<html><body>
<img src="https://counter.theconversation.edu.au/content/57114/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
It is received wisdom in the Australian superannuation industry that bigger is better. The theory goes that funds with more assets under management will benefit from economies of scale, because the costs of running a superannuation fund are largely fixed and do not change much, whether you are managing assets of A$500 million or $50 billion.
This means that funds which have more assets under management will spend proportionally less on administration and overheads. This will allow them to make more competitive returns and supposedly give them an edge in the marketplace. The endpoint of this reasoning is that a market’s conditions will be a “critical threshold” when it comes to size.
Any funds smaller than that threshold would be too inefficient and would eventually succumb to the larger and more efficient competition, being either absorbed into a larger fund (to restore economies of scale) or losing members attracted to greener pastures, as the bigger funds could charge lower fees per member.
<h2>But is this true for industry superannuation funds?</h2>
We decided to look into whether it was indeed the case that larger funds have an advantage in economies of scale over smaller funds. In particular, we were hoping to find signs of healthy competition in the superannuation marketplace, as competition helps assure us that the industry is appropriately serving the needs and demands of consumers. Such competition might take the form of strategic mergers between smaller funds, or attempts by larger funds to advertise their relative efficiency and lure away the members of the smaller funds.
Signs of healthy competition are especially important for the superannuation industry, as one of the largest sectors in the economy and a crucial part of our collective ability to finance our retirement. The review used data from industry funds, which disclose this information in annual reports. Retail (for profit) funds do not always disclose this information.
<h2>Comparing administrative efficiency</h2>
In order to work out whether super funds really do benefit from economies of scale, we looked at the largest and the smallest industry superannuation funds. In particular, we compared them based on the proportion of assets under management spent on administration costs each year. If the theory that “bigger is better” is correct, one would expect to find that larger funds spend a far lower proportion of their total assets on administration costs.
One would expect this difference to be especially prominent given the massive size discrepancy between industry superannuation funds: the largest, Australian Super, held over $90 billion in assets in 2015 compared to the smallest fund, Transport Super, with a relatively miniscule $114 million.
When comparing some of the top dogs to a handful of middle-sized industry funds, there seems to be no marked correlation between size and efficiency:
<a href="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/124413/width754/image-20160530-879-1jmptgw.png" target="_blank">Click to enlarge</a>
<h4>
<img src="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/124413/width754/image-20160530-879-1jmptgw.png" alt="">Source: Fund annual reports
</h4>
This is very surprising, as these funds do vary by quite a large margin of assets; the two mid-sized funds shown hold about $7 billion each, whereas the two large funds hold over $37 billion and $90 billion.
To further check these results we decided to compare a handful of the largest funds to the five smallest. At first glance, this comparison seems to confirm the “bigger is better” theory:
<a href="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/124414/width754/image-20160530-10041-3xm71g.png" target="_blank">Click to enlarge</a>
<h4>
<img src="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/124414/width754/image-20160530-10041-3xm71g.png" alt="">Source: Authors
</h4>
However, when we look past these averages at some of the individual funds (both the largest and the smallest), a much more interesting picture emerges: some of the tiniest funds (in solid lines) seem to be just as cost-effective as the very largest (the dashed lines).
<a href="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/124415/width754/image-20160530-864-pk9vqg.png" target="_blank">Click to enlarge</a>
<h4><img src="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/124415/width754/image-20160530-864-pk9vqg.png" alt=""></h4>
<h4>Source: Fund annual reports</h4>
<h2>A potentially embarrassing situation</h2>
These findings run in stark contrast to prevailing wisdom about the superannuation sector and indeed the classic economic theory of economies of scale. Not only do the biggest funds have no discernible efficiency advantage over the much smaller mid-sized funds, but there are some positively tiny funds which are just as efficient as some of the very largest.
What is going on here – is this merely some market aberration, or are some smaller funds putting up a heroic David-and-Goliath struggle against their competitors? The question for the big funds is why they have no efficiency advantage over their smallest competitors, and what steps they ought to be taking to rectify a potentially embarrassing situation which has been in place for many years.
<h2>Data</h2>
The data-set used for this article consisted of the financial information of the 14 largest and 5 smallest industry superannuation funds, as ranked by APRA’s statistical publications. The data as to the level of administrative expense came from the annual reports of the superannuation funds. An overview of the funds and the size of their assets is shown below.
<a href="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/124416/width754/image-20160530-903-21i56.png" target="_blank">Click to enlarge</a>
<h4><img src="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/124416/width754/image-20160530-903-21i56.png" alt=""></h4>
<h4>Source: Fund annual reports</h4>
Rob Nicholls is lecturer, UNSW Australia, and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/rob-nicholls-91073" target="_blank">here</a>.
This piece has been co-authored with Veevek Doolabh, a final year undergraduate law student at UNSW.
 
</body></html>

jchancellor-FAypfDUnLy

The myth of economies of scale: bigger is not necessarily better for super funds

<html><body>
<h2>GUEST OBSERVER</h2>
In the resource regions – Western Australia and the Northern Territory – property values continue to fall.
Even though quarterly growth continues to be in negative territory in the Perth and Darwin house markets, the figures were slightly better in the April quarter compared to the March quarter, suggesting an ease in the fall of growth. Annual growth for these markets is presented in Graph 3.
Graph 3: Annual Growth Rates – Perth and Darwin
<a href="/images/2016/06/03/Graph_3.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/06/03/Graph_3.jpg" alt="">
Source: Residex
The graph shows that property values have been falling in these areas throughout much of 2015 up to today. It has been established that movements in commodities can be closely tied to economic and housing market performance in WA and the NT. Despite a small rally in the commodity price index in the first quarter of 2016, iron ore is still less than one third of what it was worth when it peaked at US$180 in February 2011.
Additionally, profits from the mining sector are not as widely spread throughout the states, as the operational phase of the mining boom employs less labour than the construction period. Interestingly, it seems that the Queensland labour market is suffering a higher unemployment rate (6.5%) in response to mining divestment. This could be because of the tighter labour markets in WA and the NT, where workers have higher mobility in response to mining and construction projects.
Across the country, the transition from the mining to service industries is overstated in its ability to absorb lost jobs and income. The official Australian unemployment rate was 5.7% in April (seasonally adjusted), unchanged from the previous month. However, April saw the loss of 9,300 full time jobs and an increase in 20,000 part time positions. Despite the official statistics, employment is being picked up through more precarious work.
Given that part time and casual work has been linked to reduced bargaining power for pay increases, it is no surprise that increases in Australia’s annual wage growth reached a historic low of 2.1% in the March quarter. Low wages may also be contributing to low inflation, which is in turn fuelling expectations of further cash rate cuts this year.
Moving forward, I would expect modest falls in house values in the major east coast cities, while units and resource market dwellings adjust to changed conditions in demand. Low interest rates and falling dwelling prices may present opportunity in certain markets across the country, but purchasers should look for strong and diverse economic fundamentals in the markets they choose to buy in.
Eliza Owen is the market analyst for Onthehouse.com.au. She can be contacted <a href="https://www.onthehouse.com.au/" target="_blank">here.</a>
</body></html>

Value declines in resource regions show signs of easing: Eliza Owen

<html><body>
<div class="page" title="Page 1">
<div class="section">
<div class="layoutArea">
<div class="column">
GUEST OBSERVER
The proposed review of Mortgage Broker Remuneration Structures, suggested by the Finance systems Inquiry (FSI), posed some interesting questions, and as an experienced lender, Bluestone Mortgages would like to offer our perspective on some of the suggestions made. 
Our view is that the current remuneration system supports positive consumer outcomes, and that any change would, in the words of Gaden’s partner, Jon Denovan, be a “disservice” to the community. 
The reasons for our view are manifold. If the aim of the ASIC Review is to ensure quality consumer outcomes by assessing the impact of different remuneration structures, it is important to look carefully at the potential ramifications of any changes proposed. 
Having assessed the potential impact of alternative structures, we have come to the conclusion that any change to the current structure would negatively affect competition in the sector, due to their potential effect on consumer equity, access and the range of loan products available. 
A question of equity 
First, to equity. No discussion of the remuneration issue at hand is meaningful unless it is first understood that not all lenders, and not all consumers, are created equal. In fact, some lenders and some consumers are likely to be more affected by a move away from the current remuneration structure than others – and not in a positive way. 
We know that over 50 percent of consumers now choose to access home finance via mortgage brokers. Any move to charge a fee for service for brokers is likely to negatively affect consumers who choose non-bank lenders over the banks. 
Which brings us to the question of who these consumers really are? 
Often, they are individuals who, while entirely worthy of credit and able to service a loan, for one of many reasons – often outside their control – do not meet the prescriptive boundaries of traditional banks. Bluestone is one of a number of non-bank lenders which specialises in providing services to the many Australian consumers who find themselves in this category. 
A change in the current remuneration structure would mean that this group of consumers, as well as others who chose a mortgage broker, may be required to pay an upfront fee, whereas consumers (often so-called ‘ideal borrowers’) who choose to deal with the banks directly, would not. 
This is clearly not equitable. 
</div>
</div>
</div>
</div>
<div class="page" title="Page 2">
<div class="section">
<div class="layoutArea">
<div class="column">
A threat to access 
We then come to the interlinked issue of access. The monopoly of size, scale and market share of the big four and other traditional banks means they already have extensive proprietary distribution channels. Some of the banks have over a hundred years of traditional savings and loan infrastructure, and do not in any way see brokers as being essential to their business success, or even necessary. 
Non-bank operators, on the other hand, have shaped their businesses in an entirely different environment. Brokers have played a central role in their business growth, providing distribution services to the lenders and, the crucial other side of the coin, access to the growing group of customers who are no longer required to deal solely with one of a few major players, offering a relatively homogenous product range to a relatively homogenous pool of “ideal borrowers”. 
There’s no question in our mind that a change to current remuneration structures would put the use of brokers out of the financial reach of the vast majority of their target market. 
This would mean that a large and growing group of Australians would be denied access to one of the most fundamentally important financial transactions they are ever likely to make - buying a home. (And that’s without addressing the wider policy considerations around the role of home ownership in reducing the burden of caring for an ageing population into the future). 
Wider choice, more options, more competition 
Which brings us to the third – and also interlinked – part of our argument. And that is the fact that the current model actually promotes healthy and positive competition among lenders, which in turn leads to more options and greater choice for consumers. Which must surely be the kind of outcome the ASIC Review is trying to achieve. 
In fact, it’s clear that it is in fact thanks to the current broker remuneration model, and the free access it offers, that consumers are no longer limited in choice to the products and practices offered by the big four and other traditional banks. And clearly consumers are voting with their feet – more than half now access their home finance through a mortgage broker. 
In summary, from Bluestone’s lender perspective, the mortgage broker remuneration structure as it stands promotes not only consumer choice and competition, it also gives more consumers more access to more options than any alternative model. 
All of which lead to a much higher quality outcome for consumers than any alternatives posed to date. 
Royden D’Vaz is national head of sales &amp; distribution at Bluestone Mortgages and can be contacted <a href="https://www.bluestonemortgages.com.au" target="_blank">here</a>.
</div>
</div>
</div>
</div>
</body></html>

ASIC review into broker commissions: a lender's perspective

<html><body>
One of Parkville’s most expensive houses sold under the hammer last weekend.
The four-bedroom home had been quoted at $3 to $3.3 million before auction.
The offering at <a href="https://www.realestate.com.au/property-house-vic-parkville-122580242" target="_blank">81-83 Park Drive, Mentone</a> sold for $3.72 million.
There had been just the five owners since it was built in 1885 with a striking Hawthorn brick facade and a decorative cast iron balustrade.
The property last changed hands in 1999 for $962,500.
Parkville’s top residential sale price of $4.875 million was 260 The Avenue in 2014.
Records show Nocklofty at 551 Royal Pde had held the suburb’s second biggest house price of $3.7 million until last weekend.
</body></html>

Parkville home, Mentone sells at $3.72 million

<html><body>
<img src="https://counter.theconversation.edu.au/content/57114/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Australia is a land of extreme weather. Events such as the 2009 Victorian bushfires, the 2011 Queensland floods and Cyclone Yasi in 2013 are stark examples of climate-related risks faced by Australian households. Many homes are built in high-risk locations including floodplains, coastlines and bushfire-prone land.
The Climate Institute has released a report detailing the critical role Australian housing plays in the economy, and the risks housing faces with a changing climate.
It also sets out the role of banks and insurers in promoting risk reduction and climate adaptation for Australian housing.
<h2>Built on sand</h2>
Housing represents many Australians' biggest financial commitment – including those who rent rather than buy. Housing accounts for up to one-third of the economy, through direct and indirect means and across sectors such as finance, insurance and construction. With population projections forecasting continued growth and attraction to risky locations, banks and other financial institutions have a crucial role to play in minimising the economic threat posed by climate change.
But while the role of land-use planning and insurance with regard to climate risks has been well documented, the role of banks as gatekeepers to housing finance has been largely overlooked.
As the Climate Institute’s report points out, banks have a “unique ability and incentive” to steer housing purchases, because they are the main providers of residential financing. As such, they have large financial liabilities if homes are lost to fires, floods or other climate effects.
There are a range of tactics banks might use to reduce or mitigate climate risk. For instance, they could favour lending on homes that meet specific risk-reduction requirements, such as raised floor levels for homes in flood zones, or fireproof construction materials in bushfire-prone regions. This approach could also be used in setting mortgage insurance premiums as well as the mortgages themselves. Another approach is to better apportion their exposure - by lending on a reduced percentage threshold of the total property value.
Westpac has a Climate Change Position Statement and both the Commonwealth Bank and NAB have committed in reducing carbon. But more needs to be done for housing.
If banks continue under a business as usual approach, they face the risk that many properties will be devalued over time, through continued exposure to extreme weather events. This represents a significant financial liability, especially when you consider that a home loan typically takes 30 years to play out – a similar time scale to the many climate impacts expected for Australia.
Banks are already making moves to restrict lending based on location.
But the report outlines several other things banks could do, such as:
<ul>
<li>
examine climate risk exposure in their current lending practices
</li>
<li>
use their role as financiers to support good policy, by engaging policymakers and financial regulators
</li>
<li>
encourage stakeholders, including the public, private sector and civil society sectors, to develop ways to minimise climate impact risks for housing
</li>
<li>
ensure losses are addressed in an equitable way.
</li>
</ul>
<h2>A climate insurance policy</h2>
The report also details how the insurance sector assesses risk to housing, and how it might improve its approach in the future, given the intersection of urbanisation, population trends and the trend towards living in climate-threatened areas.
The insurance sector has historically been seen as the messenger of housing market signals, because of its keen focus on assessing weather-related risk. But the 2011 Queensland floods highlighted many weaknesses in relying on insurance alone.
Many properties did not have adequate flood insurance, leaving many people without a home after losing their house to the floods. The Australian and Queensland governments and the private sector struggled to co-ordinate a cost-effective response, partly because of previous bad land-use planning decisions, but also because of the lack of adequate insurance cover.
A federal government levy helped the affected regions to “build better back”. Some chose to rebuild in the same high-risk locations.
Critically, gaps identified in building codes, land use and climate resilience still require a more co-ordinated response. The current Stage 2 coastal law reforms in New South Wales offer a potential example of how competing interests might be balanced.
At face value, this issue is a no-brainer. After all, risk mitigation is bread and butter for lending institutions and insurers, and we already know that extreme weather events are forecast to increase in frequency and severity. National resilience is required.
Quantifying this risk will be easier if financial institutions utilise access to relevant data on issues like coastal risk. Some of these data are becoming more freely available. Recognising the value of climate data is a trend that should continue. For a robust and resilient future, governments and the private sector should end their tango over who should pay for the information and agree that financial climate risks are best faced with eyes wide open.
Tayanah O'Donnell is research fellow, University of Canberra and author for The Conversation. She can be contacted <a href="https://theconversation.com/profiles/tayanah-odonnell-122914" target="_blank">here</a>.
</body></html>

How can your bank help reduce climate change risks to Australian homes?

<html><body><div class="domain-article-share-panel">
<div class="domain-article-share-link domain-article-share-tw">
A former 1890s boot factory in Tempe was sold at weekend auction for $2.65 million.
It was listed by owner-builder Scott Stephens and wife, Pamela <a href="https://www.realestate.com.au/property-house-nsw-tempe-122575166" target="_blank">who designed the 2011 refurbishment</a>, taking care not to lose too much of the building’s character.
A second storey was inserted at both ends and, as there was no outdoor space parts of the roof were removed to create three courtyards.
There's even a swimming pool with a rock-climbing course alongside. 
The authentic warehouse conversion with 438 sqm space at 8 Bridge Street came with a $2.4 million price guide.
It previously traded at $825,000 in 2010 and had been available at $1600 a week rental.
It was sold to Paul Hardy and Hilary Jackson who live in a unrenovated warehouse in Chippendale.
This article was first published in the Sunday Telegraph. 
</div>
</div></body></html>

Tempe warehouse residence fetches $2.65 million

<html><body>
<img src="https://counter.theconversation.edu.au/content/57114/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
The Australian government’s intervention in the dairy crisis by offering concessional loans to struggling farmers has prompted suggestions that other types of regulation - such as a dairy floor price - might be needed.
The dairy industry was deregulated more than a decade ago; perhaps it’s time Australia looked to other countries for models to fix the system.
The current situation facing the Australian dairy industry is the same the world over. The European Union and the United States come to mind, as milk supply outweighs demand. But they provide assistance to their dairy farmers through subsidies or other support that helps to keep them viable.
Canada does not compete internationally in the dairy sector as it maintains a supply management system introduced in the early 1970s. Dairy is not subsidised, as government provides no support, and the price paid to farmers is negotiated among stakeholders.
When I explained this Canadian supply management model to Victoria dairy farmers, as part of my research earlier this year, they rejected the idea. However the current situation may cause some of them to reconsider this position.
While the Canadian model works for Canadian farmers, a supply managed system would be more difficult for those in Australia given that about 40% of Victorian dairy is exported and exports don’t happen with supply management. But Australia’s share of the global market is decreasing over time, despite the best efforts of Australian dairy organisations and farmers, and the number of farms continues to decline. Perhaps Australia will end up with a system resembling a supply managed one through market mechanisms.
I interviewed a total of 45 farmers and dairy stakeholders in Australia during February and March of this year, nearly half in Queensland and the remainder in Victoria and Tasmania. I was interested in how the Australian dairy model works, especially as it is cited by the business press in Canada as one that we should adopt given their dislike of Canada’s regulated system.
What is the supply management model? Briefly, it matches domestic demand with domestic supply and exports are non-existent. The system is based on quotas - for example a kilogram of milk solid costs C$25,000 in the province of Ontario where I live, and it represents about one cow’s worth of production. Producers need at least 50kg of milk solids to run a decently remunerative operation.
Stakeholders representing producers, consumers, processors, the restaurant association and others meet annually to determine price, not government. Included in this is a profit guarantee for farmers that allows them to make long-term decisions and maintain a middle class lifestyle while milking on average about 70 cows. It also means they are immune to this latest global crisis, and to future ones.
And if supermarkets decide to use milk as a loss leader, it is the deep-pocketed supermarket that takes the hit, not the farmer. The price paid to the latter is guaranteed by negotiation, which creates stability.
Clearly, this is not how it operates in Australia where the supermarkets, according to one Queensland dairy producer, “must bruise the farmers to give them a loss leader.” Nor is the price consumers pay for milk in Ontario out of line with that charged by Coles and Woolworths, the real regulators of Australian dairy. Southern Ontarians pay the equivalent of the infamous A$1.00 per litre – A$4.00 for Canada’s four litre container, and have done so for years.
I found in my research that Victoria’s dairy farmers are in favour of privatisation and deregulation. They talked a lot about efficiency and how they are among the world’s more efficient farmers, and Canadians must surely not be, given their system.
Perhaps this is true if efficiency is measured by getting the greatest amount of milk for the least input. But Australian dairy farmers fall behind by other parameters.
Ontario dairy farmers, for example, employ robotic technology at a much greater rate than their Victorian counterparts. New dairy barns are being put up all over the province and a majority of them install robots to do their milking. Ontario now has hundreds of farms using milking robots.
The situation in Victoria could well come to that of New Zealand’s, where cows may be culled and the survivor’s rations severely cut back, as farmers are unable to feed supplements in such an adverse economic climate.
In an interview, as part of my research, one New Zealand dairy farmer told me he was into “starvation mode” for his cows because of cost. He was feeding them with grass only and when that ran out, there was nothing else. He was certainly running an efficient farm, but at a significant cost to his own mental health and to that of his cows’ wellbeing and ability to provide milk.
One Victorian farmer told me that even before the announcement of cuts to the milk solids price, he and his colleagues “farmed at the margins". When prices are robust, so are farmer’s livelihoods, but when they collapse, as they always do in a commodity situation, so do their livelihoods.
This results in another vicious cycle of dairy farmers quitting the industry which leads to further instability. As another interviewee told me, following the cut:
“We will wait and see and hang on for dear life.”
Might the future of Victorian dairy be Queensland, where farmers suffered much of what their Victoria counterparts are now experiencing more than a decade ago after deregulation, and dairy is now a niche industry?
As one Queensland interviewee emphatically instructed me about Canada’s model:
“Don’t give away [the] regulated system!”
Now is the time for Victoria to consider the advice of this farmer and introduce more regulation.
Bruce Muirhead is professor of History and the associate vice president, External Research , University of Waterloo and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/bruce-muirhead-269512" target="_blank">here</a>.
</body></html>

Time to get regulation back into Australian dairy?

<html><body>
The amount of money Australia’s homeowners owe their banks rose above $1 trillion for the first time in April.
The latest rise in the value of outstanding home loans since March was only a modest 0.5 percent, but the annual growth rate sits at a five-year high of 7.4 percent.
The total of owner-occupier housing debt held by Australian lenders rose to $1.005 trillion in April from $998.8 billion in March.
The seasonally adjusted figures from the Reserve Bank of Australia showed the value of homeowner debt is now eight times where it was two decades ago, at $124 billion in January 1995.
It doubled to $248 billion in 2001, then to just under $500 billion by 2006.
While home loans are still growing strongly, the latest data suggests lending to housing investors has slowed.
Investor housing loans totalled $551 million in April, a rise of 0.3 percent, the RBA figures showed.
The last time a smaller increase in investor loans was recorded was in May 2009.
Annual growth in investor housing loans has now slowed to 6.5 percent, from 10.9 percent a year ago.
</body></html>

Our $1 trillion home lending debt

<html><body><div class="page" title="Page 1">
<div class="layoutArea">
<div class="column">
GUEST OBSERVER
It is time for the state government to put the interests of first homebuyers at the top of its agenda.
As part of a review of its Real Tax Policy ahead of the June 10, 2016 NSW Budget, REINSW has called for the state government to make amendments to stamp duty for first homebuyers.
Home ownership is not only something that individuals should aspire to, it is also something that government should foster and encourage as a means of building wealth and providing for a persons care post employment.
The NSW government needs to provide first homebuyers with a 50 percent reduction in the stamp duty on a purchase of a residential property less than $1 million and provide the ability to pay the stamp duty over time. 
Not supporting first homebuyers is to say the least short sighted and creates the risk that our best and brightest will be enticed to other states where the dream of home ownership can be a reality. 
The existing first homebuyer incentives are focused on new dwellings. The strategy being, by focusing demand toward new properties this will correct the supply problem. 
Unfortunately the strategy has two major short comings, firstly most first homebuyers buy existing properties as new dwellings are financially beyond their capacity. Secondly increasing demand will not solve the supply problem. 
We refer to ourselves us the Premier State, if there is truth behind the words then providing a pathway for our first homebuyers into their own home, is a clear way to demonstrate that the words have substance,.
John Cunningham is president, REINSW and can be contacted <a href="https://www.reinsw.com.au/imis15_Prod/web" target="_blank">here</a>. 
</div>
</div>
</div></body></html>

NSW tax policy calls for first homebuyer relief: John Cunningham

<html><body>
GUEST OBSERVER
News of Macquarie Bank tightening its loan to value ratio (LVR) for apartment high-rises has sparked fears of an oversupply in certain markets.
The bank named 46 postcodes where high-rise apartment lending would shrink to 70 percent of the value of the property.
The problem in these postcodes – which are concentrated in inner Sydney, Melbourne and Brisbane – is not one of supply and demand, at least not in the sense that there are more apartments than there are people to live in them. Supply and demand in these markets is not a question of how many people need a place to live versus how many places there are to live. Rather it is how many owner-occupiers and investors demand assets.
The former conception of supply and demand ignores the tax and finance incentives that encourage people to hold more property than they need to live in. These incentives include cash-free equity deposits, negative gearing and capital gains concessions, which have been introduced one by one into the housing market over the last 30 years. It makes sense then, that our understanding of supply and demand in real estate should be dynamic. As long as there is an investor looking for a property to put their money in, there is demand. As long as there is an investor demanding property, a developer is willing to supply.
Professor Laurence Murphy of the University of Auckland notes that when the price of property begins to fall, developers become less willing to supply dwellings. Graph 1 and 2 compares high-rise approval data in Victoria and NSW (which we have to assume is a proxy for inner city unit development) with quarterly growth rates in their respective unit markets.
Graph 1: Quarterly Approval Figures Victoria vs. Melbourne Units Quarterly Growth Rates
<a href="/images/2016/06/01/Graph_1.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/06/01/Graph_1.jpg" alt="">
Source: Residex
Graph 2: Quarterly Approval Figures NSW vs. Sydney Units Quarterly Growth Rates
<a href="/images/2016/06/01/Graph_2.jpg" target="_blank">Click to enlarge</a> <img src="/images/2016/06/01/Graph_2.jpg" alt="">
Source: Residex
The graphs show that approvals are highly responsive to changes in unit growth rates.
As demand for units falls away due to tighter LVRs, slowed wage growth and higher premiums on foreign investment purchases<a href="https://www.blog.residex.com.au.tmp.anchor.net.au/2016/05/26/may-market-update/?utm_source=membersNewsletter&amp;utm_medium=email&amp;utm_campaign=Cid=ResiMay16&amp;mc_cid=d432d199da&amp;mc_eid=1c64ff30b3#footnote-1">[1]</a>, the first thing to crash will most likely be applications and construction of dwellings. This has wider economic implications, particularly for NSW and VIC, where construction has been a significant contributor to growth in gross state product.
The construction of units – whether in the application phase, construction phase or completion phase – moves in much larger fluctuations than the values of the units themselves. For example, in the September quarter of 2010, the number of approvals for units in blocks of four or more stories grew by 124% in NSW, yet nothing dramatic happened with Sydney unit value growth. Values grew steadily until 2013 when they began to grow at a higher rate. I am not saying that the supply of units to speculative investors is sustainable where population growth is low, nor is it optimal for the people living in them. However, it is clear that price movements and investor interest in units are a better indicator of expected supply movements than population growth rates.
The graphs also show the approval figures for other dwelling types over the past decade. Most strikingly, the number of high-rise units began outperforming detached housing approvals from March 2011. The salience of this phenomenon increased around the beginning of the 2013 housing boom.
Less important than the effect of supply on the value of a unit is the way units are supplied and how they are integrated with wider planning. Residential dwellings crowding out commercial and cultural facilities, which are partly what makes a city desirable in the first place, can limit a city’s desirability. A lack of diverse planning can also increase pressure on transport and road congestion. This is one of the many risks of investing in rapid high-rise growth areas, and has caused some young families and retirees to move to regional parts of the state.
Eliza Owen is housing market analyst for onthehouse.com.au and can be contacted <a href="https://www.onthehouse.com.au" target="_blank">here</a>.
 
</body></html>

Oversupply fears rise as LVRs drop: Eliza Owen

Apartment buildings are increasingly being designed around how people actually live day to day, not just how they want a building to look.

For buyers, that shift is showing up in practical inclusions that respond to changing habits. Work-from-home spaces, EV charging, wellness amenities, secure bike storage and parcel management are becoming part of the broader apartment conversation, reflecting a move toward buildings that reduce friction in everyday life.

Online shopping has become one of the clearest examples of that change.

Australians spent a record $82.6 billion online in 2025, with nearly one in four retail dollars now spent online. That has made parcel delivery a regular part of apartment living, rather than an occasional inconvenience.

For apartment residents, however, the delivery process can be less straightforward than it is for detached homes. Parcels may be left in lobbies, redirected to Post Offices, missed entirely, or placed under the responsibility of building managers and concierge teams.

That is why secure parcel infrastructure is increasingly being considered alongside more familiar apartment amenities.

<iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen="" frameborder="0" height="315" referrerpolicy="strict-origin-when-cross-origin" src="https://www.youtube.com/embed/-VjjLwoViX0?si=A3k7ws9NX35Uac7_" title="YouTube video player" width="560"></iframe>

Australia Post Parcel Lockers offer one way to address the issue. When a parcel arrives, residents receive a notification through the AusPost app or SMS, then collect it using a QR code or one-time PIN. The parcel is kept secure, accessible and removed from common areas.

The broader Parcel Locker network now includes more than 1,500 locations across Australia, positioned at Post Offices, shopping centres, supermarkets, transport hubs and other accessible locations.

For new apartment projects, the relevance is clear. A building’s amenity offering is no longer only about lifestyle spaces, but also about convenience, security and functionality.

As buyer expectations evolve, secure parcel delivery is becoming part of the same design conversation as flexible working, sustainable transport and resident wellbeing.

It is one less thing for residents to worry about, and another example of apartment design adapting to the way Australians now live.

Joel Robinson

Apartment design is adapting to the way Australians shop

While school holidays and trips to Europe tend to define the winter property market, there's been no cold snap at <a href="https://www.apartments.com.au/new-apartments/the-walden-north-sydney-177-walker-street-north-sydney-nsw-2060">The Walden</a> in North Sydney.

Developer-builder&nbsp;<a href="https://www.apartments.com.au/developers/aland">ALAND</a> sold more than $35 million worth of apartments throughout June, including a $6.8 million apartment that now ranks among the highest apartment sales ever recorded in North Sydney.

SRM Residential agent Ben Stewart said buyer demand throughout June reflected a mix of improving market confidence and longer-term thinking from owner-occupiers.

"We're seeing strong demand from owner-occupiers who are taking a longer-term view," Stewart said.

"Many recognise the opportunity to secure an apartment in an iconic building and premium location while values remain attractive. They may initially lease the property, but the intention is to eventually move in themselves, rather than purchasing purely as an investment."

[smartcode_project:default project_id=134323 project_image_fid=367129]

Located at 177 Walker Street, The Walden will deliver 161 one, two, three and four-bedroom residences across a 30-storey tower designed by Rothelowman. Every apartment occupies a corner position, maximising natural light, cross ventilation and views across Sydney Harbour, the Opera House, Sydney Heads and the northern districts.

Rather than a traditional balcony, the residences feature winter gardens that seamlessly extend the open plan living areas, creating versatile spaces for relaxing or entertaining throughout the year. Floor-to-ceiling glazing draws in natural light while showcasing sweeping views from the building's elevated Walker Street position.

Every apartment features high-end Calacatta marble, bespoke joinery, and fully integrated appliances.

The larger residences have been planned with distinct entertaining and private zones, with many master suites positioned on corners to capture natural light and harbour views. Walk-in dressing rooms, freestanding baths and refined stone finishes reinforce the house-like feel that has resonated with downsizers and owner-occupiers.

[smartcode_project:default project_id=134323 project_image_fid=6393]

Rothelowman Principal Ben Pomroy said the project was designed to make the most of its unique position overlooking the harbour.

"The Walden is a celebration of all things beautiful, curated for those who expect nothing less than exceptional," Pomroy says.

"Meticulously designed entertaining spaces and light-filled living areas that capitalise on capturing the natural beauty of Sydney's iconic harbour."

Residents will also have exclusive access to The Pavilion, a dedicated amenity building featuring a rooftop pool, wellness studio, gymnasium, sauna, concierge service, residents' lounge, private dining spaces and work-from-home facilities.

[smartcode_project:default project_id=134323 project_image_fid=6402]

The project marks ALAND's first major luxury apartment development in Sydney's inner-city market after more than two decades delivering residential communities across Greater Sydney.

Founder and CEO Andrew Hrsto previously said the rarity of the Walker Street site made it an opportunity the company could not overlook.

"This is a rare opportunity to bring a truly exceptional project to life in one of Sydney's most iconic locations, and to showcase our craftsmanship and design expertise at a world-class level," Hrsto said.

[smartcode_project:default project_id=134323 project_image_fid=6383]

The Walden has been introduced to the market at a time when demand for living in North Sydney is at an all-time high. Billions of dollars have been invested in infrastructure, including the recently opened Victoria Cross Metro station, located just 300 metres from The Walden, providing residents with direct access to the Sydney CBD in just minutes.

Private investment has also transformed the area through the arrival of new retail and dining destinations, elevating the lifestyle offering in what was once considered primarily a commercial precinct rather than an aspirational residential address.

The Walden is currently under construction and is scheduled for completion in 2028.

[smartcode_project_cta:default project_id=134323]

ALAND records $35 million in sales in North Sydney as The Walden bucks quiet winter selling season

The long-awaited redevelopment of the former Eastlakes Shopping Centre site has reached a major milestone, with Conquest's plans for a new mixed-use precinct officially placed on public exhibition.

The State Significant Development Application would transform the 1.7-hectare site at <a href="https://www.apartments.com.au/new-apartments/19a-evans-avenue-eastlakes-nsw-2018">19A Evans Avenue</a> into one of Sydney's largest urban renewal projects, delivering 736 apartments above a new shopping centre anchored by Woolworths, alongside specialty retail, dining, commercial space and new public open spaces.

The public exhibition marks the next chapter for the project after <a href="https://www.apartments.com.au/developers/conquest">Conquest</a> acquired the stalled Stage Two development from Crown Group, who completed the first stage across the road prior to their voluntary liquidation.

<img alt="First look: Conquest unveils plans for 736-home Eastlakes Shopping Centre redevelopment" data-entity-type="file" data-entity-uuid="5fca22c5-d1ed-4e2c-8801-03f7df1eafc8" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/eastland%20podium.png?VersionId=uomwr41nF8CmLUZRDcu3mHQechlbxucS" />

&nbsp;

Designed by DKO Architecture, the proposal comprises four residential buildings ranging from 14 to 18 storeys above a two-level retail podium. The development would deliver 736 apartments, including 74 affordable homes, 215 Build-to-Rent apartments and 521 market residences. Provision has also been made for dual-key apartments, which could increase the total number of dwellings to 877.

At ground level, the shopping centre has been designed as the suburb's new meeting place, anchored by a full-line Woolworths and complemented by a curated mix of fresh food retailers, cafés, restaurants, health services and everyday convenience shopping. Generous pedestrian links and landscaped public spaces will connect the retail precinct through to Jack Mundey Reserve, creating a more walkable and connected neighbourhood.

Conquest CEO Michael Akkawi said the redevelopment was about far more than replacing a shopping centre.

"Eastlakes has been overlooked for too long, and this is the community’s moment. We are building a shopping centre and homes, a genuine heart for the suburb, and we genuinely want locals to help shape it."

"We enrich communities through the creation of homes, places, and experiences designed for life, built to last, and owner for generations. That starts with listening, so we warmly encourage everyone with a connection to Eastlakes to view the plans and share their thoughts."

<img alt="First look: Conquest unveils plans for 736-home Eastlakes Shopping Centre redevelopment" data-entity-type="file" data-entity-uuid="22f6fb20-54fb-4bd7-8a92-48fafdd00608" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/eastland.png?VersionId=cugp7s9hrMHGJJdYzkeAkrFoQgnF4GXf" />

DKO said the design had been shaped by the site's landscape setting and surrounding open space.

"Our vision for the site embraces its unique Bidjigal identity by blending the residential living with generous landscaping and a material palette inspired by the Bidjigal locality, and celebrating the panoramic views to Botany Bay and the wetlands reserves."

"Taking cues from Country, we seek to harmonise built form with the landscape and lightly touch the earth. By reconnecting, retaining and regenerating existing ecology, and weaving in natural elements, we can deepen our connection to Country."

The landscape strategy extends across the podium and rooftops, incorporating communal gardens, children's play areas, lawns, community gardens, family gathering spaces and extensive tree planting. New landscaped links will also strengthen the connection between the precinct and Jack Mundey Reserve, while publicly accessible open spaces have been integrated throughout the development.

The proposal builds on Conquest's broader placemaking strategy for the site. Through an ongoing partnership, local artist Joe Rashbrook has been appointed Urban Art Curator, working alongside young residents to transform the project's site hoardings into a public art gallery that allows the community to engage with the redevelopment before construction is complete.

Conquest has rapidly expanded its development pipeline since acquiring the Eastlakes site, with more than $6 billion worth of mixed-use projects now in planning across Sydney, including Stanmore, Castlecrag and Waterloo.

Conquest CEO Michael Akkawi said the redevelopment was about far more than replacing a shopping centre.

First look: ‘Far more than replacing a shopping centre’ as Conquest unveils 736-home Eastlakes redevelopment

Abadeen has lodged a State Significant Development Application (SSDA) for one of Mosman's largest apartment developments in recent years, seeking approval to transform the former Honeysuckle Garden and Midas site on Military Road into a 100-apartment mixed-use development.

The SSDA, lodged with investment partner Phoenix Property Investors, proposes around $230 million worth of new housing on the prominent <a href="https://www.apartments.com.au/new-apartments/494-516-military-road-mosman-nsw-2088">494-516 Military Road</a> site.

The proposal comes as Mosman Council continues to progress its recently endorsed Masterplan, which identifies the precinct for increased housing density while maintaining the suburb's established character.

Designed by DKO Architecture, the development would comprise 100 apartments above ground-floor retail, with a rooftop wellness precinct including a gym, sauna, entertaining areas and landscaped communal spaces.

Rather than pushing to the full 12-storey height identified in Council's Masterplan, the proposal ranges between five and nine storeys, stepping down towards Hale Road. A tenth level would accommodate resident amenities rather than additional apartments.

The project has been designed to appeal to a broad range of buyers, from first home buyers and young professionals through to families and local downsizers looking to remain on the Lower North Shore.

<img alt="Mosman" data-entity-type="file" data-entity-uuid="5dada03f-5b4c-43ba-ba62-2868add31440" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-27%20at%209.57.55%E2%80%AFAM.png?VersionId=7LBy0B.Jo8_iWAFJsClcV7Q3UnXrv49r" />

Abadeen Executive Chairman Justin Brown said the apartments had been designed as genuine long-term homes rather than investor-focused stock.

"The apartments have been designed as genuine long-term homes, with efficient floorplans that maximise usable living areas, generous storage, natural light and strong connections between indoor and outdoor spaces," Brown says."

"We've focused on creating homes for a broad range of buyers, from first home buyers and growing families through to downsizers who want to remain in Mosman."

The rooftop wellness offering forms a key part of the proposal, with residents set to have access to a gym, sauna, outdoor entertaining spaces, communal dining areas, landscaped gardens and a multi-use recreation court overlooking Sydney Harbour.

<img alt="Mosman" data-entity-type="file" data-entity-uuid="d37c2d6b-583a-4a0f-b7a9-9f46b893d2f4" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-27%20at%209.58.06%E2%80%AFAM.png?VersionId=FPoa5FCm2RtzjhAh2w5FTWJbV6GHfY8D" />

DKO drew heavily on the site's natural and cultural history, undertaking a Connecting with Country process with local Aboriginal Elders to inform the architectural and landscape design.

Senior Associate Matthew Ritchard said the design sought to create a building that responded to both the site's landscape and its cultural significance.

"The architectural language of the project is a deep expression of Connecting with Country, where the materiality and colour palette serve as a bridge between the site's geological history and its future as a residential sanctuary."

The proposal also retains the site's established blue gum tree as the centrepiece of the communal landscaped gardens, while introducing activated retail fronting Military Road to strengthen the connection between Mosman and Cremorne villages.

If approved, the project would deliver 100 new homes within walking distance of shops, public transport, schools and local amenities, adding to the limited pipeline of new apartments on the Lower North Shore.

<h2>Project Snapshot</h2>

Project: Honeysuckle Garden Redevelopment

Address: 494-516 Military Road, Mosman

Developer: Abadeen and Phoenix Property Investors

Architect: DKO Architecture

Lead Architect: Matthew Ritchard

Value: $230 million

Residences: 100 apartments

Key features:

<ul>
	<li>
	Ground-floor retail
	</li>
	<li>
	Rooftop wellness precinct
	</li>
	<li>
	Gym and sauna
	</li>
	<li>
	Outdoor entertaining and BBQ areas
	</li>
	<li>
	Landscaped communal gardens
	</li>
	<li>
	Multi-use recreation court
	</li>
	<li>
	Retained mature blue gum tree
	</li>
	<li>
	Connecting with Country design process
	</li>
	<li>
	Harbour, CBD and Balmoral views from upper-level apartments
	</li>
</ul>

Abadeen Executive Chairman Justin Brown said the apartments had been designed as genuine long-term homes rather than investor-focused stock

First look: Abadeen plans 100 apartments on former Honeysuckle Garden site in Mosman

The wave of apartment proposals sweeping through Mosman shows no signs of slowing, with another major residential development lodged through the NSW Government's State Significant Development pathway.

Developer First Quadrant Properties, which recently completed Willoughby Grounds and has several projects in planning across the North Shore, has unveiled plans for <a href="https://www.apartments.com.au/new-apartments/cove-on-ourimbah-40-56-ourimbah-road-mosman-nsw-2088">Cove on Ourimbah</a>, a 63-apartment development on Ourimbah Road, adding to the growing pipeline of projects reshaping one of Sydney's most tightly held harbour suburbs.

The proposal would consolidate nine properties at 40-56 Ourimbah Road into a part eight, part nine-storey apartment building, continuing the momentum created by the NSW Government's accelerated planning pathways that have seen several significant developments emerge across Mosman over the past 12 months.

Designed by Doroch Architects, the project would deliver 63 apartments, resident wellness facilities including a gym, pool and sauna, landscaped communal spaces and basement parking, while using recessed upper levels, generous setbacks and extensive planting to reduce the perceived scale of the building.

<img alt="First look: First Quadrant Properties eyes nine-storey Mosman apartment project under State Significant pathway" data-entity-type="file" data-entity-uuid="32ee68e4-141e-4a10-8f83-48e961a5e71e" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Ourimbah%20Road%2C%20Mosman%20a.png?VersionId=CUeILFc6APlwXPc.iplElbxHvREKwjig" />

Doroch Architects said the building had been designed to reinforce Mosman's established character.

"The building's aesthetic is grounded in the existing residential character of Ourimbah Road and the broader Mosman context," the architect noted in the planning documents submitted to the NSW Government.

The design adopts a contemporary material palette of natural stone, textured concrete and brown concave metal cladding, complemented by integrated planters and deep balconies. The podium incorporates softened curved concrete forms, while increased setbacks have been provided adjacent to the heritage-listed property at 60 Ourimbah Road to create a more sympathetic transition.

The site sits around 330 metres from Mosman Town Centre, placing it within the NSW Government's Low and Mid-Rise Housing policy area, where increased residential density is being encouraged close to shops, transport and services.

The proposal follows a string of major apartment projects lodged or declared State Significant in Mosman in recent months, including Abadeen's 100-apartment Honeysuckle Garden redevelopment on Military Road and several other developments across Awaba Street, Redan Street and Muston Street from the likes of Time &amp; Place, HELM and Prosker Property.

&nbsp;

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/time-place-to-take-on-mosman-apartment-market">Time &amp; Place to take on Mosman apartment market</a>

Read more:&nbsp;<a href="https://www.apartments.com.au/news/qld/first-look-abadeen-plans-100-apartments-on-former-honeysuckle-garden-site-in-mosman">First look: Abadeen plans 100 apartments on former Honeysuckle Garden site in Mosman</a>

&nbsp;

Jonathan Chancellor

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News