<html><body>
The April retail update came in weaker than expected, sales dipping 0.1% in the month compared to consensus forecasts of a 0.2% gain.
Annual growth slowed to 2.8% per year, the slowest pace since mid 2018.
The timing of public holidays may have been a factor in April, with Easter falling in the month this year and the ANZAC day public holiday a week later encouraging many to take leave.
While the ABS tries to adjust for these shifting seasonal effects, there may have been more of a dampening effect compared to previous years.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/6/4/retail%201.jpg" alt="">
That said, both the sub-category and state detail in April point to wealth effect spillovers from the Sydney and Melbourne led housing market corrections weighing on sales.
In particular, household goods retail sales – a bellwether for discretionary 'durables' spending – fell 0.9% in the month and NSW and Vic both recorded more pronounced 0.4% declines.
<a href="https://www.propertyobserver.com.au/images/2019/6/4/retail%202.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/6/4/retail%202.jpg" alt="">
The remaining sub-category detail shows a 0.2% gain in the large basic food retail category and more mixed results elsewhere – clothing down 1.2% month and cafes &amp; restaurants down 0.7% month but both coming off sold gains in March; and department stores up 1.8% month and 'other retailing' up 0.8% month but both coming off declines last month.
<a href="https://www.propertyobserver.com.au/images/2019/6/4/retail%203.jpg" target="_blank">Click here</a> to enlarge:  <img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/6/4/retail%203.jpg" alt="">
Needless to say it pays to look through the monthly volatility.
Looking at sales across the major states: NSW –0.4%mth, +1.2%yr; Vic –0.4%mth, +3.7%yr; Qld +0.7%mth, +6.0%yr; SA +0.6%mth, +0.5%yr; and WA +0.1%mth, +2.6%yr.
<a href="https://www.propertyobserver.com.au/images/2019/6/4/retail%204.jpg" target="_blank">Click here </a>to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/6/4/retail%204.jpg" alt="">
Looking by channel, online sales look to have posted a reasonably solid 1.1% gain in the April month, although the annual pace of growth in this segment continues to slow. 
The breakdown by retailer size shows weakness concentrated amongst small retailers, sales in the segment down 0.9%mth. Large non-food retailers saw a flat result while large food retailers recorded a 0.6% gain.
Overall the April retail update is clearly on the soft side, marking a weak start to the June quarter and with some worrying signs that wealth effect drags may be intensifying.
<a href="https://www.propertyobserver.com.au/images/2019/6/4/retail%205.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/6/4/retail%205.jpg" alt="">
<a href="https://www.propertyobserver.com.au/images/2019/6/4/retail%206.jpg" target="_blank">Click here </a>to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/6/4/retail%206.jpg" alt="">
<a href="https://www.propertyobserver.com.au/images/2019/6/4/retail%207.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/6/4/retail%207.jpg" alt="">
<a href="https://www.propertyobserver.com.au/images/2019/6/4/retail%208.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/6/4/retail%208.jpg" alt="">
<a href="https://www.propertyobserver.com.au/images/2019/6/4/retail%209.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/6/4/retail%209.jpg" alt="">
<a href="https://www.propertyobserver.com.au/images/2019/6/4/retail%2010.jpg" target="_blank">Click here </a>to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/6/4/retail%2010.jpg" alt="">
MATTHEW HASSAN is a Senior Economist for Westpac
</body></html>

Matthew_Hassan-HHWHptmrw4

Australian retail sales soften again: Westpac's Matthew Hassan

<html><body>
EXPERT OBSERVER
The correction in Australian dwelling prices that has been running since late 2017 is showing clearer signs of moderating in early 2019.
The CoreLogic home value index, covering the eight major capital cities, fell 0.4% in May to be down 8.4%yr. After tracking a 10% annualised pace of decline between Nov and March, price slippage has been running at a more moderate 6.7% annual pace over the last two months.
While that is a clear improvement it is still well short of stabilisation.
Prices nationally are now 10.7% below their Sep 2017 peak. The current price adjustment has now been running for 20mths putting, eclipsing the much shallower 2010-11 correction.
More major capital cities recorded price declines in May. The moderation in price falls continues to be slightly more pronounced in the Sydney and Melbourne markets.
The annual pace of declines in these markets improved for the first time since early 2017 but is still tracking a solid pace, –10.7%yr in Sydney and –9.9%yr in Melbourne with cumulative declines of 14.9% and 11.8% respectively.
Performances across other markets continue to be more varied. Perth's longer running correction accelerated again, prices down –1%mth, –8.8%yr. Brisbane, which was stable through 2018, has continued to see price slippage in 2019, prices down –0.5%yr, –2.3%yr. Adelaide remains an isolated area of calm amid the sea of red, prices nudging 0.2% higher in the month to be up 0.4%yr, essentially stable.
Across the smaller markets: Hobart is coming off its boom sharply with a second month of price declines paring annual price growth back to 3.4%yr, well down on the double digit pace nine months ago. Canberra has been steadier, prices dipped 0.2%, annual growth holding just under 2.5%yr.
The mining-dominated Darwin market is mirroring the difficult conditions in Perth, its long-running correction also re-accelerating with a 1.6% decline in the month taking prices down 8.6%yr to their lowest level in over 12yrs.
The dwelling type detail continues to show units outperforming houses slightly in recent months although both segments are showing a similar moderation in the pace of price declines.
The breakdown by tier shows a more pronounced moderation in price declines across properties in the top tier, albeit with this group coming from a weaker starting point. In Sydney, the three tiers have been tracking closely over the last 3mths. Bottom tiers are outperforming in Melbourne and Brisbane, with prices in these segments close to stabilisation.
The moderation in price declines is consistent with the improved tone from auction markets in recent months, with a notable lift post-election, the result meaning changes to the tax treatment of investor housing are now off the table.
With interest rates set to move lower, some relaxation in regulatory guidelines for loan assessments likely and increased Federal assistance for first home buyers, prospects for an eventual stabilisation in prices are looking considerably better, boding well for an eventual stabilisation in prices.
MATTHEW HASSAN is a senior economist for Westpac
<div>
<div data-component="sticky.side.nav">
<div data-component="tag.box"> </div>
</div>
</div>
</body></html>

Price adjustment hits 20 month mark but correction continues to slow: Westpac's Matthew Hassan

<html><body>
EXPERT OBSERVATION
The March retail report showed a slightly better than expected monthly gain but a materially weaker than expected result for March quarter sales volumes, the latter being the more important takeaway.
Monthly sales posted a 0.3% gain, beating expectations of a 0.2% rise with Feb’s surprisingly firm 0.8% gain marked up to a 0.9%. Annual growth lifted from 3.2%yr to 3.5%yr.
That’s where the good news ends though. The wash up for the quarter as a whole showed all of these gains in nominal sales were due to higher prices with sales volumes declining.
Real retail sales dipped 0.1% in Q1, coming in well below consensus expectations of a 0.3% gain with the quarter on a par with the flat result in Q4. Annual growth has slowed to 1.1%yr but with a cumulative gain of just 0.2% over the last three quarters is in danger of dropping below 1%yr next quarter.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/5/31/New%20Project%2022.jpg" alt="">
The undershoot vs expectations was due to a stronger than expected rise in retail prices which rose, up +0.8%qtr vs +0.7%qtr in Q4. The sub-category detail shows a particularly big rise in food prices (+1.4%qtr vs 1.2% in Q4). Non food retail prices posted a 0.2%qtr gain.
The detail also points to a material slowing in sales across sub-categories associated with ‘big ticket’ discretionary spend, consistent with a wealth effect drag from the housing market correction. In particular, household goods retail volumes declined 0.6% in the quarter to be flat over the year, a marked slowdown on the 5.4%yr growth seen this time last year. Department stores also recorded a contraction, sales volumes down 1.2%qtr, and –0.7%yr. Other non food categories, mostly ‘small ticket’ discretionary, recorded small gains for the quarter and over the year. Cafes and restaurants were the only bright spot, recording a 1%qtr gain in Q1 to be up 1.4%yr.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/5/31/New%20Project%2023.jpg" alt="">
By state, NSW was the only state to post a gain in Q1, up 0.6%qtr, but was coming off a bigger 1.1%qtr fall in Q4, annual sales growth slowing to just 0.9%yr. Results across the other states were: Vic –0.3%qtr, +2.3%yr; Qld –0.1%qtr, +1.5%yr; SA –0.4%qtr, –0.4%yr; WA –0.6%qtr, –0.7%yr and Tas –0.9%qtr, +1.7%yr. The broad based weakness in the quarter suggests that it is not just about spillovers from the correction in housing markets which to date has been largely confined to NSW, Vic and WA.
Looking by channel, online sales look to have posted a 0.7% gain in the March month, annual growth slowing to 'just' 12.7%yr, a subdued gain for this segment.
Overall the March retail report points to downside risks to the wider consumer spending estimates in the March quarter GDP, the headwinds that emerged in the second half of last year clearly carrying into 2019. 
MATTHEW HASSAN is a Senior Economist for Westpac. 
Read full article <a href="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/Australia/2019/May/er20190507BullRetailQ1.pdf" target="_blank">'Australian retail sales Q1'</a>.
</body></html>

Retail volume results materially weaker than expected: Westpac's Matthew Hassan 

<html><body>
EXPERT OBSERVATION
Dwelling approvals fell 15.5% in February, unwinding a 19.1% jump in February that reflected a big spike in high rise approvals. That was in line with Westpac's forecast but a touch weaker than the consensus view of a 12.5% decline.
Headline moves over the last two months have been driven by 'high rise' units with approvals in the segment more than doubling between January and February and nearly halving again between February and March. Approvals in this segment are still well above Jan's extreme low and about 10% above the average level over the three months to January.
Outside of the high rise segment, the underlying trend looks to be weak. Total approvals ex high rise (covering both detached houses and mid-low rise) looks to be down a further 2% in the month following a 4% fall in February and down around 19% year. Private detached house approvals declined 3.2% month, to be down 18.3% year. Mid-low rise unit approvals look to have risen slightly by around 1% in the March month but are still down by around 20% year.
The state detail also points to a soft underlying tone. The unwinding high rise spike was concentrated in NSW (–27% month, –23% year) and Vic (–27% month, –36% year). Excluding high rise, NSW posted a 10% month gain in the month but was coming off a much weaker January with approvals still down 7.7% on their Dec level. Vic approvals ex high rise declined 1.9% month but is down a milder 3.5% compared to Dec. Approvals declined the other major eastern states, the slide over the last year now looking brutal in Qld (–2.4% month, –35.9% year); much milder in SA (–2% month, –11.5% year). WA bucked the wider trend this month, posting a surprisingly strong 4.8% month gain to be up 20.7% year, very much against the odds.
The total value of renovation approvals fell 8.7% month to be up 3.6% on a rolling three month average basis, a reasonable uptrend still in place. The state detail continues to point to gains coming through more strongly in Qld and WA.
The total value of non res building approvals rose 2.1% month but is still down 0.5% year on a rolling three month basis. Conditions remain mixed across both segments but the state split points to slowing in NSW and Vic partially offset by gains in Qld and WA.
Overall the March dwelling approvals update again points to weakening underlying momentum, highlighting downside risks to the near term outlook for new dwelling construction. So far the weakness mostly just cancels out the lift from the February high rise spike. However clearly there are downside risks to the outlook if the weak momentum continues in coming months, particularly if we also start to see approved high rise projects get put on hold.
MATTHEW HASSAN is a Senior Economist for Westpac.
Download the full report: <a href="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/Australia/2019/May/er20190503BullDwellApprovMar.pdf" target="_blank">Australian dwelling approvals March' (PDF 327kb)</a>.
</body></html>

Dwelling construction forecast is weak: Westpac's Matthew Hassan 

<html><body>
EXPERT OBSERVER
Westpac expects falling house prices to see a significant ‘wealth effect’ drag on Australian consumer demand this year and next. However, the exact nature and size of this effect remains a major area of uncertainty. What does the latest evidence show?
<div>
For a start, the housing correction is starting to have a clearer impact on the household balance sheet. Latest data shows the total value of dwelling assets fell $270bn over 2018, reflecting both lower prices and slower additions to the dwelling stock. The decline amounts to 40% of a year’s income. Relative to income that is about half the size of the peak to trough falls seen in the GFC and 2011-12 correction.
Recall that the ‘signature’ of a wealth effect drag is a fall in net worth accompanied by a rise in the savings rate, the latter meaning that spending is growing at a slower pace than incomes. Also recall that the shock effect should be confined to states experiencing material price declines (NSW, Victoria and WA).
Westpac compiles estimates of household net worth and savings rates by state based on a range of annual and quarterly benchmarks. These ‘indicative’ estimates show, as expected, considerably larger falls in net worth in NSW and Vic with declines closer to 60% of annual income. They also highlight the extent of the prior run up with net worth in both states still well above 2015 levels.
On savings, the estimates point to declines in NSW and Vic consistent with a wealth effect boost to spending rather than a drag. Any hint of a turn in Q1 will be a key pointer to how this effect may play out.
However even before that there are some clues of a shift coming through in the composition of spending. In a detailed article on wealth effects in its March Bulletin, the RBA set out empirical estimates of the size of this effect noting that the effect appeared to be more pronounced for particular spending categories: namely, vehicles, durables and other discretionary items. A composite measure of growth in ‘wealth sensitive’ items already shows a swing to outright declines in per capita spending. While the weakness still looks to be fairly mild to date it is more pronounced in NSW, Vic and WA.
MATTHEW HASSAN is a Senior Economist for Westpac
</div>
</body></html>

The wealth effects, the latest evidence: Westpac's Matthew Hassan

<html><body>
GUEST OBSERVATION
There’s no shortage of talk about house prices. How much further will they fall? When will the market stabilise? Is it time to get in? 
What we know is national capital city dwelling prices have fallen 6.8% since peaking in October 2017, led by Sydney and Melbourne following strong prior price booms. 
But how much has affordability actually improved? 
It’s an important question, not just for potential buyers and nervous sellers. That’s because with the price adjustment in Sydney and Melbourne continuing and demand from property investors unlikely to return soon, an eventual stabilisation of the market depends heavily on the response of owner occupiers to improving affordability – and it seems there’s more to do to generate a lift in demand. 
There is little doubt that housing affordability and consumer sentiment towards housing are closely linked. Our previous research established a particularly close relationship between the “time to buy a dwelling” index and an affordability measure that incorporates both deposit requirements and mortgage repayments.<img src="https://www.westpac.com.au/content/dam/public/wbc/news/images/article/2019/03/TimetoBuy%20(002).png" style="font-size: 12.16px;">
<a href="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/Australia/2019/February/WestpacHousingPulseFebruary2019.pdf" data-s-object-id="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/australia/2019/february/westpachous_1">Latest readings on both measures show</a> buyer sentiment lifting a little in response to some easing in affordability pressures, although the gap to long run averages indicates affordability is still not back to “normal”. After hitting a seven-year high of 23.3% in late 2017, the proportion of average household income required to finance the purchase of a median priced dwelling has declined to just below 22% in early 2019 to be near the levels seen in late 2016. 
That’s partly because many factors feed into affordability with price moves, mortgage rates and incomes key. 
In other periods of price corrections, namely the late 1980s and early 1990s, the GFC and the 2011–13 interest rate tightening cycle, falling rates and income growth helped restore affordability.
In contrast, this adjustment is expected to see much less assistance from rates and is occurring against a backdrop of weak income growth, implying that price declines will need to do most of the “heavy lifting” to generate an improvement in affordability. 
And there’s likely more lifting to do, even though Westpac now expects the RBA to cut rates help affordability too. 
<img src="https://www.westpac.com.au/content/dam/public/wbc/news/images/article/2019/03/AusdwellingPrices%20(002).png">
Using some indicative estimates of how much further prices may need to move by looking at the price change required to return affordability to its 20-year average points to about a further 5% decline required nationally. In NSW and Victoria, more substantive moves in the 5-10% range are likely to be required, while other states should require milder moves.
While the picture differs across cities, and between houses and units in most cases, price adjustments in the key Sydney and Melbourne markets still look to have some way to run. 
That will be disappointing for those hoping for stabilisation to emerge but will be encouraging for those looking to get into what were previously very expensive markets.
MATTHEW HASSAN is a Senior Economist for Westpac
</body></html>

How much more affordable is housing now? Westpac's Matthew Hassan

<html><body>
EXPERT OBSERVATION
Dwelling approvals jumped 19.1% in Feb driven by a big spike in high rise approvals.
The spike is almost certainly a one-off making the headline result a misleading 'rogue'. Indeed, approvals ex high rise look to have been significantly weaker than expected. The consensus forecast going into the release was for total approvals to decline 1.8%. Approvals ex high rise instead look to have fallen 3.4%.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/5/New%20Project%202.jpg" alt="">
The detail showed a 3.6% fall in detached house approvals in the month, the 3 month rolling average down 4% on Nov and 10.9%yr, the significant deterioration since mid 2018 clearly carrying into early 2019. Around units, our estimates suggest 'high rise' approvals jumped 135% in the month, led by spectacular rises in NSW (+130% month) and Vic (+213%) the latter coming from an extreme low in Jan.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/5/New%20Project%203.jpg" alt="">
The fact that both states recorded big gains indicates the spike is not due to just a single project. However, the gain comes very much against the run of play for housing and this specific segment and runs counter to the evidence we have around site purchases. As such it is almost certainly a 'rogye' result. Medium density units were down about 2.4% in the month.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/5/New%20Project%204.jpg" alt="">
The high rise spike dominated the state breakdown, with big gains in NSW and Vic. Ex high rise, approvals look to have been particularly weak in NSW with apparent declines in Vic and WA as well but a solid gain in Qld. All major states are seeing significant declines in non high rise approvals – on a rolling 3mth basis, NSW is down 14.5%yr, Vic is down 12.6%yr, Qld is down 22%yr and WA is down 13.2%yr.
The total value of renovation approvals rose 4.4%mth to be up 3.6% on a rolling 3mth average basis, with a decent uptrend in place. The state detail shows solid gains coming through in Qld and WA but a less convincing uptrend in NSW and Vic.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/5/New%20Project%205.jpg" alt="">
The total value of non res building approvals rose 2.1%mth but is still down 8%yr on a rolling 3mth basis. Abstracting from monthly volatility, which is never that easy for this segment, the last few months has shown some lift in offices and steady reads for retail, warehouses and industrial approvals but softer reads for hotels, education, health and other social sectors.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/5/New%20Project%206.jpg" alt="">
Overall the monthly rise in total dwelling approvals should clearly be ignored – Australia's high rise building boom is not about to reignite any time soon, with the key takeaway instead the more disappointing momentum evident in non high rise approvals.
Other housing market indicators have hinted at some stabilisation in conditions in recent weeks, although the evidence remains only tentative. The flow through to new construction could be much slower given funding difficulties and the substantial increases in new supply coming through.
MATTHEW HASSAN is a Senior Economist for Westpac
</body></html>

Dwelling approvals spike is a rogue one: Westpac's Matthew Hassan

<html><body>
EXPERT OBSERVATION 
The deepening market downturn is starting to weigh more heavily on consumer sentiment towards housing. Both the complexion of this impact and the extent to which market weakening has outstripped weakness in housing-related sentiment provide important clues about some of the dynamics at play.
Consumers’ housing-related sentiment has deteriorated since November with negatives around price expectations and elevated risk aversion more than offsetting the boost from improving affordability. While sentiment overall is downbeat, the market performance has been markedly weaker than sentiment over the last year, suggesting that other factors are impacting. In particular, a tightening in loan standards from some lenders may have compounded what were already negative market dynamics following a drop in investor activity and initial price correction.
Nationally, the Westpac Melbourne Institute ‘time to buy a dwelling’ index has slipped 1.8% since November but is still up 8.6% year on year. Improving affordability continues to see a lift in NSW and Vic, the latter reaching a five year high in Feb. However buyer sentiment is still sub-par in these states while it has become a little more unsettled in other states.
Price expectations have been the big mover. The Westpac–MI Consumer House Price Expectations Index posted a sharp 11% drop over the three months to February, hitting a new historical low since we began compiling the index in May 2009. Weakness remains more pronounced in NSW and Vic, with just over half of consumers in these states expecting prices to be lower in a year’s time. That said, the more positive views in other states are also starting to show signs of softening with notable pull backs in Qld and WA.
These two aspects of housing-related sentiment highlight the ‘dynamics’ of the housing cycle. Price declines are currently dominating with negative expectations around prices likely to continue feeding into investor weakness and encourage buyers to delay purchases. At some point though, improving affordability should generate a bigger lift in buyer sentiment and a pick-up in demand that stabilises the market – exactly where that point is and how we get there remain more open questions.
<img src="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/image/Housing_Pulse/Housing_Pulse_Bites/2019-02/Housing-pulse-bite-2019-02-1.jpg" alt="">
Matthew Hassan is senior economist at Westpac. 
Read the full report: <a href="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/Australia/2019/February/WestpacHousingPulseFebruary2019.pdf" target="_blank">Westpac Housing Pulse</a>. 
</body></html>

What consumer sentiment is telling us about the housing downturn: Westpac's Matthew Hassan

<html><body>
EXPERT OBSERVATION
Housing finance approvals posted a further decline in Jan, albeit a slightly milder one than in previous months for owner occupiers.
The total number of owner occupier loan approvals ex refi declined 1.2%mth, slightly better than the consensus forecasts of a 2% decline. As always, January housing data should be treated with caution due to the summer holiday disruptions. Approvals are still weak on a year ago, down 13.6%. Notably, what was initially an investor-led cycle is now seeing clear weakness in owner occupier activity – both the value and number of loans.
The value of investor loans ex refi posted a larger 4.1%mth fall, this component showing no real moderation, the decline in line with falls over the previous five monnths. The monthly value of loans to this segment is now down 28.6%yr.
The combined total value of housing finance approvals across both owner occupier and investor segments (and excluding refi) declined 2.1%mth to be down 20.6%yr.
Construction finance approvals fared a little better, dipping just 0.2% in the month but still down over 15%yr. Approvals for the purchase of newly built dwellings, including 'off the plan apartment sales' were down sharply though, –9.5%mth, –27.6%yr and a 4yr low.
By state the number of owner occupier approvals excl refi showed the biggest falls in NSW (–4.9%mth, –18.3%r) and Qld (–2.4%mth, –16.6%yr), with approvals down only 0.7%mth in WA and SA, and up slighly in Vic (+0.4%mth, –15.4%yr) and Tas (+2.4%mth, +10.6%yr), the latter the only state seeing gains on a year ago.
Overall, the January update was soft but not quite as soft as expected for owner occupier activity. However, given the less reliable nature of January housing data this is not enough evidence to signal a shift in the clear weakening trend over the second half of 2018.
Other more recent market indicators suggest weak conditions have extended into the new year. Auction clearance rates have been around the low 50s for Sydney and and high 40s for Melbourne. As noted in our recent <a href="https://www.propertyobserver.com.au/https://westpaciq.westpac.com.au/Article/37494">article</a>, both markets are seeing abnormally high pre-auction withdrawal rates at the moment.
Adjusting for this (and allowing for preliminary and seasonal bias), the latest weekly clearance rates are around 48% for Sydney and 46% for Melbourne. While low, these are somewhat improved from reads late last year which were in the 30s and low 40s respectively.
MATTHEW HASSAN is a Senior Economist for Westpac
</body></html>

Australian housing finance rout continues: Westpac's Matthew Hassan

<html><body>
EXPERT OBSERVATION 
Weekly auction results are by far the most timely gauge of conditions across Australia’s housing markets.
For observers of the Sydney and Melbourne markets, a Sunday isn’t complete without checking the weekend clearance rate. That said, to get the right take from these figures it’s increasingly important to apply a few adjustments first. This note gives some quick tips on how to do this and how to judge whether a result really is strong, weak or indifferent.
In interpreting weekly clearance rates, there are two main effects we need to adjust for – ‘early result’ bias and seasonality – and a third aspect that, once incorporated, gives a clearer guide to price conditions. 
Early results skew high 
Unsurprisingly, successful auctions tend to get reported earlier. Patterns depend according to data provider but for CoreLogic, preliminary results are published on the Sunday then a final estimate on the following Thursday. The difference in terms of clearance rates is on average 3pts for Sydney and 1pt for Melbourne. However, the weaker market over the last 18 months has seen more slippage than usual, averaging closer to 5.5pts for Sydney and 1.5pts for Melbourne.
<ul>
<li>So, step one, for preliminary clearance rates, deduct 5.5pts for Sydney and 1.5pts for Melbourne.</li>
</ul>
<img src="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/image/Housing_Pulse/Housing_Pulse_Bites/2019-02/Auctions-2.jpg" alt="">
Seasonality positive heading into Autumn and Spring, negative around Christmas
The time of year also matters. Buyers and sellers come and go from the market at slightly different times, producing a regular ebb and flow to clearance rates as the balance of power shifts. For March this effect is worth about 2pts in Sydney, slightly more in Melbourne. Seasonality diminishes gradually heading into Winter, re-emerges in Spring and then turns sharply negative as buyers disappear over the Summer holiday period.
<ul>
<li>So, step two, take another 2pts off for seasonality (tweaking this as the year progresses). </li>
</ul>
Pre-auction withdrawals an important clue to size of price declines
One of the appeals of tracking auction clearance rates has been the relatively tight relationship with price growth. Generally speaking, clearance rates above 65% were typically associated with solid gains, and over 75% with outright strength, while rates below the 50-55% range were associated with price declines. 
That broad relationship still holds. However, clearance rates do not seem to be capturing the full extent of price weakness during the current correction. The lows seen late last year, in the 45-50% range, are comparable to those in 2011-12 and previous cycles, yet the pace of price declines has been somewhat faster. 
<img src="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/image/Housing_Pulse/Housing_Pulse_Bites/2019-02/Auctions-1.jpg" alt=""> 
Another aspect of the auction results – pre-auction withdrawals – may shed more light on this and provide a way of refining the measure to give a better gauge of price conditions. Historically, around one in eight properties heading to auction in Sydney has been withdrawn prior, with a much lower share – one in thirty – in Melbourne. Both have risen materially over the last year, and much more sharply than during previous downturns. In Sydney, it has been more than one in five and in Melbourne it has been about one in every fifteen.
Pre-auction withdrawals are part of the ‘uncleared’ portion of the clearance rate. However, they are likely a good indicator of a more stressed market. Whereas a passed in result may be due to bidders not taking the price above reserve, a withdrawal points to sellers assessing that there will be insufficient bidders to even justify an auction.
<img src="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/image/Housing_Pulse/Housing_Pulse_Bites/2019-02/Auctions-3.jpg" alt="">
How do we allow for us in our quick assessments? One relatively simple way is to calculate the ‘withdrawal rate’ – the proportion of auctions being withdrawn – and adjust the clearance rate by how this is varying to long run averages. For Sydney that adjustment is the clearance rate plus 14pts minus the withdrawal rate. For Melbourne, it is the clearance rate plus 3pts minus the withdrawal rate (the 14 and 3 in these calculations reflect the long run average withdrawal rate in each market).
<ul>
<li>So, step three, adjust both for the withdrawal rate gap to average</li>
</ul>
Conclusion
In summary, three relatively simple tweaks to the Sunday auction clearance rate give us a clearer idea of how they stack up:
<ol>
<li>A mark down for early result bias: currently –5.5pts for Sydney, –1.5pts for Melbourne; 
</li>
<li>An adjustment for seasonality: currently –2pts for both markets; 
</li>
<li>Incorporating pre-auction withdrawals: deducting the ‘withdrawal rate’ gap, the difference between the withdrawal rate and long run averages – for Sydney this is currently –8pts (22% withdrawal rate vs long run average of 14%); for Melbourne it  is –3.5pts (6.5% vs 3%). </li>
</ol>
The resulting ‘adjusted’ clearance rate can be compared against the usual benchmarks (&gt;65% associated with solid price gains, &lt;50-55% associated with price corrections) but gives a better idea of the extent of weakness. 
By way of example, Sydney’s preliminary clearance rate in the last week of February was 58.6% – knocking 5.5pts off for early result bias, 2pts of for seasonality, and a further 0.5pt for the withdrawal gap (14.5% vs avg 14%) gives an adjusted estimate of 50.6%, still a soft result but somewhat improved on the very weak reads late last year. The same adjustment for Melbourne takes a preliminary 53.1% clearance rate down to 50.1%. 
Interestingly, in both cases the main shift in early 2019 looks to be coming from a reduced rate of withdrawals rather than a lift in clearances. That may be an early sign that the pace of price declines is moderating. However, both shifts will need to be sustained and extended before auction market results are consistent with price stabilisation. 
Matthew Hassan<a href="https://westpaciq.westpac.com.au/Article/37494/14186/" target="_blank"></a> is Senior Economist at Westpac.
</body></html>

Matthew Hassan's ‘how to’ guide to reading auction clearance results

The new <a href="https://www.apartments.com.au/new-apartments/yarraville-green-42-stephen-street-yarraville-vic-3013">Yarraville Green</a> development in Melbourne's inner west is showing that landscaping can be just as influential as architecture, with buyers responding strongly to the garden-first approach adopted from the outset by developer Excelon Projects and the project's design team.

Excelon appointed Six Degrees Architects and landscape architects SBLA to work collaboratively on the development, with a brief to create "a sustainable, design-led building with a focus on community."

That approach has resonated with buyers. According to Next Chapter Director Tom Hirini, who is leading the sales campaign, the landscaped communal garden has become one of the project's defining features, alongside its boutique scale and European-inspired cluster housing concept.

Local downsizers, right-sizers and established families already living in Yarraville and surrounding suburbs have accounted for the majority of purchasers.

[smartcode_project:default project_id=144913 project_image_fid=297740]

Yarraville Green will comprise 53 homes, including apartments and townhomes, arranged around the shared central garden to maximise connections to the landscaped open space. Parking has been moved underground, allowing the ground plane to be dedicated to greenery, pedestrian movement and communal spaces.

The landscape extends well beyond passive planting. Productive garden beds, a pergola, communal gathering spaces, garden sheds and a pet wash have all been integrated into the masterplan, creating spaces designed to encourage everyday interaction between residents.

[smartcode_project:default project_id=144913 project_image_fid=297741]

The interiors continue Excelon's focus on craftsmanship, incorporating bespoke elements by Melbourne artisans including leadlight detailing by Adadaz, hand-turned timber hardware by Auburn Woodturning and blown-glass lighting by Ruth Allen.

Sustainability has also been embedded throughout the project, with Yarraville Green targeting an average 7-star NatHERS energy rating through passive design principles, rooftop solar servicing common areas and rainwater harvesting for landscape irrigation.

[smartcode_project:default project_id=144913 project_image_fid=297735]

Construction continues to progress at Yarraville Green, with structural works well underway and framing works approaching completion under builder Balmain &amp; Co. The project remains on track for completion in mid-2027.

Apartments at Yarraville Green are currently priced from $625,000, while townhomes start from $1.4 million.

[smartcode_project_cta:default project_id=144913]

Joel Robinson

Garden-led design drives buyer demand at Yarraville Green

National diversified developer Fortis has officially launched Crest &amp; Walker, its latest Brisbane apartment development, with construction now underway on the 20-storey Newstead project.

Award-winning builder BINAH has commenced construction on the Bureau^Proberts-designed building, which will deliver a limited collection of 65 two and three-bedroom apartments on Kyabra Street.

[smartcode_project:default project_id=145922 project_image_fid=373556]

The project marks Fortis' fourth active residential development in Brisbane, following River House, which is nearing completion, alongside projects in New Farm and Hamilton as the national developer continues to expand its South East Queensland pipeline.

Fortis General Manager – Development Queensland Dan Boman said Crest &amp; Walker reflects the developer's long-term commitment to delivering design-led residential projects in Brisbane's established inner-city suburbs.

"We're proud to be strengthening our presence in Brisbane with Crest &amp; Walker, particularly in such a sought-after lifestyle destination as Newstead," Boman said.

"Every Fortis project is shaped by its context, and we approach each one with the respect and care it deserves.

"Our focus is always on creating places that feel connected to their neighbourhood and elevate the everyday experience for residents. Newstead continues to evolve as one of Brisbane's most sought-after urban communities, and Crest &amp; Walker reflects our ambition to contribute meaningfully to that story."

[smartcode_project:default project_id=145922 project_image_fid=373559]

Positioned between Gasworks Plaza and James Street, <a href="https://www.apartments.com.au/new-apartments/crest-walker-newstead-12-kyabra-street-newstead-qld-4006">Crest &amp; Walker</a> has been designed as a boutique residential address offering privacy and generous living spaces within one of Brisbane's most established lifestyle precincts.

The building features a contemporary brick podium softened by integrated landscaping, while the upper levels are characterised by restrained architecture and enduring materiality. Interiors have been designed to maximise natural light, acoustic performance and long-term liveability.

[smartcode_project:default project_id=145922 project_image_fid=373583]

Residences comprise spacious two and three-bedroom floorplans, with two-bedroom apartments priced from $1.55 million and three-bedroom, half-floor residences from $3.95 million.

Residents will have access to a wellness-focused rooftop featuring a swimming pool, sauna, steam room, landscaped dining spaces and outdoor lounge areas overlooking Newstead and the Brisbane CBD.

[smartcode_project:default project_id=145922 project_image_fid=373571]

Sales are being managed by Slaite Projects, with Fortis expecting strong demand from owner-occupiers seeking a high-quality, design-focused apartment in one of Brisbane's most tightly held inner-city suburbs.

Completion of Crest &amp; Walker is slated for late 2028.

[smartcode_project_cta:default project_id=145922]

Fortis expands Brisbane pipeline with launch of Crest & Walker in Newstead

The enormity of delivering a true skyscraper in Australia's new development market is often overlooked.

It has taken the best part of a decade since plans for Chevron One were first unveiled, but the 41-storey tower is now complete, with residents collecting their keys and moving into what has become one of the Gold Coast's most recognisable new landmarks.

Rising 127 metres above Chevron Island, Chevron One stands almost twice as high as any other building on the island. Its scale places it alongside the trio of towers at Jewel, arguably the last truly significant addition to the central Gold Coast skyline when they were completed around six years ago.

While there are several developments underway around a similar height to Chevron One, they are more concentrated within clusters of the highest towers in the city. The fact Chevron One sits within a developing precinct, looking back at the other high-rise developments in Surfers Paradise and Broadbeach, makes it a different proposition altogether. It will certainly become a reference point on the Gold Coast skyline.

[smartcode_project:default project_id=6515 project_image_fid=68833]

Developer Bensons Property Group is behind the 41-storey tower, which has 229 apartments, along with an exhaustive list of resident amenity spread across what is the largest development site ever assembled on Chevron Island.

The tower has been the talk of the town for years, says Ray White Projects Gold Coast agent Caitlin Rosenboom, who is selling the remaining apartments.

"People have been watching Chevron One go up for years," Rosenboom says, adding that many prospective buyers have been surprised by the scale of the views once they step inside.

"It's only when they walk through a completed apartment that they truly understand the position of the building," Rosenboom says.

"The views are jaw-dropping. Whether you're looking east over the ocean, across Surfers Paradise, along the river systems or out to the hinterland, every level offers something different but equally impressive."

[smartcode_project:default project_id=6515 project_image_fid=360215]

One of Chevron One's defining advantages is its location on the eastern side of Chevron Island on Stanhill Drive, a position which protects the views forever.

"There's only one row of houses between Chevron One and the water, and the height restrictions along the river means views from Chevron One can never be built out,"&nbsp;Rosenboom says.

While new apartment developments continue to emerge across the Gold Coast, Rosenboom says opportunities to secure a completed apartment with this level of outlook are becoming increasingly rare.

"The size of the site is something that would be incredibly difficult to replicate today," she says.

"That's allowed Chevron One to deliver the sort of amenity, open space and resident facilities that very few projects can offer. There are not many completed apartment buildings on the Gold Coast right now that can compete with the combination of scale, quality and amenity."

[smartcode_project:default project_id=6515 project_image_fid=68839]

There's around 2,000 sqm of amenity solely for the use of residents of Chevron One. Club One features a uniquely shaped swimming pool that mirrors the footprint of the building itself, set within a extensively landscaped gardens. There's also an indoor pool and spa, a fully equipped gym with a Pilates room, a yoga garden, a bookable private dining area and lounge that can host up to 30 people, and a 24-hour concierge service.

As for the buyers, Rosenboom is fielding enquiry from everywhere: Sydneysiders and Melburnians looking at the new and off-the-plan market following the changes in the Federal Budget, as well as those looking to relocate, through to South East Queenslanders seeking either a permanent home or a weekender bolthole.

"The Gold Coast lifestyle continues to resonate with people relocating from the southern states, and when they see the views and the quality of what's been delivered at Chevron One, it becomes very easy for them to understand the appeal," Rosenboom says.

A diverse mix of one, two and three-bedroom apartments remain available, with each offering "something a little different", be it the orientation and views, configuration, or level, to suit a wide variety of buyers.

The remaining apartments are ready to inspect in person, by appointment.

[smartcode_project_cta:default project_id=6515]

A decade in the making: Residents to move into Chevron One as construction wraps up

A general rule of thumb in new apartment developments is that the penthouses get the rooftop.

It's a formula that's become commonplace across Australia's apartment market. Residents might have access to a pool, gym or barbecue facilities on a dedicated lower level, but the most desirable outdoor spaces are typically reserved for the highest-priced homes at the top of the building.

<a href="https://www.apartments.com.au/developers/sherpa-property-group">Sherpa Property Group</a> has taken the opposite approach.

Rather than dedicating the rooftop to a handful of buyers, the Gold Coast developer has made it the centrepiece of its Flourish collection, creating expansive shared spaces from the best vantage point in the building.

The philosophy has reached its most ambitious expression at <a href="https://www.apartments.com.au/new-apartments/flourish-soleira-palm-beach-1150-1160-gold-coast-highway-palm-beach-qld-4221">Flourish Soleira</a> in Palm Beach, where two rooftop precincts connected by a skybridge will deliver one of the most extensive lifestyle offerings seen in a residential apartment project on the Gold Coast.

[smartcode_project:default project_id=150017 project_image_fid=374053]

"We're seeing a clear move toward developments that offer more than just an apartment," Sherpa Group founder Christie Leet said.

"People want spaces that support how they actually live, whether that's working from home, staying active, or spending time with family and friends.

"That's where amenity becomes critical. It's not just about what's included, but how those spaces are designed to be used every day."

[smartcode_project:default project_id=150017 project_image_fid=374052]

The breadth of amenity has already attracted buyers across multiple demographics. Younger first home buyers have been drawn to Soleira's one-bedroom apartments, a product rarely delivered in Palm Beach, while families have responded to practical inclusions such as the shallow children's pool adjoining the main lap pool and the extensive communal recreation areas.

Instead of a single rooftop, Soleira delivers two distinct lifestyle zones.

[smartcode_project:default project_id=150017 project_image_fid=372547]

The southern rooftop has been dedicated to wellness, featuring a gym, yoga and Pilates studio, work-from-home facilities, a wellness centre, spa, and hot and cold plunge pools.

The northern rooftop focuses on recreation and entertaining, incorporating a heated resort-style pool, private dining rooms, pizza ovens, barbecues, a golf simulator, children's recreation areas, and what is expected to be the Gold Coast's first rooftop basketball court, which will also double as a squash court.

[smartcode_project:default project_id=150017 project_image_fid=374054]

Beyond the rooftops, Soleira will introduce 1,500 sqm of curated retail beneath the towers, creating one of Palm Beach's first genuinely mixed-use lifestyle precincts where cafés, restaurants and convenience retail become part of residents' everyday lives.

Sherpa has also retained management rights across the development, allowing it to oversee the long-term operation of the building through a 24-hour concierge model. The developer is also exploring additional revenue streams within the precinct aimed at helping offset ongoing body corporate costs for residents.

[smartcode_project:default project_id=150017 project_image_fid=370962]

While Soleira is the largest project Sherpa has delivered, the rooftop-first philosophy has been evolving for several years.

It began with <a href="https://www.apartments.com.au/new-apartments/amargo-6-12-sixth-avenue-palm-beach-qld-4221">Flourish Amargo</a>, the first project released under the Flourish brand. Rather than competing at the ultra-luxury end of the market with oversized half-floor and full-floor residences, Sherpa focused on creating lifestyle-driven apartments supported by resort-style shared spaces.

Amargo introduced more than 800 sqm of rooftop amenity, combining wellness facilities, heated pools, entertaining areas, cabanas, pizza ovens and private dining spaces into what was designed as an extension of residents' homes rather than a facility used only occasionally.

[smartcode_project:default project_id=146527 project_image_fid=366550]

That approach continued with Flourish Oasis, where the same amenity-led philosophy was refined into a more boutique development. Strong demand from Sherpa's growing VIP database saw much of the project sold before it reached the broader market, reinforcing buyer appetite for apartment communities centred around shared lifestyle experiences.

Flourish Amargo is slated for completion mid-way-through next year, with Oasis to be delivered by late 2027. Flourish Soleira is expected to complete in 2030.

[smartcode_project_cta:default project_id=150017]

Sherpa takes amenity to the sky as Flourish Soleira captures booming Palm Beach demand

As apartment living continues to evolve across Sydney's growth corridors, the quality and distribution of shared spaces is increasingly shaping how residents experience home. Rather than functioning as add-ons, amenities are being embedded into the daily rhythm of a building, supporting everything from quiet retreat to social interaction, often within a single vertical community.

At <a href="https://www.apartments.com.au/new-apartments/aeris-melrose-park-nursery-street-melrose-park-nsw-2114">Aeris</a> in Melrose Park, this approach is resolved through a layered amenity offering that unfolds from ground level through to its upper podium. Developed by <a href="https://www.apartments.com.au/developers/sekisui-house-australia">Sekisui House Australia</a> in partnership with Hankyu Hanshin Properties, the project introduces 468 apartments across two towers and a mid-rise building, positioned at the highest point of the broader masterplan.

[smartcode_project:default project_id=426 project_image_fid=359199]

The amenity experience begins at street level, where two courtyards sit within a landscaped setting that connects residents to the wider network of parks and green spaces. These green spaces are not isolated pockets but part of a wider pedestrian network that links Aeris to the surrounding <a href="https://www.apartments.com.au/developments/melrose-park-nsw-2114">Melrose Park</a> precinct, including Central Park, future schools, and the Town Centre opening in July 2026. The result is a transition that moves from public to private without abrupt boundaries, allowing residents to pass through shaded, tree-lined environments before reaching the building itself.

Moving upward, the focus shifts to the level five podium, where the primary communal facilities are concentrated. This space brings together a 16-metre swimming pool, outdoor seating areas, and a communal BBQ zone arranged to take advantage of elevated outlooks. Seating is positioned beneath pergolas, creating pockets of shade that extend the usability of the space throughout the day. The pool edge aligns with views toward the wider district, reinforcing the sense of elevation that defines the project’s positioning.

In the adjacent building, this is complemented by quieter, more contemplative spaces, including an outdoor cinema set within the same level. Positioned to operate primarily in the evening, it introduces a different tempo to the shared environment, shifting from daytime activity to after-hours use without requiring separate zones.

[smartcode_project:default project_id=426 project_image_fid=360299]

The podium also accommodates an intimate private resident gym. Located on the lower levels, it gives residents convenient access to fitness facilities without leaving the building.

Above, the elevated podium sky deck extends the amenity offering, providing additional open-air spaces with elevated outlooks across the surrounding landscape. While more restrained in program, this upper level reinforces the project’s vertical progression, from ground-level greenery to elevated outlook, allowing residents to move between distinct spatial conditions within a single address.

This distribution of amenities reflects a deliberate response to how residents use space across the day. Sekisui House Australia Sales and Marketing Director Peter Kalaf points to the role these shared areas play in shaping buyer demand. Aeris has been conceived as more than a collection of apartments, with the podium pool, gym and outdoor cinema forming part of a broader lifestyle offering that extends the home beyond each individual residence.

[smartcode_project:default project_id=426 project_image_fid=360300]

What distinguishes Aeris is not the inclusion of these elements individually, but how they are arranged in relation to one another. Active, social, and passive spaces are layered vertically rather than separated, allowing residents to choose between them without leaving the building or moving far from their apartment. This proximity supports both routine use, such as a morning swim or evening workout, and more occasional gatherings, whether around the BBQ area or within the cinema setting.

The amenity design also sits within a broader framework of connectivity across Melrose Park. The Melrose Park Town Centre, anchored by Coles and Dan Murphys, features a mix of retail, dining, health and lifestyle offerings, bringing everyday convenience closer to residents. By the end of the year, more than five hectares of parks and open space, equivalent to around seven football fields of green space on residents' doorstep, will further enhance the precinct, allowing the internal facilities at Aeris to operate as an extension of the wider neighbourhood rather than a substitute for it.

Construction at Aeris continues to gather momentum, with ground floor slabs expected to be completed in late 2026 before the first sections of the buildings begin to rise above ground.

[smartcode_project_cta:default project_id=426]

Matthew Hassan

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News