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Debates on housing affordability typically centre on demand factors but the Reserve Bank of Australia (RBA) has urged government to give due attention to housing supply in any policy responses to the challenge.
The call comes amid record building approval levels and high auction clearance rates, but low numbers of residential properties for sale.
RBA assistant governor Malcolm Edey told the Senate inquiry into housing affordability last week that while demand factors such as household incomes and the cost and availability of finance had the biggest influence on house prices in the short to medium term, the supply of homes was critical to long-term prices and affordability.
"The reason for that is that the supply side of the market is dominated by a large existing stock of dwellings, and new supply takes time to come on stream... It is the supply response that determines the extent to which additional demand results in higher prices over time," Edey says.
The total number of dwellings approved for construction rose in trend terms by 1.2% in August compared with the previous month, Australian Bureau of Statistics (ABS) data shows. At 16,273 dwellings, the number of approvals was a 6.8% higher than in August 2013, according to the ABS.
Housing Industry Association economist Geordan Murray says 197,571 new homes were approved for construction in the 12 months to August, a record high in any 12 month period.
The strong result shows that low interest rates are helping to create a sustained recovery in new home building, Murray says. However, residential construction levels have been too low over the past decade, which has lead to an accumulated deficit of housing that will take time to rectify.
"Having one year of strong building is not going to eradicate that undersupply ... Looking forward we would need to see that level of building sustained for a number of years. We estimate 180,000 to 185,000 [new homes built] on average per year through to 2020 is likely to justmeet population growth," Murray says.
He adds some approvals are for sites where an existing home will be demolished and replaced by a new building, which does not add to the total number of homes. Other newly built residences will be used as second homes or holiday houses by wealthier Australians, which will also not add to the number of available properties.
Edey told the Senate inquiry that challenges to lifting the supply of housing included regulatory and zoning constraints, inherent geographical barriers and the cost structure of the building industry.
"There are also obstacles to affordable housing created by Australia's unusually low-density urban structure, though this is gradually changing," he says.
The RBA did not put forward any suggestions on what actions should be taken to boost housing supply.
"The general point I would make is that we can't improve housing affordability simply by adding to demand," Edey said.
"Targeted assistance can certainly help particular groups such as first home buyers, but without a supply-side response, any generalised increase in demand will just be capitalised into prices."
Property prices in Sydney and Melbourne in particular have been skyrocketing and auction clearance rates have consistently been above 70%, RP Data's figures show.
House prices in Sydney jumped by 14.9% in the year to September 30 and unit prices rose by 11.5%, according to the RP Data CoreLogic Daily Home Value Index.
Melbourne house prices gained 8.5% and unit prices rose by 5.2% in that period, the Index indicates.
But while prices have been rising, the number of properties on the market has reduced.
The number of properties listed for sale around the country was 5.4% lower in the week ending September 28, 2014 than at the same time last year, according to RP Data. In Sydney, the total number of listings was down by 16.6% compared with the previous year. In Melbourne listing numbers were down 7.8%.
New building approval rates were also weaker in Sydney and Melbourne than elsewhere in the country.
In NSW the total number of units approved rose by 0.4% in August in trend terms after falling for seven months, ABS data shows. Approvals for houses rose by 1.8% following four months of increases.
ABS data shows unit approvals in Victoria rose 0.6% in August after being flat in July, while the number of houses approved fell 0.5%, following five months of declines.
Queensland has been the strongest state for new building with the ABS reporting a 2.7% rise in approvals for units in August following four months of increases, and a 0.8% lift in approvals for houses after 19 months of rises.
Murray says each capital city has a plan to increase its supply of housing to meet population growth.
"It's just when it comes to implementing those plans that the industry runs into problems," he says.
 
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Can housing supply keep up with population growth?

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Master planned communities will be South East Queensland's retirement hot spots in 2031, taking over from sea change destinations that are home to the largest numbers of older Australians now, Urban Economics predicts.
Bribie Island had South East Queensland's largest population of people aged over 65 in 2011, according to Urban Economics analysis of census data. The Gold Coast and Sunshine Coast were also popular retirement destinations.
"We are going to continue to see those areas as important but going into 2021, tree change areas pick up in importance, then to 2031, growth areas such as Greenbank and Ripley – the master planned communities – become important," Urban Economics managing director Kerrianne Bonwick-Meulman said.
The researcher forecast that in 2021 Bribie Island would continue to be home to South East Queensland's largest population of retirees with an estimated 4246 people aged 65 to 74; 3695 people aged 75 to 84 years; and 1454 people aged over 85.
But by 2031, Ripley near Ipswich would take over with a projected population of 7947 people aged 65 to 74; 5807 people aged 75 to 84; and 2765 people aged 85 plus.
Bonwick-Meulman said the shift was related to land availability.
Families moving to master planned areas now would be approaching their early, active retirement years in 2031 and would want to remain in their neighbourhoods, she said.
The trend meant there was a need to ensure master planned communities could cater to the needs of older people by incorporating health care facilities and smaller houses aimed at retirees downsizing their homes for example.
"It's about providing choice and diversity of housing stock that can best meet their needs," Bonwick-Meulman said.
Developments completed in the 1970s where most residents are now approaching retirement often lack the facilities that older people need to remain in the community.
Bonwick-Meulman said there was an opportunity for South East Queensland's master planned communities currently in the development stages, such as Ripley, Springfield and Greenbank, to ensure people who are buying into those areas now know that there will be options for them when they are older.
South East Queensland suburbs with the highest population of 65-74 year olds
<table border="0"><tbody>
<tr>
<td style="text-align: center;" colspan="2">2011</td>
<td style="text-align: center;" colspan="2">2021</td>
<td style="text-align: center;" colspan="2">2031</td>
</tr>
<tr>
<td>Area</td>
<td>#</td>
<td>Area</td>
<td>#</td>
<td>Area</td>
<td>#</td>
</tr>
<tr>
<td>Bribie Island</td>
<td>3,290</td>
<td>Bribie Island</td>
<td>4,246</td>
<td>Ripley</td>
<td>7,947</td>
</tr>
<tr>
<td>Southport</td>
<td>2,530</td>
<td>Noosa Hinterland</td>
<td>3,477</td>
<td>Greenbank</td>
<td>5,298</td>
</tr>
<tr>
<td>Noosa Hinterland</td>
<td>2,323</td>
<td>Southport</td>
<td>3,311</td>
<td>Southport</td>
<td>4,250</td>
</tr>
<tr>
<td>Beachmere - Sandstone Pt</td>
<td>2,131</td>
<td>Robina</td>
<td>3,068</td>
<td>Bribie Island</td>
<td>4,232</td>
</tr>
<tr>
<td>Maroochydore - Kuluin</td>
<td>2,066</td>
<td>Maroochydoore - Kuluin</td>
<td>2,797</td>
<td>Noosa Hinterland</td>
<td>4,045</td>
</tr>
</tbody></table>
South East Queensland suburbs with the highest population of 75-84 year olds 
<table border="0"><tbody>
<tr>
<td style="text-align: center;" colspan="2">2011 </td>
<td style="text-align: center;" colspan="2">2021 </td>
<td style="text-align: center;" colspan="2">2031 </td>
</tr>
<tr>
<td>Area</td>
<td>#</td>
<td>Area</td>
<td>#</td>
<td>Area</td>
<td>#</td>
</tr>
<tr>
<td>Bribie Island</td>
<td>2,446</td>
<td>Bribie Island</td>
<td>3,695</td>
<td>Ripley</td>
<td>5,807</td>
</tr>
<tr>
<td>Southport</td>
<td>1,564</td>
<td>Southport</td>
<td>2,118</td>
<td>Greenbank</td>
<td>4,456</td>
</tr>
<tr>
<td>Maroochydore - Kuluin</td>
<td>1,381</td>
<td>Beachmere - Sandstone Pt</td>
<td>2,052</td>
<td>Southport</td>
<td>3,610</td>
</tr>
<tr>
<td>Beachmere - Sandstone Pt</td>
<td>1,344</td>
<td>Noosa Hinterland</td>
<td>1,923</td>
<td>Caloundra - West</td>
<td>3,139</td>
</tr>
<tr>
<td>Caloundra - West</td>
<td>1,294</td>
<td>Maroochydore - Kuluin</td>
<td>1,839</td>
<td>Southport</td>
<td>2,975</td>
</tr>
</tbody></table>
South East Queensland suburbs with the highest population of 80+ year olds 
<table border="0"><tbody>
<tr>
<td style="text-align: center;" colspan="2">2011 </td>
<td style="text-align: center;" colspan="2">2021 </td>
<td style="text-align: center;" colspan="2">2031 </td>
</tr>
<tr>
<td>Area</td>
<td>#</td>
<td>Area</td>
<td>#</td>
<td>Area</td>
<td>#</td>
</tr>
<tr>
<td>Southport</td>
<td>964</td>
<td>Bribie Island</td>
<td>1,454</td>
<td>Ripley</td>
<td>2,765</td>
</tr>
<tr>
<td>Nambour</td>
<td>644</td>
<td>Southport</td>
<td>1,151</td>
<td>Bribie Island</td>
<td>2,237</td>
</tr>
<tr>
<td>Bribie Island</td>
<td>626</td>
<td>Maroochydore - Kuluin</td>
<td>969</td>
<td>Caloundra - West</td>
<td>1,999</td>
</tr>
<tr>
<td>Caloundra - West</td>
<td>583</td>
<td>Caloundra - West</td>
<td>891</td>
<td>Southport</td>
<td>1,606</td>
</tr>
<tr>
<td>Maroochydore - Kuluin</td>
<td>581</td>
<td>Cleveland</td>
<td>872</td>
<td>Robina</td>
<td>1,403</td>
</tr>
</tbody></table>
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Retirees to favour master planned communities by 2031: Urban Economics

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Spring is traditionally the busiest time of year in the property market and as the weather heats up, so does competition among lenders for customers in the $1.3 trillion mortgage market.
With interest rates remaining on hold at record low levels, lenders are already pricing their mortgages keenly. Lower funding costs are allowing lenders to offer more competitive prices for mortgages, the Reserve Bank of Australia noted in its September Financial Stability Review.
Price competition for new borrowers in the residential mortgage market has intensified with lower fixed rates on offer and larger discounts on advertised variable rates available to a broader range of borrowers, the Financial Stability Review noted.
In this environment, lenders are turning to other weapons in the war for new customers: incentives such as vouchers, fee waivers and upfront cash bonuses.
NAB announced in late September that it would give home loan customers a $1000 gift card when they took out a principal and interest mortgage for $300,000 or more between September 22 and October 31, 2014 and drew down on the loan by January 30, 2015.
NAB group executive product and markets Antony Cahill said spring was the strongest season for home loan applications in 2013 and 2012 and the gift-card was aimed at winning customers during the busiest time of year for home-buying.
The four big banks – NAB, Commonwealth Bank, ANZ and Westpac – control about 80% of the mortgage market and home loans are important to their businesses with around three quarters of bank loans used for housing. But it's not just the big four using non-interest rate measures to compete.
Macquarie Banks offers a loan that rewards borrowers with Qantas Frequent Flyer points, for example. Customers can earn up to 160,000 Qantas Points with a $500,000 home loan in the first five years.
Six lenders have cash-back offers for home loan customers, according to research that comparison website Finder.com.au conducted for Property Observer. These include NAB, Newcastle Permanent and Commonwealth Bank, which are all offering up to $1,000 cash back. Heritage Bank and Homeloans.com.au are offering $600 and Austral Mortgage is giving back $500.
Eleven lenders are offering to waive fees for new home loan customers, including St George Bank, Resi and ING Direct, according to Finder.com.au.
Many of these promotions are for a limited time to attract new borrowers, Finder.com.au money expert Michelle Hutchison says.
"We're not surprised by these promotional offers available right now because we usually see an influx of incentives at this time of the year," Hutchison said. "It's currently mortgage season during spring, which is traditionally the busiest time of year to buy, sell and refinance so the home loan market is in a spin to try and take advantage of the high demand."
Hutchison warns home buyers and those who are looking to refinance to look beyond promotional offers when comparing mortgage products.
"Make sure you compare the cost of the loan including the interest rate you will receive and all the fees involved to make sure the costs don't outweigh any incentives offered," she says.
Macquarie Bank is a corporate client of the writer.
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Competition among lenders heats up

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Demand for residential property is leading to an increasing number of secondary office buildings being converted into apartments despite the challenges posed by repurposing commercial buildings.
Converting some commercial properties to residential uses was like “trying to squeeze a square peg into a round hole”, Colliers International director of project marketing residential Curtis Field told Property Observer.
“What works for commercial office buildings, like having lift wells in the centre of the building, may not work for residential,” said Field, who spoke on the topic at the Retrofit and Refurb conference in Sydney last week.
Compromises may have to be made in turning a commercial floor plan into residential apartments, as contestants in reality TV show The Block Glasshouse have discovered.
Ceiling heights can be a problem because commercial buildings are designed as offices, not residences. It might also be difficult to obtain adequate light and ventilation for each apartment.
“It’s sometimes really hard to meet those planning requirements,” Field said, adding that it was becoming less of an issue to overcome the problems and the benefits usually outweighed the challenges.
Benefits worth the challenges
Converting an existing office building to residential uses meant developers could often achieve larger apartment buildings than if they were seeking approval for a new structure, Field said.
“That happens in the CBD where an office was allowed to be 10 to 12 storeys tall but if you knocked that building down you might not be able to get planning approval to construct a new building to that height,” he said. “You’re getting something that could not be constructed now.”
Another plus for developers was that there was less impact on the local community and neighbours could not complain about issues such as loss of views if the building was already in place.
“If you talk to builders about converting a building that’s already there they say it doesn’t save on construction costs but from a time table point of view you don’t have six months of demolition and then 12 to 18 months of heavy construction. It’s really a fit out job,” Field said.
“From a sales point of view you can see the building and what views you are going to get where off-the-plan is hard to visualise,” Field said.
Factors facilitating conversions
Changes to zoning and heritage restrictions have been allowing developers to convert commercial buildings to residential uses, which previously would not have been permitted.
“We are seeing that in industrial zoning like in South Sydney which used to be industrial,” Field said.
Secondary commercial properties in the CBD and elsewhere could deliver higher returns on investment if converted to apartments when zoning permitted, Field said.
“Milsons Point in Sydney is a classic example where commercial tenants were attracted back to the city, North Sydney and North Ryde which made those buildings almost obsolete because the costs to upgrade outweighed the return you would get from commercial tenants whereas they have become highly desirable as residential,” he said.
Superannuation fund CBUS is working on the conversion of Vibe Hotel at 88 Alfred Street, Milsons Point, which it bought earlier this year for about $80 million, to between 130 and 140 residential apartments.
The superannuation fund also owns a commercial building at 130 Elizabeth Street opposite Hyde Park in central Sydney, which recently received stage 1 development approval to be converted to apartments.
Foreign investors have bought buildings on the Hyde Park fringe and while many are commercial investments now, Field said they were being repositioned as residential development opportunities because of their views.
Singaporean investors have development applications before council on 227 Elizabeth Street with plans to develop 140 apartments in the building, which overlooks the Hyde Park.
Elsewhere in Sydney, Chinese investors bought 286 Sussex Street in late 2013 with plans to convert the vacant office building to residences. The Goldfields House commercial building at 1 Alfred Street was bought by US and Dutch investors for residential conversion.
Field estimates there is between 110,000 and 180,000 square metres of commercial floor space in Sydney earmarked for conversion to residences over the next five years.
A separate report by JLL Research estimated that nationally, 46,940sqm of office property was withdrawn for residential development in 2013 – up from 25,794 the year before.
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Office conversions to residences on the rise

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Capital appreciation often forms a large part of the return on an investment property. In general, investors are liable to pay tax on that capital gain.
This is part of a series. To see Part 1, common misconceptions around capital gains tax, <a href="/expert-insights/finance/capital-gains-tax-explained-part-1-common-misconceptions">click here</a>. To see part 2, around capital gains tax payable on deceased estates, <a href="/expert-insights/finance/capital-gains-tax-explained-part-2-deceased-estates">click here</a>. 
The rules on when and how much tax applies are not straightforward, particularly when the investment property starts out as the owner’s primary residence, or becomes the owner’s home after having been rented out for a period of time.
“The fundamental principal is that a taxpayer’s main residence is exempt from CGT and that a taxpayer can only have one main residence,” says HLB Mann Judd director of tax Bill Nussbaum.
“Commonly, circumstances can change, especially when the main residence is also used for income producing purposes for certain periods of ownership. Such circumstances include absences from the property and renting out the property for the first time.”
Nussbaum prepared the following case study examples for Property Observer to illustrate the CGT outcomes in various situations. Each person’s circumstances are different and you should seek professional tax advice if you have questions on how CGT applies to your situation.
Primary residence becomes an investment property Absences &amp; the “Six Year Rule”
<ol start="2">
<li>The main residence home is rented out as the taxpayer is transferred to another city/overseas or decides to move to rented accommodation and keep the existing home. 
</li>
<li>Home therefore stops being a “main residence”. 
</li>
<li>The “Six Year Rule” allows the taxpayer to continue to treat the home as their main residence for a maximum period of six years (See Example 1) 
</li>
<li>If the taxpayer moves back into the property after having rented it out for some time and re-establishes it as the main residence, a further period of six years starts to run if the property is rented again in the future. 
</li>
<li>If the “Six Year Rule” is breached, as the property is rented for more than six years, then a partial exemption is applicable (See Example 2)</li>
</ol>
Special rules
<ol>
<li>In addition to the “Six Year Rule”, there is also a special rule for properties which first become income producing after August 20, 1996.</li>
</ol>
<ol start="2">
<li>The Special Rule relates to determining the cost base of the property. 
</li>
<li>The property is assumed for tax purposes to have been acquired at its market value when it was first rented out, rather than the actual purchase price.</li>
</ol>
Example 1: Dwelling first used to produce income – “Six Year Rule” On July 1, 1994 Bev paid $250,000 for a house that she used as her main residence until July 1, 2007, at which time its market value was $350,000. If Bev then rented the house until she sold it before July 1, 2013, she would still be able to claim a full CGT exemption by relying on the six-year extended exemption. She would not have to pay CGT on the sale proceeds.
Example 2: Dwelling first used to produce income – Breaching the “Six Year Rule” Following on from Example 1, if Bev continued to rent the house before selling it for $700,000 on July 1, 2014 (seven years after its first income use), she could only claim a partial exemption for CGT. In that case, the market value of the house at the time of its first income use ($350,000 on July 1, 2007) is used to determine the capital gain because the property first became income-producing after August 8, 1996. The capital gain in this case is $350,000 ($700,000 − $350,000 = $350,000). The taxable capital gain would be worked out (ignoring leap years) as follows:
<table border="0" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td width="14%">
$350,000 ×
</td>
<td width="85%">
 365 days  (non-main residence days) 2,555 days (days in deemed ownership period)
</td>
</tr>
<tr>
<td colspan="2" width="100%">
= $50,000
</td>
</tr>
</tbody></table>
Since Bev has held the property for more than 12 months, a 50% CGT discount would apply. She would have to pay CGT at her marginal tax rate on $25,000 (ie 50% of the $50,000 capital gain).
Investment property becomes a main residence
Only a partial main residence exemption is available if a property is initially rented out as an investment and then becomes the taxpayer’s main residence for part of the ownership period. If the residence is used as a rental property initially, the overall capital gain on eventual disposal is reduced via a pro rata apportionment by reference to the period the taxpayer used the property as their main residence, as explained in Example 3.
Example 3: Former investment property- now main residence
Lisa acquired a dwelling on October 19, 2008 which she let out to tenants until October 21, 2011. From that date she used the dwelling as her main residence. Lisa eventually sold the dwelling on September 7, 2013 and made a capital gain of $40,000, calculated without regard to the CGT exemption provisions. The capital gain is reduced pro rata by reference to the period Lisa used the dwelling as her main residence. The reduced capital gain is:
<table border="0" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td width="12%">
$40,000 ×
</td>
<td width="88%">
1,098 (number of days from October 19, 2008 to October 21, 2011) 1,785 (number of days of Lisa’s ownership)
</td>
</tr>
<tr>
<td colspan="2" width="100%">
= $24,605
</td>
</tr>
</tbody></table>
As Lisa has owned the property for more than 12 months, she would be entitled to the CGT discount and would have to pay tax on $12,302.50 (50% of $24,605).
Do you have any queries about CGT? Email <a href="mailto:news@propertyobserver.com.au" target="_blank">news@propertyobserver.com.au</a>
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Capital gains tax explained, Part 3: Investment property appreciation

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HLB Mann Judd director of tax Bill Nussbaum spoke to Zoe Fielding about the rules that apply to capital gains tax (CGT) on deceased estates.

This is a continuation from Part 1: <a href="/expert-insights/finance/capital-gains-tax-explained-part-1-common-misconceptions">Common misconceptions around capital gains tax</a>.

“There are no death duties in Australia and a main residence property acquired from a deceased estate is generally not subject to CGT,” says HLB Mann Judd director of tax Bill Nussbaum. “However there are some important rules to consider to ensure the CGT exempt status is not lost.”

Pre-CGT Property 

Capital gains tax was introduced on September 20, 1985. Nussbaum says that if the deceased person acquired the main residence on or before September 19, 1985, the following rules apply:

<ol>
<li>The property is CGT exempt if it is sold within two years of deceased’s death. 
	 </li>
	<li>It is still CGT exempt if sold after  two years, providing the following tests are met:
	<ul>
<li>The property was not used to produce income (rented out)</li>
		<li>It was the main residence of the person inheriting the property, for example the deceased’s spouse or an individual having a right of occupancy the property under the will.</li>
	</ul>
</li>
</ol>
[smartcode_project:default project_id=7633]

Post-CGT Property

If the deceased person bought their main residence after September 19, 1985, stricter tests apply to determine whether gains on the sale of the property will be subject to CGT.

All conditions noted above must be satisfied. In addition, the property must have been the deceased person’s main residence just before their death and not used to produce assessable income at that time.

Investment properties of the deceased

Generally, no CGT is payable on the transfer of a property to a beneficiary under a will. CGT will be applicable when the property is eventually sold by the beneficiary. The cost base is calculated as follows:

<ul>
<li>For pre-CGT investments properties the cost base is calculated based on the market value of the property at the deceased date of death. </li>
	<li>For post-CGT investment properties the cost base is calculated based on the deceased’s original cost.</li>
	<li>The 50% CGT discount also applies to the sale of inherited properties that have been held for more than 12 months. </li>
</ul>
To read the third part of this series, Investment property appreciation, <a href="/expert-insights/finance/capital-gains-tax-explained-part-3-investment-property-appreciation">click here.</a>
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Capital gains tax explained, Part 2: Deceased estates

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Questions on capital gains tax on investment property were among the top five queries to financial advisers during this month’s Financial Planning Week, the Financial Planning Association says.
Australians’ love of residential property and the favourable tax treatment of investments in real estate mean capital gains tax is on many people’s radars, explained Stephan Strategic Certified Financial Planner, Joe Stephan.
“People are happy to reduce tax now through strategies such as negative gearing but eventually there will be a capital gain and there will be tax to pay,” said Stephan, who lectured on taxation at La Trobe University.
Capital gains tax (CGT) can be confusing, particularly if the property was purchased before September 21, 1999 when the rules were simplified.
There are variations in the way the tax is applied depending on the situation. For example, CGT paid on investments held inside superannuation is different from CGT paid on assets held by an individual.
“It’s also tied with timing,” Stephan says. “How long you hold an asset determines how much you pay.”
A common misconception about CGT is that it is charged at a flat rate. That’s not the case, said Stephan.
“The amount paid depends on your marginal tax rate and that depends on the income you generate,” he added.
This means it can be tax effective to time the disposal of an asset so that the sale goes through in a year when the person’s taxable income will be lower.
“Sometimes people like to wait until they are getting towards retirements and start taking an income stream from their private pension so they don’t have to pay any income tax. Then their capital gain is assessable at a lower tax rate,” Stephan said.
CGT was introduced in 1985, so the sale proceeds of properties that were bought before then are not subject to the tax.
The CGT discount was introduced on 21 September, 1999. This is a 50% discount that applies to the capital gain made on assets bought since that date if they have been held for more than one year, Stephan explained.
Most people understand there is no CGT to pay on the sale of the family home, said Stephan, but many people are confused by the special rules that apply to other properties, such as an inherited home.
“You don’t have to pay CGT on inherited property unless you sell it. The cost base might change and not be the purchase price but you don’t pay CGT until the property is sold,” Stephan said.
Different rules apply when people turn their home into a rental property or move into a property that was formerly an investment. Stephan warns that some mortgages do not allow the property to be converted into an investment. For simplicity, some people like to sell up and buy another similar property rather than converting the property’s use.
This is the first in a series of three articles explaining CGT. To see Part 2: Deceased estates, <a href="/expert-insights/finance/capital-gains-tax-explained-part-2-deceased-estates">click here</a>. To see Part 3: Investment property appreciation, <a href="/expert-insights/finance/capital-gains-tax-explained-part-3-investment-property-appreciation">click here</a>. 
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Capital gains tax explained, Part 1: Common misconceptions

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Australian commercial property is overvalued and investors in real estate investment trusts are at risk of significant capital losses when interest rates and bond yields rise, an analysis by investment researcher Morningstar has concluded.
Low interest rates have lead investors to divert capital from bonds to higher yielding property, which has driven asset values higher.
Commercial property values could drop by as much as 10 to 15% over a year when interest rates and bond yields rise again, making fixed income more attractive to investors, Morningstar suggested in a report on the Australian real estate investment trust (A-REIT) sector.
“It’s quite conceivable that when interest rates rise, property values could fall in orders of that magnitude,” Morningstar senior equity analyst Tony Sherlock told Property Observer.
The outlook for rental income from commercial properties was stable but income growth would be more than offset by the loss in asset values, he added.
Central banks have indicated that interest rates will stay low for a sustained period, although bond yields can increase ahead of any rise in official cash rates.
“From current levels, interest rates are going to eventually rise and when they do rise they are probably going to rise a bit faster than people expect,” Sherlock said.
Property values would respond fairly quickly to rising interest rates but A-REIT share prices could fall even more rapidly, he said.
A-REIT prices fell 10% over three weeks in May 2013 after yields on 10-year US treasuries increased by 10% when US Federal Reserve Chairman Ben Bernanke flagged a possible tapering of US quantitative easing.
The risk of investing in property through A-REITs was now “arguably greater” than usual because most were trading at a premium to the book value of their assets, “some by as much as 30%”, the Morningstar report noted.
Defensive A-REITS with low-risk tenants, such as BWP Trust, which owns Bunnings Warehouse properties, and ALE Property Group, which invests in pubs, were trading at the biggest premiums to book value and would be exposed to the largest share price falls, it said.
Sherlock said A-REIT prices had already started to fall due to rising bond yields and sales by offshore investors who were beginning to leave the market as the Australian dollar weakened. In the month to 18 September, the S&amp;P/ASX 200 A-REIT index dropped 3.74%.
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Investors in REITs at risk of significant capital losses: Morningstar

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Investors are missing out on thousands of dollars worth of tax deductions by failing to take advantage of depreciation benefits, according to CBRE.
The real estate services company last week launched a tax depreciation service aimed at Australian residential property investors.
“It’s astronomical the number of people who are unaware of the depreciation benefits that are available to them,” said CBRE Capital Allowances National Director Neale Scott who leads the division.
Owners of new properties could often claim 2 to 4% of the purchase price in depreciation in the first year of ownership, Scott said. On a newly constructed property purchased for $400,000, for example, the depreciation benefit could be between $8000 and $14,000 in the first year.
“It’s significant,” Scott said.
But many investors did not know they could claim such deductions by obtaining a tax depreciation schedule for the property.
“There is a lot of reliance on accountants to do this work but accountants are the ones who use the schedules; they don’t prepare them,” Scott said.
A number of other companies can prepare tax depreciation schedules for investors.
Scott said CBRE had a large residential valuation business and could use its existing infrastructure to offer a cost competitive service in preparing depreciation schedules.
The scale of its business meant it could prepare the reports in a shorter time frame than many of its competitors. It aims to deliver depreciation schedules to its clients within five to 10 days.
“For every [depreciation schedule] that we do, we fully inspect the property which is also a massive point of difference,” Scott said.
The service is available across all metropolitan areas.
CBRE launched its Capital Allowances business in Australia about 12 months ago initially targeting commercial and agribusiness sectors.
“The addition of a residential platform enables us to offer a full suite of property and tax depreciation services across all sectors,” Scott said.
The business specialises in formulating depreciation schedules and providing associated advisory services, including preparing property reinstatement costs and depreciated replacement cost assessments. 
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Investors overlooking depreciation benefits: CBRE

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Listed property stocks are well managed and in good shape to deliver strong distributions to investors but stellar capital gains made over the past year are unlikely to continue, a research specialist predicts.
Real estate companies and investment trusts have been delivering attractive running yields from high-growth property that is efficiently financed with manageable debt levels, accountancy and financial advice firm Crowe Horwath’s head of research Jeremy McPhail told Property Observer.
Over the six months to June, the property sector returned about 12%, compared with a 3% gain from the overall market as investors focused on consistent cash flow, McPhail said.
“At the start of the year we had a view that it was worth looking at more tactical short-term allocations to property and infrastructure-based stocks. Those stocks have now outperformed the market,” he said.
Share prices gains had been supported by consistent income distributions.
“For us [property and infrastructure stocks] are neither expensive nor cheap,” McPhail said.
He said distributions were likely to continue to increase at a slow and stable pace but added that he would not be surprised those stocks produced lower capital gains over the coming months.
Investments in listed property and infrastructure stocks were among ten of the best investment ideas for the year identified by Crowe Horwath’s financial advisers, investment analysts and economists. The firm last week issued its 2014 Ten Best Investment Ideas Half Year Progress Report, providing an update on the investment ideas identified at the start of the year.
The report noted: “Overall, we remain confident that balance sheets (gearing) for most investment grade opportunities are well under control. Occupancy is high, with low tenant turnover. Management are seeking to replace more expensive debt with lower interest rates and longer-term maturities aligned with current market rates, which improves funds from operations. While this isn’t helping the underlying fundamentals of the assets, it is good to see management focused on controlling what they can.”
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REITs have outperformed, but stellar gains unlikely to continue: Research specialist

<a href="https://www.apartments.com.au/developers/consolidated-properties">Consolidated Properties Group</a> (CPG) is approaching the launch of its latest Brisbane riverfront development, Castile, on the dress circle Skyring Terrace in Newstead.

VIP buyers are now being engaged, with a full public sales launch coming later this year.

Positioned as the final opportunity to secure a new absolute riverfront residence on the East bank of Newstead, Teneriffe or New Farm, Castile at 47 Skyring Terrace has been designed by <a href="https://www.apartments.com.au/architects/woods-bagot">Woods Bagot</a> as a timeless addition to the Brisbane skyline.&nbsp;

[smartcode_project:default project_id=150489 project_image_fid=371113]

The name Castile draws on themes of permanence, sophistication and legacy, reflecting a broader vision centred on enduring architecture and timelessness in the rarest of riverfront positions.&nbsp;

CPG Chairman and CEO Don O’Rorke said the project had been envisioned as a future Brisbane icon.&nbsp;

“With 47 metres of direct river frontage and never to be built out views, 47 Skyring Terrace is the definitive address on the Brisbane River,” O’Rorke said.&nbsp;

[smartcode_project:default project_id=150489 project_image_fid=371114]

“Rather than following trend-based apartment design, Castile draws inspiration from Brisbane’s great heritage buildings, reinterpreting classical architecture into a contemporary riverfront landmark designed to stand proudly for the next 100 years,” he said.&nbsp;

The approved development will comprise 227 apartments across a 25-storey tower alongside a boutique six-storey riverfront building of just 12 residences.&nbsp;

Construction is scheduled to commence in September 2026.

[smartcode_project_cta:default project_id=150489]

Joel Robinson

CPG unveils Castile Newstead ahead of upcoming sales launch

Australia’s online shopping habits have shifted dramatically over the last decade. As eCommerce volumes surged, so too did the frustrations that came with traditional parcel delivery: missed deliveries, long Post Office queues, parcel theft and the challenge of being home during business hours.

Australia Post’s Parcel Lockers emerged as one of the more practical responses to that changing consumer behaviour.

What started as a relatively niche delivery option has evolved into a nationwide network of more than 1,400 self-service Parcel Lockers positioned at train stations, shopping centres, supermarkets and Post Offices across the country. The system allows Australians to send, collect and return parcels 24 hours a day, fundamentally changing how many people interact with deliveries.

The appeal is relatively straightforward: flexibility.

Instead of waiting at home for a delivery driver or rushing to a Post Office before closing time, users can direct eligible parcels to a Parcel Locker location of their choice. Once the parcel arrives, Australia Post sends a notification with a collection code or QR access through the AusPost app, allowing customers to retrieve their package at any time within the collection window.

For apartment residents in particular, the system has become increasingly valuable.

Higher-density living has created logistical challenges around deliveries, especially in buildings without concierge services or secure parcel rooms. Missed deliveries are common, while parcel theft has become an increasing concern as online shopping volumes continue to rise.

Australia Post itself has repeatedly highlighted the growing issue of “porch pirates” during peak shopping periods, encouraging customers to use Parcel Lockers as a safer alternative to unattended home deliveries.

That security aspect is one of the key reasons the Australia Post Parcel Locker network has grown so rapidly.

Parcel Lockers are positioned as secure, monitored collection points that reduce the risk of theft while also improving delivery efficiency for Australia Post. Instead of multiple redelivery attempts, parcels can be consolidated into a single secure destination.

The Parcel Lockers themselves are free to use through a MyPost account and support a range of parcel sizes up to 16 kilograms and dimensions of approximately 35 x 44 x 61 centimetres.

Beyond receiving parcels, the system has increasingly become integrated into the broader eCommerce ecosystem.

Customers can now use Parcel Lockers to return online purchases, while retailers have embraced the model as a way to improve delivery success rates and reduce friction in the shopping process. Australia Post has actively expanded partnerships with major retailers and promoted Parcel Lockers as part of a broader out-of-home strategy.

The timing of that expansion aligns with broader changes in Australian shopping behaviour.

The acceleration of online retail during and after the pandemic placed enormous pressure on delivery infrastructure. Parcel volumes reached record highs, particularly during Black Friday and Christmas periods, with Australia Post delivering more than 100 million parcels during peak festive seasons.

That growth forced logistics providers to rethink the “last mile” of delivery, widely regarded as the most expensive and operationally difficult stage of the process.

Parcel Locker systems have increasingly been viewed as part of the long-term solution.

The concept itself is not unique to Australia. Parcel Locker networks have become common globally, particularly across Europe and Asia, where dense urban environments and apartment living create similar logistical challenges. But Australia’s geography and suburban sprawl made adoption slower initially.

Now, however, the convenience factor is driving mainstream usage.

For commuters, Parcel Lockers near train stations allow parcels to be collected on the way home from work. For apartment dwellers, they remove the uncertainty around access and missed deliveries.

The rise of the AusPost app has also streamlined the experience, centralising notifications, tracking and Parcel Locker access into a single platform. Australia Post has increasingly pushed customers toward app-based delivery management, partly as a way to combat phishing scams and fake delivery notifications, which have become more sophisticated in recent years.

The Parcel Locker model is also beginning to influence property development itself.

Parcel management has become a growing consideration in apartment building design, particularly as online shopping becomes embedded in everyday life. Many new residential developments are now incorporating dedicated parcel rooms or Parcel Locker systems into foyers and communal spaces.

For developers, parcel management is increasingly viewed as part of the broader resident amenity offering, alongside gyms, wellness spaces and communal work areas.

That reflects a wider evolution in how residential buildings are designed.

Apartment buyers are placing greater emphasis on convenience, security and operational functionality, particularly in higher-density urban environments. Parcel delivery, once considered a minor operational detail, has become an increasingly important part of that equation.

Australia Post’s Parcel Locker network sits at the centre of that behavioural shift.

What began as a simple alternative delivery option has evolved into a key piece of infrastructure supporting Australia’s growing eCommerce economy and changing urban lifestyles.

And as online shopping continues to expand, the role of Parcel Lockers is likely to become even more embedded in how Australians live, shop and receive goods.

How Australia Post Parcel Lockers changed parcel delivery convenience in Australia

Perth’s new apartment market recorded its strongest quarter of sales since Q4 2021, with 412 apartments sold in Q1 2026 and a record quarterly sold value of $537 million, according to Urbis’ latest Apartment Essentials results.

Urbis said the March quarter result reflects strong, highly product‑specific demand across both ends of the market, from more attainable projects delivering at scale, through to premium stock being absorbed by equity‑rich downsizers.&nbsp;

David Cresp, Partner at Urbis, said the key story in Perth is not demand, it is the market’s ability to convert demand into delivered housing.&nbsp;

“This is the strongest sales quarter since Q4 2021, and it reinforces that demand in Perth is real and it’s local,” David Cresp said. “But the task now is delivery, turning that demand into projects that can actually be built and completed.”&nbsp;

[smartcode_project:default project_id=110291 project_image_fid=302785]

<h2>Affordable product leads, premium demand remains resilient</h2>

Sales in Q1 were led by more affordable projects, with The Boulevard (SKS Group) recording 115 sales in the quarter, the presentation noting this is only the second time a single project has surpassed 100 quarterly sales. The project was able to offer more affordable housing product right next to a train station.&nbsp;

Palmyra West (Finbar) also delivered strong results with 28 sales in Q1, following 84 sales in Q4, with an average price of under $800,000, underscoring depth of demand for well‑located, attainable new stock.&nbsp;

At the premium end, Urbis said downsizer demand is continuing, with the results highlighting Romeo (Applecross, Finbar) recording 75 sales and reaching almost 50% sold in one quarter.

Jual (Shenton Park, Celsius Property) also posted a strong quarter with 28 sales, reaching 39% sold in one quarter.

Urbis noted that Perth apartment demand is not speculative, not investor‑led, and not uniform, describing it as localised, often equity‑driven and highly product‑specific, a pattern reflected in the polarisation between strong “attainable” performers and premium downsizer product.&nbsp;

[smartcode_project:default project_id=148957 project_image_fid=364102]

<h2>Prices underpinned by costs, and the delivery risk is growing</h2>

Urbis said pricing pressure is cost not demand‑driven: construction costs and delivery risk are now a central constraint, with the results noting build costs remain elevated and volatile, and that energy, fuel and labour uncertainty weigh on feasibility.

David Cresp said a growing challenge for private Build‑to‑Sell developers is simply securing a builder in the current environment.

“Developers are really feeling the pressure from a building market that was operating at capacity and securing a builder is challenging,” David Cresp said, adding that even where a builder can be secured, “trying to get to the price that makes the development financially viable is incredibly challenging in the current market.”&nbsp;

Urbis’ broader WA commentary also notes that industry remains at or above capacity with lot and housing creation, and that many builders are limiting new sales to manage stretched workforces and fixed‑price contract pressures, conditions that flow directly into apartment feasibility and delivery timing.

[smartcode_project:default project_id=108869 project_image_fid=317905]

<h2>Supply: improving later, but still constrained, and Perth lags eastern benchmarks</h2>

While near‑term supply remains constrained, Urbis’ forecast shows completions lifting “Supply is forecast to be back above 1,500 apartments per annum for the first time since 2019”, with 1,775 completions forecast for 2026, and volumes remaining above that level over the following years.&nbsp;

Looking further ahead, completions are forecast to reach 2,500 in 2028, with the report noting 32% of that total is social/affordable, reflecting the role of government‑supported delivery in rebuilding the pipeline.&nbsp;

However, Urbis said Perth remains behind comparable markets on pipeline scale. In a national comparison of projects under construction, the report shows under construction Perth Build‑to‑Sell (BTS) at 3,446 apartments versus the Gold Coast at 7,922. Mr Cresp said “The challenge for Perth is how to we grow the delivery pipeline”.

Urbis’ conclusion is that Perth’s market is increasingly defined by product discipline and delivery certainty, with the research identifying “delivery certainty is key” and calling out builder risk and procurement models as core success factors, alongside “timing and staging”.&nbsp;

Perth apartment sales hit strongest pace since late 2021 as builder capacity tightens

<a href="https://www.apartments.com.au/developers/sammut-developments">Sammut Group</a> has secured development approval for its latest Brisbane apartment project, marking the Sydney developer’s next step in expanding its Queensland pipeline following the success of its debut Gold Coast development, Coast.

The approved project at <a href="https://www.apartments.com.au/new-apartments/44-glen-road-toowong-qld-4066">44 Glen Road, </a><a href="https://www.apartments.com.au/developments/toowong-qld-4066">Toowong</a> will deliver a 15-storey riverfront apartment building with 42 residences, significantly increasing the scale of the site’s previous approval for a smaller luxury scheme. Designed by Bureau^proberts, the development will comprise a mix of predominantly four-bedroom and two-bedroom apartments positioned to maximise Brisbane River and city views.

Sammut Director Julian Sammut said the group had been actively searching Brisbane for several years before identifying Toowong as the right fit.

“Brisbane was the right step for Sammut,” Sammut said.

“With the success of Coast we thought we should definitely look to do more in Queensland alone. We then pushed up to look at Brisbane. We've been looking for I'd say two to three years actually and it was hard to find the right location.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screenshot%202025-12-23%20at%203.27.14%E2%80%AFPM.png?VersionId=dYAVIL7qdcGA8ojvkslSrLjczXFejSSx" />

Sammut said suburbs including New Farm and Teneriffe were considered before the group ultimately focused on Toowong due to its strong downsizer demographic and limited supply of developable riverfront land.

The site was acquired off-market after what Sammut described as a lengthy negotiation and planning process, with the developer pursuing an uplift to the original approval.

“We are DA approved now which is very exciting,” Sammut said.

“We've had our change approval come through and we've obviously doubled the height, 15 storeys plus rooftop. We've got 42 amazing apartments that are going to be coming to market soon.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-23%20at%203.27.26%E2%80%AFPM.png?VersionId=ohkRkY0dIZlqdfME2EZePsCQavRiBadE" />

Bureau^proberts said the design responds to Toowong’s evolving urban character, balancing contemporary apartment living with the area’s established residential identity.

“A place where traditional Queensland living has taken place for centuries; Toowong is seeing a shift of contemporary influence, commercial and retail hubs mixed with well-considered residential offerings – all the while maintaining its character and charm,” the architect noted in planning documents submitted to Brisbane City Council.

The architecture practice said the project’s form was shaped by its riverfront setting, flood considerations, neighbouring building scales, and view corridors.

“They said the mix of four and two-bedroom apartments capture the ‘fundamental qualities of Queenslander living,’ translated into the context of a contemporary subtropical building.”

The development sits just off Coronation Drive within walking distance of Toowong’s retail precinct and the upgraded Regatta ferry terminal, while also benefiting from proximity to the incoming green bridge connection to West End. Sammut said the accessibility and amenity offering were central to the site’s appeal.

The approval adds to growing residential activity along the Toowong riverfront, joining nearby projects including Consolidated Properties’ Monarch Residences and Spyre Group’s ARC Residences.

Sammut secures approval for debut Brisbane apartment development in Toowong

Developer Lanevick is heading back into Sydney’s apartment market after focusing more heavily on the luxury townhouse and terrace sector in recent years.

Lanevick, founded and directed by Steve Maroun, is expecting to receive approval in the coming months for a new apartment development in Gladesville, with the aim to launch it to the market later this year.

The 51-apartment project, designed by Studio Johnston, will comprise a mix of one-, two-, and three-bedroom apartments positioned toward the Hunters Hill downsizer market.

“Traditionally it’s been difficult for people in that market to downsize because there just hasn’t been the right product available,” Maroun said.

“We’re targeting buyers who might have 30 to 40 per cent of their house value sitting in the bank after downsizing.

“They still want good spacious entertaining areas, they still want quality design, but they also want flexibility and the ability to enjoy life a bit more after working hard for a long time.”

The project sits near Boronia Park and within close proximity to the Parramatta River foreshore, an area Maroun says offers more of a Hunters Hill lifestyle than a traditional apartment precinct.

“From a lifestyle perspective, it’s really more Hunters Hill than Gladesville,” Maroun said. “You’re close to the foreshore, close to parklands, and still connected back into the village precinct.”

From level four and above, apartments will capture water views&nbsp;toward Sydney Harbour. Communal amenity will include rooftop entertaining areas, wellness spaces, and a gym tailored toward owner-occupier buyers.

“We’ve really designed these apartments around that buyer coming from the Hunters Hill LGA and what they’re actually looking for in their next chapter.”

The proposed development has also been designed to respond to the changing character of the broader Gladesville town centre, where a growing number of mixed-use and residential proposals are expected to emerge over the coming years.

“Gladesville presented a rare opportunity to deliver a genuinely design-led residential project within an evolving lifestyle precinct, just moments from the growing Gladesville town centre, and we’ve approached the project with a strong focus on architecture, liveability and long-term community value,” Maroun said.

Maroun said Lanevick saw a first-mover advantage within the precinct as planning controls continue to evolve to accommodate greater housing density.

“We think there’s a real opportunity there that hasn’t really been serviced properly yet,” he said.

“There’s going to be a broader evolution of the whole Gladesville village precinct over time, particularly with more activation and mixed-use outcomes.”

The Venus Street proposal will include a commercial and retail component at ground level designed to contribute to that evolving streetscape activation.

“A big part of the thinking was how do you activate that area properly and create more vibrancy and amenity, which is what Hunters Hill has been looking for,” Maroun said.

Lanevick’s focus since 2020 has largely been on smaller-scale luxury townhouse and terrace developments. The developer recently completed Royale Randwick, also designed by Studio Johnston, where prices reached $3.65 million. The project was featured in the UDIA NSW 2026 Professional Development Prospectus and was also named a finalist for Development of the Year.

&nbsp;

Zoe Fielding

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