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EXPERT OBSERVATION
This is an extract from the Reserve Bank of Australia's (RBA) Financial Stability Review.
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Over the past three years, there has been a shift in lending for property towards non-ADI lenders, also referred to as non-bank lenders.
Residential mortgage lending by non-banks is estimated to have been growing much faster than the rate of banks’ mortgage lending.
Non-bank lending to property developers has also grown at a fast pace.
They perform similar functions to banks and lend to a wide range of borrowers.
They finance their lending by securitising loans or with funding from private investors, such as high net worth individuals and institutional investors.
Non-bank lenders are prohibited from accepting deposits, and are therefore not prudentially regulated.
Non-bank lending supports economic growth by providing an alternative form of funding and increasing competition for lending. But the activities of non-bank lenders can pose risks to financial stability, as they have in some countries internationally.
These risks arise when non-banks exacerbate credit and asset price cycles, prompt banks to weaken their lending standards or have financial links with the banking sector that see credit losses at non-banks transmitted to banks.
This box assesses these risks today, in light of the recent pick-up in growth of non-bank property lending.
Non-bank residential mortgage lending is estimated to have grown by roughly 15% per annum over recent years, well above growth in lending by banks.
This has seen their market share of outstanding lending continue to trend up.
While these estimates are based on incomplete data that may be revised over the coming year, they are broadly consistent with the information available on non-banks’ liabilities.
Almost all non-bank mortgage lending is funded by issuing residential mortgage-backed securities (RMBS) and non-bank issuance of these securities has trebled over the past three years.
The flow of non-bank RMBS issuance in 2018 was close to the pre-crisis peak.
<img src="https://www.urban.com.au/images/2019/4/12/Non%20bank%20credit%201.JPG" alt="">
A factor that had supported non-banks’ increased market share has been banks’ repricing of certain types of housing loans.
Specifically, banks have increased the interest rates they charge on investor and interest-only (IO) loans, which are now on average around 50 basis points higher than interest rates on owner occupier principal and interest loans.
Banks increased interest rates on these products as a way of meeting the investor and IO lending benchmarks introduced by the Australian Prudential Regulation Authority (APRA) in 2014 and 2017.
Non-bank lenders, which were not required to meet APRA’s benchmarks, often do not apply this differential to investor and interest only loans.
These benchmarks have both been removed for most lenders. But other prudential standards are changing, as have perceptions of risk, so, to date, banks’ interest rate differentials based on type of loan remain.
Data from the RBA’s Securitisation Data set show that non-banks generally charge higher interest rates than banks for owner-occupier principal and interest loans; however, the interest rates they charge on other loans are typically much closer to those charged by banks (Graph D2).
As a result, investor loans have made up a growing proportion of nonbank lending, while their proportion of IO loans has fallen by much less than banks (Graph D3).
In contrast, banks have retreated from both these market segments.
<img src="https://www.urban.com.au/images/2019/4/12/Non%20bank%20credit%202.JPG" alt="">
In addition, a perception that finance is more difficult to obtain from the major banks has seen even some higher quality borrowers shifting to non-bank lenders.
The RBA’s liaison with nonbank lenders indicates that borrowers have been attracted by their faster approval times and the greater likelihood of approval compared with the major banks. 
<img src="https://www.urban.com.au/images/2019/4/12/Non%20bank%20credit%203.JPG" alt="">
… but remains small and financial stability risks are limited at this point
Non-bank mortgage lenders account for less than 5% of outstanding housing credit and so are not a substantial financial stability risk (Graph D1).
In particular, their small share reduces the risk that non-bank lenders will exacerbate the credit cycle. More generally, growth in non-bank lending has accelerated as housing markets and credit growth have both been weakening overall.
There is also no evidence of banks loosening lending standards to compete.
Banks have instead tightened lending standards since 2015, although there continues to be strong competition for the highest quality borrowers.
Non-bank lenders have also tightened their lending standards over recent years, even while writing a larger share of higher risk investor loans than previously.
This is because they are still subject to responsible lending laws, for which compliance expectations have increased over recent years, and because long-term investors often expect non-bank RMBS to broadly conform with APRA standards.
Consistent with this, arrears rates for non-bank lenders are slightly lower than for banks and have not increased materially to date.
Whether this would remain true if the unemployment rate was to rise remains to be seen.
The potential for contagion from non-banks to banks also remains small because interconnections between them are limited.
Banks have some exposure to non-bank mortgage lending through short-term ‘warehouse’ funding facilities, but these are small compared with banks’ own mortgage lending and their capital.
Banks’ willingness to increase these exposures significantly is limited by APRA monitoring the growth of these facilities, a liquidity requirement to match the undrawn exposures with highquality liquid assets, and the capital required to be held against such exposures.
The main constraints to a more rapid expansion of non-bank mortgage lending stem from their funding. RMBS pricing is well above the cost of bank funding (deposits or senior unsecured bank debt) and remains significantly higher than pre-crisis levels.
The cost of funding from RMBS markets has also risen significantly since early 2018, reflecting both a rise in spreads on RMBS and the increase in the bank bill swap rate, which forms the base for RMBS pricing.
This means that non-bank lenders will struggle to compete with banks for the highest quality owner-occupier principal and interest mortgages, unless they are able to secure alternative long-term funding.
In addition, it does not currently appear feasible to significantly increase the capacity of RMBS markets.
This is because the investor base for such instruments is relatively narrow and securing new investors has been a prolonged and challenging task.
Non-bank lending to property developers is also growing fast, and poses more risk
The pick-up in non-bank lending to property developers has occurred as banks pulled back from this market due to concerns about increased risks.
Non-bank lending for property development has come from a range of sources, but the most prominent providers have been managed funds that specialise in financing property development.
This lending is mostly funded by equity investments from wealthy individuals and institutional investors, including foreign funds.
This is an area where data are very limited; however, liaison contacts report that non-bank financing of property development is widely available and still growing strongly, especially in Melbourne.
Non-bank lenders generally require lower levels of pre-sales than banks and allow greater leverage for borrowers, but also charge much higher interest rates.
Presales became harder to achieve as the property market cooled, and this contributed to the demand for non-bank financing from developers.
If more marginal developments proceed, because developers are able to obtain funding from non-bank lenders, the boost to supply would place further downward pressure on property prices.
This could have flow-on implications for banks’ property portfolios. In particular, the performance of banks’ exposures to property developers would deteriorate if apartment sales and prices experience further significant declines and settlement failures rise.
However, much of the lending by non-banks is expensive mezzanine debt (debt which is ranked below senior debt in the capital structure).
This debt is relatively expensive and so reduces the likelihood that low-return projects will proceed, minimising the financial stability risk.
Further, this mezzanine lending is subject to some external oversight because when a bank provides the senior debt it has visibility of the mezzanine debt and the risks this may pose to the developer.
This oversight may diminish as non-bank involvement in senior debt is becoming more common.
The financial stability risks from non-bank property lending are judged to be limited at this point, although risks associated with property development bear watching.
Incomplete data on non-bank lending activity currently make it challenging to assess these risks.
However, legislation passed in March 2018 expanded APRA’s data collection powers to encompass a wider range of non-bank entities.
Since then, a working group, consisting of APRA, the Australian Bureau of Statistics and the RBA, has been working to improve the coverage of non-bank data.
This should help APRA and the RBA in their ongoing monitoring of financial stability risks arising from non-bank lending.
The Reserve Bank of Australia's Financial Stability Review provides the Bank's assessment of the current condition of the financial system and potential risks to financial stability. It contains a number of boxes on topics of special interest, along with occasional articles. The Review is issued half-yearly. 
Download the complete <a href="https://www.rba.gov.au/publications/fsr/2019/apr/pdf/financial-stability-review-2019-04.pdf" target="_blank" title="Link, opening in a new window, to PDF file.">Review here</a>.<abbr title="Megabytes"> </abbr>
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j.ballantyne1990-6AQqhLzZaK

No evidence of banks loosening lending standards to compete: RBA

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EXPERT OBSERVATION
Around half of all homes up for auction across Australia’s capital cities sold during the first quarter of 2019, with the latest CoreLogic Quarterly Auction Market Review showing a clearance rate of 49.9% across the combined capitals. This is an increase of +6.6 percentage points on the December quarter results.
While clearance rates for the March quarter are on the up, they pale in comparison to the same quarter last year, when 64.6% of properties across the combined capitals sold at auction.
“Auction volumes and clearance rates are mirroring the broader slowdown in property transaction and housing market conditions. Auction clearance rates over the March 2019 quarter were 14.7 percentage points lower than they were over the March 2018 quarter,” says Cameron Kusher at CoreLogic.
Across the combined capitals, 14,647 residential auctions were scheduled in the March 2019 quarter compared to 25,894 in the December 2018 quarter and 20,701 over the March quarter a year ago. “Vendors are less confident of achieving a positive result at auction, and this hasfurther impacted auction volumes during what is traditionally a quiet start to the year.”
Sydney posted the largest improvement in auction clearance rates relative to the December quarter last year.
The CoreLogic Quarterly Auction Market Review found that quarterly clearance rates increased across all capital cities except for Hobart (-5.2 percentage points) and Canberra (-1.6 percentage points). Canberra reported the most significant drop year on year, with clearance rates falling by -22.6 percentage points to 45.6% in the March 2019 quarter.
Sydney vendors achieved the highest quarterly clearance rates with 53.2% of the 5,278 properties for auction selling in the three months to March. This was +10.1 percentage point increase relative to the December quarter, but -10.4 percentage points lower than 12 months ago.
Melbourne remained Australia’s busiest capital city market over the March quarter, with 6,375 auctions scheduled (51.8% clearance rate), down from 12,372 in the last quarter and 9,488 a year ago. Tasmania had the fewest auctions scheduled with 45 properties for sale, however it was the only capital city to report an increase in auction volumes over the past quarter.
<img src="https://www.urban.com.au/images/2019/4/16/corelogic%201.png" alt="">
Quarterly clearance rates improved across 14 out of Sydney’s 15 sub-regions, with the Central Coast the only sub-region to experience a decline in auction sales since December 2018 (-0.9 percentage points). Ryde reported the highest increase in quarterly clearance rates, with 61.9% of auction properties selling, an increase of 20.7 percentage points over the past three months. Year on year, Blacktown (+ 5.7 percentage points) and Ryde (+ 8.5 percentage points) were the only sub regions with improved clearance rates.
All regions had a lower volume of auction properties in the March quarter compared to the previous quarter and the same quarter last year. The North Sydney and Hornsby region maintained its popularity as an auction hot spot, with the highest number of scheduled auctions (839) and the highest clearance rate (62.0%).
The Eastern Suburbs was the next busiest region with 832 auctions taking place (56.6% clearance), while the Outer West and Blue Mountains held the fewest auctions. Sellers were also least likely to secure a sale in the Outer West and Blue Mountains where the clearance rate was only 30.0% over the past quarter.
Across the suburbs, Erskineville boasted the highest clearance rate at 83.3%, closely followed by Cremorne (80.6%), while Randwick had the highest number of scheduled auctions.
Melbourne
Melbourne quarterly clearance rates improved in all regions, with the greatest improvement occurring in the Inner East (+ 12.7 percentage points). The Inner East also had the highest clearance rate over the quarter at 57.0%. At the other end of the scale, the lowest clearances rates were in the West (44.4%) and the Mornington Peninsula (44.5%).
Year on year, the North West suffered the biggest slump in clearance rates, dropping -23.7 percentage points since March 2018.
Auction volumes were highest in Inner Melbourne, which had 1,288 properties under the hammer over the March quarter. The Mornington Peninsula had the least activity with only 213 properties scheduled for auction in the first three months of the year.
Craigieburn and Reservoir were Melbourne’s busiest auction suburbs, with 99 scheduled auctions over the quarter. Vendors were most successful in Hillside with a clearance rate of 75.0%, Fitzroy (73.9%) and Caulfield South (71.1%).
<img src="https://www.urban.com.au/images/2019/4/16/corelogic%202.png" alt="">
 
Source: CoreLogic
Highest clearance rate for the quarter by capital city suburbs
Calculated when there have been at least 20 auction results reported over the period.
<ul>
<li>Craigieburn &amp; Reservoir 99 Randwick 73 Sunnybank Hills 24 Norwood &amp; Adelaide 15 Curtin 23 Dianella &amp; East Perth 10</li>
<li>Sydney: Erskineville 83.3% (captured results: 24, scheduled auctions: 24, sold: 20)</li>
<li>Melbourne: Hillside 75.0% (captured results: 20, scheduled auctions: 22, sold: 15)</li>
<li>Brisbane: Sunnybank Hills 35.0% (captured results: 20, scheduled auctions: 24, sold: 7)</li>
</ul>
Geelong records highest regional clearance rates despite declining auction volumes.
The CoreLogic Quarterly Auction Review also analysed regional auction volumes and clearance rates across the Hunter, Geelong, Gold Coast, Sunshine Coast and Wollongong.
Quarterly auction volumes fell in all regions except for the Gold Coast, which had by far the most activity with 635 scheduled auctions (up from 616 over the last quarter). With 242 scheduled auctions, Geelong reported the biggest decline in annual auction volumes, down from 458 in the March 2018 quarter.
Geelong recorded the highest clearance rates with 45.5% of properties sold at auction, followed by the Hunter at 41.6%. The Hunter experienced the biggest quarterly growth in clearance rates, with an increase of 8.7%.
CoreLogic's Quarterly Auction Review provides a national analysis of auction results across Australia and is <a href="https://www.corelogic.com.au/reports/quarterly-auction-review" target="_blank">available here</a>. 
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Sydney tops the country for auction clearances as national rate jumps 6.6%: CoreLogic

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The Vaucluse house owned by the alleged mastermind behind Australia’s largest tax fraud, Adam Cranston, is up for mortgagee sale.
It seems set to be sold for a loss on its $2.4 million purchase in 2015 by Cranston and his nominated company.
He awaits trial for his role in the Plutus Payroll syndicate accused of misappropriating more than $130 million owed to the Australian Tax Office from pay-as-you-go payments.
<a href="https://www.realestate.com.au/property-house-nsw-vaucluse-130936466" target="_blank">The three-bedroom Vaucluse house</a> has a swimming pool and ocean views from the second level.
It is listed mortgagee-in-possession with a $2.1 million guide though LJH.
It was originally bought in a company name of Harmon International Holdings, set up by Cranston’s sister Lauren, in 2014, and later transferred to Four Macdonald Pty Ltd.
Title records show the NSW Supreme Court ordered the sale of the property following the Federal Police applying for a court order under the proceeds of crime legislation.
Cranston was arrested two years ago, and his assets seized and finances frozen.
At the time Cranston was arrested at the Bondi Beach townhouse he shared with his wife Elizabeth Rouhliadeff.
It was bought for $1,222,000.
It sold earlier this year for $1.3 million.
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Adam Cranston investment Vaucluse property up for mortgagee sale

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Independent online mortgage marketplace HashChing has brought to market a conveyancing partnership that provides customers with a one stop shop solution for legal assistance on home loan settlements.
Removing one of the major pain points of property transactions, for a fixed fee, customers can be instantly partnered with experienced solicitors who specialise in real estate settlement.
HashChing is a mortgage marketplace that connects customers looking for home loan deals with experienced community rated mortgage brokers nationwide.
Since launching less than four years ago, HashChing has settled more than $1.3 billion worth of home loan applications and has helped more than 46,000 Australians get a better deal on their home loans. 
“We know that around 20% of settlements are delayed due to a conveyancer’s inefficiency and we’re tackling this problem head on,” said HashChing CEO Mandeep Sodhi. 
“We also know that many transactions are very complex and often end up requiring litigation, which is why partnering with experienced solicitors makes so much sense.”
Sodhi said research showed two out of three first home buyers did not know what conveyancing was, with nearly 40% mistakenly believing it referred to checking property boundaries or other physical matters with the property.
“Our army of community rated mortgage brokers already help Australian borrowers by dealing with banks and lenders on their behalf, and the online mortgage marketplace is now looking to streamline the legal part of the process as well.” he said.
Once a HashChing mortgage broker lodges the loan, borrowers can utilise conveyancing services and get connected to certified solicitors within minutes from their HashChing consumer portal.  
“Getting all the legal documents organised has traditionally been one of the most time-consuming and inefficient parts of buying a property.
"Borrowers are at the mercy of conveyancers, who can sometimes drag the process out unnecessarily and worse – charge more for their own delay.  
Sodhi said borrowers looking to purchase a property without an experienced solicitor were potentially gambling with hundreds of thousands of dollars. 
“By integrating a conveyancing solution into the HashChing online portal, our prices are fixed starting from $995 incl GST plus disbursements, there are no nasty surprises or hidden fees for borrowers, either,” he said.
Customers can log-in to the online dashboard at any stage to check progress of their application with the solicitor.
In addition to the real-time updates to borrower, the HashChing partner broker is also kept updated on the progress through their portal with the exact breakdown of the home loan costs that need to be lodged with the lender.  
 
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New conveyancing service to make HashChing home loan process faster

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The latest RBA minutes have noted a larger-than-expected fall in dwelling investment.
Dwelling investment appeared to have passed its peak, although there continued to be uncertainty about how quickly dwelling investment might decline over the forecast period, it noted.
Members noted financial market participants' expectations of a rate cut had been brought forward following weaker than expected data, most notably the December quarter national accounts. 
It noted financial market pricing implied that the cash rate was expected to be lowered in the second half of 2019 and then again in 2020.
The board "recognised that the effect on the economy of lower interest rates could be expected to be smaller than in the past, given the high level of household debt and the adjustment that was occurring in housing markets."
But members agreed that there was "not a strong case" for a near-term adjustment in monetary policy.
Members recognised that it was not possible to fine-tune outcomes and that holding monetary policy steady would enable the Bank to be "a source of stability and confidence."
It noted in Australia, conditions in the housing market had remained weak.
Housing prices had fallen further in the capital cities and regional areas.
Over the preceding six months, the falls had been largest in Sydney and Melbourne, but prices in these cities had remained more than 40 per cent higher than in 2012.
Falls in housing prices had resulted in some borrowers having negative equity, where the value of their loans exceeded that of their properties. Nationally, just over 2 per cent of borrowers, accounting for less than 3 per cent of housing debt, were estimated to have negative equity. Around 90 per cent of these borrowers were in Queensland, Western Australia and the Northern Territory.
Members observed that negative equity by itself was not a concern for financial stability.
"However, if unemployment were to rise and borrowers were not able to continue to make repayments, then financial institutions would incur increased losses."
Members noted that the decline in high loan-to-valuation ratio (LVR) lending in recent years was expected to lessen any losses for lenders. In recent quarters, almost all loans to investors had LVRs less than 90 per cent. By contrast, a decade earlier only 85 per cent of loans to investors had LVRs less than 90 per cent. The share of owner-occupiers with high LVR loans had also declined.
Members also noted that total household payments on housing debt as a share of income had been broadly stable in recent years.
"Within the total, however, an increase in scheduled principal repayments had roughly offset a fall in unscheduled principal repayments."
Members noted that households' excess payments amounted to about two-and-a-half years' worth of scheduled repayments on average. Housing loan interest payments had increased slightly as housing debt had increased.
Construction of new dwellings had contracted in the second half of 2018; the largest falls in the December quarter had been for apartments in New South Wales and detached housing in Queensland.
Slower housing activity had also weighed on the incomes of some building contractors and property professionals in the December quarter.
There continued to be a large amount of work in the pipeline, which should support a relatively high level of building activity in the near term.
Members noted that there had been a substantial rise in building approvals for high-density residential projects in February, although this series was volatile and in trend terms remained well below earlier peaks.
Members also noted that population growth was expected to continue to support demand for housing over the medium term.
Conditions in the established housing market had remained weak in recent months, the April minutes noted.
"Housing prices had continued to fall in Sydney, Melbourne and Perth, and had declined a little in most other capital cities and regional areas.
"In March, Sydney prices were 13 per cent below their 2017 peak and Melbourne prices were 10 per cent below their peak.
"Although auction clearance rates in Sydney and Melbourne had increased over the first quarter of 2019, they remained at relatively low levels."
Members noted that in Perth, housing prices had declined over the previous year, while the rental vacancy rate had declined sharply and there were signs that newly advertised rents were starting to increase.
By contrast, rental vacancies in Sydney had risen, particularly in suburbs where the supply of new apartments had increased significantly.
Growth in consumption had clearly slowed in the second half of 2018, it noted.
"The weakness had been concentrated in discretionary items, especially those that have historically been most correlated with housing prices and housing turnover, such as motor vehicles and home furnishings.
"Retail sales data and contacts in the Bank's liaison program suggested that growth in housing-related consumption had remained soft in recent months."
Members noted that growth in household disposable income, which is an important driver of consumption growth, had been subdued for a number of years. 
In 2018, labour income growth had been above the very low rates seen in recent years, supported by a pick-up in growth in average hourly earnings and continued employment growth, but non-labour income growth had remained weak.
The RBA members observed that tax payments by households had been growing noticeably faster than income growth in recent years, partly because of efforts to increase tax compliance.
The members discussed scenarios in which a rate cut might be needed.
"Members agreed that inflation was likely to remain low for some time," the minutes noted.
"Members also discussed the scenario where inflation did not move any higher and unemployment trended up, noting that a decrease in the cash rate would likely be appropriate in these circumstances.
"They recognised that the effect on the economy of lower interest rates could be expected to be smaller than in the past, given the high level of household debt and the adjustment that was occurring in housing markets.
"Nevertheless, a lower level of interest rates could still be expected to support the economy through a depreciation of the exchange rate and by reducing required interest payments on borrowing, freeing up cash for other expenditure."
To read the full RBA minutes, <a href="/expert-insights/finance/minutes-of-april-2019-monetary-policy-meeting-of-the-reserve-bank-board">click here</a>.
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RBA notes larger-than-expected fall in dwelling investment

Rental vacancies continue to increase across most of Sydney: REINSW

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New figures have revealed national lending activity has slumped to the lowest levels in five years.
The AFG Mortgage Index and Competition Index released today showed lending volumes across Australia in the first three months of 2019 dropped 10 per cent on the previous quarter.
Volumes in the March quarter were 15 per cent lower than the same period last year.
The 23,049 loans lodged during the quarter represented the lowest number in six years, while the $11.6 billion volume was the lowest quarterly figure since 2014.
AFG Chief Executive Officer David Bailey said the numbers provide stark evidence that the lending environment has significantly deteriorated.
"It’s a wake-up call for policymakers.
"The softening of the residential market across the country is a real concern, with Sydney and Melbourne driving the downturn and some states enduring a prolonged period of falling activity.
“Despite moves by regulators to encourage activity, investment lending remains at an all-time low of 26 per cent amid the well- documented concerns around property values, particularly on the eastern seaboard.
“Today’s data confirms we have reached a critical time in the housing market cycle and we would urge policy makers to tread carefully in any regulatory responses flowing from the Royal Commission.
"This is a time for considered policy formulation that considers the full potential impact on the lending market. It is clear, the broader implications for the Australian economy are huge if we get it wrong.
“The volume of loans written in WA for the quarter of just over $1.3 billion represents the lowest volume seen in WA since the inception of the AFG Mortgage Index. Whilst there has been some talk of WA moving into a brighter resources-led period of sunshine, it is clear the local economy needs broader stimulus.”
The tight lending market and falling house prices have contributed to a decline in NSW volumes of almost 20 per cent on the same quarter in 2018. Victoria is down 16 per cent over the same period.
All other states are also much lower than the same time last year. The only lift in volume over the quarter was seen in the Northern Territory, with an increase in the average loan size and a decrease in Loan to Value Ratios.
Following the relaxation of APRA-imposed caps on Interest Only (IO) lending, AFG noted a small lift in IO lending driven by the major lenders.
Four years ago, fuelled largely by strong investor demand, Interest Only loans accounted for around 60 per cent of all loans written. Now, with investor loans accounting for a quarter of new business, Interest Only loans account for just 19 per cent of lodgements.
The breakdown of mortgages between major lenders – the ‘big four’ banks and their affiliated brands – and non-majors highlights the crucial role mortgage brokers play in delivering competition to the home loan sector.
The AFG Index showed the market share of non-majors has now been locked in above 40 per cent for more than a year despite a marginal increase for the majors to 58.6 per cent of total lodgements.
Mr Bailey said “The value mortgage brokers deliver by facilitating a competitive lending environment is most starkly shown by the ongoing decline in the market share of the major banks, which peaked in Q3 of 2013 at 78.2 per cent. Outside of the mortgage broking channel, the majors have control and dominate the market. The distribution capability provided by mortgage brokers enables the country’s non-major lenders to compete.
<a href="https://www.propertyobserver.com.au/images/2019/4/16/AFG%201.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/16/AFG%201.jpg" alt="">
Source: AFG
“With the sole exception of First Home Buyers, who remain the last bastion of major bank lending, the growth in non-major lending has been broadly uniform across all other customer types.”
Major lenders are ahead on fixed-rate loans, with a steady increase across the quarter, leaving four out of five homebuyers that chose the certainty of fixing their interest rates doing so with a major lender.
Examination of the overall volumes going to the major bank reveals the big losers over the past six months have been ANZ and NAB. NAB’s share has halved over the past six months to now be as low as five per cent.
The Westpac stable of brands emerged as big winners, as has Bankwest – whose renewed focus on broker and customer service has paid strong dividends in Western Australia. Bankwest accounts for more than one in every five WA originations. Together with CBA, Bankwest has a stranglehold on more than 35 per cent of all loans written in the State.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/16/AFG%202%20.jpg" alt="">
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/16/AFG%203.jpg" alt="">
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/16/AFG%204.jpg" alt="">
Source: AFG
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AFG report home loan activity falls to lowest in five years on back of credit squeeze

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Work on the new M4 tunnels from Homebush to Haberfield is almost complete with the project set to open in around four months.
The project is expected to taking around 10,000 trucks off Parramatta Road every day.
Premier Gladys Berejikilian and Minister for Roads Andrew Constance toured the nearly-completed M4 tunnels today, part of a seven kilometre section of WestConnex.
Berejikilian said the new M4 tunnels, themselves 5.5km long, would allow drivers from Western Sydney to bypass a significant section of stop-start traffic on Parramatta Road, and instead connect directly onto the City West Link.
“Within two years, around 67,000 trips are expected in the M4 tunnels every day, and this is still just the first stage of WestConnex,” Berejiklian said.
“Today we’ve seen first-hand that the tunnelling and road pavement for the long promised project has been completed. We are on the home straight for the new M4 tunnels, with fit-out of the tunnels now underway.”
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/11/Stage%201.jpg" alt="">
Constance thanked the communities of the Inner West for their patience while the work was undertaken.
“We appreciate the delivery of city-shaping infrastructure takes time, and it isn’t easy on those who live nearby. I look forward to the new M4 tunnels opening soon and taking thousands of vehicles off local roads,” Constance said.
Berejiklian said WestConnex will link Sydney’s west and southwest with the city,airport and port precinct in more than 30 kilometres of continuous motorway.
Upon completion, WestConnex will provide a bypass of up to 52 sets of traffic lights.
“Once all of WestConnex is complete in 2023, drivers will be able to get from Penrith to the Anzac Bridge without having to stop at a single traffic light and travel times from Parramatta to Sydney Airport will fall by up to 40 minutes. Traffic volumes on sections of Parramatta Road will also be reduced by more than 50 per cent,” Berejiklian said.
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New M4 tunnels one step closer to completion 

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GUEST OBSERVATION
Labor’s bold <a href="https://www.alp.org.au/negativegearing" target="_blank">stance on housing tax reform and investment</a> makes this one of the likely policy flashpoints in the coming election campaign. How does the Coalition government’s housing record stand up to scrutiny? What would be in prospect in a third Liberal-National term? And exactly what is Labor’s alternative pitch?
The Coalition record
Under the Abbott-Turnbull-Morrison governments we’ve seen a housing market featuring both rampant inflation and damaging volatility. Despite recent falls in some cities, late 2018 prices remained <a href="https://www.abs.gov.au/ausstats/meisubs.nsf/log?openagent&amp;641601.xls&amp;6416.0&amp;Time%20Series%20Spreadsheet&amp;1D907630FB3718CACA2583C1000F691C&amp;0&amp;Dec%202018&amp;19.03.2019&amp;Latest" target="_blank">29% up on 2013</a> across the country – 42% in Sydney.
While first home buyer numbers <a href="https://www.abs.gov.au/ausstats/meisubs.nsf/log?openagent&amp;560112.xls&amp;5601.0&amp;Time%20Series%20Spreadsheet&amp;55292123715E3E73CA2583B90076B373&amp;0&amp;Jan%202019&amp;12.03.2019&amp;Latest" target="_blank">grew in 2018</a>, the total remained well below 2007 (pre-GFC) levels. Unless this changes the <a href="https://grattan.edu.au/wp-content/uploads/2018/03/901-Housing-affordability.pdf" target="_blank">rate of young adult home ownership</a> is likely to drift still lower.
During this term of government, official action to moderate housing market instability has been left almost entirely to the Reserve Bank of Australia and the Australian Prudential Regulation Authority, through their influence on the cost and accessibility of housing finance.
The government has mostly turned a blind eye to more far-reaching reforms that could squarely address Australia’s boom-and-bust housing dynamic. The prime source of recent volatility has been the erratic behaviour of landlord investors, as the chart below shows. They are responsible for <a href="http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/5601.0Jan%202019?OpenDocument" target="_blank">around 35% of residential transactions</a> across the country.
<a href="https://images.theconversation.com/files/268262/original/file-20190409-2912-o4xj7z.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/268262/original/file-20190409-2912-o4xj7z.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt=""></a>
<a class="source" href="https://www.propertyobserver.com.au/http://www.abs.gov.au/ausstats/abs@.nsf/mf/5601.0" target="_blank">ABS Cat 5601.0</a>, Author provided
Australia’s unusually favourable tax settings on negative gearing and capital gains tax discount compound investors’ speculative instincts. Calls for reform have been growing, from sources as diverse as a <a href="https://www.smh.com.au/national/nsw/nsw-planning-minister-rob-stokes-lashes-out-at-negative-gearing-20161124-gswtrz" target="_blank">Liberal state government minister</a> and the <a href="http://www.rba.gov.au/publications/submissions/housing-and-housing-finance/inquiry-into-home-ownership/pdf/inquiry-into-home-ownership.pdf" target="_blank">Reserve Bank</a>. And the annual cost to the public purse has been rising – most recently estimated at <a href="https://grattan.edu.au/report/hot-property/" target="_blank">A$11.7 billion</a>. Despite this, federal Coalition ministers have resisted any paring back of these concessions.
The Labor alternative
The ALP enters this election campaign restating its 2016 policy to restrict current negative gearing to newly built properties and to halve the CGT discount for all newly purchased rental homes.
While sectional interests have echoed government claims of <a href="https://www.news.com.au/finance/real-estate/buying/inviting-a-crash-pm-issues-ominous-warning-as-he-defends-governments-housing-policies/news-story/4c7005bf1208054b4569eabecc78dfe2" target="_blank">damaging market impacts</a>, mainstream economists view the policy as <a href="https://www.theage.com.au/politics/federal/negative-gearing-changes-will-affect-us-all-mostly-for-the-better-20190208-p50wjn" target="_blank">a necessary structural reform</a> that will slightly moderate house price inflation over the longer term. However, with all existing investments exempt from proposed changes, the budgetary pay-off would be modest at first.
Labor also advocates rebalancing the <a href="https://www.alp.org.au/media/1657/190328_factsheet_housing.pdf" target="_blank">tax treatment of large-scale institutional investment</a> in rental housing. According to industry proponents, resulting “build to rent” development could help <a href="http://blogs.unsw.edu.au/cityfutures/blog/2017/05/can-institutional-funding-be-channelled-into-rental-housing/" target="_blank">to diversify the housing market and provide a better quality tenancy offer</a>. It would also have the benefit of introducing a counter-cyclical component to residential construction.
Housing stress on the rise
The Coalition government has also presided over intensifying stress at the lower end of the housing market since 2013. Homelessness has been <a href="https://www.launchhousing.org.au/site/wp-content/uploads/2018/05/LaunchHousing_AHM2018_Report.pdf" target="_blank">increasing by 2.8% a year</a>. The proportion of low-income tenants facing unaffordable rents <a href="https://www.abs.gov.au/AUSSTATS/SUBSCRIBER.NSF/log?openagent&amp;41300_table22_2015-16.xls&amp;4130.0&amp;Data%20Cubes&amp;A58C0970758A300FCA2581B700185D9E&amp;0&amp;2015-16&amp;13.10.2017&amp;Latest" target="_blank">rose by four percentage points</a> in the four years to 2015-16.
At least in part, these trends reflect Coalition government disinterest. While slightly moderated under the Turnbull-Morrison administrations, the die was cast with the incoming government’s 2013 decision to abolish the post of housing minister and by the Abbott inclination to re-emphasise <a href="https://www.propertyobserver.com.au/https://apo.org.au/node/56122" target="_blank">a minimalist vision of Federal government responsibilities</a>. The new government was quick to abandon <a href="https://www.propertyobserver.com.au/http://www.abc.net.au/radionational/programs/breakfast/homelessness/4764790" target="_blank">Kevin Rudd’s 2008 commitment to halve homelessness by 2020</a>.
To the credit of the Turnbull-Morrison governments, a project begun in 2016, when Morrison was treasurer, has created a <a href="https://theconversation.com/government-guarantee-opens-investment-highway-to-affordable-housing-88549" target="_blank">new institution</a> to open up access to cheaper, longer-term finance for community housing providers.
Through <a href="https://www.ahuri.edu.au/news-and-media/news/national-housing-finance-and-investment-corporation-issues-first-bond-to-community-housing-providers" target="_blank">its first bond, issued only last month</a>, the National Housing Finance and Investment Corporation (NHFIC) has enabled six of these providers to secure debt finance on much-improved terms. This will boost recipient organisations’ financial “headroom”. A worthwhile – but modest and one-time-only – addition to affordable housing stock may result.
Subsidies needed to restore supply
Importantly, though, the cheaper debt finance made available through the NHFIC only narrows – rather than bridges – the gap between the cost of delivering social housing and the rents that low-income Australians can afford.
A major social housing investment program will require <a href="https://www.propertyobserver.com.au/https://www.ahuri.edu.au/research/final-reports/306" target="_blank">a complementary government subsidy</a>. The treasurer’s own <a href="https://treasury.gov.au/sites/default/files/2019-03/C2016-050_Final_report.pdf" target="_blank">advisory working group has unambiguously stated the need</a> for such provision.
Curiously, the government has yet to give any sign it intends to finish what it started here. Without the necessary gap-filling subsidy, there must be a danger that – perhaps after exhausting the potential for refinancing community housing providers – the NHFIC could become a white elephant.
Indeed, the Coalition’s most significant action on affordable rental housing supply was its 2014 cancellation of the Rudd government’s National Rental Affordability Scheme. Mainly targeted at low-income workers, the NRAS generated 38,000 discount-to-market rental units (against an original target of 50,000).
The ALP is now promising to re-establish a large-scale supply program. As well as restricting landlord investor tax concessions to new-build properties, Labor’s 2019 pitch includes <a href="http://blogs.unsw.edu.au/cityfutures/blog/2018/12/shorten-places-housing-at-the-centre-of-the-2019-election/" target="_blank">a program similar to NRAS</a> with the aim of generating 250,000 new affordable rental homes over a decade. A shorter-term target of 20,000 dwellings during the next term of government would equal the Rudd government’s 2009-12 social housing stimulus, which helped to stave off the GFC.
Supported through subsidy in the form of annual investor incentive payments of $8,500 for 15 years, the program would be mainly targeted at <a href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=4&amp;ved=2ahUKEwjKh4HTiaPhAhUs0oMKHVmNCh0QFjADegQIAhAC&amp;url=https%3A%2F%2Fwww.alp.org.au%2Fmedia%2F1506%2F181216_affordable_housing_for_renters_fact_sheet.pdf&amp;usg=AOvVaw0VTUS5Phui2MZch0wiSeK6" target="_blank">“key workers” and “lower-income families”</a>. Tenants would pay rents of 20-25% below market levels. Beyond this, the program could help more disadvantaged Australians, but only with matching financial assistance or other subsidies from states and territories, which would enable rents to be even lower.
The Coalition’s current offer
Other than its push-back on Labor proposals, the Coalition has – as yet – said little about its election policy on housing. Last week’s budget offered nothing to suggest that, beyond a defence of the policy status quo, housing initiatives are front of mind for the Treasurer or Prime Minister.
The government will maintain the NHFIC, one of its really positive recent moves. The complementary – and overdue – <a href="http://www.nrsch.gov.au/news_and_events/nrsch-review-discussion-paper" target="_blank">review of social housing regulation</a> will also continue. We can probably expect more City Deals, which may even, as in the recent <a href="https://minister.infrastructure.gov.au/tudge/releases/2019/february/at016_2019.aspx" target="_blank">Hobart announcement</a>, include some provision for affordable housing.
The budget’s infrastructure program, including fast urban rail, might have implications for housing accessibility and affordability. But, if so, these aspects don’t feature prominently in the announcements.
But beyond continuing existing policy directions, nothing much seems likely to be added to the Coalition’s 2019-22 offer on housing. It isn’t proposing any action on the imbalanced tax settings that fuel housing market volatility, let alone any policy to boost affordable housing supply directly. Neither is there any sign of support for the build-to-rent sector, which promises much but appears as yet still-born.
It seems fear of change continues to dominate Coalition thinking on housing. The overriding priority remains to support existing property values, rather than to act on unaffordability – a Boomer protection racket par excellence! Recent ministerial statements offer little indication that a re-elected Coalition government would make a serious effort to fix Australia’s increasingly under-performing housing system.<img src="https://counter.theconversation.com/content/113556/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;">
Hal Pawson, Associate Director - City Futures - Urban Policy and Strategy, City Futures Research Centre, Housing Policy and Practice, UNSW and Bill Randolph, Director, City Futures Research Centre, Faculty of the Built Environment, UNSW
This article is republished from <a href="http://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/on-housing-theres-clear-blue-water-between-the-main-parties-113556" target="_blank">original article</a>.
This article has been updated to clarify Labor’s policy on negative gearing and capital gains tax and to correct the number of community housing providers financed by the NHFIC.
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On housing, there’s clear blue water between the main parties: Hal Pawson

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GUEST OBSERVATION
Housing affordability for new mortgage borrowers in Australia, which improved over the year to March 2019, will continue to improve over the next 12 months, because of declining housing prices, according to Moody's Investor Service.
More affordable housing reduces the credit risks of newly originated mortgages, which is positive for new residential mortgage-backed securities (RMBS) backed by such loans.
The latest report noted the proportion of household income needed to meet repayments on new Australian mortgages - our measure of housing affordability - declined to an average 26.5% in March 2019, from 28.7% a year earlier.
Affordability improved because housing prices declined, while average incomes also increased modestly. We expect housing prices to continue to decline moderately over the next year, driving further improvements in housing affordability.
It noted that housing affordability improved in most cities. Housing affordability improved in Sydney, Melbourne, Brisbane and Perth over the year to March 2019, but deteriorated in Adelaide. The biggest improvement in housing affordability was in Sydney, where housing prices declined 10.7% over the year to March.
Sydney is the most sensitive to housing price, income and interest rate changes. We tested the impact of changes to housing prices, incomes and interest rates on housing affordability. Of all Australian capital cities,
Sydney is the most sensitive to changes in the three variables.
Housing affordability for new mortgage borrowers in Australia, which improved over the year to March 2019, will continue to improve over the next 12 months, because of declining housing prices.
More affordable housing reduces the credit risks of newly originated mortgages, which is positive for new RMBS backed by such loans.
Over the year to March 2019, the proportion of household income needed to meet mortgage repayments - our measure of housing affordability - declined on average in Australia, driven in large part by declining housing prices.
Australian households with two income earners taking out an 80% loan-to-value (LTV) mortgage needed an average 26.5% of their monthly income to meet monthly mortgage repayments in March 2019, down from 28.7% in March 2018 and below the 10-year average of 28.7%.
Median housing prices declined by 6.5% over the year to March 2019, while incomes increased an average 2.8%, improving the affordability of new mortgages. Average headline mortgage interest rates increased slightly to 5.4% in March 2019 from 5.2% a year earlier, but this was outweighed by declining house prices and rising incomes.
We expect housing prices to continue to decline moderately over the next year, reflecting reduced credit supply by the banking sector and a seeming reduction in demand from households.
Accordingly, we expect housing affordability to continue to improve over the next year.
Housing affordability improved in Sydney, Melbourne, Brisbane and Perth over the year to March 2019, but deteriorated in Adelaide.
In Sydney, the proportion of household income needed to meet mortgage repayments declined 4.7 percentage points to 33.2% over the year to March 2019, the biggest improvement of any capital city, though Sydney remains the least affordable city for housing in Australia.
Median housing prices declined 10.7% in Sydney over the year to March 2019. We expect housing prices in Sydney to continue to decline and for housing affordability in the city to continue to improve over the next year.
In Melbourne, the proportion of household income needed to meet mortgage repayments declined to 29.4% in March 2019 from 31.6% a year earlier. Housing prices in Melbourne declined 5.3% over the year to March 2019, while average weekly incomes increased 3.2%. We expect housing prices in Melbourne to continue to decline over the next year, which is positive for housing affordability.
In Brisbane, the proportion of monthly income needed to meet monthly mortgage repayments declined by 1.3 percentage point to 22.5% over the year to March 2019. Housing prices declined 1.2% over the year.
In Perth, the proportion of income needed for mortgage repayments declined, albeit marginally, to 19.4% in March 2019, from 19.7% a year earlier. Perth is the most affordable capital city for housing in Australia.
In Adelaide, the proportion of household income needed to meet mortgage repayments increased moderately by 1.3 percentage point to 23.1% over the year to March 2019. Median housing prices in the city increased 4.6% over the year.
On average across Australia and in each capital city, housing affordability in March 2019 was better than the respective 10-year averages (Exhibit 1).
<a href="https://www.propertyobserver.com.au/images/2019/4/15/exhibit%201%20.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/15/exhibit%201%20.jpg" alt=""> 
The affordability of both houses and apartments improved in all cities except Adelaide, where the affordability of both types of dwelling deteriorated over the year to March 2019 (Exhibit 2).
<a href="https://www.propertyobserver.com.au/images/2019/4/15/exhibit%202a.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/15/exhibit%202a.jpg" alt="">
 
<a href="https://www.propertyobserver.com.au/images/2019/4/15/exhibit%202b.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/15/exhibit%202b.jpg" alt=""> 
Sydney most sensitive to housing price, income and interest rate changes
We tested the impact of changes to housing prices, incomes and interest rates on housing affordability. Of all Australian capital cities, Sydney is the most sensitive to changes in the three variables.
Sensitivity test 1: Housing price changes
Our sensitivity test shows that for every 10% change in housing prices, the percentage of household income needed to meet mortgage repayments changes by 2.6 percentage points on average in Australia.
In Sydney, the least affordable city, a 10% change in housing prices results in a 3.3 percentage-point change in the percentage of household income needed to meet mortgage repayments, the most of any Australian city.
Exhibit 3 shows the impact on housing affordability of (1) a 10% increase in median housing prices and (2) a 10% decrease in median housing prices.
<a href="https://www.propertyobserver.com.au/images/2019/4/15/exhibit%203.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/15/exhibit%203.jpg" alt=""> 
Sensitivity test 2: Income changes
Our sensitivity test shows that if average household income decreases by 5%, the percentage of household income needed to meet mortgage repayments increases by 1.4 percentage point on average across Australia. If average household income increases by 5%, the percentage of household income needed to meet mortgage repayments decreases by 1.3 percentage point.
In Sydney, a 5% decrease in household income results in a 1.7 percentage point increase in the percentage of household income needed to meet mortgage repayments, the most of any Australian city. A 5% increase in household income in Sydney results in a 1.6 percentage-point decrease in the percentage of household income needed to meet mortgage repayments.
Exhibit 4 shows the impact on housing affordability of (1) a 5% decrease in household income and (2) a 5% increase in household income.
<a href="https://www.propertyobserver.com.au/images/2019/4/15/exhibit%204.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/15/exhibit%204.jpg" alt=""> 
Sensitivity test 3: Interest rate changes
Our sensitivity test shows that for every 0.25 percentage point change in mortgage interest rates, the percentage of household income needed to meet mortgage repayments changes by 0.7 percentage point on average across Australia.
In Sydney, a 0.25 percentage point change in interest rates results in a 0.8 percentage point change in the percentage of household income needed to meet repayments, the most of any Australian city.
Exhibit 5 shows the impact on affordability of (1) a 0.25 percentage point interest rate increase, (2) a 0.25 percentage point interest rate decrease and (3) mortgage interest rates rising to the 10-year average of 6.1%.
<a href="https://www.propertyobserver.com.au/images/2019/4/15/exhibit%205.jpg" target="_blank">Click here </a>to enlarge: 
 <img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/15/exhibit%205.jpg" alt="">
Housing prices, income and interest rates drive affordability
We measure housing affordability based on three inputs — median housing prices, average household income and standard variable mortgage interest rates (Exhibit 6).
<a href="https://www.propertyobserver.com.au/images/2019/4/15/exhibit%206.jpg" target="_blank">Click here</a> to enlarge: 
 <img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/15/exhibit%206.jpg" alt="">
Median housing sales prices decreased
Median housing prices decreased by 6.5% on average across Australia over the year to March 2019 (Exhibit 7). Median prices declined in Sydney (-10.7%), Melbourne (-5.3%), Perth (-5.3%) and Brisbane (-1.2%). Median prices increased in Adelaide (+4.6%).
<a href="https://www.propertyobserver.com.au/images/2019/4/15/exhibit%207.jpg" target="_blank">Click here </a>to enlarge: 
 <img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/15/exhibit%207.jpg" alt="">
Household income increased
Average weekly incomes increased moderately by 2.8% on average across Australia over the year to November 2018 (Exhibit 8).2 Incomes increased in all cities except Perth.
<a href="https://www.propertyobserver.com.au/images/2019/4/15/exhibit%208.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/15/exhibit%208.jpg" alt=""> 
Alena Chen is Vice President at Moody’s.
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Housing affordability rises in Australia as prices continue to fall: Moody's Alena Chen

Developer <a href="https://www.apartments.com.au/developers/bottega-property-group">Bottega House</a> has secured council approval for its first Brisbane project - a $270 million luxury residential development on an absolute riverfront site in leafy St Lucia.&nbsp;

The 15-storey project, known as <a href="https://www.apartments.com.au/new-apartments/st-lucia-by-bottega-house-180-macquarie-street-st-lucia-qld-4067">St Lucia by Bottega House</a> , will occupy a prime north-facing site at 178-180 Macquarie Street, directly fronting the Brisbane River in the established inner-west suburb known for its rowing clubs, golf courses and sprawling University of Queensland campus.&nbsp;

St Lucia by Bottega House will feature a suite of amenities including dedicated wellness spaces, a mineral pool and cold plunge. The project has been positioned to attract affluent owner-occupiers seeking high-quality, house-sized apartments.&nbsp;

Bottega House has been set up by co-directors Nick Malloch, Louis Mennes and Craig Marsh.

Malloch said the project drew inspiration from its Brisbane River setting and leafy inner-west surrounds, while responding to the demands of discerning locals looking to transition from freestanding homes into apartment living.&nbsp;

"With an expansive river frontage and lush green surrounds, we knew we had to create something special that reflects the natural beauty of the location while offering residents masterfully crafted homes," said Malloch.&nbsp;

"Our intent was to complement the project's quiet, private setting by introducing residences that offer a calm retreat and sanctuary from the everyday. The result is a harmonious blend of architecture, interiors and amenity that emphasises wellbeing, comfort and beauty without excess."&nbsp;

Malloch added that project consultants had been carefully selected in alignment with Bottega House's commitment to care, quality and attention to detail. The design team includes architects <a href="https://www.apartments.com.au/architects/plus-studio">Plus Studio</a>, interiors practice <a href="https://www.apartments.com.au/interior-designers/mim-design">Mim Design</a> and landscaping by <a href="https://www.apartments.com.au/architects/urbis">Urbis</a>.&nbsp;

Three-bedroom apartments are expected to start around $5 millio. Selling agents Keenan &amp; Byrne said the pricing strategy for the project was anticipated to achieve upwards of $25,500 per square metre.&nbsp;

The project's development approval this week follows the success of Bottega House's inaugural Queensland project - a 22-storey collection of full-floor sky homes at Broadbeach on the Gold Coast which included the sale of a two-storey penthouse at a record price for a beachside residence.&nbsp;

St Lucia by Bottega House is expected to launch to market in November, with construction anticipated to be completed mid 2029.

[smartcode_project_cta:default project_id=151826]

Joel Robinson

Bottega House to make Brisbane debut with St Lucia riverfront apartment development

<a href="https://www.apartments.com.au/developers/sherpa-property-group">Sherpa Property Group</a> is advancing its affordable apartment model into Brisbane with the acquisition of another site at Cordelia Street in South Brisbane for $27 million.

Sherpa, which has a $1.7 billion pipeline across Southeast Queensland, intends to bring a cohort of apartments exclusively for first homebuyers into its proposed 186-apartment project to be built at 2 Cordelia Street.

The Sherpa model has already been incredibly well received from their Gold Coast projects, where Sherpa Group set aside a number of apartments exclusively for first homebuyers.

The new $320 million project marks Sherpa Group's second development in Brisbane, following its $255 million Symphony project, also on Cordelia Street, which is currently under construction.

Symphony will deliver 146 apartments across 28 levels, offering a mix of one, two and three-bedroom apartments. With 114 already sold, construction by <a href="https://www.apartments.com.au/builders/lps-group">LPS Group</a> is scheduled for completion in 2028.

[smartcode_project:default project_id=7574 project_image_fid=351654]

Sherpa Founder, Christie Leet, said the company was excited to be venturing into Brisbane for its second residential project.

“We’re big believers in the future of Brisbane as we lead into the 2032 Olympics and beyond,” Leet said.

“The success of Symphony has guided us into what will be our second project and we look forward to submitting our plans with council soon so we can deliver yet another quality project to the inner city residential market.

“Our Flourish model has been very well received both in Brisbane and the Gold Coast, and we’re excited to be able to offer some of these apartments again exclusively to first homebuyers to help get them into the property market.

“The model has been extraordinarily well received in our previous projects and it is something we are committed to moving forward.”

2 Cordelia Street will be designed by <a href="https://www.apartments.com.au/architects/hal-architects">HAL Architects</a> &amp; Finegrain and will include Sherpa’s signature residential amenities including pool, gym, recreation, wellness and work from home spaces.

The project will feature ground-floor commercial space, creating a vibrant amenity for residents and the surrounding community.

A development application will be lodged with Brisbane City Council in August on the code compliant site and will be launched to the market early 2027.

Sherpa acquires new site for second Brisbane apartment tower

One of North Sydney's best-known commercial buildings could become hundreds of new homes, with insurance giant Zurich Australia lodging a State Significant Development Application (SSDA) to transform 5 Blue Street into a mixed-use residential development above North Sydney Station.

Rather than demolishing the existing building and starting again, Zurich is proposing an adaptive reuse project that would convert the landmark office building into a 15-level residential development delivering 62 apartments, 86 affordable co-living dwellings, activated retail and significant upgrades to the Blue Street Plaza.

The proposal reflects a growing trend of commercial property owners repositioning ageing office assets into residential housing as Sydney grapples with housing supply shortages and changing workplace demand.

<img alt="Zurich" data-entity-type="file" data-entity-uuid="0bba7d12-06dc-4375-aad7-238c94b21ac5" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-22%20at%2010.42.05%E2%80%AFAM.png?VersionId=NJl5oLAEBDGuPmY3RnyliKODjMc8lvRh" />

Located directly above North Sydney Metro and train station, the 3,051 sqm site occupies one of the most strategically positioned parcels of land on Sydney's Lower North Shore.

Designed by fjcstudio, the proposal seeks to retain and adapt much of the existing structure while creating a contemporary residential address that better connects with the public domain surrounding North Sydney Station.

The application proposes two basement levels, ground floor retail, affordable co-living accommodation across the podium levels, and apartments above, while preserving and enhancing the publicly accessible Blue Street Plaza.

Rather than pursuing maximum apartment numbers, Zurich has opted for a housing mix heavily weighted towards larger owner-occupier residences.

The proposal includes 62 build-to-sell apartments comprising 12 one-bedroom, 19 two-bedroom, 29 three-bedroom apartments and two premium penthouses. It also incorporates 86 affordable co-living dwellings, which would be managed in perpetuity by a Community Housing Provider.

That balance between traditional apartments and affordable housing reflects the NSW Government's push to increase housing diversity around major transport infrastructure.

The proposal has been lodged concurrently with a rezoning application, with Zurich arguing the site is ideally positioned to support additional housing given its immediate proximity to public transport, employment and services.

"The proposal aims to respond to the housing challenges facing Sydney through the delivery of diverse housing types in a highly accessible location," the design report by fjcstudio states. It also seeks to improve pedestrian amenity through upgrades to Blue Street Plaza while creating a high-performing residential building that responds to the surrounding context.

<img alt="Zurich" data-entity-type="file" data-entity-uuid="36082e15-c636-4481-bb68-5a5f6443fe39" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-22%20at%2010.41.36%E2%80%AFAM.png?VersionId=5P6VD.fvmqjQfIG3TWWMRXxQWiQBjeFB" />

Rather than replacing the commercial building, fjcstudio has developed a design that works with the existing structural framework above the rail corridor, an approach that significantly reduces demolition while allowing the site to be repositioned as a mixed-use residential precinct.

The existing structural constraints have informed much of the building's design, including its relationship with Blue Street and surrounding public spaces.

The building has been designed as a slender tower rising above a clearly defined podium, with vertically expressed façades intended to reduce the perceived bulk while reinforcing North Sydney's emerging skyline.

According to fjcstudio, the architectural language responds directly to the surrounding commercial towers while maintaining a finer grain expression more closely aligned with the neighbouring Lavender Bay streetscape.

The tower incorporates articulated façade elements, landscaped podium edges and recessed upper levels to soften its appearance and improve pedestrian amenity below.

A significant component of the proposal is the revitalisation of Blue Street Plaza.

The existing public space has long served as one of the primary pedestrian connections between North Sydney Station, Greenwood Plaza and Blue Street, yet its role is expected to become even more important following the opening of Sydney Metro.

Zurich's proposal seeks to strengthen that role by improving landscaping, introducing new retail frontages, enhancing pedestrian permeability and creating more active edges throughout the day and evening.

Ground floor retail would wrap the plaza, while separate residential and co-living entries have been designed to improve wayfinding without reducing street activation.

Landscape design has been integrated throughout the podium and public realm, softening what is currently one of the most heavily urbanised parts of North Sydney.

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fjcstudio has carefully oriented apartments towards Sydney Harbour and the CBD while using privacy blades and articulated façades to minimise overlooking between neighbouring buildings.

Large framed openings along the western elevation maximise harbour outlooks, while the eastern apartments have been angled towards the south-east to improve privacy from neighbouring development.

The project forms part of the continuing transformation of North Sydney from a predominantly commercial CBD into a genuine mixed-use city centre.

Since the completion of Victoria Cross Metro Station, developers have increasingly shifted their attention towards residential projects capable of leveraging the area's unparalleled transport connectivity.

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FiveX recently lodged plans for a 61-storey, 490-apartment tower that would become one of the tallest residential buildings in North Sydney if approved.

Aqualand continues to expand its Lower North Shore presence following the completion of AURA on Walker Street and its recent St Leonards and Roseville proposals.

Developers are also progressing projects throughout Walker Street, Miller Street and the Victoria Cross precinct as demand for well-located owner-occupier apartments continues to strengthen.

First look: Zurich targets North Sydney office conversion with 148-unit proposal above Metro station

Busy developer Aqualand Prestige has formally taken the next step in its expansion across Sydney's Lower North Shore, lodging a State Significant Development Application (SSDA) for its long-held Archer Street site in Chatswood.

The application covers <a href="https://www.apartments.com.au/new-apartments/51-55-archer-street-chatswood-nsw-2067">51-55 Archer Street</a>, a 1,767 sqm amalgamated site on the eastern edge of the Chatswood CBD, where the developer is seeking approval for a 45-level mixed-use tower delivering 114 apartments, including a significant affordable housing component, alongside retail, commercial space and six basement levels of parking.

The SSDA marks the latest milestone for a project Aqualand has been quietly progressing over the past two years. The developer first secured the site for its Aqualand Prestige platform before undertaking an alternative design excellence process with PTW Architects, ultimately avoiding a formal design competition through the Housing Delivery Authority pathway.

The proposal has evolved considerably from Aqualand's original concept. The revised scheme has been designed around larger owner-occupier product, with an unusually high proportion of three and four-bedroom apartments, targeting the more affluent buyer profile, and downsizer, emerging across the North Shore.

<img alt="Archer St" data-entity-type="file" data-entity-uuid="0171204c-5811-41b5-9b09-2335d1b7c3d0" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-22%20at%208.52.48%E2%80%AFAM.png?VersionId=6YTuxfq.puZo7k2wbfgemcO5K3QfXYGQ" />

The 114-apartment mix comprises six studios, 27 one-bedroom apartments, 18 two-bedroom apartments, 50 three-bedroom residences and 13 four-bedroom homes. A quarter of the building will be dedicated to affordable housing, well above the mandated 15 per cent&nbsp;

PTW has structured the building vertically, with affordable housing across levels one to six, premium apartments through levels seven to 31, duplex skyhomes on klevels 32 to 43, a penthouse on level 44, and a rooftop plant level above. Six basement levels will provide resident parking and servicing.

The tower is proposed to reach approximately 154 metres, placing it among a growing collection of residential high-rises transforming Chatswood's skyline.

Rather than competing purely on height, PTW says the design has been driven by creating a slimmer tower capable of delivering significantly larger apartments.

"The primary objective of this project was to create a distinctive building that stands out from the recently approved or built structures in the Chatswood area," the design report states, noting the structural efficiency allows greater investment into apartment quality and resident amenity.

Residents would have access to more than 450 sqm of communal open space including landscaped gardens, swimming pool, rooftop entertaining areas, fitness spaces, community gardens, children's play areas and barbecue facilities.

A major focus of the design has been the public domain.

The ground plane has been opened up through landscaped terraces inspired by Willoughby's sandstone ridges, with native planting, public seating, artwork, retail activation and a series of gathering spaces intended to soften what has traditionally been a hard commercial streetscape.

The landscape strategy references Blue Gum forests once common throughout the area, while incorporating Indigenous storytelling, public art and lighting installations to strengthen the connection to Country.

Chatswood has been one of Sydney's busiest apartment markets over the past 12 months, with a steady pipeline of both new project launches and fresh development applications.

Hyecorp recently launched Celine, a 122-apartment development just along Archer Street, while Changfa and Huirong Group are progressing The Anderson, an 84-apartment project on Anderson Street.

Develotek recently secured approval for a 101-apartment tower on Pacific Highway, while Tian An LFD received the green light for Hammond Greens, its apartment development on the edge of the Chatswood Bowling Club.

Commercial property developer FiveX is also making its move into the residential market. Last month it lodged plans for a 61-storey tower with 490 apartments, which, if approved, would become one of the tallest residential buildings in Chatswood.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/first-look-fivex-targets-chatswood-skyline-with-61-storey-tower-after-north-sydney-plans">First look: FiveX targets Chatswood skyline with 61-storey tower after North Sydney plans</a>

Aqualand is also expanding its development pipeline following the launch of its luxury residential brand, Aqualand Prestige. The developer has delivered a string of high-end apartment projects across Sydney's affluent suburbs over the past decade, most recently AURA by Aqualand on Walker Street in North Sydney.

[smartcode_project:default project_id=30959 project_image_fid=292863]

It has since quietly assembled its next wave of projects.

Earlier this year Aqualand launched Boronia in Roseville, a boutique 111-apartment development on Larkin Street. The project is one of the first significant apartment developments to launch in the suburb ahead of what is expected to become one of Sydney's most active new housing precincts under the NSW Government's Low and Mid-Rise Housing reforms, which allow greater density around train stations.

[smartcode_project:default project_id=152095 project_image_fid=373685]

The developer has also lodged plans for a two-tower, 413-apartment development on Herbert Street in nearby St Leonards, further strengthening its presence across the Lower North Shore.

Beyond that, Aqualand remains behind the final stage of Barangaroo, where plans will deliver a five-hectare mixed-use precinct comprising new homes, retail, hospitality and community facilities, alongside a new Metro entrance and more than two hectares of public open space, completing the Barangaroo precinct.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/central-barangaroo-development-takes-big-step-with-concept-proposal-approval">Central Barangaroo development takes big step with concept proposal approval</a>

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/first-look-aqualand-joins-st-leonards-apartment-party">First look: Aqualand joins St Leonards apartment party</a> 
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First look: Aqualand pushes ahead with Chatswood apartment tower as SSDA lodged for Archer Street

Mass timber is becoming an increasingly popular construction material in apartment developments, but Adelaide developer <a href="https://www.apartments.com.au/developers/otello">Otello</a> is taking the approach a step further.

At its new <a href="https://www.apartments.com.au/new-apartments/flowe-bowden-18-gibson-street-bowden-sa-5007">Flowe Bowden</a> development, the exposed cross-laminated timber (CLT) structure isn't just about reducing the building's environmental footprint. It also forms the foundation of a broader wellness strategy, influencing everything from indoor air quality and natural materials to the way residents move through and experience the building.

The 115-apartment mixed-use development, designed by Melbourne-based architecture practice Fieldwork, will occupy a prominent island site opposite Bowden Village Reserve, combining one, two and three-bedroom apartments with retail and a dedicated wellness destination.

[smartcode_project:default project_id=152022 project_image_fid=375528]

Wellness isn't confined to a gym or shared resident facility at Flowe. Instead, Fieldwork embedded the concept into the building itself.

The development has been split into two residential wings connected by a naturally ventilated central breezeway, replacing traditional enclosed corridors with open-air walkways that improve natural light, encourage cross ventilation and create more opportunities for neighbourly interaction.

"Rather than treating wellness as something that only happens on the ground floor, our response integrates it throughout the building, which led us to ask what it really means to design a healthy building," Fieldwork Director Quino Holland said.

[smartcode_project:default project_id=152022 project_image_fid=375531]

The building's architecture also reflects Bowden's industrial heritage. The lower podium references the area's historic brick and sandstone buildings, while the upper levels transition to exposed CLT, allowing the timber structure to become a defining feature throughout the apartments and shared spaces.

The use of mass timber sits alongside a range of sustainability initiatives, including a fully electric, gas-free design, rooftop solar and a targeted 5 Star Green Star rating.

[smartcode_project:default project_id=152022 project_image_fid=375524]

Inside the residences, the focus remains on natural, durable materials. Blackbutt engineered timber flooring, exposed CLT ceilings, porcelain surfaces and warm timber joinery create a calming interior palette, while low-VOC finishes and responsibly sourced materials have been selected to improve indoor air quality.

Kitchens have been designed as the centrepiece of each apartment, featuring porcelain island benchtops, timber-look cabinetry and brushed steel tapware, with layouts that maximise natural light and ventilation.

[smartcode_project:default project_id=152022 project_image_fid=375530]

The more traditional interpretation of wellness comes in the form of Level Eleven, a two-storey wellness club spanning the ground floor, mezzanine and first floor.

The facility will include a gym, yoga and reformer Pilates studios, Finnish and infrared saunas, magnesium hot and cold plunge pools, and dedicated recovery spaces. Unlike many residential wellness facilities, Level Eleven will also operate commercially, allowing the broader Bowden community to access the venue while giving residents exclusive membership benefits.

The ground floor has also been designed around everyday living. A café overlooking Bowden Village Reserve will activate the street frontage, while a bike workshop with tool storage, co-working space and dog wash has been incorporated to support daily routines and encourage interaction between residents.

"Flowe brings together my two biggest passions, creating places and creating healthier lives," Otello founder Daniel Harris said.

"We wanted to create something Adelaide hasn't seen before, a genuinely healthy building, where the way you live is lifted without even trying."

Flowe is positioned directly opposite Bowden Village Reserve and within walking distance of Bowden Railway Station and the Adelaide Entertainment Centre, placing future residents just minutes from the Adelaide CBD while remaining connected to one of the city's most established urban renewal precincts.

[smartcode_project_cta:default project_id=152022]

Staff reporter

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