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GUEST OBSERVER
Most of the timely indicators of domestic economic activity suggest that growth is set to pick up pace in coming quarters (we expect year-ended GDP growth of 3.3% over 2017).
Key amongst these indicators are surveyed business conditions, which are around decade highs, and employment growth, which has picked up recently with sufficient momentum to push the unemployment rate lower.
A major driver of these developments has been an improvement in conditions in the mining sector, which has spent a number of years in retreat. Higher commodity prices and the end of the decline in mining investment mean that the resources sector is a tailwind, rather than a headwind for growth (see A commodity prices tailwind, finally, 17 January 2017). The latest manifestation of this has been the strong profits reported by Australia’s miners. The timely economic indicators have also been supported by a bounce-back in activity after poor weather held back Q1 GDP. Retail sales, non-mining investment and coal exports have risen recently. Reflecting this, we revise up our Q2 GDP growth forecast to 0.9% q-o-q (previously 0.5%).
A key question for the RBA remains whether the expected lift in growth will feed through to a pick-up in wages growth and domestic inflation. Weak wages growth has been a factor that has weighed on consumer sentiment and growth in household consumption. We expect wages growth to pick up modestly in the second half of 2017, due to a boost to the minimum wage and the impact that the lift in corporate profitability typically has on wages growth. This should mean that domestic inflation is past its trough, and we see the underlying inflation measures lifting back into the bottom part of the 2-3% target band in coming quarters.
Above trend growth, a modest lift in wages growth and underlying inflation, plus still uncomfortably exuberant Sydney and Melbourne housing markets are, in our view, likely to be sufficient to see the RBA lifting its cash rate in early 2018.
On fixed income strategy, we see potential for more money market risk premium but there is little to fear for the long-end even if the RBA tightens policy next year. 
<a href="https://www.propertyobserver.com.au/images/2017/09/04/Screen%20Shot%202017-09-04%20at%208.28.31%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/04/Screen%20Shot%202017-09-04%20at%208.28.31%20AM.png" alt="">
Business conditions and the labour market are improving 
Surveyed business conditions have remained around their highest levels for a decade in recent months (Chart 1).
Across industries, this reflects continued positive business conditions for most of the non-mining sectors and a significant improvement in the survey results for mining companies.
The improvement in business conditions is consistent with the recent strong profit reporting season, with the mining companies the stand-out performers in terms of profitability.
The key business surveys also show a pick-up in capacity utilisation. To meet demand, firms are hiring more labour, with growth in employment and hours worked picking up pace in recent months (Chart 2).
There are also signs that non-mining business investment is set to rise, with the ABS Capex survey showing a pick-up in its forward-looking estimates (Chart 3). This fits with our view that business investment will turn positive for the first time in six years in 2018 (Downunder Digest: Australia’s next investment upswing, 21 March 2017).
Timely indicators of activity, such as retail sales and exports, have also lifted in recent months, partly because they were held back by wet weather (including Cyclone Debbie), which weighed on GDP in Q1.
Given an earlier bounce-back than we had expected (we were expecting the bounce-back to be stronger into Q3), we now expect Q2 GDP growth (due out on 6 September) to be 0.9% q-o-q (previously 0.5%).
<a href="https://www.propertyobserver.com.au/images/2017/09/04/Screen%20Shot%202017-09-04%20at%208.29.41%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/04/Screen%20Shot%202017-09-04%20at%208.29.41%20AM.png" alt="">
However, we now expect a little less growth in Q3 and Q4 and are maintaining our through-the-year forecast for 3.3% y-o-y over 2017 (Chart 4).
The lift in economic activity is also starting to spread to Western Australia, which is the region that had been hardest hit by the end of the mining boom. Jobs growth in Western Australia has picked up to be running at around 1.5% y-o-y, up from falling at that pace 12 months earlier (Chart 5).
<a href="https://www.propertyobserver.com.au/images/2017/09/04/Screen%20Shot%202017-09-04%20at%208.31.04%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/04/Screen%20Shot%202017-09-04%20at%208.31.04%20AM.png" alt="">
As we pointed out in a recent piece, the improvement in conditions in the mining states, particularly in Western Australia, is a signal that the process of rebalancing growth following the end of the mining boom has almost come to its end (Downunder Digest: States reveal the rebalancing act is almost done, 21 July 2017). For the RBA, this should mean that it may no longer need to maintain its current highly accommodative stance of policy.
Wages growth sluggish but expected to pick up
A key challenge for the RBA is that although growth is expected to pick up and the labour market is tightening, wages growth remains sluggish. The wage price index rose by 1.9% y-o-y in Q2, which is around its slowest pace on record, although it appears to have stabilised in recent quarters (Chart 6).
However, we expect wages growth to edge higher in coming quarters for a number of reasons. First, the minimum wage was lifted by more this year than last year, which should directly add around 0.2-0.3ppts to wages growth from Q3 2017.
<a href="https://www.propertyobserver.com.au/images/2017/09/04/Screen%20Shot%202017-09-04%20at%208.32.12%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/04/Screen%20Shot%202017-09-04%20at%208.32.12%20AM.png" alt="">
Second, the labour market is tightening, which should provide some support for wages growth. Third, there is a strong positive historical correlation between corporate profits in Australia and wages growth. Typically, when profitability improves, as it has done recently, some of this additional income feeds through to the household sector in the form of wages growth (see Downunder Digest: Show me the money, 20 April 2017).
The AUD has risen but so have commodity prices
Another concern has been that the Australian dollar has risen recently and that this could weigh on growth, by reducing export competitiveness and driving import substitution, and could also weigh on inflation. However, it is important to keep in mind that the increase in the AUD has been accompanied by a pick-up in the prices of Australia’s commodity exports, led by iron ore and coal, and a lift in global growth.
Because of this, the RBA has been reluctant to suggest that the AUD ought to fall. In its public commentary the RBA has, instead noted that ‘an appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast’.
There is clearly considerable uncertainty about what the lift in the AUD could mean for the Australian economy. A pure mechanical model would suggest that a 10% rise in the real trade- weighted AUD index would weigh on export growth to the tune of 4% of exports. However, this assumes all else equal. If the lift in the AUD reflects a pick-up in global growth or commodity 
prices, the rise in the currency may itself be a signal of better growth to come (see Downunder Digest: Trade leads the way, 24 August 2017). Historically, it has often been the case that the first sign that local growth is set to pick up shows up in a higher Australian currency.
RBA Governor Lowe says ‘up rather than down’
At a testimony to a parliamentary committee the RBA Governor, Phil Lowe, noted that the current market pricing implying a greater probability of a rate rise than a reduction was a ‘reasonable assumption’. He stated that it is reasonable to assume that the ‘next rate move will be up rather than down’, but that ‘it’s quite some time away if things play out as we expect’.
That the next move is likely to be up is a view we have had since September 2016 (The RBA Observer: The case for no more cuts is strengthening, 30 September 2016). As we noted last month, the RBA does not give forward guidance. So Governor Lowe’s comments are by no means a promise to deliver but are instead his best current judgement as to what is likely, given the RBA’s forecasts.
We see the first hike as likely to arrive a bit earlier than the market is currently pricing. Our view partly hinges on continued expected concerns about the housing market. Although the RBA has been noting that there are ‘signs that conditions in the Sydney and Melbourne markets had eased somewhat’, the housing price growth in these markets is still running at double-digit rates y-o-y (Chart 8).
<a href="https://www.propertyobserver.com.au/images/2017/09/04/Screen%20Shot%202017-09-04%20at%208.33.08%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/04/Screen%20Shot%202017-09-04%20at%208.33.08%20AM.png" alt="">
If, as we expect, by early 2018, growth is running at an above trend pace, underlying inflation is back in the 2-3% target band (albeit around the bottom edge of the band) and wages growth is past its trough, the RBA may see little need to maintain its highly accommodative monetary policy stance, particularly given its ongoing concerns about the exuberance in the housing market.
Fixed income: more front-end risk premium
There have been modest signs of a cyclical improvement in the region since we turned bullish on bonds in Q1. Given the RBA’s one-sided guidance – that the next move is likely to be a hike – this argues for more money market risk premium and we see the 2-3Y segment of the swap curve as most vulnerable to re-pricing, having lagged the move higher in the RBA dates.
Fundamentally, it is also worth noting that above-average increases to the minimum wage and fair work awards as well as rising utility prices should add around 0.2ppts to the y-o-y rates of both the wage price index and headline CPI, respectively, in Q3. While the long-term impact is uncertain, such prints should at least embolden those arguing that these gauges have bottomed. 
<a href="https://www.propertyobserver.com.au/images/2017/09/04/Screen%20Shot%202017-09-04%20at%208.34.10%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/04/Screen%20Shot%202017-09-04%20at%208.34.10%20AM.png" alt=""> 
Yet there is little to fear for long-dated bonds even if central banks tighten policy as our economists expect in Q1 2018, sooner than currently priced. History tells us that yield curves flatten when the RBA hikes and long-end rates often fall (Chart 10). That valuations are not stretched, especially on a cross-market basis, emboldens our view (see AUD &amp; NZD Rates: Little to fear for the long-end, 30 August 2017). 
 <a href="https://www.about.hsbc.com.au/hsbc-in-australia/management-team" target="_blank">PAUL BLOXHAM</a> IS CHIEF ECONOMIST (AUSTRALIA AND NEW ZEALAND) FOR HSBC. 
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jchancellor-FAypfDUnLy

RBA on hold, but expect hikes in 2018: Paul Bloxham

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GUEST OBSERVER
Strong house price growth in Sydney and Melbourne in recent years largely reflects fundamentals.
Interest rates have been low, population growth and foreign demand have been strong and supply has been insufficient in these cities.
Tightened prudential settings and higher mortgage are expected to cool the Sydney and Melbourne housing markets in 2018.
Prices have risen most where housing supply is inadequate.
Australia has had a housing construction and price boom in recent years.
<a href="https://www.propertyobserver.com.au/images/2017/09/01/Screen%20Shot%202017-09-01%20at%2010.41.44%20AM.png">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/01/Screen%20Shot%202017-09-01%20at%2010.41.44%20AM.png" alt="">
Much of the boom reflects the central bank's use of its cash rate setting to manage the mining boom.
A high cash rate in the earlier period (4.75% in 2011), held back housing to make way for the mining boom.
Subsequent cash rate cuts (to 1.50%) drove a housing construction and price boom.
This has been mostly a good story.
The housing construction boom has helped to fill the growth gap left by falling mining investment and has reduced an accumulated housing undersupply.
Not many houses were built during the mining boom.
<a href="https://www.propertyobserver.com.au/images/2017/09/01/Screen%20Shot%202017-09-01%20at%2010.42.38%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/01/Screen%20Shot%202017-09-01%20at%2010.42.38%20AM.png" alt="">
The challenge has been that national housing prices have risen by 50% since mid-2012 and much of the rise has been driven by rising household debt.
This has reduced housing affordability and raised questions about whether Australia has a housing bubble. 
However, just because prices and housing debt have risen does not necessarily mean that there is a bubble.
The key question is whether the rise is in line with fundamentals? In our view, to a large degree, it has been.
Housing prices have risen very little in regions where housing demand has been weak, or supply has been boosted.
In contrast, where supply has not kept up with demand, house price growth has been strong.
For example, housing prices have only risen by 6% in Perth, 11% in Adelaide and 21% in Brisbane since 2012, where the mining retreat has had its biggest effects (Chars 25 &amp; 26). By contrast, Melbourne and Sydney prices have risen by 60% and 80%, respectively. In addition to low interest rates, demand for housing has been supported by migration (both international and domestic) and foreign investment: factors which have been strongest in Sydney and Melbourne.
Although supply has increased in the Sydney and Melbourne markets, it has still been insufficient to meet demand (Chart 27).
These fundamental factors largely explain the price boom and, as a result, we do not judge it to be a bubble.
It’s the distribution of debt that matters the most
Another element that could indicate a housing bubble would be misallocated lending.
If the lending that has driven the housing boom has been to households that may be unable to service it when interest rates rise, then this could cause a sharper fall in housing prices than otherwise, much as the sub-prime crisis did in the US last decade.
It is therefore the distribution of debt that matters most, rather than the aggregate level.
Although Australia has high household debt levels, in our view, they are high for fundamental reasons.
There is also strong evidence that the distribution of debt is fairly favourable and the institutional features of the mortgage market should help to ensure financial stability.
First, all of Australia's mortgages are full recourse loans. Second, Australia does not have sub- prime or low documentation loans.
Third, most of the household debt is held by higher income households (Chart 28). Fourth, although household debt is high when compared with other countries, this partly reflects differences in the tax system. In Australia, households are able to deduct the expenses related to investment properties from their broader income tax liabilities.
As a result, around one-quarter of household debt is investors that own rental properties. In many other countries, these rental properties are owned by the corporate sector.
Fifth, given the lack of tax deductibility of expenses on a first, owner-occupied, mortgage, households have an incentive to pay down their owner-occupied mortgages ahead of schedule.
As a result, the average mortgage in Australia is over 2.5 years pre-paid, which offers a significant buffer in the face of a negative income shock.
Finally, prudential settings have been tightened in Australia since late 2014, given concerns that authorities have had about the booming Sydney and Melbourne housing markets.
Tightened prudential settings make it unlikely that there has been a large enough mis-allocation of housing lending to be a systemic risk.
Overall, we expect housing price growth to slow in Sydney and Melbourne over the next couple of years, as new supply ramps up, the foreign bid pulls back (partly due to new state taxes on foreigners) and interest rates rise. 
<a href="https://www.about.hsbc.com.au/hsbc-in-australia/management-team" target="_blank">PAUL BLOXHAM</a> IS CHIEF ECONOMIST (AUSTRALIA AND NEW ZEALAND) FOR HSBC. 
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Housing boom not bubble: Paul Bloxham

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<img src="https://counter.theconversation.edu.au/content/83211/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
A contradiction is emerging between how consumers should be feeling and what the heads of companies expect them to do.
What we know about low wages growth and underemployment seems to suggest households would be tightening the purse strings but the sentiment of business leaders is very positive in sectors relying on consumer spending.
Wages are struggling to keep pace with the prices of the things we buy and average hours worked (per worker) have also been trending down or flat at best. This is not a picture of robust consumer finances.
On top of this retailers are facing the threat of competition from US giant Amazon. Yet according to our analysis of the outlook of leaders of Australia’s ASX 200 companies, positivity has increased.
<a href="https://www.propertyobserver.com.au/images/2017/09/01/Screen%20Shot%202017-09-01%20at%208.36.49%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/01/Screen%20Shot%202017-09-01%20at%208.36.49%20AM.png" alt=""> 
The sentiment of business leaders has remained positive and improved over the past 12 months according to our analysis. The “polarity” score, which measures whether the sentiment is positive or negative, has increased from 0.11 to 0.15 (a statistically significant improvement).
We also looked at how subjective these statements were and found there’s been no significant increase in how opinionated these statements are.
Our findings also mirror other business confidence surveys and even the Reserve Bank of Australia’s own outlook, which also paints a buoyant picture. The RBA expects growth in the economy to strengthen gradually to be around 3% in the first half of 2018. The RBA expects wage growth to gradually pick up over the next year or two and for average hours worked to increase somewhat.
Similarly, the Westpac-AusChamber Actual Composite index strengthened in June 2017, rising 1.8 points to 65.0. This factored in a strengthening in the labour market, as manufacturing firms plan to hire more workers and manufacturing wages rise. And the NAB business confidence survey also reveals that business conditions and confidence are improving.
The positive outlook for economic growth according to the RBA is driven by resource exports notably iron ore and liquid natural gas (LNG) production, household consumption including retail sales, and non-mining business investment. The RBA also expects wage growth to soon pick up.
<a href="https://www.propertyobserver.com.au/images/2017/09/01/Screen%20Shot%202017-09-01%20at%208.37.59%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/01/Screen%20Shot%202017-09-01%20at%208.37.59%20AM.png" alt=""> 
<a href="https://www.propertyobserver.com.au/images/2017/09/01/Screen%20Shot%202017-09-01%20at%208.39.08%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/01/Screen%20Shot%202017-09-01%20at%208.39.08%20AM.png" alt=""> 
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<img src="https://www.urban.com.au/images/2017/09/01/Screen%20Shot%202017-09-01%20at%208.40.00%20AM.png" alt="">
These drivers are reflected in our sentiment analysis. Business leaders in ASX categories relying on household spending, have stronger than average positive outlook on the future, with an average score of 0.18.
This was led by businesses like JB HiFi (0.41), TabCorp (0.23) and Flight Centre (0.18); and also consumer staples led by Ardent Leisure (0.50), Treasury Wine Estates (0.38) and Coca-Cola Amatil (0.18).
The outlook for manufacturing is also positive due to a range of factors such as infrastructure spending by governments, stronger world growth, and improved international competitiveness due to a lower currency, commercial construction and home building, according to the Westpac-AusChamber index. This is supported by our analysis which found stronger than average sentiment from business leaders in the materials sector (0.17), through companies such as Amcor (0.26).
But the outlook isn’t all positive among our business leaders. Sentiment was weaker than average in utilities (0.07) led by AGL (-0.03). This is hardly surprising given the high uncertainty around energy policy – AGL for example owns coal-fired power plants. Also sentiment was somewhat weaker (0.13) than average among industrial company leaders, the sentiment in Qantas’ outlook was negative (-0.03) and property/real estate company Lend Lease (0.09) was also weak.
Perhaps the gloomy slow wage growth and underemployment will catch up to the more positive sentiment on consumer goods and services in company reports. Or this contradiction might simply reflect the high uncertainty in the global environment.
Consumers certainly seem a little confused: the weekly ANZ-Roy Morgan Consumer confidence Index ticked up slightly last week but has jumped around in recent months. Certainly the positive sentiment from business leaders about consumer spending we see in company reports seems optimistic.
<a href="https://theconversation.com/profiles/ross-guest-13155" target="_blank">Ross Guest </a>is Professor of Economics and National Senior Teaching Fellow, Griffith University.
<a href="https://theconversation.com/profiles/ben-hachey-337155" target="_blank">Ben Hachey is</a> Honorary Associate, School of Information Technologies, University of Sydney.
Both are authors for <a href="https://theconversation.com/au" target="_blank">The Conversation</a>.
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Business leaders are betting we will spend more

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<img src="https://counter.theconversation.edu.au/content/82073/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
The densification of Australian cities has been heralded as a boon for housing choice and diversity. The up-beat promotion of “the swing to urban living” by one of Australia’s leading developer lobby groups epitomises the rhetoric around this seismic shift in housing.
Glossy advertisements for luxury living in our city centres and suburbs adorn the property pages of our newspapers.
Brochures boast of breathtaking city views from uppers storeys and gush about amenity, lifestyle and “liveability” – often touting the benefits of adjacent public infrastructure investments (but please don’t mention “value sharing”).
Depictions of attractive younger people, occasionally clutching a smiling infant, are prominent as the image of all things new, urban and desirable.
Long gone are the days when the manifestations of property marketeers’ imaginations were restricted to images of low-density master-planned estates on the urban fringe. We hardly ever hear about these nowadays.
There’s truth in the claims that housing choice and diversity have indeed widened in the last few decades as a result. The statistics clearly show a much greater spread of dwelling options in our cities.
The rise and rise of the apartment block
Apartments now account for 28% of housing in Sydney and 15% in Melbourne. As the maps below show, most recent growth in apartment stock is clearly in and around the inner city. Yet even the more distant suburbs have had an increase in higher-density residential development.
<a href="https://www.propertyobserver.com.au/images/2017/09/01/Screen%20Shot%202017-09-01%20at%208.24.06%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/01/Screen%20Shot%202017-09-01%20at%208.24.06%20AM.png" alt="">
<a href="https://www.propertyobserver.com.au/images/2017/09/01/Screen%20Shot%202017-09-01%20at%208.25.08%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/01/Screen%20Shot%202017-09-01%20at%208.25.08%20AM.png" alt="">
For many, inner-city apartment living is clearly a preferred choice for the stage in their life when an upcoming, “vibrant” neighbourhood is attractive. High-density urban renewal has been a boon for hipsters and students alike.
But the issue of choice needs to be unpacked carefully. For many others, the “swing to urban living” is more of a necessity.
True, the surge in apartment building has put many properties onto the market to rent or buy that are clearly cheaper than houses in the same suburb. From that point of view, they have added to the affordability of these neighbourhoods.
However, affordable to whom is an open question. At A$850,000 and upwards for a standard two-bedder in Waterloo, South Sydney, and $500,000 or more in Melbourne’s Docklands for a similar property, these are not exactly a cheap option for anyone on a low income.
But other than in the prestige areas where higher-income downsizers and pied-à-terre owners can be enticed to buy in some comfort, much of what is being built is straightforward “investor grade product” – flats built to attract the burgeoning investment market.
It can be argued that the investor has always been a major target of apartment developers, even in the 1960s and 1970s when strata units became common, particularly in Sydney. But it is even more so today.
Despite the clamour to control overseas investors perceived to be flooding the market, the bulk of investors are home grown. We don’t need to rehearse the debates on the factors that have fuelled this splurge, but clearly the development industry has been savvy to the possibilities of this market.
In the last decade, backed by state planning authorities and politicians desperate to claim they have “solved” housing affordability by letting apartment building rip, developers have got involved on an unprecedented scale. The figures bear this out: in 2016, for the first time, Australia built more apartments than houses. The majority end up for rent.
Problematic products with too few protections
In the rush, we, the housing consumer, have been offered a motley range of new housing with a series of escalating problems. Leaving aside amateur management by owners’ bodies in charge of multi-million-dollar assets, problems of short-term holiday lettings and neighbour disputes, there are more serious concerns over build quality, defective materials and fire compliance.
The apartment market has been left wide open for poor-quality outcomes by building industry deregulation. This includes:
moves toward complying development approval for high-rise;
self-certification of building components;
complex design and non-traditional building methods;
relaxation of defect rectification requirements;
long chains of sub-contractors;
poor oversight by local planners and authorities; and
cheap or non-compliant fittings and finishes.
Plus there’s the rush to get buildings up and sold off. Not to mention fly-by-night “phoenix” developers who vanish as soon as the last flat is occupied, never to be found when the defects bills come in.
The lack of consumer protection in this market is astounding. The average toaster comes with more consumer protection – at least you can get your money back if the product fails.
‘Vertical slums’ in the making
These chickens will surely come home to roost in the lower end of the market, which will never attract the wealthy empty-nesters or cashed-up young professionals with the resources to ensure quality outcomes.
In Melbourne, space and design standards, including windowless bedrooms, have come under critical scrutiny, as has site cramming. Tall apartment blocks stand cheek-by-jowl in overdeveloped inner-city precincts.
At least New South Wales has State Environmental Planning Policy 65, which regulates space and amenity standards, and the BASIX environmental standard to prevent the more egregious practices.
But people are most likely to confront the problems of density in the many thousands of new units adorning precincts around suburban rail stations and town centres. These have been built under the uncertain logic of “transport-orientated development”, often replacing light industrial or secondary commercial development.
These developments attract a mixed community of lower-income renters. Many are recently arrived immigrants and marginal home buyers – often first-timers. Many have young children, as these units are the only option for young families to buy or rent in otherwise unaffordable markets. Overall, though, renters predominate.
What will be the trajectory of these blocks, once the gloss wears off and those who can move on do so? You only have to look at the previous generation of suburban walk-up blocks in these areas to find the answer.
Far from bastions of gentrification, the large multi-unit buildings in less prestigious locations will drift inexorably into the lower reaches of the private rental market.
Town centres like Liverpool, Fairfield, Auburn, Bankstown and Blacktown in Sydney point the way. The cracks in the density juggernaut are already showing in many of the more recently built blocks in these areas – literally, in many cases.
This inexorable logic of the market will create suburban concentrations of lower-income households on a scale hitherto experienced only in the legacy inner-city high-rise public housing estates.
With the latter being systematically cleared away, the formation of vertical slums of the future owned by the massed ranks of unaccountable, profit-driven investor landlords is a racing certainty. The consequences are all too easy to imagine.
The call for greater regulation of apartment, planning, design and construction is being heard in some quarters. The 2015 NSW Independent Review of the Building Professionals Act highlights these concerns.
But don’t hold your breath for rapid reform. No-one wants to kill the goose that’s laying so many golden eggs for the development industry and government alike – especially in inflated stamp-duty receipts.
The market has a habit of self-regulating on supply. Evidence of a marked downturn in apartment building is a clear sign of that. But don’t expect the market to self-regulate on quality, at least with the current highly fragmented, confusing (not least to builders and bureaucrats), under-resourced and largely unpoliced regulatory system.
The legacy of this entirely avoidable crisis is completely predictable, but will be for future generations to pick up.
<a href="https://theconversation.com/profiles/bill-randolph-147968" target="_blank"></a>
<a href="https://theconversation.com/profiles/bill-randolph-147968" target="_blank">Bill Randolph</a> is Director, City Futures - Faculty Leadership, City Futures Research Centre, Urban Analytics and City Data, Infrastructure in the Built Environment, UNSW and author for <a href="https://theconversation.com/au" target="_blank">The Conversation</a>.
<a href="https://theconversation.com/profiles/bill-randolph-147968" target="_blank"> </a>
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Why investor-driven urban density is inevitably linked to disadvantage

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GUEST OBSERVER
Nearly one in three Australian investors are worried about the rising cost of living, according to new data.  
Mortgage Choice’s Investor Survey found the increasing cost of living was the biggest issue facing Australian investors over the coming 12 months. 
I am not surprised to hear that so many property investors are worried about the cost of living.
Every day expenses such as gas, electricity, childcare, and transportation continue to rise every year, which is bound to negatively impact the hip pocket of all Australians, including property investors. 
On top of that, wage growth continues to stagnate, with the latest data from the Australian Bureau of Statistics showing wages grew just 1.9% over the 12 months to June 2017. 
According to the Investor survey, one in five investors were also worried about job security, while a further 15% were worried about rising interest rates. 
Perhaps most surprisingly, our data found one in four investors were actually concerned about rising property prices. This would suggest property investors are constantly looking to expand their portfolio of assets and, as such, don’t want property to become so expensive that it is out of reach.
There are a number of strategies investors can take to lessen the impact of the rising cost of living and rising interest rates. 
While you may not be able to control the inevitable rise in everyday living expenses or interest rates, you can control where you spend your money and how much money you save. 
With good strategic planning, you can ensure that you’re able to afford your mortgage repayments and your lifestyle now and into the future.
In the first instance, its pays to take the time to draw up a budget for your pay cycle, including all of your incomings and outgoings throughout that period. 
Make sure you are detailed so that you can identify where your money is going and where you may be able to cut back. It is important to set aside a regular portion of your income as savings. This money can then be used as an emergency fund for a rainy day. 
Moreover, whether you’ve had your mortgage for a short time or a while, it is always a good time to have your home loan checked. 
Your local broker can look at your current product and compare it with others on the market. They may be able to help you find a product with a sharper rate that will end up saving you thousands of dollars.
Investors wanting to make to make their money work harder for them should also consider speaking with a financial adviser.  
Even if you are comfortable with your current financial situation, it is worth speaking to a financial planner who can assess your financial situation and create a personalised plan to help you reach your goals. 
 
John Flavell is chief executive officer <a href="https://www.mortgagechoice.com.au/" target="_blank">Mortgage Choice</a>.
 
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1 in 3 investors concerned about cost of living: John Flavell

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<img src="https://counter.theconversation.edu.au/content/82320/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Australia’s state governments, as well as some ambitious local councils, community housing providers and forward-looking private developers, are finally taking note of the housing affordability crisis in our cities.
One proposed solution is to provide relief to cash-strapped households that cannot afford skyrocketing deposits by incentivising a new “build-to-rent” affordable housing sector.
Build to rent simply means developers build housing with the intent of retaining the building and renting it out to lower-income families at prices affordable for those families.
Australia has almost everything it needs to kick-start this sector. These efforts could not come soon enough: failing to tackle the situation will cost us billions of dollars. However, state and local efforts cannot reach their full potential unless the federal government steps in with something only it has: cash.
US model shows the way
The federal government has tried build-to-rent schemes before, with the National Rental Affordability Scheme. Built off a similar US model, the program rewarded investors in affordable housing with tax credits. 
The program’s US counterpart, known as “tax credit housing”, is so popular that a bipartisan group of senators are working to expand its funding by 50%. Australia’s super funds have even invested in US tax credit housing. 
However, Australia abandoned the National Rental Affordability Scheme in 2013. The government is instead creating a “bond aggregator” agency to support build-to-rent affordable housing. This agency will issue government-backed bonds to provide cheap loans to housing associations to build affordable housing.
<a href="https://www.propertyobserver.com.au/images/2017/08/31/file-20170829-10454-1xs49oh.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/08/31/file-20170829-10454-1xs49oh.jpg" alt="">
Mind the gap
But truly affordable rents for Australia’s low-income households cannot cover the combined cost of building and operating apartment buildings, even with cheap loans. US housing experts call this problem the “housing finance gap”, and many of their Australian counterparts have called on the federal government to help fund it.
To illustrate, below is a rough hypothetical example of a breakdown of tax credit housing funding sources, based on real numbers out of several Californian tax credit housing projects from between 2006 and 2016.
In Victoria, most of the pieces are being set up for the middle band of funding (in purple) as part of Plan Melbourne and other local government initiatives. Similar efforts are under way in New South Wales and Queensland. 
The federal government’s bond aggregator will be in place to maximise revenue of the project (plotted in green). Victoria is set to soon join NSW in providing a regulatory framework defining “affordable rents”. This will enable estimates to be made of how large this segment of funding can realistically be.
What Australia lacks is federal support to cover the remaining gap (shaded in orange). 
This is a rough sketch based on US numbers, which will not translate exactly. But so long as the project contains any truly affordable housing, as NSW defines it and as Victoria is looking to define it, projects will need more cash to close the gap.
Filling the gap while keeping things simple
Capital gains tax deductions and negative gearing cost the federal government roughly A$11 billion per year, even if the houses are vacant. It spends roughly half as much on public housing and rental assistance. 
A modest rebalancing of federal tax policy toward affordable housing could fill the funding gaps in build-to-rent housing. This would enable the bond aggregator to unlock hundreds of millions of dollars in matching private capital. 
The federal government should set a goal of shifting 20% of the tax dollars currently written off on negative gearing into a gap-financing fund managed by the bond aggregator. Unlike the National Affordable Housing Agreement schemes of the recent past, these funds should be dedicated exclusively to building new housing.
Alternatively, Treasury could issue cash vouchers to affordable developers to fill the gap. To keep this simple, the value of the voucher could be pro-rated, on a per affordable unit basis, using up-to-date construction cost data. 
The government could also offer this funding to private developers that are willing to set aside 30% of their units for low-income families, in exchange for gap financing of that 30% of units and the certainty the bond aggregator provides for the entire project. 
It can be done
Asking the federal government to cover around $90,000 per affordable unit may sound like a lot. But a decent apartment can last for 30 years before requiring substantial rehabilitation. That translates to just $60 per week. 
Although Australian construction costs are higher than in the US, even if we double it we are still spending only $120 per week. This amount is paltry compared to how much money the low-income family living in such an apartment will save if the apartment is located in inner Melbourne or Sydney. 
Add the long-term healthcare, social service and educational benefits and cost savings into the mix, and this is one smart investment.
<a href="https://theconversation.com/profiles/matthew-palm-399340" target="_blank">Matthew Palm</a> is Postdoctoral Research Fellow, Transforming Housing Research Network, University of Melbourne and author for <a href="https://theconversation.com/au" target="_blank">The Conversation</a>.
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‘Build-to-rent’ could be the missing piece of the affordable housing puzzle

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<img src="https://counter.theconversation.edu.au/content/83094/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Retailers are starting to realise the benefit of combining online and in-store shopping. And by encouraging you to buy online first and collect later, these businesses are saving in a number of areas. 
Despite historically lagging behind the rest of the developed world, Australian retailers are beginning to embrace this approach. From groceries, alcohol, fashion and accessories, sports clothing and even automotive parts, more and more retailers are adopting this strategy. KPMG research found that by 2014, 64% of customers in Australia had ordered online and picked up in-store. 
In Australia 42% of retailers are now offering click and collect, and perhaps in response to the impending threat from Amazon’s entry, this number is up from 24% in 2015. To supplement their pick up in store service, 38% of retailers also allow customers to return their online purchases in-store. 
By comparison, 36% of Western European and 31% of North American retailers offer a click and collect service. The UK’s click and collect market is expected to grow 78% by 2020, to £8.2 billion. This is not surprising given the intense competition among retailers within the British market and the strategic shift away from price to convenience.
<h2>Why you click and collect</h2>
Customers are embracing buying online and picking up in store because it offers them immediate gratification but with cost savings on delivery. Click and collect provides an immediacy that traditional home delivery usually can’t match, particularly in Australia where delivery times have traditionally been slow relative to international standards. 
Depending on the type of merchandise customers are buying, the costs of delivery can be high. In the US, 73% of supermarket shoppers reported they would pick up items in store to avoid shipping costs and 30% said they were not prepared to wait around for delivery of their online order.
The sort of in-store pickup service also helps customers avoid problems with unprofessional delivery services and dodge the dreaded “card in the mailbox”, where parcels are returned to the depot. 
In-store pickup is especially handy for customers purchasing online just prior to the weekend or at peak shopping periods such as Christmas and Easter when timing is paramount. It can also help solve delivery problems for many customers living in apartment blocks, or living or working in properties that are difficult to access. More and more customers are finding it convenient to order online and then pick up their purchases during their lunch hour or on the commute home.
Online shopping doesn’t allow for tactile purchasing – actually touching the products – in-store collection enables customers to check the quality, as well as assess the colour, style and size prior to leaving the store. Any problems can be resolved immediately in-store and returns can even be processed at the same time if products don’t meet customer requirements. 
With many retailers increasingly moving away from the traditional online “price wars” and recognising the importance of connecting with customers through multiple channels and touch points, click and collect is the natural progression to encourage customers back into physical stores. 
<h2>Why retailers are adopting click and collect</h2>
Retailers can save a lot on click and collect. It reduces operational costs and leverages impulse purchases. Retailers are finding that in-store collection also provides them with additional opportunities to connect with customers and enhance the customer experience.
One of the main benefits for retailers from shoppers who come into the store to collect their online purchases is that almost 50% make an unplanned purchase. A study by company Bell and Howell of 530 shoppers found 49% of customers were likely to purchase an additional item when picking up their online order. 
The International Council of Shopping Centres found 61% of shoppers who bought items online and picked up in-store, made an additional purchase. This was higher for younger shoppers, with three-in-four millennials making impulsive purchases when popping in to collect.
Offering click and collect also means customers feel more comfortable about returns as well. A report from packaging company UPS found 82% of shoppers are more inclined to purchase online if they can return the product in store. 
Average parcel delivery costs in Australia are around $25 for a 5kg parcel (for next business day delivery) with courier services even more expensive, particularly for large and bulky items. 
The majority of retailers provide in-store collection free of charge, however some retailers are charging a fee for pickup in order to recoup staffing and storage costs. At the cheaper end of the scale Kmart charges a A$3 fee while Ikea Australia recently announced its fees which range between A$59 and A$149. 
“Bricks and mortar” retailers see click and collect as a way to differentiate and defend themselves from online players. In the US, Walmart announced last month it would offer discounts on products shoppers ordered online, but picked up in stores as a tactic to combat Amazon.
Now Amazon has started its roll out in Australia, any edge over this competition will be an advantage. Deploying click and collect into a store allows retailers to compress sale time.
Australian retailer, Super Cheap Auto recently announced shoppers could click and collect their online purchases within 90 minutes - and is now exploring how it can reduce that time down to 60 minutes.
While shoppers continue to seek convenience, the frequency of online shopping (forecast to hit 12.5% of total retail sales by 2025), will also increase. But getting the product to the customer will continue to be a challenge for retailers. 
So you can expect more retailers to adopt a click and collect strategy. If you can’t get the products to the customers, get the customer to the products.
<a href="https://theconversation.com/profiles/gary-mortimer-1322" target="_blank">Gary Mortimer</a> is Associate Professor, Queensland University of Technology.
<a href="https://theconversation.com/profiles/louise-grimmer-212082" target="_blank">Louise Grimmer</a> is Lecturer in Marketing, University of Tasmania.
Both are authors for <a href="https://theconversation.com/au" target="_blank">The Conversation</a>.
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Why retailers want you to ‘click and collect’

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GUEST OBSERVER
The Property and Construction sector has rightly been identified by the Queensland Government as one of the four pillars of the economy, alongside Tourism, Agriculture and Resources.
The sector consistently contributes approximately 11% of Queensland’s gross state product. After Health and Retail, it is the third largest employer. 
Worryingly, of the $42.75 billion allocated to infrastructure over the next four years, only $4.8 billion will be invested in regional Queensland. Historically, on average, less than 12% of infrastructure spending is invested into regional infrastructure development.
The question then is: is that distribution equitable and can our budgets be brave enough to significantly shift the historical balance in favour of regional over metropolitan infrastructure and development? The arguments in favour of being brave are compelling.
For their contribution and according to Regional Australia Institute (RAI), regional cities will have added $375 billion to the national economy by 2031. With the Queensland economy in a transitional phase and on a continued downward slide from the resource boom, taking advantage of the opportunities that regional cities provide has never been more important.
Regional cities north of Brisbane are optimistically investing in long rather than short term strategies. Geographic opportunities in the agri-foods and freight logistics sub-sectors offer possibilities that the north is able to yoke through harnessing untapped water supplies and developing agricultural potential in its vast plains. A northern food bowl would help sustain the emerging and ever increasing demographic realities that the likes of China and Singapore face. 
The resultant logistic hubs could in parallel, sustain other economic stimulators. Toowoomba’s Wellcamp Airport for example has had a significant impact on local food and horticultural production for which commercial freight flights have commenced. Further north, Mount Isa Regional Council predicts that the new Mount Isa to Tennant Creek rail link will be the stimulus for an economic corridor that will boost local economies along its route and diversify that particular region’s mining focused economies into other sectors. 
Airports could unlock the two-stop long-haul flights to Europe and therefore lure large carriers who currently use Dubai or Hong Kong as a preferred international stopover. How? Qantas, for example, has already commenced direct flights from Perth to London. By making Broome or Mackay the first stopover for a long range ‘Dreamliner’ or similar flight to London, Australia’s regional tourist hubs could be the next mega transit hubs in their own right. Bernard Salt suggests that this will help create new secondary cities equitably spread (geographically) across Australia.
Regional cities are recognising that the knowledge worker can work from anywhere as long as they have access to their tools and technology. Sunshine Coast Council for example plans to link its region directly to global communications systems in Asia, the Pacific and the United States by encouraging the private sector to deliver an international submarine broadband cable connection that would land at Maroochydore. Initial economic modelling indicates that this initiative will generate an additional $700 million to the Sunshine Coast economy every year and $1.1 billion annually to the state’s economy.
The Commonwealth Government’s embracing of the UK’s City Deals, Growth Deals and Smart specialisation concepts is a step in the right direction to managing regional infrastructure growth and investment. City Deals are agreements between the Commonwealth Government, a state or territory government, and local governments to enhance economic activity and liveability. They work by developing collective plans for growth and commitments to action, investment, reforms and governance from the associated stakeholders. Already, the first city deal agreements have been signed this year for Townsville and Launceston. 
It is demonstrably evident that regional cities are now starting to think bigger than ever and making their own luck in the process. However it is only with sound equitable funding of infrastructure initiatives with strong leadership that sustainable and long term success can be achieved. Are our leaders brave enough to push for a strong catalytic stimulus to regional infrastructure development and fundamentally shift the balance of growth, population, economic benefit and employment?  
Lawson Katiza is Project Director, Savills, and can be contacted <a href="https://www.savills.com.au" target="_blank">here</a>.
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Being brave in budgeting for regional infrastructure: Lawson Katiza

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GUEST OBSERVER
Various government policies have fuelled the demand for housing over time, expanding the wealth of older home owners and pushing it further and further beyond the reach of young would-be home buyers. 
A new study highlights this divide between millennials and their boomer parents.
The study is part of a Committee of Economic Development of Australia (CEDA) report called Housing Australia. It compares trends in property ownership across age groups over a period of three decades. 
Between 1982 and 2013, the share of home owners among 25-34 year olds shrunk the most, by more than 20%. On the other hand, the share of home owners among those aged 65+ years has risen slightly. 
The rate of renting has spiralled among young people. By 2013, renting had outstripped home ownership among 25-34 year olds.
<h2>Same policies, different impacts on generations</h2>
There is undoubtedly a growing intergenerational divide in access to the housing market. The timing of policy reforms has been a major driver of this widening housing wealth gap. 
Negative gearing has long advantaged property investors, potentially crowding out aspiring first home buyers. While negative gearing was briefly quarantined in 1985, this was repealed after just two years. 
The appeal of negative gearing grew as financial deregulation spread rapidly during the 70s and 80s. This deregulation widened access to mortgage finance, but also pushed real property prices to ever higher levels. 
In 1999, the Ralph review paved the way for the reform of capital gains tax on investment properties. Instead of taxing real capital gains at investors’ marginal income tax rates, only 50% of capital gains were taxed from 1999 onwards, albeit at nominal values. 
The move, designed to promote investment activity, actually aggravated housing market volatility. The confluence of negative gearing benefits and the capital gains tax discount encouraged investors to go into more debt to finance buying property, taxed at discounted rates. The First Home Owners Grant, introduced in 2000, was another lever that increased demand. In the face of land supply constraints, these sorts of subsidies were likely to result in rising house prices.
Other policy reforms, while not directly housing related, have also affected young people’s opportunities to accumulate wealth. 
The Higher Education Contribution Scheme (HECS) was introduced in 1989, at a time when many Gen X’s were entering tertiary education. This ended access to the free education that their boomer parents enjoyed. 
HECS parameters were tightened over time. And in 1997, HECS contribution rates rose for new students and repayment thresholds were reduced.
Of course, the 1992 introduction of the superannuation guarantee would have boosted Gen X’s retirement savings relative to boomers. However, these savings are not accessible till the compulsory preservation age, so can’t be used now to buy a house. 
All these policies have clearly had varying generational impacts, adversely affecting home purchase opportunities for younger generations while delivering significant wealth expansion to older home owners. 
<h2>An intergenerational housing policy lens</h2>
A new housing landscape has emerged in recent years. It is marked by precarious home ownership and long-term renting for young people. 
It’s also dominated by a growing wealth chasm – not just between the young and old – but also between young people who have access to wealth transfers from affluent parents and those who do not.
The majority of housing related policies do not consider issues of equity across generations. There are currently very few examples of potential housing reforms that can benefit multiple generations. 
However, there is one policy that could - the abolition of stamp duties. It would remove a significant barrier to downsizing by seniors.
The equity released from downsizing would boost retirement incomes for seniors, while freeing up more housing space for young growing families. Negative impacts on revenue flowing to government could be mitigated by a simultaneous implementation of a broad based land tax. This would in turn push down house prices. 
As life expectancies increase, the need for governments to take into account policy impact on different generations is critical. On the other hand, policies that take a short-term view will only worsen intergenerational tensions and entrench property ownership as a marker of distinction between the “haves” and “have nots” in Australia.
Rachel Ong is deputy director of the Bankwest Curtin Economics Centre, Curtin University and author for The Conversation. She can be contacted <a href="https://theconversation.com/profiles/rachel-ong-113482" target="_blank">here</a>.
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How governments have widened the gap between generations in home ownership

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For many years now, home buyers and investors have had to wade through a sea of negativity on housing price commentary, while all the time prices have been going up.
Bearish commentators have regularly forecast dramatic downturns. None have eventuated in Sydney. And the pessimists were out in force last week on the ABC Four Corners program.
Even well regarded property forecasters don't necessarily get it right either - as they all tipped 2017 would see a significant slow down in price growth.
But here we are entering spring with continued strength. Sydney's annual price growth running at above 10 percent, according to CoreLogic, having done so since 2012.
Imagine if you had missed out because you placed you faith in a headline grabbing forecast by Steve Keen or Harry Dent?
You'd be sitting on the sidelines, having missed out on 10, 20, maybe 50 percent price growth.
Of course there was risk in your purchase, but hopefully you did so with some caution and some cushioning should circumstances turn.
The economic bear Gerard Minack has long been warning of a recession. It was supposed to come as Australia ended its once in a century mining boom. 
"I think it's a powder keg," he told the 4 Corners reporter investigating the forces driving our debt fuelled housing boom.
"I don't know when we get a downturn that pops this, but sure as hell one's coming," he told 4 Corners which found several sad situations where Perth buyers had thought it was all risk-free.
Gerard Minack, the former Morgan Stanley executive, said Australia had been led down a perilous path by current tax arrangements and lenders who had been increasingly willing to leverage up borrowers.
Australia now has a household-debt-to-income ratio of 190 per cent.
“For every $1 of household income, there’s [nearly] $2 of debt,” Mr Minack said.
The same Minack quietly upgraded Mosman homes a little while back to a $4.2 million three storey house.
Minack's former Federation sold for $3.1 million having paid $1.2 million in 1999, appreciating at a nice annual rate of 6.45 percent.
Both featured five bedrooms but the latest has prized harbour views. 
Locals say he bought well as the block cost $2,725,000 some 10 years ago.
Of course there was risk for Minack, like every other purchaser. Ofcourse something could happen to any family or our economy that makes a sound purchase riskier.
In 2015 before his purchase Minack forecast when "we get across-the-board unemployment then we’ll get an across-the-board downturn in house prices; it’s just a matter of time."
Time has moved onto record low unemployment, with most home purchasers happy with their well-leveraged lot. 
A downturn will happen one day, but I sense when it does there will be a buffer that wasn't there last time, in the early 1990s recession.
Given the preponderance of investment property, unemployed homeowners will firstly sell their investment property, rather than get booted out by the banks of their own home.
This article first appeared in the Daily Telegraph.
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No dramatic downturn with residential market entering spring with continued strength

<a href="https://www.apartments.com.au/developers/consolidated-properties">Consolidated Properties Group</a> (CPG) is approaching the launch of its latest Brisbane riverfront development, Castile, on the dress circle Skyring Terrace in Newstead.

VIP buyers are now being engaged, with a full public sales launch coming later this year.

Positioned as the final opportunity to secure a new absolute riverfront residence on the East bank of Newstead, Teneriffe or New Farm, Castile at 47 Skyring Terrace has been designed by <a href="https://www.apartments.com.au/architects/woods-bagot">Woods Bagot</a> as a timeless addition to the Brisbane skyline.&nbsp;

[smartcode_project:default project_id=150489 project_image_fid=371113]

The name Castile draws on themes of permanence, sophistication and legacy, reflecting a broader vision centred on enduring architecture and timelessness in the rarest of riverfront positions.&nbsp;

CPG Chairman and CEO Don O’Rorke said the project had been envisioned as a future Brisbane icon.&nbsp;

“With 47 metres of direct river frontage and never to be built out views, 47 Skyring Terrace is the definitive address on the Brisbane River,” O’Rorke said.&nbsp;

[smartcode_project:default project_id=150489 project_image_fid=371114]

“Rather than following trend-based apartment design, Castile draws inspiration from Brisbane’s great heritage buildings, reinterpreting classical architecture into a contemporary riverfront landmark designed to stand proudly for the next 100 years,” he said.&nbsp;

The approved development will comprise 227 apartments across a 25-storey tower alongside a boutique six-storey riverfront building of just 12 residences.&nbsp;

Construction is scheduled to commence in September 2026.

[smartcode_project_cta:default project_id=150489]

Joel Robinson

CPG unveils Castile Newstead ahead of upcoming sales launch

Australia’s online shopping habits have shifted dramatically over the last decade. As eCommerce volumes surged, so too did the frustrations that came with traditional parcel delivery: missed deliveries, long Post Office queues, parcel theft and the challenge of being home during business hours.

Australia Post’s Parcel Lockers emerged as one of the more practical responses to that changing consumer behaviour.

What started as a relatively niche delivery option has evolved into a nationwide network of more than 1,400 self-service Parcel Lockers positioned at train stations, shopping centres, supermarkets and Post Offices across the country. The system allows Australians to send, collect and return parcels 24 hours a day, fundamentally changing how many people interact with deliveries.

The appeal is relatively straightforward: flexibility.

Instead of waiting at home for a delivery driver or rushing to a Post Office before closing time, users can direct eligible parcels to a Parcel Locker location of their choice. Once the parcel arrives, Australia Post sends a notification with a collection code or QR access through the AusPost app, allowing customers to retrieve their package at any time within the collection window.

For apartment residents in particular, the system has become increasingly valuable.

Higher-density living has created logistical challenges around deliveries, especially in buildings without concierge services or secure parcel rooms. Missed deliveries are common, while parcel theft has become an increasing concern as online shopping volumes continue to rise.

Australia Post itself has repeatedly highlighted the growing issue of “porch pirates” during peak shopping periods, encouraging customers to use Parcel Lockers as a safer alternative to unattended home deliveries.

That security aspect is one of the key reasons the Australia Post Parcel Locker network has grown so rapidly.

Parcel Lockers are positioned as secure, monitored collection points that reduce the risk of theft while also improving delivery efficiency for Australia Post. Instead of multiple redelivery attempts, parcels can be consolidated into a single secure destination.

The Parcel Lockers themselves are free to use through a MyPost account and support a range of parcel sizes up to 16 kilograms and dimensions of approximately 35 x 44 x 61 centimetres.

Beyond receiving parcels, the system has increasingly become integrated into the broader eCommerce ecosystem.

Customers can now use Parcel Lockers to return online purchases, while retailers have embraced the model as a way to improve delivery success rates and reduce friction in the shopping process. Australia Post has actively expanded partnerships with major retailers and promoted Parcel Lockers as part of a broader out-of-home strategy.

The timing of that expansion aligns with broader changes in Australian shopping behaviour.

The acceleration of online retail during and after the pandemic placed enormous pressure on delivery infrastructure. Parcel volumes reached record highs, particularly during Black Friday and Christmas periods, with Australia Post delivering more than 100 million parcels during peak festive seasons.

That growth forced logistics providers to rethink the “last mile” of delivery, widely regarded as the most expensive and operationally difficult stage of the process.

Parcel Locker systems have increasingly been viewed as part of the long-term solution.

The concept itself is not unique to Australia. Parcel Locker networks have become common globally, particularly across Europe and Asia, where dense urban environments and apartment living create similar logistical challenges. But Australia’s geography and suburban sprawl made adoption slower initially.

Now, however, the convenience factor is driving mainstream usage.

For commuters, Parcel Lockers near train stations allow parcels to be collected on the way home from work. For apartment dwellers, they remove the uncertainty around access and missed deliveries.

The rise of the AusPost app has also streamlined the experience, centralising notifications, tracking and Parcel Locker access into a single platform. Australia Post has increasingly pushed customers toward app-based delivery management, partly as a way to combat phishing scams and fake delivery notifications, which have become more sophisticated in recent years.

The Parcel Locker model is also beginning to influence property development itself.

Parcel management has become a growing consideration in apartment building design, particularly as online shopping becomes embedded in everyday life. Many new residential developments are now incorporating dedicated parcel rooms or Parcel Locker systems into foyers and communal spaces.

For developers, parcel management is increasingly viewed as part of the broader resident amenity offering, alongside gyms, wellness spaces and communal work areas.

That reflects a wider evolution in how residential buildings are designed.

Apartment buyers are placing greater emphasis on convenience, security and operational functionality, particularly in higher-density urban environments. Parcel delivery, once considered a minor operational detail, has become an increasingly important part of that equation.

Australia Post’s Parcel Locker network sits at the centre of that behavioural shift.

What began as a simple alternative delivery option has evolved into a key piece of infrastructure supporting Australia’s growing eCommerce economy and changing urban lifestyles.

And as online shopping continues to expand, the role of Parcel Lockers is likely to become even more embedded in how Australians live, shop and receive goods.

How Australia Post Parcel Lockers changed parcel delivery convenience in Australia

Perth’s new apartment market recorded its strongest quarter of sales since Q4 2021, with 412 apartments sold in Q1 2026 and a record quarterly sold value of $537 million, according to Urbis’ latest Apartment Essentials results.

Urbis said the March quarter result reflects strong, highly product‑specific demand across both ends of the market, from more attainable projects delivering at scale, through to premium stock being absorbed by equity‑rich downsizers.&nbsp;

David Cresp, Partner at Urbis, said the key story in Perth is not demand, it is the market’s ability to convert demand into delivered housing.&nbsp;

“This is the strongest sales quarter since Q4 2021, and it reinforces that demand in Perth is real and it’s local,” David Cresp said. “But the task now is delivery, turning that demand into projects that can actually be built and completed.”&nbsp;

[smartcode_project:default project_id=110291 project_image_fid=302785]

<h2>Affordable product leads, premium demand remains resilient</h2>

Sales in Q1 were led by more affordable projects, with The Boulevard (SKS Group) recording 115 sales in the quarter, the presentation noting this is only the second time a single project has surpassed 100 quarterly sales. The project was able to offer more affordable housing product right next to a train station.&nbsp;

Palmyra West (Finbar) also delivered strong results with 28 sales in Q1, following 84 sales in Q4, with an average price of under $800,000, underscoring depth of demand for well‑located, attainable new stock.&nbsp;

At the premium end, Urbis said downsizer demand is continuing, with the results highlighting Romeo (Applecross, Finbar) recording 75 sales and reaching almost 50% sold in one quarter.

Jual (Shenton Park, Celsius Property) also posted a strong quarter with 28 sales, reaching 39% sold in one quarter.

Urbis noted that Perth apartment demand is not speculative, not investor‑led, and not uniform, describing it as localised, often equity‑driven and highly product‑specific, a pattern reflected in the polarisation between strong “attainable” performers and premium downsizer product.&nbsp;

[smartcode_project:default project_id=148957 project_image_fid=364102]

<h2>Prices underpinned by costs, and the delivery risk is growing</h2>

Urbis said pricing pressure is cost not demand‑driven: construction costs and delivery risk are now a central constraint, with the results noting build costs remain elevated and volatile, and that energy, fuel and labour uncertainty weigh on feasibility.

David Cresp said a growing challenge for private Build‑to‑Sell developers is simply securing a builder in the current environment.

“Developers are really feeling the pressure from a building market that was operating at capacity and securing a builder is challenging,” David Cresp said, adding that even where a builder can be secured, “trying to get to the price that makes the development financially viable is incredibly challenging in the current market.”&nbsp;

Urbis’ broader WA commentary also notes that industry remains at or above capacity with lot and housing creation, and that many builders are limiting new sales to manage stretched workforces and fixed‑price contract pressures, conditions that flow directly into apartment feasibility and delivery timing.

[smartcode_project:default project_id=108869 project_image_fid=317905]

<h2>Supply: improving later, but still constrained, and Perth lags eastern benchmarks</h2>

While near‑term supply remains constrained, Urbis’ forecast shows completions lifting “Supply is forecast to be back above 1,500 apartments per annum for the first time since 2019”, with 1,775 completions forecast for 2026, and volumes remaining above that level over the following years.&nbsp;

Looking further ahead, completions are forecast to reach 2,500 in 2028, with the report noting 32% of that total is social/affordable, reflecting the role of government‑supported delivery in rebuilding the pipeline.&nbsp;

However, Urbis said Perth remains behind comparable markets on pipeline scale. In a national comparison of projects under construction, the report shows under construction Perth Build‑to‑Sell (BTS) at 3,446 apartments versus the Gold Coast at 7,922. Mr Cresp said “The challenge for Perth is how to we grow the delivery pipeline”.

Urbis’ conclusion is that Perth’s market is increasingly defined by product discipline and delivery certainty, with the research identifying “delivery certainty is key” and calling out builder risk and procurement models as core success factors, alongside “timing and staging”.&nbsp;

Perth apartment sales hit strongest pace since late 2021 as builder capacity tightens

<a href="https://www.apartments.com.au/developers/sammut-developments">Sammut Group</a> has secured development approval for its latest Brisbane apartment project, marking the Sydney developer’s next step in expanding its Queensland pipeline following the success of its debut Gold Coast development, Coast.

The approved project at <a href="https://www.apartments.com.au/new-apartments/44-glen-road-toowong-qld-4066">44 Glen Road, </a><a href="https://www.apartments.com.au/developments/toowong-qld-4066">Toowong</a> will deliver a 15-storey riverfront apartment building with 42 residences, significantly increasing the scale of the site’s previous approval for a smaller luxury scheme. Designed by Bureau^proberts, the development will comprise a mix of predominantly four-bedroom and two-bedroom apartments positioned to maximise Brisbane River and city views.

Sammut Director Julian Sammut said the group had been actively searching Brisbane for several years before identifying Toowong as the right fit.

“Brisbane was the right step for Sammut,” Sammut said.

“With the success of Coast we thought we should definitely look to do more in Queensland alone. We then pushed up to look at Brisbane. We've been looking for I'd say two to three years actually and it was hard to find the right location.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screenshot%202025-12-23%20at%203.27.14%E2%80%AFPM.png?VersionId=dYAVIL7qdcGA8ojvkslSrLjczXFejSSx" />

Sammut said suburbs including New Farm and Teneriffe were considered before the group ultimately focused on Toowong due to its strong downsizer demographic and limited supply of developable riverfront land.

The site was acquired off-market after what Sammut described as a lengthy negotiation and planning process, with the developer pursuing an uplift to the original approval.

“We are DA approved now which is very exciting,” Sammut said.

“We've had our change approval come through and we've obviously doubled the height, 15 storeys plus rooftop. We've got 42 amazing apartments that are going to be coming to market soon.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-23%20at%203.27.26%E2%80%AFPM.png?VersionId=ohkRkY0dIZlqdfME2EZePsCQavRiBadE" />

Bureau^proberts said the design responds to Toowong’s evolving urban character, balancing contemporary apartment living with the area’s established residential identity.

“A place where traditional Queensland living has taken place for centuries; Toowong is seeing a shift of contemporary influence, commercial and retail hubs mixed with well-considered residential offerings – all the while maintaining its character and charm,” the architect noted in planning documents submitted to Brisbane City Council.

The architecture practice said the project’s form was shaped by its riverfront setting, flood considerations, neighbouring building scales, and view corridors.

“They said the mix of four and two-bedroom apartments capture the ‘fundamental qualities of Queenslander living,’ translated into the context of a contemporary subtropical building.”

The development sits just off Coronation Drive within walking distance of Toowong’s retail precinct and the upgraded Regatta ferry terminal, while also benefiting from proximity to the incoming green bridge connection to West End. Sammut said the accessibility and amenity offering were central to the site’s appeal.

The approval adds to growing residential activity along the Toowong riverfront, joining nearby projects including Consolidated Properties’ Monarch Residences and Spyre Group’s ARC Residences.

Sammut secures approval for debut Brisbane apartment development in Toowong

Developer Lanevick is heading back into Sydney’s apartment market after focusing more heavily on the luxury townhouse and terrace sector in recent years.

Lanevick, founded and directed by Steve Maroun, is expecting to receive approval in the coming months for a new apartment development in Gladesville, with the aim to launch it to the market later this year.

The 51-apartment project, designed by Studio Johnston, will comprise a mix of one-, two-, and three-bedroom apartments positioned toward the Hunters Hill downsizer market.

“Traditionally it’s been difficult for people in that market to downsize because there just hasn’t been the right product available,” Maroun said.

“We’re targeting buyers who might have 30 to 40 per cent of their house value sitting in the bank after downsizing.

“They still want good spacious entertaining areas, they still want quality design, but they also want flexibility and the ability to enjoy life a bit more after working hard for a long time.”

The project sits near Boronia Park and within close proximity to the Parramatta River foreshore, an area Maroun says offers more of a Hunters Hill lifestyle than a traditional apartment precinct.

“From a lifestyle perspective, it’s really more Hunters Hill than Gladesville,” Maroun said. “You’re close to the foreshore, close to parklands, and still connected back into the village precinct.”

From level four and above, apartments will capture water views&nbsp;toward Sydney Harbour. Communal amenity will include rooftop entertaining areas, wellness spaces, and a gym tailored toward owner-occupier buyers.

“We’ve really designed these apartments around that buyer coming from the Hunters Hill LGA and what they’re actually looking for in their next chapter.”

The proposed development has also been designed to respond to the changing character of the broader Gladesville town centre, where a growing number of mixed-use and residential proposals are expected to emerge over the coming years.

“Gladesville presented a rare opportunity to deliver a genuinely design-led residential project within an evolving lifestyle precinct, just moments from the growing Gladesville town centre, and we’ve approached the project with a strong focus on architecture, liveability and long-term community value,” Maroun said.

Maroun said Lanevick saw a first-mover advantage within the precinct as planning controls continue to evolve to accommodate greater housing density.

“We think there’s a real opportunity there that hasn’t really been serviced properly yet,” he said.

“There’s going to be a broader evolution of the whole Gladesville village precinct over time, particularly with more activation and mixed-use outcomes.”

The Venus Street proposal will include a commercial and retail component at ground level designed to contribute to that evolving streetscape activation.

“A big part of the thinking was how do you activate that area properly and create more vibrancy and amenity, which is what Hunters Hill has been looking for,” Maroun said.

Lanevick’s focus since 2020 has largely been on smaller-scale luxury townhouse and terrace developments. The developer recently completed Royale Randwick, also designed by Studio Johnston, where prices reached $3.65 million. The project was featured in the UDIA NSW 2026 Professional Development Prospectus and was also named a finalist for Development of the Year.

&nbsp;

Jonathan Chancellor

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