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GUEST OBSERVATION
Since the start of quantitative easing in the US and UK in the aftermath of the global financial crisis, yields on fixed interest investments have fallen significantly.
This has encouraged investors to seek investments with higher yields. One of the attractive asset classes has been real estate investment trusts (AREITs). AREITs provide both attractive yields and prospective capital growth.
What Attractions?
AREITs have a history of providing investors with strong and growing distribution income through growth in rental income. Investors have been embracing REITs in recent years for their attractive income yields.
Table 1 compares the income return of AREITs and the 10 year Australian government bond yield for 15 years to 31 December 2014. The average income yield of AREITs over 15 years to 31 December 2014 is 1.6% higher than that of the average10 year government bond yield.
Table 1- AREITs Income Yield vs Government Bond Yield – 15 Years
<table style="width: 455px;" border="0" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="bottom" nowrap width="285">
 
</td>
<td valign="bottom" nowrap width="170">
Average Yield (%)
</td>
</tr>
<tr>
<td valign="bottom" nowrap width="285">
AREITs
</td>
<td valign="bottom" nowrap width="170">
6.8
</td>
</tr>
<tr>
<td valign="bottom" nowrap width="285">
10 Year Government Bond
</td>
<td valign="bottom" nowrap width="170">
5.2
</td>
</tr>
</tbody></table>
In the current environment, AREITs provides attractive absolute earnings yields of 6.0% and a margin of 3.0% over the 10 year government bond yield. Chart 1 compares the AREITs earnings yield and 10 year government bond yield. AREITs have been providing significantly higher earnings yields than that of the 10 year government bond since March 2011.
Chart 1 – Australian Listed Property Earnings Yield vs Government Bond Yield
<img src="/images/2015/03/04/nui%20mar%204%20one.png" alt="">
Source: RBA, IRESS
In addition to yield, investors have benefited from capital gains. Large numbers of investors who have found the yields from AREITs attractive have invested in listed property trusts, pushing up AREITs prices. Over the one year period to 31 January 2015, the AREITs price has risen by 29.1%.
When Interest Rates Rise?
Investors will be concerned that AREITs will become less attractive when interest rates rise. While we acknowledge that this is a valid concern, there are some offsetting factors.
Firstly, although higher interest rates will cause higher costs of borrowing, the rise of interest rates is also a signal of a strengthening economy. Higher growth in the economy will increase the demand for commercial real estate, improve occupancy rates and rental income. Hence, any increase in cost of borrowing may be offset by the landlord’s ability to raise rental rates, which will flow through to higher distributions to investors.
Secondly, the AREITs sector today does not show the same risky characteristics as it did during the GFC. Table 2 below shows that AREITs, on average, have reduced their gearing levels, as measured by debt/asset ratios, since the GFC. The highly geared trusts, which are more likely to suffer from negative cash flow impacts when interest rates rise, are less exposed than in 2009. It is believed that the burden of rising interest rates on AREITs will be much less.
Table 2- AREITs - Average Gearing Levels
<table style="width: 460px;" border="0" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="bottom" nowrap width="171">
 
</td>
<td valign="bottom" nowrap width="132">
GFC 
(Dec-09)
</td>
<td valign="bottom" nowrap width="113">
Current 
(Dec-14)
</td>
</tr>
<tr>
<td valign="bottom" nowrap width="171">
Average Gearing (%)
</td>
<td valign="bottom" nowrap width="132">
34.0%
</td>
<td valign="bottom" nowrap width="113">
30.0 %
</td>
</tr>
<tr>
<td valign="bottom" nowrap width="171">
Gearing Range (%)
</td>
<td valign="bottom" nowrap width="132">
24.0% - 61.0%
</td>
<td valign="bottom" nowrap width="113">
0%-40.9 %
</td>
</tr>
</tbody></table>
Source: UBS, ASX
Moreover, the spread between AREITs earnings yields and 10-year government bond yields remains wide. This point is demonstrated in Chart 2 by comparing the margin of the current earnings yield of AREITs with 10 year government bond yield and the long-term average. The current margin of 3.0% is above the long term average of 2.2%, which provides a buffer when interest rates rise.
Chart 2 –Property Earnings Yield vs Bond Yield - Margin
<img src="/images/2015/03/04/nui%20mar%204%20twol.png" alt="">
Source: UBS, IRESS
Interest rates have remained low for a long time. AREITs provide stable income and prospective capital growth. When interest rates rise, investors still have some support from rising rents, the wide yield spread and the lower gearing levels. Prices may fall but only marginally.
Ming Niu is an analyst at <a href="https://atchison.com.au/" target="_blank">Atchison Consultants</a>.
This article has been updated since initial publication.
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Will AREITs remain attractive once interest rates start to rise? Ming Niu

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GUEST OBSERVATION
As property development involves significantly more components of risk factors, higher returns are required above rental income generating property returns.
Property investment strategies include: core; core-plus; value-add; opportunistic; and development. Each strategy exhibits different characteristics which have been evaluated and quantified.
The differences in required returns and prospective volatility of returns are demonstrated in Figure 1.
Figure 1: Effect of Increasing Risk
<img src="/images/2014/11/06/nui%20nov%206%20one.jpg" alt="">
Source: Atchison Consultants
Investors in property across the risk spectrum encounter multiple risk factor exposures. Key risk factors include:
<ul>
<li>Property</li>
</ul>
There are risks inherent in direct property investment. They reflect the potential variability of property return due to macroeconomic events, such as rental market changes, economic activity involving demand and supply and change in transaction costs.
<ul>
<li>Planning and zoning</li>
</ul>
In the preliminary stages applying for and obtaining the planning and zoning approvals can be a protracted process. Time taken in the process results in consequential increase in holding costs for outlays during the process. 
<ul>
<li>Construction</li>
</ul>
Construction risks are viewed from a cumulative perspective as each stage cannot commence until the preceding stage has been completed. Activities are grouped by the three key stages of construction comprising in-ground, structure and fit-out and completion with resulting holding costs.
<ul>
<li>Settlement</li>
</ul>
Settlement risk considers the potential for a downturn in financial markets, in particular property markets and the prospective failure of pre-committed contracts for sale or lease to settle.
<ul>
<li>Leasing</li>
</ul>
This represents the prospect that on completion of a property development or expiry of a lease, it cannot be leased or released for an extended time. 
<ul>
<li>Capital works</li>
</ul>
Capital works risk represents the potential extensive time during which rental income is not being generated when capital works are being undertaken.
<ul>
<li>Capital management including gearing</li>
</ul>
Capital management includes structuring equity and debt financing terms which are suitable for specific property acquisition and development.
<ul>
<li>Asset management risks</li>
</ul>
Inefficient asset management would result in delay in successful leasing, which consequentially results in lower rental income.
Risk factors result in the opportunity cost of time when these factors are incurred. Premiums for these risk factors would be measured on the basis of the opportunity cost being core property expected return over the time period when return income is not being received.
Table 1 illustrates the property investment strategies and their prospective required rate of return range.
Table1: Australian property strategies and expected returns
<table style="width: 400px;" border="0" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="bottom" nowrap width="172"> </td>
<td valign="bottom" nowrap width="228">Property Return Range per annum (%) </td>
</tr>
<tr>
<td valign="bottom" nowrap width="172">Core</td>
<td valign="bottom" nowrap width="228">8 – 10%</td>
</tr>
<tr>
<td valign="bottom" nowrap width="172">Core Plus</td>
<td valign="bottom" nowrap width="228">9 – 12%</td>
</tr>
<tr>
<td valign="bottom" nowrap width="172">Value Add</td>
<td valign="bottom" nowrap width="228">12 – 15%</td>
</tr>
<tr>
<td valign="bottom" nowrap width="172">Opportunistic</td>
<td valign="bottom" nowrap width="228">14 – 25%</td>
</tr>
<tr>
<td valign="bottom" nowrap width="172">Development</td>
<td valign="bottom" nowrap width="228">25 - 45%</td>
</tr>
</tbody></table>
Source: Atchison Consultants
Ming Niu is an analyst at <a href="https://atchison.com.au/" target="_blank">Atchison Consultants</a>.
This article has been updated since initial publication.
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The property risk factor spectrum: How it can affect returns

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GUEST OBSERVATION
Value-add property includes a range of investment strategies, including buying assets at a discount to replacement costs; undertaking a releasing strategy; renovation and refurbishment of assets; redevelopment; strata subdivision of a property; land subdivision and rezoning of an industrial site.
Returns are delivered through the capture of market valuation enhancement as a consequence of insightful property management and capital expenditure, by improving property utilisation and improving occupancy. Upon completion the upgraded property asset may generate a higher and more reliable income.
Return and Factor Characteristics
Commercial factors associated with value-add property imply a periodic absence of income reflecting the time engaged in negotiating and concluding leasing or sale outcomes or implementing other value add strategies. The prospective return characteristics of value-add property and core property across the property spectrum are shown in Figure 1.
Figure 1: Effect of Increasing Commercial Factors
<img src="/images/2014/04/15/ming%20apirl%2015%20one.png" alt=""> Source: Atchison Consultants
Investment strategies illustrated in Figure 1, being core and value-add, exhibit different property factors and reflect increasing risk for which investors seek a higher return. Value-add property investment sits at the higher end of the spectrum, indicating an expected internal rate of return range of 12-20% per annum. Figure 1 also illustrates that as commercial risks are increased, the downside potential also increases.
Current Environment
Core property has the least risk for property investment. Given the prevailing prudent investing sentiment after the global financial crisis, these assets appealed to risk-averse investors. Investment opportunities providing enhanced returns above core property returns, may be generated by value-add property assets.
Investment in value-add property can be implemented through value-add property funds, or single asset syndicates. Participation tends to be limited to wholesale or sophisticated investors.
The conversion of secondary quality office space into residential apartments is a continuing trend. Lack of sites for residential use across capital city CBD markets, combined with softer investor demand for older office stock, has led to innovative managers offering funds which will participate in such projects.
A recent example of a value-add syndicate involved commercial office property in Sydney CBD which was 80% leased to two international corporate tenants. The building was purchased well below replacement cost reflecting a relatively poor lease structure. Value enhancement of the property is planned through upgrading the ground floor lobby entrance and external presentation of the building. This will result in the renewal of the lease with an existing tenant. In addition, the manager has identified a prospective tenant which will take the occupancy rate from 80% to 89%.
Ming Niu is an analyst at <a href="https://atchison.com.au/" target="_blank">Atchison Consultants</a>.
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The merits of a value-add property strategy

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In November 2012, the Australian government introduced a Significant Investor Visa (“SIV”) for migrants as prospective permanent residents who invest $5 million into complying investments in Australia for a minimum period of four years. Complying investments include Australian government bonds, ASIC regulated managed funds and direct investment into Australian proprietary companies. This initiative has brought opportunities and challenges in Australian property.
Opportunity
SIV will draw capital flows into Australia. Under the new visa scheme, the Australian government expects to attract 700 new residents annually and $3.5 billion in complying investments. As the majority of SIV applicants to date are Chinese, known for their keen interest in Australian property investments, it is reasonable to expect that a sizable portion of SIV funds will flow into the property market, with estimates of $2 billion per annum of new capital.  On a cumulative basis this is material for a total commercial property market valued at $700 billion. Investors may participate in property investment syndicates, which purchase existing properties or participate in property development projects.
With the aid of advisors and Australian fund managers arranging financial affairs for migration purposes, SIV applicants will gain an initial exposure in Australian investments. As familiarity and trust between SIV applicants and Australian fund managers grow, participation in wider investment products is possible with additional savings from SIV applicants. Although the initial $5 million from successful SIV applicants is committed to complying investments, excess funds are not restricted. Australian fund managers will be in a strategic position to build long term relationships with SIV clients, providing holistic solutions for their financial needs.
Table 1 shows current SIV statistics from the creation of this visa on 24 November 2012 to 31 October 2013 which provides support for the target of 700 new residents annually.
Table 1: Significant Investor Visa key indicators - November 24, 2012 - October  31, 2013
<table style="width: 470px;" border="0" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="bottom" nowrap width="293">
Indicators
</td>
<td valign="bottom" nowrap width="64"> </td>
</tr>
<tr>
<td valign="bottom" nowrap width="293">
Expression of Interests (EOIs) submitted:
</td>
<td valign="bottom" nowrap width="64">
825
</td>
</tr>
<tr>
<td valign="bottom" nowrap width="293">
Invitations issued:
</td>
<td valign="bottom" nowrap width="64">
631
</td>
</tr>
<tr>
<td valign="bottom" nowrap width="293">
Applications lodged:
</td>
<td valign="bottom" nowrap width="64">
498
</td>
</tr>
<tr>
<td valign="bottom" nowrap width="293">
Primary visas granted:
</td>
<td valign="bottom" nowrap width="64">
65
</td>
</tr>
<tr>
<td valign="bottom" nowrap width="293">
Applicants from China:
</td>
<td valign="bottom" nowrap width="64">
91%
</td>
</tr>
<tr>
<td valign="bottom" nowrap width="293">
 
</td>
<td valign="bottom" nowrap width="64"> </td>
</tr>
<tr>
<td valign="bottom" nowrap width="293">
Applications on hand (31 Oct 2013)
</td>
<td valign="bottom" nowrap width="64">
422
</td>
</tr>
<tr>
<td valign="bottom" nowrap width="293">
- Less than 3 months:
</td>
<td valign="bottom" nowrap width="64">
41.2%
</td>
</tr>
<tr>
<td valign="bottom" nowrap width="293">
- 3-6 months:
</td>
<td valign="bottom" nowrap width="64">
38.6%
</td>
</tr>
</tbody></table>
Source: Department of Immigration and Border Protection
Challenges
Converting SIV investors into a viable funding source for property investment or development lies with the development of syndicates which will include a number of SIV investors. Property syndicate managers will need to accommodate a number of investors from different cultural ethnicity and business practices.
Another challenge of SIV funding lies with the liquidity of funding. The SIV legislation requires the applicant to have $5 million invested into complying funds for four years. This exceeds most development project lifespans. SIV Investors may switch within four years, as long as the switch is done within 30 days into another complying fund.
SIV poses as an opportunity for raising capital into property syndicates. Property syndicate managers will need to acknowledge and manage the unique nature of SIV investors in order to tailor solutions around this initiative.
 
Ming Niu is an analyst at <a href="https://atchison.com.au/" target="_blank">Atchison Consultants</a>.
 
                      
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Significant Investor Visa – a new source of capital for property investment syndicates? 

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A comparison of the performance of prime and secondary office property demonstrates that prime at 9.0% per annum has outperformed secondary office property at 8.6% per annum over the 28 years from 1985 to 2012 by 0.4% per annum. Through cyclical market fluctuations, performance outcomes vary. Secondary property returns are more volatile, however secondary office property can outperform prime property in the stable return periods and the subsequent initial upswing phase of market cycle.

Prime properties are located in major commercial centres with great public transport accessibility, built with quality design externally and internally, which are energy efficient, and have tenants which are financially strong. Absence of any of these criterion means that an asset will generally be rated as secondary property.

Total Return

In broad terms, prime and secondary office returns have followed the same cycle over the past 28 years, indicating that that they are significantly influenced by the same fundamental demand and supply forces. Chart one compares annualised total returns for prime and secondary office property in Australia over the period from 1985 to 2012.

Chart one – Prime and secondary office property annual total return 1985 - 2012

<img alt="niu_nov_8_chart_one" height="279" src="/images/stories/2013/11/08/niu_nov_8_chart_one.png" width="470">

Source: IPD

Table one compares the performance of prime and secondary property over different periods. Four periods have been selected which highlight the different market conditions.

Table one – Prime v secondary office property returns

<img alt="niu-nov-13-chart-one" height="105" src="/images/stories/2013/11/13/niu-nov-13-chart-one.gif" width="470">

Source: IPD

There are three key observations:

<ul>
<li>
	During the stable return period from mid 1990s to mid 2000s, secondary office properties outperformed. The higher risk of secondary office property through higher vacancy was rewarded through the higher returns achieved over the period reflecting the higher income yield of secondary office property.
	</li>
</ul>
<ul>
<li>
	Prime office properties have led the initial recovery in returns, however secondary offices gained more momentum in the later phases of upswings and surpassed prime property from 2005 to 2007. Investors sought higher returns and were willing to accept more risk in the positive market.
	</li>
</ul>
<ul>
<li>
	Returns for prime property have surpassed secondary property in the recovery stage from periods of weak return in the property market. Two examples are recoveries after the “recession we had to have” in early 1990s and global financial crisis (GFC) in 2008. Property market falls led investors to be more risk averse with a preference for prime properties with more secure rental income. As a result, prices of prime office property have recovered from weakness in advance of secondary office property.
	</li>
</ul>
Income return

Income return provides a further performance measure that differentiates prime fraom secondary office property. Chart two tracks the changes in prime and secondary office rents from 1985 to 2012. Secondary office properties have generated a higher income return that is also more variable than prime office properties.

 

 

 

 

 

 

 

 

 

 

 

 

 

Chart two – Prime and secondary office property - income returns 1985 - 2012

<img alt="niu-nov-8-chart-two" height="276" src="/images/stories/2013/11/08/niu-nov-8-chart-two.jpg" width="470">

Source: IPD

The difference in variability between prime and secondary income returns reflects the fact that prime offices fulfils the majority of market demand as an economy rebounds. However, in a sustained economic recovery, with limited availability of prime properties, tenants that could not secure or afford prime office space compromise by securing secondary property. That spill over of demand leads to improved rents in the secondary office property.

\Conversely, in an economic downturn when there is a lot of vacant space, tenants will secure prime office buildings and prime office rents will fall less than secondary rents. Secondary property will suffer more from increased vacancy. Secondary offices are generally let to less financially resilient tenants for relatively shorter terms, therefore downsizing and subsequent non-renewal of leases by tenants in a weak economy is more likely. Secondary property vacancy rates and therefore rental income are more variable.

Investment in commercial property can be implemented in a variety of ways. Prime office properties are larger in size and value and can be invested in through AREITs or wholesale unlisted property funds. Secondary properties can be invested in through retail unlisted property funds or through property syndicates.

Prime office has shown outperformance in the recent market as investors are still relatively risk averse after the GFC. Signs of recovery in corporate earnings in Australia indicate that the market is heading for a stable period. Secondary office properties will be rewarded by stable rental income at higher income yields so that higher total returns are expected in the immediate future.

 

 

<hr>
Ming Niu is an analyst at <a href="https://atchison.com.au/" target="_blank">Atchison Consultants</a>.

 

<h2>Recently listed properties:</h2>

[smartcode_project:default project_id=4939]

[smartcode_project:default project_id=27575]

[smartcode_project:default project_id=24323]
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Prime v secondary office property: Which one is more likely to outperform?

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Links between interest rates and housing prices have been complex. Reductions in interest rates generally stimulate housing markets, as mortgage payments are lowered and making the housing market more affordable for home buyers.
This indicates an inverse relationship between the direction of mortgage interest rates and housing prices with house prices rising when interest rates fall.
The inverse relationship was largely observable until the financial crisis in 2007.
In the financial meltdown in 2007 and 2008 interest rates fell sharply, as did housing prices. The inverse relationship was broken, at least temporarily.
The peak of the financial crisis period in 2007-2008 is seen as an anomaly due to the credit freeze, which started with the collapse of subprime structured loan market.
Initially it was a shock to financial markets that turned into systemic stress in the economy and ultimately peaked with the collapse of Lehman Brothers and other financial companies.
Interbank lending froze as banks struggled to maintain liquidity and borrowers were left without access to credit.
This included home loans, with housing demand dropping due to a lack of finance.
Revisiting historical data reveals further anomalies in the inverse relationship between house prices and mortgage rates.
During the housing bubble of 1987-89 house prices rose around 40% while mortgage rates also significantly increased.
The period from 2007 to 2012 highlights a timeframe where a positive relationship was in place, where prices and interest rates rose and fell largely in unison, though with varying magnitudes.
Chart 1 – Relationship between Mortgage Rate and Residential House Price  
 <img alt="niu_aug_14_chart" src="/images/stories/2013/08/niu_aug_14_chart.png" width="470" height="307">
Source: REIA, RBA
Positive correlation over the period from 2007 to 2012 raises questions about why the negative relationship between rising mortgage interest rates and rising housing prices does not always hold.
Rising mortgage interest rates do not occur in isolation, as it reflects an expanding economy with growing consumer confidence and inflation. 
Higher borrowing costs dampen housing price increases. On the other hand, other economic factors emerge such as limited new supply and population growth that would have supported housing prices.
Aside from mortgage interest rates, other economic factors cause increases in housing prices.
In a rebounding economy, growth in employment, real wages, and inflation rate are expected. This will improve affordability for the workforce and switching from renting to buying, increasing demand for houses, and consequently creating upward pressure on housing prices.
In Australia the demand for employment encourages migration which also increases demand for houses and underpins prices.
On the contrary, when the economy slows, housing prices may be weak.
As unemployment increases, the ability of households to meet housing repayments diminishes, even with a reduction in interest rates. Affordability will be diminished until growth in employment emerges.
A consistent inverse relationship between the movement in mortgage interest rates and house prices is not evident.
Anomalies occur, reflecting wider economic influence and variable time frames between interest rate changes and demand and supply.
With weakening economic growth in Australia, slowing employment growth in 2013-2014 and a cautious sentiment, significant increases in house prices are unlikely despite lower interest rates.
Ming Niu is an analyst at <a href="https://atchison.com.au/profile.htm" target="_blank">Atchison Consultants</a>.
 
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Identifying the links between mortgage interest rates and housing prices: Ming Niu

After inspecting the a mixture of new apartment developments in Sydney's thriving north west corridor, Rouse Hill downsizers Lynne and Dale Kennedy were set to buy a two-bedroom apartment in <a href="https://www.apartments.com.au/developers/ellipse-property-group">Ellipse Property</a>’s Carrington Place development, until they saw the penthouse floorplans.

The retired police officer and her builder husband, aged in their mid-60’s, quickly upsized to a three-bedroom penthouse within the Atrium building, the first stage of the Castle Hill masterplan.

Their luxury apartment is one of eight in Atrium’s exclusive Penthouse Collection and features striking interior design. The penthouses offer flexible open-plan layouts with abundant space and tranquillity. With two living spaces, walk-in wardrobes and butlers’ pantries, Atrium’s penthouses feature large balconies with sweeping views to Cattai Creek and the wider Hills District.&nbsp;

“As soon as we saw the floorplan for this penthouse, we knew it was the one for us," Lynne said.

"It is oversized with abundant storage, so we know we are not going to feel cramped, even though we are downsizing from a large, five-bedroom family home. The open-plan design spills out to a large deck, perfect for entertaining and when the grandchildren visit. The finishes are top-quality and I love the butler’s pantry and integrated appliances in the kitchen – with the steam oven, pyrolytic oven and coffee machine all built in.”

High-quality material finishes and premium appliances are used throughout Atrium’s penthouse collection. Miele appliances in the newly-released Pearl Beige finish, Vintec wine fridges, Parisi tapware and fireplaces are set within luxe finishes including pure wool carpets and statement Caesarstone benchtops. Built-in barbecues, and in some cases bars and skylights, are further signature features of the penthouse design.

Dale Kennedy owns Inspect It FIRST, a building inspection company he has operated for over 25 years. With stringent views on design and build integrity, he was quick to recognise the quality behind the architectural design and iCIRT-rated builder, <a href="https://www.apartments.com.au/builders/decode">Decode Group</a>.

“This penthouse sets a new benchmark in terms of quality and attention to detail. The floorplan is well-considered - special features like the skylight are a stand-out and not typical in new builds. The iCIRT-rated builder adds a further level of comfort buying off-the-plan, and we are confident that the finished apartment will be high-quality with no nasty surprises,” said Dale.

The Kennedy’s are excited at the freedom that apartment living will unlock for them.

[smartcode_project:default project_id=151821 project_image_fid=360287]

“We won’t have to maintain a house, swimming pool and gardens anymore, and are looking forward to having more leisure time," Lynne added.

"The low maintenance apartment lifestyle and security of the building means we can travel more and take extended trips. We can simply ‘lock and leave’, something we can’t do with a big house. We also love the location so close to Showground Metro Station and retail precinct, but without being in the thick of it. Everything is literally on our doorstep, just a few minutes’ walk. It will be so convenient being able to access the city so easily and not having to drive to the shops.”

After 11 years in their home on Morrisey Way, Rouse Hill, the couple will sell it before moving into their new penthouse. The expansive five-bedroom family home features a cinema, swimming pool and six-car garage.

There are just six penthouses left in Atrium’s Penthouse Collection in a mix of three- and four-bedroom configurations, ranging from 160 to 334 sqm in size and priced from $3.025 million to $5.4 million.&nbsp;

[smartcode_project:default project_id=151821 project_image_fid=360286]

According to <a href="https://www.apartments.com.au/project-marketer/colliers">Colliers</a>, exclusive sales agents at Carrington Place, Atrium’s Penthouse Collection is meeting a groundswell of demand from local downsizers – aligned with broader trends in Metro-connected suburbs across Sydney.

“The Penthouse Collection sets a new standard for apartments in Castle Hill,"&nbsp;said Blake Schulze, National Director – Residential at Colliers.

"There is simply nothing else like these penthouses. Downsizers are drawn to their house-like scale and premium finishes. With sought-after views plus access to outstanding new local amenities, the Penthouse Collection unlocks a new lifestyle for buyers.

Schulze says buyers are drawn to Carrington Place’s lifestyle with close proximity to the Showground precinct’s vibrant mix of retail and dining options.

"Being able to walk to the Metro and this rapidly emerging lifestyle hub is of huge appeal to this demographic.”

According to Puja Khanna, Associate Director at Ellipse Property, the carefully curated interiors are proving to be a point of difference.&nbsp;

“Our floorplans have been thoughtfully considered, knowing that many buyers will be downsizing from large homes," Khanna says.

"Smart and abundant storage was an absolute must. And for many of our buyers, entertaining is a priority – with adult children, grandchildren and family visiting and sometimes staying over. We made sure bedrooms are spacious and living spaces are oversized, and kitchens incorporate butler’s pantries alongside the latest appliances."

Atrium is under construction by award-winning iCIRT-rated builder Decode Group, with completion scheduled for Q3 2026.&nbsp;

[smartcode_project:default project_id=151821 project_image_fid=360285]

<a href="https://www.apartments.com.au/new-apartments/lily-lane-at-carrington-place-castle-hill-32-carrington-road-castle-hill-nsw-2154">Lily Lane</a>, the second stage&nbsp;of Carrington Place, is set to commence construction later this month on the back of Atrium’s significant sales success, with 85 per cent of all apartments now sold.

Carrington Place will be constructed across multiple stages and deliver more than 800 new homes, with the entire precinct set for completion in 2032. It will feature abundant open space with over 20,000 sqm of outdoor recreational area, including a one-kilometre boardwalk to the nearby Fred Caterson Reserve.&nbsp;

The project is also integrated with the surrounding bushland, with a site boundary that stretches to the edge of Cattai Creek, immersing residents in the beauty of Sydney’s ‘Garden Shire’.

The Hills Showground Metro Station is just a two-minute walk away, offering fast connectivity to Sydney’s CBD, North Sydney, Chatswood, Macquarie Park and Norwest Business Park.

[smartcode_project_cta:default project_id=151821]

Joel Robinson

Local downsizers set sights on Carrington Place, Castle Hill penthouses

Lifestyle, residential and wellness developer <a href="https://www.apartments.com.au/developers/lowe-living">Lowe Living</a>, and joint venture development partner lNT.RE (formerly Icon Developments) have announced the popular SOAK Bathhouse brand will anchor the ground floor of their $160m luxury <a href="https://www.apartments.com.au/new-apartments/emerald-place-by-lowe-living-200-clarendon-street-south-melbourne-vic-3205">Emerald Place</a> development at 182-200 Clarendon St, South Melbourne, which is set to open in August 2026.&nbsp;

This will be the second Melbourne outpost for the SOAK Bathhouse brand, after its inaugural Victorian location in South Yarra launched in 2025, which has quickly become a staple in Melbourne’s bathing and wellness scene.&nbsp;

SOAK Bathhouse has signed a 10-year partnership to take out the 459sqm prime corner ground-floor tenancy, which will join the other two retail tenancies, high-end commercial space and 38 ultra-luxury residential apartments and penthouses above.&nbsp;

[smartcode_project:default project_id=135816 project_image_fid=365847]

SOAK Bathhouse is renowned for its luxurious and socially-focused mineral pools, cold plunge, sauna, steam room, infrared LED therapies, and massage services. Its arrival at Emerald Place, South Melbourne marks a significant milestone for both brands and for South Melbourne.&nbsp;

While the specific inclusions of the venue are still under wraps, SOAK Bathhouse has confirmed the space will be equipped with a signature SOAK Bathhouse mineral pool, cold plunge, saunas and steam room, alongside a lush dedication to verdant greenery and ferns throughout the tranquil bathing spaces.&nbsp;

SOAK Bathhouse will serve both Emerald Place residents and the broader South Melbourne business community, creating a wellness destination that bridges the gap between work and home. For residents, it's a daily ritual on their doorstep. For the surrounding office workers, it's a place to decompress, recharge and transition between professional and personal life.&nbsp;

[smartcode_project:default project_id=135816 project_image_fid=365850]

The partnership has underpinned Lowe Living’s commitment to delivering wellness-led amenities that not only embed physical spaces within the projects but integrate established, renowned wellness brands to anchor and operate these spaces.&nbsp;

Through the partnership with SOAK Bathhouse, penthouse buyers will be granted complimentary memberships, while all other residents of the Emerald Place development will benefit from exclusive discounted access. Together, these privileges deliver a compelling lifestyle enhancement and a lasting investment in wellbeing.&nbsp;

Lowe Living has been steadily carving out a niche in the luxury property market as a wellness-led developer, having a partnership with the Sorrento-based Aurora Spa &amp; Bathhouse to offer a private, residents-only wellness spaces at its upcoming Camberwell and Brighton projects.&nbsp;

These partnerships with Aurora Spa &amp; Bathhouse and now SOAK Bathhouse, reinforce a broader shift across Lowe Living’s portfolio towards a meaningful commitment to health-focused amenity and wellness offerings.&nbsp;

[smartcode_project:default project_id=135816 project_image_fid=231195]

Since its inaugural offering in Mermaid Beach, which has since expanded nationally across Queensland, Sydney and Melbourne, SOAK Bathhouse has grown into a leading contemporary bathhouse brand, attracting a dedicated following thanks to its unique social-focused approach to bathing.&nbsp;

Emma Lowe, Co-Founder and Managing Director of Lowe Living, said the Lowe Living team "view our partnerships as an extension of our design philosophy."

"We align with brands that genuinely elevate the everyday experience of our residents and deliver tangible value for our purchasers that enrich their lives.&nbsp;SOAK Bathhouse was a natural fit for Lowe Living and specifically Emerald Place. Their approach to contemporary bathing and social wellness strongly aligns with our vision of creating homes that prioritise long-term health, connection and lifestyle.”&nbsp;

Tim Lowe, Co-Founder and Managing Director of Lowe Living, said securing Melbourne’s second SOAK Bathhouse for Emerald Place is a significant milestone for Lowe Living, INT.RE and South Melbourne.&nbsp;

“This partnership reflects the continued evolution of luxury residential development," Lowe says.

"Today’s buyers are looking beyond finishes and floorplans and investing in holistic living environments, not just inside their apartments but in the communal and wider local amenity offerings, too."

[smartcode_project_cta:default project_id=135816]

Lowe Living secures SOAK Bathhouse on 10-year lease at Emerald Place, South Melbourne development

While the Gold Coast continues to densify around key transport and lifestyle nodes, <a href="https://www.apartments.com.au/developments/mermaid-beach-qld-4218">Mermaid Beach</a> has retained its village-like charm even as demand intensifies for walkable beachside living. It’s a suburb that holds firm to its community feel, while sitting within one of Australia’s fastest-growing urban corridors.

Developer DANKAV put the neighbourhood and its residents first when drawing up the plans for <a href="https://www.apartments.com.au/new-apartments/the-alfred-residences-mermaid-beach-2375-gold-coast-highway-mermaid-beach-qld-4218">The Alfred Residences</a>, which will replace the former Mermaid Beach Shopping Village near Nobby Beach. The project marks a rare example of precinct renewal at a truly local scale.&nbsp;

<a href="https://www.apartments.com.au/new-apartments/the-alfred-residences-mermaid-beach-2375-gold-coast-highway-mermaid-beach-qld-4218">The Alfred Residences</a>&nbsp;comprises a wide variety of one- and two-bedroom apartments, set above a new ground plane of curated hospitality and boutique retailers, all framed by generous laneways, shaded plazas, and garden paths designed to enhance pedestrian flow and public interaction.&nbsp;

[smartcode_project:default project_id=149942 project_image_fid=355148]

The site’s configuration reflects both a respect for the area's established rhythm and a recognition of its future trajectory, particularly with the planned Mermaid Beach South light rail station directly across the road.

Residents will find immediate access to both everyday needs and broader connectivity. A Woolworths Metro and local cafés are already operating nearby, while the beach sits just 100 metres from The Alfred’s front door. Pacific Fair, the region’s flagship retail centre, is also close by, with an extensive mix of dining, fashion and entertainment.&nbsp;

For those commuting or exploring beyond Mermaid Beach, the upcoming light rail link promises seamless movement north through Broadbeach, Surfers Paradise and into Southport, expanding access without the need for a car.

[smartcode_project:default project_id=149942 project_image_fid=355150]

Neighbouring locales such as Miami and Nobby Beach further enrich the lifestyle offering. These established precincts contribute everything from surf clubs and oceanfront parks to laid-back dining venues and independent retailers, all within a short walk or bike ride.&nbsp;

The Alfred effectively places residents within one of the Gold Coast’s most liveable pockets, where the essentials of daily life converge with long-term infrastructure planning and timeless natural appeal.

Predominantly local buyers jumped at the first release at The Alfred Residences, transacting the majority of the release in a matter of weeks. Demolition of the former shopping village is now underway, and Dankav expects completion of the first collection of residences in 2027.

[smartcode_project_cta:default project_id=149942]

The Alfred Residences brings village-style living to the heart of Mermaid Beach

<a href="https://www.apartments.com.au/developments/chermside-qld-4032">Chermside</a> is better known for bus interchanges and Westfield than for high-end apartment towers. Kabbalah, on Playfield Street, is a deliberate push against that reputation.

Developed by <a href="https://www.apartments.com.au/developers/playfield-developments">Playfield Developments</a>, the building holds 64 apartments, all three and four bedrooms, across its 13 storeys. The apartments are generous by any measure: lower-floor three-bedrooms start at 164 sqm, each with a multi-purpose room and private balcony, while the north-facing penthouse stretches to 382 sqm. Every residence comes with two car spaces.

<a href="https://www.apartments.com.au/architects/ana-architects">ANA Architects</a>, the Brisbane firm behind the 25-storey Willahra Tower on Queen Street and the 45-storey Mantra on Mary in the CBD, shaped the building around curved forms drawn from the natural landscape. Balcony gardens run throughout, with planter boxes worked into the private outdoor spaces of each apartment, giving residents greenery at the threshold rather than just at the rooftop.

[smartcode_project:default project_id=149578 project_image_fid=354319]

That rooftop carries its own weight: a pool, landscaped gardens, and outdoor entertaining areas sit above the city, designed as much for quiet evenings as for hosting. The wellness offering continues at ground level, where a centre with pool, sauna, and communal lounge zones anchors the building's other end. Together they give the building a rhythm, somewhere to arrive at the top and somewhere to retreat to below.

The site itself is part of the pitch. "One of the last available sites to develop in an established precinct," is how Playfield Developments describes the Playfield Street address, and the surrounding context backs that up. Westfield Chermside, the second largest Westfield in Australia, is within a few minutes on foot, along with its dining precinct and cinema complex.&nbsp;

The Chermside bus interchange connects directly to the Brisbane CBD and across the northern suburbs via more than 20 Translink routes, with the CBD roughly 15 minutes away by road. The Prince Charles Hospital, one of Queensland's major teaching hospitals and the state's leading cardiac centre, is roughly a kilometre up the road on Rode Road.

[smartcode_project:default project_id=149578 project_image_fid=354321]

Place Projects is handling sales, bringing a track record across some of Queensland's largest residential developments. Early buyer response has centred on the finishes and scale, "buyers consistently comment on the high-quality finishes throughout the apartments," the sales team notes, pointing to craftsmanship and considered design as the recurring draw.&nbsp;

"They're looking for generously sized apartments that offer both space and functionality, combined with a strong lifestyle offering," Place Projects says.

Construction has been awarded to Clearcon, with completion slated for late 2027. Pricing runs from $1.5 million for a lower-floor three-bedroom up to $3.65 million for the penthouse.

[smartcode_project_cta:default project_id=149578]

Playfield Developments brings 64 apartments to Chermside with Kabbalah

More than 3,000 dwellings are currently selling or gearing up to launch across Surfers Paradise, the suburb’s most concentrated apartment pipeline in years. At least eight projects are already in market, with more moving through registration and presale, creating a meaningful wave of new supply.

This isn’t happening in a vacuum. Strong interstate migration into Queensland, particularly the Gold Coast, continues to underpin demand, with the local population expected to push past 800,000 in the early 2030s.

We’re also seeing solid early-stage buyer activity. As usual, the earliest phases tend to offer the best mix of pricing and choice, before the more popular layouts get snapped up.

Comparing Surfers Paradise projects? Browse all listings → <a href="https://www.apartments.com.au/developments/surfers-paradise-qld-4217">View all Surfers Paradise apartments</a>

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<h2 data-end="1218" data-section-id="tdhbfr" data-start="1191">How to Read the Pipeline</h2>

Apartment projects in Surfers Paradise are at various stages of their project lifecycle, from pre-launch, selling now, construction commenced, or construction complete.

Where you buy in that cycle matters.

<ul data-end="1674" data-start="1409">
	<li data-end="1542" data-section-id="d5c11p" data-start="1409">Registration and&nbsp;presale: Typically the lowest price points and best choice, but with longer wait times to completion</li>
	<li data-end="1608" data-section-id="plnjqp" data-start="1543">Under construction: Greater certainty, shorter timelines.</li>
	<li data-end="1674" data-section-id="13k7yl8" data-start="1609">Completed: No construction risk, but pricing reflects that.</li>
</ul>

The projects below are grouped by stage to help buyers understand where they sit in the buying window.

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<h2 data-end="1967" data-section-id="zj5dj7" data-start="1944">Projects Now Selling</h2>

<a href="https://www.apartments.com.au/new-apartments/exhale-surfers-paradise-8-enderley-avenue-surfers-paradise-qld-4217">Exhale</a> is the newest apartment development to launch in Surfers Paradise.

Exhale, being developed by SIERA, comprises just 54 apartments, a density not often seen in Surfers. It sits on the corner of Enderley Avenue and Garfield Terrace, just off Northcliffe Beach. SIERA Founder and Managing Director Brent Thompson spent over a year trying to secure the rare beachside site.

[smartcode_project:default project_id=112661 project_image_fid=359603]

SIERA engaged BDA Architecture to design the building, with a striking glass curtain wall&nbsp;façade.

Offering two-, three-, and four-bedroom apartments, Exhale will also offer its residents a two-level wellness podium with a heated magnesium pool, spa, sauna, Nordic&nbsp;cold shower, and biophilic designed landscaped gardens.

There's also a dedicated Pilates and yoga studio, library and reading retreat, cinema lounge, and private dining room with a private bar and wine cellar.

<a href="https://www.apartments.com.au/new-apartments/exhale-surfers-paradise-8-enderley-avenue-surfers-paradise-qld-4217" style="text-decoration:none">Enquire about Exhale →</a>

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Paradiso Place is the largest project currently in market in Surfers Paradise. Developer SPG Land recently begun construction on its 845-unit development they are bringing to 103 Ferny Avenue.

[smartcode_project:default project_id=106566 project_image_fid=185858]

At this scale, it’s effectively its own sub-market, offering a wide mix of configurations across multiple price points, from entry-level investor stock through to larger owner-occupier product. Amenities include a pool, gym, and outdoor spaces.

With projects of this size, early buyers typically benefit most from the broader selection before key layouts are taken up.

<a href="https://www.apartments.com.au/new-apartments/paradiso-place-surfers-paradise-103-ferny-avenue-surfers-paradise-qld-4217" style="text-decoration:none">Enquire about Paradiso Place →</a>

<hr data-end="2500" data-start="2497" />
Jewel Residences is the only completed development on this list. The three towers, which drastically altered the Surfers Paradise skyline when they were complete in 2020 from their dress circle position&nbsp;at 36 Old Burleigh Road, home 512 apartments.

[smartcode_project:default project_id=8843 project_image_fid=264503]

With the six-star The Langham within the middle tower, Jewel offers&nbsp;​​​​​​significant hospitality venues including&nbsp;signature restaurants, a bar, cafe, and a resort pool with a swim-up bar

<a href="https://www.apartments.com.au/buildings/jewel-residences-surfers-paradise-36-old-burleigh-road-surfers-paradise-qld-4217" style="text-decoration:none">Enquire about Jewel Residences </a>

<hr data-end="2938" data-start="2935" />
Andrews Projects recently commenced construction at South Beach, just shy of 400 apartments at 3006–3016 Surfers Paradise Boulevard. Prices start from $1.08 million for the one-bedroom apartments.

[smartcode_project:default project_id=8887 project_image_fid=358399]

Central to the South Beach offering is a 5,500m sqm wellness and lifestyle precinct designed around the concept of renewal as a daily ritual.

The wellness facilities include sunrise and sunset pools, an indoor hydrotherapy pool, plunge baths, a Hammam, traditional and infrared saunas, red-light therapy and dedicated treatment rooms. A Technogym gym,&nbsp;cinema, co-working lounge and a range of indoor and outdoor dining and entertaining spaces, including BBQ terraces, complete the amenity.

<a href="https://www.apartments.com.au/new-apartments/south-beach-surfers-paradise-3006-3016-surfers-paradise-boulevard-surfers-paradise-qld-4217" style="text-decoration:none">Enquire about South Beach →</a>

<hr data-end="3316" data-start="3313" />
Another new entry to the market is Palmera Residences, developed by Central Equity at 18 Garfield Terrace. That majority of the 347 residences are large three-bedroom apartments, priced from just shy of $3 million.

[smartcode_project:default project_id=108274 project_image_fid=361247]

<a href="https://www.apartments.com.au/new-apartments/palmera-residences-18-garfield-terrace-surfers-paradise-qld-4217">Palmera Residences</a>&nbsp;is being constructed in the prestigious Northcliffe residential neighbourhood on an expansive 3,239 sqm site. It is located at 18 Garfield Terrace near the Northcliffe Surf Life Saving Club and the patrolled Northcliffe surf beach, situated between&nbsp;<a href="https://www.apartments.com.au/developments/broadbeach-qld-4218">Broadbeach</a>&nbsp;and&nbsp;<a href="https://www.apartments.com.au/developments/surfers-paradise-qld-4217">Surfers Paradise</a>.

Residents will have private access to extensive, state-of-the-art amenities, featuring two large pools including a generously scaled, family-friendly pool with safe shallow zones, and a 25-metre lap pool facing the western side, ensuring maximum sunlight all day.

<a href="https://www.apartments.com.au/new-apartments/palmera-residences-surfers-paradise-18-garfield-terrace-surfers-paradise-qld-4217" style="text-decoration:none">Enquire about Palmera Residences →</a>

<hr data-end="3711" data-start="3708" />
26 Vista has benefitted from the boom in Surfers Paradise over the last few years. Over 70 per cent of the 280 apartments have sold, with the remaining priced from $1.86 million.

[smartcode_project:default project_id=112730 project_image_fid=365605]

26 Vista, being developed by MRCB, is scheduled to complete in late 2030 and has attracted strong interest from locals and interstate buyers, Matt George, from project marketer Urban Activation, says.

“The diverse mix of buyers we’ve seen investing in this development stands as a testament to the superior product that is being offered. 26 Vista is truly the gold standard for coastal living, with its thoughtfully considered design and its commitment to providing residents with five-star luxury in sub-tropical surrounds.”

<a href="https://www.apartments.com.au/new-apartments/palmera-residences-surfers-paradise-18-garfield-terrace-surfers-paradise-qld-4217" style="text-decoration:none">Enquire about 26 Vista →</a>

<hr data-end="3711" data-start="3708" />
Away from the beach and closer to the Budds Beach area of Surfers Paradise is Homecorp's new tower, Florence Residences.

[smartcode_project:default project_id=150414 project_image_fid=357950]

The Monte Carlo building has 116 apartments amid a suite of wellness spaces including&nbsp;a private residents’ only wellness club including a resort-style rooftop pool, hot and cold plunge pools, a spa retreat, contemporary gymnasium and a spacious yoga and Pilates studio.&nbsp;

<a href="https://www.apartments.com.au/new-apartments/florence-residences-24-monte-carlo-avenue-surfers-paradise-qld-4217" style="text-decoration:none">Enquire about Florence Residences →</a>

<hr data-end="4321" data-start="4318" />
<h2 data-end="4364" data-section-id="1bj0450" data-start="4323">The Broader Pipeline</h2>

There's a lot more to come in Surfers Paradise in the coming years. The most interest is likely the two-tower beachfront project proposed by Winx billionaire John Camilleri. The two towers, which will comprise 275 apartments, are to be connected by a 45-storey skybridge.

On the more boutique end, Cavella, by SEYAH, will have <a href="https://www.apartments.com.au/news/qld/first-look-seyah-to-launch-cavella-in-emerging-sunrise-boulevard-surfers-paradise-pocket-following-density-rethink">just 18 residences</a> across a more modestly-sized 12-level building, also nearer the river than the beach.

For a broader view, see our breakdown of the top 10 new apartment projects launching on the Gold Coast in 2026, covering key opportunities suburb by suburb.

<hr data-end="5185" data-start="5182" />
<h2 data-end="5234" data-section-id="1kp72fk" data-start="5187">What Buyers Should Weigh Up Before Enquiring</h2>

Where a project sits in the development cycle matters just as much, if not more than, the price.

An off-the-plan apartment at registration stage may offer the lowest entry point, but it typically comes with a 24–36 month settlement timeline.

Later-stage projects trade some of that upside for greater certainty, so the right choice ultimately depends on your timeframe, risk appetite, and what you’re prioritising: price, selection, or delivery.

Ming Niu

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