<h2>EXPERT INSIGHT</h2>

Australian capital city average dwelling prices rose 1.8% in April according to CoreLogic and are up 6.4% on a year ago.

This is their seventh monthly gain in a row.

While down from the break neck pace of 2.8% seen in April, price growth is still strong and average capital city prices are now 5.4% above their September 2017 record high.

All capital cities saw prices rise solidly in April with Darwin the strongest at +2.7%, followed by Sydney at +2.4% and Adelaide at +2%. See the table below.

All capital city prices are at record levels except for Perth and Darwin which are recovering from 22% and 33% falls respectively between 2014 and 2020, which was in the aftermath of the mining investment boom.

[smartcode_project:default project_id=22057 project_image_fid=150836]

Regional dwelling prices rose 1.9% in April and are up 13% on a year ago with their relative strength over the last year reflecting lower levels of indebtedness and hence less vulnerability to the financial stresses caused by the pandemic driven economic downturn, less exposure to the slump in immigration and increased buyer interest as people seek to relocate from cities as part of a secular trend towards working from home and a greater focus on lifestyle.

Capital city house prices rose 2% in April and 8% over the last 12 months whereas unit prices lagged with a 1.2% gain in the month and a 1.8% rise on a year ago, with the relative underperformance reflecting a shift in preferences towards houses as a result of more working from home and a lifestyle choice and as weak rental conditions made worse by the slump in immigration constrained the inner city unit markets in Sydney and Melbourne. However, the Sydney and&nbsp;

Melbourne unit rental markets have shown signs of stabilisation and improvement in recent months and this appears to be helping unit prices, although they are still lagging.

The slowdown in price growth compared to March was inevitable given that the 2.8% average gain that month was the strongest since October 1988 and was always going to be hard to beat. Moreover, the moderation is also consistent with some pick up in new listings which has seen auction clearances slow a bit from March, some easing in the impact of government incentives and perhaps some of the initial boost from four year fixed mortgage rates below 2% having run its course.

However, average home gains of 1.8% a month are still very strong, housing finance commitments remain around record highs suggesting more demand to come and auction clearance rates in Sydney and Melbourne remain very high and at levels consistent with strong home price growth. While first home buyers led the initial recovery, spurred on by various incentives, housing finance data suggests that first home buyer demand may now have peaked but that investors are now jumping in to take over from first home buyers and that demand from owner occupiers generally remains very strong.

The fundamentals of still ultra-low mortgage rates, ongoing government incentives, economic recovery, the strong jobs market and an element of FOMO (buying now for fear of missing out) point to further home price increases ahead. We expect average home prices to rise another 10 to 15% out to the end of 2022, but this to mask a slowing from 15% this year(of which they have already done 7.5%) to 5% next year. 2023 could start to see another cyclical downturn in property prices as the interest rate cycle starts to move up more decisively.

There are six reasons to expect a gradual slowing in the pace of capital city dwelling gains going forwards:

First, government housing incentives are likely to be wound back a bit. The First Home Loan Deposit scheme is likely to see home price thresholds increased in the Budget, but HomeBuilder has now ended and some states may start to wind back various incentives.

Second, poor affordability is starting to become an increasing constraint again and is likely already starting to weigh on first home buyer demand going by housing finance data.

Third, the RBA and APRA are expected to reach yet again for macro prudential controls to slow housing lending sometime in the next six months. While they don&rsquo;t target house prices and are of the view that we have not yet seen a significant&nbsp;deterioration in lending standards, past experience indicates that surging house prices leads to a deterioration in lending standards and increasing financial stability risks. And the metrics APRA and the RBA look at are starting to push up in the direction of a deterioration in lending standards with record housing finance, an acceleration in housing debt (see the next chart), an increasing share of lending at high loan to valuation ratios and a rising share of interest only loans albeit from a low base. The first thing to do would be to increase interest rate buffers but limits on high loan to valuation ratio lending and high debt to income ratio lending may make sense too.

Fourth, it&rsquo;s likely that the 30 year tailwind for the property market of falling interest rates has now run its course. While variable rate hikes are probably two years away at least, four year plus fixed mortgage rates have started to move up with the rise in bond yields and shorter dated fixed mortgage rates may also start to move up over the next year. Longer term the RBA is more determined than ever to see inflation sustained in its target range which will ultimately put an end to the long term downtrend in interest rates and mean higher variable rates.

Fifth, the hit to immigration and a likely only gradual recovery in it once international borders are reopened combined with continued strong home building is likely to lead to an oversupply of property in the next few years.

Finally, the &ldquo;escape from the city&rdquo; phenomenon unleased by the pandemic and made possible by technology enabling more working from home compared to prior to the pandemic is likely to take some further pressure off capital city property prices &ndash; albeit this will drive a further catch up in regional prices.

The “escape from the city” phenomenon unleased by the pandemic and made possible by technology enabling more working from home compared to prior to the pandemic is likely to take some further pressure off capital city property prices

soliver

6 reasons to expect a gradual slowing in the pace of capital city dwelling gains: Shane Oliver

<html><body>
EXPERT INSIGHT

Australian capital city average dwelling prices rose a whopping 2.8% in March according to CoreLogic and are up 4.8% on a year ago. This is their seventh monthly gain in a row and their fastest monthly rise since October 1988 and they have now surpassed their September 2017 record high by 3.5%.

Sydney dwelling prices rose a very strong 3.7%, which is their faster since August 1988, and they have now surpassed their July 2017 record high.

Melbourne prices also rose 2.4% and have now surpassed their November 2017 record high.

Prices in other cities were all up strongly led by Hobart with prices up 3.3% in March, followed by Canberra up 2.8%, Darwin up 2.3%, Brisbane up 2.4%, Perth up 1.8% and Adelaide up 1.5%. Prices in Hobart, Canberra, Brisbane and Adelaide are all at record highs.

[smartcode_project:default project_id=26734]

Regional dwelling prices rose 2.5% in March and are up 11.4% on a year ago with their relative strength over the last year reflecting lower levels of indebtedness and hence less vulnerability to the financial stresses caused by the pandemic driven economic downturn, less exposure to the slump in immigration and increased buyer interest as people seek to relocate from cities as part of a secular trend towards working from home and a greater focus on lifestyle.

Capital city house prices rose 3.1% in March and 6% over the last 12 months whereas unit prices lagged with a 1.9% gain in the month and 1.1% rise on a year ago, with the relative underperformance reflecting an ongoing shift in preferences towards houses as a result of more working from home and a lifestyle choice and as weak rental conditions made worse by the slump in immigration constrained the inner city unit markets in Sydney and Melbourne.

[smartcode_project:default project_id=8082]

Over the last 12 months unit rents fell -3.8% compared to a 5.2% in house rents, with the weakness in unit rents concentrated in Sydney and Melbourne. However, the Sydney and Melbourne unit rental markets have shown signs of stabilisation and improvement in recent months.

The strength in home prices is consistent with other data showing a booming property market including record new housing finance commitments over recent months, surging home sales and record or near record auction clearance rates.

Clearance rates are now at levels consistent with 15% to 20% annual price gains in Sydney and Melbourne!

[smartcode_project:default project_id=22699]

So why is the property market back to booming?

The property market has seen a huge turnaround from expectations of a year ago for sharp falls in home prices as a result of the pandemic driven lockdowns. Capital city home prices did fall nearly 3% around mid-last year (led by Melbourne), but the fall was brief as the government policy response intervened to protect the housing market from the recession and to push prices higher. Basically the combination of ultra-low mortgage rates, multiple government home buyer incentives, economic recovery, the strengthening jobs market and now an increasing element of FOMO (buying now for fear of missing out) combined initially with low listings are driving prices sharply higher. The pandemic driven desire to “escape from the city” also appears to be pushing up suburban house prices and regional prices up at a faster rate than its depressing inner city unit prices in Sydney and Melbourne.

While first home buyers led the initial recovery, spurred on by various incentives, owner occupiers have followed and now investors appear to be starting to jump in too.

[smartcode_project:default project_id=7633]

Average capital city dwelling prices have now surpassed their September 2017 boom time high by 3.5% with Brisbane, Adelaide, Hobart and Canberra and now Sydney and Melbourne along with average regional prices all at clear record highs. Perth and Darwin remain well down on their 2014 mining boom highs, but are now recovering rapidly.  

Outlook

With variable mortgage rates set to remain ultra-low for the next few years average prices are expected to rise another 15-20% or so over the next 18 months to two years.

However, the pace of increase is likely to slow through 2021-22.

First, government housing incentives are likely to be sharply curtailed in the months ahead with HomeBuilder ending, the First Home Loan Deposit Scheme tapped out and some states may start to wind back various incentives.

[smartcode_project:default project_id=24323]

Second, in the absence of an ability to raise interest rates, the RBA and APRA are expected to reach yet again for macro prudential controls to slow housing lending. While they don’t target house prices and are of the view that we have not yet seen a significant deterioration in lending standards on the metrics they look at, past experience indicates that surging house prices leads to a deterioration in lending standards and increasing financial stability risks. And the metrics APRA and the RBA look at are starting to push up in the direction of a deterioration in lending standards with record housing finance pointing to an acceleration in housing debt, an increasing share of lending at high loan to valuation ratios and a rising share of interest only loans albeit from a low base. All of which suggests that it will make sense to start tapping the lending standards brake soon. The first thing to do would be to increase interest rate buffers but limits on high loan to valuation ratio lending and high debt to income ratio lending may make sense too.

Thirdly, the recovery in immigration once the international borders are reopened is likely to be gradual and if so this will allow for years of property undersupply to give way to oversupply which is the best way to take pressure off house prices.

Fourth, it’s likely that the 30 year tailwind for the property market of falling interest rates has now run its course. Four year plus fixed rate mortgage rates look to have bottomed and the RBA seems more determined than ever to see inflation sustained in its target range which will ultimately put an end to the long term downtrend in interest rates.

Fifth, poor affordability will start to become an increasing constraint again if it’s not already.

Finally, government policy should further encourage the shift away from city living as unleashed by the pandemic and working from home as a way to take pressure off capital city property prices. This remains to be seen though. 
The ending of JobKeeper and the expiration of home loan deferrals may also act as a dampener to the extent that they may boost forced sales but in the absence of a significant new coronavirus driven lockdown the impact is likely to be marginal. Actual net job losses from the ending of JobKeeper are likely to be low and the proportion by value of home mortgages on payment holidays has collapsed from 11% in May to below 2%.
</body></html>

Australian capital city average dwelling prices rose a whopping 2.8% in March according to CoreLogic and are up 4.8% on a year ago

Australian capital city home prices surge 2.8% in March, their fastest since 1988: Shane Oliver

<html><body>
EXPERT INSIGHT

Australian capital city average dwelling prices rose 2% in February according to CoreLogic and are up 2.6% on a year ago. This is their fastest monthly gain since 2003 and they have now surpassed their September 2017 record high by 0.7%.

Sydney dwelling prices rose a very strong 2.5%, resulting in five months of gains, and are up 2.8% on a year ago. Melbourne prices also rose 2.1%, resulting in four months of gains, but are down -1.3% on a year ago reflecting a -5.6% fall around mid-2020 through the various lockdowns.

Prices in other cities were all up strongly led by Hobart with prices up 2.5% in February and 8.7% through the year, followed by Canberra up 1.9%, Brisbane and Perth both up 1.5%, Adelaide up 0.8% and Darwin up 0.7%. Prices in Hobart, Canberra, Brisbane and Adelaide are all at record highs.

<img alt="" height="794" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/surging_house_prices_oliver.jpg" width="1200">

Regional dwelling prices rose 2.1% in February and 9.4% on a year ago with their relative strength reflecting lower levels of indebtedness and hence less vulnerability to the financial stresses caused by the pandemic driven economic downturn, less exposure to the slump in immigration and increased buyer interest as people seek to relocate from cities as part of a secular trend towards working from home and a greater focus on lifestyle.

Capital city house prices rose 2.3% in February and 3.6% over the last 12 months whereas unit prices lagged with a 1.1% gain in the month and a -0.1% fall on a year ago, with the relative underperformance likely reflecting an ongoing shift in lifestyle preferences towards houses as a result of more working from home and a lifestyle choice and as weak rental conditions made worse by the slump in immigration constrain the inner city unit markets in Sydney and Melbourne. Over the last 12 months unit rents fell -8.0% in Melbourne and -5.3% in Sydney, although there were further signs of stabilisation in February.

The strength in home prices is consistent with the surge in new housing finance commitments over recent months. This rose another 10.5% in January and is now up 44.3% from a year ago. First home buyer finance surged 10.1%mom - and is up a whopping 73% on a year ago - to a new record high although with owner occupier ex first home buyer finance up an even stronger 11.3%, the first home buyer share of new loans slipped from a record 25% to 24.9%. Investor finance is now also surging and rose 9.4%. The ongoing strength in finance commitments points to more solid house price gains in the months ahead although January’s 2% capital city rise may be hard to beat.

Auction clearances are now very strong and sales are running around pre coronavirus levels, although listings are still relatively low. Clearance rates are at levels consistent with 15% or so annual price gains!

What’s driving the surge in home prices?

The combination of reopening unleashing pent up demand, government incentives, the removal of responsible lending obligations, record low mortgage rates, the desire to "escape from the city" and relatively low property listings are all helping to push prices higher with an element of FOMO (or the “fear of missing out” creeping in too. This is after bank payment holidays and Government income support measures averted a sharp fall in prices that would otherwise have followed from the pandemic recession. The combination has more than offset the impact of weak inner city rental markets and the hit to immigration and has brought forward demand from first home buyers and owner occupiers, with investors now starting to jump in too.

Average capital city dwelling prices have now surpassed their September 2017 high, although this masks a wide divergence with: clear record highs in Brisbane, Adelaide, Hobart and Canberra and in average regional home prices; Sydney and Melbourne still down just over 1% from their 2017 highs; and Perth and Darwin remaining well down on their 2014 highs.  

<img alt="" height="806" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/average_prices_record_high_oliver.jpg" width="1200">

Outlook

Australian home prices are likely to rise another 5% to 10% this year and next being boosted by record low mortgage rates, government home buyer incentives and the recovery in the jobs market but the stop to immigration and weak rental markets will likely constrain price gains in inner city areas and units in Melbourne and Sydney. Outer suburbs, houses, smaller cities and regional areas will see relatively stronger gains in 2021.

The phasing down of government incentives and exhaustion of first home buyers will likely see first home buyer demand as a share of housing finance and overall demand peak in the months ahead but they will likely be replaced by rebounding investor demand. Possible increases in 4 year plus fixed rate mortgage rates flowing from the recent surge in bond yields will act as a bit of a dampener but likely only enough to see price growth settle around a 5-10% annual pace.

Shane Oliver is the Head of Investment Strategy and Chief Economist at AMP Capital 
</body></html>

The strength in home prices is consistent with the surge in new housing finance commitments over recent months

Housing finance commitments surged another 10.5% to start 2021: Shane Oliver

<html><body>
EXPERT OBSERVER

After a 2.8% dip around mid-last year in response to the pandemic, average capital city home prices are rising again.

<img alt="" height="649" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/shane_oliver_chart_1.jpg" width="1200">

Put simply - record low mortgage rates, multiple government home buyer incentives, government income support measures, pent up demand from the lockdowns, bank mortgage payment holidays, activity associated with a desire to “escape from the city” and an emerging element of FOMO (fear of missing out) have swamped the negative impact of higher unemployment, a collapse in immigration and weak rental markets in Sydney and Melbourne.

So, we are in yet another cyclical upswing in property prices. So, where to from here? But first to provide some perspective, there are seven key things worth bearing in mind regarding the Australian property market.

<h2>First – it remains expensive</h2>

According to the 2020 Demographia Housing Affordability Survey, the median multiple of house prices to income is 5.9 times in Australia versus 3.6 in the US and 4.5 in the UK. In Sydney, it’s 11 times and Melbourne is 9.5 times.

The ratios of house prices to incomes and rents versus their long-term averages are at the high end of OECD countries – all of which have low interest rates too! See the next chart.

The surge in prices relative to incomes has seen the ratio of household debt to income rise 5-fold over the last 30 years, taking it from the low end of OECD countries to the high end.

<img alt="" height="748" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/shane_oliver_chart_2.jpg" width="1200">

<h2>Second – house prices go up and down</h2>

A common property myth is that prices only ever go up. But this is not so. Real Sydney house prices (ie, after inflation) fell 36% in 1934-35, 32% in 1937-41, 41% in 1942-43, 12% in 1947-48, 14% in 1951-53, 12% in 1961-62 and 22% in 1974-77. In nominal terms based on CoreLogic data, Sydney dwelling prices fell 25% in 1980-83, 10% in 1989-91, 8% in 2004-06, 7% in 2008-09, 3% in 2011-12, 3% in 2015-16 and 15% in 2017-19.

<h2>Third – talk of mortgage stress remains overstated</h2>

There is no denying housing affordability is poor, debt is high and some households are suffering significant mortgage stress. But most borrowers appear to be able to service their mortgages. The share by value of housing loans on bank payment holidays has collapsed from 11% in May to just 2.4% in December. And the collapse in mortgage rates – that has seen household interest payments as a share of income fall to their lowest since the mid-1980s – has helped.

<img alt="" height="762" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/shane_oliver_chart_3.jpg" width="1200">

In the absence of an unexpected renewed economic downturn, it’s hard to see much rise in distressed sales. It’s also easy to see from this chart, when combined with home buyer incentives, why home borrowing and buying is surging again.

<h2>Fourth – the Australian property market has been in a long-term bull market since the mid-1990s</h2>

Looking back over the last 100 years, the first long term boom was in the 1920s and ended with the Depression and WW2. This was followed by the post war immigration boom that ended with high rates in the 1970s. The latest long-term boom started in the mid- 1990s. The key drivers of this boom have been easier access to debt and the shift from high to low interest rates (with mortgage rates dropping from around 17% in the late 1980s to around 2-4% now) which allowed Australians to pay each other more for property and from about 15 years ago a chronic undersupply of property. The latter can be seen in the next chart.

<img alt="" height="701" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/shane_oliver_chart_4.jpg" width="1200">

Annual population growth surged from around 2005 but the supply of dwellings did not start to catch up until around 2015, which led to a chronic undersupply of housing. This combined with low interest rates and easier access to debt explains why Australian housing went from cheap to expensive and stayed there over the last 25 years. Other countries have had low rates and tax breaks for property but far cheaper property because it’s been better supplied.

<h2>Fifth – we may be getter closer to the end of the long- term bull market in property</h2>

It may still have a way to go, but the two key drivers of the long- term property boom may be getting close to the end. First, interest rates are at or close to the bottom with the RBA now resorting to extreme measures to get inflation back up – which should ultimately mean higher interest rates. Second, the chronic under supply of property may be starting to fade thanks to the unit building boom since 2015, the hit to immigration and home building incentives which are likely to keep home building high for the next 12 months. As evident in the last chart, supply is likely to remain strong this year and next, but population growth has collapsed &amp; could take years to recover. This may take some pressure off house prices on a 3-5 year view.

<h2>Sixth – “escape from the city” will have a big impact</h2>

The pandemic has seen a profound shift in how office workers do work. In particular, the work from home phenomenon is likely to remain, albeit not five days a week for all. This means less need to live close to work and a greater focus on lifestyle, which means greater demand for houses relative to units and in outer suburbs, smaller cities and regional areas.

<h2>Finally – the national property market is highly diverse</h2>

While it’s common to refer to “the Australian property market,” in reality there is significant divergence between cities. This was clearly evident over the last decade with Sydney and Melbourne booming up until 2017, Perth and Darwin falling sharply after the mining boom and the other capital cities and regional property generally seeing modest gains. See the next chart. Right now, Perth and Darwin are only just starting to recover and there is potential for Brisbane, Adelaide, Hobart, Canberra and regional dwelling prices to play catch up to Sydney and Melbourne. The surge in immigration played a big role in the outperformance of Sydney and Melbourne into 2017 and this is now going into reverse as other cities and regional centres are benefitting from the “escape from the city” phenomenon.

<img alt="" height="636" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/shane_oliver_chart_5.jpg" width="1200">

The divergence is also evident in residential vacancy rates that have been rising in Sydney and Melbourne, reflecting increased unit supply and the collapse in immigration, but falling in other cities. This in turn points to upwards pressure on rents and property values in other cities relative to Sydney &amp; Melbourne.

<img alt="" height="714" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/shane_oliver_chart_6.jpg" width="1200">

<h2>So where to now for residential property prices?</h2>

Australian home prices are likely to continue rising over the next two years thanks to record low mortgage rates and the recovery in the economy, with the latter offsetting the phasing down of income support measures and bank payment holidays. Housing finance is running around record levels and auction clearance rates are at levels consistent with strong price gains.

As a result, average capital city home prices are expected to rise by 5-10% this year and next. While first home buyer incentives are likely to be reduced, investor interest is expected to pick up and fill the gap.

However, the outlook is divergent. The hit to immigration is likely to constrain inner city Sydney and Melbourne as well as unit demand but outer suburban areas, houses, the smaller cities and regional property are all likely to see strong price gains helped along by the “escape from the city” phenomenon and less exposure to immigration. Expect average price gains of around 10% in Adelaide, Brisbane, Perth, Hobart, Canberra and Darwin in addition to regional areas.

The broader economy is unlikely to justify rate hikes until around 2023, but if the property market continues to hot up as expected, causing financial stability concerns for the RBA, a tightening in lending standards is likely next year which should start to slow things down and eventually the bottoming of the long-term interest rate cycle and the shift to oversupply may take pressure off prices, but that’s a while off yet.

Dr Shane Oliver 
Head of Investment Strategy and Chief Economist AMP Capital

 

 
</body></html>

After a 2.8% dip around mid-last year in response to the pandemic, average capital city home prices are rising again.

Seven things to bear in mind about the Australian property market as prices swing upwards: Dr Shane Oliver

<html><body>
EXPERT INSIGHT

The combination of reopening unleashing pent up demand, an avalanche of government incentives (including stamp duty concessions, various state support measures, HomeBuilder and an expansion of the First Home Loan Deposit Scheme), a further easing in lending standards on the way for early this year (with the removal of responsible lending obligations), record low mortgage rates, the desire to "escape from the city" helped along by ongoing bank payment holidays and Government income support measures averted a sharp fall in prices that would otherwise have followed from higher unemployment and underemployment, weak inner city rental markets and the hit to immigration and brought forward demand from first home buyers and owner occupiers. As a result property prices have turned up far earlier than I had been expecting and there appears to be a bit of FOMO (or the “fear of missing out”) creeping into some markets and pushing them higher.

At the current rate of increase average capital city dwelling prices will surpass their September 2017 record high by March, although this masks a wide divergence with: record highs already in Brisbane, Adelaide, Hobart and Canberra and in average regional home prices; Perth and Darwin remaining well down on their 2014 highs; and Sydney and Melbourne prices having been range bound since 2017.  

Outlook

Australian home prices are likely to continue to rise through 2021 being boosted by record low mortgage rates, government home buyer incentives and with the recovery in the economy expected to offset the phasing down of income support measures and bank payment holidays and some incentives. As a result average capital city home prices are expected to rise by around 5% through the year. While first home buyer incentives are likely to be reduced seeing a decline in first home buyer demand later in the year, investor interest is expected to pick up.

However, the outlook is widely divergent across cities, within cities and across units versus houses.

<img alt="" height="355" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/amp_jan_2.png" width="545">

The downside risks relate to: renewed coronavirus related lockdowns with the latest being in Perth although so far new case numbers seem to be getting kept down and vaccines should help head off this risk entirely later in the year; higher unemployment and underemployment and distressed sales as government income and bank support measures wind down although the risk on this front are rapidly diminishing; falling rents and high vacancy rates in inner city Melbourne and Sydney weighing on investors; a 100,000 per annum reduction in underlying dwelling demand flowing from the hit to immigration; and a pandemic/work from home driven “escape to the suburbs and regions” that is weighing on inner city/unit prices but pushing up outer suburban/house and regional prices.

It remains hard to see that the reversal in net immigration from around 240,000 people per annum to an expected net outflow of people this financial year (of -70,000) and next (of -20,000) won’t have a significant impact. The surge in population growth of around 150,000 people per annum taking it to around 375,000 people per annum due to higher immigration from the middle of the 2000s was the main factor explaining very expensive Australian housing over the last 15 years as the property market became chronically undersupplied. The collapse in population growth which is likely to result in a halving in underlying demand for housing this financial year and next at the same time that governments are intent on supporting housing construction via various initiatives including HomeBuilder is likely to weigh on prices at some point as chronic undersupply gives way to oversupply in some areas. Particularly with rate cuts and incentives pulling demand forward and mortgage rate reductions reaching the end of the road. This is particularly likely to weigh on unit rents and prices along with investor demand in Sydney and Melbourne.

<img alt="" height="376" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/amp_jan_1.png" width="620">

Inner city Melbourne and Sydney are the most vulnerable to the hit to immigration, but this may not become fully apparent for another six months or so. Outer suburban areas and houses in these cities are likely to continue seeing solid price gains reflecting the “escape from the city” phenomenon against a backdrop of very low mortgage rates. On average Sydney and Melbourne price gains are likely to be modest at around 2 to 3% through 2021.

Other cities and regional areas are likely to perform well reflecting lower levels of debt and less exposure to immigration and as such as likely to see rising average prices with record low mortgage rates dominating. Adelaide and Brisbane are playing catch up after years of underperformance compared to Sydney and Melbourne, Canberra is benefitting from strength in public sector employment and Perth and Darwin are starting to recover after bear markets ever since 2014 helped by the recovery in mining investment in WA. Expect average price gains of close to 10% in Adelaide, Brisbane, Perth, Darwin and regional areas and around 5 to 7% in Canberra and Hobart.

Basically, Sydney and Melbourne lead the longer term cycle and the other cities and regional prices follow. Right now, Brisbane, Adelaide, Hobart, Canberra and average regional dwelling prices are playing catch up after underperforming Sydney and Melbourne into 2017 and Perth and Darwin home prices are finally recovering from a multi-year bear market that went bust with the end of the mining investment boom. The surge in immigration played a big role in the outperformance of Sydney and Melbourne into 2017 and this is now going into reverse.

Outer suburban houses and dwellings in regional centres are likely to perform better than inner city units in most capital cities as a continuing trend to working from home and a greater focus on lifestyle dominates.

SHANE OLIVER is the Head of Investment Strategy and Chief Economist at AMP Capital 
</body></html>

Regional home prices outpacing the capital cities in 2021: Shane Oliver

<html><body>
EXPERT INSIGHT

With the deepest recession since the end of World War 2, a sharp collapse in employment in April and May and a halving in underlying population based demand for housing (as a result of the hit to immigration) it might have been expected that 2020 would have been a pretty bad year for house prices. As its turned out though the property market held up pretty well and in recent months has started to accelerate again. It certainly turned out a lot stronger than I anticipated 6-9 months ago.

Basically, the combination of reopening unleashing pent up demand, an avalanche of government incentives (including stamp duty concessions, various state support measures, HomeBuilder which has now been extended to March albeit at a reduced payment and an expansion of the First Home Loan Deposit Scheme), a further easing in lending standards on the way for early this year (with the removal of responsible lending obligations), record low mortgage rates, the desire to "escape from the city" helped along by ongoing bank payment holidays and Government income support measures averted a sharp fall in prices that would otherwise have followed from higher unemployment and underemployment, weak inner city rental markets and the hit to immigration and brought forward demand from first home buyers and owner occupiers. As a result property prices turned up far earlier than I had been expecting and there appears to be a bit of FOMO (or the “fear of missing out”) creeping into some markets – particularly outside of Melbourne and Sydney.

At the current rate of increase average capital city dwelling prices will surpass their September 2017 record high by March, although this masks a wide divergence with: record highs already in Brisbane, Adelaide, Hobart and Canberra and in average regional home prices; Perth and Darwin remaining well down on their 2014 highs; and Sydney and Melbourne prices having been range bound since 2017.  

Outlook

Australian home prices are likely to continue to be boosted through 2021 by record low mortgage rates, government home buyer incentives, with the recovery in the economy expected to offset the phasing down of income support measures and bank payment holidays. As a result average home prices are expected to rise by around 5% through the year.

However, the outlook is widely divergent across cities, within cities and across units versus houses.

The risks relate to: renewed coronavirus related lockdowns although so far new case numbers seem to be getting kept down and vaccines should help head off this risk entirely later in the year; higher unemployment and underemployment and distressed sales as government income and bank support measures wind down although the risk on this front are rapidly diminishing; falling rents and high vacancy rates in inner city Melbourne and Sydney weighing on investors; a 100,000 per annum reduction in underlying dwelling demand flowing from the hit to immigration; and a pandemic/work from home driven “escape to the suburbs and regions” that is weighing on inner city/unit prices but pushing up outer suburban/house and regional prices.

It remains hard to see that the reversal in net immigration from around 240,000 people per annum to an expected net outflow of people this financial year (of -70,000) and next (of -20,000) won’t have a significant impact. The surge in population growth of around 150,000 people per annum taking it to around 375,000 people per annum due to higher immigration from the middle of the 2000s was the main factor explaining very expensive Australian housing over the last 15 years as the property market became chronically undersupplied. The collapse in population growth which is likely to result in a halving in underlying demand for housing this financial year and next at the same time that governments are intent on supporting housing construction via various initiatives including HomeBuilder is likely to weigh on prices at some point as chronic undersupply gives way to oversupply in some areas. Particularly with rate cuts and incentives pulling demand forward and mortgage rate reductions reaching the end of the road. This is particularly likely to weigh on unit rents and prices along with investor demand in Sydney and Melbourne.

<img alt="image008.png@01D6B106.AC24C7A0" data-image-whitelisted="" height="376" id="m_-6478027253593781169m_-4542295210685584014_x0000_i1028" src="https://mail.google.com/mail/u/0?ui=2&amp;ik=134db8e8c7&amp;attid=0.7&amp;permmsgid=msg-f:1687916156705272432&amp;th=176caecd330f7270&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ9FtgYIq5JXDH2F_FyDfWWj9C1o7lbrwJ0rLtJRxkUsCjYI8qllivVKe1pXjUSJNWDUdLouyLHVy7qTgDDiqkj4DCVMLXl-pTuQmmupxL23y3wHb3M12fQAooA&amp;disp=emb&amp;realattid=176caec726b25664d67" tabindex="0" width="620">

Source: ABS, AMP Capital

Inner city Melbourne and Sydney are the most vulnerable to the hit to immigration, but this may not become fully apparent for another six months or so. Outer suburban areas and houses in these cities are likely to continue seeing solid price gains reflecting the “escape from the city” phenomenon against a backdrop of very low mortgage rates. On average Sydney and Melbourne price gains are likely to be modest at around 2 to 3% through 2021.

Other cities and regional areas are likely to perform well reflecting lower levels of debt and less exposure to immigration and as such as likely to see rising average prices with record low mortgage rates dominating. Adelaide and Brisbane are playing catch up after years of underperformance compared to Sydney and Melbourne, Canberra is benefitting from strength in public sector employment and Perth and Darwin are starting to recover after bear markets ever since 2014 helped by the recovery in mining investment in WA. Expect average price gains of close to 10% in Adelaide, Brisbane, Perth, Darwin and regional areas and around 5 to 7% in Canberra and Hobart.

The next chart puts the relative performance of the capital cities into perspective by focussing on rolling 5 year price gains. Basically, Sydney and Melbourne lead the longer term cycle and the other cities follow. Right now, Brisbane, Adelaide, Hobart and Canberra dwelling prices are playing catch up after underperforming Sydney and Melbourne through much of last decade and Perth and Darwin home prices are finally recovering from a multi-year bear market that went bust with the end of the mining investment boom. The surge in immigration played a big role in the outperformance of Sydney and Melbourne into 2017 and this is now going into reverse.

<img data-image-whitelisted="" height="355" id="m_-6478027253593781169m_-4542295210685584014Picture_x0020_9" src="https://mail.google.com/mail/u/0?ui=2&amp;ik=134db8e8c7&amp;attid=0.8&amp;permmsgid=msg-f:1687916156705272432&amp;th=176caecd330f7270&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ_gH4A3QD-fRbFPZ5uL1acBi9UQclRFlZW5h5YkYBpGbsseFJmIcT8l9FO0gBY-fXqDo6QcHXR13csczrDC4G-2YcCyYnxgAhCDQLHlYLdwZt4SAXlNf5KFFwY&amp;disp=emb&amp;realattid=176caec726b3a898ee8" tabindex="0" width="545">

Source: CoreLogic, AMP Capital

Outer suburban houses and dwellings in regional centres are likely to perform better than inner city units in most capital cities as a continuing trend to working from home and a greater focus on lifestyle dominates.

SHANE OLIVER is the Head of Investment Strategy and Chief Economist at AMP Capital 
</body></html>

At the current rate of increase average capital city dwelling prices will surpass their September 2017 record high by March

2020 property market far stronger than anticipated when the pandemic first hit: Shane Oliver

<html><body>
EXPERT OBSERVER

2020 didn’t exactly turn out the way I or many expected a year ago. For Australia, the year started badly as severe drought had given way to the worst bushfires on record. But just as the bushfires were receding it gave way to the coronavirus pandemic. Every year has a big surprise - or what Dr Don Stammer has long called Factor X - but they don’t usually have such a profound impact as the coronavirus pandemic has.

- It caused a massive health crisis claiming at least 1.5 million lives, with many countries seeing at least two waves.

- It kept many confined to their homes and shut down big chunks of economies, driving the biggest fall in economic activity since the end of WW2 if not the Great Depression, with major economies seeing peak to trough falls in GDP of 10% to 20% and the Australian economy contracting by 7.3%. This saw unemployment surge and inflation plunge.

- Share markets had 35% or so plunges in February/March, commodity prices collapsed with the oil price going negative at one point as investors sought out safe havens like bonds.

- And it, or rather the poor management of it, lost President Trump the US election (even though he denies losing).

The pandemic also increased tensions with China and is likely to leave a longer term mark with a further set back to globalisation, more social tensions, bigger government and public debt, the risk that massive money printing eventually results in higher inflation, faster structural change due to an accelerated embrace of technology, more consumer caution and a lower population in Australia due to the hit to immigration.

However, while 2020 is a year many of us would prefer to forget and coronavirus continues to wreak havoc in much of the world, the end result for economies hasn’t been as bad as had been feared back in March and April. This reflected a combination of:

- An unprecedented and rapid fiscal stimulus that protected businesses, jobs and incomes;

- Debt forbearance schemes that headed off defaults;

- Massive monetary stimulus that saw interest rates plunge;

- Social distancing which has helped contain the virus enabling some reopening – albeit better in some countries (eg, Asia, Australia and New Zealand) than others.

This enabled economic activity to bounce back faster than expected through the second half as restrictions eased, even though it wasn’t always smooth (eg, in Victoria or in Europe and the US) and we still have a way to go to full recovery. As a result investment markets also performed far better than feared.

- While share markets plunged in March during the early stages of the pandemic, they then rebounded thanks to massive fiscal stimulus and reopening, low interest rates and bond yields that made shares cheap as well as good news on vaccines that enabled investors to look forward to further recovery in 2021.

- This all drove solid returns in global shares with Asian and US shares (which were boosted by a relatively a high exposure to IT and initially health care stocks which benefitted from the pandemic) outperforming. The more cyclical Japanese and European markets underperformed.

- Australian shares also unperformed due to the greater cyclical exposure of the Australian share market.

- Government bonds had reasonable returns as yields fell in response to central bank rate cuts and bond buying along with safe haven demand – which drove capital growth.

- Real estate investment trusts had negative returns as a result of a hit to property space demand and rents.

- It was the same story for unlisted commercial property and infrastructure, although industrial property did well.

- Home prices fell 3% around mid-year but then started to recover as low interest rates, government support measures and reopening swamped the hit to immigration, weak rental markets and higher unemployment. Houses, outer suburbs &amp; regions benefitted from “escape from the city.”

- Cash and bank term deposit returns were poor as the RBA cut the cash rate to just 0.1%.

- After a pandemic driven plunge to $US0.55 in March the $A rose reflecting higher commodity prices and a falling $US.

- Due to reasonable share returns but weak property and infrastructure returns balanced super funds have so far seen low but positive returns – but this followed a strong 2019.

<h2>2021 – recovery</h2>

Just as 2020 was dominated by the pandemic and this determined the relative performance of investment markets and stocks, 2021 is likely to be dominated by the recovery. This in turn will have a profound effect on investment markets. There are four reasons for optimism. First, massive fiscal and monetary stimulus is still feeding through economies with very high saving rates indicating pent up demand that can be spent once confidence improves, which will also help offset the wind down of some support measures like JobKeeper in Australia.

Second, the news on vaccines is positive. While uncertainties remain, by end 2021 or early 2022 there is a good chance the world will be approaching a degree of herd immunity.

Third, a new US president in Joe Biden should usher in a period of more stable and expert based policy making in what is still the world’s biggest economy. In particular, it will likely head off a return to trade wars that could have wreaked havoc in 2021.

A more diplomatic US approach to resolving differences with China could also help Australia move down a path to resolving its own differences with China.

Finally, Australia along with NZ has navigated 2020 remarkably well, controlling coronavirus far better than most comparable countries and seeing its politicians and institutions work well together. It also led to structural reforms that may help future growth (eg, property tax reform in NSW, IR reform nationally).

The combination of vaccines, policy stimulus and pent up demand is expected to see a supercharged cyclical rebound in global GDP of around 5.2% and 4.5% in Australia in 2021. This is likely to see strong double-digit rebounds in profit growth.

Inflation is likely to remain weak, reflecting still high levels of spare capacity which in turn means interest rates will remain low. While this is not good for those relying on bank interest, it benefits the household sector as a whole (with debt exceeding bank deposits) &amp; corporates, eases the servicing of high public debt levels and makes shares cheap. So, in a way we remain in the sweet spot of the investment cycle with improving growth but low rates. In Australia, the cash rate is expected to end 2021 at 0.1% but there is still a risk of more quantitative easing.

<h2>Implications for investors</h2>

Shares are at risk of a short term correction after having ran up so hard recently and 2021 is likely to see a few rough patches along the way (much like we saw in 2010 after the recovery from the GFC), but looking through the inevitable short term noise, the combination of improving global growth and low interest rates augurs well for growth assets generally in 2021. In particular, we are likely to see a continuing shift in performance away from investments that benefitted from the pandemic and lockdowns - like US shares, technology and health care stocks and bonds - to investments that will benefit from recovery - like resources, industrials, tourism stocks and financials.

- Global shares are expected to return around 8%, but expect a rotation away from growth heavy US shares to more cyclical markets in Europe, Japan and emerging countries.

- Australian shares are also likely to be relative outperformers helped by better virus control, enabling a stronger recovery in the near term, stronger stimulus, sectors like resources, industrials and financials benefitting from the rebound in growth and as investors continue to drive a search for year yield benefitting the share market as dividends are increased resulting in a 4.4% grossed up dividend yield. Expect the ASX 200 to end 2021 back around 7200.

- Ultra-low yields &amp; a capital loss from a 0.5-0.75% or so rise in yields are likely to result in negative returns from bonds.

- Unlisted commercial property and infrastructure are ultimately likely to benefit from a resumption of the search for yield but the hit to space demand and hence rents from the virus will continue to weigh on near term returns.

- Australian home prices are being boosted by record low mortgage rates, government home buyer incentives, income support measures and bank payment holidays but high unemployment, a stop to immigration and weak rental markets will likely weigh on inner city areas and units in Melbourne and Sydney. Outer suburbs, houses, smaller cities and regional areas will see stronger gains in 2021.

- Cash and bank deposits are likely to provide very poor returns, given the ultra-low cash rate of just 0.1%.

- Although the $A is vulnerable to bouts of uncertainty about coronavirus and China tensions and RBA bond buying will keep it lower than otherwise, a rising trend is still likely to around $US0.80 over the next 12 months helped by rising commodity prices and a cyclical decline in the US dollar.

<h2>What to watch?</h2>

The main things to keep an eye on in 2021 are as follows:

- Coronavirus and vaccines – problems with vaccines or their deployment could result in ongoing waves of new coronavirus cases &amp; slower recovery than we are assuming.

- US politics – a Democrat victory in Georgia’s January 5 US senate elections would risk more of a leftward tilt under Biden, although conservative Democrat senators will limit this. Trump could also try to throw a spanner in the works.

- China tensions – we expect a shift to a diplomatic approach here but there is a risk of misjudgement on either side which could start to slow our longer-term economic growth rate.

- Inflation – we are assuming it remains weak but if it rebounds faster than expected it will mean faster increases in bond yields and downward pressure on asset valuations.

- The hit to immigration in Australia – it’s hard to see 700,000 less immigrants out to mid-2023 having no impact on inner city Sydney and Melbourne property prices.

Dr Shane Oliver 
Head of Investment Strategy and Chief Economist AMP Capital
</body></html>

Just as 2020 was dominated by the pandemic and this determined the relative performance of investment markets and stocks, 2021 is likely to be dominated by the recovery

Outer suburbs, houses, smaller cities and regional areas will see strongest property gains in 2021: Shane Oliver

Local developer Harridan is seeking to turn its Woolloongabba apartment project into the first stage of a broader transformation of Burke Street, using a new 16-storey mixed-use building to establish a greener pedestrian connection toward the rapidly evolving Boggo Road transport and knowledge precinct.

The South East Queensland developer has filed plans for 154 apartments on the <a href="https://www.apartments.com.au/new-apartments/4-burke-street-woolloongabba-qld-4102">southern side of Burke Street</a>, where its proposal has been designed alongside a wider vision by LatStudios for the street.

That vision positions the southern side of Burke Street for buildings of 15 storeys and above, while envisaging lower-rise development of up to five storeys on the northern side to transition into Woolloongabba's existing character housing. It also proposes wider pedestrian verges, deep planting, new street trees and upgrades to the pedestrian approach to Boggo Road Station.

The Harridan development itself has been designed by Brisbane-based Arqus Design and will comprise 154 apartments across 16 storeys. The mix is weighted heavily toward two-bedroom apartments, with 121 proposed alongside 10 one-bedroom and 23 three-bedroom residences. There will typically be around 14 units per floor.

A lower-ground car park and three podium levels will accommodate 156 resident parking spaces, along with visitor and commercial parking. There will also be 154 resident bicycle spaces and 40 visitor bicycle parks.

&nbsp;

Harridan is a family-owned developer and part of the Holmwood Highgate Group, with more than three decades of development activity across South East Queensland. Its portfolio spans residential, commercial and industrial property, with current residential projects including Riverbank on Byron in Bulimba, Esperance Residences in Carina and The Precinct at Kinross Road in Thornlands.

Wooloongabba has been popular for apartment developers, particularly since the announcement of the 2032 Summer Olympics games in Brisbane.

While there have been a lot of development applications, it has failed to materialize into real supply.&nbsp;

Sarazin has been the major player in the area. They are under construction at Murcia Residences, on the fringe of East Brisbane and Woolloongabba. They have just launched <a href="https://www.apartments.com.au/new-apartments/the-stanley-residences-woolloongabba-8-trafalgar-street-woolloongabba-qld-4102">The Stanley Residences</a>, in Woolloongabba on Trafalagar Street. They also have Nuage coming soon on the nearby <a href="https://www.apartments.com.au/new-apartments/nuage-woolloongabba-14-wellington-road-woolloongabba-qld-4102">Wellington Road</a>.

Joel Robinson

First look: Harridan plans Burke Street transformation beside Boggo Road transport hub

IN BRIEF

<ul>
	<li>
	Just three double-storey Sky Homes sit at the top of The Waterline, each with its own private marina berth and rooftop terrace.
	</li>
	<li>
	Construction on The Waterline is complete, with the first residents expected to move in from mid-October.
	</li>
	<li>
	Sky Homes range from 282 sqm to 367 sqm and are priced from $3.65 million.
	</li>
</ul>

<hr />
Lewis Land has opened the first completed sky home for inspection at Harbour Shores, giving buyers their first opportunity to step inside one of just three double-storey residences crowning The Waterline.

Each sky home comes with its own private marina berth, rooftop terrace and Broadwater views, combining the scale of a larger home with direct access to the boating lifestyle that underpins the wider <a href="https://www.apartments.com.au/new-apartments/harbour-shores-biggera-waters-564-oxley-drive-biggera-waters-qld-4216">Harbour Shores</a> masterplan.

[smartcode_project:default project_id=113271 project_image_fid=366708]

Lewis Land Head of Development Michael Long said the inclusion of a berth with every Sky Home had become increasingly valuable as marina access across the Gold Coast tightened.

“Marina berths are becoming increasingly difficult to secure across the Gold Coast, so including one with every Sky Home makes this a genuinely rare offering,” Long said.

“The private 70-berth marina will accommodate boats up to 12 metres in length and is positioned just 2.5 kilometres from the Broadwater, placing the open ocean only 15 minutes away.

“Being able to step out of your home onto your boat is a rare luxury, and it’s something residents here can look forward to when it opens later this year.”

[smartcode_project:default project_id=113271 project_image_fid=366709]

The display opening comes as construction completes on The Waterline, with the first residents expected to move in from mid-October.

The three Sky Homes range from 282 sqm to 367 sqm and each feature three bedrooms, three bathrooms, multiple living zones, expansive kitchens with butler's pantries and large balconies taking in the Broadwater outlook.

Each residence also has three secure basement car spaces and additional storage.

“This is the first opportunity the Gold Coast has had to step into Harbour Shores and see, touch and feel what we’re bringing to life here,” Long said.

“There are only three Sky Homes within The Waterline, ranging in size from 282sqm to 367sqm, with each residence featuring three large bedrooms, three bathrooms, multiple living zones, expansive custom-built kitchens with butler’s pantry, and large balconies capturing Broadwater views.”

<img alt="Harbour Shores" data-entity-type="file" data-entity-uuid="bab65e10-4fab-45e1-92d8-fc56e2ab98ff" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-25%20at%202.00.16%E2%80%AFPM.png?VersionId=XT8q76LsPkw3cYTsvN3JfFDaPLud90PN" />

Residents of The Waterline will have access to a private pool, along with Harbour Shores' wider collection of amenity including a lagoon pool, social clubhouse, tennis court, gym, yoga facilities and sauna.

Lewis Land partnered with Studio Collective to furnish the completed display, with the interiors designed to demonstrate how the residences could function as permanent homes rather than simply as show apartments.

Studio Collective Director Melissa Park said the surrounding waterways informed the interiors, but in a more restrained way than a traditional coastal scheme.

“We drew inspiration from the canals and coastal surrounds, but our approach was to interpret that subtly through layered materials and a grounded palette of earthy tones, rather than literal coastal references,” Park said.

“We introduced hero moments of green and teal to reference the surrounding waterways, while mirrored elements help reflect natural light.

“The result is a residence that feels elevated yet comfortable, somewhere buyers can genuinely imagine themselves living, entertaining and unwinding.”

Sky Homes are priced from $3.65 million.

Lewis Land is also offering private marina berths with The Residences, its limited collection of three and four-bedroom villas positioned directly along the Harbour Shores waterfront boardwalk.

Three-bedroom villas are priced from $2.99 million, while four-bedroom residences start from $3.19 million.

Harbour Shores is being marketed by Colliers International.

[smartcode_project_cta:default project_id=113271]

Lewis Land opens sky home display as The Waterline completes at Harbour Shores

St Vincent de Paul Society Housing Australia has filed plans for a major mixed-use housing precinct on the southern edge of the North Sydney CBD, adding another significant proposal to a pocket around North Sydn​ey Station that is quickly becoming one of the LGA's busiest development zones.

The State Significant Development Application covers a 5,990 sqm site at <a href="https://www.apartments.com.au/new-apartments/1-19-mackenzie-street-lavender-bay-nsw-2060">1-19 MacKenzie Street and 211 Blues Point Road in Lavender Bay</a>, immediately south of Nor​th Sydney Station and between the commercial core and the lower-rise Lavender Bay Heritage Conservation Area.

Designed by Wardle, the proposal would deliver a new residential tower comprising 88 build-to-sell apartments and 19 affordable apartments, alongside a separate co-living building with 57 rooms and a building manager's studio.

It would also see the significant restoration and upgrade of St Francis Xavier Catholic Church, the adaptive reuse of the former school building, new parish facilities, retail, a new public square and around 1,000 sqm of publicly accessible open space.

<img alt="Vinnies North Sydney" data-entity-type="file" data-entity-uuid="d5dd7f87-a617-463e-b577-17541e01f0e9" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-26%20at%209.10.13%E2%80%AFAM.png?VersionId=4R8TsFN3P_LrrXO2HswTOIrx2blil8lh" />

The project is seeking a concurrent rezoning of the site to R4 High Density Residential and an increase in the maximum building height to allow a tower reaching RL120, or up to 20 storeys. The proposal was progressed through the NSW Government's Housing Delivery Authority pathway.

The build-to-sell component will be weighted toward larger apartments, with just six one-bedroom apartments compared with 31 two-beds, 43 three-beds and eight four-bedroom residences.

The 19 affordable apartments will comprise two studios, 15 one-bedroom apartments and two two-bedroom apartments, taking the total apartment component to 107 residences before the 58 co-living rooms are included.

<img alt="Vnnies" data-entity-type="file" data-entity-uuid="7d568ca5-cb90-4e18-96c6-d9795dba0c56" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-26%20at%209.10.05%E2%80%AFAM.png?VersionId=GY2R5M9VtQh0EKy1vajaea19PSLOPuRD" />

Wardle's design for the Vinnies site has sought to negotiate that emerging high-rise context while retaining the lower-scale character of MacKenzie Street and the adjoining heritage conservation area.

The main building adopts a three-storey podium and tower arrangement, with the podium aligned to the ridgeline and front setback of St Francis Xavier Church.&nbsp;Wardle has designed the podium with colonnades, seating, recessed entries and active ground-floor frontages, with sandstone-toned precast concrete and face brick referencing the materiality of the existing church.

The tower then steps back eight metres to the south and six metres to the north before rising in a sculpted form comprising four interlocking quadrants. Wardle has also introduced rounded forms and chamfered corners to reduce the tower's perceived bulk and improve view sharing with neighbouring development sites.

Resident facilities and outdoor areas are planned at the separation between the podium and tower at Level 3, oriented toward Sydney Harbour and the CBD skyline.

The tower itself will feature a glass reinforced concrete facade, with recessed balconies and deep reveals used both to provide shading and privacy and frame views toward the harbour and city. The lower levels take a different architectural approach, using brick and sandstone-toned finishes intended to establish a stronger relationship with St Francis Xavier Church. The Church itself will be conserved and upgraded for its continued use, while the former school building will be adaptively reused as part of the co-living component.

<img alt="Lavendar Bay" data-entity-type="file" data-entity-uuid="2d4418ad-90aa-4d49-af93-c80b140aea80" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-26%20at%209.09.47%E2%80%AFAM.png?VersionId=Kv4gzbsACaGvZSRuaqcfGC54jEJRXIDJ" />

&nbsp;

The proposal adds to an increasingly concentrated pipeline of residential development around Blue Street, MacKenzie Street and Lavender Bay.

Just west of the site, Central Element lodged plans earlier this year for one of the most significant residential developments proposed in Lavender Bay in recent years.

Central Element's SJB-designed scheme at 64-66 Lavender Street and 3-7 Middlemiss Street would deliver 163 apartments across two towers rising 23 and 32 storeys, replacing five existing apartment buildings containing 32 homes. The project also forms part of the Housing Delivery Authority pathway.

<a href="https://www.apartments.com.au/news/nsw/first-look-central-element-reveals-lavender-bay-apartment-plans?utm_source=chatgpt.com" rel="noopener" target="_blank">First look: Central Element reveals Lavender Bay apartment plans</a>

Immediately around North Sy​dney Station, another two significant proposals have emerged at 5 and 15 Blue Street.

Zurich Australian Insurance Properties is seeking to adaptively reuse its longstanding commercial building at 5 Blue Street, directly above North Sydney Station, rather than demolishing the structure.

Its SSDA proposes converting the building into a 14-storey mixed-use development with 62 apartments and 86 co-living rooms, together with ground-floor retail and a major refurbishment of Blue Street Plaza. The application is currently at the Response to Submissions stage.

<a href="https://www.apartments.com.au/news/nsw/first-look-zurich-targets-north-sydney-office-conversion-with-148-unit-proposal-above-metro-station">First look: Zurich targets North Sydney office conversion with 148-unit proposal above Metro station</a>

&nbsp;

First look: Vinnies files for 20-storey Lavender Bay apartment tower as North Sydney housing pocket heats up

When the opportunity arose for South Australian developer Palumbo to return to Kent Town, where it had previously delivered East Park Apartments and the East 
Rundle Apartments, it wasn't one the longstanding developer-builder was going to pass up.

The decision was quickly vindicated, with more than 30 apartments sold within the first month of launching <a href="https://www.apartments.com.au/new-apartments/royal-apartments-kent-town-2-8-north-terrace-kent-town-sa-5067">Royal Apartments</a> to the market.

The 206-apartment development, which will bring significant new supply to Adelaide's tightly held eastern city fringe, also gives <a href="https://www.apartments.com.au/developers/palumbo">Palumbo</a> the opportunity to bring new life to one of Kent Town's most recognisable watering holes.

[smartcode_project:default project_id=6109 project_image_fid=376073]

Royal Apartments incorporates the historic Royal Hotel, a venue Palumbo Managing Director Daniel Palumbo said has a longstanding connection with the local community.

"Everyone in the area has history with the Royal Hotel," Palumbo told Apartments.com.au.

"It was quite an active pub and social gathering place for locals. We want to bring it back to its former glory."

[smartcode_project:default project_id=6109 project_image_fid=376072]

The wider development will comprise two residential towers alongside the restored hotel, sitting on North Terrace opposite the Adelaide Park Lands.

For Palumbo, the project also marks a return to familiar territory.

The developer completed East Park Apartments next door more than a decade ago and jumped at the opportunity to develop in Kent Town again when the Royal Hotel site became available.

"The opportunity emerged, and we moved to secure the site," Palumbo said.

"We were approached by the previous landowner, who said they had extensive commitments in Sydney and weren't in a position to deliver the project.

"We took over the site and within six months recut the design scheme to be more in keeping with the type of development we want to bring to Adelaide.

"Now we're on the market and those changes have really resonated with local buyers."

That has translated into a strong start to sales, with 33 apartments transacting in the project's first 35 days.

Palumbo said the early purchaser profile had been consistent with the group's traditional focus on owner-occupiers rather than investor-led apartment stock.

"Local owner-occupiers have always been our market," he said.

"There are always some investors, but we've never developed what would be called traditional development stock. Owner-occupiers are very much our market."

[smartcode_project:default project_id=6109 project_image_fid=376068]

The buyer mix has been diverse so far, with downsizers and younger professionals both accounting for a significant portion of early sales.

South Australia's current stamp duty settings, which allow&nbsp;eligible homeowners in South Australia aged 60 savings of up to $103,830 on stamp duty when they downsize to a new property valued at up to $2 million,&nbsp;have helped encourage downsizer activity, while younger buyers in their late 20s and early 30s have been attracted to the opportunity to live immediately outside the CBD while still being able to walk into the city.



Location has been a major part of the proposition for both buyer cohorts.

[smartcode_project:default project_id=6109 project_image_fid=376075]

Royal Apartments sits on North Terrace directly opposite the Adelaide Park Lands, with residents able to walk through the parklands toward the East End, Rundle Street and Rundle Mall.

Apartments have been positioned to capture views across the parklands, Adelaide skyline, Botanic Gardens and Adelaide Hills.

Palumbo believes the scarcity of developable land along this section of the Park Lands makes the site particularly difficult to replicate.

"There's very few allotments on that side that can be developed," he said.

"If this location was in New York and you were sitting on Central Park, you'd be talking about a $60 million apartments."

Royal Apartments will offer a broad mix of residences, ranging from one-bedroom apartments through to four-bedroom sub-penthouses and penthouses.

Current listings include one-bedroom apartments from $680,000, while larger three and four-bedroom residences are priced around $2.5 million.

Residents will have access to a swimming pool, gym, barbecue and recreation areas, residents' lounge and dining space, and a communal deck.

[smartcode_project:default project_id=6109 project_image_fid=376067]

The apartments will feature generous balconies, while secure parking, bicycle storage and storage cages will also be provided.

A porte-cochère-style arrival and drop-off area has also resonated with buyers, particularly those attracted to being able to walk into the CBD during the day while retaining secure vehicle access at home.

Palumbo is acting as developer, architect and builder on Royal Apartments, continuing the vertically integrated model it has used across its South Australian portfolio.

The group was also behind the $150 million Sofitel Adelaide, the 251-room five-star hotel and residential tower which opened in 2021.

Palumbo said Royal's launch had come at an interesting time for the broader Adelaide apartment market.

Buyer confidence had initially been impacted by uncertainty surrounding the Federal Budget and broader economic conditions, but Palumbo believes sentiment is beginning to improve against a backdrop of significant investment flowing into South Australia.

He pointed to increased activity across defence and resources, including Olympic Dam, as potential long-term drivers of the state's economy and housing market.

"Money is starting to flow into Adeliade, significant amounts as Adelaide bucks the trend of the rest of the country.," Palumbo said.

"There's a lot of activity in the economy over the next decade. I think more investment will come into this market."

Early works on Royal Apartments are expected to commence this year, with major construction activity and cranes anticipated on site from early next year.

[smartcode_project_cta:default project_id=6109]

Palumbo's return to Kent Town strikes early chord with buyers

Go-to builder-developer <a href="https://www.apartments.com.au/developers/graya">GRAYA</a> is continuing to bulk out its already impressive and diverse apartment portfolio across South East Queensland. Their latest milestone is securing development approval for Silk, its boutique riverfront apartment development in St Lucia.

The approval clears&nbsp;the way for the team to begin construction planning for the 22-residence project.

<a href="https://www.apartments.com.au/new-apartments/silk-st-lucia-16-18-sandford-street-st-lucia-qld-4067">Silk</a> will rise 15 levels from an 810 sqm site at 16-18 Sandford Street, occupying a prominent bend of the Brisbane River with a prized northern aspect across Orleigh Park toward the Brisbane CBD.

The approved scheme will comprise 16 split-floor and six full-floor residences, continuing GRAYA's move into larger-format apartment developments targeting Brisbane's prestige owner-occupier market.

The project has been designed around the site's broad river frontage and dual-direction views, with GRAYA prioritising larger residences, privacy and outlook over apartment yield.

<img alt="Silk St Lucia" data-entity-type="file" data-entity-uuid="aa5c2349-f96c-4914-a812-1f2cd6827af8" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-26%20at%208.25.44%E2%80%AFAM.png?VersionId=WY0vEU_7vYjeRJKQHiCwFdMxu8PvFh52" />

GRAYA Co-founder and Chief Executive Officer Rob Gray said the project had been shaped around local homeowners wanting to remain in St Lucia without maintaining a traditional family home.

"St Lucia is one of those suburbs people do not want to leave," Gray said.

"They know the river, the trees, UQ, the golf course, Toowong and Indooroopilly, and that familiarity is hard to replace.

"True riverfront opportunities here are exceptionally scarce. What we have designed at Silk is a way to stay in the suburb people love, with the scale and privacy of a private home and far less to maintain.

"This is not typical apartment product. It is a proper home on the river, and that is exactly what this market has been missing."

The approval comes as new apartment development continues to increase across the St Lucia and neighbouring Toowong corridor, although direct riverfront sites remain considerably more tightly held.

GRAYA Co-founder and Managing Director Andrew Gray said securing the approval had removed a significant element of development risk from Silk.

"Genuine riverfront sites of this quality in St Lucia are not something that comes up regularly," Gray said.

"The approval removes a substantial layer of execution risk, and the location underwrites demand in a way very few inner-city sites can.

"The fundamentals here are as strong as anything we have assessed in Brisbane."

<img alt="Silk St Lucia" data-entity-type="file" data-entity-uuid="d0f3d734-65e1-48e8-8ed3-2e0715ffcdd9" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-26%20at%208.25.56%E2%80%AFAM.png?VersionId=sOLSs_jdHkXLWbBKzRyayf5BfTb2vPsD" />

Silk will see GRAYA return to a stretch of the Brisbane River where it already has recent construction experience. The vertically integrated group recently completed ARC in neighbouring Toowong as builder for developer Spyre, delivering the riverfront project on a constrained site.

GRAYA will take a different role at Silk, controlling the project from design and development through construction and aftercare under its vertically integrated model.

The development will include a gym and resident leisure areas at ground level, integrated with the river's edge.

Silk joins a growing pipeline for GRAYA across Brisbane and the Gold Coast, which includes Enclave, The Gallery, Coral and Ripple.

The developer-builder has also recently lodged plans for its largest project to date, <a href="https://www.apartments.com.au/new-apartments/the-silo-19-chester-street-newstead-qld-4006">The Silo</a>, a proposed <a href="https://www.apartments.com.au/news/qld/graya-buys-frasers-newstead-site-plans-the-silo-between-james-street-and-gasworks-precincts">$700 million mixed-use development</a> in Brisbane's James Street precinct.

Silk is expected to predominantly target local owner-occupiers and prestige buyers seeking a permanent riverfront home in Brisbane's inner west.

Registrations of interest are now open, with further details on the project and construction program to be released as it progresses.

<hr />
<h2>SILK PROJECT FACTS</h2>

Developer-builder: GRAYA

Project: Silk

Location: 16-18 Sandford Street, St Lucia

Apartments: 22

Built form: 15 levels

Site: 810 sqm riverfront holding

Mix: 16 split-floor and six full-floor residences

Status: Development approved

Next step: Construction planning underway

[smartcode_project_cta:default project_id=152168]

Shane Oliver

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News