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GUEST OBSERVER
At last, the official labour force survey is starting to line up with other labour market measures, such as job advertisements and business surveys.
For quite some time we have argued that the divergence had largely reflected measurement issues in the official survey.
Stronger official prints in recent months means that the indicators are now all showing a tightening labour market.
The positive momentum is also consistent with the view emanating from the business surveys.
The NAB survey showed business conditions and capacity utilisation around decade highs in May.
This is happening despite weak real GDP numbers for 1Q.
The GDP print, which was published in early June, showed growth of 0.3% q-o-q and 1.7% y-o-y.
However, as we noted last month, we think most of the weakness reflects the impact of Cyclone Debbie and unusually wet weather on the east Coast.
Despite weak real GDP, nominal GDP rose by a strong 7.7% y-o-y, which is its fastest rate in over five years.
Nominal growth has been boosted by the rise in commodity prices, although there are also some signs that the nominal lift has moved beyond just a mining story.
Corporate profits have also picked up in a broad range of non-mining sectors.
However, as yet, we have not seen a pick-up in wages growth.
Although there are signs that wages growth has stabilised, it is still running at multi-decade lows.
Nonetheless, we expect wages growth to pick-up in 2H17 supported by a number of factors.
First, corporate profits growth is strong and historically this leads to a rise in wages growth.
Second, the labour market is tightening, and even though the link between wages and jobs market conditions may be weaker than in the past we still expect some traction.
Third, the minimum wage was lifted by more this year than last year, which we expect could add 0.2-0.3ppts to wages growth.
The lift in wages growth should support a gradual rise in underlying inflation.
Once the RBA sees clear evidence of a lift in wages growth, we expect that a hike will not be too far away.
On fixed income strategy, expect front-end risk premium to rise as the RBA would like to remove accommodative policy if/when the data allows, similar to other central banks.
As we pointed out last month, ahead of the 1Q national accounts, Cyclone Debbie and wet weather on the east Coast were expected to hold back first quarter GDP growth and indeed they did (Chart 1).
<a href="https://www.propertyobserver.com.au/images/2017/06/30/Chart-1.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/2017/06/30/Chart-1.jpg" alt="">
Exports fell, partly due to a fall in coal exports out of Queensland, retail sales were held back and housing construction also declined in the first quarter.
Much of this disruption is likely to be temporary.
Coal exports and retail sales have already bounced back and there is still a considerable pipeline of work yet to be done on apartments in major cities.
We expect modest growth in 2Q, as the cyclone effect continued into April, and then a strong bounce back in 2H.
Although real GDP was weak in the first quarter, nominal GDP rose at its fastest pace in over five years, particularly supported by higher commodity prices (Chart 2).
<a href="https://www.propertyobserver.com.au/images/2017/06/30/Chart-2.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/2017/06/30/Chart-2.jpg" alt="">
Measures that are better at abstracting from the impact of weather, such as business surveys and the labour market numbers, are also showing that underlying economic conditions are improving, rather than deteriorating.
Indeed, the NAB survey shows that business conditions and capacity utilisation are around decade-highs (Chart 3 and 4).
<a href="https://www.propertyobserver.com.au/images/2017/06/30/Chart-3.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/2017/06/30/Chart-3.jpg" alt="">
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The improvement in surveyed business conditions is consistent with a strong recent lift in profits.
Although part of this reflects the effect of higher commodity prices on the mining industry, with mining profits up 113% y-o-y, non-mining profits have also lifted by a strong 17% y-o-y.
The jobs numbers suggest the labour market is tightening rather than loosening.
Given measurement issues in the official survey we have, for some time, been putting more emphasis on other measures of the labour market, such as the job advertisements and business surveys.
To keep track, we constructed a labour market index, which has shown a trend improvement in the jobs market, unlike the official survey (Chart 5).
<a href="https://www.propertyobserver.com.au/images/2017/06/30/Chart-5.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/2017/06/30/Chart-5.jpg" alt="">
However, the official numbers are now starting to come back into line.
A strong lift in the official jobs growth numbers in the past three months drove the unemployment rate down to 5.5% in May, which is its lowest level since 2013 (Chart 6).
<a href="https://www.propertyobserver.com.au/images/2017/06/30/Chart-6.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/2017/06/30/Chart-6.jpg" alt="">
The official numbers also showed a sharp jump in hours worked in May, which has brought the trend growth in hours worked back into line with the employment numbers (Chart 7).
<a href="https://www.propertyobserver.com.au/images/2017/06/30/Chart-7.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/2017/06/30/Chart-7.jpg" alt="">
A key question for the RBA is: when will the tightening in the labour market start to translate into a pick-up in wages growth?
The main indicators are showing signs that wage growth has stabilised, but there are few signs of a pick-up at this stage.
Many other countries are also grappling with the fact that labour markets have tightened, but wages growth has not yet lifted.
Our central case is that local wages growth will gradually pick-up in the second half of 2017.
Our view has largely been formed around the idea that there is a strong historical positive correlation between the terms of trade (mostly driven by commodity prices) and unit labour costs in Australia.
Typically, when commodity prices rise and support a pick-up in nominal GDP, some part of this boost to incomes ends up in wages growth.
Although it could be argued that the lift in commodity prices will have less effect this time around, as there is unlikely to be another mining investment boom, it is also worth keeping in mind that profits are also rising in the non-mining industries (Chart 8).
<a href="https://www.propertyobserver.com.au/images/2017/06/30/Chart-8.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/2017/06/30/Chart-8.jpg" alt="">
As the chart shows, there is also a strong positive correlation between non-mining profits and wages growth.
The recent lift in the minimum wage also supports our view.
The Fair Work Commission announced a 3.3% rise in the minimum wage from 1 July 2017, which is larger than the 2.4% rise announced last year.
This decision directly affects around one-quarter of all workers and can also form the benchmark for other enterprise bargaining agreements.
We expect the decision to lift wages growth by 0.2-0.3ppts.
The improvement in the local labour market and business conditions as well as improving global economic conditions and a recent shift in rhetoric at other central banks will all act to re-affirm the RBA’s view that it will not need to cut the cash rate further.
Although the RBA’s commentary has suggested that the leverage-fuelled housing market boom had been the key reason that it is not considering further cuts, improvements in the local and global macro-economy over recent months would further bolster the central bank’s resolve.
The RBA will also be keenly aware that central banks have gradually been turning more hawkish in recent weeks.
The Federal Reserve has clearly suggested that it will begin to reduce its balance sheet soon and that it intends to continue to lift its policy rate.
The ECB has given stronger hints that it may reduce its quantitative easing program soon.
<a href="https://www.propertyobserver.com.au/images/2017/06/30/Chart-9.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/2017/06/30/Chart-9.jpg" alt="">
There is debate at the Bank of England, amongst the MPC members, about the possibility of a rate hike.
Officials from the Bank of Canada and Norges Bank have turned more hawkish in recent weeks.
We do not expect the RBA to introduce any explicit forward-guidance in its policy statement, although the tone of the commentary may very well be a little more upbeat than previously, particularly on the local labour market.
We expect the RBA to point to forthcoming CPI numbers as the next key release to watch.
In our view, once the RBA has clear signs that wages growth is past its trough it will not be long before it will seek to move towards a more normal cash rate setting.
Our central case is for a hike in 1Q18 (not quite yet, but sooner than the market is currently pricing).
A growing theme in developed market central bank communication has been a boldness in signalling the removal of accommodative monetary policy, with softening headline inflation and weak wage growth downplayed.
The Bank of Canada’s recent communication shift was particularly interesting given that Canada shares many similar macro attributes with Australia, meaning they tend to be cyclically synchronised.
That front-end pricing has moved to opposite extremes presents an attractive cross-market opportunity, in our view.
Even if the RBA is not the “next cab off the rank”, we believe the risk-reward favours positioning for higher AUD front-end risk premium.
Current OIS implies a broadly flat path for the cash rate over the next 12 months, while only Japan and Switzerland have a lower spread between 2Y IRS and the 3m fixing among the G10 countries.
Yet, the RBA has set a very high bar for cuts and we suspect the central bank has a strong desire to remove its accommodative policy if/when the data allows.
Recent tightening of the labour market (the unemployment rate fell to 5.5% in May – the lowest since 2013) should embolden the hawks.
Paul Bloxham is the Chief Economist for HSBC and Daniel Smith is the Economist for HSBC. They can be contacted <a href="https://www.hsbc.com.au" target="_blank">here</a>.
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The hikes are coming, but not quite there yet: HSBC

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GUEST OBSERVER
The 2016/17 financial year is now complete and it is an opportune time to see how investments, financial markets and economies have performed over the past year.
Overall, the year was remarkable for being unremarkable. At least as far as the economy and financial markets performed. The year started with the fall-out from Brexit.
There was a domestic election and the US Presidential election. In 2017 there has been a raft of elections in Europe. And there was the OPEC production agreement.
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<img src="https://www.urban.com.au/images/2017/07/03/Screen%20Shot%202017-07-04%20at%208.16.09%20AM.png" alt="">
But despite the challenges, returns on shares and residential property lifted over the past year while interest rates are lower and the Aussie dollar is little changed from a year ago. In fact the Aussie dollar has tracked a range of US6.25 cents – the least volatile year in 27 years. The sharemarket has had the least volatile year in 16 years. And the record (and world-leading) Australian economic expansion continues.
The economy has grown by around 1.75-2.00 per cent in 2016/17 and we expect growth of around 3.0 per cent in 2017/18. Infrastructure will be a key driver of growth in 2017/18 alongside exports, while home building continues, especially in Sydney, Melbourne &amp; Brisbane. Underlying inflation may lift from 1.7 per cent to 2.0 per cent over the coming financial year while unemployment may ease modestly from 4-year lows of 5.5 per cent currently to the 5.0-5.5 per cent range. Official interest rates may remain on hold for another year.
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<img src="https://www.urban.com.au/images/2017/07/03/Screen%20Shot%202017-07-04%20at%208.17.31%20AM.png" alt="">
It is clear that Australia is well placed. Inflation is under control; interest rates are at record lows, the Aussie dollar is supportive and the record expansion continues 
What does the data show?
Interest rates
The cash rate stands at a record low of 1.50 per cent, down from 1.75 per cent in June 2016, and courtesy of a quarter per cent rate cut in August 2016.
The market-determined 90-day bank bill rate has fallen from 1.97 per cent to 1.72 per cent over 2016/17. Yields on the long bond – 10-year government bonds – have held between 1.85 per cent and 2.99 per cent. Long-bond yields hit record lows on August 11 2016 and now stand at 2.39 per cent.
Currencies
The Aussie dollar has risen around 3.6 per cent over 2016/17. The Aussie started the year around US74.26 cents and ended the year at US76.92 cents. We have calculated that the Aussie is 22nd strongest against the US dollar of 117 currencies tracked. The strongest currencies have been the Icelandic króna (up 17 per cent), Swazilabnd lilangeni (up 11.3 per cent), South African rand (up 11.1 per cent), and Israeli shekel (up almost 10 per cent). Weakest currencies have been Syrian pound (down 138 per cent), Egyptian pound (down 104 per cent) and Turkish lira (down 22 per cent).
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<img src="https://www.urban.com.au/images/2017/07/03/Screen%20Shot%202017-07-04%20at%208.18.35%20AM.png" alt="">
In the six months of 2017, the Aussie dollar is rose just over 6 per cent against the US dollar, making it the 25th strongest of 117 currencies tracked. The strongest currencies have been the Mozambique metical (up 16 per cent), Mexican peso (up 13 per cent), and Poland zloty (up 11 per cent). Weakest currencies have been the Tunisian dinar (down 5 per cent), Ethiopian birr (down 4 percent) and Agentinian lec (down 3.9 per cent).
The high for the Aussie dollar in 2016/17 was US77.77 cents in November 2016 and the low was US71.52 cents in December 2016. The US6.25 cent range for the Aussie dollar is the smallest in 27 years.
Commodities
Commodity prices have been decidedly mixed over 2016/17. The Commodity Research Bureau futures index has fallen 9 per cent over the year, under-performing the Aussie dollar (up 3.6 per cent)
The price of oil is down almost 5 per cent, gold is down 6 per cent and sugar is lower by 32 per cent. But iron ore prices have lifted 15 per cent, thermal coal has risen by 36 per cent, beef is up 10 per cent and base metal prices have generally firmed over the period with lead, zinc and copper up between 22-31 per cent.
Sharemarket
The Australian sharemarket started 2016/17 with the All Ordinaries at 5,327.0 and the ASX200 at 5,246.6. The All Ords ended the financial year at 5,764.0 points (up 8.5 per cent) with the ASX200 at 5,721.5 (up 9.3 per cent). We estimate that Australia is 55th of 73 global bourses and only five bourses recorded declines in 2016/17. The best performer has been hyperinflation-affected Venezuela (up 860 per cent) but notably Greece is up 52 per cent and Austria is up 48 per cent. The worst performers have been West Africa, Oman, Qatar and South Africa. 
In the six months of 2017, the All Ordinaries has risen by 0.8 per cent, ranking Australia 61st of 73 nations. Commodity producers have recorded the weakest performances such as Qatar, Canada, South Africa, Saudi Arabia and Brazil. Best performers include Greece, Austria, Argentina, Nigeria and Turkey.
Investment returns
Total returns on Australian shares (All Ordinaries Accumulation index) rose 13.1 per cent over 2016/17. Returns on dwellings are up 13.2 per cent while returns on government bonds have fallen by 0.8 per cent. The returns on bonds, was the weakest result in 23 years.
Sectors &amp; size groupings
 Of the 21 identified industry sub-sectors, only five recorded declines in 2016/17.
Leading the gains has been Consumer Durables &amp; Apparel (up by over 40 per cent) followed by Food, Beverages &amp; Tobacco (up 29.1 per cent) and Capital Goods (up 26.3 per cent)
At the other end of the scale, Telecom has fallen by over 26 per cent, followed by the Real estate sector (down almost 9 per cent) and Autos &amp; Components (down 6 per cent).
Of the size categories, the MidCap 50 index has again out- performed, (up 14.2 per cent), from the ASX100 (up 9.7 per cent), ASX 50 (up 9.1 per cent) and Small Ordinaries (up 3.7 per cent).
What are the implications for investors?
Returns on shares are set to record the best gain in three years. And that means that sharemarket returns have only fallen once in the past seven years. So an investor that has employed a diversified strategy across asset classes would be well pleased with the performance over the past year.
The economic and financial metrics remain encouraging. Australia has underlying inflation below the Reserve Bank’s 2- 3 per cent target band at 1.7 per cent. Economic growth is low at 1.7 per cent but that reflects a raft of elections in 2016/17 as well as bad weather. Business conditions are near 9-year highs. The cash rate is at record lows. And unemployment is at a 4-year low of 5.5 per cent,
Housing is providing the momentum for the economy with home building and purchase especially driving the NSW, Victorian and ACT economies. Over the coming year, infrastructure will be a key driver of economic activity. 
Over the coming year more and more apartments will be completed with more stock hitting the market. It has taken a little longer than expected, but supply and demand for homes are likely to prove more balanced in 2017/18, restraining growth in home prices.
Last year we noted: “CommSec expects the All Ordinaries index to be near 5,500-5,700 points at end-December 2016 and 5,700- 5,900 points in June 2017.” The December forecasts was realised and similarly the June forecast should has been realised.
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<img src="https://www.urban.com.au/images/2017/07/03/Screen%20Shot%202017-07-04%20at%208.19.50%20AM.png" alt="">
Over the coming year CommSec expects the All Ordinaries index to be near 5,900-6,100 points at end-December 2017 and 6,000-6,200 points in June 2018.
Home prices nationally are likely to grow by 5-7 per cent in 2017/18 with inflation around 2.0 per cent. The Aussie dollar is expected to remain in the mid 70s against the US dollar over most of the coming year.
The low inflation/low interest rate environment is entrenched, meaning that lower nominal investment returns are also here to stay. So investors will need to remain flexible and alert to the returns achieved across sharemarket sectors and across asset classes to ensure that their savings are keeping pace with the cost of living.
The issues to watch over the coming year include Donald Trump; Oil prices; Australian home prices; Wages &amp; Jobs; and Geopolitics.
US President Trump was elected vowing to cut taxes, repeal the Obamacare health reforms and spend more on infrastructure. Global sharemarkets have rallied on the expectation that extra stimulus in the US will boost revenues and profits.
 But we are still waiting for the tax cuts. Infrastructure spending has been announced – now it is a case of gauging the impact on the economy. The Federal Reserve will take its time lifting interest rates back to more “normal” levels for the simple fact that inflation is well contained.
A soft landing for Australian housing is possible. But there is also the risk of indigestion if too much supply comes onto the market at one time. Overall, regulators and banks have done well in restraining buyer effervescence.
We assume that Aussie households will gradually get used to the new reality of 2 per cent wage growth, especially as wages are still out-pacing prices and the job market is lifting in line with strong business conditions.
There are all manner of geopolitical risks. But these can never be adequately factored into forecasts. As always investors need to be alert, not alarmed.
Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>.
Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a>. 
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Remarkable for being unremarkable: CommSec

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GUEST OBSERVER
The Reserve Bank of Australia Governor Philip Lowe was not taken to giving boring speeches. This week, Federal Reserve Chair Janet Yellen went him one better with her remarks to the British Academy. 
Yellen said of the prospect of another financial crisis like that of 2008: 
"I do think we’re much safer, and I hope that it will not be in our lifetimes, and I don’t think it will be."
Her rationale was that the regulatory changes put in place since the crisis have made the system a great deal safer.
Yellen expressed her hope that these regulations would not be overturned, saying of attempts to do so:
"We’re now about a decade after the crisis and memories do tend to fade, so I hope that won’t be the case, and I hope those of us who went through it will remind the public that it’s very important to have a safer, sounder financial system and that this is central to sustainable growth."
One piece of evidence supporting Yellen’s view were the so-called “stress tests” that the Federal Reserve has performed on US banks since 2011.
Just hours before this writing, the Fed approved plans for proposed dividend payouts for all 34 firms taking part in their annual stress tests. This is the first time since the annual stress tests began that all participating firms got a passing grade from the Fed.
So what should we make of Yellen’s prediction? This doesn’t have the ring of “confidence-boosting” rhetoric. It seems as though this is her genuine view.
At this point I should make two things clear. One: I have enormous respect for Janet Yellen, and two: I was fairly surprised by her remarks. So how does one reconcile these?
We still don’t know what caused the global financial crisis
It’s important to understand that the proximate cause of the financial crisis was a kind of “bank run on the system”. In a classic bank run - like the ones of the Great Depression - depositors go from believing that other depositors think their banks are safe, and are therefore willing to leave their money there, to believing that others consider the banks unsound.
Once investors believe that other investors are going to run on the bank, they want to run too (because banks typically hold less than 10% of the cash required to pay back all depositors). In the language of game theory, there is a switch from the “good equilibrium” to the “bad equilibrium”.
In the financial crisis there wasn’t a run on traditional banks so much as on investment banks and other financial institutions. This led to credit markets drying up (such as the commercial debt and “repo” markets).
What caused this shift in beliefs is a hotly debated issue. The large increase in US house prices and imprudent lending by US mortgage originators played an important role. The use of collateralised debt obligations (CDOs) and synthetic versions of CDOs were important. Lack of regulator controls allowed these things to happen, and incentives within financial institutions facilitated and encouraged risk and bad behaviour.
Yet for quite a long time the “good equilibrium” prevailed. What caused the switch?
That is the big question, and I’m pretty confident that not even Yellen knows the answer.
It all comes down to what we believe
What Yellen does seem to be saying is that regulatory responses to the crisis have made it much less likely that bad behaviour is going to occur. That certainly seems plausible. And if there is no - or very little - bad behavior, then beliefs about what other believe may not be particularly important.
But if there is a view that some new form of moral hazard is taking place, and people lose faith in the regulatory regime, then perhaps 2008 could occur again. And soon.
As game theory - and the lessons of the classic depression-era bank runs - teach us, it all comes down to what people believe about what other people believe.
That seems like a pretty slippery object to me.
<a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">Richard Holden</a> is a Professor of Economics and PLuS Alliance Fellow at UNSW and author for The Conversation.
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How likely is another financial crisis? It comes down to what we believe

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GUEST OBSERVER
Current market mechanisms need to be reformed to give better price signals to developers, and to direct subsidies to achieve the goal of affordable housing.
Ideally, the reforms would be comprehensive, including road congestion charges, capital gains taxes and negative gearing, tax-advantaged investment, and other measures. But such comprehensive reforms are unlikely. 
Furthermore, general solutions that apply throughout Australia may be unnecessary for problems concentrated in major cities. It is strategic to focus on more incremental, local responses that target problem areas.
A targeted solution
The suggested package of practical measures would be based on a special rate applying to new residential developments in selected urban centres. This strategic intervention is justified by being a form of benefit capture– one that would send more efficient price signals to the market. 
Also, this rate would improve the capability to deliver affordable housing with appropriate infrastructure.
This approach also creates an asset from the flow of future income from the special rate. This reliable income flow will help attract long-term investment by the private sector at relatively low interest rates (government guarantees or tax-advantaged provisions could also help attract investment).
The special rate is levied on the land area of a centre. The total income from the rate is enough to service debt used to fund infrastructure provision, as well as to compensate government for the removal of stamp duty and contributions paid by developers. 
Removing these costs will reduce up-front dwelling prices, and make the market more efficient.
How would a special rate work?
The standard rate per dwelling is set according to a target number of dwellings for the centre. A dwelling target and special rate are then allocated to each site based on its area. 
The allocated rate for a site is apportioned to individual properties at subdivision. A buyer of a dwelling would purchase property with a known obligation to pay the special rate.
If a development has fewer dwellings than its site target, then the average special rate per dwelling will be correspondingly higher. A denser development would have a lower rate per dwelling. This creates an incentive to supply more affordable dwellings at higher density.
Measures to promote transit-oriented development would be complementary. So too with inclusionary zonings that give priority to housing associations or long-term rental investors. 
This proposal could be extended by giving the agency responsible for setting the rate and providing infrastructure the authority to acquire and rezone land, and sell it to developers. This would reduce land costs and risks with gaining approvals. 
Furthermore, land could be sold for long-term rental housing at reduced prices but with additional special rates.
What’s wrong with current approaches?
Currently, no strategic pricing mechanism applies to infrastructure servicing new development. There are either no charges on development or capped ones with providing water, sewerage, drains, public domain and other infrastructure. This means developers do not have to take into account the costs of providing such infrastructure when considering their proposals.
The lack of pricing discipline does not encourage efficiency. This means subsidies, with unpriced resources used, increase with inefficiency. High-cost infrastructure developments get greater subsidies than low-cost ones, and the lower the density, the greater the subsidy per dwelling. This promotes less dense and more dispersed development. 
In essence, current pricing mechanisms are at odds with the policy goals of affordable housing and denser and better-structured urban development. This feeds, in turn, into problems like congestion management, productivity, and economic growth.
Under current arrangements, the wider public bears the cost of subsidies. The criticism here is not against subsidies, but against policies that are not efficient in achieving social objectives. Reforms are needed if markets are to be more efficient at producing affordable housing and improving wider urban outcomes.
Current policies on economic growth and affordable housing presume coherence between them. But this presumption may not be realistic. 
Economic and population growth are accompanied by increased demand for housing. The prevailing policy response is for more-of-the-same, prioritising land rezoning. This would work if it led to reduced demand for the lower-priced portion of the housing stock. This portion of the market desirably should increase with increasing prices.
This is not happening and cannot be expected to happen without some major adverse economic event. Complementary market reforms are essential to achieve economic growth with affordable housing.
The risks of blunt policy instruments
There is also a paradox: even if more-of-the-same policy worked, would it be desirable? Policy based on decreased demand for significant portions of the market may be undesirable as well as unrealistic. 
Price decreases would reduce owners’ equity. They would also reduce the value of mortgages held by lenders, such as banks. In turn, this would reduce the value of lenders’ assets and thus reduce wider lending, affecting the wider economy. 
Policies to reduce oversupply by reducing lending are sensible. However, they create a situation where prices are allowed to increase while significant decreases are prevented. 
Interest rate adjustments are a crude instrument for managing housing markets. Interest rate increases may curtail oversupply in some parts of the market but would exacerbate under-supply in the lower-priced market. 
Furthermore, government concern about perceived housing bubbles may distort interest rate policy to the detriment of the wider economy. Adopting more precise instruments would be strategic.
The proposed measures are complementary to current policies as they promote pricing reforms to make the market more efficient and more effective in producing affordable housing. They are better targeted than wider taxation and interest rate policies, and would make wider economic policy less dependent on housing issues.
Martin Payne is casual lecturer in Planning, University of Sydney and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/martin-payne-323295" target="_blank">here</a>.
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Send the market a price signal where affordable housing is most needed

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<img src="https://counter.theconversation.edu.au/content/78100/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Australians were once world champion beef-eaters but now you’re much more likely to find chicken than steak on Australian dinner tables.
Total meat consumption per capita in Australia has been stable since the 1960s, at around 110 kilograms per person per year.
But the type of meat consumed has changed significantly, with chicken and pork both now far outstripping beef, mutton and lamb, according to historical data from researchers Wong et al and more recent data from the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES).
<a href="https://www.propertyobserver.com.au/images/2017/06/16/Screen%20Shot%202017-06-16%20at%201.32.34%20PM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/16/Screen%20Shot%202017-06-16%20at%201.32.34%20PM.png" alt="">
Source: <a href="https://www.sciencedirect.com/science/article/pii/S0264999315000656" target="_blank">Wong et al and ABARES</a> 
(The apparent spike in beef consumption in the late 1970s is linked to Australia’s beef export trade crash and much of this spike was thought to have gone to pet food and by-products rather than the dinner table).
Whereas chicken was once a rare meal, eaten on special occasions, today the Australian chicken industry produces around 600 million chickens a year. Most are consumed domestically.
The per-capita annual consumption of chicken meat in Australia increased ten-fold from 4.6 kilograms per person in 1965 to 47 kilograms in 2016. The industry projects growth to 49.2 kilograms a person by 2019–20.
From the 1960s on, public health messages steered people away from red meats. There was also a rapid proliferation of fast food franchises selling chicken - notably the entry of Kentucky Fried Chicken in 1969.
Similarly, pork consumption has been bolstered by re-marketing. Once considered a red meat, pork was reinvented as “the other white meat” through a marketing campaign categorising pork as lighter and healthier, alongside chicken (and due to changes in breeding, pork meat really has lightened in colour over recent decades). While not as steep an increase as chicken, pork consumption in Australia has nearly tripled since the 1980s.
However, a major driver of these changes has been price, linked to massive changes in production.
<a href="https://www.propertyobserver.com.au/images/2017/06/16/Screen%20Shot%202017-06-16%20at%201.34.41%20PM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/16/Screen%20Shot%202017-06-16%20at%201.34.41%20PM.png" alt="">
Source: <a href="https://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6401.0Mar%202017?OpenDocument" target="_blank">ABS CPI TABLE 9. CPI: Group, Sub-group and Expenditure Class, Index Numbers by Capital City</a>
After adjusting for inflation, chicken per kilo costs less than a third of its price than it did in the early 1970s, while real prices for other meats have been comparatively static. The Australian Chicken Meat Federation, which represents chicken producers, reports that over the five years to 2014–15, chicken meat was on average 50% cheaper than pork, 59% cheaper than lamb and 65% cheaper than beef.
Since the 1960s, most Australian chicken and pork production has become rapidly industrialised and automated in large intensive indoors operations. Piggeries and broiler farms have typically become specialised, intensified, high technology factory farm complexes. Intensification of chicken production has increased efficiency, in turn steadily decreasing the retail price of chicken. Around 70% of chicken meat is supplied by two privately owned processing companies, the Australian Chicken Meat Federation says.
Chicken farms in Australia have increased markedly in size and intensity. Our research on planning disputes shows farms of the 1970s housed around 10,000 chickens. Now, while nearly 600 million broiler chickens were slaughtered in Australia in 2014-15, there were only around 750 broiler farms, a decline from the 1990s. The average chicken farm now has nearly 120,000 chickens at any one time and some run into millions. The number of pork farms has also dropped, consolidating into larger operations.
<a href="https://www.propertyobserver.com.au/images/2017/06/16/Screen%20Shot%202017-06-16%20at%201.36.11%20PM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/16/Screen%20Shot%202017-06-16%20at%201.36.11%20PM.png" alt="">
Global meat consumption continues to rise rapidly as more countries – notably China – increase their consumption of meat and dairy products. Australia imports very little meat due to strict quarantine, but is a major exporter of beef, sheep and goats.
Sheep and cattle farms are more extensive, more common, and produce fewer animals than pork or chicken farms. There were over 66,000 cattle farms and around 39,000 sheep farms in Australia in 2015-16. Cattle farm numbers and the overall cattle herd declined slightly, although this belies the formation of two extremes: at one end large and export-focussed grazing, while other areas have seen a proliferation of sub-commercial, small-scale, scattered “hobby” grazing. The national sheep flock also declined, and is transitioning away from wool production to meat and dual-purpose breeds.
These transitions in production and consumption of meat result in some rural and semi-rural landscapes shifting to expansive, remotely-managed holdings in areas with declining population. Closer to cities, hobby farmers and amenity migrants sit in often uneasy proximity to industrial scale production.
As other countries take up Australia’s traditional fondness for meat, global as well as domestic forces continue to change the nature of farming and Australian rural landscapes. That, in turn, also affects the price and type of meat Australians consume.
<a href="https://theconversation.com/profiles/elizabeth-taylor-97922" target="_blank">Elizabeth Taylor </a>is Vice Chancellor's Post-Doctoral Research Fellow, RMIT University.
<a href="https://theconversation.com/profiles/andrew-butt-229215" target="_blank">Andrew Butt </a>is <a href="https://theconversation.com/profiles/andrew-butt-229215" target="_blank"></a>Senior Lecturer in Community Planning and Development, La Trobe University.
Both are authors for The Conversation.
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Three charts on Australia's declining taste for beef and growing appetite for chicken

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SPONSORED POST
Sam Khalil's property investment outlook investigates and dissects recent market changes that Australian property investors should be aware of.
In part one, Sam Khalil gave his thoughts on <a href="/expert-insights/investing/sam-khalil-s-property-investment-outlook-part-one">Australian property investment in 2017</a>.  He looked at performance in the capital cities and identified regions that will continue to grow despite changing market forces. 
In part two, Sam investigates and dissects recent market changes that property investors should be aware of.
Stricter lending rules
There are far tighter lending guidelines than ever before. This has all been generated by ASIC, worried about high levels of risk in a red hot market.  It has trickled down to all the major lenders. CBA and Bankwest are refusing to refinance investors. While AMP will no longer offer new investor loans through their mortgage channel. Other lenders such as MyState have imposed a 12 basis point margin on all variable and fixed rates, for both investment and residential loans. Meanwhile APRA is bringing in a 10 percent speed limit for investors. There could be more restrictions on the horizon with APRA worried about the level of risk in the market.
Overall lenders are charging more for investment loans and then again for interest only. This will make people revaluate their lenders and question if they will purchase at all.
Foreigners locked out of the market
There has been a distinct clamping down on foreign investment over the last year. Westpac is not writing loans for non-residents, ANZ is no longer lending to non-residents and the CBA is following suit. Other banks have similar tight restrictions. The sum effect has been that foreign investors are walking away in droves, many unable to get funding. This in turn will have a flow on effect to the construction industry, impacting on the number of new builds. There’s also speculation that foreign investors will favour apartments over houses even more than they currently do because they need a lesser deposit.
Development slowing down
Developers have seen significant tightening in lending for projects. This has slowed down supply, which may be a stabilising measure to avoid any large property bubble bursting.  Banks have especially tightened down on lending to residential property developers with an oversupply of apartments and high-rise towers an especial concern. This has led to many developers to put projects on hold and others look to for alternate funding.
Shortage of land
There’s a desperate demand for new land supply in <a href="https://www.dpn.com.au/learn/market-updates/macarthur-the-sleeping-giant-of-sydney" target="_blank">Sydney’s fringe</a> as well as Wollongong and Newcastle. Developers are finding it extremely difficult to process land through local councils and then register the land. We must hope that the NSW government can fast track services to bring land to the market sooner so pricing doesn’t continue to increase dramatically due to lack of supply. This is the primary issue affecting housing affordability: land supply and how quickly it arrives to the market. Remember there’s always a lag between development and construction and the frantic nature of the market itself.
Apartment oversupply
There’s a real concern about apartment oversupply in the major capital cities, especially in Melbourne. The Commonwealth Bank estimates 140,000 new apartments will be built in the city from 2016 to 2018. This oversupply will ultimately lead to a drop in prices. Some experts are anticipating drastic drops of up to 20 percent in some suburbs by 2019.  So projected growth for apartments in many major cities has hit its peak and is estimated to correct or be sideways for next 5-8 years, with owners losing money and not getting capital growth. So there’s a clear message here: be very wary of apartment purchasing for the next few years. Research the area and project meticulously.
The global market
Well, it’s almost impossible not to talk about the political upheavals last year. From Brexit through to Trump it was a year of surprises. Trump’s avowal to increase spending around infrastructure and his distancing from the Asia trade pacts will certainly have an effect on Australia. His promise to pour money into defence and infrastructure will act as a fiscal stimulus. It’ll also mean lots of capital fleeing Australia and going into the USA. Potentially Australia will have to lift interest rates to compete and keep capital here. This in turn will effect market sentiment. Properties and projects that are vulnerable will be exposed awfully quickly.
You can read the original article <a href="https://www.dpn.com.au/learn/market-updates/sam-khalil%E2%80%99s-property-investment-outlook-part-two-winter-2017" target="_blank">here</a>.
For more information from <a href="https://www.dpn.com.au/" target="_blank">DPN</a>.
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Sam Khalil’s property investment outlook - part two

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SPONSORED POST
The Australian property market is shifting and changing thanks to a multitude of forces. DPN's Managing Director, Sam Khalil shares his thoughts on the current market and reveals property investment opportunities in the Wollongong, Newcastle and Brisbane areas.
The last five years have seen a phenomenal surge in the demand for property. It’s been a perfect storm of consistently low interest rates; an endless, thirsty demand for stock and foreign investment at record high levels. This in turn pushed up construction and new builds and kept up supply.
However, like all good things it had to come to an end. This is not to say the market is in trouble by any means. More that it’s no longer like 2012 or 2013 where property investment was like shooting fish in a barrel. Almost anyone with a little knowledge and a lot of luck could do well in the prosperous conditions.
But things have changed in <a href="https://www.dpn.com.au/learn/market-updates/sam-khalil%E2%80%99s-property-outlook-for-summer-2016" target="_blank">the last 12 months</a> and so 2017 and beyond will still present golden opportunities, but only for the canny and well researched investor.
How property investment is changing in the capital cities
2016 saw Melbourne and Sydney continue to rise significantly compared to other Australian cities. Despite gloom and doom predictions - remember there were lots of experts claiming Melbourne would slump in 2016 and that Sydney would stagnate - both cities outperformed expectations. In fact, dwelling prices rose 15.5 percent in Sydney whilst Melbourne had a rise of 13.7 percent for the year.
Perth had experienced seven quarters of negative growth and is in major recovery mode after its boom and bust. However, it may well have reached the bottom and signs are that it’s slowly starting to ascend. In the last 3 months there has been a small increase in property prices for the first time in a long time. It’s still a long way back, but investors who can’t afford the big capital cities may start looking in this direction.
Brisbane started a gentle ascent and should continue to find value in housing and land appreciation, whilst inner city apartments may experience price correction as I detail in part two.
So how will 2017/2018 play out? I’m confident we’ll see rises in Sydney and Melbourne as demand and sentiment still remain positive. Brisbane investment property will continue to follow closely behind. The lending measures that may impact the market and sentiment are the move in interest rates from lenders separate to the Reserve Bank.
Look to the regions
Land in <a href="https://www.dpn.com.au/learn/market-updates/macarthur-the-sleeping-giant-of-sydney" target="_blank">South Western Sydney</a>, Wollongong and Newcastle remains very tight with strong local and investment demand helping sustain and increase prices of land.  These areas will only continue to grow in 2017. It’s not just investors but we’re seeing many Sydney “refugees” – that is younger owner-occupiers - who are moving to these areas in search of houses they can afford. Because all three areas are within coo-ee of Sydney and they all have their own strong infrastructure and local economy they are highly desirable and will continue to rise.
It’s worth noting that Brisbane is also showing signs of upward movement in land values in the metro area. And not just Brisbane itself, but even further out there’s some very strong opportunities as we recently noted in the case of <a href="https://www.dpn.com.au/learn/market-updates/why-springfield-brisbane-is-a-hot-investment" target="_blank">Springfield</a>.
Overall forecast
So what does all this tell us? Sam Khalil’s outlook is positive, there are a myriad of opportunities in the market. Which, as we know, are really <a href="https://www.dpn.com.au/learn/how-to-guides/what-is-a-property-market" target="_blank">many different markets</a>.
The caveat being that one has to be more selective as market forces could change due to macro economic factors and policy changes by the regulators as well as the oversupply of apartments. This apartment oversupply poses the greatest risk for investors. It’s a cautionary reminder of not buying through emotion. Or buying the wrong product at the wrong time.
There are some excellent prospects for property investment in the right areas that may not fit investors’ usual comfort zones. 2017/2018 will definitely be about hunting in different fields, certainly not in the usual areas that investors have been doing.
So there won’t be any quick rewards from backing the same winners of the past five years. The investors that will do well in the next 12 months will be those who put in the solid research and are prepared to look in other areas off their normal radar. As always: if you put in the work, the research and don’t automatically follow the herd, you can reap great rewards.
In part two, Sam Khalil investigates and dissects recent market changes that <a href="/expert-insights/investing/sam-khalil-s-property-investment-outlook-part-two">property investors should be aware of</a>.  He covers lending policy, slowing development and challenges with land and apartment supply.
You can read the original article <a href="https://www.dpn.com.au/learn/market-updates/sam-khalil%E2%80%99s-property-investment-outlook-part-one-winter-2017" target="_blank">here</a>.
For more information from <a href="https://www.dpn.com.au/" target="_blank">DPN</a>.
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Sam Khalil’s property investment outlook - part one

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SPONSORED POST
Be prepared and knowledgeable about year-end tax deductions for your investment property. This checklist will help make the end of the financial year smoother.
It’s the end of financial year, which, for some means a mad scramble for paperwork. Even if you’ve been proactively monitoring your expenses and tax deductible claims, this checklist should make the year-end smoother for all property investors.
Tax deductible property expenses include:
<ul>
<li>Property management fees and expenses</li>
<li>Professional commissions and fees</li>
<li>Rental marketing expenses</li>
<li>Body corporate fees and charges</li>
<li>Council rate</li>
<li>Land tax</li>
<li>Water supply charges</li>
<li>Building, contents and public liability insurance</li>
<li>Cleaning</li>
<li>Garden and lawn maintenance</li>
</ul>
Repairs and maintenance – specifically, the cost of work undertaken to remedy defects in, damage to or deterioration of the property. Repairs include fixing electrical appliances or replacing storm damaged roofing or guttering for instance. Examples of maintenance deductions are things that will prevent future deterioration or address existing issues, such as painting the interior and exterior, or keeping the plumbing in good order. These are distinct from capital expenses (i.e. a renovation) – which would need to be depreciated.
Loan Interest expenses - incurred as a direct result of: the purchase of a rental property, the purchase of a depreciating asset for the rental property (eg. new dishwasher), cost of repairs, financing renovations for your rental premises or the acquisition of land on which to build rental accommodation.
Prepaid loan interest – you can also claim interest you’ve pre-paid up to 12 months in advance. This can be a useful way to bring a tax deduction forward into the current tax year if you have a particularly high-earning year that pushes you into the next tax bracket.
Claiming a tax deduction on loan interest
It’s important to note with regard to interest related deductions, if you use a portion of your loan for any private purpose, such as buying a new car, you cannot claim interest on that portion of the loan.
No Longer Tax Deductible: Investor Travel Perks
While the government asserted it would leave negative gearing entitlements untouched prior to this year’s federal budget announcement, they did wind back one significant tax perk: travel expense claims related to rental assets.
Whereas it used to be possible to claim travel expenses when visiting a rental property (even interstate) this is no longer the case.
This information is of general nature and should not be considered financial advice. DPN recommends you see your Accountant or Financial Advisor to understand how this information applies to your situation.
You can read the original article <a href="https://www.dpn.com.au/learn/how-to-guides/2017-tax-time-checklist-for-property-investors" target="_blank">here</a>.
For more information from <a href="https://www.dpn.com.au/" target="_blank">DPN</a>.
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2017 Tax time checklist for property investors

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SPONSORED POST
You can always find reasons why you shouldn’t invest in property. Property investment can seem like a big step and it’s easy to be fearful.  You’ll also hear lots of stories either from others or in the media, which may put you off.
So let’s break down some of the common myths floating about that can scare potential investors.
67 percent of investors using negative gearing have incomes of $80,000 or less.
1. You need a big deposit to invest in property
Not true. Property investment is no longer exclusively the domain of the wealthy. Smart investors who buy wisely, in high yielding areas with good capital growth, can have positively geared properties that cost them very little out of pocket. The Australian Tax Office figures found that 67 per cent of investors using negative gearing have incomes of $80,000 or less. This is not to say that all these investors are successful, but they have certainly been able to break into the market. 
Now, let’s look at the claim you need a giant deposit. Again, this isn’t correct. You can still get into the property market without a deposit by either leveraging off an existing home or getting a guarantor loan through relatives. Using super via an SMSF is another option.
Many property investors don’t own their own homes and so they rent in the suburb they want to live while having a portfolio somewhere else.
2. The market is skewed against first home buyers
There’s been a spate of media stories about how first time buyers are finding it increasingly difficult to break into the big property markets of Sydney and Melbourne. Property investors are blamed for this. However the reality is that there’s a myriad of factors. Basically Sydney and Melbourne are highly desirable places to live. Consequently population has skyrocketed; more global companies have shifted here and both cities are now firmly on the radar of international investors. The good news is that the demand to live in both cities is very unlikely to go down.
The other good news is that first home buyers are now becoming first time investors or “rentvestors”. The line between ‘first time buyers’ and ‘investors’ is very much blurred. The reality is many property investors don’t own their own homes and so they rent in the suburb they want to live while having a portfolio somewhere else.  This is the new reality for the majority of people in most capital cities of Australia as prices gallop to stratospheric levels.
3. Foreign investors make it harder to break in
This is a common complaint from locals especially in Sydney and Melbourne. Surely all the Asian investors buying up so much land and units in the cities is shutting out local investors? Actually, it’s not.
The Federal Government launched the Murray Inquiry in 2014 to look at this very issue. The inquiry found that: “foreign investment is regarded by industry experts as vital to increasing this supply. Rather than causing price pressures, the evidence suggests that foreign investments may actually help keep prices lower by increasing supply.”
It’s also worth noting that foreign investors are often playing in a different pool to local investors. They are restricted from buying established homes and can only buy newly developed properties.  This is why foreign investors are great for the construction industry, as they need more housing stock to be built.  So foreign investors help keep up a demand for supply and the market buoyant.
Your property investment, like the DPN Seconda, needs to be in a growing area with excellent infrastructure and a demand for rentals.
4. It’s best to buy in your local area
This is similar to the myth that says you should buy an investment home you’d like to live in yourself.  The reality is you may never see or visit your investment property. The property you invest in may be thousands of miles away, in another state. Investment can’t be an emotional decision where you buy a house in an area you like that you may want to live in. The investment needs to be based on cold hard facts and data. It needs to be a property with good capital growth in a growing area with excellent infrastructure and a demand for rentals. If it turns out that you have a property you do want to live in at some point, that’s a big bonus. However, as much as we get emotionally invested in properties, that can’t be part of the strategy.
Doing a renovation is no longer a guarantee that it will add exceptional value to the property.
5. Buy, renovate and sell for a quick profit
This idea of buying a rundown property, renovating and then selling quickly afterwards is out of date. Firstly, while the market may rise in the time you’ve bought and then sold, will it really have risen enough to cover all your costs? Plus, you’ll be hit with stamp duty and other property taxes, which will take the sugar out of any profits. We’re seeing now that the land is viewed far more favourably than the house that’s built on it. So that is why rundown, derelict houses on prime inner city land are often just left as they are and sold for a high price. Doing a renovation is no longer a guarantee that it will add exceptional value to the property. Finally, you’re missing out on the long-term capital growth. Good property investors think in the long term.
In conclusion, it’s dangerous to believe popular myths about property investment. No one ever made a fortune by listening to Chinese whispers. Any decision or strategy you make should be informed and backed by data and solid research.
To read the original article, <a href="https://www.dpn.com.au/learn/market-updates/5-myths-about-property-investment-busted" target="_blank">click here</a>.
For more information from <a href="https://www.dpn.com.au" target="_blank">DPN</a>.
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5 myths about property investment, busted!

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<img src="https://counter.theconversation.edu.au/content/79907/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Housing Australia’s ageing population in homes that are affordable, accessible and sustainable presents a major challenge, particularly in a time of rising housing costs.
Older people want homes where they can feel comfortable and independent, and which allow them to remain connected to their family and friends.
However, many fail to anticipate the health and financial challenges that can diminish their housing choices as they age. With an emphasis on social interaction, environmental sustainability and accessible design, co-housing can provide an attractive housing option for seniors.
We set out to explore the potential of co-housing for seniors, in newly released research funded by the NSW Department of Family and Community Services and Office of Environment and Heritage.
How does co-housing work?
Co-housing is well established internationally as a housing option but relatively new to Australia.
Co-housing, or co-living, arrangements aim to mix private and shared living spaces in a way that meets the need for both privacy and a sense of community and support. Germany’s Baugruppen model is a prominent international example.
Despite huge diversity in the size, density and design of co-housing, there are some common characteristics:
First, the future residents are typically involved in the design process to ensure the final building meets their needs.
Second, the design includes some mix of private dwellings and shared spaces, and encourages community interaction. Shared spaces can be as minimal as a garden or laundry, or as extensive as a common kitchen, lounge and guest facilities.
Third, residents are usually actively involved in the governance of the property.
What did the research look at?
Through initial interviews with stakeholders, we identified three different co-housing options that look particularly promising for seniors in Sydney:
Deliberative development, where the building designer actively enables participation by future residents in the design of a multi-unit building that they will eventually live in. Breathe Architecture pioneered this approach with The Commons in Melbourne, and Nightingale Housing is helping the idea to spread. While not aimed specifically at seniors, this model has great potential to deliver co-housing for seniors.
Co-operative tenancy, where residents form a housing co-operative to manage their tenancy of a building. Common Equity is the leading proponent of this model in New South Wales, with 39 housing co-operatives established. This model is particularly attractive for private tenants, who are especially vulnerable to financial problems and social isolation.
Small-scale co-housing, where an existing single dwelling is renovated to accommodate one to three dwellings. The Benn family home is a great example. This model is appealing as a way of downsizing, or assisting children with their own housing challenges.
Barriers to acceptance
We tested these three models in focus groups with seniors and found that co-housing has an image problem. The participants were keenly aware of the housing challenges that co-housing seeks to overcome. However, when we started to discuss co-housing, their thoughts immediately turned to hippies, communes and share houses.
This is unfortunate, because there are modern co-housing options that are perfect for the mainstream. These examples feature great design and balance between privacy and community.
We found that awareness of co-housing and its potential benefits was low. In particular, seniors resisted the idea of sharing living spaces.
Some said they had “done their time” and wanted to maintain their independence. They were worried that others would not “do their bit” to maintain the shared spaces. Others liked the idea of increased social interaction but were less enthusiastic about being involved in ongoing governance of the property.
Participants were quick to identify potential barriers to co-housing. These included local planning restrictions, securing finance, or impacts on their pension eligibility.
It is tempting to conclude that co-housing is a nice idea that lacks a market. A common refrain in our focus groups was: “It’s a nice idea, but not for me.”
However, in all these groups we found a small number of participants, perhaps 10-20%, who were enthusiastic about the idea. A market of 10-20% could make a very significant contribution to meeting our housing challenges.
We also discovered many groups that are working hard to establish co-housing, like the AGEncy Project in Balmain. The market could be even larger if co-housing could overcome its image problems.
How to win converts to co-housing
We propose the following steps to start realising the potential of co-housing for seniors.
First, more people need to know that co-housing is an option. Raising awareness about co-housing and busting some of the myths about it are high priorities.
Our small contribution is a set of three factsheets on co-housing for seniors. More demonstration projects are also badly needed, so people can see what it is actually like to live in co-housing.
Second, more needs to be done to link up the growing number of people who do want to live in co-housing. One of the biggest challenges is finding a group of people who have similar housing needs and aspirations.
Web platforms offer great potential here and some attempts to develop such platforms have already been made. For example, the Henry Project is working on a Co-Living Network platform.
Third, governments can do to much to support co-housing and overcome existing barriers. For example, governments can provide financial support or access to land for demonstration projects. They can also ensure that planning regulations allow co-housing developments.
Finally, existing seniors’ housing providers can adopt the core ideas of co-housing in their developments. Retirement villages and aged care facilities typically include shared living spaces. Participation in design and governance is perhaps less common.
<a href="https://theconversation.com/profiles/chris-riedy-76" target="_blank"></a>
<a href="https://theconversation.com/profiles/chris-riedy-76" target="_blank">Chris Riedy </a>is Associate Professor, University of Technology Sydney. 
<a href="https://theconversation.com/profiles/chris-riedy-76" target="_blank"></a>
<a href="https://theconversation.com/profiles/kylie-mckenna-344346" target="_blank">Kylie McKenna </a>is Research Principal (Business and Sustainability), University of Technology Sydney.
<a href="https://theconversation.com/profiles/chris-riedy-76" target="_blank"></a>
<a href="https://theconversation.com/profiles/laura-wynne-97854" target="_blank">Laura Wynne </a>is Senior Research Consultant, Institute for Sustainable Futures, University of Technology Sydney. 
<a href="https://theconversation.com/profiles/chris-riedy-76" target="_blank"></a>
<a href="https://theconversation.com/profiles/matthew-daly-3948" target="_blank">Matthew Daly </a>PhD Researcher at Institute for Sustainable Futures, University of Technology Sydney.
<a href="https://theconversation.com/profiles/chris-riedy-76" target="_blank"></a>
All are authors for The Conversation.
<a href="https://theconversation.com/profiles/chris-riedy-76" target="_blank"> </a>
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Co-housing works well for older people, once they get past the image problem

Camberwell Junction has long been the epicentre of amenity in Melbourne’s Boroondara region.

For nearly a century, it has drawn both locals and visitors, anchored by the Camberwell Sunday Market, which first operated in 1929 and quickly became a fixture of the suburb’s identity. Over time, the Junction evolved into one of Melbourne’s most established retail and lifestyle precincts, now comprising more than 400 stores and over 300 commercial businesses.

Despite that depth of amenity, one thing has remained notably limited: the supply of new apartments.

In a suburb defined by its heritage streetscapes and tightly held residential stock, new development opportunities have been scarce, particularly within the core of the Junction itself. That lack of supply has left a gap in the market for larger, design-led apartments suited to downsizers and owner-occupiers wanting to remain in the area.

Boutique developer Above Zero identified that gap when it secured a prime site on Burke Road, in the heart of Camberwell Junction.

[smartcode_project:default project_id=4896 project_image_fid=368543]

The site has a long planning history. Various proposals have been put forward over more than a decade, many of which were knocked back by the City of Boroondara, with initial applications dating back to 2015. Above Zero acquired the site in 2022 and returned with a revised scheme, refining both the building’s height and its ground-level interface to better align with Council expectations.

That process has culminated in approval for Camberwell House.

The Cera Stribley-designed development will deliver 57 residences on a 1,950 sqm site within the Camberwell Activity Centre, placing it directly within one of Melbourne’s most established retail and transport hubs.

It is expected to be one of the only new apartment developments to launch in the Junction in recent years, reinforcing the rarity of new supply in the precinct. Currently, there are just a handful of projects on the market in Camberwell, underscoring the significance of a development of this scale and positioning.

[smartcode_project:default project_id=4896 project_image_fid=368544]

Camberwell House has been conceived with a clear focus on larger-format apartments. The project will offer a mix of two-, three- and four-bedroom residences, alongside a limited number of penthouses, targeting owner-occupiers seeking scale rather than volume-driven product.

The building’s vertical presence will also set it apart.

Positioned on Burke Road, the development is set to become one of the taller buildings in its immediate context, allowing for elevated outlooks across Melbourne’s CBD skyline and toward the Dandenong Ranges. In a precinct characterised by lower-scale built form, that height provides a point of differentiation, particularly for buyers seeking outlook and natural light.

[smartcode_project:default project_id=4896 project_image_fid=368568]

Architecture has been led by Cera Stribley, with interiors by GOLDEN and landscape design by Florian Wild. The design approach centres on material consistency and restraint, with residences oriented to maximise light, ventilation and connection to outdoor spaces.

Full-height glazing and generous terraces form a key part of that strategy, allowing apartments to extend beyond their internal footprint and engage with the surrounding environment.

Beyond the private residences, a significant component of the project is its amenity offering.

Above Zero has positioned Camberwell House as a “complete living environment”, incorporating a full floor dedicated to resident facilities. At the centre of that is a wellness zone, including a 12.5-metre lap pool, spa, sauna and treatment spaces, alongside a gym and recovery-focused amenities.

This level of amenity is more commonly associated with inner-city developments, rather than established middle-ring suburbs like Camberwell.

[smartcode_project:default project_id=4896 project_image_fid=368588]

Additional shared spaces include a private library lounge, dining and entertaining areas, and an indoor golf simulator. A self-contained guest suite has also been incorporated, allowing residents to accommodate visiting family or friends without impacting their primary living space.

The inclusion of these facilities reflects a broader shift in buyer expectations.

As more downsizers look to transition from larger family homes into apartments, there is increasing demand for developments that offer not just a residence, but a lifestyle. That includes access to wellness, social and entertaining spaces within the building itself, reducing the reliance on external amenity while still maintaining proximity to established precincts.

Camberwell House is positioned to benefit from both.

Its location places it within immediate walking distance of Camberwell Junction’s retail and dining offering, as well as public transport connections, including tram and train services. That combination of internal amenity and external convenience is central to its appeal.

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Jellis Craig Projects Director Stephen Bowtell is handling sales for the project and says Camberwell House offers a rare entry point into one of Melbourne’s most tightly held markets.

“Buyers are recognising that Camberwell House offers something they simply haven’t seen before in Boroondara,”&nbsp;Bowtell&nbsp;says.

“It combines a level of resident amenity and service typically associated with Melbourne’s premium inner-city developments, while being positioned right in the heart of Camberwell Junction.

“The response to the concierge offering has been particularly strong. Buyers appreciate not only the convenience, but also the sense of security and peace of mind that comes from having a dedicated presence in the building every day.

“When you combine that with the wellness facilities, the exceptional arrival experience, and panoramic views across both the CBD skyline and the Dandenong Ranges, it creates a lifestyle proposition that is genuinely unique within the local market.”
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[smartcode_project_cta:default project_id=4896]

Joel Robinson

Above Zero launches Camberwell House in undersupplied Camberwell Junction precinct

<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]

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.

Jonathan Chancellor

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