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Reserve Bank deputy governor Philip Lowe returned to theme of higher funding costs pushing up bank lending rates at a speech in Sydney today.

Lowe presented the following slide as part of a talk on the euro crisis at The Economist Bellwether Series showing that average bank lending rates have risen more or less in tune with increases in funding costs.

<img src="/images/stories/2012/07/rbajuly12.gif">
Yesterday, at an economist conference in Melbourne, Lowe said the Reserve Bank reduced the cash rate by around 150 basis points more than it would otherwise have done to compensate for the widening gap between the benchmark lending rate and interest rates set by the banks.
Speaking at an economists’ conference in Melbourne yesterday, Lowe said that due to both market and regulatory developments there had been an “increase in most interest rates in the economy relative to the cash rate”.
“This is something that the Reserve Bank has spoken about at length, and it has been an important factor in the setting of monetary policy over recent years.
“In particular, this increase in interest rates relative to the cash rate has been offset by the bank setting a lower cash rate than would otherwise have been the case. While it is difficult to be too precise, the cash rate today is in the order of 1.5 percentage points lower than it would have been in the absence of these developments,” said Lowe.
According to mortgage comparison website RateCity.com.au, the average standard variable rate stands at 6.38%, compared with a cash rate of 3.5% with banks passing on around 80% of cash rate cuts since November last year.
Westpac economist Bill Evans, who is tipping the cash rate to fall to 2.75% by year-end, said that following the 50-basis-point cash rate cut in May the average standard variable mortgage rate (SVMR) fell by 35 basis points, “blunting the potential impact”.
A week after the June decision to cut the cash rate by 25 basis points, Evans said just one major bank had announced that it would cut its standard variable mortgage rate by the full 25 basis points.
But Lowe also acknowledged the increasing costs that banks have had to bear since the GFC due to increasing regulation.
These include having to keep high reserves of cash, improving the quality of the capital held and holding more liquid assets.
“These changes are occurring not just because of new regulations, but also because they are being demanded by the marketplace,” he said.
“Together, these various changes are increasing the cost of financial intermediation conducted across the balance sheets of banks.
“In effect, the choice that our societies are making – partly through our regulators – is to pay more for financial intermediation and, perhaps, to have less of it.”
Lowe says the benefit of these changes and having to pay a higher price is “a safer and a more stable financial system”.
“As the world is being painfully reminded, the losses in output during a crisis and in subsequent years are substantial, and some of the losses may be permanent,” he said.
Lowe said Australia’s banks, alongside those in other countries, would continue to feel the impact of regulatory changes, as well as a “global loss of trust in financial institutions” that had led to all banks paying more for their funds in capital markets.
“These various changes are increasing the cost of financial intermediation conducted across the balance sheets of banks,” Lowe said.
“In effect, the choice that our societies are making – partly through our regulators – is to pay more for financial intermediation and, perhaps, to have less of it.
“The benefit that we hope to receive from paying this higher price is a safer and a more stable financial system.”
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RBA cash rate could have been around 5% if banks had passed on full rate cuts: Philip Lowe

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The national office vacancy rate eased by 0.6 percentage points to 7.8% in the second quarter of the year despite a net absorption of 73,900 square metres of office space, according to statistics released by Jones Lang LaSalle Research. 
Net office absorption is the amount of space leased minus the amount of space vacated over a given time frame. 
Of the 73,000 square metres absorbed over the three months to the end of June, Perth accounted for 64,000 square metres or 88% of the total.
 
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Prime gross effective rents in Perth increased by 3.2% over the quarter and are now up 31.8% from the cyclical low in the third quarter of 2010.
During this period the Perth vacancy rate increased from 2% to 2.9% principally due to the completion of Brookfield’s 45-storey City Square office tower in June, which has added 85,000 square metres of office and retail space to the CBD.
Mining giant BHP Billiton is the tower’s anchor tenant, taking 60,000 square metres of space.
Perth now has only 8,633 sqm of new office space under construction, equating to 0.5% of total stock.
Prime gross effective rents in Perth increased by 3.2% over the quarter and are now up 31.8% from the cyclical low in the third quarter of 2010.
“The price signals from the space market in Perth have yet to translate into development activity. We expect that a number of pre-commitments will conclude over the next six to 12 months,” says Kevin George, Jones Lang LaSalle’s national head of office leasing.
“Nevertheless, the first completions in the next development cycle are unlikely to occur until 2015 at the earliest, keeping Perth vacancy at a very low rate over the next three years.”
The other big project to complete over the June quarter was GPT’s 111 Eagle Street in Brisbane, which consists of 44 levels and 64,000 square metres of net lettable space.
George says the completion of City Square North 111 Eagle Street “finally dispels the myth that these markets have significant development pipelines”.
“Both of the projects were substantially leased before practical completion, vacancy is low and the development outlook is moderate,” he says.
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In the Brisbane CBD, net absorption was 11,700 square metres, with the office vacancy rate increasing from 6.1% to 8.8%.
“Projections of mid-teen vacancy rates in the Brisbane CBD following the completion of 111 Eagle Street have proven to be inaccurate,” says George.
“The pre-production phase of large-scale resource and energy projects is very labour intensive and continues to underpin the demand for office space. Similar to Perth, I expect a number of pre-commitments to be announced over the next 12 months.”
Net absorption was essentially flat (+1,000 square metres) in the Sydney CBD, but the vacancy rate tightened by 0.1 percentage point to 8.6% in the second quarter. Prime gross effective rents were unchanged over the quarter.
George says the pre-commitments made by Westpac, KPMG and Lend Lease to the first two commercial towers planned for Barangaroo South shows that major leasing transactions can still be concluded.
The Melbourne CBD was one of the weakest markets, recording negative net absorption of -16,400 square metres with the vacancy rate increasing from 5.8% to 7.4% in the second quarter.
“The 2011-12 financial year will be remembered as Melbourne’s annus horribilis. The finance sector contracted, while the Victorian government confirmed 3,500 public sector job cuts in the May budget. As a result, sub-lease availability increased to 1.3% of total stock,” says Jones Lang LaSalle head of capital markets research Andrew Ballantyne.
There is a further 236,700 square metres of space under construction in the Melbourne CBD to be delivered by the first half of 2014.
“If demand remains weak in the 2012-13 financial year, vacancy could be moving out towards 10% in Melbourne,” says George.
The Adelaide CBD office market recorded net absorption of 5,800 square metres, with the vacancy rate tightening to 7.7%.
Canberra recorded a fourth successive quarter of positive net absorption of 7,800 square metres with the vacancy rate tightening to 9.9% – the first time vacancy has been below 10% since the fourth quarter of 2009.
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Perth steams ahead as best-performing CBD office market: Jones Lang LaSalle

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The soil has this week been turned on a new Quest serviced apartment project in Wodonga on the NSW/Victoria border, with seven more projects to be completed over the next 12 months. 
The new $25 million Quest Wodonga located on the Scout hall site on Reid Street in Wodonga is expected to open before next Easter and will feature 48 units comprising a mix of studios, one-, two- and three-bedroom apartments.
Currently Quest is selling apartments in four projects in Launceston (starting at $280,000), Gladstone ($487,000 for two-bedroom), Maitland (starting at $235,000) and Moonee Valley ($330,000 for two-bedroom unit). 
The Wodonga apartments will not be available for investors to purchase individually, a spokesperson for Quest says. 
Serviced apartments are seen as a growth market in Australia. 
A <a target="_blank" href="https://www.propertyobserver.com.au/leisure/serviced-apartments-to-outperform-hotels-in-next-three-years-atchison/2012031253796">report released by Atchison Consultants earlier this year</a> said the serviced apartments sector would outperform the hotel sector over the next three years with total ungeared returns of between 13% and 15% per annum compared with 10% to 11% per annum for hotels. 
They are also a way for smaller investors to get a direct foothold into the leisure market. 
In March this year Quest set up a specialist property division – Quest Property – to sell serviced apartments to investors. The group manages about 5,000 serviced apartments. 
The apartments are sold with 6.5%+ fixed rental income, guaranteed full tenancy and no management fees. 
The Quest Wodonga will cater for business travellers in the area and will complement the Quest Albury already operating on the other side of the state border. 
In May <a target="_blank" href="https://www.propertyobserver.com.au/leisure/quest-to-operate-serviced-apartments-in-rothelowman-designed-frankston-property/2012050854596">Quest revealed that it would operate a new property in Frankston, Victoria</a> after signing a lease with development partners the Deague family’s Asian Pacific Group.
The $50 million project will refurbish the Nepean Highway complex known as the Peninsula Centre and create 81 serviced apartments within the 150-apartment RotheLowman-designed building, which is expected to be completed in early 2013.
The Quest Wodonga and Quest Frankston serviced apartment projects are among eight new serviced apartments that will be completed between August this year and mid-2013. 
The new projects are: 
<ul>
<li>Quest Bundoora – Opening August 2012</li>
<li>Quest Frankston Central – Opening early 2013</li>
<li>Quest Wodonga – Opening June 2013</li>
<li>Quest Albion – Opening November 2012</li>
<li>Quest Rockhampton – Opening Mid-Year 2013</li>
<li>Quest at Sydney Olympic Park – Opening November 2012</li>
<li>Quest on Franklin – Opening April 2013</li>
<li>Quest Whyalla – Opening August 2012 </li>
</ul>
The serviced apartment group has also announced that it has started working on a $2 million stage two refurbishment of its Quest Docklands property, which is expected to be completed in October. 
Stage two will involve the restyling of Quest Dockland's 133 apartments with a warmer colour scheme, new interior furnishings and larger work desks. 
In stage one Quest restyled the property's lobby, reception and common areas, created a high-tech business centre and a property-wide Wi-Fi internet upgrade. 
Quest Serviced Apartments, which was established in 1988 by Paul Constantinou and now has more than 142 properties in Australia, New Zealand and Fiji with corporate travellers making up 80% of revenue. 
Other serviced apartment operators include the Mantra Group, Oaks Hotels &amp; Resorts, Accor Hotels, Toga Hospitality, Mirvac Hotels &amp; Resorts, Meriton Serviced Apartments, Q Resorts and StayWell Hospitality Group. 
<a target="_blank" href="https://www.propertyobserver.com.au/developments/harry-triguboff-s-meriton-group-to-build-700-serviced-apartments-next-year-across-australia/2011120752737">Harry Triguboff’s Meriton group is set to add around 700 apartments to its portfolio this year.</a>
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Construction begins on $25 million Quest Wodonga serviced apartment project, with seven more in the pipeline

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Real estate group LJ Hooker will start advertising its residential and commercial listings on Chinese real estate listings portal Juwai.com following the signing of a partnership agreement between the two organisations.
The agreement will allow LJ Hooker to market its properties directly to Chinese buyers and others in Asia via Juwai.com.
Georg Chmiel, chief executive of LJ Hooker, says the real estate group has invested heavily in the online and digital space and the partnership with Juwai.com will “further expand the online reach of our residential and commercial listings and provide access to one of the fastest-growing markets for our clients”.
Chinese investors spent $4.2 billion on Australian real estate in 2011, representing about $48 million in estate agent commissions.
LJ Hooker is the first real estate network in Australia to enter into a partnership with Juwai.com, which launched in December last year.
Juwai.com promotes itself as the largest international property search and information platform for Mandarin-speaking Chinese consumers and says that 84% of its traffic comes from high-net-worth Chinese buyers.
The site has also been adopted by global Chinese communities living in Hong Kong, Taiwan, Macau, Singapore and Malaysia, providing Juwai.com customers with comprehensive exposure within China and across south-east Asia.
LJ Hooker was one of the first real estate firms to establish a physical presence in China, setting up an office in Shanghai in 2004.
“We are delighted to have LJ Hooker join Juwai.com, and to play the lead role in the network’s reach into China and south-east Asia,” says Simon Henry, co-founder of Juwai.com.
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LJ Hooker to market commercial and residential property listings on Chinese portal Juwai.com

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The May cash rate cut of 50 basis points failed to spark a revival in mortgage lending, according the latest ABS housing figures.
They show that the total value of owner-occupied housing commitments rose 0.2% in May 2012 to $13.6 billion on a seasonally adjusted basis, while the number of owner-occupier home loans fell by 1.2% (or 582 mortgages) to 46,120.
This figure is well below market expectations of a 8% month-on-month increase in the number of owner-occupied home loan approvals.
A separate Bloomberg survey of economists had forecast a 1% rise in the number of owner-occupier mortgages taken out over May.
The number of owner-occupier loans fell in New South Wales (down 451, 3.4%), Queensland (down 239, 2.6%) and the Northern Territory (down 5, 1.7%), while rises were recorded in Victoria (up 140, 1.1%), Tasmania (up 69, 8.7%), Western Australia (up 48, 0.7%) and the Australian Capital Territory (up 15, 1.8%). South Australia was flat.
The value of investment housing lending slumped 4.6% on a seasonally adjusted basis.
Demand for financing of new dwellings remainde week with the number of loans for new homes fallingl 0.3% on a seasonally-adjusted basis following a fall of 0.4% in April 2012.
One positive was an increase in the number of loans arranged for first-home buyers.
In original terms, the number of first-home buyer commitments as a percentage of total owner occupied housing finance commitments rose to 17.8% in May 2012 from 16.8% in April 2012.
Between May 2012 and April 2012, the average loan size for first home buyers rose $5,500 to $285,700.
The average loan size for all owner occupied housing commitments rose $4,700 to $293,600 for the same period.
Andrew Hanlan, senior economist at Westpac says the 1.2% slip in the number of housing finance loans to owner-occupiers slipped in May "fell short of expectations".
 "The weakness evident in May reversed modest gains for March (0.7%) and April (0.5%), suggesting that the market was stabilising over this period," he says. 
"Loans to first-home buyes strengthened in the month, rising 3.9% to be up 11% on a year ago. However, the upgrader market remains sluggish, with loans to this segment slipping 2.5% to be unchanged on a year ago," says Hanlan.
"The investor market remains lacklustre and volatile from month to month.
"Looking ahead, RBA rate cuts in May and June will act to support the market over coming months.
"In the first instance, first-home buyers are likely to respond to improved housing affordability.
"However, we are not expecting a 'V' shaped recovery to emerge, with the sector facing a number of headwinds, including patchy labour market conditions and fragile confidence at a time of global risks," Hanlan says.
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Owner-occupier mortgage lending disappoints in May with 0.2% rise: ABS

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Failed NSW builder Reed Construction has been placed in the hands of a liquidator following a successful winding-up petition to the NSW Supreme Court from creditor SCE Group.
SCE Group is a raw materials management group of companies.
Mark Robinson, partner at PBB Advisory, has been appointed as liquidator of Reed Construction.
Robinson told the Australian Financial Review it was possible that alternatives could be found to liquidating the company that would provide a larger return to creditors.
<a href="https://www.propertyobserver.com.au/industry-news/contractors-must-wait-in-line-as-reed-construction-prepares-to-sue-nsw-government-following-%2470-million-collapse/2012061855164" target="_blank">Reed Construction</a> and another related company RST Nominees were placed in voluntary administration on June 15 with Ferriers Hodgson partners John Melluish and Ryan Eagle appointed as administrators.
Melluish and Eagle will hand over a creditors’ report to the liquidator today.
Reed has debts of $182.1?million after suffering losses <a href="https://www.propertyobserver.com.au/news/st-hilliers-founder-says-government-owes-it-millions-but-reed-group-government-claim-rejected/2012052854859" target="_blank">on several key government contracts.</a>
All payments to creditors were frozen on June 15, with administrators saying at the time that there might be insufficient funds to pay employees their entitlements.
St George Bank is a secured creditor and owed $48.1 million, while trade creditors and over 1,000 subcontractors are owed $78.7 million.
Former employees are owed $5 million.
Founder Geoff Reed blames the collapse on a decision by the NSW government’s Roads and Maritime Services and Department of Education and Communities to prematurely terminate contracts with Reed Construction.
Reed says contractors are owed $60 million on these projects.
The June 27 creditors’ meeting revealed that the company had claims against the NSW government, a claim of $15.5 million against MidCoast Water and $13.4 million from 20 other debtors.
Yesterday, another prominent NSW builder, <a href="https://www.propertyobserver.com.au/industry-news/nsw-builder-baseline-constructions-in-voluntary-administration/2012071055495" target="_blank">Baseline Constructions</a>, was placed into voluntary administration owing $65 million, joining <a href="https://www.propertyobserver.com.au/news/kell-rigby-one-of-australia-s-oldest-most-respected-building-companies-set-for-voluntary-administration/2012020853012" target="_blank">Kell &amp; Rigby</a> and <a href="https://www.propertyobserver.com.au/industry-news/st-hilliers-construction-arm-placed-in-voluntary-administration/2012051554713" target="_blank">St Hilliers Construction,</a> which have also collapsed recently.
A second creditors’ meeting was due to be held on July 20, where it was to be decided whether to execute a deed of company arrangement or whether the company would be wound up.
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Liquidator appointed for collapsed NSW builder Reed Construction

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There was a small increase in the percentage of properties available to rent in the inner and middle suburbs of Sydney over June, according to figures compiled Real Estate Institute of NSW (REINSW).
The residential vacancy rate eased by 0.2 percentage points from 1.6% to a rate of 1.8% in the inner-Sydney suburbs (0-10km from CBD) and by 0.1 percentage points in the middle suburbs (10-25km from CBD) from 1.7%, also to a rate of 1.8%.
Rental vacancies tightened in the outer suburbs (25km or more from CBD) by 0.1 percentage point from 1.9% to match the vacancy rate in the rest of Sydney at 1.8%
The overall Sydney vacancy rate has hovered around the 1.8% mark since the start of 2012, up from 1.5% in the second half of 2011.
Despite the small improvement in the inner and middle suburbs Sydney remains an extremely tight rental market favouring landlords – according to the Real Estate Institute of Australia (REIA) a vacancy rate of 3% indicates a balanced market.
REINSW June 2012 Sydney vacancy rates
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Outside of Sydney all the other major metropolitan centres recorded increases in the percentage of available rental properties last month.
Wollongong recorded the strongest increase, rising 0.4 percentage points from 2.8% to 3.2%.
Newcastle increased by 0.1 percentage point to 1.7% and on the Central Coast the percentage of available properties rose by 0.2 percentage points to 2.8%.
Coffs Harbour recorded the highest rental vacancy rate of 5.1%, and the Orana District recorded the lowest in the state at 1.2%
REINSW June 2012 regional NSW vacancy rates
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“Wollongong continues to record vigorous growth in the number of available rental properties, which are now more than three times the 0.9% level recorded in June 2011,” says REINSW president Christian Payne.
“June did prove to be a good month for those looking to rent a property with some strong increases recorded in available properties towards the end of the financial year.”
“Nowhere is this more the case than in Wollongong, which now offers prospective tenants a wide choice of available property.
“Elsewhere across the state there were more modest increases, which have also improved the situation for tenants,” Payne says.
‘It is clear that whatever the reason for the increases, it is still too early to be seeing any impact from the state government’s budget initiatives announced in May.
“Given the incentives are only just starting to come online now and the full package not expected to be in place until October, the increases we have seen in the rental market are attributable to other factors,” he says.
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Sydney's rental vacancy eases slightly but property market still favours landlords: REINSW

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The inner-north Brisbane suburb of Bowen Hills will get a new high-rise tower with construction commencing on David Devine’s 30-level Madison Heights project following strong off-the-plan sales.
Madison Heights is a $140 million joint venture project between Devine’s Metro Property Development and Indian-owned developer Pearls Australasia.
The 35 Campbell Street project features 308 apartments, and 40 remain available for purchase, with pre-sales totalling $117 million.
Of the sales to date approximately 260 are unconditional with a 10% deposit paid.
<img src="/images/stories/2012/07/madison-heights.jpg">
The strong sales performance of the project has allowed the joint venture partners to secure a funding agreement with the Commonwealth Bank.
<a target="_blank" href="https://www.propertyobserver.com.au/residential/brisbane-high-rise-apartment-sales-down-31-in-may-quarter-midwood/2012062755299">According to the Midwood report</a> Madison Heights was the top-selling Brisbane high-rise project in the three months to May, recording 55 sales. Prices start from $346,000 for a one-bedroom, one-bathroom apartment and range to $556,000 for a two-bedroom, two-bathroom unit.
Eight of the apartments are studios, 228 are one-bedroom and 62 are two-bedroom units.
Madison Heights is being built by Canberra-based construction firm PBS Building and is due to be completed in mid-2013. 
At peak construction the new project will create 550 jobs.
<img src="/images/stories/2012/07/madisonconstruct.jpg">
Devine is one of the most active developers in the inner-Brisbane market, where there are more than 40 projects in various stages of development.
Metro and Pearls are involved in three joint venture projects – the other two being the Chelsea Tower also in Bowen Hills and <a target="_blank" href="https://www.propertyobserver.com.au/developments/buyers-snap-up-20-of-fortitude-valley-s-brooklyn-offerings/2011101351911">Brooklyn on Brookes</a> in Fortitude Valley.
The 195-apartment Chelsea is sold out, currently under construction and due for completion and settlement in the middle of the year.
Metro says Brooklyn on Brookes is selling strongly and construction is due to commence in August or September.;
The Midwood report recorded 88 out of 216 units had been sold off-the-plan by the end of the May quarter at Brooklyn on Brookes with prices starting from $418,000 for one-bedroom, one bathroom unit.
Devine is also building the Riverside Hamilton Harbour project in partnership with Leightons.
Metro executive chairman David Devine says with two of the three projects under construction and Brooklyn on Brookes selling well, Metro has “well and truly achieved our vision of becoming the dominant force in the Brisbane apartment market”.
Pearls Australasia joint managing director and CEO Paul Brinsmead says the commencement of construction of Madison Height is evidence of the market’s ability to support projects that represent value to buyers.
“The fact we have got two major projects under construction and a third due to start later this year underlines the strength of the market for the right product,” he said.
<img src="/images/stories/2012/07/madisonbris.jpg">
The biggest project currently underway in Brisbane is Harry Triguboff’s Infinity Tower, which will rise to 81 floors upon completion. It is due to be finished in 2014.
Meriton’s other skyscraper, <a target="_blank" href="https://www.propertyobserver.com.au/residential/brisbane-tower-set-to-be-third-tallest-in-australia-and-loom-over-harry-triguboffs-soleil/2011111052320">the Soleil tower</a>, was completed in September last year, rising up to 74 stories. 
Metro Property Development was created in 2010 by Devine Limited founder David Devine and business partners Ken Woodley and Luke Hartman.
Pearls Australasia entered the Australian market in 2009 with the cash purchase of the Sheraton Mirage Resort and Spa on the Gold Coast and is backed by India’s largest private landowner.
It has launched a $75 million lakefront project at Varsity Lakes on the Gold Coast.
Download Property Observer’s <a target="_blank" href="http://propertyobserver.com.au/ebooks/free-ebook-the-brisbane-inner-city-market">free eBook: Brisbane's inner-city urban renewal</a>, which provides an overview and analysis of the current inner-Brisbane apartment market scene.
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Construction of David Devine’s Madison Heights Brisbane tower begins with 87% of units sold off the plan

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Commercial property investors are likely to shift their focus away from retail property and focus on better-performing office and industrial assets, according to a new report by BIS Shrapnel
In its latest forecasts for retail property to 2022, BIS Shrapnel expects only modest retail turnover growth over the next decade principally due to the rise of online shopping and an oversupply of new retail floor space.
According to BIS Shrapnel, the growth of online spending overseas helps explain why consumer spending in total (including overseas online spending) is growing at a solid pace but retail turnover growth is subdued.
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Australians are also travelling overseas more and spending their retail dollars abroad.
Both of these factors are likely to continue to be a drain on retail turnover growth as long as the Australian dollar stays high, says BIS Shrapnel, which declares that the golden age of retailing has come and gone and won’t be returning.
It is forecasting annual retail growth of 2.9% per annum over the next five years compared with the “halcyon era” of retailing from the mid-1990s to GFC, when it averaged close to 5% per annum due to a “debt-fuelled spending surge by consumers”.
The most recent data from the ABS shows that retail turnover rose just 0.5% in May, and is trending up 3.3% on an annual basis.
“Without firming yields to save the day, modest income growth won’t be enough to generate the strong investment returns that investors have become used to,” says report author Maria Lee.
She says prospective returns for regional shopping centres are between 9% and 10% over a five-year and 10-year investment horizon.
“This is OK, but not impressive.
“Some investors are likely to turn their attention to stronger-performing office and industrial property instead,” she says.
Figures compiled by Colliers International for the first half of 2012 show that foreign capital flows into the Australian retail sector made up just 4% of offshore acquisitions (out of a total of $4.06 billion), with the transaction of three assets valued at around $184 million.
However, local investors appear to be more keen, with the <a href="https://www.propertyobserver.com.au/retail/perron-group-to-acquire-half-stake-in-three-centro-centres-for-%24690-million-setting-post-gfc-commercial-retail-record/2012051754740">privately owned Perron Group paying a post-GFC record of $690.4 million</a> to acquire a 50% share in a portfolio of three Centro flagship regional shopping centres –the Colonnades in South Australia, The Glen in Victoria and the Galleria in Western Australia – in a deal brokered by Simon Rooney, Australian head of retail investments at Jones Lang LaSalle.
Shopping centres in particular are likely to lose their investment sparkle according to BIS Shrapnel due to lower rates of turnover growth thanks largely to the growth of online shopping and the “dilutionary effect of additional retail floor space”.
According to BIS Shrapnel, the construction of new retail floor space continues to outpace both population growth and real retail turnover growth, a long-term trend in Australia, broken only during the late 1990s/early 2000s period of unusually strong turnover growth.
“It’s surprising that this is happening now, when floor space growth is relatively muted due to the challenges facing development in the post-GFC environment,” says Lee. “It means that, in real terms, turnover per square metre is falling.”
Instead, Lee says, some investors are likely to turn their attention to stronger-performing office and industrial property instead.
According to BIS Shrapnel, online retailing has a two-pronged impact - the obvious effect of taking market share from ‘traditional’ retailing, but another effect that could be equally important.
“Consumers are using price comparison websites or apps on their mobile phones when in-store, and then demanding a price match in order for them to buy there and then,” says Lee. “This can have an impact on retailer profit margins.”
She also points out Australians are purchasing more online from overseas retailers.
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Retail property to provide only modest returns to investors by 2022: BIS Shrapnel

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Demand for variable-rate mortgages rose for the third straight month, according to June figures from Mortgage Choice, accounting for 82% of all mortgages arranged by Mortgage Choice brokers over the month.
The figure represented a nine-month high for Mortgage Choice, with demand for variable rate loans now above the 12-month average of 80%.
At the same time demand for fixed-rate loans fell from 21% to just 18% of all loan approvals – below the 12-month average of just under 20%.
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Source: Mortgage Choice
According Mortgage Choice spokesperson Belinda Williamson, borrowers may be able to negotiate a variable rate below that of fixed-rate offerings.
“Our extensive lender panel, which consists of major and smaller banks, non-bank lenders, credit unions and building societies, currently has an average three-year fixed rate loan at 6.22%. In comparison, the average standard variable rate is 6.79%,” she says.
However, Williamson says it is possible for borrowers to negotiate a discount on their standard variable interest rate to below 6% in some instances, usually in return for an annual fee.
Ongoing discount variable rate loans were the most popular variable rate loan in June, accounting for two out of every five loans arranged by Mortgage Choice loan writers.
“It goes to show there are competitive deals on offer for new borrowers as well as those looking to refinance,” Williamson says.
“The end of the financial year brought with it an air of optimism around the direction of interest rates, as a growing number of home loan borrowers – more than one in four – chose variable rates.
“Perhaps whispers of one more rate cut in coming months is wielding influence.”
The second most popular loan type for June was basic variable rate, at 19.1%, closely followed by standard variable rate, at 18.6%.
The popularity of line-of-credit home loans rose by just over one percentage point to 3.8% of approvals, with borrowers showing no appetite for introductory rate loans.
 
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Despite this, Macquarie Bank today said it would offer its Classic, Premium and Line of Credit loans at a discounted rate of 5.85% for the first 12 months for all eligible applications settled on or before September 28, 2012.
The falling demand for fixed-rate loans has also been noted by Ray White’s mortgage broker Loan Market, with customer enquiries for fixed-rate mortgages falling to around 15% of total home loan enquiries since the RBA cut the cash rate by 75 basis points in May and June.
Fixed-rate products had spent the majority of 2012 around a full percentage point below variable rates, however with a downward outlook on rates, lenders aren’t shifting fixed rates parallel to variable rates, according to Loan Market spokesperson Paul Smith.
“The feedback from consumers shunning fixed rates is that they’re convinced home loan rates have further to drop and that they’re anticipating a period of prolonged low interest rates,” he says.
However, some brokers are still encouraging borrowers to consider a fixed-rate product.
John Kolenda, managing director of mortgage broker network 1300 Home Loan, says home owners should consider switching to a fixed-rate home loan to take advantage of historically low interest rates.
Kolenda says fixed rates are now available for as little as 5.74% over a three-year fixed term, 30 to 40 basis points below average discounted variable rates.
“Lenders are clearly pricing in further interest rate cuts due to global economic weakness,” he says.
However, if history is a guide, the window of opportunity for locking in a low fixed-rate home loan is likely to be short lived, he says.
“No one can be confident of picking the exact bottom of the cycle, but this is certainly not a bad time to look at fixing.”
Kolenda says borrowers can also manage their interest rate exposures by splitting their loans between fixed and variable.
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Variable-rate mortgage demand rises for third straight month: Mortgage Choice

<a href="https://www.apartments.com.au/developments/broadbeach-qld-4218">Broadbeach</a> offers plenty of reasons to live vertically, but moving from a substantial family home into an apartment can expose the compromises of high-density living. Privacy, room for guests and usable living space tend to matter more when an apartment is intended as a permanent home rather than an occasional coastal base.

A typical residential floor at <a href="https://www.apartments.com.au/new-apartments/the-eveleigh-broadbeach-7-9-surf-parade-broadbeach-qld-4218">The Eveleigh</a>, on Surf Parade,&nbsp;contains just four apartments. The 94-residence development by <a href="https://www.apartments.com.au/developers/hirsch-faigen">Hirsch &amp; Faigen</a> is predominantly made up of expansive three-bedroom homes, with a limited collection of half-floor penthouses above.

Across the apartment floors, <a href="https://www.apartments.com.au/architects/rothelowman">Rothelowman</a> has used the relatively limited number of residences to give each home greater access to natural light and outlook. Living spaces extend towards full-height glazing, while a series of bay windows frame selected views across the Pacific Ocean, city and hinterland rather than treating the building edge as a continuous wall of glass.

&nbsp;

[smartcode_project:default project_id=149670 project_image_fid=360965]

“The apartment floors deliver a collection of homes that embrace controlled outlook via a series of bay windows deliberately framing moments of view,” Rothelowman Director Kim Lowman said.

From outside, those projecting forms contribute to the tower’s faceted profile. Strong horizontal and vertical elements establish its proportions, while the changing position of the sun alters the light, shadow and reflection across the façade throughout the day.

The same attention moves inside the apartments, where the material palette combines warm timber, natural stone, metallic detailing and softer curved forms. Kitchens sit within the main living zone, with stone island benches, integrated joinery and European appliances, before the living areas extend towards the glazing and the outlook.

&nbsp;

[smartcode_project:default project_id=149670 project_image_fid=360981]

Three genuine bedrooms provide room to accommodate family and guests, while two secure car spaces and storage address some of the practical considerations that can become more noticeable when moving from a larger home. Feedback from the display suite has centred on the warmth and restraint of the interiors, with buyers commenting that the residences feel like homes rather than conventional coastal apartments.

A limited collection of half-floor penthouses occupies the upper levels, increasing the scale of the living spaces and adding private balconies and elevated finishes. From this position, the outlook extends between the ocean and hinterland.

Outside the private residences, The Eveleigh separates its shared spaces between the podium and rooftop. The podium is centred on wellness, with subtropical landscaping surrounding a swimming pool and pool terrace, yoga garden, private gymnasium, sauna and hot and cold plunge facilities. Landscaped retreats and pavilions provide additional places to sit away from the main recreation areas.

&nbsp;

[smartcode_project:default project_id=149670 project_image_fid=360966]

Higher in the building, a rooftop pavilion and private dining suite sit alongside resident lounge, barbecue and outdoor dining areas, opening towards panoramic views across the ocean, city and hinterland.

“Buyers are no longer just looking for an apartment, but a lifestyle where they can relax, reset, and enjoy a balanced way of living,” Hirsch &amp; Faigen Director of Sales Matt George said.

Interest to date has come from established owner-occupiers and interstate lifestyle purchasers, including buyers planning a future move to the Gold Coast. Many are coming from larger homes and want to reduce ongoing maintenance without giving up space for family and guests, privacy, two car spaces or the ability to entertain at home.

&nbsp;

[smartcode_project:default project_id=149670 project_image_fid=360969]

Much of that daily life can also take place beyond the building without requiring a drive. Kurrawa Beach and Pratten Park are an easy walk from Surf Parade, while Pacific Fair, Oracle Boulevard, The Oasis, restaurants, cafés, entertainment and public transport are also within walking distance.

The Eveleigh is Hirsch &amp; Faigen's fourth Gold Coast development since entering the market in 2021, following The Hemingway at Palm Beach, The Emerson at Kirra and Yves at Mermaid Beach. Each of the preceding projects sold out before completion.

“Broadbeach had been on our radar throughout our time operating on the Gold Coast,” the developer said. “Following our projects in Palm Beach, Kirra and Mermaid Beach, Broadbeach represented the natural next step for the business.”

The Surf Parade site brought together proximity to the beach, protected coastal outlooks and walkability to dining, shopping and recreation. Hirsch &amp; Faigen also identified the street as an emerging premium residential address, with enough separation from Broadbeach's busier destinations to retain a quieter environment at home.

The Eveleigh is now under construction by Maxcon, with completion forecast for mid-2028. Three-bedroom residences are currently available from $2.87 million.

[smartcode_project_cta:default project_id=149670]

Joel Robinson

The Eveleigh brings house-like apartments to Broadbeach

A long-stalled Campbelltown development site is back in play, with new plans for 139 apartments set to supersede a mixed-use scheme approved almost a decade ago but never built.

The new proposal for 28 Cordeaux Street would deliver 116 market and 23 affordable apartments in a part 14-storey building, bringing a substantial new project into a Campbelltown market where new apartment supply remains limited.

Plans have been filed over the 3,092 sqm corner site at Moore-Oxley Street, around 600 metres from Campbelltown Railway Station and the city-centre retail core.

The site already carries a mixed-use residential approval dating to 2016. Doroch Architects has now been engaged on a larger replacement scheme, which is progressing as a State Significant Development Application following a Housing Delivery Authority determination in August 2025.

The apartment mix comprises 39 one-bedroom, 72 two-bedroom and 28 three-bedroom residences. Two-bedroom apartments make up just over half of the project, while three-bedroom homes account for 20 per cent.

<img alt="First look: New 139-apartment plans revive long-stalled Campbelltown city centre site" data-entity-type="file" data-entity-uuid="136dd5b9-3791-4da6-9e31-76f533f5b4de" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Campbelltown%20da2.png?VersionId=LgOSy9nwf5u.MGswBBwaGGxuX8QpHSl_" />

Of the 139 apartments, 23 will be delivered as affordable housing under the in-fill affordable housing provisions of the Housing SEPP. The affordable component represents 15 per cent of the residential gross floor area and will be managed by a registered Community Housing Provider.

Doroch has sought to break the scale of the building into two distinct elements, with a masonry podium of around four storeys establishing the street edge before the residential tower steps back above.

The corner position has shaped that approach. Cordeaux Street faces toward the commercial and civic centre, while Moore-Oxley Street leads into the lower-scale residential neighbourhood to the south, and the design verification report describes the site as "bridging the commercial core to the north and established residential areas to the south."

The podium will be expressed predominantly in face brick, while the upper levels shift to brushed and grooved concrete cladding with darker metal detailing. Recessed sections, deep balcony edges and landscaping break down the upper form, with an approximately 11.8-metre setback to the northern boundary addressing the adjoining St Peters Anglican School.

<img alt="First look: New 139-apartment plans revive long-stalled Campbelltown city centre site" data-entity-type="file" data-entity-uuid="c8b3d2d3-c561-4bfc-a5d9-a68c0c10dac1" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Campbelltown%20da1.png?VersionId=AeAEyJU02Gk2k5noUj2StziCvdQ7fW4B" />

Campbelltown has been starved of new residential developments in the last decade.

The only other notable development set to come to market this year is ALAND's Queen Square, a mixed-use precinct on over two hectares that will comprise apartments above a vibrant ground-level retail and hospitality dining precinct.

First look: New 139-apartment plans revive long-stalled Campbelltown city centre site

First Look: Sherlock Construction pitches apartments for low-rise Deception Bay

Queensland builder-developer MAYD has revealed the first look at its major North Kirra beachfront development, lodging amended plans that reduce the number of apartments and increase the proportion of larger residences.

The project is planned across a substantial 4,742 sqm amalgamated site spanning seven lots at <a href="https://www.apartments.com.au/new-apartments/2-6-pacific-parade-bilinga-qld-4225">2-6 Pacific Parade</a> and 27-33 Golden Four Drive in Bilin​ga, directly opposite Nor​th Kirra Beach.

<a href="https://www.apartments.com.au/developers/mayd-group">MAYD</a> secured the site for $32.5 million in 2025, in what was one of the Gold Coast's largest property transactions of the year.

The development will be delivered across two stages, with the first stage carrying an estimated gross realisation value of around $360 million.

The latest amendments seek to reduce the overall apartment count and shift the project further toward the owner-occupier market, with larger residences designed for buyers wanting considerably more space than traditionally offered in a beachfront apartment.

The residential mix will include townhomes, oversized two-bedroom apartments, substantial three-bedroom residences and four-bedroom homes.

MAYD has appointed Cera Stribley to lead the architecture and interiors, with the Melbourne-based design practice drawing on the beachfront setting through a series of ocean-facing terraces and heavily landscaped balconies.

Strong horizontal forms and curved balconies will define the exterior, with subtropical landscaping integrated throughout the building to soften the built form and increase the connection between the residences and the beachfront.

The project will also include an extensive collection of resident wellness and lifestyle facilities, continuing the broader shift across the Gold Coast's luxury apartment market toward larger homes supported by resort-style amenity.

<img alt="MAYD" data-entity-type="file" data-entity-uuid="d1bcbb05-e659-4b47-8bd4-1e595315e2ad" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-27%20at%202.05.03%E2%80%AFPM.png?VersionId=jj0XEud1X1DuLt7_KyElhjMdZGOXmLHP" />

MAYD Founder Todd Mould said North Kirra was increasingly appealing to buyers attracted to the more established, lower-density character of the southern Gold Coast.

"North Kirra presents one of the most compelling luxury residential opportunities currently emerging in Australia, combining absolute beachfront with the character and authenticity that buyers are increasingly seeking, and the same sense of tight-knit community that defined Burleigh and Currumbin perhaps 10 or 15 years ago," Mould said.

"With Gold Coast Airport on its doorstep, it also offers a level of accessibility that broadens its appeal across almost every market demographic."

The project comes as the southern Gold Coast continues to attract an increasing share of high-end apartment development and buyer activity.

Kirra in particular has emerged as one of the region's more tightly held beachfront markets, with its relatively low-density character, established surf and hospitality scene and proximity to Gold Coast Airport differentiating it from the higher-density markets further north.

Mould said those characteristics had informed the approach MAYD and Cera Stribley had taken to the project.

"We've worked closely with Cera Stribley to create a vision that is deeply connected to its surroundings," he said.

"Inspired by the coastline itself, the architecture has been shaped around space, privacy and resort-style living, creating a collection of homes that reflects the next generation of luxury on the southern Gold Coast."

MOTIV Managing Director Carly Cottam, who has been appointed to market the project, said buyer attention had continued to move south along the Gold Coast.

"Purchasers who may once have defaulted to Broadbeach, Main Beach or Surfers Paradise are increasingly recognising the value of a genuine beachfront location that offers lower density, strong amenity and a more established sense of community," Cottam said.

"Kirra has a powerful combination of growing demand and genuine scarcity. Beachfront supply is inherently constrained, the area remains relatively low density, and buyers are increasingly placing a premium on locations that feel established, uncrowded and authentic rather than heavily developed."

Cottam said the proximity to Gold Coast Airport was also proving increasingly important for interstate and second-home buyers.

"Being minutes from Gold Coast Airport makes it particularly compelling for interstate buyers, frequent travellers and second-home purchasers who can access an authentic coastal lifestyle almost immediately after stepping off a flight."

The acquisition takes MAYD's active development portfolio to more than $500 million, with the North Kirra project representing one of its largest undertakings to date.

MAYD is targeting an early 2027 launch.

First look at MAYD's North Kirra mixed-use precinct

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Castle Hill, the longtime hub of the Hills District, has been one of the major beneficiaries of Sydney's Metro expansion, with improved connectivity helping drive continued population growth, development and buyer demand across the Hills District.

But despite that growth, the suburb has seen relatively few major new apartment projects brought to market over the past 18 months.

Hills District developer Reve Group is looking to fill that gap with <a href="https://www.apartments.com.au/new-apartments/nova-r-ve-castle-hill-2-garthowen-crescent-castle-hill-nsw-2154">Nova Rêve</a>, a major new mixed-use precinct on the corner of Garthowen Crescent and Old Castle Hill Road, a short walk from Castle Hill Metro Station and Castle Towers.

[smartcode_project:default project_id=152737 project_image_fid=377679]

The project will comprise three residential towers alongside a hotel, restaurants, cafes and a skybar, more than 1,600 sqm of ground-floor retail and almost an acre of landscaped gardens.

It represents the largest project undertaken by Reve Group, the development arm of the Kassis family, which has been building across the Hills District for more than 30 years through Kassis Homes.

[smartcode_project:default project_id=152737 project_image_fid=377675]

Nova Rêve also represents a significant step up from the family's first apartment development, Grand Rêve, which was delivered nearby on Garthowen Crescent.

Grand Rêve introduced larger, house-like apartment layouts and premium inclusions including Wolf and Sub-Zero appliances to the Castle Hill market.

Nova Rêve takes that approach to a precinct scale, combining the residential component with hospitality, retail and substantial public and resident landscaping.

[smartcode_project:default project_id=152737 project_image_fid=377685]

Reve Group Managing Director Sam Kassis said the project reflected the family's three decades of building in the Hills, which has evolved from trophy homes on quarter-acre blocks to larger-scale apartment development.

"Grand Rêve was our first apartment project here and it showed us what this pocket of Castle Hill could be. Nova Rêve is the refinement of that idea: not just apartments, but a place the whole suburb can use," Kassis said.

A key part of that approach is the hotel, which has been designed to operate as an amenity for the wider Castle Hill community rather than solely hotel guests.

It will include restaurants, cafes, skybars and all-day dining, alongside conference and event facilities catering to business functions, community groups and private events.

At ground level, more than 1,600 sqm of shops and cafes will open onto the surrounding streets and landscaped areas.

Almost an acre of gardens designed by Land and Form Studios will run through the precinct, incorporating pathways, seating, barbecue areas and children's play spaces.

[smartcode_project:default project_id=152737 project_image_fid=377680]

Reve Group's Romio Georges said creating an active ground plane had been central to the planning of Nova Rêve.

"There are gardens with pathways, barbecues, seating and play areas, shops and cafes opening onto the street, and a hotel with restaurants and a skybar that anyone in Castle Hill can walk into," Georges said.

The project's elevated position on one of Sydney's highest ridgelines will also provide apartments with outlooks toward the Sydney skyline, surrounding parkland and the Blue Mountains.

More than 80 per cent of the apartments will occupy corner positions, with Turner responsible for both the architecture and interiors.

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[smartcode_project_cta:default project_id=152737]

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Larry Schlesinger

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