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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

The Gold Coast economy has grown by 25 per cent since 2020/21 to surpass $55 billion, but perhaps the more significant story is what sits behind the headline number.

For decades, the Gold Coast has been viewed through the lens of tourism, lifestyle and population growth. The latest State of the City Report suggests that perception is increasingly out of step with reality.

Released by Invest Gold Coast, the report ranks the Gold Coast as Australia's largest non-capital city economy and, perhaps more notably, second nationally behind Sydney for Economic Complexity, a measure that assesses the diversity and sophistication of an economy.

It's a result that places the Gold Coast ahead of Melbourne, Brisbane, Perth and Adelaide, highlighting the extent to which the city's economic base has broadened beyond its traditional industries.

Today, the Gold Coast supports more than 350,000 jobs, is home to over 83,000 businesses and generates $19 billion in annual exports. Manufacturing now accounts for 62 per cent of international export growth, while sectors including health, education, advanced manufacturing, technology and professional services are becoming increasingly important contributors to the local economy.

[smartcode_project:default project_id=150017 project_image_fid=372547]

Gold Coast Mayor Tom Tate said the report confirmed the city's evolution into one of Australia's most significant economies.

"The Gold Coast economy continues to grow at an incredible pace. This is no surprise to those of us who have watched the evolution up close," Mayor Tate said.

"As one of the most entrepreneurial, investment driven and opportunity focused economies in the country our ambition has been realised and possibilities are endless.

"The Gold Coast has built a reputation as the city that says yes. We say yes to investment, yes to opportunity and yes to people who want to build something.

"It's this mindset helping us drive major growth across health, advanced manufacturing, screen production, marine, technology and the knowledge economy."

[smartcode_project:default project_id=149670 project_image_fid=360975]

While population growth has been one of the defining stories of the past decade, the report points to a broader economic transformation taking place.

The city's knowledge economy now contributes $7.9 billion annually and supports around 31,000 jobs, while the health and wellbeing sector contributes $5.2 billion and employs more than 42,000 people. Together, the six priority sectors identified in the report account for almost $24 billion in economic output and more than 145,000 jobs.

One of the strongest examples is the Gold Coast Health and Knowledge Precinct at Southport. The 200-hectare precinct now contains more than $5 billion worth of health, education, research and innovation infrastructure and supports over 16,000 jobs.

The report also highlights the growing role of advanced manufacturing, particularly in aerospace, defence and modular construction.

Gold Coast-based Gilmour Space Technologies recently became the first Australian commercial company to attempt an orbital launch, while companies including Modscape and ModnPods are helping establish the Yatala-Stapylton corridor as one of Australia's fastest-growing advanced manufacturing hubs.

The city's entrepreneurial culture is also translating into business growth.

Since 2019/20, the number of businesses operating on the Gold Coast has increased by 22 per cent, while firms employing more than 200 people have grown by 80 per cent. The report suggests the next challenge is converting more local start-ups and medium-sized businesses into nationally significant companies.

Development activity remains another key indicator of confidence.

There are currently more than $23 billion worth of major projects underway across the Gold Coast, supported by a record 75 active cranes, a figure that now exceeds Brisbane and represents a 150 per cent increase since 2016.

[smartcode_project:default project_id=112024 project_image_fid=343235]

Importantly, the report notes the next phase of investment will need to extend beyond residential development.

While 93 per cent of crane activity is currently tied to housing, Invest Gold Coast argues future investment will increasingly need to focus on cultural, civic, infrastructure and industry-enabling projects that strengthen the city's long-term economic resilience.

Invest Gold Coast Chair Will Hodgman said the city was now benefiting from years of economic diversification.

"What is happening on the Gold Coast is the result of the city's economic base broadening, fuelled by industries with long-term, high-growth potential," Mr Hodgman said.

"This is no longer a secondary Australian economy, the Gold Coast is becoming a globally connected city with deeper capability across health, knowledge and creative industries, advanced manufacturing, technology and exports."

[smartcode_project:default project_id=108274 project_image_fid=365786]

Looking ahead, the Gold Coast's population is projected to exceed one million residents by 2046.

For a city that was once largely defined by tourism and lifestyle, the latest figures suggest the Gold Coast is becoming something more significant, one of Australia's most diverse and economically sophisticated urban economies, and increasingly one that national and international investors can no longer afford to overlook.

Joel Robinson

75 cranes, $23 billion pipeline and a $55 billion economy: Inside the Gold Coast economic boom

Ron Bakir's Homecorp has sold more than 75 per cent of the apartments in its wellness-driven Florence Residences in Surfers Paradise following its first weekend release.

The <a href="https://www.apartments.com.au/new-apartments/florence-residences-24-monte-carlo-avenue-surfers-paradise-qld-4217">26-storey project on Monte Carlo Avenue</a>, which commenced construction earlier this year, has seen a flurry of buyers secure their slice of the Gold Coast's latest wellbeing-focused offering in one of the nation's most competitive property markets.

Since the pandemic, the Gold Coast's population has grown by more than 11 per cent, a rate approximately four times faster than Sydney's, driven largely by lifestyle changes and interstate migration. While buyer activity has moderated in some markets nationally, demand for newly built dwellings on the Gold Coast continues to gain momentum as purchasers increasingly prioritise lifestyle, amenity, wellbeing, liveability and long-term investment potential.

&nbsp;

[smartcode_project:default project_id=150414 project_image_fid=372743]

Homecorp CEO Ron Bakir says buyers today are looking for more than just a home.

"What we are seeing is a shift in how people define value in property," Bakir says.

"What attracts residents to new developments is a desire for more than just a residence. They are looking for a place that complements their lifestyle, supports their wellbeing and reflects the way they want to live into the future.

"Lifestyle, longevity, proactive health, wellbeing, connection and a sense of community are increasingly shaping purchasing decisions, particularly on the Gold Coast, where these factors continue to be a major drawcard."

[smartcode_project:default project_id=150414 project_image_fid=372744]

Bakir says Homecorp is responding to this shift through an approach that places greater emphasis on design, amenity and experience working together to create places that feel considered, connected and enduring in value.

Inspired by Eastern European design, Florence Residences will comprise 120 apartments alongside a private residents-only wellness club featuring a resort-style rooftop pool, hot and cold plunge pools, a spa retreat, contemporary gymnasium, and a spacious yoga and Pilates studio.

The development will also feature a residents-only lounge with private dining facilities and a rooftop bar, premium outdoor entertaining areas, a hotel-style lobby lounge, generous bike parking, and pet-friendly amenities including a heated dog wash.

[smartcode_project:default project_id=150414 project_image_fid=372742]

A limited number of apartments remain available, with an exclusive collection of four-bedroom sub-penthouses set to be released in the coming months.

Florence is one of the latest additions to Homecorp's expanding multi-billion-dollar property portfolio, which also includes plans for a <a href="https://www.apartments.com.au/news/qld/homecorp-lodges-plans-for-260-million-moroccan-bathhouse-inspired-tower-in-budds-beach">$260 million development in Budds Beach</a> tailored to the growing wellness market.

A development application has been lodged for a 27-storey, 156-residence tower at 8–10 Acacia Avenue and 25–27 Oak Avenue, featuring a residents-only Moroccan spa-inspired sanctuary.

Apartments at Florence Residences are priced from $1,249,000, with construction expected to be completed by late 2027.

[smartcode_project_cta:default project_id=150414]

Buyers rush to Homecorp's Florence Residences as Gold Coast wellness trend gains momentum

The NSW Government has expanded its $1 billion Pre-sale Finance Guarantee program, broadening access for affordable housing providers and smaller residential developments as it seeks to accelerate housing delivery across the state.

The Minns Government says the program has already helped bring forward more than 600 homes across Sydney and regional NSW since launching in September 2025, with similar models now adopted in South Australia and Western Australia.

The latest changes, announced by Treasurer Daniel Mookhey and Minister for Planning and Public Spaces Paul Scully, are designed to improve access to finance for projects that have planning approval but are struggling to secure funding.

Among the key changes is an expansion of support for community housing providers. The program will now support up to 100 per cent affordable housing projects valued at up to $30 million when delivered by not-for-profit providers, while support for larger affordable housing developments will increase for projects worth up to $80 million.

The government says the changes will help accelerate the delivery of housing for low-income workers, older people, people living with disability, and those at risk of homelessness, while reducing reliance on direct grants or subsidised loans to bridge funding gaps.

The eligibility criteria for smaller residential developments have also been broadened. The previous $5 million minimum project value threshold has been removed and replaced with a requirement that projects deliver at least four homes.

Support has also increased for projects delivering fewer than 20 homes, with the guarantee now able to cover up to 75 per cent of dwellings in a development, capped at $30 million per project.

The changes are expected to particularly benefit smaller-scale and regional developments, which often face greater challenges meeting pre-sale requirements imposed by lenders.

Treasurer Daniel Mookhey said the scheme demonstrates how government can use its balance sheet to stimulate housing supply without relying solely on taxpayer-funded grants.

"The Pre-sale Finance Guarantee shows how this Government is using its balance sheet to reduce risk and unlock private investment, enabling new homes to move from design to construction faster," Mookhey said.

"This landmark reform allows us to deliver homes for working families at a lower cost to taxpayers, while also maintaining strong financial discipline."

Planning Minister Paul Scully said the program had already proven effective in bringing stalled projects to market.

"The Pre-sale Finance Guarantee has already proven it can unlock stalled projects and accelerate housing delivery by giving lenders the confidence they need to back good developments," Scully said.

"These changes will allow more affordable housing and smaller developments to access support so more homes can be built faster where communities need them most."

Housing Minister Rose Jackson said the expansion would help community housing providers overcome financing barriers that often delay projects.

"We know community housing providers are ready to build more homes, too often they're held back by barriers to finance," Jackson said.

"Expanding the Pre-sale Finance Guarantee helps remove those barriers so more affordable homes can get off the ground sooner."

The announcement was welcomed by the Property Council of Australia, which has long advocated for measures aimed at improving project feasibility and access to finance.

Property Council NSW Executive Director Katie Stevenson described the expansion as a practical intervention that addresses one of the most immediate constraints on housing delivery.

"This is exactly the kind of practical intervention we need right now, focused on getting projects out of the ground, not just approved," Stevenson said.

"It builds on a model the Property Council has worked closely with government to develop following calls for such a scheme ahead of last year's NSW Budget, so it's great to see it being expanded."

Stevenson said the reforms would help unlock projects that are ready to proceed but have been delayed by financing challenges. However, she noted that broader feasibility issues remain a significant barrier to increasing housing supply.

"The biggest challenge in NSW housing today is delivery. Too many projects have planning approval but are simply not financially viable to proceed under current settings," she said.

Speaking at the Property Council's NSW Housing Summit, Housing Minister Rose Jackson acknowledged that feasibility and financing pressures continue to constrain housing delivery, while reaffirming the government's commitment to work with industry on solutions.

Stevenson said the government's recognition of those challenges was encouraging ahead of next week's state budget.

"It's positive to see the government clearly recognising that feasibility pressures are now a binding constraint on supply," she said.

"With the Budget just days away, the focus must be on backing delivery, making sure projects stack up, finance can flow, and more homes can move from approval to construction."

The expanded Pre-sale Finance Guarantee forms part of the NSW Government's broader housing agenda, which also includes planning reforms, the NSW Housing Pattern Book, and a series of rezonings intended to increase housing capacity across the state.

NSW expands Pre-sale Finance Guarantee to unlock more affordable and regional housing

Design-led developer-builder Lowe Living has unveiled its latest residential development, Jardin House, marking its first foray into Melbourne's blue-chip City of Boroondara.

Located a short walk from Camberwell Junction, <a href="https://www.apartments.com.au/new-apartments/jardin-house-by-lowe-living-camberwell-335-camberwell-road-camberwell-vic-3124">Jardin House</a> has been designed to appeal to affluent local downsizers and established families seeking a low-maintenance alternative to the large homes that have long defined Camberwell and surrounding suburbs.

The project will comprise a collection of two and three-bedroom apartments ranging from 92 sqm to 280 sqm, alongside a limited number of penthouse residences featuring rooftop terraces spanning more than 100 sqm, with optional private pools.

&nbsp;

[smartcode_project:default project_id=146717 project_image_fid=372212]

Lowe Living Co-Founder and Managing Director Tim Lowe said Camberwell represented a natural next step for the developer as it expands into some of Melbourne's most tightly held residential markets.

"Jardin House is an important project for our team as it marks the next evolution of our portfolio into different well-established blue-chip pockets of Melbourne," Lowe said.

"Camberwell, with its incredible walkability, family-led neighbourhood feel and superb access to education and transport, makes it a natural choice for us."

[smartcode_project:default project_id=146717 project_image_fid=372227]

Designed by Tristan Wong Architects, with interiors by Hecker Guthrie and landscaping by Acre, the development takes inspiration from the Art Deco architecture that remains a defining feature of many of Camberwell's established streets.

A curved facade, arched openings, textured brickwork and sculpted forms reference the suburb's architectural heritage, while extensive landscaping softens the building's presence and creates a strong connection to the surrounding tree-lined streetscape.

The project will be set behind a secure gated entrance, with residents arriving through landscaped gardens designed to create a transition between the public realm and private residences.

Inside, the residences feature natural stone and timber finishes, full-height glazing, Miele appliances and generous open-plan living areas designed for long-term owner occupation.

[smartcode_project:default project_id=146717 project_image_fid=372225]

While the apartments themselves have been designed to attract discerning owner-occupiers, it is the amenity offering that sets Jardin House apart from many other boutique projects currently launching across Melbourne.

The centrepiece is a 350 sqm private bathhouse curated in partnership with Aurora Spa &amp; Bathhouse founder Lyndall Mitchell.

The wellness precinct includes mineral pools, hydrotherapy experiences, a Himalayan salt room, sauna, steam room, cold plunge pools and dedicated relaxation spaces, creating what Lowe Living describes as a private wellness retreat exclusively for residents.

[smartcode_project:default project_id=146717 project_image_fid=372222]

The collaboration follows Lowe Living's recent partnership with Aurora at Maison Savoy in Brighton, although Jardin House is the first project to incorporate both indoor and outdoor wellness experiences.

Emma Lowe, Co-Founder and Managing Director of Lowe Living, said wellness was becoming an increasingly important consideration for apartment buyers.

"Collaborating with Lyndall Mitchell from Aurora Spa &amp; Bathhouse for a second time is an intentional nod to creating residences that are more than just homes, but a way to enrich the lives of our residents through wellness and longevity," Lowe said.

The amenity offering is complemented by a Technogym fitness studio, residents' lounge, private dining spaces and concierge services.

The launch comes as developers increasingly target Melbourne's established eastern suburbs, where rising land values, ageing housing stock and growing downsizer demand are creating opportunities for boutique apartment projects.

Lowe said the company expects significant generational wealth transfer across suburbs such as Camberwell in coming years, creating further demand for luxury apartment living.

"Camberwell is a blue-chip suburb where homes regularly transact for multiple millions of dollars," he said.

"The generational change of wealth in these locations expected in the coming years is significant, so we see an opportunity to create exclusive residences that appeal to older families and downsizers in order to meet this demand."

Apartments at Jardin house start from $1,195,000. The project forms part of Lowe Living's near-$1 billion portfolio of new developments across Melbourne.

[smartcode_project_cta:default project_id=146717]

Lowe Living launches Jardin House in Camberwell

As <a href="https://www.apartments.com.au/developments/north-sydney-nsw-2060">North Sydney</a> continues its transition from a commercial centre into a more layered residential and lifestyle precinct, a new generation of apartment developments is reshaping expectations around scale, amenity, and long-term liveability.

Improved transport connections through the Victoria Cross Metro, continued investment in dining and public spaces, and a constrained supply of new luxury apartments have sharpened demand for homes that combine proximity to the CBD with the privacy and outlook traditionally associated with harbourside houses.

At 177 Walker Street, <a href="https://www.apartments.com.au/developers/aland">ALAND</a>’s new apartment development <a href="https://www.apartments.com.au/new-apartments/the-walden-north-sydney-177-walker-street-north-sydney-nsw-2060">The Walden</a> enters the market with a distinctly residential approach to high-rise living. The 30-level tower will deliver 161 residences, ranging from one-bedroom apartments through to sub-penthouses and a full-floor penthouse, all oriented to capture uninterrupted views across Sydney Harbour, the Opera House, and out toward the Pacific Ocean.

[smartcode_project:default project_id=134323 project_image_fid=6395]

Designed by <a href="https://www.apartments.com.au/architects/rothelowman">Rothelowman</a>, the project takes advantage of the site’s natural topography and elevated position above the harbour. Rather than relying on density alone, the architecture focuses on outlook, orientation, and spatial flow, with every apartment occupying a corner position to maximise natural light and cross ventilation.

Rothelowman says the site itself shaped much of the architectural response.

“The site has a long history in terms of its inevitable transformation and when we came in, we took inspiration from the idea of reestablishing a sense of the site’s natural terrain and fall. Our scheme aims to integrate with the terrain and the landscape, using the undulating site to slowly reveal glimpses and views of the harbour. The rotation of the tower off grid means every apartment has a view and is naturally cross ventilated. The building's colour palette is quintessentially Sydney, with bronze and sandstone and a luminescent green colour in the glass, making it very earthy and grounded in its location.”

[smartcode_project:default project_id=134323 project_image_fid=6399]

Inside the residences, the emphasis moves toward larger-format living typically associated with standalone homes. Kitchens sit at the centre of the apartments, connecting directly to open-plan dining and living areas before extending outward into expansive winter gardens and balconies. Calacatta marble, bespoke joinery, integrated appliances, and custom metal detailing are used throughout, while three distinct interior palettes, Terrace, Opera, and Harbour, allow buyers to personalise the spaces without compromising the architectural consistency of the project.

The larger residences place particular attention on separation between entertaining and private zones. In many apartments, master suites occupy the outer corners of the floorplates, allowing bedrooms to benefit from floor-to-ceiling glazing and harbour outlooks independent of the living spaces. Dressing rooms and ensuites continue the material palette through fluted detailing, freestanding baths, and layered stone finishes.

Rothelowman says the design intent centred on creating homes that feel enduring rather than transient.

“Our philosophy is all about the way people live in these spaces, and we wanted to create homes that reflect the quality of life in this unique Sydney location. The apartments showcase expansive living spaces that are generous, sophisticated, and bold, with the ability to connect with views throughout each apartment.”

[smartcode_project:default project_id=134323 project_image_fid=353235]

A separate four-storey amenity building known as The Pavilion expands the residential offering beyond the apartments themselves. Positioned alongside the tower, the building consolidates wellness, recreation, and social spaces into a dedicated resident retreat. Facilities include a 20-metre rooftop pool and sundeck, sauna, spa, ice bath, wellness studio, gymnasium, concierge service, wine cellar, residents’ lounge, private dining spaces, and dedicated co-working areas with meeting rooms and boardroom facilities.

The amenity mix reflects the buyer profile emerging in North Sydney, where owner-occupiers and downsizers are increasingly prioritising convenience, apartment scale, and long-term usability over purely investment-driven decisions.

The Walden also represents a significant milestone for ALAND, marking the company’s first major move into Sydney’s inner-city luxury apartment market after more than two decades delivering large-scale residential communities across Greater Sydney. Founder Andrew Hrsto says the Walker Street site stood apart because of both its positioning and its rarity.

[smartcode_project:default project_id=134323 project_image_fid=6390]

“As a company, we had been searching for a site in one of Sydney’s blue-chip locations, spanning the Eastern Suburbs, the Sydney CBD and the North Shore, and when we had the opportunity to purchase this site, we immediately recognised that it could be something iconic.”

At launch, The Walden recorded more than $103 million in sales, with buyers drawn to the project’s harbour positioning, apartment scale, and proximity to the Metro, which now connects North Sydney to Barangaroo in three minutes and Martin Place in five.

ALAND has commenced construction, and is expecting a completion date in 2028.

[smartcode_project_cta:default project_id=134323]

Larry Schlesinger

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