Apartment buyers in New South Wales are set to gain a decade of insurance-backed protection against major building defects, after the NSW Parliament passed the Fair Trading and Building Legislation Amendment Bill 2026.&nbsp;

The Bill establishes decennial defect insurance, known in the market as Latent Defects Insurance (LDI), as an alternative to the existing two-year strata building bond. It cleared the Legislative Council with amendments on Tuesday evening (August 4, 2026), with the Legislative Assembly agreeing to those amendments shortly after.

Under the reform, eligible developers can satisfy their statutory bond obligation by taking out an approved decennial-style policy that gives owners 10 years of cover for major structural defects from completion, claimable directly, without first having to pursue developers or builders through costly legal action.&nbsp;

The change forms the final tranche of amendments arising from the 2021 statutory review of the Strata Schemes Management Act 2015 and related legislation.

Resilience Insurance, which originated the cover in Australia and has delivered it in NSW since 2022, welcomed the passage and credited the NSW Government for delivering it.

“This is protection apartment buyers have needed for a long time, and the credit for delivering it belongs to the NSW Government,”&nbsp;said Corey Nugent, CEO of Resilience Insurance.

“Minister Chanthivong and his team have shown real leadership in replacing an outdated two-year bond with cover that matches the lifespan of the buildings people are buying into. Reform like this is what good, evidence-based regulation looks like.”

Resilience has delivered LDI in NSW since 2022, protecting thousands of apartments, giving the State, and now the country, real-world evidence of how decade-long, no-fault protection works in practice.

The reform also places NSW within a wider national shift.

NSW is the third jurisdiction to put decennial cover into law. The ACT legislated for it in 2024, with the scheme taking effect in late 2025, and Victoria passed its own framework on 17 June. Between them, the three cover the majority of Australia's apartment market.

The reform commences once the legislation is proclaimed, which is expected in the coming weeks. From that point, developers of Class 2 residential apartment buildings can meet their statutory obligation with an approved decennial policy in place of the bond.

Buyers who purchased into projects that took out the cover early are among the first in the country to take keys to apartments carrying decade-long structural protection.

“With the legislation passed, the focus now turns to making it work for buyers,”&nbsp;Nugent said.

“There are already thousands of apartments in NSW covered by this insurance, bought by developers who moved early. The question every buyer should be asking in a display suite is a simple one: does this building come with 10-year defect cover, and who stands behind it?&nbsp;

“We look forward to working with the Government and the Building Commission in coming weeks as the framework moves to implementation, and to sharing what we have learned over the past four years so the protection reaches owners as smoothly and quickly as possible.”

Other states are working through their own reform programs. Western Australia has indicated that decennial cover is within consideration a later stage of its reform sequence, and Queensland has been examining the settings as it looks at the development pipeline ahead of the 2032 Olympics.

Resilience Insurance acknowledges the NSW Government’s continued focus on strengthening consumer protection while supporting housing delivery across the State.

Fast Facts: What the reform means

<ul style="color:#222222; font-family:Arial, Helvetica, sans-serif; font-size:small; font-style:normal; font-variant-ligatures:normal; font-weight:400; text-align:start; white-space:normal; background-color:#ffffff; text-decoration-thickness:initial; text-decoration-style:initial; text-decoration-color:initial">
	<li style="margin-left:15px; font-family:Aptos, Arial, Helvetica, sans-serif; font-size:12pt; color:#000000">Proven at scale:&nbsp;Decennial cover has operated in NSW since 2022, protecting thousand of apartments.</li>
	<li style="margin-left:15px; font-family:Aptos, Arial, Helvetica, sans-serif; font-size:12pt; color:#000000">10 years of cover:&nbsp;Protection for major structural defects runs for a decade from completion, claimable directly and with no legal action required.</li>
	<li style="margin-left:15px; font-family:Aptos, Arial, Helvetica, sans-serif; font-size:12pt; color:#000000">An alternative to the bond:&nbsp;Eligible developers can meet their statutory obligation with an approved decennial-style policy in place of the 2% strata building bond.</li>
	<li style="margin-left:15px; font-family:Aptos, Arial, Helvetica, sans-serif; font-size:12pt; color:#000000">Part of a national shift:&nbsp;The ACT has had decennial provisions in force since 2025 and Victoria passed its framework in June. NSW now joins them.</li>
	<li style="margin-left:15px; font-family:Aptos, Arial, Helvetica, sans-serif; font-size:12pt; color:#000000">No-fault, first resort:&nbsp;Owners corporations claim directly from the insurer without first having to establish who is liable for the defect.</li>
	<li style="margin-left:15px; font-family:Aptos, Arial, Helvetica, sans-serif; font-size:12pt; color:#000000">Cost-competitive:&nbsp;At approximately 1.8% of build cost, LDI is typically priced below the 2% bond while offering broader, longer protection.</li>
	<li style="margin-left:15px; font-family:Aptos, Arial, Helvetica, sans-serif; font-size:12pt; color:#000000">Market position:&nbsp;Resilience originated LDI in Australia and has delivered it in NSW since 2022.</li>
</ul>

Fast Facts: What is Resilience LDI?

<ul style="color:#222222; font-family:Arial, Helvetica, sans-serif; font-size:small; font-style:normal; font-variant-ligatures:normal; font-weight:400; text-align:start; white-space:normal; background-color:#ffffff; text-decoration-thickness:initial; text-decoration-style:initial; text-decoration-color:initial">
	<li style="margin-left:15px; font-family:Aptos, Arial, Helvetica, sans-serif; font-size:12pt; color:#000000">Resilience Latent Defects Insurance (LDI):&nbsp;Covers major structural defects for 10 years from completion.</li>
	<li style="margin-left:15px; font-family:Aptos, Arial, Helvetica, sans-serif; font-size:12pt; color:#000000">Consumer-first:&nbsp;Direct claim access, no need for lengthy legal action.</li>
	<li style="margin-left:15px; font-family:Aptos, Arial, Helvetica, sans-serif; font-size:12pt; color:#000000">Cost advantage:&nbsp;At approximately 1.8% of build cost, LDI is typically priced below the traditional 2% Strata Bond while offering broader protection.</li>
	<li style="margin-left:15px; font-family:Aptos, Arial, Helvetica, sans-serif; font-size:12pt; color:#000000">Market leader:&nbsp;&nbsp;Resilience Insurance originated LDI in Australia and is the national market leader.</li>
</ul>

Joel Robinson

NSW parliament passes 10-year defect insurance laws for new apartment buyers

Builder-developer <a href="https://www.apartments.com.au/developers/mcnab-developments">McNab</a> has wasted little time reshaping one of South Brisbane's most significant undeveloped apartment sites after acquiring the property earlier this year.&nbsp;

McNab has lodged plans to scrap an existing approval for two 30-storey towers and instead deliver a single 28-storey residential building, preserving part of the site for a future development opportunity.

The proposal, lodged over <a href="https://www.apartments.com.au/new-apartments/64-peel-street-south-brisbane-qld-4101">64 Peel Street and 9 Cordelia Street</a>, is for a residential-led mixed-use development comprising 124 apartments above a landscaped podium, alongside a boundary realignment that preserves part of the land for a future residential project.

<img alt="First look: McNab resets decade-old South Brisbane approval with 124-apartment tower" data-entity-type="file" data-entity-uuid="743bf564-3f8f-45fc-b8d3-bbf18f5b628f" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/mcnab%20Peel%20st%20podium.png?VersionId=EhCxGrVn_VFH3qTbKnI4WppGwaMnOn0t" />

Designed by <a href="https://www.apartments.com.au/architects/hayball">Hayball</a>, the development will deliver 119 two-bedroom and five three-bedroom apartments across 23 residential levels. A five-level podium will accommodate 135 car spaces, while the ground floor will include a 66 sqm commercial tenancy, an activated residential lobby with work-from-home spaces, and a publicly accessible landscaped plaza linking Cordelia and Peel streets.&nbsp;

Communal amenities will span Level 6 and the rooftop, including indoor and outdoor recreation spaces, a swimming pool, barbecue facilities, kitchen and dining areas, lawn space, sauna, steam room and yoga facilities.

The application also proposes a boundary realignment to create a standalone 1,290 sqm development lot while retaining an adjacent parcel for future redevelopment, allowing the balance of the site to contribute additional housing over time.

Hayball said the architecture has been shaped by the site's elevated corner position at the intersection of Peel and Cordelia streets and Brisbane's subtropical climate.

The design incorporates generous landscaped setbacks, a masonry podium wrapped with planting, large north-facing balconies, and a slender tower profile intended to maximise natural light, cross ventilation and long-range views. The rooftop has been conceived as a wellness-focused retreat overlooking Brisbane, with amenities positioned to capture views towards Mount Coot-tha and the CBD.

<img alt="First look: McNab resets decade-old South Brisbane approval with 124-apartment tower" data-entity-type="file" data-entity-uuid="c5f99e84-6ad8-4a87-82d1-869685b754d2" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/mcnab%20tower%20perspective.png?VersionId=Gw0IuJaSAlk.tvGBxInhZOcQAdIB..2b" />

The planning submission positions the proposal as a response to both changing market conditions and Brisbane's Kurilpa Sustainable Growth Precinct planning reforms.

McNab acquired the site after the previous approval was granted, with the existing scheme no longer reflecting current residential market demands, economic conditions, construction challenges, construction efficiencies or the quality of development outcome now being pursued, the planning report noted.

McNab continues to expand its residential development pipeline across Brisbane and the Gold Coast. The developer recently launched The Tannery in West End, securing more than 60 per cent of apartments before the project's public release. It is also delivering Elements Budds Beach in Surfers Paradise and Lucia Highgate Hill, an eight-apartment boutique development overlooking the Brisbane River.

McNab resets decade-old South Brisbane approval with 124-apartment tower

A steeply sloping Bellevue Hill site is set to accommodate a new mid-rise apartment development, with plans lodged for 20 homes that respond to the site's dramatic topography.

The proposal for the consolidated land at <a href="https://www.apartments.com.au/new-apartments/138a-140-bellevue-road-bellevue-hill-nsw-2023">138A-140 Bellevue Road</a> has been designed by Sydney architecture practice Common Office, which has used the site’s substantial fall to distribute the building’s scale and unlock 20 apartments without presenting the full height to the street.&nbsp;

“The unique design strategy leverages the site’s substantial topographical fall to facilitate increased density, presenting a seven-storey profile to Bellevue Road while rising to 10 storeys at the rear,” Common Office said in its architectural design report.

The apartment mix spans one, two, three- and four-bedroom residences. Four two-bedroom apartments are designated as affordable housing, while the plans also include two adaptable dwellings. The mix is majority three-beds, with the typical three-bed apartment offering around 144 sqm internally, with balconies of around 15 sqm.

The affordable housing component represents 15 per cent of the residential floor area and allows the project to access additional height and floor space under the NSW Government’s in-fill affordable housing provisions. The site also falls within the inner area of the Low and Mid-Rise Housing Policy because it is within 400 metres walking distance of Double Bay Town Centre.

<img alt="First Look: Plans lodged for topography-led affordable housing project in Bellevue Hill" data-entity-type="file" data-entity-uuid="b1230d0f-3bfa-4a11-abaf-0928c66ef345" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Bellevue%20da.png?VersionId=dZeMK3P.OutGjN8ycjsxm8uNsj_QFWQv" />

Common Office has arranged the building around a masonry podium and a lighter upper volume, drawing on two recurring elements of Bellevue Hill’s established architecture: sandstone bases and the vertical proportions of local Inter-war Art Deco apartment buildings.

“The proposal is governed by a holistic design language that reconciles the solid horizontal masonry of the neighbourhood’s podiums with the elegant verticality of its Art Deco heritage,” the architect said.

“The building maintains a consistent rhythmic logic utilising deep recesses and a sophisticated material transition to break down the 10-storey scale into a series of articulated, human-scale volumes.”

<img alt="First Look: Plans lodged for topography-led affordable housing project in Bellevue Hill" data-entity-type="file" data-entity-uuid="0147f503-1af1-4d51-97fb-c2f1cba63a9d" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Bellevue%20bldg.png?VersionId=GoW7q3NlK67OpnePXhk7zvklrlKb72Qc" />

Large-format sandstone tiles will define the lower levels, establishing a robust base that negotiates the change in elevation from Bellevue Road. Above, red-tinted precast concrete frames, recessed balconies, anodised aluminium screens and expanded metal details will create a more vertically expressed façade. Integrated planter beds will introduce greenery across balcony edges and recessed sections of the building.

The elongated northern façade has been divided into three recessed vertical masses to reduce its perceived length. Triangular window elements and metal privacy screens reference the geometry of nearby Art Deco buildings while controlling overlooking toward surrounding homes. The southern elevation will incorporate further privacy screening, landscaped edges and deep balconies to maintain light and ventilation.

<img alt="First Look: Plans lodged for topography-led affordable housing project in Bellevue Hill" data-entity-type="file" data-entity-uuid="e8679cf1-18bc-4447-8a0f-0052b94ab83c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Bellevue%20da%20rooftop.png?VersionId=5SQqQqRFf76rvE2p1TbxJSweMN70AIbc" />

Private and communal landscaping is distributed throughout the development. A landscaped garden apartment is positioned within the lower portion of the site, while a communal terrace on Level 5 will include a central timber deck, barbecue facilities, resident planting plots and areas for outdoor dining and informal gatherings.

Common Office described the terrace as an elevated sanctuary designed to capture district views and sunlight. Its planting strategy incorporates endemic species associated with the Eastern Suburbs Banksia Scrub, extending the landscape vertically through the building and providing habitat for local flora and fauna.

A second communal outdoor area is proposed at roof level, with built-in seating, paved gathering areas and perimeter planting.

Bellevue Hill is enjoying renewed momentum in the new apartment market, with several boutique developments recently launched and currently under construction. Positive Investment Enterprise is delivering the 16-apartment Kew Palm House on Birriga Road, while Chanine Developments is also under construction at Florian, a 36-apartment project on Banksia Road.

&nbsp;

Bellevue Hill is enjoying renewed momentum in the new apartment market, with several boutique developments recently launched and currently under construction.

First Look: Apartment development pitched for Bellevue Hill, Double Bay fringe

South Brisbane's apartment pipeline continues to build momentum, with <a href="https://www.apartments.com.au/developers/trk-property-group">TRK Property Group</a> lodging plans for a 161-apartment tower on Montague Road as developers accelerate investment across the Kurilpa Sustainable Growth Precinct.

The proposal for 176–186 Montague Road would replace an existing office building with a 20-storey residential tower designed by <a href="https://www.apartments.com.au/architects/cox-architecture">COX Architecture</a>, adding to a growing pipeline of high-density projects reshaping one of Brisbane's fastest-evolving inner-city precincts.

The project has been conceived as a "living building", featuring a flowing tower form, extensive vertical landscaping, and generous communal spaces that respond to the evolving Kurilpa Sustainable Growth Precinct.

TRK Property Group Development Director Matt Kan said the project reflected the confidence developers have in South Brisbane's long-term future.

"South Brisbane is entering an incredibly exciting period, and we see Montague Road sitting right at the heart of that evolution," Kan said.

"With the former Visy site directly opposite us and significant investment planned throughout the broader Kurilpa precinct, there is a real sense of momentum around this part of the city and what it will become over the coming years.

"For TRK, this is an opportunity to be part of that next chapter and deliver a project that responds to where the precinct is heading, while contributing to the continued evolution of Brisbane's river edge."

<img alt="First look: TRK Property joins South Brisbane apartment surge with Montague Road tower plans" data-entity-type="file" data-entity-uuid="590fe1ad-f892-4446-a679-80e33a16d029" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/TRK%20tower%20facade.png?VersionId=uOJStrcKpyHFcPE1w6_9SMAFzVMCcZll" />

The scheme includes a mix of one, two, three and four-bedroom apartments, incorporating multi-purpose rooms in selected residences to provide additional flexibility for home offices or expanded living areas. The proposed mix comprises 15 one-bedroom, 13 one-bedroom plus MPR, 73 two-bedroom, 26 two-bedroom plus MPR, 30 three-bedroom, and four four-bedroom apartments.

Rather than adopting a conventional rectilinear tower, COX Architecture has developed a sculpted form inspired by the movement of the Brisbane River.

"The proposal has been designed by COX Architecture as a 'living building' that responds to the site's riverine setting, floodplain history and evolving urban context within the Kurilpa Sustainable Growth Precinct," the planning report states.

"The architectural form draws from the fluid nature of the Brisbane River, with a curved and undulating tower form that creates a varied architectural edge and avoids a conventional rectilinear tower expression."

The podium has also been designed as an architectural feature rather than a conventional parking structure, with cascading planting, screening and natural-toned materials softening its appearance. Resident parking is elevated above ground level to address the site's flood constraints, while habitable apartments sit above flood planning levels. Upper-level communal facilities are designed to accommodate shelter-in-place arrangements during major flood events.

<img alt="First look: TRK Property joins South Brisbane apartment surge with Montague Road tower plans" data-entity-type="file" data-entity-uuid="01fa15d0-90df-46c7-9555-7941fc45373c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/TRK%20podium.png?VersionId=mHyua.w1pHGBt9qEdWzrlsv.leztUCwO" />

Communal amenity is a major focus of the proposal. Around 1,815 sqm of shared resident space is proposed across the ground floor, level 19 and the rooftop, including co-working areas, indoor and outdoor recreation spaces, wellness facilities, dining and gathering areas, lawn spaces, a rooftop pool and spa, and extensive landscaping. At street level, a landscaped forecourt and approximately 345 sqm of publicly accessible open space along Montague Road are intended to improve the pedestrian experience while activating the building's frontage.

The development will provide 163 car spaces, including 152 resident bays and 11 visitor spaces, together with 144 bicycle spaces incorporating resident storage, visitor parking, bicycle maintenance facilities and e-mobility charging infrastructure.

The site sits within one of Brisbane's fastest-changing inner-city precincts, less than two kilometres from the CBD and within easy reach of South Bank, West End, the Queensland Cultural Centre and extensive public transport connections. The Kurilpa Sustainable Growth Precinct planning framework is encouraging higher-density residential development to help meet Brisbane's housing supply targets while supporting walkable, transit-oriented neighbourhoods.

TRK Property joins South Brisbane apartment surge with Montague Road tower plans

Article summary

<ul data-end="785" data-start="311">
	<li data-end="459" data-section-id="5hbcyr" data-start="311">Pikos Group has released the five-penthouse collection at Skye Kangaroo Point, headlined by a two-storey sky home spanning more than 1,000 sqm.</li>
	<li data-end="561" data-section-id="1p7lq8n" data-start="460">Early buyer interest suggests the residences could set a new Queensland apartment price record.</li>
	<li data-end="667" data-section-id="1y70z0l" data-start="562">The collection includes four move-in ready penthouses and the highly customised Skye One residence.</li>
	<li data-end="785" data-section-id="yvm0y1" data-start="668">The release caps one of Bri​sbane's most ambitious luxury apartment developments overlooking the Brisbane River.</li>
</ul>

<hr data-end="790" data-start="787" />
Pikos Group has released the five-penthouse collection at its <a href="https://www.apartments.com.au/buildings/skye-residences-by-pikos-kangaroo-point-8-river-terrace-kangaroo-point-qld-4169">Skye by Pikos</a> development in Kangaroo Point, with early buyer interest indicating the flagship residences could eclipse every apartment sale previously recorded in Queensland.

The collection crowns the luxury riverfront development with five residences, including four completed penthouses and Skye One, a two-level sky home spanning more than 1,000 sqm that will be tailored to its eventual owner.

[smartcode_project:default project_id=90059 project_image_fid=374075]

Wanting to offer a fully customisable home, Pikos is offering Skye One as a blank canvas, allowing the buyer to work alongside the developer's design team to customise the home's layout, finishes and internal spaces.

The residence will feature a 247 sqm private rooftop terrace with its own swimming pool, sauna, steam room, outdoor kitchen and multiple entertaining areas overlooking the Brisbane River and CBD skyline.

The remaining four penthouses have been completed and are ready for immediate occupation, each offering four bedrooms, expansive open-plan living areas, soaring ceilings and private lift access.

[smartcode_project:default project_id=90059 project_image_fid=374059]

One of the defining features throughout the project is its use of Roman Classic Travertine, with more than 20,000 sqm of the natural stone imported from Italy after being personally selected by Pikos Group Founder and Executive Director Pedro Pikos, interior designer Julie Williamson and third-generation stone specialist Mario Caucci.

Pikos said the penthouse collection represented the culmination of the company's long-term vision for Skye.

"True legacy isn't measured by what we build today, but by what endures tomorrow," Pikos said.

"Our ambition is to create places that become more valuable with time, enrich the lives of generations, and stand as timeless landmarks long after we've stepped away."

[smartcode_project:default project_id=90059 project_image_fid=374060]

Williamson said the interiors were inspired by the natural character of Kangaroo Point and the Brisbane River rather than international design trends.

"Materiality tells the story of a place," Williamson said.

"We looked to the movement of the Brisbane River, the texture of the cliff face and the warmth of the surrounding landscape to create interiors that feel understated, enduring and unmistakably Brisbane."

Positioned above the Kangaroo Point cliffs, Skye places residents within walking distance of Howard Smith Wharves, South Bank and James Street while offering uninterrupted river and city views.

[smartcode_project_cta:default project_id=90059]

Brisbane's next apartment price record? Pikos unveils Skye's exclusive penthouse collection

Sydney’s property market is known for high prices, competitive bidding, and mounting pressure on first home buyers. But change is on the horizon.

From late 2025, eligible first home buyers in New South Wales will have access to a new federal government initiative aimed at addressing affordability: the Help to Buy Scheme.&nbsp;

<h2>What is the Help to Buy Scheme?</h2>

The program introduces a shared equity model intended to reduce the upfront cost of entering the property market, particularly in high-demand urban areas such as Sydney.

The scheme operates under a shared ownership structure in which the federal government takes an equity stake of up to 40 per cent for new homes, or 30 per cent for existing dwellings. This arrangement allows eligible buyers to significantly reduce their loan size and avoid the added cost of Lenders Mortgage Insurance (LMI).

Under this model, purchasers can enter the property market with as little as a two per cent deposit, well below the traditional 10 to 20 per cent usually required. The government’s contribution is not a loan but a co-ownership stake in the property. As such, there is no interest or rent charged on its portion.

Because the government’s equity combined with the buyer’s deposit typically meets or exceeds the 20 per cent threshold, LMI does not apply. The remaining balance, generally between 60 and 70 per cent of the property’s value, is financed through a standard home loan with a participating lender.

The government's equity in the property remains in place until the buyer chooses to repay it voluntarily or until the property is sold. Buyers can buy back the government’s share over time, in increments of at least five per cent, depending on their financial situation.

There is no fixed repayment timeline, but the amount to be repaid will be based on the property's market value at the time of repayment, not the original purchase price.

<h2>How do you qualify for the&nbsp;Help to Buy Scheme?</h2>

To qualify for the Help to Buy Scheme, applicants must meet the following conditions:

<ul>
	<li>Be an Australian citizen at least 18 years of age.</li>
	<li>Be a first-home buyer who does not currently own property.</li>
	<li>Intend to live in the property as their primary residence.</li>
	<li>Earn less than $100,000 per year for individuals, or $160,000 for couples.</li>
	<li>Purchase a property within the regional price caps, currently $950,000 in Sydney, though this is expected to rise to approximately $1.3 million ahead of the program’s launch.</li>
</ul>

While the Help to Buy Scheme does not solve affordability challenges across the board, it does offer a more accessible pathway for a defined segment of the market, particularly younger buyers with moderate incomes who have been priced out of traditional lending routes.

The scheme is expected to commence in NSW in late 2025, as part of a national rollout.

Under the new model, purchasers can enter the property market with as little as a two per cent deposit, well below the traditional 10 to 20 per cent usually required

Help to Buy Scheme: What first home buyers in NSW need to know

The First Home Owners Grant (FHOG) is a government initiative designed to help eligible first-time home buyers by offering financial assistance towards the purchase or construction of a new home.

While the FHOG is a nationwide program, it is administered separately by each state and territory, meaning the eligibility criteria, grant amounts, and property requirements can vary depending on your location. This means that the amount available and the conditions attached to the grant will differ, so it is important to check the specific guidelines for your state or territory.

It’s important to note that the FHOG is just one of several incentives available to first home buyers. In most states and territories, the grant is not linked to stamp duty exemptions or concessions, with the exception of the Australian Capital Territory (ACT). The FHOG is typically a one-off payment, reducing the overall cost of purchasing or building a new home before any stamp duty concessions are applied.

Below, we provide a breakdown of the First Home Owner Grants available across Australia, outlining the specific details for each state and territory.

<h2>New South Wales First Home Owner Grant</h2>

First Home Owner Grant: Offers a $10,000 grant for new homes valued up to $600,000. For land purchases and owner-builders, the threshold extends to $750,000.

Stamp Duty Benefits: Provides full stamp duty exemption for homes valued up to $800,000, with concessions available for properties up to $1 million.

<h2>Victoria South Wales First Home Owner Grant</h2>

First Home Owner Grant: Provides a $10,000 grant for first-home buyers purchasing or building new homes valued up to $750,000.

Stamp Duty Benefits: Offers full stamp duty exemption for properties up to $600,000, with concessions available up to $750,000.

<h2>Queensland First Home Owner Grant</h2>

First Home Owner Grant: Offers $30,000 for contracts signed between 20 November 2023 and 30 June 2025. The FHOG applies to new homes valued up to $750,000.

Stamp Duty Concessions: Provides additional concessions for properties valued up to $800,000.

<h2>Western Australia First Home Owner Grant</h2>

&nbsp;

First Home Owner Grant: Offers a $10,000 grant for new homes valued up to $750,000 in the southern regions and up to $1 million in the northern regions.

Stamp Duty Concessions: Available for homes valued up to $600,000 for transactions entered into on or after 9 May 2024.

<h2>Australian Capital Territory First Home Owner Grant</h2>

First Home Owner Grant: Replaced by the Home Buyer Concession Scheme, offering full stamp duty concessions for eligible buyers.

<h2>South Australia First Home Owner Grant</h2>

First Home Owner Grant: Provides up to $15,000 for new homes, including houses, apartments, and townhouses. As of 6 June 2024, there is no property value cap for eligibility.

Stamp Duty Relief: Available for new homes and vacant land purchases.

<h2>Tasmania First Home Owner Grant</h2>

First Home Owner Grant: Offers a $10,000 grant for new homes and off the plan purchases.

Stamp Duty Exemption: Between 18 February 2024 and 30 June 2026, first home buyers of established homes valued up to $750,000 receive a full exemption on property transfer duty.

<h2>Northern Territory First Home Owner Grant</h2>

First Home Owner Grant: The Northern Territory provides a $10,000 grant for new homes only. Additional government grants and concessions are available for first home buyers.

Stamp Duty Exemption: The only stamp duty exemption available to property buyers is the House and Land Package Exemption (HLPE).

Eligibility criteria and application processes differ across states. Prospective buyers should refer to their respective state revenue offices for full details on grant availability, conditions, and additional concessions.

Every First Home Owner Grant for new property by state

In the ever-evolving landscape of sustainable architecture and environmentally conscious design, systems and ratings in place can help determine the energy efficiency of residential buildings in Australia.

Australia has multiple building rating systems that evaluate energy efficiency and sustainability in existing and new building designs.

Some systems assess individual building components, while others provide an overall rating for the entire structure.

A rating system ensures that homes are comfortable and energy-efficient, whether you are buying, renovating, or building.

NatHERS (Nationwide House Energy Rating Scheme) is a common way for new homes to meet energy efficiency requirements.

As new developments continue to shape the urban environment, understanding NatHERS ratings becomes essential for developers and homeowners. This article delves into the concept of NatHERS ratings, their significance, and how they contribute to creating energy-efficient homes.

<h2>What is NatHERS?</h2>

NatHERS is a national initiative implemented by the Australian government to promote energy efficiency in residential buildings. The scheme aims to provide a standardised method for assessing the thermal performance of homes, considering factors such as insulation, orientation, ventilation, and building materials.&nbsp;

NatHERS ratings are the most common way new homes meet the National Construction Code's (NCC's) minimum energy efficiency requirements.&nbsp;

NatHERS assessments provide thermal and whole-home ratings for new homes, townhouses, and apartments.

The rating helps evaluate the energy performance of buildings, guides homeowners and developers to make informed decisions about the energy efficiency of their properties, and encourages the construction of more sustainable, comfortable, and cost-effective homes.

<h2>How NatHERS Ratings Work</h2>

NatHERS ratings are determined through four accredited software tools (AccuRate, BERS Pro, FirstRate5, HERO) using a calculation engine CSIRO developed to predict building temperature based on various factors.

The tools can model complex effects of building mass, insulation, window size, and other elements.

The outcome is a star rating that reflects the building's overall thermal efficiency, indicating how well it can maintain a comfortable indoor temperature without excessive reliance on heating or cooling systems.

The star rating scale ranges from 0 to 10, with a 6-star rating being the minimum requirement for compliance with the National Construction Code (NCC).&nbsp;

Achieving a higher star rating demonstrates a commitment to energy efficiency and sustainability, as the building is better equipped to minimise its environmental impact and reduce long-term energy costs.

Anyone can use NatHERS tools, but accredited assessors can provide certified ratings and professional advice.

<h2>Benefits of Higher NatHERS Ratings</h2>

Energy Efficiency: Buildings with higher NatHERS ratings are more energy-efficient, requiring less heating and cooling energy. This reduces the structure's carbon footprint and lowers occupants' energy bills.

Cost Savings: Homes with higher NatHERS ratings are generally more energy-efficient, resulting in reduced energy consumption for heating and cooling. This translates to lower energy bills for homeowners, making sustainable living environmentally friendly and economically viable in the long run.

Environmental Impact: Lower energy consumption directly translates to a reduced environmental impact. Buildings with higher NatHERS ratings contribute to the overall goal of mitigating climate change by lowering greenhouse gas emissions associated with heating and cooling systems.

Improved Comfort: Buildings with high NatHERS ratings offer better thermal comfort to occupants. Proper insulation, well-designed ventilation, and optimal orientation maintain a consistent and comfortable indoor temperature, providing occupants with a more enjoyable and healthier space.

Market Value and Desirability: Higher NatHERS ratings can enhance the market value of a property. As energy efficiency becomes a more significant consideration for homebuyers, a well-rated building may attract a premium price and stand out in the real estate market.

Compliance with Building Codes: NatHERS ratings are a vital component of the National Construction Code (NCC), and compliance with these ratings is often a mandatory requirement for new developments. Local councils and planning authorities may set minimum energy efficiency standards that must be met to obtain development approval.

The Nationwide House Energy Rating Scheme (NatHERS) is a crucial initiative shaping the future of energy-efficient, resilient, and cost-effective homes. With its recent upgrades, NatHERS has evolved into a world-leading tool for the building sector, supporting the global commitment to achieving net-zero emissions by 2050.

Staff Writer

What is a NatHERS rating in new off the plan apartment developments?

Mixed-use developments have gained significant popularity across Australia in recent years due to their unique blend of residential, commercial, and recreational spaces.

Unlike traditional single-purpose developments, mixed-use projects offer a harmonious integration of various functions within a single locale.

Residential units seamlessly coexist with commercial establishments, retail outlets, dining venues, entertainment hubs, and recreational facilities, with the combination not only enhances convenience but also fosters a vibrant lifestyle and a sense of community.

<h3>Convenience and accessibility</h3>

Mixed-use developments are designed with convenience in mind. They often integrate residential units with commercial spaces, retail outlets, restaurants, and recreational facilities, creating a self-contained community.

[smartcode_project:default project_id=114215 project_image_fid=204874]

The proximity allows residents to enjoy the convenience of having essential amenities and services within walking distance. Whether it's grabbing a cup of coffee, going grocery shopping, or accessing healthcare services, everything is conveniently located, saving residents time and effort.

<h3>Vibrant lifestyle and community</h3>

One of the major advantages of mixed-use developments is the vibrant lifestyle they offer. With a diverse range of amenities and communal spaces, residents have ample opportunities to interact, socialise, and build a sense of community.

[smartcode_project:default project_id=107714 project_image_fid=214122]

The presence of parks, community centres, and shared spaces fosters a lively atmosphere, encouraging residents to engage in various activities and events. The vibrant lifestyle within these developments creates a unique sense of belonging and camaraderie among the residents.

<h3>Potential for higher rental yields and property value appreciation</h3>

Mixed-use developments tend to attract a broad range of tenants and buyers due to their versatile nature. This high demand can result in higher rental yields for investors and potentially lead to property value appreciation over time.

[smartcode_project:default project_id=139989 project_image_fid=212887]

The integration of commercial and retail spaces attracts businesses, which can provide a stable rental income stream. Additionally, the popularity of mixed-use developments often drives up property values, making them a potentially lucrative investment in the long term.

<h3>Enhanced security and maintenance</h3>

Mixed-use developments typically have comprehensive security measures in place. With controlled access points, CCTV surveillance, and professional security staff, residents can enjoy enhanced safety and peace of mind.

[smartcode_project:default project_id=108019 project_image_fid=212658]

Additionally, these developments often have dedicated maintenance teams responsible for the upkeep of common areas, landscaping, and infrastructure. This ensures that the overall appearance and functionality of the development are well-maintained, creating a pleasant living environment for residents.

<h3>Live-work-play balance</h3>

One of the key attractions of mixed-use developments is the ability to achieve a desirable live-work-play balance. The integration of residential and commercial spaces allows residents to live closer to their workplaces, reducing commuting time and improving work-life balance.

The proximity to various amenities and recreational facilities encourages an active and healthy lifestyle. Residents can easily access fitness centres, parks, restaurants, and entertainment options, all within the same development, leading to a more fulfilling and convenient way of life.

alisonwarters@gmail.com

The top five reasons to buy in a mixed-use development

When buying a property, everyone needs to be aware of the additional costs that come as part of the buying process.

Often the largest outlay, after the deposit which goes to the bank, is stamp duty.

<h2 style="line-height: 1.38;">What is Stamp Duty?</h2>

Stamp duty is an extra tax to pay the government when you buy land, a property, and other certain assets.

It happens when the legal ownership is transferred. It can also be known as property transfer duty or transfer duty.

<iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="" frameborder="0" height="415" src="https://www.youtube.com/embed/C32BWkB5--c" title="YouTube video player" width="660"></iframe>

<h2>Who pays Stamp Duty?</h2>

In some circumstances, you may get an exemption. For some states, you won’t have to pay for stamp duty if you are a first home buyer or a pensioner for houses under a particular price. There are also stamp duty concessions, where you may be entitled to a discount.

<h2>How much does Stamp Duty cost?</h2>

Each state has different rules which affect how much you need to pay. These rules can affect the rate you pay, and the timeframe you will need to pay in. Before you buy land or a property, make sure you check the up-to-date information for your state’s stamp duty.

You can use a free stamp duty calculator online to see approximately how much you’ll need to pay. Find out if you’re eligible for an exemption by enquiring on a project via Urban!

Overall, the stamp duty you need to pay will depend on:

<ul>
	<li aria-level="1">How much your land/property is worth</li>
	<li aria-level="1">Where your land/property is located</li>
	<li aria-level="1">What type of land/property it is</li>
</ul>

Want to find out more? <a href="https://www.youtube.com/@UrbanAustralia?utm_source=YouTube&amp;utm_medium=Video&amp;utm_campaign=Subscribe&amp;utm_id=Subscribe">Subscribe to our YouTube channel</a> for more property videos.

Ellen Walker

Off-the-plan property explained: What is stamp duty?

Prominent New Zealand apartment and hotel operator, <a href="/developers/safari-group">Safari Group</a>, is offering up a prime investment opportunity for Australians to purchase off the plan in one of the world’s most popular ski destinations.

They recently took to market Mountain Oak Queenstown Apartments, in the growing precinct of Remarkables Park in Frankton, near the airport and at the foot of The Remarkables - the mountain range the locals like to call “The Remarks”.&nbsp;

Sydney investors have shown interest in the one, two and three-bedroom apartments that secure high-season occupancy six months over the year, primarily over summer and winter months.

They average 90 per cent occupancy across their portfolio over January, February, March, August, November and December, while shoulder season months of April, July, September and October are still occupied 70 per cent of the time, with the growing appeal of Queenstown becoming not just a hotspot for the snow, but a lifestyle destination.

Even in the low seasons of May and June, occupancy levels reach around 40 per cent.

<img alt="Safari Group’s Mountain Oak Apartments brings new investment potential to Queenstown" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_auto/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Ext_Cam15_Sunny.jpg?VersionId=SJAROUM_1s.Tr5ciMk4EEj5oAt_Vewmv" />

Safari’s Safari Hotels arm can also manage the holiday letting for an investor, from the listing on holiday accommodation websites such as Airbnb and Booking.com to the cleaning and maintenance of the investment. They’ve been in the short stay management business for 15 years and offer 24/7 support for investors, an important convenience benefit for any overseas investor

Another major drawcard for Australians is that New Zealand doesn’t have a stamp duty policy - so the entry price of NZ$639,000 (AU$586,000), is all that is payable on completion.

<img alt="Safari Group’s Mountain Oak Apartments brings new investment potential to Queenstown" 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/313_Livingv2_WEB.jpg?VersionId=nV229fM0ZeYpoxOrX372HyGjfwY_LR8c" />

Safari is starting construction of the 141 apartments in Q2 this year, with a two-year build estimated to complete in mid-to-late 2027.<img alt="" data-entity-type="" data-entity-uuid="" height="15" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXczFpFAb7WuA6f4f9TtKWcqXyNwR8qqtakWv352ERkpqNlP3KwIo8YKxw67jZNHfpjEGIZGv5MQTbnvLZwNt8iu9IVdOrswOjCvBZ4zhSoOOLrpt6etVEZTN1gkBho0r_R72zdHNA?key=yq3daOanqHSb88QFd8jGYKdb" title="Click and drag to move" width="15" />​

The apartments will feature modern amenities and contemporary designs with expansive windows capturing sweeping views of The Remarkables mountain range.&nbsp;

Interiors are equipped with modern finishes, premium appliances, and secure electronic key-locked doors, ensuring a comfortable living experience for residents and guests alike.

With its strategic location near Coronet Peak and Cardrona Alpine Resort, as well as key retail and dining precincts such as Market Street, Five Mile Shopping Centre, and Remarkables Market, Mountain Oak offers a strong proposition for investors seeking high rental yields and capital appreciation in one of New Zealand’s most sought-after locations.&nbsp;

Queenstown’s sustained demand for visitor accommodation and rental properties is underpinned by a shortage of housing options, attracting both local and international buyers.

Safari Group offers low-touch investment proposition in Queenstown’s popular ski fields district

<html><body>
The shine appears to be wearing off the Pilbara region as a property investment hotspot with rents falling around 20% on average over the past year and with rental vacancies rising steadily.
This, however, needs to be put into context.
Rents in Pilbara – principally the towns of Port Hedland and Karratha plus smaller surrounding towns like Dampier, Newman, Tom Price – remain very high by national standards with some landlords still seeking in excess of $3,000 per week for three, four and five bedroom houses.
And investment in the region continues with Leighton Contractors this week awarded a $1.3 billion contract variation to mine the Kings deposit at the Solomon Hub for Andrew Forrest's Fortescue Metals Group, taking the total value of work under the Solomon Hub agreement to $2.8 billion, the largest single contract award in the history of Leighton Contractors.
However, evidence is emerging of a broader correction and the seemingly unthinkable: some Pilbara landlords reducing rents by up to 40% to secure tenants.
These figures (below) prepared by the Real Estate Institute of Western Australia show that the Karratha unit market in particular has been hard hit with rents almost halving in the past two years from $1,600 per week to $850 per week.
In Port Hedland, the rental market appears to have peaked in the June quarter of last year.
<table cellpadding="0" cellspacing="0" border="1" style="width: 470px;"><tbody>
<tr>
<td width="123">
Karratha
</td>
<td width="123">
Overall median rent $ p/week
</td>
<td width="123">
Houses only
</td>
<td width="123">
Units, apartments, villas only
</td>
</tr>
<tr>
<td width="123">
June Q 2010
</td>
<td width="123">
1,500
</td>
<td width="123">
1,550
</td>
<td width="123">
1,050
</td>
</tr>
<tr>
<td width="123">
June Q 2011
</td>
<td width="123">
1,600
</td>
<td width="123">
1,650
</td>
<td width="123">
1,600
</td>
</tr>
<tr>
<td width="123">
June Q 2012
</td>
<td width="123">
1,500
</td>
<td width="123">
1,550
</td>
<td width="123">
1,250
</td>
</tr>
<tr>
<td width="123">
Current
</td>
<td width="123">
1,200
</td>
<td width="123">
1,200
</td>
<td width="123">
850
</td>
</tr>
<tr>
<td width="123">
Port Hedland
</td>
<td colspan="3" width="370">
 
</td>
</tr>
<tr>
<td width="123">
June Q 2010
</td>
<td width="123">
1,350
</td>
<td width="123">
1,400
</td>
<td width="123">
1,100
</td>
</tr>
<tr>
<td width="123">
June Q 2011
</td>
<td width="123">
1,500
</td>
<td width="123">
1,600
</td>
<td width="123">
1,425
</td>
</tr>
<tr>
<td width="123">
June Q 2012
</td>
<td width="123">
1,800
</td>
<td width="123">
1,900
</td>
<td width="123">
1,575
</td>
</tr>
<tr>
<td width="123">
Current
</td>
<td width="123">
1,675
</td>
<td width="123">
1,800
</td>
<td width="123">
1,400
</td>
</tr>
</tbody></table>
Source: REIWA
 
<hr class="system-pagebreak">
Property Observer has found a number of examples of properties in Port Hedland where asking rents have been reduced substantially.
Most notable is a 2012-built six bedroom house at <a href="https://www.realestate.com.au/property-house-wa-port+hedland-410520339" target="_blank">79 Dowding Way</a> (pictured below), which, according to RP Data was advertised for rent at $5,500 per week in June last year, and which is now on the market for $2,500 – a 54% reduction – through Shayne Macaulay-Smith of Crawford Realty – South Hedland.
<img alt="pilbarajune25one1" height="337" width="470" src="/images/stories/2013/06/pilbarajune25one1.jpg">
Macaulay-Smith is also seeking tenants for an elevated three-bedroom house at <a href="https://www.realestate.com.au/property-house-wa-port+hedland-410473539" target="_blank">8 Trembath Street</a> (pictured below), “a short stroll from Cemetery Beach” with an advertised weekly rent of $1,500 down from $2,500 per week in May last year (when the listing was held by Jan Ford Real Estate- Port Headland).
<img src="/images/stories/2013/06/pilbarajune25two.jpg" width="470" height="321" alt="pilbarajune25two">
Jane Aspey from Hedland First National - Port Hedland is seeking tenants for a centrally-located three-bedroom house at <a href="https://www.realestate.com.au/property-house-wa-port+hedland-410411143" target="_blank">113 Anderson Street</a> (pictured below) with an asking rent of $1,200.
<img src="/images/stories/2013/06/pilbarajune25three.jpg" width="470" height="304" alt="pilbarajune25three">
This rental provides a good proxy of the recent performance of Port Hedland rental market – the property was first listed for rent at $1,000 per week in 2009, peaking at $1,550 per week in mid-2011 with asking rent reduced to $1,500 per week in November 2012 and now down to $1.200.
 
<hr class="system-pagebreak">
This reduction in rents is being driven by greater choice with the REIWA reporting that at the end of February 2013 there were 164 rental listings in Karratha, up 4% on December and up a significant 56% from a year earlier.
In Port Hedland, the REIWA records 144 listings at the end of February. Currently there are 215 properties listed for rent on realestate.com.au, suggesting a rise comparable with Karratha.
On the forum propertyinvesting.com discussions about the Pilbara market focus on a correction and on the monthly rises in properties available for rent.
One participant warns that investors who paid between $600,000 and $800,000 for one-bedroom apartments off the plan, paid “crazy money for them”.
“There were heaps of them…they're now trying to get around $1300 - $1,500 per week. Good luck with that.”
One forum participant, writing from personal experience, attributes the rise in vacancies and the reduction in asking rents to a number of factors including seasonality (the extreme heat from October to February), BHP laying off contracting groups in September and October (partly in response to “spiralling rents) and a large number of new dwellings coming on to the market at the same time.
This writer says it will take another bull run for one-bedroom apartments asking $1,850 per week to be taken up and says investors should "avoid them with a barge pole”.
“I was caught in this perfect storm. I bought a property and the reno wrapped late October 2012 - and it lay empty until January 1 and is on a one year lease. The rent last year would have been $3,800 per week - the rent is now $2,800 per week.”
Another contributor warns that investors “have to be careful to stay away from any off-the-plan properties or transportable homes posing as new builds”.
The writer adds that there is “definitely a lot of trepidation in the market at the moment which makes it a buyers’ market” – she is currently negotiating on a less than 12 month old four-bedroom, two bathroom unit in a new subdivision returning $2,700 per week.
The most recent figures from BIS Shrapnel forecast a 36% reduction in new dwelling commencements over the next 12 months with 984 starts expected compared with 1,531 a year ago.
This slowdown in supply appears welcome given the rise in rental vacancies and fallen rents.
However, according to the REIWA’s Pilbara branch chair, Jan Ford, while there has been a 20% correction in rents, she still expects some properties to top $5,000 per week by 2014.
“We already have a few $3,000 to $4,000 per week houses in top locations. They are rare, large, new, modern, spacious, multi bedrooms and bathrooms, multi-keyed and designed to appeal to mature professional singles who are sharing and prefer the privacy and comfort of a residential house.
“These are not average rents as we don’t have enough of them.
“Average rents have dropped around 20% after rising 30%.
“Houses are always in higher demand than single units but price often dictates what people take,” she says.
Looking ahead Ford suggests investors and developers consider adaptable living by building large houses that can be separated, with dual or multi keyed for several tenancies during construction and single families in the long term.
</body></html>

lschlesinger-FZcF9M3vE6

Pilbara rental market starts to lose some of its sparkle

<html><body>
Never one to shy from giving his opinion on the property market, Sunrise presenter and financial journalist David Koch, believes that the property market moves in cycles of between seven to 10 years.
However, within the overall market cycle, each city and even down to the city block can be in its own cycle, which investors need to understand so they buy at the right time.
"Knowing where you are on a property cycle means following a strict process of understanding the macro and micro elements affecting your decision," writes Koch in an advice column for news.com.au.
For example, while the overall housing market is considered to be undergoing a moderate recovery, Kochie believes the Gold Coast is oversupplied with apartments - many of which have been on the market for a long time - meaning <a target="_blank" href="https://www.propertyobserver.com.au/queensland/gold-coast-basket-case-a-good-bet-for-property-bargains-kochie_online/2013061462238">there are bargains</a> to be snapped up by investors.
He suggests astute investors make themselves aware of such things as "local influences" such as new infrastructure in the works or the release of plans for new housing, "property condition" (the extent and cost of any future improvements), "city variances"(local economic and demographic factors) and the overall economic indicators like consumer confidence, interest rates and unemployment, which can all impact on demand for property.
Most importantly, Kochie says investors must understand the four property phases, which he labels as:
Opportunity Phase
This he says is the best time to buy, at the beginning of cycle when the market has bottomed out (not always easy to pick)
<div>Growth Phase</div>
<div></div>
<div>This is the point when investors are most confident and prices start to rise. 
</div>
 <div>Peak Phase: </div>
<div></div>
<div>When the best gains have been achieved, this is the point, says Kochie, when "inexperienced and timid investors pile in".</div>
<div></div>
<div></div>
<div>Correction Phase</div>
<div></div>
<div>This he says is when buyers over extend themselves and banks start to tighten credit, making it harder to get a mortgage or refinance.</div>
</body></html>

The four property phases you need to know according to David Koch

<html><body>
I can remember playing junior rugby when a can of Coke after the game cost 10 pence and a packet of chips (or crisps as we say in England) cost even less.
By the time I was at high school in Huddersfield (Yorkshire) the price of a can of Coke was 30 pence, which felt a little unfair, although perhaps not as unfair as living in Huddersfield (ohh, joke).
These days if you go to a service station we can get hammered for several dollars for a small bottle of Coke. In my head, though, 30 pence still feels like a fair price.
And, for a product like Coke, it probably is! The product costs only a few cents per can to produce. What we are paying for is the astronomical advertising and promotions budgets.  
The Money Illusion
In 1928, Irving Fisher wrote an important book called <a href="https://en.wikipedia.org/wiki/Money_illusion" target="_blank">The Money Illusion</a>, which explained how we as humans tend to think in currency in nominal terms rather than real terms.
It’s an illusion, particularly because now in the modern era we have fiat currencies – the currency itself has no intrinsic value, so we should instead think in terms of its purchasing power and how that shifts over time.  
The idea was popularised further by the great John Maynard Keynes.
What are the outcomes?
Sometimes contracts are not indexed for inflation and sometimes, though not always, prices can be ‘sticky’ – they don’t move up smoothly in line with inflation.
Studies have shown that while we want to move heaven and earth as and when we are given a 2% pay cut, yet if we are given a pay rise of 2% when inflation is cruising along at 4% that somehow feels more ‘fair’ to us.  
The Money Illusion in Australia
Is there an illusion happening in Australia today? Well, to some extent, but I think it’s a little more complex than that.
Adam Creighton recently highlighted in Charter magazine (geeky mag for Chartered Accountants) that over three decades, incomes have outstripped price growth across all income groups in Australia.
Since 2003, he notes, the poorest fifth of houses holds are $42 better off and the richest fifth $576. The ‘Money Illusion’ dictates that we instinctively focus on nominal price increases rather than real price movements after accounting for inflation.
That said, the cost of living in Australia is definitely now high and there is some debate as to whether the CPI data released by the <a href="https://abs.gov.au/" target="_blank">ABS</a> represents this fairly.
I’ve recently been looking at getting a short-term let in Sydney’s CBD – and while I probably to some extent am being suckered by the Money Illusion, those prices are not completely illusory! Australian cities are expensive places to be a renter these days.  
Investment markets
It’s popular to talk of “the share market being at a 5 year high” and you sometimes also hear property market commentators say that “shares have returned nothing in 5 years”.
<img src="https://hfgapps.hubb.com/asxtools/imageChart.axd?s=xao&amp;pi=Index&amp;ct=3&amp;tf=M10&amp;ovs=&amp;si=Code%20not%20supplied&amp;tima1=0&amp;tima2=0&amp;bi=2&amp;bima=0&amp;comt=index&amp;ds=xao&amp;dovs=0&amp;ex=ASX&amp;ex2=ASX&amp;val=1&amp;stmp=20130524095905420" width="400" height="275">
Source: ASX
 
<hr class="system-pagebreak">
This is deceptive on two counts.
Firstly, partly due to inflation and partly due to rebalancing you would expect the share market indices to move higher over time.
For this reason it makes more sense when assessing if the market is expensive or cheap (rather than to focus on the headline index figure) to look at other measures such as average PE ratios and prevailing dividend yields.
Secondly, commentators from a non-financial background seem unaware that shares are an income asset. You buy shares for the dividend stream with attached franking credits not purely for the potential capital gain – so to say that “shares have returned nothing” shows a clear misunderstanding of the asset class.  
Australian property
In property, it is commonly said that “prices are at unprecedented highs” or similar. Prices are indeed high but it’s not quite as simple as that here either.
<img alt="Dwelling Prices graph" src="https://www.rba.gov.au/chart-pack/images/5-6-household-sector/6bl-dwelpri-small.gif?accessed=2013-05-24-09-21-28">
If you look at dwelling prices on a city-by-city basis you can see that all is not equal.
There is no question that Melbourne has been a massive outperformer, although there is more than one ‘market’ within the city as I’ll consider bellow.
Prices in Canberra shot upwards in the period to 2010 and look set for a weaker period as the number of ACT employees in the public sector seems set to fall.
Dwelling prices in Adelaide have been mostly dead in the water for more than four years, and similarly Brisbane has had a weak run since its last strong appreciation some half a decade ago.
Regional prices are going nowhere fast.
In Sydney, while prices are around all-time highs, if you wind the chart back to 2003 you will see that prices have only increased by 25% since that time whereas household incomes have increased by around around 15% more than this during the same time period. So while there is much talk of “unprecedented” prices, in fact, in real terms median prices have fallen over the last decade.  
 
<hr class="system-pagebreak">
So where does the bubble talk come from?
So taking all of the above into account, how can Australia be in a bubble as some claim? Especially given that interest rates have been dumped from 17% to just 2.75% which surely must result in higher household leverage? The problem stems from the fact that so many of us want to live in just a few locations, and particularly in only two cities. And, more than almost any other equivalent country, we want to live in urban locations:
<img alt="Graph 6: Urban Population" src="https://www.rba.gov.au/speeches/2013/images/sp-so-230413-graph6-small.gif">
Our lack of population density is absurd when compared to other countries – millions of us are crammed into a few urban areas, and people wonder why prices are driven up…
<img alt="Graph 7: Urban Population Density" src="https://www.rba.gov.au/speeches/2013/images/sp-so-230413-graph7-small.gif">
 
<hr class="system-pagebreak">
RBA studies show that the price of greenfield land in cities such as Melbourne, Brisbane and Perth is cheap (see chart below), although construction costs and government levies wrench the median price of detached housing higher. In Melbourne, the cost of greenfield land spiked during the first homebuyers boost and then receded again.
<img alt="Graph 8: Construction Costs" src="https://www.rba.gov.au/speeches/2013/images/sp-so-230413-graph8-small.gif">
The city markets are multi-speed, however. In Melbourne some CBD markets have performed very poorly, and as noted, in the fringe suburbs where land value appreciation is weak, prices remain relatively cheap.
However, the price of Melbourne’s established dwellings in the popular suburbs have powered ahead, and until we change our thinking, little else seems likely to change in this regard. We need better transport, planning, approval processes, construction and infrastructure. Simply building more dwellings does not work in a country with a booming population if nobody wants to buy or live in the new builds.  
Sydney
In Sydney, it’s a similar, although slightly different story. Investors have cottoned on to the trend and are flying back into the market, and are focussing heavily on established, medium-density dwellings in the inner and middle ring, as well as terraced houses in certain inner western suburbs.
The cheapest and the fringe suburb sectors of the market and particularly the premium priced dwellings are underperforming, however, and as a result the median dwelling price data for May will show moderate losses.
Investors will doubtless love this because it will likely cause the RBA to keep its hand away from the interest rate trigger for longer. But ask those who actually work in the industry what is happening in the established middle market and you will see a different pattern emerging, which is growth and prices pushing through to all-time highs.
Crashniks and housing bears will no doubt mock this observation – but before you scoff, I’d ask you to point me in the direction of any median- or mid-priced property which has fallen significantly in price in the eastern suburbs, the north shore or in the inner west? It hasn’t happened in any meaningful way and nor does it appear likely to.
Prices in the broad middle market are on the move and with the cash rate being cut yet again in May serviceability is close to its best level in years.
<img alt="Graph 11: Repayments on New Housing Loans" src="https://www.rba.gov.au/speeches/2013/images/sp-so-230413-graph11-small.gif">
<a href="https://www.propertyobserver.com.au/residential/investor-demand-could-spur-10-gain-in-mid-market-sydney-property-prices-in-2013-apms-dr-andrew-wilson-docandrewwilson/2013052361556?utm_source=po&amp;utm_medium=aida&amp;utm_campaign=news" target="_blank">APM predicts</a> 10% price gains in Sydney’s middle-market for these reasons.
It’s not a bubble yet, but we could well end up with one as appropriate supply lags a booming demand and Australia’s grand plan continues to focus on packing ever more of us into a few popular suburbs. It hasn’t worked to date and I doubt it will in the future.
Pete Wargent holds a range of finance and property qualifications and is the author of <a href="https://petewargent.blogspot.com.au/" rel="nofollow" target="_blank">Get a Financial Grip – a simple plan for financial fr</a><a href="https://petewargent.blogspot.com.au/" rel="nofollow" target="_blank">eedom.</a>
 
 
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No Australian property bubble yet but it's on the cards: Pete Wargent

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With a huge number of investors active in the Australian property market, John McGrath of McGrath Estate Agents has compiled a list of tips on reorganising debt for investing.
Tip 1: Principal and Interest Loans vs Interest-Only Loans A typical scenario for investors is that they will own their own home, with a mortgage, and will plan to use the equity available to fund or partly-fund an investment purchase.  Most owner-occupiers will have a Principal and Interest loan on their home. P &amp; I loans are excellent for owner-occupiers because your equity increases as you pay off the principal. If you’re going to remain living in your home, staying on a P &amp; I loan is a good idea because the interest is not tax-deductible so that’s the debt you want to pay off first with spare cash. However, the interest on the loan for an investment property is tax deductible, so you might like to take out an interest-only loan on your investment property. Because you don’t pay off any of the principal, the regular repayments are less than a P &amp; I loan. Thus, you have more cash in your pocket, which allows you to borrow more and buy more property!  Tip 2: Freeing up cash flow Freeing up additional cash flow is a priority for most investors. One of the things you could do is convert the home loan on your principal place of residence to interest only as well. This would put more money in your pocket, but the downside is you won’t be paying off any of the principal and the interest remains non-tax deductible. But what if you moved out?  Tip 3: Take advantage of tax deductibles If you moved out of your home and rented it out, while renting somewhere cheaper yourself, you could free up a lot of cash flow. If you converted the loan to interest only, you’d have even more cash available and the interest would be 100% tax deductible too. Plus, you could claim all the expenses of the property, such as strata levies, council rates and water rates, as a tax deduction too. But what about capital gains tax, I hear you say?  Tip 4: Use the six year rule to avoid capital gains tax If you rent out your principal place of residence, the Tax Office will allow you to do this for six years with no exposure to capital gains tax (CGT). You receive all the benefits, such as rental income and deductibility of expenses and loan interest, but you won’t have to pay capital gains tax if you sell it within six years. After six years is up, you can move back in and re-qualify for another six years if you move out again. This is a generous opportunity that could save you thousands in capital gains tax if you ever decide to sell the asset. (Click here to read more about the six year rule.) Tip 5: Variable vs Fixed Rate Loans Finally, a word on fixed and variable rates. Fixed rates give you peace of mind but little flexibility. But today’s fixed rates are extremely attractive and well below variable rates, so it might be worth considering locking in below 5% for a couple of years while you’re getting used to having not only a home loan but also an investment loan to manage too.  McGrath advises as each situation may differ, it is best to discuss individual circumstances with financial advisors.
McGrath's tips were published on the financial planning website <a target="_blank" href="https://www.switzer.com.au/the-experts/john-mcgrath-property-expert/re-organising-your-debt-to-invest/">Switzer.</a>
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John McGrath's 5 tips for reorganising your debt to invest

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Australia's big four banks have been ranked the most profitable in the developed world for the third straight year, but all that money hasn’t improved their offerings to small business.
The Swiss-based Bank for International Settlements published figures today showing the pre-tax profits of the big four banks – the Commonwealth Bank, Westpac, ANZ and NAB were equal to 1.18% of their total assets.
This puts Australian banks well ahead of those in the other developed countries on the list such as Canada, the US and Britain, with only lenders in the emerging economies of Brazil, Russia, India and China making better returns.
The Bank for International Settlement’s figures also show Australian banks have lower costs than most of their peers and enjoy wider interest margins – a measure of profitability from lending.
So what are the banks doing with all that profit?
Not lending to small business, that’s for sure.
The big four claim they are eager to lend to SMEs, but <a target="_blank" href="https://www.smartcompany.com.au/financial-services-and-insurance/055527-half-of-small-business-loan-applications-knocked-back">just under half of all credit applications made by small and medium businesses in the past ye</a>ar were not granted.
In fact, the banks have been milking small business, with bank fees for businesses <a target="_blank" href="https://www.smartcompany.com.au/financial-services-and-insurance/056145-rba-banking-data-sparks-anger-among-small-businesses-as-it-reveals-bank-fees-have-soared-in-the-past-three-years">jumping 23.9% over the past three years</a> despite fees for consumers falling.
They also failed to pass on the RBA’s interest rate cuts in full to business.
There’s a distinct lack of competition in Australia’s banking sector which small business is paying the price for.
We need an alternative.
This article originally appeared on <a target="_blank" href="https://www.smartcompany.com.au/">SmartCompany</a>.
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Australian banks still most profitable in developed world but still turning down many SME loan applications

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Often times when we are presenting our research findings we find there is sometimes confusion about the geographic boundaries we are reporting on.  Take our standard indices reporting for example, which is typically across capital city boundaries.  As a default, whenever we are reporting on capital cities we use the respective capital city statistical division boundary.
It’s easy to understand why there can be some confusion though, as most people aren’t familiar with standardised boundaries that are provided and maintained by the Australian Bureau of Statistics.  Take my home town of Brisbane as a case point.  When people refer to ‘Brisbane’ they could be talking about the suburb of Brisbane, the Brisbane Local Government Area, the Brisbane Statistical Division or more recently the Brisbane Greater Capital City Statistical Area.  As you can see from the map below, the regions are vastly different in their geographic scope and area; property market conditions will be quite different depending on which region is being analysed.
<a rel="wp-prettyPhoto[g2162]" href="https://blog.rpdata.com/wp-content/uploads/2013/06/Brisbane-examples.jpg"><img height="284" width="470" src="https://blog.rpdata.com/wp-content/uploads/2013/06/Brisbane-examples-580x350.jpg" alt="Brisbane examples"></a>
The maps below provide a further summary about which council areas and statistical subdivisions are included within each of the capital city statistical division boundaries that we report on.
The Sydney statistical division extends north to the border of Lake Macquarie, south to Wollongong and west to include the Blue Mountains.  The Sydney statistical division contains 43 council regions, the largest number of municipalities of any capital city.
<a rel="wp-prettyPhoto[g2162]" href="https://blog.rpdata.com/wp-content/uploads/2013/06/Sydney-LGA.jpg"><img height="284" width="470" src="https://blog.rpdata.com/wp-content/uploads/2013/06/Sydney-LGA-580x350.jpg" alt="Sydney LGA"></a>
<a rel="wp-prettyPhoto[g2162]" href="https://blog.rpdata.com/wp-content/uploads/2013/06/Sydney-SSD.jpg"><img height="283" width="470" src="https://blog.rpdata.com/wp-content/uploads/2013/06/Sydney-SSD-580x349.jpg" alt="Sydney SSD"></a>
 
<hr class="system-pagebreak">
The Melbourne statistical division extends out to the border of Geelong to the west, to the Bass Coast to the South, West to Baw Baw and north to the Macedon Ranges and Mitchel council regions.  There are 31 council regions across the Melbourne statistical division, the second highest number of capital city municipalities after Sydney.
<a rel="wp-prettyPhoto[g2162]" href="https://blog.rpdata.com/wp-content/uploads/2013/06/Melbourne-LGA.jpg"><img height="280" width="470" src="https://blog.rpdata.com/wp-content/uploads/2013/06/Melbourne-LGA-580x345.jpg" alt="Melbourne LGA"></a>
<a rel="wp-prettyPhoto[g2162]" href="https://blog.rpdata.com/wp-content/uploads/2013/06/Melbourne-SSD.jpg"><img height="280" width="470" src="https://blog.rpdata.com/wp-content/uploads/2013/06/Melbourne-SSD-580x345.jpg" alt="Melbourne SSD"></a>
The Brisbane statistical division contains just 5 local government area boundaries, all of which are very large compared with most other capital city council areas.  The region is bordered by the Sunshine Coast to the North, Gold Coast to the south and Somerset / Lockyer Valley / Scenic Rim to the west.
<a rel="wp-prettyPhoto[g2162]" href="https://blog.rpdata.com/wp-content/uploads/2013/06/Brisbane-LGA.jpg"><img height="288" width="470" src="https://blog.rpdata.com/wp-content/uploads/2013/06/Brisbane-LGA-580x356.jpg" alt="Brisbane LGA"></a>
<a rel="wp-prettyPhoto[g2162]" href="https://blog.rpdata.com/wp-content/uploads/2013/06/Brisbane-SSD.jpg"><img height="284" width="470" src="https://blog.rpdata.com/wp-content/uploads/2013/06/Brisbane-SSD-580x351.jpg" alt="Brisbane SSD"></a>  
 
<hr class="system-pagebreak">
The Adelaide statistical division is the third smallest of the capital city statistical divisions (after Canberra and Hobart) at just 1,826 square kilometers.  The region includes 18 council areas and is bordered by the Adelaide Hills, Barossa and Mount Barker council regions to the east, Mallala to the north and Yankalilla to the south.
<a rel="wp-prettyPhoto[g2162]" href="https://blog.rpdata.com/wp-content/uploads/2013/06/Adelaide-lga.jpg"><img height="283" width="470" src="https://blog.rpdata.com/wp-content/uploads/2013/06/Adelaide-lga-580x349.jpg" alt="Adelaide lga"></a>
<a rel="wp-prettyPhoto[g2162]" href="https://blog.rpdata.com/wp-content/uploads/2013/06/Adelaide-ssd.jpg"><img height="283" width="470" src="https://blog.rpdata.com/wp-content/uploads/2013/06/Adelaide-ssd-580x349.jpg" alt="Adelaide ssd"></a>
Perth is home to six out of ten of the smallest local government area boundaries across the capital cities.  The Peppermint Grove council region is just 1.06 square kilometers in area, East Fremantle is 3.1 square kilometers and Cottesloe is 4.4 square kilometers.  The Perth statistical division includes 30 council areas, the third highest number of capital city municipalities.  The borders of Perth statistical division extend north to the Gingin and Chittering Shire Councils, east to the Northam, York and Beverley council regions and south to Mandurah and Murray.
<a rel="wp-prettyPhoto[g2162]" href="https://blog.rpdata.com/wp-content/uploads/2013/06/Perth-lga.jpg"><img height="281" width="470" src="https://blog.rpdata.com/wp-content/uploads/2013/06/Perth-lga-580x347.jpg" alt="Perth lga"></a>
<a rel="wp-prettyPhoto[g2162]" href="https://blog.rpdata.com/wp-content/uploads/2013/06/Perth-ssd.jpg"><img height="284" width="470" src="https://blog.rpdata.com/wp-content/uploads/2013/06/Perth-ssd-580x351.jpg" alt="Perth ssd"></a>  
Hopefully the maps provide some more context about the regional specification of our reporting.  Capital city boundaries (and regional boundaries for that matter) are broad in geographic scope, and similarly, the housing market statistics across these regions should be considered to be fairly macro in their analysis.  For anyone involved in the industry or who is active in the market, you need to keep in mind that housing markets can perform quite differently at a more granular level (which is why we have plenty of indices available at smaller geographic aggregations including council regions, suburbs, postcodes and even streets).
Note that we are in the process of releasing our flagship hedonic indices suite across the new ASGS boundaries and our capital city reporting will eventually be across the GCCSA (Greater Capital City Statistical Areas).  <a href="https://www.abs.gov.au/ausstats/abs@.nsf/mf/1270.0.55.001" target="_blank">Check out the ABS geographic pages for more information on the standardised geography we report on</a>.
Tim Lawless is national research director of <a rel="nofollow" href="https://www.myrp.com.au/" target="_blank">RP Data.</a>
 
 
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Navigating geographic boundaries when reporting real estate statistics: Tim Lawless

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The bounce to prestige property markets anticipated from the approval of signficant investor visas (SIV) could take a long time to filter through given very long processing times and a backlog of applications.
The Department of Immigration says that once it has developed the “organisational expertise for the new visa” it will take between six to nine months to process applications under a "business as usual" scenario.
Checks include assessing an applicants source of funds among a range of the usual background checks a spokesperson told Property Observer.
"The time to process each case will be different."
The department has revealed just two visas issued since the scheme was launched in November – one to a Chinese toymaker - with around 222 invitations issued to investors up to early June, 212 of them to Chinese investors.
The visas are available to offshore investors with at least $5 million to invest in approved schemes, which include Commonwealth, State or Territory government bonds, ASIC-regulated managed funds with a mandate for investing in Australia; and direct investment into Australian proprietary companies.
In NSW, applicants must invest a third of the $5 million in state government Waratah bonds, with the state hoping to use the scheme to fund infrastructure and road projects.
Direct property investments do not qualify, but <a target="_blank" href="/news">Dominic Ong, who heads up a new Knight Frank special significant visa team</a> specifically targeting wealthy Chinese investors, told Property Observer last month that he was showing Asian clients around some of the most expensive Sydney waterfront real estate.
The visas qualify the recipient with four-year’s residency without needing to be proficient in English or meet other traditional visa requirements. Following this period they can then apply for permanent residency.
<a target="_blank" href="/news">Property Observer has previously written</a> that the issuing of the first two visas had generated a seemingly disproportionate amount of press coverage with the Department of Immigration seemingly in no hurry to approve applications despite a pipeline of more than 400 applications.
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Significant investor visas to take up to nine months to process

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Australian feels more confident about buying residential property and of its potential to build wealth, the latest QBE LMI Mortgage Barometer report has found.
The survey or more than 1,100 home owners and prospective homebuyers also found a distinct shifting in buying tastes with a higher percentage of first-home buyers, second homebuyers and investors contemplating buying a new house or apartment rather than an existing one.
Thirdly, there also appears to be a shift towards buying units with respondents considering buying detached houses in 2013 than in 2012.
Nearly one in three (32%) of those surveyed believe the next six months is the best time to buy residential property, up from 26% in 2012 while more than half believe the next 12 months is the best time to buy, up from 40% in 2012.
“This sentiment is in line with almost half of respondents (47%) thinking that property prices will increase strongly in the next three years and more than a third believing prices will be at least 10% higher in 2013,” says Jenny Boddington, chief executive officer of QBE LMI.
Other results also point to the belief that property will be a better investment vehicle in the coming years with 17% of those surveyed classifying it as a “reliable blue-chip investment” – up from 16% in 2012; 14% considering it as a way to build wealthy relatively quickly (up from 8% in 2012) and 22% considering it an investment to fund retirement (up from 19%).
In addition, significantly fewer respondents now believe property should only be one part of a diversified portfolio (17% in 2013 versus 29% in 2012) - in other words more Australians believe that the asset class can stand on its own as an investment vehicle.
<img width="470" height="223" src="/images/stories/2013/larry_uploads/perceptions.jpg" alt="perceptions">
“The slow recovery of the share market post-Global Financial Crisis (GFC) has likely had a large part to play in these perceptions, with dwelling values outperforming the ASX 200 Index on capital appreciation over the last decade to 2012, and proving to be far more stable (largest 12-month fall of 5% vs. 40%+ for shares),” notes the report. 
While buying an existing home remains the most popular choice for all buyers, the survey did find a rise in appetite for new homes across first-home buyers, owner occupiers and investors.
 
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In 2013, more than a third of respondents (35%) said they were looking to buy a new house compared with 29% in 2012.
Interest is a new home highest among first-home buyers, which is not surprising given the changes in first-home owner grants in NSW and Queensland, incentivising only new home purchases, with Victoria, the ACT, South Australia and Tasmania all to follow suite in the coming months and years.
Nearly one in two (49%) first-home buyers are considering a new home compared with 34% in 2012.
Among owner-occupiers, more than a third (34%) are considering a new home over an existing one (up from 26% in 2012) and among investors, 32% are considering a new home (up from 27% in 2012).
Perhaps signalling a desire for a more affordable property, but possibly also reflecting the rise in apartment living in capital cities, the survey found a distinct shift towards purchasing units among owner occupiers and investors with demand for generally more expensive detaching housing falling.
Desire for an apartment remains high among first-home buyers at 32%.
<img width="469" height="456" src="/images/stories/2013/larry_uploads/existing_homes.jpg" alt="existing_homes">
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Homeownership sentiment improves as demand for new homes rises: QBE LMI survey

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AMP Capital’s chief economist Shane Oliver <a target="_blank" href="https://www.ampcapital.com.au/tv/Where-to-for-the-Australian-economy">discusses the outlook</a> for the economy as interest rates and the dollar fall.
<iframe src="https://player.vimeo.com/video/68588907" width="470" frameborder="0"></iframe>
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AMP Capital's Shane Oliver explores the outlook for the Australian economy

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There has been plenty of subject matter on our ageing population and it's clear Australia faces challenges ahead.
Allowing for a few fluctuations - since 1907 to present day, the fertility rate has fallen from around four newborns per woman, to 1.88 (a little above the record low of 1.73 in 2001.)  Significantly, this figure is below ‘replacement level’ which is considered to be 2.1 babies per female.
According to the United Nations, life expectancy in Australia is equal fourth in the world – coming in alongside Switzerland for the same recorded period (2005-2010) – and from most recent ABS data, a man and woman can be expected to live well into their eighties with one in five Australians expected to last into their nineties.
It’s worth noting, the proportion of overseas born Australian residents has also added significantly to our age weighted demographic with a median age - as of 2010 - of 44.7 years – a figure attributed to the large number of migrants who inundated Australia’s shores as post-war ‘boat people’ when the last major call went out to ‘populate or perish.’
The number of older Australians aged 85 years and over has doubled over the past 20 years and is expected to increase as a proportion of the population, to 18% in 2036.
Add to this the stark reality that in 2012, 250,000 Australians reached retirement age with an estimated 5000 reaching the age 65 weekly – and it’s clear Australia’s capacity to fund its population’s needs as the number of working aged individuals decreases, is being severely stretched.
In this respect, when you lift the blanket on unemployment data the trends are concerning and certainly not as good as the headline rate suggests.
Full time job growth is weak and both hours worked along with levels of underutilisation are deteriorating.  As the mining construction boom unwinds, non mining industries underperform, and we pull in our belts with fiscal consolidation, it’s likely we’ll see little change over the months ahead. The short term data is volatile and somewhat unreliable albeit, the long term trend is clear.
In 2009-2010 financial year 26% of the government’s budget was directed towards age related services (health, age related pensions, and aged care) – however, according to treasury projections, this figure’s expected to increase substantially over the next 40 years <a target="_blank" href="https://archive.treasury.gov.au/igr/igr2010/report/pdf/IGR_2010.pdf">“pushing the share of spending to almost half.”</a>
<img src="/images/stories/2013/06/cashmorejune24one.png" width="470" height="310" alt="cashmorejune24one">
As a result, each and every policy decision Australia makes in the years ahead will be – or rather should be – influenced by the necessity to fund an ageing demographic.
For those currently reaching retirement, it’s hoped most will be able to provide for their own needs through a combination of superannuation, working past the age of 65, and tapping into their assets – the biggest of which is housing.
Some will downsize, some will look towards various financial products, such as a reverse equity loan for example – but a majority will have the good fortune of doing so in a house free of debt.
There’s no doubt baby boomers worked as hard as any modern first-time buyer to purchase their principal place of residence.  They made significant sacrifices in a high interest rate environment often working, more than one job to achieve the dream of ownership – and in this respect, it’s never been easy.
However, they were lucky enough to get in at the beginning of the lending boom.
 
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Over the years - financial deregulation, the emergence of duel income households, and the very real realities of our ‘golden decade’ of growth – which essentially gave purchasers a ‘get out of jail free’ card, knowing they could sell into a rising market if the going got tough - provided a layer of protection against loss of equity.
The outer suburbs were some 10km outside of established job and commercial hubs, not the 40km+ we see today – and as the population went through various phases of rapid expansion and different financial products were created, the number of buyers increased and mortgage lenders reaped the benefits.
However, the family home was not the only property acquisition from which this demographic drew benefit.  By 2009-2010 the total value of investment housing owned by our baby boomer generation was 57% – a majority no doubt purchased with the tax advantage of negative gearing.
Baby boomers hold roughly half of Australia’s housing stock – a mix of owner-occupied dwellings and investments.  If Australia was to experience any significant downturn in house prices – or demand, it’s the generations heading toward retirement that would suffer most.
Thus far, population growth has somewhat supported the economy – however, due to woeful planning on both the part of state and federal governments, we’ve evolved into a country gripped to its capital cities which play host to the highest accommodation prices in the country.
Furthermore, our environment has changed considerably.  From an atmosphere where a job was for life and family units were formed early, to a set of differing cultural conditions with fairly fluid fluctuation between periods of ownership and tenancy as buyers and renters migrate through various stages of their ‘employment’ career.
As a result, first-home buyers purchase later in life, marry later in life, start their family later in life, and significantly, tap into their housing equity to fund rising costs of living and lifestyle, earlier in life.
An increasing number of first-home buyers are rummaging into mum and dad’s equity pot - reducing the retirement income stream of the current middle aged populous, and evidently - as census results project - it’s now expected future generations will reach retirement still paying down this principal debt with superannuation used to fund the difference.  Subsequently, the age at which most folk can easily retire, will extend well into the seventies.
It’s all very well making the call to ‘populate or perish’ as some of our industry commentators regularly do however, it is notoriously difficult to predict changes in both natural and migrant fluctuations in growth.
In an excellent study by Jessica Brown and Oliver Hartwich entitled “Modelling Australia’s Demographic Future” it was found that increased migration on its own could not provide a viable solution to our ageing population – significantly, it’s our falling fertility rates that are the biggest cause for concern.
As the paper points out, the current European Union average is 1.5 children per female – and if we were to match it with the downward trend in fertility rates, under the best case scenario (with continued high migration growth) the median age today – currently 37 years - will rise close to 46 years with the number 80 year olds set to reach around 2 million by 2050.
Furthermore, as mining investment scales down – unless there’s a considerable uptick in other areas of our economy – a scenario which is looking increasingly dire as manufacturing struggles and job losses continue to filter in from in various regions, it’s highly likely we’ll see a drop in net migration which will exacerbate the problem.
 
<hr class="system-pagebreak">
All in all – is it doesn’t matter what we do – whether we throw open our boarders (unlikely under current political opinion) or take a sustainable ‘steady as she goes’ rhetoric – which in essence means little, because even with a strict migration policy and a further fall in the birth rate, Australia’s population would still lead to over 29 million bodies by 2050 – we’re heading toward an ageing tsunami.
Evidently, this presents significant challenges.  In years when house prices were booming, it followed that the level of consumer spending increased and credit growth was strong.
In a study by Australian Housing and Urban Research institute in 2007 (the height of the boom) it was found for every $100,000 increase in housing wealth, there was a bounce back in consumer consumption of $1000 to $1500 per annum.
It was all going swimmingly whilst the market remained rampant.  However, following the backdrop of GFC, households are saving more – spending less – and a marked proportion of those who purchased at the ‘peak’ of 2010 remain in negative equity.  As it stands, national turnover of sales remains weak.
The reducing number of first home buyers as a percentage of the buying market is significant.  As noted from a recent <a target="_blank" href="/news">QBE LMI survey</a> – and certainly shared by my own anecdotal evidence – first home buyers perceive prices ‘too high.’ Their budget is typically around $300,000 which will barely purchase a one bedroom inner city apartment in either Sydney or Melbourne, and is less than the average ‘new’ house price on the fringe ($400,000.) 
They also recognise they will need to hold their properties for a longer period of time to advantage from an increase in equity. In other words – it will take longer, before an ‘upgrade’ is possible.
For those looking to downsize, the challenges are also evident.  Retirees don’t generally look at the apartment market when <a target="_blank" href="https://www.propertyobserver.com.au/residential/there-s-little-evidence-to-suggest-a-downsizing-rush-catherine-cashmore/2013041460355">downsizing</a>. Evidence shows most preference low maintenance single level, independent units, close to transport, shops, doctors and hospitals, ideally with space enough to hold the lifetime’s worth of accumulated memories.
However, the majority stock currently being developed consists of high density ‘squeeze as many on the block as possible’ apartments, double story townhouses – or new house and land packages – hence why the tendency to remain in their principal place of residence is strong.
It’s clear the property needs of home buyers must be addressed by urban planners if we’re to free up the market stagnation which will increasingly affect city dwellers as the population expands.
Adequately funding infrastructure for our fringe suburbs to boost the construction sector as well as reducing hefty development overlays which are passed onto the buyer, addressing policies to constrain investor and foreign acquisition into the established sector which does little to increase supply, not to mention the recent trend of land banking vacant blocks which could be subdivided into homes ideally suited to both the downsizer and young family buying demographic - all need addressing.
But the bottom line remains that politicians are not going to be able to control the inevitable - in the future the dependency ratio (the relationship between the working age and non working age) is projected to be roughly 60% – therefore we need to foster improvements to workforce participation if we stand any chance of offsetting this imbalance.
Demands on the taxpayer will be immense, and with one in seven Australians a property investor, and one in ten, negatively geared it remains a key drain on revenue.
It won’t be politically popular, but this – along with other poor tax strategies – should be reviewed if we’re to survive the inevitable.
All in all – we’re playing ‘catch up’ as we head toward our ageing headwind.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.
 
 
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