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EXPERT OBSERVER
February Labour Force Survey: Total employment: 4.6k from 38.3k (revised from 39.1k), unemployment rate: 4.9% from 5.0% (unrevised 5.0%), participation rate: 65.6% from 65.7% (unrevised 65.7%).
Employment growth slowed in February lifting 4.6k less than what the market was looking for (median +15k) but a touch better than Westpac’s forecast of –5k. So far 2019 has had a sound start for the labour market with a three month average gain of 21.1k/per month. 
Through 2018 total employment grew 274.5k, or 2.2%yr, with a solid momentum into year end with a six month annualised pace of 2.3%yr. 
While it is just second month into the year, employment grew 284k in the year to February (2.3%yr) but the six month annualised pace has moderated from 2.9%yr in January to 2.3%yr in February.
<a href="https://www.propertyobserver.com.au/images/2019/3/21/employment%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/2019/3/21/employment%201.jpg" alt="">
 
Source: Westpac
As highlighted in our preview we are very cautious about making too much of the January/February releases given the large underlying seasonality in these months. However, what we can say is that it does appear that the momentum in employment has slowed. 
As such, there is nothing in this release to make us change our view that employment growth will take a breather through the first half of 2019 leading to a lift in unemployment. But, to be fair, the fall in the unemployment rate to 4.9% also means that at this point in time, the RBA will also feel little pressure to change their forecast for the unemployment rate to fall to 4¾%.
 It will all come down to who is the better forecaster.
<a href="https://www.propertyobserver.com.au/images/2019/3/21/employment%202.jpg" target="_blank">Click here</a> to enlarge:
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/3/21/employment%202.jpg" alt="">
 
Source: Westpac
In February, in reverse to the January result, the mix of employment gains painted a soft picture with a 7.3k loss in full-time employment offset by an 11.9k gain in part-time employment. However, hours worked was a bit more upbeat in the month with total hours worked up 0.2% (total employment was flat in the month) as hours worked per person gained 0.1% due to average hours worked rising for both full-time and part-time employees. 
In the year to February total hours worked has lifted 2.2%yr which is on par with the 2.3%yr pace for employment.
<a href="https://www.propertyobserver.com.au/images/2019/3/21/employment%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/2019/3/21/employment%203.jpg" alt="">
 
Source: Westpac
Despite the soft print on employment, the unemployment rate fell to 4.9% (market median was 5.0%) as a 0.1ppt decline in the participation rate to 65.6% (65.57% at two decimal places) resulted in a –7.1k decline in the labour force. At this stage it appears that both male and female participation is levelling out in a trend sense and we are closely watching where they go next. We do expect both to edge lower though 2019 H1 as employment growth stalls.
<a href="https://www.propertyobserver.com.au/images/2019/3/21/employment%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/2019/3/21/employment%204.jpg" alt="">
 
Source: Westpac
February was a soft month for employment growth across the states. Employment fell 5.8k in NSW (+128.9k in the year) and the unemployment rate lifted to 4.3% from 3.9% which was a 30 year low in unemployment for that state. In Victoria, employment lifted 5.7k (+136.7k in the year) but with a lift in participation, the unemployment rate lifted to 4.8% from 4.6%. 
Queensland employment lifted in February 6.4k (+20.4k in the year) but a decline in participation saw the unemployment rate dip to 5.4% from 6.1%. In WA employment rose 2.8k (+7.7k in the year) with the 1ppt fall in unemployment to 5.9% being supported by a 0.6ppt fall in participation. Meanwhile in SA a lift in employment 3.8k (–0.1k in the year) in February saw the unemployment rate ease back 0.6ppt to 5.7%.
<a href="https://www.propertyobserver.com.au/images/2019/3/21/employment%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/2019/3/21/employment%205.jpg" alt="">
Source: Westpac
Overall, while the annual pace of employment growth has picked up in Victoria, and eased back in NSW, NSW can still claim the mantle of having the lowest unemployment rate.
 Victoria was the state showing the greatest improvement through 2018 with the unemployment rate down 2ppts to 4.2% in December while in NSW unemployment fell just 0.5ppts to 4.3%.
<a href="https://www.propertyobserver.com.au/images/2019/3/21/employment%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/2019/3/21/employment%206.jpg" alt="">
Source: Westpac
We are closely watching how these trends continue through 2019 – NSW did surprise in January by dipping below 4%, but it has since bounced back to 4.3%, while Victoria’s improvement does look to be cooling with the unemployment rate holding above 4.5%.
It is these two states, and how their labour markets will respond to falling house prices, a contraction in construction activity and weak retail sales, that is behind our expectation for the unemployment rate to rise through the first half of this year. While we are cautious about interpreting too much from the January/February releases, we see nothing in them that makes us nervous about our forecasts.
It is also worth noting that in 2018, for all the strength in the labour market, the underemployment rate only declined 0.2ppt. So far there has been a further improvement with the rate falling from 8.3% in December to 8.1% in February. Again, we would caution that so far we have only see the January and February prints, so would not project that this improvement can be sustained, but nevertheless, it is another indicator of just how robust the labour market was at the end of 2018.
<a href="https://www.propertyobserver.com.au/images/2019/3/21/employment%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/2019/3/21/employment%207.jpg" alt="">
Source: Westpac
For 2019, we are looking for a pause in the pace in employment growth due to the economic uncertainties surrounding the Federal Election at the same time as we expect to see a moderation in momentum in NSW and Victoria on the back of a moderation in housing activity. With reasonable estimates for the participation rate, our weaker jobs growth profile has the unemployment rate lifting to 5.5% in the second half of 2019 and further by end 2020.
JUSTIN SMIRK is ‎a senior economist for Westpac 
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j.ballantyne1990-6AQqhLzZaK

Australian employment saw a February pause: Justin Smirk

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ASIC is assisting the Financial Conduct Authority of the United Kingdom (FCA) in seeking to identify investors who may be eligible for restitution in the failed Reforestation Projects carbon credits scheme intended for land in Sierra Leone, Brazil and Australia.
Following action in the High Court in relation to a series of unregistered collective investment schemes, the Financial Conduct Authority of the United Kingdom (FCA) is seeking to identify investors who may be eligible for restitution.
It is not known how many Australian lost money in the scheme.
ASIC is assisting the FCA to share this information, which may be of interest to Australians who had invested in either:
<ul>
<li>African Land (also known as Agri Capital) which offered investments in rice farm harvests in Sierra Leone and was run by African Land Limited; or</li>
<li>Reforestation Projects (also known as Capital Carbon Credits) which offered investments in carbon credits intended to be generated from land in Sierra Leone, Brazil and Australia and was run by Reforestation Projects Limited.</li>
</ul>
<a href="https://www.fca.org.uk/news/fca-wins-appeal-case-against-capital-alternatives">This link contains information about the matter</a>, including steps that can be taken to notify the FCA of details in relation to investments made. The FCA requires these details by 31 March 2019.
The High Court decided in February 2014 that the schemes were collective investment schemes which could not be lawfully operated by the defendants.
Some of the defendants appealed this decision.
In March 2015 the Court of Appeal rejected the appeal.
On 28 July 2015, the Supreme Court refused to give the defendants permission to make a further appeal.
Following these rulings, the Court gave directions for a further trial to consider misleading statements, the extent of the defendants’ liability and the orders the Court should make. 
This trial took place over 22 days in July and October 2017 and the judgement was handed down on 26 March 2018.
The High Court initially ordered the defendants to pay £16.9 million in restitution.
Following further applications by the FCA to take into account further losses from the African Land scheme, the Court has increased the amount to £18.7 million.
The defendants applied for permission to appeal the High Court’s decision. In a hearing on 24 April 2018, the trial judge refused the defendants’ applications for permission to appeal.
Some of the defendants then applied to the Court of Appeal for permission to appeal, and these were all refused in October 2018.
On 1 March, The High Court of Justice sentenced Robert John McKendrick to six months imprisonment for contempt of court.
McKendrick had diverted funds and failed to disclose information about his assets in breach of freezing injunctions obtained by the Financial Conduct Authority (FCA).
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:
"In this case, Mr McKendrick misled investors and then, in contempt of court, failed to comply with court orders requiring him to properly account for the losses. The FCA will ensure that defendants who mislead investors are held to account to the fullest extent possible."
The FCA launched legal action in July 2013 in respect of four unauthorised collective investment schemes promoted mainly by Capital Alternatives.
McKendrick was the main Director and sole shareholder of African Land. The scheme was unlawfully promoted and operated without authorisation from the FCA.
The Court found that McKendrick made misleading statements to investors and was knowingly concerned in misleading statements made by others.
McKendrick was also knowingly concerned in the Capital Carbon Credits scheme in Sierra Leone, which was also operated and promoted unlawfully.
The losses across the schemes in which McKendrick was involved exceed £15 million.
In March 2018, the Court gave Judgment in the FCA’s claim and ordered McKendrick to pay the losses to the FCA so they can be paid back to investors.
McKendrick has since been declared bankrupt.
When the FCA took action in 2013, it obtained a freezing order against McKendrick. Upon Judgment in March 2018, the Court made a further freezing order requiring McKendrick to disclose all his assets and preventing him from disposing of them.
In breach of the freezing orders, McKendrick appointed his wife to manage his portfolio of buy-to-let properties at a commission rate significantly higher than he had paid to his previous letting agents. He then diverted the rental income from these properties to his wife. He did not disclose these arrangements.
As a result, the FCA brought an application to Court with the primary aim of discovering what had happened to the money so it could recover it for investors. In response, McKendrick admitted his breaches of the freezing orders and finally provided an account of where the money went. The FCA will ensure that as much of it as possible is recovered for investors.
In sentencing McKendrick, Justice Marcus Smith noted that McKendrick had admitted, and apologised for the breaches but they were many, varied and deliberate, and intended to thwart orders of the court. Monies were paid away and used by McKendrick for his own benefit.
The Court indicated that McKendrick would have received a 12 month sentence but for his admissions and his genuine attempt to remedy his failures to provide full and accurate information.
The defendants in the proceedings were:
<ul>
<li>Capital Alternatives Limited</li>
<li>Capital Secretarial Limited</li>
<li>Capital Organisation Limited</li>
<li>Capital Administration Services Limited</li>
<li>MH Trustees Limited</li>
<li>Marcia Hargous</li>
<li>Renwick Haddow</li>
<li>Richard Henstock (case settled)</li>
<li>African Land Limited (in liquidation)</li>
<li>Robert McKendrick</li>
<li>Alan Meadowcroft</li>
<li>Regency Capital Limited</li>
<li>Reforestation Projects Limited</li>
<li>Mark Ayres/Eyres</li>
<li>Mark Gibbs</li>
<li>the estate of David Waygood (case settled)</li>
</ul>
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ASIC seeking restitution for Aussie investors caught in Reforestation Projects carbon credits scheme

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GUEST OBSERVATION
Banks’ funding costs increased a little over 2018, driven by a rise in the cost of wholesale funding linked to money market rates, but with some offset from reductions in the cost of retail deposits. Most lenders passed the increase in funding costs through to their lending rates, including for mortgages. Nevertheless, funding costs and lending rates remain low by historical standards.
Funding costs typically influence lending rates
The rates that banks offer on loans to households and businesses are partly driven by the cost of their funding. Banks also take into account the risks inherent in lending, such as the credit risk associated with loans and the liquidity risk involved in funding long-term assets with short-term liabilities. Competition in the financial sector, banks’ growth strategies and the rate of return desired by equity holders also affect their lending rates.
The level of the cash rate is an important determinant of banks’ funding costs (Graph 1). This is because the cash rate acts as an anchor for the broader interest rate structure of the domestic financial system. The pass-through from the cash rate to funding costs and lending rates is an important channel of monetary policy transmission. Nevertheless, there are other factors that influence funding costs, such as changes in the level of compensation required by investors for holding bank debt. The full effect of such changes can take some time to flow through to funding costs and lending rates. This article updates previous Reserve Bank research, focusing on developments in major banks’ funding costs and lending rates over 2018.
<div class="image-graph">
<div class="title">Graph 1</div>
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-01.gif" alt="Graph 1: Cash Rate and Funding Costs">
</div>
The cost of banks’ funding increased a little over 2018, driven by the higher cost of raising funds in wholesale debt markets as a result of increases in money market rates, in particular the rise in bank bill swap (BBSW) rates. The costs of around two-thirds of the major banks’ debt and deposit funding are ultimately linked to BBSW rates, either directly or as a result of their interest rate hedging practices. The major banks’ overall funding costs have increased by less than money market rates because of the decline in interest rates on retail deposits, which account for around one-third of their non-equity funding.
Most lenders, including the major banks, have passed the increase in funding costs through to their lending rates. However, the average interest rate on outstanding housing loans increased only a little toward the end of 2018, and by less than the increases in banks’ standard variable rates (SVRs) for housing loans. This owed in large part to strong competition for low-risk borrowers, as observed through the larger discounts that banks offered from their SVRs. Rates on loans to businesses also increased, particularly for large business loans, since many of these loans are linked to BBSW rates. Despite the increases, both funding costs and lending rates remain historically low, consistent with the low level of the cash rate.
Banks’ funding composition was little changed over 2018
Banks obtain funding from four main sources: retail deposits, wholesale deposits, wholesale debt and equity. Excluding equity, around one-third of major banks’ funding is from retail deposits. These are sourced from households and small- to medium-sized businesses. Another third of non-equity funding is from wholesale deposits, such as those from large corporations, pension funds and the government. Short- and long-term wholesale debt account for most of the remaining third of funding. The composition of major banks’ funding was little changed over 2018 (Graph 2).
<div class="image-graph">
<div class="title">Graph 2</div>
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-02.gif" alt="Graph 2: Major Banks Funding Composition">
</div>
In aggregate, deposits account for around two-thirds of major banks’ non-equity funding. This share has been relatively stable over recent years, following a large increase in the share of deposits in the aftermath of the global financial crisis. That increase was consistent with banks seeking more stable funding, particularly from term deposits (Graph 3). The introduction of new liquidity regulations – such as the Net Stable Funding Ratio requirement that came into force at the start of 2018 – has also supported the banks’ demand for stable funding over recent years. Deposit growth slowed in 2018, in line with the generally subdued growth in banks’ assets.
<div class="image-graph">
<div class="title">Graph 3</div>
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-03.gif" alt="Graph 3: Deposit Growth">
</div>
The share of funding sourced by the major banks from wholesale debt markets was little changed over 2018. Within this, the major banks shifted their funding slightly, moving away from short-term debt toward long-term debt (Graph 4). A large share of wholesale debt funding for the major banks is sourced from offshore markets, mainly in US dollars. Australian banks transform most of these foreign-currency denominated exposures into Australian-dollar denominated exposures using the cross-currency swap market. As a result, Australian banks are far less sensitive to changes in interest rates in other jurisdictions than their share of offshore funding may suggest.
<div class="image-graph">
<div class="title">Graph 4</div>
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-04.gif" alt="Graph 4: Major Banks' Wholesale Debt">
</div>
The share of funding from equity has been stable
In addition to deposits and debt, banks obtain a small portion of their funding from equity. The share of funding from equity has been stable over recent years. Since mid 2015, banks have increased their stock of equity funding by around $40 billion. This was largely in response to changes in prudential regulations that have increased the average mortgage risk weights, and therefore the amount of capital that banks are required to hold. The major banks continue to indicate that they are on track to meet the Australian Prudential Regulation Authority’s (APRA) increased ‘unquestionably strong’ capital benchmarks by 2020 (as expected by APRA). Distinct from its ‘unquestionably strong’ benchmarks, APRA consulted on plans in late 2018 to implement a loss-absorbing capacity regime in Australia from 2023 (APRA 2018).
Banks' funding costs are a little higher than in recent years but remain low
We estimate that overall debt and deposit funding costs for the major banks increased by around 10 basis points over 2018 (Graph 5). This was driven by increases in the costs of wholesale debt and wholesale deposits. Nevertheless, funding costs remain low by historical standards.
<div class="image-graph">
<div class="title">Graph 5</div>
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-05.gif" alt="Graph 5: Major Banks' Funding Costs">
</div>
The cost of wholesale funding increased …
Wholesale funding – which includes both wholesale debt and wholesale deposits – accounts for around two-thirds of major banks’ non-equity funding. Wholesale funding costs tend to be roughly linked to BBSW rates, which increased in 2018 (Graph 6).
<div class="image-graph">
Graph 6
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-06.gif" alt="Graph 6: Bank Bill Swap Rates">
</div>
BBSW rates measure the cost for highly rated banks in Australia to issue short-term bank paper with tenors of up to six months. These rates are some of the key interest rate benchmarks for the Australian dollar and are widely used as reference rates in contracts including derivatives, loans and securities (Alim and Connolly 2018). BBSW rates are heavily influenced by expectations for the cash rate, although they are also affected by other factors, including developments in offshore money markets and changes in the demand for short-term bank paper from investors.<a id="r1" href="https://www.rba.gov.au/publications/bulletin/2019/mar/developments-in-banks-funding-costs-and-lending-rates#fn1"> </a>
The cost of wholesale debt for Australian banks is ultimately linked to BBSW rates either directly or as a result of their interest rate hedging practices. In addition to issuing floating-rate Australian-dollar denominated debt (at a spread to BBSW rates), banks swap much of their foreign-currency denominated or fixed-rate debt into Australian-dollar floating-rate exposures by using derivatives that typically use a BBSW rate as the reference rate. These hedging practices better align movements in the rates on Australian banks’ funding with those that they receive on their assets, which consist largely of loans that are variable rate and denominated in Australian dollars. Rates on wholesale deposits also tend to be closely linked to BBSW rates. In particular, wholesale term deposits are close substitutes for bank paper of the same tenor, so the rates offered on these deposits tend to move with BBSW rates.
Wholesale funding costs moved broadly in line with BBSW rates over 2018, with BBSW rates around 20 basis points higher than their average in 2017 (Graph 6). In particular, BBSW rates rose noticeably toward the end of the March, June and December quarters, as did other short-term money market rates in Australia and offshore. Most of the impact of a change in BBSW rates flows through to wholesale funding costs in three to six months, with the time frame varying between banks based on the maturity profiles of their short-term debt, wholesale deposits and interest rate hedging instruments. The increases in BBSW rates were reflected in higher costs for outstanding short-term and, to a lesser extent, long-term wholesale debt. Nevertheless, wholesale funding costs remain low relative to recent history (Graph 7).
<div class="image-graph">
Graph 7
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-07.gif" alt="Graph 7: Major Banks' Wholesale Debt Costs">
</div>
A few factors other than BBSW rates also put upward pressure on the cost of wholesale debt in 2018, although their contributions were relatively small. The major banks’ wholesale debt that is issued offshore was affected by increases in cross-currency basis swap spreads, which measure the cost of swapping foreign-currency exposures into Australian-dollar exposures. In particular, the major banks’ cost of sourcing short-term debt funding in US dollars and swapping it into Australian dollars increased by a little more than the increases in BBSW rates (Graph 8). Nevertheless, Australian banks may still prefer to issue offshore – even when it appears to be relatively more expensive – to diversify their funding base (Kent 2018). The slight shift in the composition of wholesale debt from short term to long term added a little to funding costs, along with an increase in the average original tenor of the major banks’ long-term debt.
<div class="image-graph">
<div class="title">Graph 8</div>
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-08.gif" alt="Graph 8: Major Banks Marginal Cost of Short-term Debt">
</div>
Banks continued to issue wholesale debt at relatively low yields in 2018. Australian banks issued bonds at a similar pace to previous years, with around $115 billion of bonds issued in the year. Net issuance, which takes into account bond maturities, was high in 2018, with issuance outpacing scheduled maturities by around $25 billion. Although spreads to benchmark rates for the major banks’ bonds widened over 2018, yields remained little changed around the low levels of recent years (Graph 9).
<div class="image-graph">
<div class="title">Graph 9</div>
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-09.gif" alt="Graph 9: Major Banks Bond Pricing">
</div>
… but this was partly offset by a decrease in the cost of retail deposits
Major banks’ funding costs increased by less than money market rates because the cost of retail deposits declined. Major banks’ overall deposit costs therefore fell over 2018, even though wholesale deposit rates increased (Graph 5). The decline in the cost of retail deposits was in large part due to substantial reductions in all of the major banks’ base rates on online savings accounts (excluding any ‘honeymoon’ or introductory bonus rates) (Graph 10). Honeymoon rates on online savings accounts were little changed. Partly offsetting this, there was a small increase in the major banks’ average rate on bonus savings accounts. Major banks’ advertised rates on retail at-call deposits remain low relative both to historical rates and to rates currently offered by non-major banks.
<div class="image-graph">
Graph 10
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-10.gif" alt="Graph 10: Major Banks' Retail Deposit Rates">
</div>
Although rates on new retail term deposits were little changed over 2018, the cost of outstanding term deposits fell slightly because some term deposits that were contracted at higher rates in earlier years have since been replaced by term deposits at lower rates. However, the impact of this on overall funding costs was somewhat offset by a change in the mix of deposits toward term deposits, which typically have higher interest rates than at-call deposits.
Banks increased their lending rates a little, but they remain low
Most lenders passed the increase in funding costs through to their lending rates for households and businesses. But lending rates remain low, consistent with funding costs and the cash rate.
Interest rates on housing loans rose a little for many borrowers over 2018. Most banks increased their SVRs on housing loans in the second half of 2018 by around 10–15 basis points. The banks generally attributed the increases to higher funding costs. However, the average interest rate on outstanding variable rate housing loans increased by only a few basis points over the second half of the year (Graph 11). This was partly because not all lenders raised their SVRs in that period; one of the major banks increased its housing SVRs in early 2019. In addition, interest rates on new housing loans continued to be significantly lower than interest rates on outstanding loans, which provides an indication of the strength of competition for low-risk borrowers. Some existing borrowers refinanced at a lower rate with a different lender or renegotiated the rate of their loan with their existing lender. Moreover, advertised interest rates on fixed-rate housing loans, which account for around one-fifth of outstanding housing credit, declined throughout 2018.
<div class="image-graph">
<div class="title">Graph 11</div>
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-11.gif" alt="Graph 11: Variable Housing Interest Rates">
</div>
Interest rates on outstanding loans to large businesses are estimated to have increased by around 35 basis points over 2018, reflecting in part the increases in BBSW rates (Graph 12). Most loans to large businesses are linked to BBSW rates. Rates on loans to small businesses were little changed over the year, though they remain noticeably higher than those for large businesses. Some banks increased their advertised rates for small businesses toward the end of 2018, citing higher funding costs.
<div class="image-graph">
Graph 12
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-12.gif" alt="Graph 12: Variable Business Lending Rates">
</div>
Banks’ implied lending spread narrowed a little
A bank’s implied spread on its outstanding lending is the difference between its average lending rates and overall funding costs. We estimate that this spread narrowed slightly for the major banks over 2018 (Graph 13). The implied lending spread did not narrow by as much as the increase in funding costs because much of this increase was passed through to an increase in lending rates, including for mortgages and large business loans.
<div class="image-graph">
<div class="title">Graph 13</div>
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-13.gif" alt="Graph 13: Major Banks Funding Costs and Lending Rates">
</div>
The implied lending spread differs from some commonly reported measures of bank profitability (for example, the net interest margin), because it excludes the returns on banks’ other interest-earning assets, such as high-quality liquid asset holdings. Yields on some of the banks’ liquid assets rose over 2018, consistent with increases in BBSW rates. The effect of this was to dampen the impact of higher funding costs on banks’ net interest margins.
Susan Black and Dmitry Titkov are from Domestic Markets Department at the Reserve Bank of Australia (RBA). 
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Developments in Australia banks' funding costs and lending rates: RBA Bulletin 

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Housing markets remain weak, particularly in Melbourne, Sydney and Perth, according to last week's meeting of the Council of Financial Regulators.
The group meets quarterly to discuss systemic risks facing the Australian financial system, regulatory issues and developments relevant to its members.
However, the council suggested the adjustment in housing prices and activity has been orderly and did not raise material financial stability concerns.
Housing prices nationally have fallen by 6.5% over the past year, but this has followed a period of large price gains in some areas.
Further, the improvement in banks’ lending standards – including a lower share of high loan-to-valuation ratio lending – means that households and lenders generally are less vulnerable to falling housing prices than in the past, it noted.
Despite historically high household debt, signs of financial stress remain relatively contained given a strong labour market and low interest rates.
The Council noted that while mortgage arrears rates remain low, they have reached a post-financial crisis high.
"This largely reflects regional conditions," the minutes suggested.
It concluded overall that future paths of housing activity and prices remain uncertain.
The Council discussed the slowdown in housing credit growth and the weaker conditions in the housing market.
Members agreed the evidence from data and consultations with banks indicated that the slowing in credit largely reflects weaker demand, particularly from investors.
There has also been some tightening of credit supply over the past year as lenders have applied their lending policies more stringently and undertaken more detailed scrutiny of borrowers’ expenses and other liabilities.
It noted there remains strong competition for borrowers of low credit risk.
The Council agencies will be closely monitoring the extent of any further adjustments, and in particular the ongoing availability of credit.
It also noted members observed that new lending to small businesses has slowed over the past year.
"For many small businesses, personal and business finances are intermingled," the report said.
"As a consequence, the higher standards that lenders apply to personal borrowing are affecting some small business loan applications.
"Further falls in housing prices could constrain small business borrowing, given that around half of loans to unincorporated businesses are secured by residential property."
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Housing markets remain weak with future uncertain: Council of Financial Regulators 

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Kyneton's modular flat pack house that featured in the Grand Designs Australia series in 2012 has been sold.
The home sold before this weekend's scheduled auction having been listed for sale with a guide of $1.75 million through Keatings Real Estate Woodend agent Sandi Barry-Mueller.
It was offered by Di Foggo and Rod Moore who had commissioned the architecture firm Intermode to build on their property in Victoria's spa district in the Macedon Ranges, north of Melbourne. 
The result was a factory-built modular home, what Intermode call a flat pack house, built in a simple T-shape configuration.

<div id="div-gpt-ad-1553484609107-0" style="height: 1px; width: 1px;"> </div>
The couple installed an in-floor, gas fuelled, hydronic heating system under the polished concrete waffle-pod slab floor.
There's an ultra-efficient Apricus evacuated-tube solar hot-water system.
The full-height doors promote cross-ventilation. 
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Kyneton home featured on Grand Designs Australia sells

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One of the biggest changes for investors has been the repricing of investment home loans, in response to the removal of the interest-only investment lending caps from January 2019 and the continuing slowdown in demand, according to Canstar.
Since September 2018, 47% of the lenders on Canstar’s database have decreased one or more of their investment interest-only offerings across fixed or variable rate loans.
The average interest rate for interest-only has come down across variable, one-year fixed, two-year fixed, three-year fixed and five-year fixed by up to 0.08%.
“What’s interesting is while we’re seeing the average investor home loan rates decrease, the lowest offer in the market is where the greatest movement has happened over the last six months with decreases of up to 0.20% on fixed loans,” Mickenbecker adds.
When comparing the average one-year fixed interest only loan amount of $400,000, the average decrease could mean a saving of up to $253 per year. Looking at the market minimum the rate cuts could mean a potential annual saving of up to $518 for investment property owners.
On the reverse side, the majority of increases for investment lending that occurred since September 2018 have been on variable rate loans, with an average increase of 0.15%, meaning that investors are paying higher rates for their existing loans.
While that market has observed more increases on variable rate investment loans than fixed, there has still been a 0.01% reduction on the average variable rate for new borrowers. The reduction has resulted from a number of large downward movements with the average decrease being 0.25%.
Mickenbecker says with great deals out there for new loans it’s a good time for investors, and homeowners for that matter, to check their rate, fees and loan features to see if they could be getting a better deal.
With lenders’ home and investment loan interest rates on the move in both directions, Australia’s biggest financial comparison website, Canstar, released its latest Home Loan Star Ratings research.
Canstar considered more than 4,800 home loans finding that on average a 5-Star Rated home or investment loan had access to lower interest rates compared to the market average.
Canstar’s finance expert, Steve Mickenbecker says it’s not hard to see how borrowers may be left confused as to whether they’re getting a good deal or should look to refinance their home loan.
While the latest Australian Bureau of Statistics figures show a 17.1% year-on-year decline in value for new lending commitments to owner occupiers compared with a 28.6% decline in value for lending commitment for investment dwellings, the door is still wide open for investors, he said.
Canstar has awarded a 5-Star Rating to 26 home loan lenders after they were found to offer outstanding value.
Owner-Occupier Home Loan Star Ratings
Outstanding Value – Home Lender
This award goes to home loan lenders that provided outstanding value products to owner-occupiers across variable and fixed-rate loan terms considered in these ratings. Home loans were assessed across four loan amounts ranging from $200,000 up to $750,000, for borrowers making principal and interest repayments. Here are the winners, listed in alphabetical order:
<ul>
<li>Bank Australia</li>
<li>Freedom Lend</li>
<li>Greater Bank</li>
<li>Heritage Bank</li>
<li>Homestar Finance</li>
<li>HSBC</li>
<li>ING</li>
<li>Qudos BanK</li>
<li>RACQ Bank</li>
</ul>
The new Canstar research found owner-occupiers with a 5-Star Rated home loan had access to lower interest rates compared to the market average.
Outstanding Value – Variable Home Lender
This award recognises lenders that consistently offered outstanding value products to owner- occupiers across varying loan amounts. Home loans were assessed across four loan amounts ranging from $200,000 up to $750,000 for borrowers making principal and interest repayments. Here are the winners, listed in alphabetical order:
<ul>
<li>AMO Group</li>
<li>Easy Street Financial Services</li>
<li>Freedom Lend</li>
<li>Homestar Finance</li>
<li>HSBC</li>
<li>MOVE Bank</li>
<li>Pacific Mortgage Group</li>
<li>Reduce Home Loans</li>
<li>SCU</li>
</ul>
The research shows owner-occupiers who choose a 5-Star Rated home loan have the potential to save themselves thousands of dollars over the life of the loan. For instance, the average variable interest rate for a 5-Star Rated residential loan valued at $350,000 with an 80% loan-to-value ratio (LVR) and principal and interest repayments was 3.68%. This compares favourably to the marketaverage of 4.47% out of all products on Canstar’s database. Over a 25-year loan term, that difference could equate to more than $50,000 in savings on the total cost of the loan.
Outstanding Value – Fixed Home Lender
This award recognises home loan lenders that consistently provided outstanding value products to owner-occupiers across one, two, three and five-year fixed rate loan terms. Home loans were assessed across four loan amounts ranging from $200,000 up to $750,000 for borrowers making principal and interest repayments. Here are the winners, listed in alphabetical order:
<ul>
<li>BankVic</li>
<li>Freedom Lend</li>
<li>Greater Bank</li>
<li>ING</li>
<li>Newcastle Permanent</li>
<li>Qudos Bank</li>
<li>RACQ Bank</li>
<li>TicToc Home Loans</li>
<li>UBank</li>
</ul>
Borrowers looking to fix their home loan for a set period may want to consider the difference in interest rates between a 5-Star Rated loan and the market average. For example, the average 5-Star three-year fixed interest rate for a residential loan valued at $350,000 with an 80% LVR and principal and interest repayments was 3.83%, compared to the average from our database of 4.19%.
Investment Home Loan Star Ratings
Outstanding Value – Investment Home Lender
This award acknowledges lenders that consistently offered outstanding value products to investors across the variable and fixed-rate loan terms considered in these ratings. Home loans were assessed across four loan amounts ranging from $200,000 up to $750,000 for borrowers making principal and interest and interest-only repayments. Here are the winners, listed in alphabetical order:
<ul>
<li>Freedom Lend</li>
<li>Greater Bank</li>
<li>Homestar Finance</li>
<li>loans.com.au</li>
<li>Newcastle Permanent</li>
<li>RACQ Bank</li>
<li>TicToc Home Loans</li>
<li>Virgin Money</li>
<li>Reduce Home Loans</li>
<li>Suncorp Bank</li>
</ul>
The research revealed 5-Star Rated home loans offer investors lower interest rates when compared to the market average within the investor home lender profile.
Outstanding Value – Investment Variable Home Lender
This award goes to home loan providers that consistently offer outstanding value products to investors across variable loans. Home loans were assessed across four loan amounts ranging from $200,000 up to $750,000 for borrowers making principal and interest and interest-only repayments. Here are the winners, listed in alphabetical order:
<ul>
<li>Freedom Lend</li>
<li>Gateway Bank</li>
<li>Homestar Finance</li>
<li>loans.com.au</li>
<li>Newcastle Permanent</li>
<li>Pacific Mortgage Group</li>
<li>RACQ Bank</li>
<li>Reduce Home Loans</li>
<li>State Custodians</li>
<li>Community First Credit Union</li>
</ul>
The research revealed there were potential savings to be found for investors if they chose a 5-Star Rated home loan. For instance, the average 5-Star variable interest rate for an investment loan valued at $350,000 with an 80% LVR and principal and interest repayments was 4.25%, while the interest-only rate was 3.98%. These average rates compare favourably to the market averages from our database of 5.08% and 4.77%, respectively. These differences can potentially add up to be quite significant over time. For example, over a 25-year loan term, that difference means investors making principal and interest repayments could save more than $51,000 on the total cost of the loan.
Outstanding Value – Investment Fixed Home Lender
This award recognised lenders that consistently provided outstanding product offerings to investors across one, two, three and five-year fixed rate loan terms. Home loans were assessed across four loan amounts ranging from $200,000 up to $750,000 for borrowers making principal and interest and interest-only repayments. Here are the winners, listed in alphabetical order:
<ul>
<li>Aussie</li>
<li>Freedom Lend</li>
<li>Greater Bank</li>
<li>Newcastle Permanent</li>
<li>RACQ Bank</li>
<li>Suncorp Bank</li>
<li>TicToc Home Loans</li>
<li>Virgin Money</li>
</ul>
For borrowers looking to fix their investment home loan, the difference in interest rates between a 5- Star Rated loan and the market average can be significant. For instance, the average 5-Star three- year fixed interest rate for an investment loan valued at $350,000 with an 80% LVR and principal and interest repayments was 4.01%, while the interest-only rate was 4.11%, compared to averages from our database of 4.32% and 4.53% respectively.
Line of Credit Star Ratings
Outstanding Value – Line of Credit
Canstar’s Research team compared the price and features of 48 lending institutions that provided a line of credit secured by a property. Here are the winners, listed in alphabetical order:
<ul>
<li>Aussie</li>
<li>BankVic</li>
<li>Suncorp Bank</li>
<li>State Custodians</li>
</ul>
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Canstar reveals top rated lenders for investors

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Moody's Investors Service says that the 30-plus day delinquency rate for prime Australian residential mortgage-backed securities (RMBS) increased in the fourth quarter of 2018.
It tips they will likely continue to rise moderately amid declining house prices, high levels of debt, and the conversion of interest-only mortgages to principle and interest loans. 
The 30-plus day delinquency rate for prime RMBS increased to 1.58% in December 2018 from 1.49% in September 2018.  
The increase was driven in part by declining house prices, with house prices in Australia declining by 6.3% for the 12 months to February 2019, and by 10.4% and 9.1% in Sydney and Melbourne.  
Moody's expects prices will continue to decline moderately through 2019, while record-high household debt – at 191% of annual gross disposable income – will also contribute to a moderate increase in delinquencies.  
"Nevertheless, we expect the increase in mortgage delinquencies to be limited, while defaults and losses will remain low, as continued GDP growth and low unemployment will continue support borrowers' ability to meet mortgage repayments," says Alena Chen, a Moody's Vice President and Senior Analyst.  
<a href="https://www.propertyobserver.com.au/images/2019/3/22/RMBS%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/2019/3/22/RMBS%20.jpg" alt="">
Specifically, Moody's forecasts real GDP growth of around 2.5% in both 2019 and 2020, and for Australia's unemployment rate to remain relatively stable at 5.5% over the same period.  
"Mortgage delinquencies will likely increase over the short term in areas hit by the far north Queensland floods in February 2019, as borrowers may lose income or face costs while dealing with the aftermath of the disaster," adds Chen.  
However, Moody's says this is unlikely to translate into a material increase in defaults, given that insurance payouts, government assistance and financial hardship arrangements entered into with lenders will ease the burden on borrowers.
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Australian RMBS delinquencies to rise as house prices fall: Moody's

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GUEST OBSERVATION
For the past half-decade Australian wages have barely moved after adjusting for inflation.
In the United States the picture is far bleaker — the real wages of average workers have changed little <a href="http://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/" target="_blank">in 40 years</a>.
Not so for US chief executives.
In 1965 the heads of America’s 350 biggest companies earned 20 times what the average worker did. By 2017 they earned <a href="https://www.epi.org/files/pdf/152123.pdf" target="_blank">312 times as much</a>.
As is often the case, things aren’t quite as extreme in Australia, but the pattern is similar. In 2017 the heads of the 100 biggest ASX-listed companies earned an average of <a href="https://www.acsi.org.au/images/stories/ACSIDocuments/generalresearchpublic/CEO-Pay-in-ASX200-Companies-2017.Jul18.pdf" target="_blank">A$4.75 million</a> – roughly 78 times as much as the average worker.
They get the bulk of their income not from their salaries, but from stock options or payments tied to the share price of the companies they run.
It at least raises the possibility than one way to get pay to rise for average workers is to structure their pay a little more like that of chief executives.
There are upsides to paying workers in shares…
Paying workers in the stock of the company would not affect the day-to-day profitability of the company. It would just mean the shareholders owned a bit less of the company.
That might not sound like an important distinction, but the everyday costs —- of which wages and salaries can be a big part -— help determine how competitive a firm is compared to its rivals. Paying workers in stock could give firms a strategic advantage.
It could also better align their interests with those of senior management and shareholders. It could reduce intra-firm conflict about wages, benefits and employment terms.
One manifestation occurs when executives receive large payouts from stock options while “ordinary workers” are facing redundancies or pay cuts.
Giving workers a slice of the same type —- if not the same level -— of compensation could help reduce this conflict.
…and downsides
If the idea was perfect, we would go to the extreme and pay workers exclusively in stock.
We wouldn’t, in part because equity-based compensation imposes risk on workers, as workers employed by firms whose share price is falling know well.
A basic principle of contract theory – the field that gave rise to the 2016 Nobel Prize in Economic Sciences for its creators Oliver Hart and Bengt Holmstrom – is that if a compensation contract imposes more risk on an employee than wages, it’ll need to be larger than wages on average to make up for the additional risk. It would cost the firm more.
And it would encourage workers to put most of their investment eggs in one basket (the same basket that employs them), which is always a bad idea.
Despite appearances, for many or even most, it woudln’t link their efforts to their compensation. Stock price movements often have little to do with the efforts of paper-shufflers or cleaners. Another key principle of contract theory is that it is suboptimal to reward workers for luck.
Shadow equity might be better
New developments in blockchain technology offer a way to link the efforts of employees to an equity-like security —- or what one might call “shadow equity”.
<a href="https://bitcoin.com.au/understanding-token-sales-initial-coin-offerings-part-1/" target="_blank">Initial Coin Offerings</a> are used in the US as an alternative to venture capital. They involve creating a digital currency that is linked to performance but not to share price.
They can be used to invest in or bet on specific components of a company. Take the pharmaceutical giant Pfizer. It has a whole portfolio of drugs. Buying stock in Pfizer is a bet on its entire portfolio. But suppose Pfizer issues, say, 1 million Xtandi tokens to help it develop the colon cancer drug Xtandi. Suppose it also agrees that all future purchases of Xtandi will have to be done with those tokens. That would link the aggregate value of those tokens to the value of revenue from the drug.
An investor who bought those tokens would be betting on a specific part of Pfizer’s portfolio.
The idea could be extended to traded securities tied to a granular level of performance within an organisation. It wouldn’t mean it was possible to have securities in the impact of single worker (expect perhaps for superstars such as actors or recording artists) – but it would be conceivable to have such securities for divisions of companies, or even teams within divisions.
How could it work?
It will take time for these technological developments to play out, but there are steps we could take to hasten it. One would be increased tax deductibility for equity-based compensation.
We are not suggesting workers’ pay be cut to allow equity-based compensation, or that it not rise to keep up with the cost of living. But as extra pay rises happen from time to time, they could be offered in the form of shadow equity.
It would mean workers would be paid (at least in part) the same way as executives. And it might start to reverse the trend of rising executive to worker pay ratios.
<hr>
The <a href="https://www.assa.edu.au" target="_blank">Academy of the Social Sciences in Australia</a> is one of Australia’s four learned academies. The ASSA coordinates the promotion of research, teaching and advice in the social sciences, promotes scholarly cooperation across disciplines, comments on national needs and priorities in the social sciences, and provides advice to government on issues of national importance.<img src="https://counter.theconversation.com/content/113362/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;">
Rosalind Dixon, Professor of Law, UNSW
Richard Holden, Professor of Economics, 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/introducing-shadow-equity-a-fresh-idea-to-escape-the-low-wage-trap-113362" target="_blank">original article</a>.
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Introducing shadow equity: a fresh idea to escape the low wage trap

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After months on the market, Wyatts Creek is set for auction.
Wyatts Creek at <a href="https://www.realestate.com.au/property-livestock-nsw-armidale-7943666" target="_blank">32 Cornelsons Road Jeogla, Armidale</a> is a working grazing property with a residence situated on the Eastern Fall of the New England Tablelands.  
The architecturally designed home comprises two separate pavilions connected by a breezeway with paddock and bushland views.
<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/2019/3/19/armidale%202.jpg" alt="">
The main residence features six bedrooms, four bathrooms, formal and informal living areas, and a separate double garage.
The second smaller pavilion comprises a private master suite, bathroom and study. 
Wyatts Creek comes with 428 hectare working cattle grazing property which has been divided into 21 paddocks, well balanced pastures, timber and large secured shed.
<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/2019/3/19/armidale%203.jpg" alt="">
It also has stock and domestic water throughout which includes a total of 12 dams and water reticulated to a number of troughs.
Armidale is known as a retail, cultural and educational hub with New England Regional Art Gallery, University of New England and schools.
The property has been scheduled to go under the hammer on April 9. 
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Armidale grazing property Wyatts Creek set for auction after months on the market

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A Strathalbyn, WA mortgagee home has sold for $335,000.
It made a loss of $185,000 on its November 2013 sale price of $520,000.
Mike Paterson of Professional Geraldton held the listing.
Situated at <a href="https://www.realestate.com.au/sold/property-house-wa-strathalbyn-129569494" target="_blank">12 Catspaw Court</a>, it is a four bedroom two bathroom abode.
The Catspaw Court home had been sold at a small loss in 2013 too as it transacted for $540,000 back in 2010.
Set on 2,021 sqm, the property features a 21 sqm pool that was installed for $12,000 in 2012.
It also features a 9m x 6m shed.
<a href="https://www.propertyobserver.com.au/subscribe" target="_blank"><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/2019/1/Subscriber%20strip%20ad.jpg" alt=""></a>
The median price for a home in <a href="/news">Strathalbyn, WA</a> is $475,000 according to CoreLogic, which calculate its annual change in median price over the past 10 years as -2.1%.
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Strathalbyn, WA mortgagee house sold for $185,000 loss

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."

[smartcode_project:default project_id=1979 project_image_fid=363228]

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."

[smartcode_project_cta:default project_id=1979]

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.

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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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