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GUEST OBSERVER
It’s reporting season, and over the past few weeks some of Australia’s biggest companies have been releasing information on how they’re travelling. 
These reports reflect key themes of how things are going in key sectors of the economy. 
Today we look at the banking sector.
The Australian banking industry is a classic economic ‘oligopoly’ with the so-called ‘Four Pillars’ or ‘Big Four’ (National Australia Bank (NAB), Commonwealth Bank of Australia (CBA), ANZ and Westpac) dominating not only the banking sector but the whole financial sector and arguably the economy.
The big four banks account for over 25 percent of the market capitalisation of the ASX 200, and are valued at over $360 billion. In total, the four banks reported assets in 2015 of some $3.5 trillion or about 10 times the size of BHP and RIO combined, and profits for their latest financial year of over $30 billion between them.
<a href="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/114178/width668/image-20160308-15110-odx4a3.png" target="_blank"> Click to enlarge</a>
<img src="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/114178/width668/image-20160308-15110-odx4a3.png" alt=""><a class="license" href="https://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a>
 
 
<h2>The risks in Australia’s banking system</h2>
In an oligopoly, the dominant players operate a very similar business model. This is true of the Big Four, which operate within a structure known as ‘universal banking’. Not only do each of these behemoths run a traditional retail and business bank, they also have wealth management (mainly retail superannuation fund management) and insurance subsidiaries. To complete the picture, each of the four runs a wholly owned bank in New Zealand, again dominating the banking system in that country. The banks operate throughout Australasia, often with competing branches (and valuable jobs) in each small town - Australia is ‘over banked’.
The risks of having one of the most concentrated banking systems in the world were outlined in 2012 by the International Monetary Fund (IMF), it warned that Australia’s banks had: “broadly similar business models and reliance on offshore funding leave them exposed to common shocks and disruptions to funding markets. Against a still worrying global environment, these risks will need to be closely monitored, particularly if the domestic economy slows sharply.”
Among the four banks, there is constant jockeying for prominence and any one time one bank climbs to the top of the pile. At the moment, the clear winner is CBA, largest by capitalisation, latest annual profits and staff employed with the lowest Cost to Income Ratio (CIR). Another winner is Westpac, the smallest by assets and employees but with an enviable CIR and Net Interest Margin (NIM) leading to excellent profit results. Meanwhile, NAB trails the others by profitability and with a low NIM and high CIR, will be likely do so for some time. Nonetheless, NAB is by any standards a very profitable company, if a bit overshadowed by the other banks this year.
It should be noted that not all banks report their financial results at the same time in a completely consistent fashion. However each quarter the banks are required to report their risk numbers to the Australian Prudential Regulation Authority (APRA), the banking regulator. These so-called APS 330 reports give a picture (albeit slightly murky) of where banks are taking risks and the size of those risks.
These numbers show that the banks hold roughly similar amounts of assets, so-called Risk Weighted Assets (RWA) and associated capital. Although Westpac, being slightly smaller, has about 10 percent less of each. This data shows Big Four banks are still predominantly lending institutions with about 86 percent of their Risk Weighted Assets (RWAs) related to credit.
While ANZ has a higher proportion of corporate and business lending than the others, about 23 percent of its credit (RWAs) relates to retail, mainly residential mortgage, lending. With a few notable exceptions, such as CBAs exposure to interest rate risks and NAB’s operational risks, the risk numbers are similar across the banks.
From an analysis of prior APS 330 reports (not shown), it appears that, although the RWAs for residential mortgages have increased slightly for all banks (mainly because lending has increased), the banking sector has not factored in much additional capital to cover the potential for the busting of a housing bubble.
The large Australian banks will in the next year face headwinds from a number of directions. First, any busting or even deflation of Australia’s real or imagined housing bubble will undoubtedly give the banks serious headaches.
Likewise, the end of the mining boom is already beginning to take its toll on mining companies, even the largest. If the gloom spreads, loans to the sector might be under pressure. Last, but far from least, banking scandals will definitely come to the fore this year especially market manipulation and product misselling.
<h2>Disruption from technology</h2>
Following the retreats of both NAB and ANZ from their respective overseas forays, it looks like the four banks are going to resemble each other even more as they are all embarking on strategies that target the same Australasian retail, mortgage and business markets. But there is at least one significant point of difference between the banks that might give a clue to potential shifts in future.
In banking, as in other industries, technology is critical. After an outsourcing deal that went sour, in 2008 the CBA board was forced (some say was brave enough) to embark on a complete refresh of its ageing IT systems, often called a Core Systems Replacement (CSR).
After some significant project blowouts, CBA eventually got the CSR to work and their annual profit numbers are beginning to reflect that success. Meanwhile, NAB is in the middle of its almost decade long CSR project (called Nextgen) and is constantly changing its management, which does not bode well for its completion in the near future. On the other hand, the new Chief Information Officer (CIO) of Westpac has denied that the firm needs a CSR, and has embarked on a much needed face-lift to the bank’s ageing systems.
After a number of attempts to change its core systems, the new management of ANZ have just announced that they are hiring an ex-Google executive to become its head of ‘digital banking’ - but to do what is still not certain.
Given the oft repeated fact that some 70 percent of IT projects fail, it looks like one or more of the banks are in for some big headaches over the next decade.
For this snapshot, the information is collected from the latest annual reports (2014-2015), except for CBA which reported its semi-annual numbers in February 2016. The risk figures are taken from the 2016 December quarter APS 330 reports of the banks to APRA, which are available at the banks’ websites.
Pat McConnell is honorary fellow, Macquarie University Applied Finance Centre, Macquarie University and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/pat-mcconnell-13137" target="_blank">here</a>.
 
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jchancellor-FAypfDUnLy

Property 101: The housing bubble risk to the big four banks

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A Victorian era Hawthorn home at 5 Yarra Street was passed in on a $4.4 million vendor bid, after the one buyer bid at $4.35 million at weekend auction.
It had sold in spring 2014 at $4.36 million, suggesting little if any price growth. 
<a href="https://www.realestate.com.au/property-house-vic-hawthorn-121793466" target="_blank">The three bedroom home</a> is set within Hawthorn's prestigious St James Park precinct.
The grand Victorian residence comes with contemporary rear extension on its 920 sqm block.  
Only 414 Melbourne auctions were held given the holiday long weekend with the 70 percent success rate, a slight decrease on the 72 percent last week. 
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No sale for Hawthorn trophy home

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Australia is experiencing the biggest apartment development boom in its history — with an estimated 80,000 apartments under construction in our major capital cities.
There's another 117,000 approved or in the off-the-plan marketing phase, according to a recent CommBank Property Insights report.
The highest concentration of apartment completions in absolute terms, in the next two years, will be Brisbane and inner Melbourne, where as a result, owner occupiers and investors have been warned of the prospect of rising vacancy rates, reduced rental income and possible falls in property values. 
The broader geographic spread of Sydney completions across a large number of suburbs, together with a greater depth to the market, was likely to mitigate these risks, according to Kevin Stanley, head of property strategy and research at the bank.
He says Sydney stands out nationally as a city with the most even distribution of apartment developments across the metropolitan area, which will help boost their occupation. He stressed the importance of access to amenities and transport. He says Sydney's 550 new proposals will typically have 160 apartments.
His list of top suburbs for nearing completions of apartments has Mascot heading NSW with around 1400 completions likely during 2016. Next busiest was Burwood at 650; Wenworth Point with 530 and Burwood scheduled for 500 new flats. 
He also did the same for 2017 which sees an anticipated 2100 unit completions in the Sydney CBD and 1500 in Parramatta.
Stanley noted while metropolitan Sydney accounts for 38 percent of Australia’s expected population growth by 2017, the city has just 33 percent of the apartments proposed or under construction nationally.
Our higher land prices and more restrictive planning laws are impediments to the apartment development sector, and look like continuing Sydney's undersupply of housing.
"This situation is also pushing upward pressure on pricing," he concludes.
Unlike Melbourne at 25 per cent, the Sydney CBD accounts for just seven per cent of the pending Sydney metropolitan total.
Sydney's largest sub-region for future apartments is the most distant from the city — with Western Sydney constituting around 23 per cent of forward supply including Liverpool and Carlingford. 
Ofcourse the analysis anticipates supply is likely to adjust to a more sustainable level should events dictate.
Some projects may not get approval, other's wont get bank finance and some developers will delay their projects depending on where they see the property cycle.
I recall Hegney Property Group chairman Gavin Hegney saying apartments are always in over-supply or under-supply because of the "lumpy nature" of the market.
While a housing estate can release or hold back land allotments in stages, you can’t do that with an apartment tower, he noted.
As more Sydneysiders embrace apartment living, I'd suggest the CommBank report ought be the backdrop to your own solid research around the markets of interest to ensure your decisions whether buying or selling, now or later, comes with data, local insights and your own personal aspirations.
This article was first published in the Saturday Daily Telegraph. 
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The biggest apartment boom in Australia's history: CommBank 

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China’s policy makers met at the National People’s Congress in early March, announcing an economic growth target range of 6.5-7 percent. 
In addition, they released a target growth rate for total social financing of ‘around 13 percent’ – which would result in a further deterioration of debt-to-GDP.
As noted in this month’s China Economic Update, a broader estimate of China’s debt puts this figure at around 308% of GDP – a level comparable to many advanced economies and particularly high for a still developing country. Chinese authorities are now facing a debt dilemma – they can no longer allow debt to grow unchecked, however controlling debt growth would mean accepting a slower rate of economic growth. At least for 2016, they appear content to allow the former to happen.
Industrial production growth slowed to a seven year low in January-February, while fixed asset investment accelerated slightly, on the back of stronger investment in real estate. New construction starts were stronger over this period, but it is too early to know if this is a trend that can be sustained.
Retail sales were a little softer – with real retail sales growth likely dipping below 10 percent yoy, slightly weaker than the levels recorded across most of 2015 but still robust. 
At the end of February, the People’s Bank of China (PBoC) cut the Required Reserve Ratio for the fifth time in a year – down to 17 percent for large institutions – potentially adding RMB 690 billion in liquidity to financial markets. As we have previously noted, these policy changes are not necessarily stimulatory, as RRR cuts have been necessary to maintain liquidity in the finance sector, given the capital outflow in recent years.
<a href="/images/2016/03/14/Screen%20Shot%202016-03-14%20at%208.35.51%20AM.png" target="_blank">Click to enlarge</a>
  <img src="/images/2016/03/14/Screen%20Shot%202016-03-14%20at%208.35.51%20AM.png" alt="">
China’s policy makers met at the National People’s Congress in early March, releasing a range of targets for key economic indicators. The most closely watched is the economic growth target, which was slightly reduced for 2016 – to a range of 6.5 percent to 7.0 percent – compared with last year’s ‘around 7.0 percent’. 
Our forecast for growth is unchanged at 6.7 percent in 2016 and 6.5 percent in 2017, although we consider the risks to be weighted to the downside. 
Authorities also set a target for growth in total social financing, at around 13 percent for 2016 – which would mean a further deterioration in the country’s debt-to-GDP ratio. 
As noted in this month’s China Economic Update, a broader estimate of China’s debt puts this figure at around 308 percent of GDP – a level comparable to many advanced economies and particularly high for a still developing country. 
Under the newly commenced 13th Five Year Plan, also released at the National People’s Congress, China is targeting an average rate of growth of 6.5 percent in the period to 2020 – which would result in a doubling of GDP over 2010 levels. 
Chinese policy makers are facing a significant dilemma regarding the country’s debt. They can no longer afford to allow debt to grow unchecked – as this would increase the likelihood of a major financial crisis and the potential for a hard landing. On the other side, real economic growth is unlikely to be sustainable at the five year target without stronger growth in debt – bringing down the ratio would mean tolerating a considerably lower potential rate for economic growth (something that policy makers are unlikely to tolerate). 
China’s industrial production slowed across January and February – down to 5.4 percent yoy (compared with 5.9 percent in December 2014). This rate of growth was below expectations and the slowest rate of growth since the same period in 2009. 
Key heavy industrial sectors remained weak – with crude steel output falling by 5.7 percent yoy, cement production down 8.2 percent yoy – reflecting weakness in the construction sector, while the motor vehicle sector recorded growth of 5.3 percent yoy. Electricity generation was marginally stronger – up 0.3 percent yoy. 
•China’s industrial surveys have remained negative in early 2016, with the official NBS survey falling to 49.0 points in February (from 49.4 points previously), the weakest level since January 2009. In contrast, the Caixin Markit PMI also fell, down to 48.0 points (from 48.4 in January), but this measure is less negative than late 2015. 
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Fixed asset investment recorded an acceleration in early 2016, with growth at 10.2 percent yoy across January and February, up from 8.2 percent yoy in December. It is worth noting that this was around the rate of growth recorded in November 2015, which was well below the trend levels of recent years. 
Investment in the manufacturing sector has continued to slow – reflecting tough industrial conditions and excess production capacity – down to 6.7 percent yoy (on a three month moving average basis), compared with 7.6 percent in December. In contrast, there has been a slight improvement in real estate investment, recording growth of 1.7 percent yoy (3mma) in February, up from -3.3 percent in December. Combined, these two sectors accounted for almost 56 percent of total investment in 2015. 
In contrast, strong investment growth has been sustained in water conservation and environmental management (27 percent yoy across January-February) and public utilities (19 percent yoy) – with these sectors comprising around 15 percent of the total in 2015. 
Residential construction activity was stronger in January-February, however it is too soon to know whether this is a trend that can be sustained. New construction starts were up around 9.7 percent yoy over this period, and up 1.5 percent yoy on our preferred three month moving average basis (reflecting very weak growth in late 2015). 
House price trends have improved in recent months, however the majority of gains have been in China’s tier 1 cities (Beijing, Shanghai, Shenzhen and Guangzhou) – where prices rose by 17% yoy. In contrast, tier 2 cities rose by just 0.3% yoy and tier 3 and below by 1.1% yoy. A more sustained recovery outside tier 1 cities may be required to support sustained stronger construction activity. 
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China’s trade activity pulled back sharply over the first two months of the year, with substantial falls in both imports and exports – both from the levels of late 2015 and from levels a year ago. China’s trade surplus only narrowed marginally – averaging US$47.9 billion a month across January and February (compared with US$59.4 billion in December 2015).
Across January and February, China’s imports totalled US$207.5 billion, a year on year fall of 17%. In part, this reflects the continued falls in commodity prices, with the RBA Index of Commodity Prices falling by almost 25% yoy in the first two months of the year.
In contrast, the volume of imports has declined less significantly, down by only around 2.8% in 2015, and around 6.8% in January (although the earlier timing of Chinese new year may have distorted the latter result).
In terms of major commodities, there were noticeable increases in imports of copper (up 23% yoy in January-February), crude oil (up 9.3% yoy) and iron ore (up 6.3% yoy). In contrast, the declining trend for coal continued, down by 10% yoy over the first two months.
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<img src="/images/2016/03/14/Screen%20Shot%202016-03-14%20at%208.51.56%20AM.png" alt="" width="913" height="357">
China’s exports totalled US$303.3 billion across January and February, a fall of 18% yoy. China’s exporters remain relatively negative, with the new export orders measure in the NBS PMI survey at 47.4 points in February (albeit improved from 46.9 points in January).
The key driver of the fall in export values over the first two months was a decline in exports to Asia – which fell by over 18 percent yoy, to US$90 billion. Exports to Europe and the United States fell less significantly – with both down by around 16 percent yoy.
Exports to Hong Kong declined less sharply than other markets – down by around 13 percent yoy across January and February. In contrast, non-Hong Kong Asia saw declines of almost 22 percent yoy – led by falling export values to Malaysia, South Korea and Vietnam.
Trade data between China and Hong Kong continues to have considerable distortions, in part due to false invoicing used to hide unapproved capital flows – providing considerable uncertainty around the true level of trade.
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<img src="/images/2016/03/14/Screen%20Shot%202016-03-14%20at%208.54.00%20AM.png" alt="" width="787" height="294">
 
At the end of February, the People’s Bank of China (PBoC) cut the Required Reserve Ratio for the fifth time in a year – down to 17 percent for large institutions – potentially adding RMB 690 billion in liquidity to financial markets. As we have previously noted, these policy changes are not necessarily stimulatory, as RRR cuts have been necessary to maintain liquidity in the finance sector, given the capital outflow in recent years. 
We continue to expect two cuts to interest rates in early 2016 – bringing the benchmark one year lending rate to 3.85 percent by mid-year. Similarly further cuts to the Required Reserve Ratio are likely to maintain liquidity in the finance sector, with capital outflows likely to continue in the short term. 
After a sharp increase in January (ahead of Chinese new year), new credit slowed significantly in February. Over the two month period, aggregate financing totalled RMB 4.2 trillion, an increase of 23 percent yoy. 
Bank loans recorded slightly slower growth, 19 percent yoy, to total RMB 3.1 trillion. Efforts to tightened regulation around the shadow banking sector has seen a strong increase in bank loans across the past two years. 
The key driver of other credit was corporate bonds, with net issuance totalling RMB 541 billion in January and February, an increase of 110 percent. 
Key components of the shadow banking sector largely cancelled each other out – with growth in trust and entrusted loans (at 111 percent yoy) offset by a sharp fall in banker acceptances (-275 percent yoy). 
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Alan Oster is group chief economist, National Australia Bank, and can be contacted <a href="https://business.nab.com.au/author/alan-oster/" target="_blank">here</a>.
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China's economy at a glance: NAB's Alan Oster

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Stamp duty revenue from home sales have started off 2016 in decline reducing surplus funds available for the NSW State Government's infrastructure spending spree.
Property sales netted $515 million in duties in January this year.
It was lower than the $551 million paid in January 2015.
Transactions were down to 14,800 from 16,400 monthly property sales a year earlier, in the quietest January for three years.
January is typically among the lowest months for revenues, but NSW Office of State Revenue figures indicated the 6.5 percent dip was the first since May 2013 that revenue was down on the same month 12 months prior.
Auction levels are running at less than last year suggesting the January dip may extend further into 2016. 
The latest February auction activity could signal the end of the bonanza enabling the high spending on infrastructure with February auction listings down around 20 percent at 2400 offerings. 
The auction market also ended a five-weekend sequence of above 70 percent clearance rates last weekend, slipping to 68 percent according to CoreLogic RP Data. Fresh Sydney for sale listings - auction and private treaty - are down 6.5 percent over the past four weeks compared to this time last year, CoreLogic noted.
After a slump in auction clearance rates in December to the low 50 percent, agents also blamed the wet mid-summer and an early Easter for contributing to the slowdown in activity.
The early 2015 strength in the Sydney property boom was being especially driven by properties valued over $1.2 million, the last NSW State Budget revealed, but the housing boom longevity was not being assumed by the NSW Treasury.
NSW land tax revenues were forecast to rise at a faster rate than stamp duty revenues, according to the NSW state budget papers when in her first budget, Treasurer Gladys Berejiklian announced a surplus of $2.1 billion for 2014-15 largely to windfall stamp duty receipts.
Stamp duty receipts were predicted to rise from $7.8 billion in 2015-16 to $8.6 billion in 2018-19, while the June budget papers warned that stamp duty is an "inherently volatile" revenue source for the state government.
The stamp duty fee, which remain at percent levels mostly introduced three decades ago, currently sits at a $5.33 billion total after the first seven months of the financial year.
 
 
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NSW stamp duty revenues in decline

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The managing director of Growthpoint Properties Australia, Tim Collyer, and artist Kylie Thomas secured $3.11 million when they sold their Armadale home.
Their 1900 Victorian home at <a href="https://www.domain.com.au/27-union-street-armadale-vic-3143-2012582050" target="_blank">27 Union Street</a>, refurbished in 2008, sold through Jellis Craig agent Lachie Fraser-Smith.
Collyer and Thomas were expecting about $2.4 million for the five bedrooms house with a formal front sitting room, large study, open plan living, outdoor deck and upstairs retreat.
It had been tightly held since 1998 when it fetched $427,500. 
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Armadale home sells at $600,000 more than guidance

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The Manly silvertail apartment market is pumping, but Sydney suburbs more associated with fibros are not missing out when it comes to affordable luxury.
Just this month there's been the $7 million plus sale of coal miner Tony Haggarty’s Manly apartment (above) overlooking Fairy Bower.
It was scheduled to go to auction last Saturday, but was snapped up by a local buyer through McGrath agent Jake Rowe who had strong interest from two other buyers.
The four bedroom, three bathroom 430 sqm, Vince Squillace designed apartment is spread over two levels with a terrace with a glass walled plunge pool.
On the North Steyne promenade there was a $5,125,000 sale last week.
Another over two levels, the four bedroom apartment had 200 sqm of living space with four terraces, Ray White selling agent Adam Reeves said.
The property traded at $4.4 million in 2007. 
The Manly record still stands at $12.2 million when a five bedroom sub-penthouse down the road sold to the co-founder of Greenhill Caliburn, Peter Hunt and wife Ellie.
The Hunt couple bought the apartment off the plan with lap pool in 2008 in the Susan Rothwell designed Waillea building.
The median for a Manly four bedroom apartment is $2.6 million.
Manly's median unit price sits at $1.02 million, up from $710,000 in 2013, and $620,000 in 2008, according to CoreLogic RP Data.
A development application at 138 North Steyne could see another two level penthouse come up for sale shortly through Adam Reeves. 
Across town in fibro territory, the prices aren't quite that of the Northern Beaches. 
Despite being at record levels, Canterbury's average unit sale price is $650,000 with Bankstown's $470,000.  
The soon to be compete Mosaic residential building at Bankstown is being marketed as 'where luxury and location meet' with apartments ranging from $449,000 to $675,000, "with incomparable living in one of Sydney's most culturally diverse and vibrant communities."
This article was first published in the Saturday Daily Telegraph.
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Manly's prestige apartment sales spree

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GUEST OBSERVER
A new monthly uncertainty index has been constructed by the Reserve Bank of Australia (RBA) to track the cost of different factors such as international events and government policy decisions on the economy.
Uncertainty is widely recognised as being a drag for the economy. Workers who become more uncertain about their future wages typically reduce what they buy to save for the future and face events like, say, a pay cut.
Entrepreneurs unsure about the economic environment, such as fiscal incentive or the availability of technology, reduce their investment and wait until the uncertainty dissolves. Research has found in spikes of uncertainty, in a given country, overall demand for goods falls, at least temporarily.
While these sorts of predictions are common among economists and policy makers, it’s a lot harder to quantify the impact of uncertainty. What is needed is a way to measure the consequences of events that cause shocks of uncertainty in the economy. Unfortunately, economic uncertainty is not directly observable.
Economist Angus Moore from the RBA combined information from news (in particular, keywords such as “uncertainty”, “budget”, “policy” and so on), financial indicators (mainly, financial market volatility), and measures of disagreement among forecasters for key economic variables like firms' earnings and real GDP growth, to document the evolution of the Australian economic uncertainty from 1986 to 2014.
The RBA’s index appears to correlate with domestic events, like Paul Keating’s “recession we had to have” speech in November 1990, and even more clearly with external events such as<a href="https://theconversation.com/9-11-fostering-connections-after-the-horror-3105"> </a>the 9/11 terrorist attacks and Lehman Brothers' bankruptcy. Some events, as the Greek debt restructuring in March 2012, actually correspond to decreases in the index because they work in favour of reducing uncertainty.
<a href="https://www.propertyobserver.com.au/images/2016/03/11/image-20160308-15308-1z0kkpl.jpg" target="_blank">Click to enlarge</a>
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<h4>
Major events and economic uncertainty Angus Moore, Reserve Bank of Australia 
</h4>
One test of this index is how is might relate to key macroeconomic indicators such as unemployment. If an increase in uncertainty is one of the reasons for slow growth, the labour market should show signs of slowdown in the presence of high uncertainty.
A comparison of the employment rate with the uncertainty index shows that economic uncertainty does seem to move hand-in-hand with unemployment in Australia. In particular, the economic uncertainty index is on average 20 points higher when unemployment is rising.
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<h4>Unemployment and economic uncertainty Angus Moore, Reserve Bank of Australia</h4>
It may be that major external shocks - like 9/11 - may induce variations in the business cycle and, consequently, generate uncertainty. It’s difficult to factor in the business cycle in the data that used to create an uncertainty index.
The RBA’s model found that increases in uncertainty of a fairly modest amount - such as 30 basis points - are associated with a downturn characterised by lower employment growth, weaker retail sales growth, and a fall in consumer confidence.
However, the size of the impact appears to be small. Uncertainty shocks are found to have a noticeable effect on the level of the cash rate, which decreases by about 20 basis points. This may explain why the impact of uncertainty on real activity is modest, for example, the RBA would have promptly intervened when needed in order to tackle the effects of spikes in uncertainty.
Does this mean that uncertainty is unimportant? No. In fact, the results point to the fact that, in absence of an adequate systematic policy response by the RBA, uncertainty could have more markedly slowed down the Australian economy.
Olivier Blanchard, former chief economist of the International Monetary Fund, famously wrote in the aftermath of the collapse of the US financial markets in 2009 that there was “(nearly) nothing to fear but the fear itself.” Policymakers should aim at reducing uncertainty as much as possible by clearly communicating credible fiscal and monetary plans. This is crucial because, as the US case proves, economic uncertainty is more often than not driven by policy uncertainty.
In light of this relationship, Prime Minister Malcolm Turnbull should bear in mind that carefully managing Australian’s expectations on future economic policy reforms is a delicate task, and that backpedalling does not appear to be an option.
 
Efrem Castelnuovo is principal research fellow, Melbourne Institute of Applied Economic and Social Research, associate professor, Faculty of Economics and Business, University of Melbourne and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/efrem-castelnuovo-145615" target="_blank">here</a>.
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Economic uncertainty; nothing to fear but fear itself

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GUEST OBSERVER
If GST is payable on the sale of a strata lot, can a dissenting owner recover GST in respect of the sale of its lot having regard to Part 10 of the Strata Schemes Development Bill 2015? 
The short answer is yes, GST will most likely be recoverable as part of the “compensation value” received by a dissenting owner.
Who is a “dissenting owner”?
A dissenting owner is an owner of a lot which does not support a strata renewal plan prepared in accordance with Part 10 of the Strata Schemes Development Bill 2015. 
What is the “compensation value”?
The “compensation value” is the value of a lot determined:
• pursuant to s55 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (Acquisition Act) subject to any modifications prescribed by the regulations; or  • by any different valuation method prescribed by the regulations.
The regulations are yet to be published, so it is unclear whether the regulations will specifically regulate (or modify) the manner in which the “compensation value” is calculated, and in particular whether or not  GST will be recoverable by a dissenting owner as part of the market value of the dissenting lot.
However, if the “compensation value” is to be determined solely pursuant to the Acquisition Act, then it is most likely that any GST paid (or payable) on the sale of the dissenting lot would form part of the market value of that lot, meaning that a dissenting lot owner would then recover GST as part of the overall value it receives. 
Is a dissenting owner entitled to “compensation value” for its lot?
Yes, at a minimum.
When making an order to effect to a strata renewal plan, a court must be satisfied in relation to the compensation being received by lot owners that:
• in the event of the sale of the entire strata scheme (a “collective sale”), each lot owner must receive not less than the “compensation value”; and • in the event of a “redevelopment”, the amount to be paid to a dissenting owner must be the greater of the “compensation value” of the dissenting owner’s lot and the amount which the dissenting owner would have been entitled to had they supported the strata renewal plan.
Leisha de Aboitiz, partner at William James Law and Ole Mitrevski, solicitor at William James Law. They can be contacted <a href="https://www.williamjameslaw.com.au" target="_blank">here</a>.
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Property 101: GST and strata

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Michael Teys has written to clients after ASIC disqualified him from being a director or officer of a company for a period of five years.
It followed the winding up of two companies of which he was a director. One was wound up in 2010 and the other in 2014.
He told clients neither company nor the events investigated were related to his work for them as a lawyer or his recent work as founder and director of Block Strata Pty Ltd.
Block Strata was formed after these events took place.
"I deeply regret my past commercial failings.
"However, I cannot change what has happened and must learn from my experience.
"Therefore, having co-operated fully with ASIC, I have resigned from all of my directorships and corporate roles and have decided not to appeal the disqualification."
Teys notified the management of Block Strata Pty Ltd would continue under Jacqui Bartholomeusz’ directorship and a new licensee-in-charge, Paul Loccisano, has been appointed.
However he signalled he would continue to serve Block Strata as its legal counsel and would maintain my private legal practice as a specialist in strata law.
In February ASIC disqualified Michael John Teys from managing corporations for five years following his involvement in the failure of three companies.
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Michael Teys expresses deep regret at past commercial failings

Walk past a new apartment development promoting its sustainability credentials and it's easy to picture rooftop gardens, mature trees, landscaped courtyards and residents surrounded by nature.

But in many cases, that's not actually what those sustainability ratings guarantee.

Australia's leading environmental rating tools have played a significant role in improving the energy efficiency and environmental performance of buildings. Yet despite their focus on reducing emissions, many don't require developers to include trees, biodiversity or meaningful green space.

In other words, a building can achieve one of the country's highest sustainability ratings while containing little more than concrete, glass and hard landscaping.

That disconnect has led to the emergence of a new movement across Australia's property industry: nature-based cities.

The concept goes beyond designing buildings that consume less energy. Instead, it encourages developers to treat nature as essential infrastructure, integrating biodiversity, tree canopy, living landscapes and green spaces into projects from the earliest stages of planning.

Research has consistently linked access to nature with better physical and mental health, cooler neighbourhoods, improved biodiversity, stronger climate resilience and more connected communities. As Australia's cities continue to become denser, advocates say those outcomes should be considered just as important as energy efficiency.

Nature Based Cities (NBC) was established in 2022 to help accelerate that shift.

Founded by Hamton Executive Chairman Paul Hameister OAM, the not-for-profit was created after research highlighted a significant gap in Australia's sustainability framework. While existing environmental rating tools rewarded energy performance and emissions reductions, they placed little emphasis on the inclusion of living landscapes.

"We've always wanted to do more, and we know other developers who want to do more, but the ESD rating tools just aren't there," Hameister says.

"In Australia, you can have a five-green-star rated building that's concrete and glass with not a blade of grass.

"The focus is on reducing emissions, which is laudable, but there hasn't been enough attention paid to protecting and re-establishing nature. We need both for the health of the environment and for communities."

Since its launch, NBC has developed independent design guidelines and accreditation frameworks that encourage developers to prioritise ecology, biodiversity, tree canopy, walkability and living landscapes alongside traditional sustainability measures. The organisation first focused on medium and high-density residential developments before recently expanding into precinct-scale communities and masterplanned neighbourhoods.

Jan Talacko, founder of sustainability consultancy Ark Resources and a member of the Nature Based Cities Advisory Council, says the initiative addresses an area that has largely been overlooked by the property industry.

"Throughout my 25 years of working collaboratively with all stakeholders in the property sector, I've always favoured a pragmatic approach to sustainable design which encourages initiatives that not only meet environmental expectations but also improve amenity," Talacko says.

"Whilst we are making steady progress in relation to energy and carbon emissions from buildings, there has been much less emphasis on encouraging biodiversity and tackling the urban heat island effect.

"The Nature Based Cities initiative responds to a gap in the suite of tools currently used by the property development sector, which don't provide sufficient incentive, or recognition, for the integration of landscaping and greenery."

For apartment buyers, the shift is also changing the questions worth asking.

Rather than assuming a sustainable building will naturally include abundant green space, buyers are increasingly being encouraged to look beyond environmental ratings and ask what nature is actually being delivered. How much tree canopy will the development create? Has biodiversity been considered? Are landscaped spaces designed for people as well as appearance?

As Australia's cities continue to grow upwards and outwards, the next generation of sustainability may not simply be measured by lower emissions, but by how successfully developments bring nature back into everyday urban life.

Joel Robinson

What does it really mean for a building to be 'green'?

A who's who of Australian surfing, business and entertainment has emerged on title records following the completion of Esprit Rainbow Bay, the latest boutique beachfront apartment development by former professional surfer Paul Gedoun's S&amp;S Projects.

The completed project has attracted an enviable collection of owners, many with long-standing ties to the southern Gold Coast and the surf culture that has helped define Rainbow Bay and neighbouring Kirra for generations.

Given Gedoun's own background in surfing, it perhaps comes as little surprise that some of Australia's most recognisable surfers have chosen to buy into the development overlooking one of the country's most celebrated stretches of coastline.

Pezet Matheson directors Jayde Pezet and Todd Matheson launched the project in late 2021, and have managed the sales campaign all the way through to its sell-out and recent completion.

<img alt="Esprit" data-entity-type="file" data-entity-uuid="08fc6261-b84e-4b09-8a44-66d3067fd0d1" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-29%20at%208.51.05%E2%80%AFAM.png?VersionId=4AOcb6ETZwNUnMPdTtz1B3pZAIB_jgZ2" />

Former world champion Mick Fanning, who grew up in Coolangatta, secured an apartment in 2023. He paid&nbsp;$2.07 million. Last year he sold his Bilinga home for over $16 million.

Three-time world champion Joel Parkinson also purchased in the development, alongside big wave surfer Mark Mathews. Mathews bought the most expensive apartment in the building, spending just over $4 million.

Joining them is Rip Curl founder Doug Warbrick, whose company helped shape Australia's global surfing industry over the past five decades.

The appeal of Rainbow Bay has extended well beyond the surfing community.

International DJ Paul Fisher purchased an apartment through his investment vehicle, YLB Developments, an abbreviation of his trademark phrase "You Little Beauty".

The purchase comes as Fisher and his wife Chloe are developing their own luxury apartment project further north in Palm Beach. Their boutique beachfront development, Pescado, comprises just seven apartments on Jefferson Lane, which start from just shy of $6 million. The couple intend to retain the two-level penthouse as their Australian base between international touring commitments.

Melbourne Storm coach Craig Bellamy and his wife Wendy have also invested in Esprit, purchasing two apartments after spending decades holidaying on the southern Gold Coast. They also have a luxury apartment in Joe Adsett's Rockpool, less than 400m away from Esprit.

<h2>Boutique project draws owner-occupiers</h2>

Esprit launched in 2021 and sold strongly, with buyers drawn to its boutique scale, beachfront position and contemporary design.

The completed development comprises 94 apartments across 11 levels, offering expansive floorplans designed primarily for owner-occupiers rather than the investor market.

Crowning the building is Club Esprit, pitched as being the Gold Coast's first residential rooftop wellness centre. The roof features a&nbsp;25 metre magnesium lap pool, which is surrounded by wet daybeds and poolside cabanas,&nbsp;multiple barbecue areas,&nbsp;a yoga and relaxation play lawn, and a private dining room with a kitchen scullery, bar, lounges, and an outdoor terrace.

The wellness centre is&nbsp;fully equipped with a Technogym, ice bath, infra-red sauna, steam room, thermal room, and treatment room. The roof has views spanning&nbsp;Rainbow Bay, Snapper Rocks and the Pacific Ocean.

<h2>S&amp;S Projects continues to shape Rainbow Bay</h2>

S&amp;S Projects founder Paul Gedoun has become one of the key figures behind Rainbow Bay's evolution over the past several years.

After establishing S&amp;S Projects, Gedoun has focused on delivering lifestyle-driven apartment developments designed primarily for owner-occupiers seeking a permanent coastal home.

Esprit is Gedoun's third completed project in Rainbow Bay, following Flow and Awaken, both of which achieved record prices for the suburb.

He is now delivering <a href="https://www.apartments.com.au/new-apartments/radia-rainbow-bay-271-boundary-street-coolangatta-qld-4225">Radia Rainbow Bay</a>, a 38-apartment development on Boundary Street that is currently selling, and has no plans to leave the precinct anytime soon. S&amp;S Projects has also lodged plans for its fifth Rainbow Bay development, an 88-apartment project on Boundary Street featuring a strong wellness focus.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/qld/first-look-s-s-projects-proposes-88-apartment-wellness-tower-at-coolangattas-boundary-street">First look: S&amp;S Projects proposes 88-apartment wellness tower at Coolangatta's Boundary Street</a>

&nbsp;

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Who's who of buyers revealed as Esprit Rainbow Bay settles

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

Apartment design is adapting to the way Australians shop

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

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

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

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

Jonathan Chancellor

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