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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

For most new apartment buildings, the Owners Corporation starts life with little more than a bank account and the first quarterly strata levies.

At <a href="https://www.apartments.com.au/buildings/9-gay-street-castle-hill-9-gay-street-castle-hill-nsw-2154">9 Gay Street</a> in <a href="https://www.apartments.com.au/developments/castle-hill-nsw-2154">Castle Hill</a>, it starts with around $7 million in reserve.

It's an unusual legacy of what was once one of Sydney's highest-profile apartment remediation projects. When the development, originally known as Skyview and built by disgraced developer Top Place, came under scrutiny by then NSW Building Commissioner David Chandler, an $11 million remediation bond was negotiated to ensure any building defects could be fully rectified.

The building underwent an 18-month remediation program, during which around $4 million of that bond was spent bringing the building up to the standard it should have been in from the outset.

After extensive inspections, all active rectification orders have been lifted. What's more, around $7.2 million remains secured for the Owners Corporation for the next 15 years.

In a twist few would have predicted, what began as a significant concern for purchasers has left the building with something almost unheard of in the apartment market: a multi-million-dollar financial reserve from day one.

[smartcode_project:default project_id=147685 project_image_fid=359136]

<a href="https://www.apartments.com.au/project-marketer/equitifund-group">Equitifund</a> Executive Chairman Greg Huxley said the structure offers buyers a level of certainty that is difficult to replicate.

"The $11 million bond established for the Skyview Castle Hill development represents exceptional value, providing genuine financial security for purchasers," Huxley said.

"Unlike a standard insurance policy, this bond consists of real funds held in trust for the Owners Corporation, offering a tangible layer of protection and added peace of mind."

The apartments themselves have been designed with a focus on practical, contemporary living. Interiors feature Smeg appliances, stone benchtops, tiled living areas, carpeted bedrooms, 2.7-metre ceilings, floor-to-ceiling glazing, and ducted heating and cooling throughout.

Residents also have access to a range of shared amenities, including two rooftop barbecue areas, a swimming pool, children's playgrounds, secure building access, storage cages, and visitor parking.

The location continues to be one of the project's strongest drawcards. Castle Hill Metro Station sits virtually on the doorstep, providing direct connections across Sydney's expanding Metro network, while Castle Towers offers extensive retail, dining, entertainment, and service amenities within walking distance.

[smartcode_project:default project_id=147685 project_image_fid=359127]

The building, now named after its location at 9 Gay Street, comprises a diverse mix of one-, two-, and three-bedroom apartments starting from just under $600,000.

Equitifund National Sales Director Ben Hamblett said demand in the Hills District continues to be driven by buyers seeking convenience and connectivity.

"Interest from both owner-occupiers and investors in Castle Hill remains exceptionally strong, with buyers consistently prioritising developments in close proximity to the Metro station and Castle Towers Shopping Centre," Hamblett said.

"There is a clear trend in the market, with purchasers seeking convenient access to transport and lifestyle amenities that support a seamless, low-maintenance way of living."

On top of the long-term protection afforded by the remaining $7.2 million bond, Equitifund is offering a limited-time stamp duty rebate on selected apartments.

Eligible purchasers can also secure finance options, including a 3.99 per cent two-year variable rate, loan-to-value ratios of up to 90 per cent, and interest-only lending options through EquitiCredit.

[smartcode_project_cta:default project_id=147685]

Joel Robinson

Why this Castle Hill apartment building starts with a $7 million advantage

For much of the past few years, conversations about Australia's property market have centred on the rapid growth seen in Sydney, Brisbane, Gold Coast, and Perth. <a href="https://www.apartments.com.au/developments/melbourne-vic-3004">Melbourne</a> has followed a different trajectory.

That relative underperformance is now encouraging some buyers to reassess the city, particularly those willing to look beyond short-term market movements and focus on quality property in established locations, along with the long-term growth prospects of a city expected to overtake Sydney as Australia’s most populous.

John Bekiaris, Research &amp; Market Insights at <a href="https://www.apartments.com.au/project-marketer/equitifund-group">Projects by Equitifund</a>, said Melbourne's current position is attracting increasingly sophisticated purchasers.

"Melbourne continues to present one of Australia's strongest long-term investment stories," Bekiaris says.

"While other capital cities have experienced stronger recent growth, that relative underperformance is exactly what's attracting sophisticated counter-cyclical investors."

[smartcode_project:default project_id=1979 project_image_fid=363268]

Equitifund isn't just commenting on Melbourne's property market, it's investing in it.

The Sydney-headquartered capital partner has taken over the remaining apartments at <a href="https://www.apartments.com.au/buildings/victoriana-melbourne-20-queens-road-melbourne-vic-3004">Victoriana</a>, the recently completed glass-encased development opposite Albert Park Lake in Melbourne's tightly held St Kilda Road precinct.

Designed by <a href="https://www.apartments.com.au/architects/rothelowman">Rothelowman</a> and built by <a href="https://www.apartments.com.au/builders/hickory">Hickory</a>, Victoriana places residents between one of Melbourne's most recognised parklands and the CBD, offering oversized two and three-bedroom apartments aimed at owner-occupiers seeking a genuine alternative to a traditional family home.

The development comprises 232 completed residences alongside a suite of resident amenities, including a 25-metre indoor swimming pool, gymnasium, landscaped entertaining areas, resident lounges, EV charging, secure basement parking and a concierge-style arrival experience.

[smartcode_project:default project_id=1979 project_image_fid=363229]

The apartments have been designed with owner-occupiers firmly in mind.&nbsp;Open-plan living and dining areas flow onto generous balconies framing views across Albert Park Lake, Fawkner Park, the Royal Botanic Gardens and the Melbourne skyline.

Kitchens feature Gaggenau appliances, stone benchtops and generous preparation space. Bedrooms include built-in robes, while bathrooms feature full-height textured tiling. Hardwood flooring and ducted air conditioning complete residences designed for long-term living.

Rothelowman's architecture takes its cues from the landscape opposite the site. Sweeping horizontal glazing references the movement of Albert Park Lake, while generous balconies and expansive glazing strengthen the connection between the apartments and the surrounding parklands. The result is a building designed to deliver the scale and amenity expected of luxury apartment living, while offering the larger floorplans increasingly sought by owner-occupiers.

[smartcode_project:default project_id=1979 project_image_fid=363284]

The location is one of Victoriana's defining characteristics. Positioned on Queens Road, residents are directly opposite Albert Park Lake and within easy reach of Fawkner Park, the Royal Botanic Gardens, South Melbourne, St Kilda Road and the CBD. With few comparable development opportunities remaining in the precinct, buyers are increasingly placing value on outlooks that are unlikely to be interrupted by future construction.

Greg Huxley, Founder of Equitifund, believes those qualities become even more valuable over time.

"Premium real estate has always rewarded buyers who take a long-term view," Huxley said.

"Victoriana represents the kind of asset that's increasingly difficult to recreate today, particularly in an established location like Queens Road."

He said rising construction costs are also changing the way buyers assess completed developments.

"When you combine an irreplaceable location with thoughtful architecture and premium finishes, you create something that becomes increasingly difficult to reproduce as construction costs continue to rise."

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According to National Sales Director Ben Hamblett, enquiry has been driven largely by Melbourne downsizers and buyers upgrading from smaller apartments.

"Interest in Victoriana continues to build, with strong buyer focus on the larger owner-occupier residences within the development," Hamblett says.

"Enquiry is increasingly driven by local buyers who recognise the rarity of what's on offer: park-facing apartments in an established neighbourhood where new development opportunities are becoming increasingly scarce. At Victoriana, the view is not just a feature; it's an appreciating asset in its own right."

He said interstate enquiry has also strengthened as buyers reassess Melbourne's position within the national property cycle.

"Melbourne currently stands as the most compelling entry point of any major Australian capital, and discerning buyers are beginning to recognise what those who move early always understand: the best opportunities are taken before the price rise confirms them."

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Why now is the time to buy in Melbourne's premium apartment market

Developers and apartment buyers have a narrowing window of opportunity before Brisbane's Olympic infrastructure pipeline begins competing directly with residential construction, pushing up costs, tightening labour supply and making new projects increasingly difficult to deliver.

While Brisbane's apartment market continues to benefit from strong population growth and limited housing supply, industry research suggests the years leading up to 2027 could prove to be the most important period for developers looking to secure builders and buyers hoping to purchase before the next wave of price increases.

A new Colliers report, Brisbane 2032 Olympic and Paralympic Games: Creating Solutions, highlights the scale of the challenge. While thousands of new homes are planned across South East Queensland, the Brisbane Olympic Athletes Village alone will deliver more than 10,500 beds during the Games before being converted into around 1,750 to 2,000 apartments. Equivalent to almost two years of typical inner-city apartment supply, the project will also absorb a significant share of the construction workforce and building materials.

The broader construction pipeline paints an even clearer picture.

Construction Skills Queensland's Horizon 2032 report forecasts Queensland's annual construction pipeline will average $69 billion over the coming years before peaking at $75 billion in 2027-28. Demand for construction workers is expected to increase by 17 per cent to almost 150,000 people, with the industry facing an annual shortfall of around 19,000 workers that could blow out to as many as 35,000 during the peak construction period.

The Olympic venues, athletes village and supporting infrastructure will account for billions of dollars worth of work across South East Queensland through to 2032, creating intense competition for labour at a time when Australia's residential construction sector is already under pressure.

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Colliers Queensland Residential Director Andrew Scriven said the convergence of these projects is creating a clear window of opportunity for both developers and buyers.

"From 2027 onwards, the market will shift dramatically," Scriven said.

"Labour will increasingly be locked into government-led infrastructure and Olympic projects, which means private residential developments will face higher costs and tighter margins. The developers who move now are the ones most likely to get projects off the ground."

Scriven said the same dynamic would also affect buyers, with fewer apartment projects expected to launch once construction capacity tightens.

"If you're looking to change your lifestyle over the next five years, now is your window of opportunity to buy."

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Developers are already positioning themselves ahead of that window.

Following the success of Monarch at Toowong, Consolidated Properties is preparing to launch two new Brisbane apartment projects in the second half of 2026. They include <a href="https://www.apartments.com.au/new-apartments/gloriette-30-bedivere-street-yeerongpilly-qld-4105">Gloriette</a> at Yeerongpilly Green, a 25-storey tower within one of Brisbane's key Olympic precincts, and <a href="https://www.apartments.com.au/new-apartments/castile-47-skyring-terrace-newstead-qld-4006">Castile</a>, a recently approved 25-storey riverfront development at 47 Skyring Terrace in Newstead.

Hutchinson Builders will deliver both projects, with early works already underway at Yeerongpilly and Newstead expected to commence later this year.

The timing comes as Brisbane's fundamentals continue to strengthen, with strong interstate migration, population growth and vacancy rates remaining below 1.5 per cent.

Colliers Queensland researcher Pragya Sharma said Greater Brisbane is forecast to require around 40,000 new apartments between 2021 and 2031.

"There's a real mismatch emerging between when housing is needed and when it will be feasible to build," Sharma said.

"As a result, the period leading up to 2027 presents a key window of opportunity for developers to secure approvals, funding and construction capacity, while buyers will have greater choice before supply constraints intensify."

Colliers research outlines a critical pre-2027 window to start residential projects before labour squeeze: now is the time to buy

Developers, buyers on watch in South East Queensland ahead of construction crunch: Colliers

It's taken less than nine months for developer Sherpa Property Group to sell out all 51 apartments in its <a href="https://www.apartments.com.au/new-apartments/flourish-oasis-palm-beach-7-9-sixth-avenue-palm-beach-qld-4221">Flourish Oasis</a> development in <a href="https://www.apartments.com.au/developments/palm-beach-qld-4221">Palm Beach</a>, over a year before its anticipated completion.

&nbsp;

Located at 7-9 Sixth Avenue, the $67 million development has resonated strongly with both local owner-occupiers and downsizers seeking high-quality apartments within walking distance of the beach, dining precincts and everyday amenities.

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Christie Leet, Founder of <a href="https://www.apartments.com.au/developers/sherpa-property-group">Sherpa Group</a>, said the sell-out reflected both the strength of the Palm Beach market and the success of Sherpa's community-first approach to development.

"The sell-out of Oasis is a fantastic outcome and reinforces the strong demand we're seeing for thoughtfully designed apartments in lifestyle locations," Leet said.

"From the outset, our vision was to create a development that genuinely enhanced the Palm Beach community while providing residents with exceptional homes and wellness-focused amenities.

"We've been incredibly encouraged by the level of local support throughout the campaign, 72.5 per cent of buyers are locals, with a significant proportion of purchasers choosing Oasis as their future home rather than an investment."

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Construction is now progressing following development approval, with trusted builder LPS Group delivering the project and completion anticipated in Q3 2027.

Oasis forms part of Sherpa Group's successful Flourish collection, which has become recognised for its focus on wellness, community and elevated coastal living.

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Residents will have private access to a rooftop amenity space featuring a pool, gym, sauna, steam room, hot and cold plunge pools, spa and barbecue facilities.

"The success of Oasis demonstrates that buyers continue to prioritise quality, location and lifestyle," Leet said.

"We are proud to have delivered a project that has resonated so strongly with the market and look forward to bringing Oasis to life for our future residents."

Sherpa recently launched <a href="https://www.apartments.com.au/new-apartments/flourish-soleira-palm-beach-1150-1160-gold-coast-highway-palm-beach-qld-4221">Flourish Soleira</a>, its third instalment of the Flourish brand in Palm Beach following Flourish Oasis and <a href="https://www.apartments.com.au/new-apartments/amargo-6-12-sixth-avenue-palm-beach-qld-4221">Flourish Amargo</a>.

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Sherpa sells out Flourish Oasis in booming Palm Beach

Urban Property Group's <a href="https://www.apartments.com.au/new-apartments/la-vera-macquarie-park-94-talavera-road-macquarie-park-nsw-2113">La Vera</a> is leading the next phase of Macquarie Park's residential evolution, with the new apartment development set to become the first of several new apartment projects in the precinct to complete.

The 169-apartment building has now topped out ahead of its scheduled completion in the third quarter of 2026, as new residential investment continues to reshape one of Sydney's largest employment hubs into a true mixed-use precinct.

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Cox Architecture has designed La Vera to capture the best of its unique positioning on Talavera Road, orienting the building towards Lane Cove National Park.&nbsp;The building features a sculpted northern façade with flowing curves inspired by the surrounding landscape, while its city-facing elevation adopts a more structured architectural expression to maximise skyline views.

"The vision for the project was to conceive a building that adopted an organic and curvilinear form to the northern portion that faces the Lane Cove National Park," <a href="https://www.apartments.com.au/architects/cox-architecture">Cox Architecture</a> Director Felipe Miranda said.

"The residents that reside in the northern portion of the building benefit by having beautifully crafted curved balconies that speak to the natural context and heighten the relationship of their internal living spaces to the external balconies."

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La Vera offers a diverse mix of one, two, three, and four-bedroom configurations, with prices currently starting from $740,000. Buyers so far have been a mix of Sydney-based investors,&nbsp;metro commuters, owner-occupiers and downsizers from surrounding North Shore suburbs.

Both investors and owner-occupiers have been drawn to La Vera's proximity to Macquarie University, Macquarie University Hospital, Macquarie Centre and the Sydney Metro, infrastructure that supports both strong rental demand and a convenient lifestyle for residents.

The apartments feature full-height glazing, timber flooring throughout living areas, stone kitchen benchtops, SMEG appliances, floor-to-ceiling bathroom tiling and ducted air conditioning.

Residents will have access to a rooftop recreation level featuring a swimming pool, sauna, barbecue facilities and landscaped relaxation areas, complemented by additional communal space at ground level. Many apartments enjoy uninterrupted views across Lane Cove National Park, reinforcing the project's connection to its natural setting.

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<a href="https://www.apartments.com.au/developers/urban-property-group">Urban Property Group</a>, a family-owned developer and builder with nearly four decades of experience, holds a 4.5-star iCIRT rating and was Australia's first developer to introduce 10-Year Latent Defects Insurance (LDI). La Vera is the first apartment development in <a href="https://www.apartments.com.au/developments/macquarie-park-nsw-2113">Macquarie Park</a> approved to offer the additional insurance protection, alongside a five-year warranty on SMEG appliances.

Urban Property Group CEO Patrick Elias said the additional protection reflects changing buyer expectations in the off the plan market.

"Consumers are a lot more weary and a lot more concerned in buying off the plan than they ever have been. Having LDI is a tool to portray the confidence that we have in our product, and a confidence we want buyers to share," Elias said.

Following completion of the building later this year, buyers will move into their apartments well before Christmas.

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