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Home loan lender, ME, has announced a range of interest rate cuts across variable and fixed rate products.
It included introducing a variable rate below 4 percent for new owner occupier with a maximum LVR of 80 percent. The variable rate for new owner occupier loans has been discounted by 6 basis points to 3.95 percent. This is an 88 basis point discount off the reference rate for the life of the loan. The variable rate on its investment Flexible Home Loan with Member Package has been reduced by 9 basis points to 4.15 percent. This is a 68 basis point discount off the reference rate. The non-major has also cut its one and two-year fixed rates by 30 basis points on its Flexible Home Loan for owner occupiers to 3.99 percent.
The four and five-year fixed rates have been cut by 10 basis points to 4.49 percent. For investors, the Flexible Home Loan has been discounted by 20 basis points on its one and two-year fixed rates, to 4.09 percent, effective yesterday.
For more information, <a href="https://www.mebank.com.au" target="_blank">click here</a>.
Following the Reserve Bank of Australia’s decision to cut the cash rate in May, demand for variable rate mortgages has risen, according to Mortgage Choice’s latest national home loan approval data.
Variable rate home loans accounted for 76% of all loans written in May – up from 75% the month prior.   “After the Reserve Bank’s decision to cut the cash rate at its May Board meeting, three of the four majors passed on the full rate cut – trimming their variable rates by 25 basis points,” Mortgage Choice chief executive officer John Flavell said.   “With that in mind, it was hardly surprising to see a lift in demand for variable rate products this month. Borrowers are clearly looking to take advantage of the historically low rate environment.   “And, with many economists predicting at least one more rate cut this calendar year, I wouldn’t be surprised to see demand for variable rate products remaining strong for the foreseeable future.”   Across the country, demand for variable rate products was highest in Victoria, with this type of product accounting for 86% of all loans written in May.   Variable rate demand was lowest in New South Wales, with this type of product accounting for 71.47% of all loans written.
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jchancellor-FAypfDUnLy

ME drops variable home loan rate to below 4 percent

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A warehouse conversion in Pyrmont owned by two-hatted chef and restaurateur Mark Best and his wife Valerie sold at weekend auction.
The minimalist two-level apartment at <a href="https://www.domain.com.au/501-502-380-harris-street-pyrmont-nsw-2009-2012731824" target="_blank">501 &amp; 502/380 Harris Street</a> sold on its reserve for $2 million to an inner-west buyer. 
The Bests had amalgamated apartments in 2007 and 2008 paying $1,395,000 total in the M Central development.
The two apartments were amalgamated by architect Julius Bokor, blending his modernist style with the building’s industrial touches.
 
 
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Pyrmont warehouse conversion sale by two hatted chef

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GUEST OBSERVER
High rental returns in a low interest rate environment are driving residential investors to the industrial property market in Sydney.
Based on current market conditions, rental increases of between 35 to 45 per cent are expected over the next three to five years and possibly more due to an under supply of industrial property in Sydney.  
The low interest rate environment is creating perfect conditions to invest in industrial property. The owners of residential property and developers with land banks, who have made strong returns in recent years are cashing in and now moving into industrial property to capitalise on higher returns. The cost of money domestically is falling and driving price growth.
Astute investors are realising you can’t eat capital growth. To build long term wealth through property, cash flow is king which is what is delivered through industrial property. We are witnessing a shift towards investors purchasing industrial property in their self-managed super funds to generate an income for life.
Sydney investors are realising that a small industrial strata unit can be purchased for half the capital outlay compared to a home. There are significant advantages associated with investing in industrial real estate when compared to residential. These include the security bond is usually bigger (three months), leases are longer – typically three to five years,  less capital outlay is required for smaller units and rental yields are generally higher. 
According to the latest statistics from the Property Council/IPD Australia All Property Index, the average annual return of industrial property was 15 per cent in the year to end 31 March.
Property shares returned 9.2 percent, bonds recorded 1.6 percent and balanced share portfolios went backwards by 11.3 percent. The average rent income yield was 6.6 percent, plus 7 percent capital growth, which is the best since 2008.
In a Sydney based example, a private investor purchased a 746 sq m property (total area) in the Seven Hills Industrial Precinct in October, 2010 for $1.117 million. Today the property is worth $1.49 million which is an increase of 33 percent in value since the purchase price. The net rental cash flow from the tenant on the existing lease is $82,399 returning 7.37 percent with total returns exceeding 10 percent per annum.
Sydney’s industrial property market is currently experiencing a major under supply. I don’t expect the market will suffer any significant rental downturn due to supply constraints. With price increases continuing, Sydney offers the potential for very good industrial rental and price return growth well into the future. However the window of opportunity to secure the best returns will be gone after 2017 due to supply constraints today.
Barry Cawthorn is managing director, Bawdens Industrial and can be contacted <a href="https://www.bawdens.com.au" target="_blank">here</a>.
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High rental returns driving residential investors to industrial property: Barry Cawthorn

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GUEST OBSERVER
Due to an unprecedented number of recent changes in the conveyancing practice in NSW, the 2005 and 2014 editions of the Contract for Sale and Purchase of Land with copyright to the Law Society of NSW and the Real Estate Institute of NSW (Contract) should no longer be used for contracts exchanged on or after 1 July 2016.
Rather the new 2016 edition of the Contract launched on Monday 30 May 2016 should be used, and will be available only in electronic format.
The significant changes that precipitate the new 2016 Edition of the Contract include:
<ul>
<li>Pursuant to the new sub-division 14D, of Schedule 1 to the Taxation Administration Act 1953 (Cth), where the market value of the property is $2 million or more, the purchaser is obliged to comply with a foreign resident capital gains withholding payment obligation (regardless of whether the vendor is in fact a foreign resident), in which the purchaser must withhold 10 percent of the price at settlement and remit this to the Australian Taxation Office (ATO), unless the vendor supplies to the purchaser a clearance certificate. A lesser amount may be withheld if the vendor supplies to the purchaser a variation from the ATO authorising less to be withheld.  </li>
<li>Pursuant to the Swimming Pools Act 1992 (NSW) and new regulations made in March 2016, vendors of property being single freehold or strata schemes with no more than two lots, that contain a swimming pool or spa, are required to attach to the Contract:</li>
</ul>
<ol start="1">
<li>A valid certificate of compliance issued under section 22D of the Swimming Pools Act 1992 (NSW); or</li>
<li>A relevant occupation certificate (less than 3 years old) and evidence that the swimming pool is registered under Part 3A of the Swimming Pools Act 1992(NSW); or</li>
<li>A valid certificate of non-compliance issued under clause 18BA of the Swimming Pools Regulation 2008.</li>
</ol>
<ul>
<li>Pursuant to the Conveyancing Amendment (Sunset Clauses) Act 2015 (NSW), which came into effect on 2 November 2015, vendors are required to either obtain the consent of all the purchasers before they can rescind an “off-the-plan” contract in reliance of the sunset clause for not registering the new titles by an agreed date in the Contract, or alternatively, obtain the permission of the Supreme Court to rescind.</li>
</ul>
In addition to these changes, there are miscellaneous other changes that can be found on the Law Society of NSW website.
There potentially may be more editions to the Contract, to cover more changes in the pipeline such as the changes to the operation of land tax certificates requiring vendors to obtain a land tax certificate and serve it on the purchaser before completion, and changes to strata schemes.
Clients should be aware that the 2005 and 2014 editions of the contract are expected to be no longer sold after 30 June 2016, and these editions should not be used for contracts exchanged on or after 1 July 2016. It is recommended that you use the 2016 edition of the Contract to cover the multitude of issues, or if you want to use older editions, then you will need to consider inserting additional conditions to address the significant changes. 
Gary Newton is partner TressCox Lawyers and Henry Yuan is paralegal. Both can be contacted <a href="https://www.tresscox.com.au/page/our-expertise/property/" target="_blank">here</a>.
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Property 101: New edition of the NSW Contract for Sale and Purchase of Land

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<img src="https://counter.theconversation.edu.au/content/57114/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
The Australian Securities and Investments Commission (ASIC) inquiry into the way mortgage brokers are paid may uncover some isolated shady dealings but the system of remuneration for brokers is already regulated well enough by intense competition.
Assistant Treasurer Kelly O’Dwyer announced the inquiry last year in line with recommendations from the Financial System Inquiry and ASIC recently commenced the inquiry with a scoping paper. The focus is likely to be on whether the advice of brokers is in the best interests of the customers.
As always, there are questions about whether the remuneration incentives for brokers distort their advice. And, again as always, there are questions about whether the fact that big banks own some brokers leads these brokers to favour the products of their owners, and not necessarily to offer the products most appropriate to the customer.
In many ways, the inquiry is just part of the ongoing reviews of different parts of the finance sector. The same arguments are likely to be rehashed.
In announcing the review, ASIC Commissioner Peter Kell was clear that:
“We are focused on consumer protection issues in the context of personal credit products, ranging from small amount credit contracts through to home loans."
There has been some discussion in the press that loans organised by brokers default at a higher rate than loans written by banks. The Australian Prudential Regulation Authority (APRA) might regard this as a concern for financial stability, but ASIC will be concerned with whether people are getting loans they really should not be. The focus will clearly be on consumer outcomes.
It’s worth looking at the mortgage broking sector mainly because it has been growing rapidly and is now quite big. About half of all mortgages are provided through brokers, up from 40 percent a decade ago. The upfront commissions for brokers are about 0.5%, which yields annual revenue of close to A$2 billion.
So it is a big and rapidly growing financial sector and ASIC has duly been charged to have a look around for problems. Australia already has laws addressing any concerns. The National Consumer Protection Act has, since 2011, put the onus on providers to act in the best interests of customers. ASIC is really just checking up that the law is being complied with.
While there may be some bad behaviour, it is hard to see what the concern is. People have a choice.
They can go to their own financial institution and buy a mortgage direct from the manufacturer. Alternatively, they can look around among financial institutions to find the mortgage that works for them.
Now they can also go to one of the dozens of mortgage brokers to see if one of them can find a better deal. From the customers’ point of view, there are hundreds of retail outlets (banks and mortgage brokers) offering mortgages.
The fact that mortgage brokers are taking market share away from the banks suggests that customers really appreciate the mortgage broker effectively cutting the buyer’s cost of searching.
There shouldn’t be a problem with the banks paying the broker for delivering the customer, as there is a clear cost saving to the bank. It does not need to have as many branches or as many staff.
Seen from the bank’s point of view, it can originate the mortgage through its own branch and incur some overhead and running costs, or initiate the loan through the broker channel and pay the broker for its overhead and running costs.
Ultimately, the client is buying a product, in this case a mortgage. The price the customer pays is transparent, as are the terms and conditions.
If brokers were not providing a good service, customers could easily swing back to searching for their own mortgage among the banks, or simply walk down the street to another broker. Smart customers will thus keep the providers honest and make sure competition works as it should.
There is a not a lot of academic research into the issues associated with remunerating mortgage brokers. What there is tends to be from the US, which has not had a good record in managing mortgages over recent years. The most relevant paper suggests that loan quality can be improved though requiring registration, higher education standards and continuing education and/or by requiring brokers to post bonds.
The ASIC inquiry will uncover more information about the sector. It may also find some people have behaved badly (as in any area of human endeavour), but it’s hard to see a significant structural problem in a very competitive market.
Rodney Maddock is vice chancellor's fellow at Victoria University and Adjunct Professor of Economics, Monash University and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/rodney-maddock-107543" target="_blank">here</a>.
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Mortgage brokers: ASIC goes fishing

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<img src="https://counter.theconversation.edu.au/content/57114/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
The Australian dairy farming industry is in a state of crisis. Cheap dairy products and fluctuations in both the domestic and global markets have taken a financial toll on farmers. Consumers have rallied to help struggling dairy producers.
But this is only half the problem. The true cost of dairy is also paid by dairy cows and the environment.
<h2>Welfare problems</h2>
Despite the idyllic image of outdoor farming, several industry practices negatively affect dairy cows. To meet production demands, dairy cows are subject to a continuous cycle of impregnation, induced calving and milking.
Tail-docking and horn removal are routinely performed without pain relief. Lameness is another major animal welfare problem, often the result of environmental pressures, such as tracks, herd size and handling. The average lifespan of a dairy cow is six to seven years, whereas generally cows can live for 20 to 25 years.
One of the most controversial issues is young “bobby” calves. A bobby calf is a newborn calf, less than 30 days old, who has been purposely separated from their mother. Immediately after separation, cow and calf call out and search for each other.
Most bobby calves are slaughtered within the first week of their life. Handling and transport pose added problems for young calves who have not developed herding behaviours, are vulnerable to stress, and are forced to go without their mother’s milk. Each year, 450,000 bobby calves are slaughtered.
Advocacy groups frequently uncover the routine abuse of bobby calves in Australian abattoirs and challenge the dairy industry to do something about it.
Yet aside from the wider ethical questions over the use and exploitation of animals, farmers are not legally doing anything wrong. This is because the treatment of animals operates in a legal context where animals are considered absolute property.
What’s more, farm animals are exempt from the provisions of anti-cruelty legislation. Codes of practice are practically useless, because they promote low welfare standards and are unenforceable.
<h2>The environmental impact</h2>
As well as systematic welfare problems, livestock farming is, both directly and indirectly, one of the most ecologically harmful human activities. The Australian livestock sector is worth A$17 billion and dairy cattle farming is a A$4.2 billion industry.
In Australia, livestock farming accounts for 10 percent to 16 percent of greenhouse gas emissions, with dairy farms contributing 19 percent of this, or 3 percent of total emissions. Methane emissions, from digestion and manure, and nitrous oxide from livestock are significant contributors. Globally, the livestock sector is responsible for more greenhouse gases than the world’s transport.
Livestock production accounts for 70 percent of all agricultural land, including the land used to grow crops to feed these animals. Animal agriculture is a key factor in land degradation, deforestation, water stress, pollution, and loss of biodiversity.
Livestock farming will also be affected by climate change, particularly changes in temperature and water. The quantity and quality of pasture and forage crops will also be affected. Diseases may increase due to fluctuating weather and climate.
<h2>Emissions can be reduced</h2>
Just as the energy sector is attempting to transition to low-carbon energy sources to tackle climate change, the agricultural sector needs to transition to an ethical and sustainable alternative.
From the current crisis, there are several opportunities for farmers to seize. Large transitions are possible in land use, production, output and profitability.
Places such as Gippsland in Victoria, which currently produces 19% of Australia’s dairy, have the opportunity for agricultural development based on apples and brassicas, such as broccoli, kale, cauliflower, cabbage, turnip and mustard. Some of these crops are already popular in the region. As a result of climate change and increasing temperatures, some areas will be more suitable than others.
While still in the stages of research, perennial grain crops – which store more carbon, maintain better soil and water quality, and manage nutrients better than annuals – have the potential to contribute to sustainable agriculture. New land uses could also include carbon plantings, biofuels and bioenergy crops. Investing into further research for alternatives to livestock farming is needed.
Some have argued that livestock emissions can be technically mitigated by modifying animal feed, better managing pastures, carbon sequestration and manure storage.
<h2>Welfare issues remain</h2>
But technical mitigation does not address the endemic animal welfare problems in the livestock industry.
Consumer demand is one of the most powerful strategies to combat animal welfare and environmental problems. Research shows that we must reduce food waste and losses in the supply chain and change our diets toward less resource-intensive diets, such as a plant-based diets. Doing so would cut emissions by two-thirds and save lives. It’s possible to eliminate animal suffering and reduce carbon emissions by reducing and replacing livestock production and consumption.
Alternatives to dairy milk include soy and almond milk. Soy milk is nutritionally comparable to dairy milk and has a significantly smaller environmental footprint.
Policy initiatives also need to address these issues. The Food and Agriculture Organization’s Livestock’s Long Shadow report recommends a policy approach that correctly prices natural resources to reflect the full environmental costs and to end damaging subsidies. In the interim, higher taxes on meat and other livestock products will be necessary to improve public health and combat climate change.
Denmark, for instance, is considering proposals raise the tax on meat, after its ethics council concluded that “climate change is an ethical problem”.
Governments everywhere need to have a transitional plan for livestock producers and workers – one that helps to cultivate the ethical and sustainable agricultural endeavours of the future.
Gonzalo N Villanueva is PhD Candidate, School of Historical and Philosophical Studies, University of Melbourne and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/gonzalo-n-villanueva-14280" target="_blank">here</a>.
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Dairy farmers are being ‘milked dry’, but let’s remember the real cost of milk

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The practice of taxing foreigner property holdings at a higher rate than the locals is a world wide trend finally taken up by Australian legislators.
It looks like it will become the norm too in Sydney any day now. 
Just like the Labor Government in Victoria in 2015, overseas property investors look set to soon have to pay more to own a home in NSW under Treasurer Gladys Berejiklian’s upcoming state budget­.
The Daly Telegraph's state politics reporter Andrew Clennell says Ms Berejiklian is seriously considering a 1.5 percent foreigner land tax surcharge to "tackle housing affordability­" in the June budget.
It would mimic a 1.5 percent surcharge in Victoria, ­although there is a hint Ms Berejiklian could impose a slightly lesser rate of 1 percent, perhaps to obtain a competitive advantage over our southern rivals.
Victoria also imposes an extra 7 percent on stamp duty for foreign buyers but Ms Berejiklian is understood to have ruled that out.
In Victoria Premier Daniel introduced a 3 percent stamp duty charge and a 0.5 percent land tax levy for foreigners in his first 2015 budget and increased them to 7 percent and 1.5 percent this year.
Those measures are predicted to raise $486 million over four years.
Forget the tackling housing affordability, such measures are really just a cash grab against a buying group whose voice can't be heard at the ballot box.
Since words of the higher land tax emerged industry groups have been quick to suggest the proposals against foreign investors could actually slow down housing construction supply.
“The proposals by NSW Treasury to impose surcharge on land tax on foreign investors in housing will be a disincentive to invest in NSW,” says Urban Taskforce CEO, Chris Johnson. 
Johnson's taskforce says the Sydney region needs 33,200 new homes a year, but last financial year only 27,348 were built leaving a shortfall of nearly 6,000 homes.
"We must do all we can to boost housing supply and foreign investors have been contributing to this particularly through new apartments.
"To send a message that these investments are not wanted in NSW can only reduce the flow of capital into new housing.”
“Foreign investors often help make development projects become feasible by underpinning the pre-sales with up to 15% of purchases and this helps local purchasers buy into a viable project.”
But there has already been a slow-down in housing approvals in NSW inpart due to prior budgetry measures.
NSW lead the way on restricting first home grants for new builds rather than established homes, and this has contributed to record low recipients.
In the last budget NSW land tax revenues were forecast to rise at a faster rate than stamp duty revenues, rising from $2.49 billion this financial year to $3.11 billion by 2018-19.
This was based on no change in the tax rate, just reflecting growth in land values. 
The benchmark land tax base is the average of the last three years unimproved land value of all land owned above the indexed threshold for that year. The benchmark tax rate for the 2015 land tax year is $100 plus 1.6 percent of the land value between the thresholds of $432,000 and $2,641,000, and 2 percent thereafter.
Total stamp duty revenues were forecast to rise from $7.29 billion this year to $8.6 billion in 2018-19.
Property has become the constant cash cow for increasing desperate governments with just more than half of state and local government tax revenue now coming from property.
And it ain't ever going to ease off.
This article was first published in the Saturday Daily Telegraph.
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Taxing foreigner property holdings at a higher rate to become the norm

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<h1> </h1>
GUEST OBSERVER
Deflation refers to persistent and generalised price falls.
It occurred in the 1800s, 1930s and the last 20 years in Japan. Most people would see falling prices as good because they can buy more with their income. However, deflation can be good or bad depending on the circumstances.
In the period 1870-1895 in the US, deflation occurred against a background of strong economic growth, reflecting rapid productivity growth and technological innovation. This can be called “good deflation”. However, falling prices are not good if they are associated with falling wages, rising unemployment, falling asset prices and rising real debt burdens. For example, in the 1930s and more recently in Japan. This is “bad deflation”.
In the current environment of high debt levels, sustained deflation could cause big problems. Falling wages and prices would make it harder to service debts. Lower nominal growth will mean less growth in tax revenues making high public debt levels harder to pay off. And when prices fall people put off decisions to spend and invest, which could threaten economic growth. This could risk a debt deflation spiral of falling asset prices and falling incomes leading to rising debt burdens, increasing defaults, spurring more falls in asset prices, etc. There are good reasons why central banks want to avoid that.
As can be seen in the next chart, there are still more countries experiencing deflation than hyperinflation.
<h1><a href="/images/2016/05/31/chart-2.png" target="_blank">Click to enlarge</a></h1>
<div class="article-body">
<img src="/images/2016/05/31/chart-2.png" alt=""> Source: Thomson Reuters, AMP Capital
</div>
The RBA eased this month because actual inflation has fallen below target and is likely to stay there for a while.
Cutting inflation targets would be foolish and make it harder to get inflation back up to target.
Low rates are helping the Australian economy and zero rates and quantitative easing have helped the US. Central banks are not out of ammo.
For investors, it’s likely to remain a low interest rate environment for some time to come.
This year has seen a growing concern that central banks are out of ammo when it comes to reinvigorating global growth and preventing deflation. And the Reserve Bank of Australia’s latest rate cut has some fearing that it’s going down the same “failed path” as other major central banks. But is it really that bad? Have central banks really failed? Are they really out of ammo?
Why did the RBA ease again?
The latest RBA rate cut, which took the official cash rate to a record low of 1.75% percent, surprised many because recent economic data in Australia has been OK. But the reason for the cut is simple. Inflation has fallen well below the RBA’s 2-3 percent target, the weakness in prices was broad based and inflation is expected by the RBA to remain below target or at the low end of the target for some time.
<a href="/images/2016/05/31/chart-1.png" target="_blank">Click to enlarge</a>
<div class="article-body">
<img src="/images/2016/05/31/chart-1.png" alt=""> <div class="article-body">
Source: ABS, RBA, AMP Capital
Naturally, the RBA worried that if it didn’t provide more stimulus to the economy low inflation could become entrenched and could give way to deflation. With the $A pushing up towards $US0.80 prior to the cut and the Fed continuing to delay rate hikes, the RBA was no doubt also concerned that if it didn’t ease the $A would push even higher, putting more downwards pressure on inflation.
<h2>Why not just lower the inflation target?</h2>
Since the last RBA cut, some have said that the RBA should just lower its inflation target because it cannot fight falling global commodity prices and what’s wrong with very low inflation anyway. This reminds me of a similar argument back in 2007-08, when inflation had pushed above 4%, that the RBA should not worry but just raise its inflation target as it cannot fight rising global commodity prices. Such arguments are nonsense.
First, the whole point of having an inflation target is to anchor inflation expectations. If the target is just raised or lowered each time it looks like being seriously breached then those expectations - which workers use to form wage demands and companies use in setting wages and prices - will simply move up or down depending on which way the target is changed. And so inflationary or deflationary shocks from things like commodity prices will turn into permanent shifts up or down in inflation. Second, there are problems with allowing too-low inflation. Most central bank inflation targets are set at 2% or so because statistical measures of inflation tend to overstate actual inflation by 1-2% because statisticians have trouble actually adjusting for quality improvements and so some measured price rises really reflect quality improvements. In other words, 1.5% inflation could mean we are actually in deflation. And there are problems with deflation – see below.
<h2>How far will the RBA cut rates?</h2>
To the extent that the minutes from the RBA’s May meeting indicate the RBA had considered “waiting for more information”, it may choose to sit tight at its June meeting. However, given the downside risks to inflation, particularly with wages growth falling to a record low 2.1%, constrained growth and the still high $A more rate cuts are likely. We are allowing for two more rate cuts this year, taking the cash rate to 1.25% by year end.
<h2> </h2>
</div>
<div class="article-body">
<h2>What has been driving deflation?</h2>
Several factors have driven the plunge in global inflation and some countries dipping into deflation: commodity prices have been in a downtrend since 2011 as their supply surged; and the sub-par global recovery since 2009 means the world has plenty of spare capacity. Global economic activity is around 2.5% below potential. Excess capacity means companies lack pricing power and workers lack bargaining power.
<h2>But are rate cuts actually working?</h2>
Some worry that rate cuts have just made things worse by cutting into the spending power of retirees and forcing those nearing retirement to save more. However, there are several points to note in relation to this. First, the level of household deposits in banks in Australia at around $0.9 trillion is swamped by the level of household debt at $2.2 trillion. So the household sector is a huge net beneficiary of lower interest rates. Second, the responsiveness to changes in spending power for a family with a mortgage is far greater than for retirees. Third, the proof is in the pudding. The fall in interest rates has helped the economy rebalance as mining investment has collapsed: first via a pick-up in housing construction and more recently via growth in consumer spending of close to 3% per annum (pa). While those close to retirement may be saving more because of lower investment returns, the household saving rate overall has drifted down from 11% to around 8% since the first RBA rate cut in late 2011. And of course RBA rate cuts have helped push the $A lower. So overall, rate cuts do work.
<h2>Have non-traditional monetary policies failed?</h2>
This is a relevant question with many saying that zero interest rates and quantitative easing in developed countries have not worked. But actually in the US they have as growth there has been averaging around potential at 2% pa, unemployment has fallen from 10% to below 6%, wages look to be picking up and underlying inflation is close to the Fed’s 2% inflation target. Sure, the Eurozone and particularly Japan are less clear but this may be because they waited too long before acting by which time low inflation or deflation had become entrenched. The lesson from this is that central banks need to act quickly and not that non-traditional monetary policy doesn’t work.
<h2>Are central banks out of ammo?</h2>
This is a common concern. However, central banks are a long way from being unable to do anything: the Fed can reverse last year’s interest rate hike and launch another round of quantitative easing if needed; and both the ECB and Bank of Japan could expand their quantitative easing programs further both in terms of size and the type of assets. More negative interest rates are an option but central banks are wary of this after the adverse impact of Japan’s experience regarding negative rates.
The ultimate option is for central banks to provide direct financing of government spending or tax cuts using printed money. This is often referred to as “helicopter money”. Unlike quantitative easing, which requires banks to lend their newfound cash to borrowers who want to borrow, it would yield an almost guaranteed response as the recipients of government spending/tax cuts will spend at least some of it. It won’t add to government debt either. As the examples of Zimbabwe and the Weimar Republic demonstrate, such an approach would make no sense if supply is constrained relative to demand and inflation is already high and rising. But that is not the case now and deflation remains the main threat, not inflation.
Of course none of these are an issue for the RBA as it still has plenty of scope to cut interest rates if needed.
Ideally, central banks should be getting more help from governments in terms of fiscal stimulus and supply side reforms but there are all sorts of constraints around this.
<h2>Implications for investors?</h2>
There are a number of implications for investors. First, while the worst may be over in terms of commodity price falls so the threat from deflation may be receding globally, the risk remains thanks to spare capacity and low wages growth, so low interest rates will remain in place for some time. While the Fed may continue down its path of gradual rate hikes, elsewhere rates are likely to stay low and, in Australia, fall further. Australian term deposit rates at around 2% are at their lowest since the early 1950s. So don’t expect great returns from them.
Second, given the absence of significant monetary tightening, a 1994-style bond crash remains as distant as ever. The most likely outcome is just low returns from government bonds.
Third, the low interest rate environment means the chase for yield is likely to continue supporting commercial property, infrastructure and shares offering sustainable high dividends.
Finally, as can be seen in the next chart, low inflation is generally good for shares as it allows shares to trade on higher price to earnings multiples. But it would be preferable not to see low inflation slip into deflation as this could be bad for shares given it tends to go with poor growth and profits and as a result shares trade on lower PEs. The same would apply to assets like commercial property and infrastructure.
</div>
 
</div>
<div class="article-body"><a href="/images/2016/05/31/chart-3.png" target="_blank">Click to enlarge</a></div>
<div class="article-body">
<img src="/images/2016/05/31/chart-3.png" alt=""> Source: Global Financial Data, Bloomberg, AMP Capital
So, combined with the social damage that a bout of debt deflation could cause, I would much prefer to see central banks continue to do all they can to avoid deflation.
<a href="https://www.propertyobserver.com.au/https://plus.google.com/110172465327488162875?rel=author" target="_blank">SHANE OLIVER</a> is head of investment strategy and economics and chief economist at <a href="https://www.ampcapital.com.au/home" target="_blank">AMP Capital</a> and is responsible for AMP Capital's diversified investment funds.
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RBA rate cuts, inflation targets, deflation and are central banks out of ammo? AMP Capital's Shane Oliver

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A Brunswick development site has been sold by Raine &amp; Horne at $1.2 million.
Its town planning permit consist of 10 generous two bedroom apartments, 1 one bedroom apartment and a 52sq metre office on the ground floor.
Set within walking distance to cosmopolitan Sydney Road, the <a href="https://www.rhcommercial.com.au/properties/15-breese-street-brunswick-3056-victoria-cd7744c8-1283-4440-958e-0cd86e076c66" target="_blank">Breese Street property</a> was offered by Raine &amp; Horne agent Tim Frian.
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Brunswick development site sold by Raine & Horne Commercial

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Villa les Cedres, the grand estate at St Jean Cap Ferrat, is set for imminent sale and then becoming off limits.
The longtime owners, the Grand Marnier Group is selling their liquor company along with their grand 1800s family home.
But Davide Campari Campari-Milano SpA - the makers of Campari - don't want the prize 14 ha estate.
So the listing of the world's priciest residential offering now looms.
Set on the peninsula to the east of Nice, Villa les Cedres is surrounded by a botanical garden dating back to the 1920s.
The Marnier-Lapostolle family has opened it up for small tour groups of green thumbs several times a year, so it was on Title Tattle's bucket list.
The unexpected sharemarket announcement will see an abrupt end to that quaint possibility when some Russian oligarch or US tech billionaire locks it up behind hedges of high security.
The nearest villa is Maryland where Brad Pitt and Angelina Jolie stayed as guests of Microsoft co-founder Paul Allen. With the Cannes film festival underway this month, Katy Perry and Orlando Bloom were snapped on the luxury Eclipse mega yacht off the coast in what is dubbed the bay of billioniares.
Having holidayed in the region since the late 1980s, and spotting Robson Green there one Easter, I made the dash earlier this month to get through through the elaborate gold leaf gates - a bit like Willy Wonka but with an eye more on the house rather than the Theobroma Cacao, aka choco tree. 
I was pretty impressed by the garden and the estate's tallest tree, an Australian bunya pine (araucaria bidwillii) and also their most recent planting of an historic wollemi pine.
Alexandra Connolly, who runs a local real estate brokerage, suggests it could fetch 200 million euros to 350 million euros, though it’s hard to estimate given the diminished buying power of Russian billionaires who have previously snapped up anything the region in recent years.
A mansion outside Paris fetched a world record price of more than 275 million euros recently.
Nearby Villa Leopolda, on the hillside south of France vantage point, went close to a world record but the deal fell over. Set above Cap Ferrat at Villefranche-sur-Mer, widow Lily Safra accepted an unsolicited Euro 385 million offer from Russian nickel miner Mikhail Prokhorov, who pulled out of the deal and lost his deposit on Leopolda. Russia's richest man then took proceedings for the return of his 38 million deposit, arguing he didn't get a seven-day cooling off period. Safra donated the deposit to charities after a Nice judge ruled in her favour.
Campari plans to keep 80 million euros of the Villa les Cedres proceeds after taxes and brokerage fees, and divide the rest equally among the holders of Grand Marnier’s 85,000 shares so long as the villa sells by June 30, 2021, according to the takeover offer.
This villa, built in 1870, belonged to King Leopold of Belgium from 1904 to 1924.
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Les Cedres, the St Jean Cap Ferrat trophy home set for sale

The Victorian Government has secured the passage of the Building Legislation and Treasury Legislation (Tax Relief) Amendment Bill 2026, introducing a suite of reforms aimed at improving consumer protection and confidence in the apartment market.

Resilience Insurance, Australia’s leading Latent Defects Insurance (LDI) provider, has welcomed the move.

The LDI elements of the Bill passed with bipartisan support and now moves to the Legislative Council where debate and passage are expected later this month. It represents a significant milestone in the national shift toward stronger, longer-term protection for apartment buyers.&nbsp;

The reform would deliver practical benefits across the housing system. Apartment owners will have stronger protection if major defects emerge, developers and builders will have a clearer quality framework to work within, and the State will reduce the risk of serious building failures becoming a long-term financial and social burden for households, communities and government.&nbsp;

LDI helps support apartment delivery while providing stronger protection for buyers and encouraging better construction outcomes.&nbsp;

Resilience LDI provides apartment owners with 10 years of insurance-backed cover for major structural defects from completion, with direct claim access to the insurer. This means owners are not required to first pursue developers or builders through costly legal action before accessing protection.&nbsp;

Resilience Insurance has been operating in Australia since 2022 and has already insured hundreds of development projects covering many thousands of apartments across Australia.&nbsp;

At approximately 1.8 per cent of build cost, it is a cost-competitive alternative to the traditional two per cent Strata Bond, bond while delivering significantly broader and longer protection.&nbsp;

“The Victorian Lower House vote shows that reforms like this succeed when they are practical, evidence-based and supported by industry," says Corey Nugent, CEO of Resilience Insurance.

"Victoria is moving quickly on a reform that will make a real difference for apartment buyers, while supporting better building outcomes and greater confidence in apartment delivery.

“This is step one. We look forward to the Bill completing its passage through the Legislative Council and to working with government and industry to implement the framework effectively.”&nbsp;

Fast Facts: What is Resilience LDI?&nbsp;

<ul>
	<li>Resilience Latent Defects Insurance (LDI): Covers major structural defects for 10 years from completion.&nbsp;</li>
	<li>Consumer-first: Direct claim access, no need for lengthy legal action.&nbsp;</li>
	<li>Cost advantage: At approximately 1.8% of build cost, LDI is typically priced below the traditional 2% Strata Bond while offering broader protection.&nbsp;</li>
	<li>Market leader: Resilience Insurance is the first approved LDI provider in NSW.</li>
</ul>

The Building Legislation and Treasury Legislation (Tax Relief) Amendment Bill 2026 has passed the Victorian Lower House, putting Victoria on track to become the first state to legislate an industry workable LDI framework as a formal alternative to the Strata Building bond. 

Joel Robinson

10-year Latent Defects Insurance for new apartment buyers set to land in Victoria

Just a few months after acquiring a prime Broadbeach site on the corner of First Avenue and Surf Parade, family-run developer <a href="https://www.apartments.com.au/developers/raptis">Raptis</a> has filed fresh plans for a new apartment development.

Raptis is seeking to deliver a <a href="https://www.apartments.com.au/new-apartments/17-19-first-avenue-broadbeach-qld-4217">29-storey tower with 73 apartments</a> on the 818 sqm site. It will be the developer's seventh project in the suburb, as they are approaching completion of The Sterling on George Avenue.

There will be a pool, barbecue and outdoor dining area, residents lounge and dining, sauna and steam room, gym, and a Yoga and Pilates studio.

<img alt="Raptis" data-entity-type="file" data-entity-uuid="b554da3f-7344-49aa-b1c9-44cf459af0d7" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-06-05%20at%2010.41.45%E2%80%AFAM.png?VersionId=zzjWu1iO1wnuYv4EV4fyOyf5nSXjGYut" />

Raptis Joint Managing Director, Evan Raptis, says they remain&nbsp;committed to developing quality infill sites across the Gold Coast in the lead-up to the 2032 Brisbane Olympics.

"This project continues our long track record of delivery in Broadbeach, and we look forward to bringing another premium development to this thriving precinct."

The announcement follows strong delivery momentum for Raptis, with The Sterling Broadbeach nearing completion and construction well underway on the final stage of the Waterpoint community adjacent to Harbour Town. The developer's continued investment in the Gold Coast reflects confidence in the region's apartment market fundamentals, underpinned by sustained Southeast Queensland population growth.&nbsp;

The outlook for the region is further bolstered by infrastructure investment tied to the Brisbane 2032 Olympic Games, which is expected to drive continued economic and population growth across the SEQ corridor.&nbsp;

Subject to a favourable response from Gold Coast City Council, construction on the new First Avenue tower is targeted to commence before the end of 2026.&nbsp;

Read more:&nbsp;<a href="https://www.apartments.com.au/news/qld/it-s-all-in-the-family-four-decades-later-raptis-continues-to-shape-the-gold-coast-skyline">It’s all in the family: Four decades later, Raptis continues to shape the Gold Coast skyline</a>

Read more: <a href="https://www.apartments.com.au/news/qld/raptis-secures-prime-surf-parade-site-for-next-broadbeach-apartment-development">Raptis secures prime Surf Parade site for next Broadbeach apartment development</a> 
&nbsp;

Gold Coast developer brings seventh Broadbeach project to market, targeting construction commencement before year end

First look: Raptis lodges plans for new 29-storey Broadbeach tower 

Brisbane development veteran Kevin Seymour's Seymour Group is set to deepen its presence on one of Brisbane's most tightly held riverfront addresses, lodging revised plans for a luxury apartment development on Oxlade, just a few doors down from The Oxlade, which it completed in 2024.

The <a href="https://www.apartments.com.au/new-apartments/70-72-oxlade-drive-new-farm-qld-4005">new project at 70-72 Oxlade Drive</a>, directly north of The Oxlade, will have 27 apartments across a seven-storey building&nbsp;overlooking the Brisbane River and Merthyr Park. It's a revision from a 2021-approved design.

Designed by bureau^proberts, the project has evolved from the previously approved 26-apartment scheme, introducing an additional penthouse level while maintaining a low-density, boutique character. The development will comprise 26 three-bedroom apartments and a single four-bedroom penthouse, supported by two basement levels with 86 car spaces and 34 bicycle spaces.

The architectural response is centred around two distinct building forms separated by a landscaped open-air atrium.&nbsp;"This dual composition captures and embraces Brisbane’s subtropical environment whilst breaking down built form and scale," the submission to the Brisbane City Council noted.

<img alt="First look: Seymour Group returns to Oxlade Drive with revised riverfront apartment plans in New Farm" data-entity-type="file" data-entity-uuid="c12d84d0-bc11-4067-b46f-5bd2d786a34d" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/new%20farm%20landscape.png?VersionId=YEPc2k5CAdh6aAPlu4uVpgZadh4MEfRd" />

A defining feature of the design is a deep landscaped void running through the centre of the building, creating what bureau^proberts describes as a "natural ravine" that enhances airflow, daylight penetration and resident amenity. The design report notes that the separation of the two building volumes is intended to maximise natural light, cross-ventilation and outlook while strengthening connections to the surrounding riverfront setting.

Curved balcony edges, integrated planting and extensive landscaping throughout the façade reinforce the subtropical design approach. The building's façade is softened by elevated gardens and planter beds, creating a green edge that complements the established landscape character of Oxlade Drive and neighbouring Merthyr Park.

New Farm has become one of Brisbane's most sought-after suburbs for developers delivering premium downsizer-focused apartments.

GRAYA has been particularly active in the precinct, completing both Chalk and York in recent years, while construction of Moray House, being delivered for Spyre, is now nearing completion. Architect-turned-developer Joe Adsett recently launched <a href="https://www.apartments.com.au/new-apartments/arcilla-new-farm-by-joe-adsett-28-maxwell-street-new-farm-qld-4005">Arcilla on Maxwell Street</a>, an exclusive collection of just nine apartments.

First look: Seymour Group returns to New Farm's Oxlade Drive with riverfront apartment plans

A new residential tower will be the first piece of a broader mixed-use precinct set to reshape a prominent Newcastle West site, with local developer <a href="https://www.apartments.com.au/developers/gwh">GWH</a> bringing its <a href="https://www.apartments.com.au/new-apartments/cambridge-quarter-newcastle-west-12-denison-street-newcastle-west-nsw-2302">Cambridge Quarter</a> vision to market.

The first release, Tempo, will introduce 87 apartments across a 24-storey tower, marking Stage 1 of the residential component of a larger urban regeneration project planned for the western end of Newcastle's city centre, encompassing the former Cambridge Hotel site.

Positioned on Denison Street, Tempo has been designed as the inaugural building within Cambridge Quarter, a precinct that will ultimately combine apartments, retail activation and revitalised public spaces including the revamping of the Cambridge Hotel.

[smartcode_project:default project_id=135876 project_image_fid=368853]

The tower will comprise a mix of one, two and three-bedroom apartments, including layouts with multipurpose rooms, catering to a broad cross-section of owner-occupiers. Apartment sizes range from around 60 sqm to 192 sqm, with a number of residences oriented to capture views across Newcastle Harbour, the city skyline and coastline.

GWH has emphasised liveability in the design, with open-plan layouts extending to generous balconies and terraces. Residents will have a choice of two interior palettes, while specifications include engineered stone benchtops, SMEG appliances, full-height bathroom tiling and secure building access. Premium upgrade packages will also be available.

Multiple rooftop resident retreats will provide communal outdoor space overlooking the harbour and city, offering an elevated amenity layer above the activity of the precinct below.

[smartcode_project:default project_id=135876 project_image_fid=368851]

The broader Cambridge Quarter vision extends beyond the residential tower itself. Ground-level retail activation and landscaped public areas are planned throughout the precinct, creating a walkable neighbourhood environment connected to the surrounding renewal of Newcastle West. The Cambridge Hotel is also earmarked for future redevelopment into a family-friendly hospitality venue integrated with the new precinct.

The project is strategically positioned within walking distance of Newcastle Interchange, providing access to light rail, regional rail services and direct connections to Sydney. Residents will also be close to Honeysuckle, Newcastle Harbour and the city's beaches and coastal walkways.

[smartcode_project:default project_id=135876 project_image_fid=368852]

For GWH, Cambridge Quarter represents one of its most significant Newcastle developments to date. The locally based developer, which has operated in the Hunter region since 1995, describes the project as a new chapter in the ongoing transformation of Newcastle West.

GWH Executive Director Jonathan Craig said the project had been shaped by a focus on creating lasting community connections.

"We take pride in creating places that last. Spaces where people feel connected, comfortable and a genuine sense of belonging," Craig said.

"Cambridge Quarter is something we are truly proud of, a place shaped by local knowledge, built with care and designed to be part of Newcastle's next chapter."

[smartcode_project_cta:default project_id=135876]

GWH unveils first release at landmark Cambridge Quarter precinct in Newcastle West

<a href="https://www.apartments.com.au/developers/ss-projects">S&amp;S Projects</a>,&nbsp;Rainbow Bay's busiest developer,&nbsp;has officially lodged plans for the largest development in its booming local portfolio, seeking approval for a further 88 apartments on Boundary Street.

The proposal&nbsp;at <a href="https://www.apartments.com.au/new-apartments/209-213-boundary-street-coolangatta-qld-4225">209–213 Boundary Street, Coolangatta</a>,&nbsp;marks the next chapter in the developer's transformation of the southern Gold Coast beachside precinct. It will be its fifth in the area, having already delivered Flow, Awaken and Esprit, while construction continues on the 38-apartment Radia. The new project would rise 57 metres above a consolidated 1,518 sqm site, on the same street as Radia and Esprit.

&nbsp;

Designed by <a href="https://www.apartments.com.au/architects/cottee-parker-architects">Cottee Parker</a>, the proposed development comprises 88 two and three-bedroom apartments across a contemporary podium-and-tower form that integrates extensive landscaping from street level through to the rooftop.

The tower would be delivered above a basement and multi-level podium accommodating resident and visitor parking, with the residential component commencing from level three. The design incorporates cascading planting throughout the façade, landscaped podium edges, and deep planting zones along the Boundary Street frontage.

<img alt="First look: S&amp;S Projects lodges plans for 88-apartment wellness tower at Coolangatta's Boundary Street" data-entity-type="file" data-entity-uuid="677e6615-b5c0-4b6c-b4f9-efb14fcde1a6" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/ss%20da%20pers.png?VersionId=YOnPKQm7IFXv0M5H326djEpxk80500Hi" />

A key feature of the development is its expansive rooftop wellness and recreation precinct. Plans reveal a resort-style pool deck, gymnasium, sauna, steam room, hot and cold plunge pools, rooftop terraces, barbecue areas and landscaped relaxation spaces positioned to capture views across the southern Gold Coast coastline.

The rooftop wellness focus builds on the vision S&amp;S Projects first outlined when it acquired the site for $20.25 million last year.

"We are taking every advantage to create a truly unique rooftop wellness experience with a natural feel for residents, offering stone features throughout and an underlying theme that emulates a botanical garden," S&amp;S Projects founder and director Paul Gedoun said at the time.

The proposal seeks a 57-metre building height, representing a 50 per cent uplift on the site's mapped 38-metre height limit. Planning documents argue the additional height is consistent with recently approved and emerging towers in the immediate Boundary Street and Rainbow Bay precinct.

Urbis, acting as planning consultant, said the development would provide "88 dwellings, comprising a mix of two and three-bedroom apartments, contributing to housing choice and supply within an established medium to high-rise coastal urban neighbourhood."

The scheme has undergone extensive pre-lodgement consultation with the City of Gold Coast, with the design refined following feedback relating to architectural expression, landscaping, traffic access and podium treatment.

<img alt="S&amp;S" data-entity-type="file" data-entity-uuid="0a2d70fd-62ac-4b83-97c6-b798fc1243dd" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-06-05%20at%209.16.31%E2%80%AFAM.png?VersionId=yHmghUwKM3IVGpBktQU1mE.0Lpf3WimG" />

The architectural team is led by Brisbane-based Cottee Parker, one of Australia's most active residential design studios, with landscape architecture by Dunn + Moran. The consultant team also includes ADG Engineers, Windtech and Acoustic Works.

S&amp;S Projects has become one of the most influential private developers operating on the southern Gold Coast. Since entering Rainbow Bay in 2022, the company has assembled a portfolio exceeding $1 billion in end value, establishing itself as a key player in the area's evolution into a premium apartment destination. Pezet Matheson will again handle the sales for S&amp;S.

Coolangatta is entering another wave of apartment development, following the delivery of several prominent residential projects in recent years.

John Kearney's Immerse Projects will launch&nbsp;<a href="https://www.apartments.com.au/new-apartments/kaiya-kirra-beach-5-haig-street-coolangatta-qld-4225">Kaiya on Haig Street</a>&nbsp;soon, meanwhile, Palm Beach-based Sherpa Property Group is preparing to bring its debut Coolangatta development, <a href="https://www.apartments.com.au/new-apartments/flourish-viver-87-griffith-street-coolangatta-qld-4225">Flourish Viveré</a>, to market later this year, subject to approvals.

Jonathan Chancellor

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