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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 price gap between houses and apartments in many Australian cities is closing as property investors exhibit a significant degree of herding behaviour, according to new research.
The research comes amid speculation that Australia is in a housing bubble. Herding behaviour is leading to excessive borrowing, further fuelling apartment prices, particularly in Sydney.
A major cause of the sub-prime crisis in the US was a herd mentality, in which home buyers were influenced by purchasing behaviour of others. More recently a widely publicised 2015 report by global fund manager PIMCO suggested that low interest rates and rising house prices in Australia were driving similar behaviour.
We examined whether there was formal evidence of a herd mentality in Australian metropolitan property markets. To do so, we looked at the dynamic interaction between house prices and apartment prices in Australian capital cities using monthly CoreLogic RP Data from December 1995 to June 2015.
<h4><a href="/images/2016/05/12/image-20160416-26305-8y7601.png" target="_blank">Click to enlarge</a></h4>
<img src="/images/2016/05/12/image-20160416-26305-8y7601.png" alt="">
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Figure 1. Monthly house and Apartment prices (December 1995- June 2015) Note: Green dotted lines show the narrowing of the pairs over time. CoreLogic RP Data
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Figure 1 shows house and apartment prices exhibit a strong degree of co-movement and both prices tend to deviate from each other quite often. Nevertheless, every now and then the price gap has narrowed.
Except for Canberra, in all cities the narrowing takes place after a long period of widening. There are at least two reasons why there is a long-run relationship between house and apartment prices. First, houses and apartments are considered as substitutable investments. Second, negative gearing and capital gains provisions encourage people to borrow against the equity in their home to purchase an investment property, which is typically an apartment. When the price of the family home increases, this boosts demand for apartments, pushing up their price as well.
We found that in some cities such as Sydney, investors can equally profit by purchasing apartments because rising house prices eventually push up apartment prices and vice versa.
We found house prices significantly affect apartment prices across all cities. But in only four cities (Adelaide, Melbourne, Perth and Sydney) apartment and house prices influenced each other equally. However, when apartment prices are on the rise (i.e. the market is bullish), the positive impact of house prices on apartment prices is substantially larger. This implies that investors exhibit a significant degree of herding behaviour. Such evidence of herd mentality is highest in Sydney and lowest in Darwin.
Our finding for Sydney is consistent with a widely accepted view by RBA officials who argue that prices have grown too fast and there is a housing bubble threatening to burst. Vernon Smith, who won the 2002 Nobel Prize in Economics and visited Australia in July 2015, also recently said Sydney house prices are in a bubble.
There are various ways in which this herd mentality might be reined in, including adjusting interest rates, tightening lending criteria, changing negative gearing and reforms to self-managed superannuation. Some of these initiatives have already been introduced.
In order to address a similar problem, in February 2014 Canada decided to ban rich foreign nationals from purchasing property and, as a result, some turned to Australia as their next favourite destination.
Although Australia has partially recognised this issue by prohibiting the purchase of established properties by foreign investors, there still remains several loopholes that go undetected, making housing extremely unaffordable for young Australians. This has increased intergenerational inequality between millennials and baby boomers that policy makers must be brave enough to make hard decisions about based on evidence rather than election outcomes.
Abbas Valadkhani is professor of economics, Swinburne University of Technology and can be contacted <a href="https://theconversation.com/profiles/abbas-valadkhani-177513" target="_blank">here</a>.
Russell Smyth is professor, Department of Economics, Monash Business School, Monash University and can be contacted <a href="https://theconversation.com/profiles/russell-smyth-144621" target="_blank">here</a>.
Both are authors for The Conversation. 
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jchancellor-FAypfDUnLy

The herd driven housing bubble that could trigger an apartment bust

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The Onthehouse property website, which will include the Residex data base founded by John Edwards, has been bought by CoreLogic RP Data.
OTH's consumer online division (Onthehouse.com.au, Residex and REAN, the Real Estate Ad Network) fetched $3 million.
The stockmarket listed Onthehouse Group’s strategy is now solely focused on its real estate software division.
"The board believes the business is now funded to grow Console’s real estate software products market share and leverage new revenue opportunities through integrating or building other services to real estate agents and their clients."
Earlier this year it was signalled the property website was set to be shut down after its board ended negotiations with realestateVIEW just before contracts were due to be signed on the national price data base. 
"In the absence of a sale agreement for the Onthehouse.com.au and media businesses, they will be closed by April 2016 at an estimated closure cost of circa $1.7 million," the ontheouse company said in a statement to the ASX earlier this year. 
No white knight emerged until today.
Residex was initially intended to be retained in the envisaged remaining restructure, having been forecast to deliver revenues of more than $2 million in FY16 and to operate at a break even position going forward.
It was 2012 when Onthehouse acquired the last tranche to own 100% of property data business Residex.
Onthehouse acquired a half-share in May 2011.
The second 50% of Residex cost onthehouse $3.5 million.
Residex was founded by John Edwards in 1990 to to develop house price indices for the NSW state government and has since added expanded historical residential data, suburb reports and valuation reports to its national mix of products and services.
Residex hold more than 350 million records provided to the property industry and the public dating back to 1865.
Following the sale of COD division announced today, the onthehouse company’s cash position has materially improved through the lower COD exit costs.
The estimated but now avoided cost announced in February to close the business was $1.7 million.
The estimated cost to the company to exit COD has now been revised to $1.5 million which includes professional fees on the sale of COD.
The company’s cash position is $3.2 million better off than previously expected under a COD shutdown scenario.
The group chief Chris Meehan advised discussions with the Macquarie Group hostile takeover consortium are continuing.
"Onthehouse will continue to keep the market informed in accordance with its continuous disclosure obligations," said Chris Meehan.
The takeover consortium included CoreLogic RP Data.
 
 
 
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Onthehouse property website sold to CoreLogic RP Data

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It has been recently suggested the once popular sea and tree change relocation phenomenon - which was lead by retirees over a decade ago - is showing signs of a return.
At the top end of the price range is a $6.5 million offering in Casuarina known as <a href="https://www.realestate.com.au/property-house-nsw-casuarina-121721178" target="_blank">The Retreat</a>.
The private residence sits alongside Casuarina beach on a 8000 sqm block and has a striking white curved design.
Sitting behind the enormous timber front doors and marble adorned entrance are 11 bedrooms, 12 bathrooms,
The third level penthouse suite has three of the bedrooms, sprawling roof top decks and a gym.
The home is surrounded by lush manicured gardens, tranquil ponds and a cascading waterfall.
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Sea change to Casuarina?

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<img src="https://counter.theconversation.edu.au/content/57114/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
A memo on the subject of housing taxation from the Reserve Bank of Australia (RBA) is stirring up debate on proposed changes to negative gearing and capital gains tax in the election campaign.
The memo, dated December 9 2014, does counter the government’s claim that changes to negative gearing will have an adverse effect on housing prices, although this was never its intended purpose.
The memo was in response to the report from the Financial System Inquiry two weeks earlier. The inquiry noted that reducing capital gains tax concessions would “lead to a more efficient allocation of funding in the economy,” that “the tax treatment of investor housing…tends to encourage leveraged and speculative investment,” and that “housing is a potential source of systemic risk for the financial system and the economy”.
The RBA is usually reluctant to comment on areas of government policy outside its remit and hasn’t expressed any views on whether changes are needed to the long-standing tax treatment of housing investment. However, in response to a Productivity Commission inquiry 12 years ago, the RBA pointed out that:
“…taxation arrangements in Australia are more favourable to investors in residential property than are the arrangements in other countries.”
It also went on to note that a higher share of Australian taxpayers are attracted to property investment to lighten their tax burden and reducing investor demand would allow for more demand from first home buyers, without adding to the overall pressure on demand and prices. The RBA submission suggested this could also lead to a more stable housing market.
At that time, housing investors accounted for just over 45 percent of all lending by Australian financial institutions. In 1999 this was less than 32 percent, when the Howard government amended the tax treatment of capital gains in a way that made it more generous to investors (in property and other assets).
After falling back to around 36 percent in the aftermath of the global financial crisis, the share of property loans taken out by investors rebounded to more than 50% in the first half of 2015. The Australian Prudential Regulatory Authority (APRA) has since required banks to tighten their lending standards for property investment loans, now the share of new housing loans going to investors has fallen back to about 45 percent.
The key point to note here is that the changes enforced by APRA to banks’ lending criteria have also had the effect of dampening investor demand, as Labor’s current policy also intends, without any obvious adverse effects on property prices.
The government’s strict enforcement of foreign investment regulations, designed to prevent foreigners from purchasing established properties (other than in limited circumstances), and the cutting of grants to first-time buyers of established properties while boosting grants to first-time buyers of new dwellings at a state level, have both failed to dampen investor demand for property.
In other words, governments are trying with these policies to reduce demand for the purchase of established dwellings (90% of borrowing by Australian property investors is for the purchase of established dwellings) while encouraging the demand, and therefore building of, new properties. This is exactly what the Opposition’s proposed changes to negative gearing and the capital gains tax discount seek to do.
Labor is trying to make it less attractive for investors to buy an established property after 1 July 2017. As a result, the prices of established dwellings should go up at a slower rate than it would otherwise – and from the standpoint of would-be home-buyers, this is a good thing.
However, the Opposition proposes to “grandfather” existing negatively-geared investors from these changes. This means anyone who has a negatively geared property investment as of 30 June 2017 will still be able to offset the excess of their interest costs over their net rental income against their other taxable income. So there is no reason to expect that investors will seek to sell their investments en masse and that prices of existing properties will fall any more than they have done as a result of the other government measures.
And this is precisely what the memo from the RBA notes:
“only if changes were not grandfathered” would there be a risk of “large scale sale of negatively geared properties.”
The RBA note also raises the possibility that changes to negative gearing could prompt a “potential increase in rents” – a point which the Coalition has been as quick to seize upon. Presumably this concern reflects an assumption that if changes were to be made to existing negative gearing arrangements, those changes would apply to new properties as well as established ones (since the Financial System Inquiry whose recommendations prompted this staff memo didn’t make any distinction between the two).
The Opposition’s policy is to keep existing negative gearing arrangements for investors in new dwellings. There is a risk that it could end up inflating builders’ profit margins, rather than boosting the supply of new housing.
However, to the extent that it does the latter, there is less reason to expect rents to rise. This is because under the Opposition’s policy more would-be home-buyers could fulfil their aspirations. It would reduce the competition they face from investors who negatively gear and this would decrease the demand for rental housing.
The Reserve Bank hasn’t explicitly supported Labor’s negative gearing policy. But it does appear to have rebutted one of the government’s principal arguments against it.
Saul Eslake is vice-chancellor’s Fellow, University of Tasmania and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/saul-eslake-665" target="_blank">here</a>.
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What the RBA memo really says about negative gearing: Saul Eslake

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GUEST OBSERVER
An overhaul of education and training standards for the real estate profession must take place to help prevent illegal activities.
Trust account fraud, misleading and deceptive conduct, underquoting and a lack of knowledge about property and the laws relating to its transaction are simply unacceptable behaviours.
On the surface real estate sales and management appear to be very simple, however it is in reality a very complex and multilayered process that requires a high level of knowledge and diverse skills to carry it out in a professional manner.
Most people would expect that an agent has been properly trained and has the required qualifications to fulfil their obligations. The sad truth is that for the past 10 years the education standards delivery especially in NSW have been watered down and in the interest of increased competition abused by many course providers that are allowed to continue operating.
It actually requires more training to become a barista than a real estate agent.
You would expect an agent to understand how the property they are dealing with was built; its age; what the zoning is; if there are any easements, building or height restrictions; and what special conditions are in the contract, to name just a few issues.
Professional agents can answer all of these questions, but not every agent will be able to because of the low level of training in the industry.
The Real Estate Institute of New South Wales has been fighting for the past 10 years for better training and qualifications, and government cannot ignore the issue any longer.
Inadequate real estate agent training needs to be addressed to achieve better consumer experiences and outcomes. Both the NSW Government and NSW Fair Trading must act on our recommendations for reform.
Professional agents and consumers demand it, and now is the time to deliver it. 
John Cunningham is president of the REINSW and can be contacted <a href="https://www.reinsw.com.au/imis15_prod/" target="_blank">here</a>.
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More training for coffee making than property sales: John Cunningham

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GUEST OBSERVER
Stamp duty concessions, including exemptions for downsizers and adjustments for off-the-plan buyers, should be incorporated in the WA state budget to tackle Perth’s failing housing targets. 
With the release of Perth’s long-term planning blueprint in 2011, there was a clear objective to reduce urban sprawl by driving higher-density housing options in established areas as the city’s population grows to over 3.5 million people.
Since then, we’ve seen changes in the types of housing being constructed in metropolitan Perth with an increase in multi-residential complexes, rather than the traditional trend of single dwellings.
This has been driven by a shift in buyer attitudes towards apartment living as well as many councils adopting planning schemes that are conducive to higher-density housing.
However, it’s clear that more needs to be done as Perth’s infill development continues to fall short of the state’s target of 47 percent.
Initiatives key to reaching housing goals
Two initiatives that are conducive to the state’s long-term planning targets are the exemption of transfer costs for downsizers and the modification of stamp duty for off-the-plan purchases.
These concessions should be included in the WA budget, scheduled for May 12, to incentivise buyers to continue to move into high density housing and, in turn, support the state reach its infill targets.
1. Exemption of transfer costs for downsizers
The introduction of a one-off stamp duty exemption for people over 65 who are selling their family home to downsize.  The exemption should be available in any cases where the family home sells for less than $1 million and the buyer purchases a property of a lesser value. Given that many retirees are hesitant to downsize because of the high stamp duty costs involved, a one-off exemption would provide a significant incentive to move to a smaller residence, possibly in a higher-density complex. It would also help free larger blocks in established areas for development of more higher-density housing options.
2. Modify how stamp duty is applied for off-the-plan purchases
Changing the way stamp duty is applied to off-the-plan purchases will drive more buyers to higher-density housing options. An effective method, which is utilised in other Australian states, is to charge stamp duty on the value of the land alone, rather than the combined value of the land and the dwelling. For example, take a developer who acquires a development site for $1 million and then seeks to build 30 apartments on the site. 
This would make the value of the land of each apartment worth approximately $33,000, which a potential buyer of one of the apartments would then pay stamp duty on. This should only be applied to off-the-plan purchases made prior to the start of construction. Any apartments purchased after the start of construction would have to pay stamp duty on the full price of the land and dwelling. 
Such an initiative would incentivise buyers to purchase high-density housing options during presales, because they save on the stamp duty. It would also assist developers attain finance for these projects, as lenders typically require about 60% of apartments sold as presales before approving funding.
Without further impetus for buyers to move to high-density housing, Western Australia, and more specifically Perth, risks falling significantly short of its key housing goals.  
Such stamp duty concessions are a swift and low-cost lever the Barnett government can pull in its forthcoming budget to help realise its long-term planning blueprint.
 
Damian Collins is the founder and managing director of Momentum Wealth and can be contacted <a href="https://www.momentumwealth.com.au/damian-collins/" target="_blank">here</a>.
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Stamp duty concessions key to achieving housing goals: Damian Collins

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The 30 minute city is a worthy town planning concept of connectiveness but isn't ever going to happen in Sydney.
Buyers on the fringe must simply cop the consequences of distance.
The valuers Herron Todd White suggested recently just because fringe localities are cheap, doesn’t mean they can’t be savvy buys too.
They offer the chance of property at a fraction of the cost compared to city hub. Badlands no more.
The major worry from a price growth perspective is that supply can rise suddenly on the fringe.
Suburban addresses on the circumference of any city are abutted by greenfield sites.
"While you can see solid value performance, it doesn’t take much for competition to kick in," HTW noted.
If big parcels of housing land nearby gain development approval, there’s suddenly a whole new option for potential buyers.
Nowadays developers effectively create mega-suburbs through multi-stage projects extending over decades that include major community spaces, schools, universities, even hospitals as well as the mandatory shopping centre.
The aim is that families can effectively live within the boundary of these new communities and want for very little. 
The inner suburbs of Sydney hold most of the buyer attention, but the sought after cafe lifestyle pursuit exist beyond the hipster belt in suburbs 25 kilometres away the CBD. 
And also on the outskirts of NSW's major regional cities too.
Take the Illawarra, where fringe areas tend not to be too far from the main centres of Wollongong, Shellharbour and Kiama.
HTW suggests these include Cringila, Port Kembla, Unanderra, Dapto, Barrack Heights and Lake Illawarra.
Prices below $400,000 are now rare, generally for 1960s brick or fibro dwellings without major updates.
Cringila, close to the steelworks, is priced under $350,000, with capital growth pegged back due to location, HTW advise.
The Shoalhaven fringe are the small coastal towns based around Nowra, including Shoalhaven Heads, Culburra and Callala Beaches.
While all have local shops and services, they don't have departments stores and good public transport.
Most of all they lack a deep job pool, HTW warns.
Their real estate prices reflect this but can be buoyed by buyers seeking that holiday house dream.
Prices in Shoalhaven start around Nowra at $250,000 for a 50 year old three bedroom fibro.
As Australia’s seventh largest city, Newcastle has many fringe options including Fletcher and Cameron Park.
A contemporary four bedroom in Fletcher costs around $550,000, compared to $800,000 plus closer in.
Apparently traffic in Newcastle is rarely problematic, allowing fringe commuters 20 minute access to CBD based careers, services and social activities.
On the Central Coast, close to the Gosford CBD are the fringe options of Niagara Park, Narara and Wyoming.
Lacking the popularity enjoyed by the beachside suburbs, HTW suggests as gentrification occurs they may well prove a smart buy.
Further north, Chain Valley Bay, Gwandalan and Summerland Point have been popular with retirees and a constrained budget, but have seen a recent rising market.
The Southern Highlands has experienced increased investors in its fringe options, which are the villages away from the three major towns of Bowral, Mittagong and Moss Vale. Prices have increased 10 percent since 2014, but this is now expected to slow.
The Southern Tablelands region has been steady with HTW anticipating Goulburn to plateau or even soften.
Goulburn is sometimes viewed as a fringe suburb of Canberra, suggesting rather than the 30 minute city outcome, we rather might all merge into one huge metropolis.
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The 30 minute city isn't ever going to happen in Sydney

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<img src="https://counter.theconversation.edu.au/content/57114/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Neighbourhoods as “battlefields”, “sardine city”, traditional suburbs as “threatened species” and urban hubs as the domain of “latte-sipping yuppies”. These are examples of the dramatic and negative imagery Queensland newspapers use to describe urban consolidation in Brisbane.
Our research identifies depictions of urban consolidation in Brisbane by five newspapers: The Courier Mail and Sunday Mail, Brisbane Times, Northside Chronicle and South-East Advertiser. Our examination of 456 articles from 2007 to 2014 reveals a glut of negative imagery.
Urban consolidation is predominantly depicted as dangerous and uncontrollable. Dire warnings abound of a city bursting at the seams and sustained assaults on the Australian suburban dream.
Newspapers remain powerful forces despite their declining fortunes in recent times. Their capacity to shape public opinion remains strong. So how do Queensland newspapers heighten the drama of consolidated urban development? And what imagery do they use to sustain the narrative?
<h2>Planning responses to growth</h2>
Cities are rapidly changing all over the world as urban populations grow. Urban consolidation has become a common planning response. It focuses on concentrating growth in existing urban areas. This involves the delivery of higher-density housing and mixed-use developments.
Urban consolidation is often advocated as a neat solution to increasing populations, decreasing housing affordability and unsustainable urban sprawl. It is now a key planning policy in many Australian cities, including all of the capitals.
Of the 156,000 additional dwellings forecast to be developed in Brisbane between 2006 and 2031, The South East Queensland Regional Plan has set the goal of delivering 88 percent in areas targeted for consolidation. The over-arching priority is to accommodate an ever-increasing urban population within existing boundaries.
Evidence of implementation in Brisbane can be seen all over the inner city and throughout inner and middle-ring suburbs. Apartment and unit development projects are proceeding at pace. This is leading to a huge upswing in approvals and new stock coming to market.
<h2>The drama of consolidated development</h2>
Media reports predominantly capture the drama of consolidated development with references to warfare or natural disasters. Articles commonly refer to floods of development or a city under siege.
Local politicians opposed to consolidation are characterised as saviours of the people. These white knights stand strong, benignly offering their constituents protection from the destruction of over-development.
Dramatic physiological language is used in articles discussing high-density apartment buildings. Such places are characterised as choking the city or ripping the heart out of its suburbs. Increasing urban densities are presented as threatening the overall health of the city.
Apartments are depicted as “shoeboxes”, “rabbit hutches” and “charmless chunks of brick”. The people who choose to live in them are routinely portrayed as outsiders. They are the unwelcome intruders who are taking over the city and corrupting traditional suburban values.
By contrast, articles featuring direct quotes from developers and planners tend to use more moderate imagery. Consolidation is portrayed more commonly as a means to create quality places to “live, work and play”. Associated images are usually consumption-based and focus on the benefits of access to inner-city employment and amenities.
While some imagery depicting cosmopolitan lifestyles finds traction, it is regularly offset by images of the declining suburban dream.
Usually this involves images of the “real Australians” whose happy suburban lives are threatened by over-development. These rarefied beings live on a median wage and host friendly barbecues in a suburb near you. Their depiction is far removed from that of their inner-city counterparts sipping lattes and swirling expensive wine.
<h2>(Mis)representing urban realities</h2>
Our research suggests Queensland newspapers create a sense of danger around urban consolidation in Brisbane. They perpetuate mostly negative imagery, referencing war, death and disease. Increased urban density becomes associated with towering buildings, faceless residents and unhealthy places.
Yet this isn’t necessarily the reality. Urban consolidation in Brisbane occurs as a result of managed planning processes. It is designed to meet the city’s current and future development needs. Developments generally occur in accordance with zoning regulations and development plans.
Newspapers have a tradition of sensationalising and simplifying news stories. And depictions of urban consolidation in Brisbane do tend towards sensationalism. The drama of consolidated development appears to work well to fill column inches and sell papers.
We argue that the use of negative imagery in Queensland newspapers relies more on subjective judgements than facts. Visions of unplanned, laissez-faire urban consolidation subsuming Brisbane are generally at odds with reality. Is the adage of not letting facts get in the way of a good story ringing true once more?
 
Katrina Raynor is PhD candidate in Urban Studies, Queensland University of Technology and can be contacted <a href="https://theconversation.com/profiles/katrina-raynor-255374" target="_blank">here</a>. Tony Matthews is lecturer in Urban &amp; Environmental Planning, Griffith University and can be contacted <a href="https://theconversation.com/profiles/tony-matthews-234160" target="_blank">here</a>. Both are authors for The Conversation.
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Media picture of urban consolidation focuses more on a good scare story than the facts

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<img src="https://counter.theconversation.edu.au/content/57114/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Despite being widely described as a “tax rort for rich investors”, negative gearing is not a tax concession (a tax deduction as opposed to an exemption or rebate). It does, however, encourage over-investment and over-leveraging in Australia’s housing market, as the Financial System Inquiry Murray Report concluded.
Consequently, while not the only reason for increasing house prices and affordability issues in some locations, negative gearing has become a focal point in an election year for tax reform debate and a review of housing policy.
From Waleed Aly to the prime minister on his own blog, negative gearing is generating much talk without context.
<h2>Where does the idea come from?</h2>
Gearing describes the use of borrowing to finance an investment. When the interest costs of servicing that borrowing exceed the net income of the investment, it is said to be negatively geared.
The idea underlying negative gearing is relatively straightforward: when an individual (or business) incurs costs associated with generating income, those costs are tax-deductible from income.
As it is applied to investment properties in Australia, when interest costs of the mortgage exceed the net rental income of the property (that is, it is negatively geared) then the net loss on the investment property may be used by an individual to offset their ordinary wage income.
This is because, under the current rules in Australia, investment property losses are not “quarantined”. That is, the losses on an investment property are not only tax-deductible against the income from the investment property. As a result, the higher your total income, the greater the tax-minimisation benefit of negative gearing.
Quarantining losses is a major point of difference in the application of negative gearing in Australia to the rest of the world, and a key area that previous reforms in Australia have targeted.
<h2>International examples</h2>
Compared to the rest of the world, Australia’s negative gearing policy is one of the most generous to property investors.
Of OECD countries, New Zealand and Japan have the most similar treatment of negative gains to Australia. In these countries, negative gearing is allowed with relatively few restrictions.
On the other hand, the United Kingdom applies strict quarantining rules to loss-making properties. Investment property losses may be applied to the pool of income from investment properties and carried forward, but the losses may not be deducted against wages (i.e. non-passive income).
However, this summary should be treated with extreme caution. An international comparison of negative gearing treatment is incomplete without also examining the rules for capital gains and other housing market distinctions such as owner-occupier versus investment properties and new versus existing developments.
In the United States, while not a system to aspire to, even interest on owner-occupied housing is fully tax-deductible against ordinary income. By contrast, in Sweden, tax deductions from negative gearing of rental properties are permitted (although quarantined with income from other capital assets), but imputed rents from owner-occupied housing are taxed.
The net welfare gains are cumbersome to measure and entwined with government policy.
<h2>Previous attempts at reform</h2>
In 1984-85, major reform to negative gearing policy in Australia took place.
Prior to the Hawke government’s tax reforms, negative gearing rules quarantined investment property losses and allowed investors to carry these losses forward to offset future income when, or if, the property became positively geared.
In the space of six months, investment property losses quarantines were lifted (in order to boost the stock and affordability of rental housing) and then removed.
From property investors’ perspective, this final reform was severe: losses were quarantined on an asset-by-asset basis and could not be carried forward to offset future income.
Though this reform was not retrospective (that is, it would apply only to properties purchased after July 1985), it was largely criticised at the time and arguments that it caused rents to increase dramatically prevailed. While these analyses have been questioned in more recent debates, in September 1987 the reform was repealed and the system largely as it exists today was set.
The one major subsequent attempt at reform to negative gearing came in the 2010 Henry Tax Review. The primary recommendations for a “fairer” and more efficient housing market were for the removal, or reining in, of negative gearing. Specifically, negative gearing losses should be capped at 40 percent.
At the time of the report’s release, then-prime minster Julia Gillard chose to maintain the status quo with respect to negative gearing. Her response on ABC’s Q&amp;A shows that negative gearing is a bilaterally difficult topic.
<h2>Where are we now?</h2>
With calls for negative gearing reform from a range of voters, economists and advocacy groups such as ACOSS, why has no major political party achieved significant reforms to negative gearing?
There is the elephant in the room: the majority of Australian voters have a direct interest in the stability of the housing market.
Beyond that, the added confusion is the conflict between what negative gearing policy aims to achieve and the reality.
It is true that negative gearing distorts the housing market. It encourages over-investment and over-leveraging in Australia’s residential real estate sector. And this is exactly what it was intended to do.
But when combined with the existing progressive income tax structure, the relative benefit to low-income versus high-income earners is easily muddied.
For over 30 years, negative gearing has been untouched under the primary political motivation – that it increases the housing supply and, importantly, the stock of rental housing. It has taken this long to conclude that the stated aim does not appear to have been achieved. Finding a better alternative is not going to happen overnight, no matter how persuasively Waleed Aly puts the case against it.
<h2>So what are the reform options?</h2>
The Turnbull government has ruled out changes to negative gearing in the pre-election budget. The government has walked away from earlier suggestions of capping the losses that may be claimed from negative gearing, or restricting the number of negatively geared properties in an individual’s portfolio.
By contrast, Labor’s policy has been placed on a pedestal by proponents of reform. Labor proposes to restrict the tax benefits of negative gearing to new properties only. In theory this would redirect housing investment (which currently is concentrated in existing properties) to housing construction and help to boost supply.
Labor’s proposal would be a further distortion. Taken to its limit, offering incentives for investment in new properties also encourages speculative developments. The policy risks unoccupied housing investments and the resulting “ghost towns”, without improving housing affordability.
Complicating this analysis, however, is the complexity of the tax system and housing market policy. Negative gearing should not be analysed in isolation from capital gains (on which the Grattan Institute has published a comprehensive report) and other special treatments of housing such as stamp duty, land taxes and first-home-buyer exemptions. Rather than take a sledgehammer to the current policy, a good reform should encapsulate this spectrum of housing market distortions.
Danika Wright is lecturer in Finance, University of Sydney and author for The Conversation. She can be contacted <a href="https://theconversation.com/profiles/danika-wright-121868" target="_blank">here</a>.
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Negative gearing reform has chequered recent history

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GUEST OBSERVER
Mixed-use developments are back in favour and a growing trend, with many developers opting to incorporate several property uses into new projects.
Many factors are driving this trend including uncertainty in the residential market, growth in the hotel sector, the continuing scarcity of prime sites and the creation of activated lifestyle precincts.
Today’s mixed-use development model is emerging as a modern fusion of commercial, retail, residential and even hotel uses to maximise planning criteria. 
Rather than relying on one “star performer” property type, such as residential over the last five years, risk is now being reduced with developments incorporating several uses. 
In addition to risk being minimised by using the mixed-use development model, another core benefit for developers is that mixed-use projects are a highly efficient way to unlock the best value out of land and potentially increase return on investment. 
I liken it to a return to the good old-fashioned mixed business retail model we all grew up with. A bit of this and a bit of that for sale, and not all the eggs in “one basket” so to speak. 
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Rather than asset classes having to independently compete against each other in silos to generate the highest return, a mixed-use project enables different property types to work together and collaboratively deliver maximum value. 
Interestingly, hotels are now being proposed on the lower levels of new high rise residential towers where solar and ventilation criteria can't be met for residential uses. It’s an organic move, a bit like complimentary planting to create a sustainable garden, but rather complimentary planning where property uses complement each other to safeguard their individual on-going survival. 
In this case the hotel can be constructed on the lower levels not suited for residential development and create an opportunity for on-going cashflow or immediate sale, yet the upper levels with views can be developed as apartments and derive higher profit margins. 
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The on-going trend toward the creation of lifestyle precincts is also another factor influencing the surge in mixed-use developments. This is particularly evident in CBD and fringe environments with the focus in activating beyond the traditional “9 to 5” hours of an office building. 
Mixed-use developments have the added benefit of creating active and connected communities where people can work, rest, sleep and play. This supports the property sector’s fascination with sustainability and also ensures further opportunities for developers to maximise returns on investment are not missed. 
The benefits of mixed-use developments are far-reaching and transpire beyond developer profits to improve communities and ensure efficient use of our space. We certainly have not seen the end of mixed-use projects and will see more interesting combinations of property uses in new developments over the next few years as developers become more experimental in their planning. 
Drenka Andjelic is managing director of Construction Assignments and can be contacted <a href="https://www.constructionassignments.com" target="_blank">here</a>.
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The secret is in the mix: Mixed-use developments cut risk, deliver value 

An entity directed by HSN's Rafi Assouline and Rebel Property's Allen Linz has filed plans for an impressive new precinct in Woolloomooloo.

The major mixed-use development would transform a prominent William Street site into a new residential village anchored by affordable housing and a large public park.

The proposal, submitted as a State Significant Development Application, covers 164-172 and 174-194 William Street, a 6,398 sqm site between Forbes Street and Dowling Street on the southern edge of Woolloomooloo.

Designed by fjcstudio in collaboration with Bangawarra, Studio Bright and Tribe Studio Architects, the scheme would deliver 227 apartments across four residential buildings ranging in height up to 18 storeys, alongside retail space, public domain improvements and a new publicly accessible park.

<img alt="Rebel" data-entity-type="file" data-entity-uuid="0eb59b7c-914a-4a5c-b849-3a56749f5e93" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-06-12%20at%2011.18.51%E2%80%AFAM.png?VersionId=mxM6EEqeoLjrCiTlCzTKTvzpKuh6kSkH" />

It's another design scheme for Rebel, who took <a href="https://www.apartments.com.au/news/nsw/first-look-rebel-property-group-takes-woolloomooloo-precinct-to-nsw-government">concept plans to the NSW Gov late last year</a>.

The latest plans will be a mix of 167 build-to-sell apartments and 60 affordable apartments, with the affordable housing component representing 15 per cent of the project's gross floor area. The apartment mix includes 12 one-bedroom, 53 two-bedroom, 89 three-bedroom apartments and 13 penthouses, while the affordable housing component would comprise 42 one-bedroom and 18 two-bedroom apartments.

<img alt="Rebel" data-entity-type="file" data-entity-uuid="3b3d4553-8a8c-4af5-aa8c-519ffb1e28c6" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-06-12%20at%2011.20.12%E2%80%AFAM.png?VersionId=_Yb6ibN7eDnOtQjCNDK2eviORa4qzgv." />

Rebel Property is seeking to take advantage of the NSW Government's infill affordable housing bonus provisions under the Housing SEPP, which provide additional floor space and height in exchange for the delivery of affordable housing for a minimum of 15 years. The planning pathway allows a 30 per cent increase in floor space ratio and building height where 15 per cent of the development is dedicated to affordable housing.

&nbsp;

At the centre of the development is a 1,356 sqm sunlit public park designed to become a new community gathering space at the gateway to Woolloomooloo. The park would be complemented by a network of pedestrian laneways connecting William Street with the surrounding streets, improving permeability through what is currently a largely impermeable block.

<img alt="Rebel" data-entity-type="file" data-entity-uuid="257af931-a393-4007-8c6d-7219796df58d" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-06-12%20at%2011.20.51%E2%80%AFAM.png?VersionId=KAHy94GrhaReFsWTGDKfy39EDJ8gEEv4" />

The design team says the public domain has been heavily influenced by the site's topography and Aboriginal cultural heritage, drawing on the escarpments, gullies and landscape characteristics that historically defined the area before urbanisation. The landscape design has been developed in partnership with First Nations consultancy Bangawarra.

The project would be delivered across four separate buildings. The William Street East and William Street West buildings, designed by fjcstudio, would contain the majority of the apartments. Melbourne-based Studio Bright has designed the Forbes Street building, while Tribe Studio Architects is responsible for the Dowling Street building.

Rebel had secured approval for the concept plans late last year.

Joel Robinson

First look: HSN, Rebel, advances Woolloomooloo precinct plans

A locally heritage-listed furniture showroom on Water Street is set to become the centrepiece of a new mixed-use residential development as local developer&nbsp;<a href="https://www.apartments.com.au/developers/keylin-group">Keylin</a> seeks approval for <a href="https://www.apartments.com.au/new-apartments/lotus-on-water-street-290-water-street-fortitude-valley-qld-4006">Lotus on Water Street</a>, a 15-storey project on the Fortitude Valley side of Spring Hill.

The proposal spans 290 Water Street and 137-141 Warry Street, combining several properties into a 2,869 sqm site that sits between Fortitude Valley, Spring Hill and the rapidly evolving Victoria Park precinct. Keylin's plans would deliver 132 apartments alongside new retail, hospitality and commercial space, while retaining and repurposing the historic Brunswick Home Furnishers Showroom that fronts Water Street.

Designed by <a href="https://www.apartments.com.au/architects/jackson-teece">Jackson Teece</a>, Lotus on Water Street comprises a 12-storey residential tower rising above a three-storey podium and communal rooftop terrace. The development includes 76 apartments classified as multiple dwellings and a further 56 units proposed as short-term accommodation, designed to be flexibly used as either accommodation or permanent residences. The apartment mix comprises six one-bedroom, 54 two-bedroom and 16 three-bedroom homes.

<img alt="First look: Keylin unveils heritage-led Lotus on Water Street tower in Fortitude Valley" data-entity-type="file" data-entity-uuid="9822bb79-6c49-49c9-95ba-319e8c8d81c3" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/fortitude%20valley%20front.png?VersionId=ioW8zbN4UVebbLetTFuv92t.HkdgfR5e" />

Residents would have access to an extensive rooftop recreation level spanning more than 1,200 sqm of communal open space. Plans include a pool, gym, sauna, infrared sauna, yoga area, library, private dining room, barbecue facilities and landscaped entertainment spaces, making the rooftop the project's largest shared amenity offering.

At street level, the proposal focuses on the adaptive reuse of the heritage buildings along Water Street, where 518 sqm of retail and commercial space is planned across shop, office and food and drink outlet uses. A permeable residential lobby would be positioned between the retained heritage buildings, creating a pedestrian connection between the historic streetscape and the new tower behind.

<img alt="First look: Keylin unveils heritage-led Lotus on Water Street tower in Fortitude Valley" data-entity-type="file" data-entity-uuid="269cf3e0-7d13-48bf-a318-05a00deb5c10" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/fortitude%20valley%20podium.png?VersionId=DLXmTCLsp6GOcLpQ0h.0z7wKCw59EhN_" />

The heritage retention strategy is central to the scheme. The development application notes that the Brunswick Home Furnishers Showroom and adjoining heritage buildings will remain, with only non-significant structures on the site earmarked for removal under a previously issued Heritage Exemption Certificate. Levels one and two of the new podium are recessed behind the heritage façades to maintain their prominence within the streetscape.

Jackson Teece has drawn inspiration from the site's manufacturing history when designing the podium. The planning documents state that the façade incorporates perforated metal screening that references the woven and rattan furniture historically produced on the site. Cascading and climbing plants are integrated throughout the podium to soften the building's presentation and screen parking levels behind. The landscape strategy also informs the project's name, Lotus on Water Street, drawing on the historic Spring Hollow waterholes that once ran through Spring Hill and the blue water lilies associated with Meeanjin, Brisbane's traditional name.

The proposal also incorporates the neighbouring property at 141 Warry Street, currently occupied by a healthcare service. The existing building would remain, with nine dedicated parking spaces allocated within the new development to support its ongoing operation. In total, Lotus on Water Street proposes 117 car spaces, including 110 resident spaces and seven visitor bays, alongside 100 bicycle spaces.

<img alt="First look: Keylin unveils heritage-led Lotus on Water Street tower in Fortitude Valley" data-entity-type="file" data-entity-uuid="70cf07bc-4fd8-4e70-92dd-be8b21c4e4f0" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/fortitude%20valley%20site.png?VersionId=txlxrJImM0Sm_vTzHVKh5DDUkyL_CiiA" />

The site sits within the Spring Hill East Precinct of the Spring Hill Neighbourhood Plan and is positioned around 650 metres from both Fortitude Valley Station and Exhibition Station. It is also within walking distance of the King Street precinct, Royal Brisbane and Women's Hospital, Herston Quarter and Victoria Park, which is earmarked to become a major venue precinct ahead of the Brisbane 2032 Olympic and Paralympic Games.

Planning documents describe the location as a key gateway between Spring Hill and Fortitude Valley and highlight the area's increasing importance as new transport infrastructure and Olympic-related investment reshape Brisbane's inner north. The development team argues the project will contribute additional housing supply while activating a section of Water Street that has historically received less investment than other parts of the Valley.

Keylin has become increasingly active across Brisbane and southeast Queensland, assembling sites in strategic inner-city locations. They are currently selling and delivering <a href="https://www.apartments.com.au/new-apartments/oria-spring-hill-447-gregory-terrace-spring-hill-qld-4000">Oria Spring Hill</a>, just over 140 apartments due for completion in 2027.

Keylin plans heritage-led Lotus on Water Street apartment development in Fortitude Valley

Roseville is poised for a wave of new apartment development following the NSW Government's rezoning of land around Roseville Station under its Transport Oriented Development program.

The new planning controls have unlocked significant development potential within walking distance of the station, with a number of sites expected to be amalgamated and redeveloped in the coming years as developers seek to take advantage of the increased density allowances.

One of the more restrained developments in the precinct, and set among the first to be delivered having commenced well before the recent changes, is Hyecorp's Juliet. The boutique apartment project is already well under construction and remains on track to welcome residents by the end of the year, offering a markedly different proposition to many of the larger-scale developments now likely to emerge across the suburb.

[smartcode_project:default project_id=7395 project_image_fid=278194]

<a href="https://www.apartments.com.au/new-apartments/juliet-roseville-64-pacific-highway-roseville-nsw-2069">Juliet</a> will comprise just&nbsp;34 one-, two-, and three-bedroom apartments opposite Roseville Station. For Hyecorp, which has delivered projects across Sydney's Lower North Shore for more than three decades, Roseville presented a rare opportunity to address a growing gap in the market.

"<a href="https://www.apartments.com.au/developments/roseville-nsw-2069">Roseville</a> has long been one of the North Shore's most tightly held and desirable suburbs, offering a unique combination of village charm, established greenery, excellent transport connections, and proximity to some of Sydney's best schools and lifestyle amenities," Hyecorp said.

"We recognised a growing demand from local homeowners seeking to downsize without leaving the community they have built their lives around. The location presented a rare opportunity to create homes that cater specifically to that buyer profile."

[smartcode_project:default project_id=7395 project_image_fid=278196]

The six-level development has been designed by <a href="https://www.apartments.com.au/architects/pbd-architects">PBD Architects</a> as a collection of residences that feel more like homes than apartments. The brief centred generous floorplans, abundant natural light, quality finishes, and strong connections to outdoor space.

PBD Architects drew inspiration from Roseville's established garden suburb character, creating a building that sits comfortably within its surroundings rather than dominating them. The architecture incorporates natural materials, soft forms, layered landscaping, expansive balconies, and generous setbacks to strengthen the connection between residents and the suburb's leafy environment.

"The focus was on designing spacious, house-like residences for discerning owner-occupiers and downsizers who wanted to remain on the North Shore without compromising on comfort, privacy, or design," PBD said.&nbsp;

"Every apartment was to feel considered, timeless, and highly functional."

[smartcode_project:default project_id=7395 project_image_fid=278195]

Inside, residences feature engineered timber flooring, stone kitchen benchtops and splashbacks, integrated Fisher &amp; Paykel appliances, ducted air conditioning, and large outdoor entertaining areas designed to take advantage of district and treetop views.

Residents will also have access to a rooftop barbecue and lounge area, alongside practical amenities including parcel lockers, EV charging capability, bicycle storage, a dog wash bay, and a basement car wash facility.

The majority of purchasers so far have been local owner-occupiers from Roseville, Lindfield, Chatswood, Killara, and the broader Upper North Shore, many of whom are transitioning from larger family homes.

"Buyers are looking for spacious, house-like apartments that allow them to downsize without feeling like they are sacrificing comfort or functionality," Hyecorp noted.

"They value large kitchens, generous living areas, ample storage, quality finishes, secure parking, lift access, and low-maintenance living."

[smartcode_project:default project_id=7395 project_image_fid=278204]

Juliet sits directly opposite Roseville Train Station and within walking distance of Roseville Village, while Chatswood's retail and dining precinct is only minutes away. The development is also surrounded by some of Sydney's most established schools, including Roseville College, Ravenswood, Pymble Ladies' College, and Knox Grammar, as well as nearby parklands and golf courses.

Juliet is currently more than 75 per cent sold ahead of its anticipated completion in late 2026.

[smartcode_project_cta:default project_id=7395]

Juliet to sit quietly amid Roseville apartment boom

Sherpa Property Group has unveiled the third instalment of its Flourish series, securing full approval for the two-tower, $500 million Flourish Soleira development in Palm Beach.

<a href="https://www.apartments.com.au/new-apartments/flourish-soleira-1150-1154-gold-coast-highway-palm-beach-qld-4221">Flourish Soleira</a> will rise from a prominent site in the commercial heart of Palm Beach, the long-time home of Cash Converters and a range of local retailers.

The project will introduce a new retail and dining precinct at ground level, beneath 286 apartments.

[smartcode_project:default project_id=150017 project_image_fid=370959]

“We’re very committed to not only providing affordable residential offerings that are much needed in Palm Beach, but also delivering a vibrant new commercial heart that complements the extraordinary growth of the southern Gold Coast,” Sherpa Property Group founder Christie Leet said.

The development will sit under Sherpa's Flourish brand, which is aimed at providing a pathway into the beachside suburb for locals, first-home buyers and downsizers. In a move designed to assist first-home buyers entering the market, Sherpa has reserved all one and two-bedroom, one-bathroom apartments exclusively for eligible first-home buyers.

[smartcode_project:default project_id=150017 project_image_fid=370964]

“Our vision through Flourish is to create a vibrant retail and lifestyle focal point within the Palm Beach centre zone, delivering thriving communities underpinned by lifestyle-rich locations,” Leet said.

“So far, Flourish has been an incredible success, and we hope to carry this momentum as we progress the next two Flourish projects in Palm Beach.”

[smartcode_project:default project_id=150017 project_image_fid=371430]

Located across 1150-1164 Gold Coast Highway and 3 Sixth Avenue, the development will comprise two towers. The northern tower will deliver 154 apartments, while the southern tower will add a further 132 residences, helping address ongoing demand for new apartments in the tightly held coastal suburb.

Flourish Soleira will also feature the most extensive rooftop amenity offering ever delivered in Palm Beach.

The two towers will be connected by a skybridge, with residents gaining access to a rooftop recreation deck featuring a full-width swimming pool, hot and cold plunge pools, wellness spaces, a gymnasium, private dining facilities, massage treatment rooms, barbecue areas, a basketball court, golf simulator, indoor and outdoor dining spaces, sun lounges and extensive landscaping.

LPS Group is expected to start construction later this year.

Sherpa is already well advanced on construction of its debut Flourish project, Flourish Amargo, located just around the corner from Soleira. Meanwhile, Flourish Oasis, positioned opposite Amargo, recently commenced construction and has nearly sold out its collection of 47 apartments.

[smartcode_project_cta:default project_id=150017]

Sherpa unveils $500m mixed-use Palm Beach precinct, Flourish Soleira

Are mortgage holders set to get a reprieve from the RBA in 2026?

Big Four bank NAB believes so. They are now expecting the next move from the RBA to be a cut, rather than a hike, which they had pencilled in for August. They are unsure of the timing of the cut however, they note in their latest&nbsp;NAB Economics RBA Watch.

NAB Chief Economist, Dr Sally Auld, said recent data suggests the economy has lost momentum and the outlook for rates has shifted, noting that the broader economic backdrop has changed since earlier in the year.

“The next move in the cash rate is likely to be down, but the timing is uncertain," Dr Auld said.

"In February, growth was above trend, the economy was operating above capacity and there was uncertainty over the restrictiveness of rates. None of these conditions exist today,” she outlined.

Dr Auld said recent data pointed to softer momentum across the economy while acknowledging that at the same time, uncertainty remains a key feature of the outlook.

“Both Q1 GDP data and the NAB business survey suggest momentum in the economy has slowed, meaning that growth has likely peaked for the cycle. That said, we are cognisant there is still considerable uncertainty around the outlook, both with respect to activity and inflation.”

Dr Auld said inflation risks and labour market outcomes would be important to watch.

“On the prices side, we are still forecasting above target core inflation through to mid-2027. Margins will compress and weaker labour market outcomes are a risk.”

She said tighter financial conditions are expected to weigh on housing and activity.

“Tighter financial conditions will be reflected in a slowing in house price growth and housing credit growth. In summary, we have greater conviction that the next move in rates is down, but less conviction on the timing.”

Jonathan Chancellor

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