look comparatively affordable. No matter what wealth bracket you sit within, I doubt anyone would deny <country-region>Australia</country-region> is an expensive place to reside.
Other data highlights the stress low-income families experience while meeting essential needs, and housing is the main contributor.  The Australian Council of Social Service recently released a national report making the bold and astounding call that one in eight people now live in relative poverty.
The analysis of the term “poverty” is defined as those having disposable income of less than half that of the median household (the accepted international definition). This would equal a disposable income of less than $358 per week for a single adult and $752 per week for a couple with two children.
The term poverty is an emotionally fuelled word – it brings up images of third world hunger and refugee camps – conditions we don’t experience here. In addition, a report that suggests such a high proportion of Australian’s live in relative poverty is a poor assessment, as no matter how wealthy <country-region>Australia</country-region> grows, there will always be “relative” poverty.
However, I would challenge anyone to find appropriate accommodation within <country-region>Australia</country-region> for a single-or dual-income family on the income levels cited above. As much as we celebrate the resilience of our housing market with the various economic and employment offshoots, the widening gap between the supply of appropriately located affordable accommodation suited to those in – or just above – the poverty line is huge and shameful.
Private investment does not narrow the gap.  Australian property investors are not in the business of targeting property that can be rented on a dime.  They want quality tenants, market yields and increasing equity. 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.
The scheme targets institutions willing to fund a large supply of residential accommodation available for rent at 20% below current market rates.  The tax benefits offered over a 10-year duration are designed to buffer the short fall in yield.   However, the system is easily manipulated.
Many of the homes set aside for NRAS investors are new properties in outer-suburban zones lacking in facilities and home buyer desirability. Even with a reduction of 20% the rental rates are no cheaper than that of an older home in a similar location.  This is because the rents are assessed 20%below “market rates”, which are always somewhat inflated when dealing with property not previously occupied.
When the scheme was first initiated in 2010, the AHURI (Australian Housing and Urban Research Institute) analysed the project to assess the overall impact in easing affordability. The findings revealed only 40%of applicants using the accommodation had fallen below the 30% “housing stress benchmark”. Claims have also come to light suggesting the scheme is being used by developers and selling agents to take advantage of <a href="https://www.heraldsun.com.au/news/national/national-rental-affordability-scheme-tainted-by-ruse/story-fndo45r1-1226489767612">“unsophisticated investors”</a>. Quite clearly there’s a need for re-evaluation and improvement to the current legislation, and no one should mistakenly believe it’s an answer to an increasing and overwhelming demand for social housing.
All in all, in our current environment of low consumer confidence, high yields, increasing household expenses and potential upward pressure on house prices, further rate cuts are of no help at all to the most venerable in our community, and certainly not the outright answer to building a healthier economy.
So amidst the shouts of good news when/if the RBA cut the cash rate another 25 basis points on Cup Day, someone could perhaps consider the savers and renters who don’t have a mortgage, just a reducing pot of money and consequently, future security.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
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Interest rate fall bad news for property buyers

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The Home Buyer and Property Investor Show was in Melbourne last week. It’s one of those events where many free tickets are handed out. The show is advertised with the motto of being “dedicated to educating home buyers and property investors of all levels” and having attended many shows during its six-year run, I can assure all home buyers or investors, if you don’t come out more confused than when you headed in, something’s amiss!
“Now is a great time to buy” – runs the advertisement – and boasts a host of “independent” advice from “trusted, reliable experts”. Let me be the first to say, as with other organisations, “trusted and reliable experts” do exist within the property industry. However, filtering them out from the mishmash of stands and the 80 or so speaking events is not an easy task for any armchair property investor.
“Independent” is a funny term. To the layman, it hints at someone who is “free of bias” – a qualification not many would be able to claim. Every professional has met with influences that sway judgement and learned scepticism to some degree or another. However at a corporate level, seeing the term independent would cause one to assume the provider has no relationships or affiliations that would direct its advice against the best interests of its customers – and these qualities aren’t always easy to identify.
The financial industry has struggled with the term “independent” for quite some time. In 2010 the IFAAA (Independent Financial Advisers Association of Australia) was established to try to filter out those who could truly claim to have no hidden associations.
Their website identifies the following criteria as being “independent”, without which “low-quality advice (would be) more likely”:
<ul>
<li>“Do not have any ownership links or affiliations with product manufacturers;</li>
<li>Do not receive commissions or incentive payments from product manufacturers; and</li>
<li>
Do not charge asset-based fees.”</li>
</ul>
How much policing goes into checking the ongoing performance of each “independent” advisor on the database is unclear, however, at the very least, it sums up what customers would expect when confronted with the word.
Section 923 of the Corporations Act lists its own restrictions when using the terms “independent, impartial or unbiased”.  However, these are broadly limited to receipt of commissions (unless they are fully disclosed and rebated to the client) receipt of benefits, or the need to achieve various provider volumes when referring business.
The Home Buyer and Property Investor Show has no such gold standard. Obviously, most of the speakers and traders pay to promote their wares, and a good proportion are openly associated with various providers and manufacturers.
Within the show itself, you’ll discover a broad array of developers, mortgage brokers, property “experts”, and so forth, each promoting its own vested method to achieve that pot of retirement gold.
By the time you exit the show, you’ll have been lectured to invest in the USA, negatively gear a portfolio, positively gear a portfolio, build, develop, purchase in mining towns, purchase within five kilometres of capital cities and so forth, from exhibitors affiliated with providers and in receipt of commissions from many different offshoots.
To inexperienced ears, every piece of well-delivered advice can seem persuading, hence the need to do plenty of homework before commitment. However, even taking into account the modest number of exhibitors who do fall under the definition of “independent”, I have a problem with using the term to promote the show – it’s simply incorrect and arguably misleading.
 
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Having said this, the show is always useful for gauging a “feel” of current sentiment, and from the feedback I’ve received from colleagues who attended, numbers were significantly down, even compared with last year, which was also notably quiet.
As improving sentiment tends to mirror rises and falls in median values, a cautionary approach to calls of market recovery would seem appropriate – although I don’t doubt at a micro level, this is exactly what we’ll see in some pockets of our cities.
Transaction levels have improved over the month of September – due in part to home buyer incentives in a few states, recent rate drops, and rises in rental yields, which have stimulated investor activity. However, ease of affordability on one level can easily be outweighed by other struggling segments of the economy, in which case any uplift in transaction levels – or for that matter, median prices – may remain marginal.
Of course, the one piece of advice you won’t hear at the home buyer show is anything other than that now is the right time to purchase – especially as many view interest rate drops as the sole indicator market conditions are about to improve.
Other excuses used to inspire buyers at property shows are the so-called “hotspots”, from rural mining towns to regional townships and inner-city hubs.
The term hotspot seems to imply that property prices are about to soar and investors lap the information up as if it’s a piece of insider trading advice. Some advocates base their assessment of a “hotspot” on historical data – others wave this aside, preferring to look at new infrastructure projects, assuming a rush of population growth will add fuel to the fire without any assessment of what could oppose the assumed price rises.
If you purchase at the beginning of a mooted boom and leave at the end you’ll be a winner – but to do this you need to both speculate and gamble, and one thing history does teach us is where there’s rapid inflation, there is also a period of sharp “correction”.
To be honest, a hotspot cannot be truly identified until a buyer’s unique circumstances and property investment goals have been assessed.  To do this, takes more than a property expert – and usually begins with a trip to the individual’s financial advisor.
A hotspot for one buyer looking to balance cashflow will be different from the equity buyer looking for growth – and unless the property expert has a crystal ball to hand, all such information should come with a lengthy disclaimer attached.
Hares who rush in based on a whimsical promise of positive returns or double-digit growth may outpace the tortoise investor in the short term, but every piece of historical data we have to hand proves it’s the tortoise who wins in the long run. In other words – those who enter property investment with a long-term approach, to hedge against inflation and ride out inevitable short-term volatility – are ultimately the winners in the game of building wealth.
 
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Gambling and property markets don’t complement each other; however it never quells the thirst to happen upon riches.  Statistics cover a multitude of property sins, and never more so than when associated with “hotspots”.
Whether at a property show or free seminar, if someone’s encouraging you to rush in based on an imminent rise in median figures or surge in population growth, I’d advise taking a step back and finding an opposing argument for each point presented, because you won’t be warned of rain clouds ahead if all you ever get presented with is a sunny forecast.
All this aside, before you heed the calls to buy now” that are sprouting from all four corners (except perhaps the camp of Steve Keen), purchasing a property for investment or occupation is a decision each buyer must take based on individual circumstances and should not be dictated by drop in rates, home buyer incentives, advice from property magazines, articles or home buyer shows that liberally use terms such as “market cycles” and “property clocks.”
They are all designed to inspire consumers to spend with a retail sale mentality and in such instances, mistakes are too often made. Instead it’s vital to keep a long-term considered outlook and to do this, it’s arguably better to avoid those areas to which consumers flock.
Of course, the key to any wise investment is in education – and I’ve written plenty on the subject in previous columns. However, it remains the case that many come out of university hand in hand with a degree, credit card, ability to earn, but little idea how to purchase a property, invest in the stock market, manage their super account, or control debt.  Trying to gain such knowledge via self education is also littered with potholes, especially if you glean it based on a mishmash of vested advice.
There’s no easy answer, but I can promise one thing.  You’ll never comfortably build wealth chasing a bargain or timing a boom.  Work hard to save hard, but invest with a slow and considered approach based on what you want to achieve in X number of years to secure your family’s future.
Hotspots will come but if you’re not careful, they’ll take your profits with them.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
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Property investors must be cautious when seeking advice

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I often get asked the question from investors “which is better – an apartment or house?”. Of course, it broadly depends on what the investor hopes to achieve from their purchase and depending on their preferred location, the answer is often dictated by budget alone.
Broadly speaking, as a “set and forget” option that promises appreciation over time, it’s hard to beat an apartment close to inner-city amenities. Providing you’re careful with the pre-purchase due diligence in terms of property style and position, apartments generally attract a higher yield, are low maintenance, and when issues with the building do occur, they are generally handled by the owners’ corporation and/or property manager.
However, regularly you’ll read property commentators dictating that apartments perform better in their median data than house prices.  While this may often be the case over the short term, it has not been proven over the long term.  In fact, over a long time frame, median detached house prices have outperformed unit prices, and there are sound fundamental reasons why this may continue.
Apartments have their benefits.  The price of land in inner suburban capital city zones has become so expensive that for a good proportion of buyers restricted in location their budget is hamstrung to this type of property.  However, for the larger demographic, apartments are considered the place where you start out – not end up.
We get bombarded with this idea that everyone is “downsizing” – and once again it’s another excuse by property commentators specialising in apartment sales to promote this option over others.  Everyone’s living alone, they cry! They use previous census data to prove the single-person household is the fastest -growing demographic in the nation.
However, I’d hazard a guess that a good proportion of these single dwellers are comfortably living in houses or town residences, rather than pottering about in a one-, or even two-bedroom apartment – and recent census data proves exactly this.
At 44%, the typical Aussie home still has three bedrooms, and the stats show the majority are occupied by only one or two residents. In fact, only 14% of lone-person households live in one-bedroom dwellings, and there’s been a big increase in the number of four-bedroom homes, which now make up almost a third of the housing stock.
Not only this but, as the latest census results further prove, the single-person household is no longer the fastest-rising demographic. In the 2011 results, lone-person households dropped from 24.4% to 24.3%, while group households (shared accommodation) jumped from 3.9% to 4.1%. This is most likely due to reasons of affordability – renting a one-bedroom inner-suburban apartment can often be more costly than an older three- or four-bedroom detached dwelling a few suburbs out. It makes sense therefore to share, and this trend is mirrored in other international markets – such as the UK and Canada, which produce similar data in their own census breakdowns.
Most of the first-home buyers who cross my path also follow the above pattern.  Rarely do they opt for a one-bedroom apartment – unless they’re restricted to a particular suburb. Most opt to move outwards and purchase something larger and if given the option, would rather rent until they’re able to afford a suitable property for their five- to seven-year needs.  So who’s buying all the apartments?
What we do know is Australia-wide, 58% of apartments are owned by investors. Break this data 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 states exceeds even this (ABS data.)
 
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Therefore, while there are a proportion of home owners selecting an apartment lifestyle, for many it’s still not the desirable option. Furthermore, data proves the first-home buyer demographic broadly prefer established over new, therefore it’s highly likely they will opt for older-style apartments in smaller blocks, all of which generally offer larger floor plans and fewer owners to battle with in the annual owners’ corporation meetings.
Furthermore, it seems when home buyers (first or otherwise) do purchase new, they will generally stick to low-rise apartment blocks. This is due to stricter lending restrictions for high-rise accommodation, coupled with high owners’ corporation fees and the not-so-desirable aspects this type of accommodation offers.  This is evidenced in the latest NAB quarterly Australian residential property survey.
The report notes that when it comes to inner-city new dwellings, demand across all states is strongest for “low-rise apartments and townhouses”, with “middle-ring housing” being the next best option. In fact, when broken down, demand for townhouses far outweighs demand for apartments.  Yet, despite this, across all inner-city regions, we’ve seen a boom in high-density accommodation – most of which has been in the form of relatively compact one- and two-bedroom high-rise dwellings.
It would seemingly make sense to build as much accommodation on a piece of land as possible, however I often wonder if once constructed, the council ever goes and inspects the developments it has approved?
I’ve had the “good fortune” to walk through many of the high-rise – and for that matter, low-rise – unit blocks. The artist drawings depicted in the pre-sale advertisements rarely represent the reality – which is always somewhat of a disappointment. Therefore, it pays for buyers to enlist the utmost caution when assessing apartments of this type prior to purchase (which of course cannot be done when purchasing off the plan). It’s also my experience that many home buyers consider the accommodation on offer in the newer units, poor value when confronted with the initial asking price.
<a target="_blank" href="https://www.propertyobserver.com.au/residential/units-more-affordable-but-buyers-still-attracted-to-detatched-houses-cameron-kusher/2012100256896">Last week RP Data published some interesting information that further clarifies the above</a>. The latest research shows the largest number of sales nationally is for detached dwellings as opposed to units or apartments.  Considering Australia’s biggest buyer demographic is made up of family home buyers with and without children, this isn’t surprising, however the data also shows a decline in the number of unit sales, which is interesting when it’s generally assumed home buyers at all stages would be flocking to the unit sector for affordability reasons.  After all, as one managing director of Colliers International recently stated:
“Australia is catching up with the rest of the world, with apartment living becoming more acceptable to families.”
I’d suggest there is a lack of significant evidence to back this statement up.
 
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Further research from RP Data may throw some light on the demise in sales. It notes that the greatest number of unit sales is predictably in capital cities, where there is a large disparity between house and unit prices. For example, its analysis shows Canberra and Sydney have a gap of $110,000 between house and unit sales.  However, Melbourne only has a gap of $48,000 between the property types.
Consequently, the unit sales percentage in comparison to detached dwellings in both Canberra and Sydney is 42.5% and 42.8% respectively.  Obviously, the greater the difference in price, the larger the perceived value for buyers and investors who would therefore be encouraged to buy.
The report offers the following statement:
 “Demographic factors are also likely to contribute to greater demand for units, with baby boomers looking to downsize from their large family homes into something smaller and more easily maintainable.”
This is may be true for some property types that fall under the umbrella of a unit sale, however it’s unlikely to be the case for apartment sales.
While downsizing to a younger brain may be simply mean moving into a flat or apartment, elderly residents have a lifetime’s worth of furniture and memories to accommodate. Selling costs – along with stamp duty and the stress involved in a house move – often deter consideration of the above altogether.  However, when it does occur, the preference would certainly be downsizing the land component of the property rather than the level of accommodation. In other words, the good old single- or double-level townhouse or terrace.
It’s clear therefore the predominant market for inner-city unit sales (particularity high rise) is firmly in the court of the investor who is one step removed emotionally, and need not have personal lifestyle requirements as her main objective. This is all well and good, however if the investor is looking for capital growth over rental return she’s going to do a lot better focusing on property that attracts Australia’s larger buyer demographic – the owner-occupier market.  Hence why established or older-style period apartments in smaller blocks deliver higher long-term returns.
For investors who like the idea of purchasing new in order to take advantage of increased yields, various spruiked rental guarantees and tax depreciation benefits – they could find securing long-term tenants problematic. Vacancy rates in high-rise accommodation far exceed their established counterparts. For example, Melbourne’s Docklands and Southbank, which have the largest number of high-rise apartments, have vacancy rates of 10.4% and 9.2% respectively, however St Kilda East, which has a higher percentage of low-rise established apartment blocks, currently has a vacancy rate of 2.5%, according to SQM.
Considering the above, I would suggest it’s far more sensible when re-zoning inner-city land, to cater to a home buyer market and provide a greater proportion of accommodation to attract home buyers – principally low-rise developments and terrace housing – rather than building an endless supply of tower blocks. However, considering the pace of high-rise construction it’s a piece of advice I can all but guarantee developers and town planners won’t adhere to. Perhaps the property investors out there can take note instead.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
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Should you invest in an apartment or a house?

<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.

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[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.

&nbsp;

[smartcode_project_cta:default project_id=152737]

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Catherine Cashmore

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