<a href="https://www.apartments.com.au/developers/far-east-consortium">Far East Consortium</a> is preparing to commence construction on <a href="https://www.apartments.com.au/new-apartments/640-bourke-street-melbourne-640-bourke-street-melbourne-vic-3000">640 Bourke Street</a> this October, marking the next milestone for the Melbourne CBD development and its higher-end Eliza Collection.

Spanning levels 44 to 68 of the 68-storey <a href="https://www.apartments.com.au/architects/rothelowman">Rothelowman</a>-designed tower, the Eliza Collection has been conceived as a lower-density offering within the broader development, with only five apartments on each floor, dedicated lift access and a collection of resident spaces reserved exclusively for Eliza Collection residents.

The Eliza Collection forms part of Far East Consortium's broader move toward larger-format residences at 640 Bourke Street, where the number of apartments was reduced from earlier plans as apartment sizes increased.

[smartcode_project:default project_id=509 project_image_fid=365685]

"What it's meant for 640 Bourke is we've actually reduced the number of apartments. We've increased the overall size of the apartments. We don't have any studios in here, and what that does for a project is it elevates it," Far East Consortium Director of Sales and Marketing Lauren Sheldon said.

Rothelowman Associate Jun Chang said the design process provided an opportunity to create more generous floorplans.

"We were given the opportunity to be more generous. The apartments became bigger and squarer than any other apartments which had been designed in the CBD before that."

[smartcode_project:default project_id=509 project_image_fid=368869]

That thinking carries through to the Eliza Collection, where the residences have been designed around the space and functionality associated with a larger home, but positioned high above the centre of Melbourne.

Kitchens are equipped with Gaggenau appliances, a butler's pantry, temperature-controlled wine cabinet and sculptural pendant lighting, while engineered timber flooring, stone and porcelain finishes and custom cabinetry feature throughout the broader interiors.

Privacy and security are another point of distinction. Eliza Collection residents have dedicated lift access, while 640 Bourke Street will provide concierge services and secure resident parking. Short-stay accommodation, including Airbnb, will not be permitted within the development.

[smartcode_project:default project_id=509 project_image_fid=365689]

Eliza Collection residents will also have exclusive access to selected amenity spaces across levels one and three of the restored Eliza Tinsley building. These include the Salon with grand piano, an art therapy room, private dining rooms and treatment rooms.

They sit within more than 3,000 sqm of amenity planned across 640 Bourke Street, alongside facilities including a pool, gym, whisky lounge and further social and wellness spaces.

The Eliza Tinsley building itself is central to the wider project's identity. Rather than treating the existing Eliza Tinsley façade as a separate element, Rothelowman used it as a starting point for the architecture of the new tower, with the historic building to accommodate the project's gallery and lobby.

"It's a significant asset and wants to be celebrated and experienced by all residents every single time they go in and out of the building," Rothelowman Principal Stuart Marsland said.

[smartcode_project:default project_id=509 project_image_fid=368872]

The tower will rise behind the retained heritage building at 640 Bourke Street, placing residents within walking distance of Southern Cross Station, Flagstaff Gardens, Queen Victoria Market and the Docklands waterfront.

With construction scheduled to begin in October, Far East Consortium has established an onsite display gallery at 640 Bourke Street, including fully built apartments that allow the project's layouts, materials and finishes to be inspected at full scale.

A fully built Eliza Collection apartment is also available to view at the display suite by appointment ahead of the planned October construction commencement.

Eligible purchasers who buy before construction commences can secure the full available off-the-plan stamp duty savings, subject to eligibility and applicable conditions.

[smartcode_project_cta:default project_id=509]

Joel Robinson

Far East Consortium brings Eliza Collection to 640 Bourke Street ahead of October construction start

By the time S&amp;S Projects began planning <a href="https://www.apartments.com.au/new-apartments/radia-rainbow-bay-271-boundary-street-coolangatta-qld-4225">Radia</a>, the developer already had three Rainbow Bay projects from which to draw.

Flow, Awaken and Esprit had given <a href="https://www.apartments.com.au/developers/ss-projects">S&amp;S Projects</a> experience developing in the southern Gold Coast enclave, as well as buyer feedback that could be carried into its fourth project, a boutique collection of 38 residences at 271 Boundary Street.

“We have experienced a lot of success in this location and as this was our fourth building we had taken all of the learnings and buyer feedback from previous projects to arrive at a design and apartment mix that we believe had captured all of that experience and remained a true S&amp;S Project in its design and amenity,” the developer said.

That experience has translated into a collection of two, three, four and five-bedroom residences including two penthouses positioned on an elevated corner in Rainbow Bay, where the site opens to multiple coastal view corridors and the area's distinctive north-facing bay.

[smartcode_project:default project_id=140491 project_image_fid=284542]

S&amp;S Projects says the Boundary Street site took years to assemble, having previously comprised six units, a house and a duplex. The developer worked individually with the existing owners to bring the properties together after an earlier attempt to sell the site had been complicated by the number of parties involved.

“We are constantly looking for properties that meet our brand standards of location, views, and sites that are rare with unique aspects that we can develop to maximise the lifestyle of residents who live in our buildings,” S&amp;S Projects said.

The Boundary Street site gave <a href="https://www.apartments.com.au/architects/cottee-parker-architects">Cottee Parker</a> a different set of conditions to work with.&nbsp;

“Our design brief was to design a building that took advantage of its unique elevated corner siting offering a range of spectacular view corridor opportunities,” Cottee Parker said.

“The design had to reinforce the strong brand pillars of S&amp;S which are quality, luxury and superior resident amenity.”

[smartcode_project:default project_id=140491 project_image_fid=284543]

Cottee Parker responded with a sculptural floorplate and strong horizontal banding, with continuous balconies and landscaped planters wrapping the building. Operable screens along the balcony edges allow residents to manage light and shade while creating an additional layer of pattern across the facade.

The tower rises above a heavily landscaped podium incorporating the entry lobby and recreational level, while the broader architectural expression takes cues from Rainbow Bay's coastal environment through its organic forms and light material palette.

Cottee Parker says the design has also been developed to complement S&amp;S Projects’ three previous Rainbow Bay developments while retaining its own architectural identity.

Inside, the residences continue that coastal response through two interior schemes centred on warm timbers and neutral tones, alongside patterned natural stone and fluted detailing.

Floor-to-ceiling sliding glass doors connect open-plan living areas to wraparound balconies, while natural stone is used across benchtops, splashbacks and bathroom walls. Specifications also include light-washed timber flooring, gas fireplaces, integrated bar and wine fridges, freestanding stone baths and 100 per cent wool carpet.

[smartcode_project:default project_id=140491 project_image_fid=284559]

Cottee Parker Director Sandra Brown said the intention was to create an architectural response closely connected to its surroundings.

“Imagine architecture that breathes with the rhythm of nature, where every curve and line flows seamlessly – creating spaces that dance with the elements, where sunlight kisses every surface and the gentle sea breeze fills every space,” Brown said.

The lessons S&amp;S Projects carried into Radia also extend to its resident amenity, with a substantial collection of shared facilities planned for just 38 residences.

A dedicated Residents Club will include a lap pool and spa, gymnasium, ice bath, sauna, steam room and hot rocks sauna. A residents' lounge, private dining room, outdoor dining and barbecue area and business centre are also planned, along with storage and dedicated surfboard and beach lockers.

S&amp;S Projects Founding Director Paul Gedoun said the facilities were also designed around the project's Rainbow Bay setting.

“Each amenity is designed to capitalise on the lifestyle of Rainbow Bay, ensuring residents can enjoy the relaxed coastal experience the enclave is famous for,” Gedoun said.

[smartcode_project:default project_id=140491 project_image_fid=284555]

<a href="https://www.apartments.com.au/project-marketer/pezet-matheson">Pezet Matheson</a> says purchasers to date have predominantly included local downsizers, interstate lifestyle investors and families, alongside a strong contingent of repeat S&amp;S purchasers.&nbsp;

According to the project sales team, feedback has centred on the natural stone and joinery, generous floorplans, natural light and the ability for residences to capture views in multiple directions. The completed Flow, Awaken and Esprit developments have also provided prospective purchasers with an existing reference point for S&amp;S Projects' delivery in Rainbow Bay.

There has also been interest from high-profile surfers and people connected to the surf community, with the elevated building providing outlooks towards several of the area's recognised surf breaks.

Radia continues S&amp;S Projects' concentration of development in a tightly held part of the southern Gold Coast, close to Rainbow Bay Beach, Snapper Rocks, Duranbah Beach, Greenmount Beach and the Tweed River. The neighbourhood also includes a growing collection of hospitality venues, while Coolangatta Airport provides connections beyond the southern Gold Coast.

Hutchinson Builders is now delivering Radia, continuing the project from early works privately funded by S&amp;S Projects. The $250 million development is expected to reach completion in the third quarter of 2027.

“With our history in Rainbow Bay, we have been fortunate to be heavily involved in how the development landscape has unfolded and this project slides into the property landscape comfortably and will feel like it was always there,” the developer said.

[smartcode_project_cta:default project_id=140491]

How three Rainbow Bay projects shaped S&S Projects' fourth, Radia

Nearly 40 years after <a href="https://www.apartments.com.au/developers/sheida-group">The Sheida Group</a> began working on the northern Gold Coast, the family-owned developer is continuing its involvement in Hope Island with Marina Point Apartments, where apartment scale has been a central part of the development.

Across the 235-apartment waterfront community, the developer has prioritised larger floorplans, substantial open space and marina access, responding to a purchaser base that has predominantly comprised local owner-occupiers and downsizers moving from larger homes.

"Having already delivered Anchorage nearby, we also understood this particular market and how people live here," developer Rick Sheida said.

"<a href="https://www.apartments.com.au/new-apartments/marina-point-apartments-hope-island-66-view-line-terrace-hope-island-qld-4212">Marina Point&nbsp;Apartments</a> gave us the opportunity to build on those lessons and create the next evolution of our work in Hope Island."

[smartcode_project:default project_id=136992 project_image_fid=293151]

The Sheida Group acquired the Marina Point land around 2018. Its appeal, Sheida says, went beyond having a waterfront address.

"What attracted us was not simply that the site was waterfront, but the way it meets the water," he said.

"It sits at the junction of broad waterways, creating long sightlines, changing views and a sense of movement throughout the day. Its shape also allowed us to orient the buildings outward, improve privacy between residences and make better use of natural light and breezes."

The buildings have subsequently been positioned around the perimeter of the site, allowing most apartments to take in water views while others look across the resort amenity or hinterland. Once all four buildings are complete, approximately one hectare of the site is expected to remain as open space.

The waterfront also provides the potential for up to 50 marina berths, with berths ranging from 15 to 24 metres and options designed to accommodate wider vessels including catamarans. Access from the marina to the Gold Coast Seaway is bridge-free.

[smartcode_project:default project_id=136992 project_image_fid=293149]

The developer says purchasers to date have predominantly been owner-occupiers and downsizers from <a href="https://www.apartments.com.au/new-apartments/marina-point-apartments-hope-island-66-view-line-terrace-hope-island-qld-4212">Hope Island</a> and elsewhere on the Gold Coast, generally aged between 45 and 70. Many have sold larger family homes or properties requiring significant upkeep.

That purchaser profile informed a design brief centred on retaining the space and functionality of a larger home within an apartment format.

"Many of our buyers are coming from large, well-appointed homes in Sanctuary Cove and the surrounding area," the project team said.

"They are accustomed to generous spaces and thoughtful design, so it was important that the apartments delivered the same sense of comfort and functionality.

"Every room needed to feel well proportioned, every space needed a clear purpose and nothing could feel compromised."

Residences range from 139 sqm through to 319 sqm penthouses, with two car spaces provided to apartments and three to penthouses. Minimum 2.7-metre ceilings, floor-to-ceiling glazing, entertainer's kitchens with butler's pantries, substantial storage and balconies ranging from 18 sqm to 37 sqm further reflect the emphasis on space.

One purchaser from Sanctuary Cove has taken the concept further, combining two of Marina Point's largest apartments to create a 552 sqm residence with raked ceilings reaching up to 4.5 metres.

[smartcode_project:default project_id=136992 project_image_fid=293155]

With Building 1 now complete, the developer is also seeing its original design assumptions tested against purchaser feedback.

Three completed display residences allow prospective purchasers to compare apartment sizes, layouts, finishes and outlooks in person. The sales team says one of the most consistent responses has been to the scale of the apartments, with visitors describing them as feeling more like homes than conventional apartments.

The first stage of resident amenity is also operational, including a 25-metre heated lap pool, Technogym-equipped gym, infrared sauna, golf simulator and yoga room. Future facilities are set to include a resort-style pool and spa, waterfront barbecue area and a residents' lounge with a library, fireplace, pool table, kitchen and bar.

Rather than treating the four buildings independently, the design brief called for a complete waterfront neighbourhood, balancing private residences with landscaping, open space, marina access and shared amenity.

[smartcode_project:default project_id=136992 project_image_fid=293152]

For Sheida, Marina Point Apartments is ultimately an extension of the developer's longer-term involvement in Hope Island and its view of how the suburb is evolving.

"We were equally interested in the long-term future of Hope Island," he said.

"Its position between Brisbane and the central Gold Coast gives residents access to both, while improving transport connections are making the northern Gold Coast increasingly attractive as a permanent place to live."

Hope Island Marketplace is 1.3 kilometres from Marina Point, while Sanctuary Cove and Paradise Point are within six kilometres. Links Hope Island, The Pines and The Palms golf courses are also nearby, and the new Hope Island train station is under construction around five kilometres from the development.

Building 2 is under construction, with completion scheduled for 2027.

[smartcode_project_cta:default project_id=136992]

Marina Point Apartments continues The Sheida Group's 40-year Hope Island story

Sydney-based fund manager and developer EG is seeking to turn part of the former Roche pharmaceutical campus in Cromer into a 130-home residential community, introducing a mix of low-rise apartments, townhouses and duplexes to the tightly held Northern Beaches market.

The SJB-designed masterplan has been prepared for the 3.2-hectare site at <a href="https://www.apartments.com.au/new-apartments/100-south-creek-road-cromer-nsw-2099">100 South Creek Road</a>, part of the former Roche landholding that EG acquired for $55 million in 2017 through its Yield Plus Infrastructure Fund No. 2.

EG is proposing what SJB describes as a new "urban village" set within the site's significant existing tree canopy.

<img alt="Cromer" data-entity-type="file" data-entity-uuid="482c9a58-49f1-4c53-a12e-aaa02336229f" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-24%20at%2011.20.57%E2%80%AFAM.png?VersionId=hZP8_XfPnfNq500dbcjlpVwYU1ebhF9_" />

Around three hectares of the site is considered developable, with the balance incorporating a riparian corridor that would be rehabilitated and revegetated as part of the proposal.

The indicative masterplan comprises approximately 72 apartments in low-rise residential buildings and another 58 townhouses and duplexes.

The apartment component would include around five one-bedroom, 37 two-bedroom and 30 three-bedroom residences, while the townhouse and duplex component would be spread across several different housing typologies. The overall scheme would deliver around 19,500 sqm of gross floor area at an FSR of 0.6:1.

Parking for the apartment component is currently estimated at around 112 resident spaces and 14 visitor spaces, while the townhouse and duplex component would have 116 resident and 12 visitor spaces.

A significant part of the masterplan revolves around retaining the established landscape character of the former Roche campus.

SJB's plans show heavily treed setbacks along both Campbell Avenue and South Creek Road, a centrally located collection of significant native and exotic trees retained as communal open space, and the regeneration of the northern bushland area.

The existing creek corridor along the site's western edge would also be rehabilitated and revegetated, creating additional separation between the new homes and the neighbouring Northern Beaches Business Park.

A heritage-listed cottage and its garden setting would be retained and restored, with SJB flagging its potential adaptive reuse as communal space.

The proposal also includes new communal recreation areas, pedestrian connections to Campbell Avenue and South Creek Road, and a contribution toward improvements to the adjoining Michele Reserve.

Vehicular access would be restricted to South Creek Road, with no vehicle entry proposed from Campbell Avenue. The main internal road would largely follow the site's existing driveway to minimise the impact on established trees.

SJB said residential redevelopment presented an opportunity to retain the majority of the site's heritage-listed mature trees while delivering a broader range of housing types than typically seen across the Northern Beaches.

"The site being 3.27 hectares in area represents one of the largest vacant sites in common ownership in the Cromer and Dee Why area capable of residential renewal," SJB noted in the masterplan.

The architect said the proposal would particularly target housing diversity through townhouses and other "missing middle" typologies suitable for singles, young families, downsizers and retirees.

<img alt="Cromer" data-entity-type="file" data-entity-uuid="e3f5d841-8491-427e-8ada-c70d3d03d6bc" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-24%20at%2011.21.02%E2%80%AFAM.png?VersionId=xTV7r.q8lrTzC9vKzMS9zMbjm9wKwhgm" />

The site emerged following the subdivision of the former Roche campus into eastern and western parcels.

EG has already transformed the western portion into the Northern Beaches Business Park, which incorporates heritage-listed office space, modern warehouses and indoor recreation facilities.

The proposed residential community, referred to as Cromer East in SJB's plans, adjoins established housing to the north, east and south-east, while the business park sits beyond the creek corridor to the west.

It is also within 250 metres of Pittwater House School and Northern Beaches Secondary College, while bus stops within a three-to-five-minute walk provide connections to Dee Why, Brookvale and express services to the Sydney CBD. Cromer Park and the South Creek open space corridor are also nearby.

EG acquired the broader 7.5-hectare former Roche campus in 2017 for $55 million through its Yield Plus Infrastructure Fund No. 2. The campus at the time comprised more than 25,000 sqm of industrial and office buildings set within landscaped grounds.

The current residential site represents the eastern portion of that original holding.

EG's investment strategy for the fund has centred on acquiring income-producing real estate with longer-term rezoning and repositioning potential, particularly assets benefiting from infrastructure and changing land-use patterns.

EG also has an established residential track record across Sydney, including Bosco in Five Dock, Tempo in Drummoyne, The Flour Mill in Summer Hill and Pindari in Randwick.

The developer says it has delivered more than 1,000 homes to date, with a further 3,000-plus residences across its development pipeline.

First look: EG plans 130 apartments on former Roche pharmaceutical campus in Cromer

<a href="https://www.apartments.com.au/developers/s-p-setia">SP Setia</a> has lodged plans for a $750 million, three-tower mixed-use precinct that would complete the long-running redevelopment of Carlton's former Carlton United Breweries site.

The proposal at <a href="https://www.apartments.com.au/new-apartments/185-195-queensberry-street-carlton-vic-3053">46-78 Bouverie Street and 185-195 Queensberry Street</a> spans a 6,468 sqm site, the last remaining undeveloped parcels within the former brewery's 2007 masterplan.

Designed by <a href="https://www.apartments.com.au/architects/cox-architecture">COX Architecture</a>, the development will comprise two purpose-built student accommodation towers and a third build-to-sell apartment tower above a shared commercial podium and basement.

Across the three towers, SP Setia is proposing 606 build-to-sell apartments and 1,499 student accommodation units containing 2,009 beds.

The apartments will sit in the tallest tower, which will rise nearly 200m and 55 storeys. It will become&nbsp;one of the more substantial new build-to-sell apartment projects at the northern edge of Melbourne's CBD.

The apartment mix is weighted toward smaller inner-city product, with 188 studios, 206 one-bedroom apartments, 192 two-bedroom apartments and 20 three-bedroom apartments

<img alt="First look: SP Setia plans three-tower finale for Carlton’s former CUB precinct" data-entity-type="file" data-entity-uuid="8271bc87-1b0a-41b7-ac73-a425ee375261" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/3_2.png?VersionId=G4lw23o90B1boX4k4dj7rdz2ZEajS9wy" />

Part of the precinct will be a large-scale&nbsp;3,684 sqm supermarket and a further 2,198 sqm of speciality retail, creating close to 5,900 sqm of new commercial space within the precinct.

But one of the biggest components of the proposal is what sits between the buildings.

Around 4,650 sqm, or roughly 72 per cent of the site, will be publicly accessible open space, incorporating plazas, pedestrian connections, landscaped laneways and retail spill-out areas.

The ground plane is intended to finally complete pedestrian connections envisaged when the CUB masterplan was first approved nearly two decades ago, stitching together Victoria Street, Queensberry Street, Bouverie Street and Swanston Street through the former brewery precinct.

Urbis said the development would "complete the CUB precinct", with the public realm providing important north-south and east-west connections through what is currently the final undeveloped portion of the masterplanned site.

SP Setia is also exploring a new linear park within the Bouverie Street road reserve, with the concept to be developed further with the City of Melbourne through the planning process.

The proposal is being pursued through the Victorian Government's Development Facilitation Program under Clause 53.23 for significant residential development with affordable housing.

The planning report acknowledges the proposed heights exceed those contemplated under the original Comprehensive Development Plan and masterplan, but argues the built-form context has changed considerably over the past two decades.

Urbis said the three towers would instead create a stepped transition between Carlton and the Hoddle Grid, rising progressively from the 94.1-metre Tower One along the Queensberry Street edge to the 199.44-metre Tower Three closer to the established CBD-scale buildings to the south.

<img alt="SP Setia" data-entity-type="file" data-entity-uuid="e885a07a-592c-40fc-bf82-e6dbaf32da54" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-21%20at%208.52.24%E2%80%AFAM.png?VersionId=7s_ErUkSKAdY1mAWp3GRZgMNCGtwhk5m" />

SP Setia plans to deliver the development across three stages.

Stage One would deliver the basement, podium and retail areas for the entire precinct alongside the first student tower. Tower Two would follow in Stage Two, before the 606-apartment Tower Three is delivered as the final stage.

If approved and delivered, the project would close out a redevelopment process that has been underway since the former brewery masterplan was approved in 2007, adding more than 2,600 student beds and apartments to a precinct already home to Swanston Central, the Barak Building, RMIT Design Hub and several large student accommodation developments.

&nbsp;

&nbsp;

SP Setia plans three-tower finale for Carlton’s former CUB precinct

National Australia Bank (NAB) has brought forward the timing of the first RBA cash rate cut by three months.

NAB is now expecting a cut in February, in line with ANZ and Westpac, having initially thought a cut wouldn't come until May.

Commonwealth Bank, the nation's largest lender, still thinks the first cut will come in December.

NAB changed its call following the August monthly inflation figures that were released at the end of September, showing it had dropped to 2.7 per cent.

"The risk has been skewed to a first cut earlier in 2025, and today’s change acknowledges the balance of risks has likely shifted sufficiently for the RBA to feel comfortable cutting a little sooner than we earlier expected," NAB noted in its latest update.

They added that the cadence of the cuts may be faster than its central profile.

"Domestic inflation pressures are cooling, but only gradually, and we continue to expect the conditions for a cut will not be in place this year.

NAB believes the easing cycle will end at 3.1 per cent by early 2026, which is five cuts from the current 4.35 per cent cash rate.&nbsp;

CBA also thinks 3.1 per cent will mark the end of the cutting cycle, while Westpac is forecasting 3.35 per cent, and ANZ is the most pessimistic at 3.6 per cent, which would be just three interest rate cuts.

<h2>What would a rate cut in February look like for borrowers?</h2>

According to&nbsp;<a data-saferedirecturl="https://www.google.com/url?q=https://link.mediaoutreach.meltwater.com/ls/click?upn%3Du001.IVvjJ-2BPT0A8C3VxtqKc6e3bj5hBuw27WFEYqovsYs7kPsgFulYrdOzeP8gI7CybJOya3_RgrM7qq-2BfK-2FtAHeRBLv5Qrb-2Bii5fzjLeKcP4w-2FkNgJPXygpiRhVUan3WV3QEggcf617UC8Z60RjQJZAqx7PiO7FtVJQSn0D46Zc3iTVP0kAhTTzG51cPpa5hrqz1OkSA-2BiXAxUajQ686MTtiseWBIdMdknd83aB7cOVgXlVTeHCGf3-2BcMHwfvI8TYlkUovqEhn4dj0KXf2eJGpb9-2BBv20hPXdLlPP9yD7DvFFDBM5yrTqxvcCiMfAsW1onD-2FcriL628eYdhNQE7bwzYrxcOYnmaYfRhGl-2FEHQ6eK2uQcLxs6Cbu6Dx0bYvpi5A6enmxMWU5TkcRYrP6Z8GbXZYtc5qSoKu6eWFBQR9K7fsjXwHMmby3D3X6Yx-2BxcDcdRruTG&amp;source=gmail&amp;ust=1727774368149000&amp;usg=AOvVaw2vK2ujS77CHs9VRvSSXzLC" href="https://link.mediaoutreach.meltwater.com/ls/click?upn=u001.IVvjJ-2BPT0A8C3VxtqKc6e3bj5hBuw27WFEYqovsYs7kPsgFulYrdOzeP8gI7CybJOya3_RgrM7qq-2BfK-2FtAHeRBLv5Qrb-2Bii5fzjLeKcP4w-2FkNgJPXygpiRhVUan3WV3QEggcf617UC8Z60RjQJZAqx7PiO7FtVJQSn0D46Zc3iTVP0kAhTTzG51cPpa5hrqz1OkSA-2BiXAxUajQ686MTtiseWBIdMdknd83aB7cOVgXlVTeHCGf3-2BcMHwfvI8TYlkUovqEhn4dj0KXf2eJGpb9-2BBv20hPXdLlPP9yD7DvFFDBM5yrTqxvcCiMfAsW1onD-2FcriL628eYdhNQE7bwzYrxcOYnmaYfRhGl-2FEHQ6eK2uQcLxs6Cbu6Dx0bYvpi5A6enmxMWU5TkcRYrP6Z8GbXZYtc5qSoKu6eWFBQR9K7fsjXwHMmby3D3X6Yx-2BxcDcdRruTG" target="_blank">Canstar</a>, if there is a cut in February, a borrower with a $600,000 loan today and 25 years remaining would see their monthly repayments drop by $92.&nbsp;

<table border="1" cellpadding="0" cellspacing="0">
	<tbody>
		<tr>
			<td colspan="3">
			Impact of 0.25% pt cut in February 2025
			</td>
		</tr>
		<tr>
			<td>
			Current loan size
			</td>
			<td>
			Drop in monthly repayment
			</td>
			<td>
			New monthly repayment
			</td>
		</tr>
		<tr>
			<td>
			$600,000
			</td>
			<td>
			-$92
			</td>
			<td>
			$3,907
			</td>
		</tr>
		<tr>
			<td>
			$750,000
			</td>
			<td>
			-$114
			</td>
			<td>
			$4,884
			</td>
		</tr>
		<tr>
			<td>
			$1M
			</td>
			<td>
			-$153
			</td>
			<td>
			$6,512
			</td>
		</tr>
		<tr>
			<td colspan="3">
			Source:&nbsp;<a data-saferedirecturl="https://www.google.com/url?q=https://link.mediaoutreach.meltwater.com/ls/click?upn%3Du001.xWMOP9hChsvn-2BC9O-2FebBihXIZ4cEzbiuENdxm-2Bx3-2FYEEgYMhZlKWNj5Zzy1YZ56RuASD_RgrM7qq-2BfK-2FtAHeRBLv5Qrb-2Bii5fzjLeKcP4w-2FkNgJPXygpiRhVUan3WV3QEggcf617UC8Z60RjQJZAqx7PiO7FtVJQSn0D46Zc3iTVP0kAhTTzG51cPpa5hrqz1OkSA-2BiXAxUajQ686MTtiseWBIdMdknd83aB7cOVgXlVTeHCGf3-2BcMHwfvI8TYlkUovqEhn4dj0KXf2eJGpb9-2BBv20v2akwr6-2BqLyRrlEgkJ4J-2BCCyY0x189xEHZA4Ylf8c7ChBqNIkhmftZzoFuZKFn43pw3oJVg2o1gumrpdA-2B7MB-2FBtmL2rFCI-2FXORATQHySCLVOMg7Vywv-2BqnnQUAtDz6XkvpwxdHFXh70VwKazzhJsICilEYOvP4ju0sIfi5g6TL&amp;source=gmail&amp;ust=1727774368149000&amp;usg=AOvVaw2qVnp6oqATgqDUi2Frm22q" href="https://link.mediaoutreach.meltwater.com/ls/click?upn=u001.xWMOP9hChsvn-2BC9O-2FebBihXIZ4cEzbiuENdxm-2Bx3-2FYEEgYMhZlKWNj5Zzy1YZ56RuASD_RgrM7qq-2BfK-2FtAHeRBLv5Qrb-2Bii5fzjLeKcP4w-2FkNgJPXygpiRhVUan3WV3QEggcf617UC8Z60RjQJZAqx7PiO7FtVJQSn0D46Zc3iTVP0kAhTTzG51cPpa5hrqz1OkSA-2BiXAxUajQ686MTtiseWBIdMdknd83aB7cOVgXlVTeHCGf3-2BcMHwfvI8TYlkUovqEhn4dj0KXf2eJGpb9-2BBv20v2akwr6-2BqLyRrlEgkJ4J-2BCCyY0x189xEHZA4Ylf8c7ChBqNIkhmftZzoFuZKFn43pw3oJVg2o1gumrpdA-2B7MB-2FBtmL2rFCI-2FXORATQHySCLVOMg7Vywv-2BqnnQUAtDz6XkvpwxdHFXh70VwKazzhJsICilEYOvP4ju0sIfi5g6TL" target="_blank">www.canstar.com.au</a>. Starting rate is the RBA existing average owner-occupier variable rate of 6.36%. Assumes banks pass the cash rate cut on in full the month after the meeting.
			</td>
		</tr>
	</tbody>
</table>

Canstar Data Insights Director, Sally Tindall, says if core inflation continues to track in the right direction, or unemployment starts to accelerate significantly, we could well see a cash rate cut as early as February of next year.

“All four big banks now believe the RBA will be ready to cut the cash rate in just over four months’ time, if not before, in the case of CBA.

“However, the outlook for both inflation and unemployment is still highly uncertain. A couple of wobbly sets of inflation data could see the RBA holding for longer, particularly if unemployment remains relatively steady."

&nbsp;

Commonwealth Bank, the nation's largest lender, still thinks the first cut will come in December.

NAB bring forward first RBA cut to February 2025

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GUEST OBSERVER
The Reserve Bank has left the cash rate at a record low of 1.50 percent for the ninth straight month (eighth meeting).
The Reserve Bank has maintained its “neutral stance” – meaning that rate hikes are as likely as rate cuts in the period ahead.
What does it all mean?
The Reserve Bank Board was seemingly a little downbeat on the economy at the April meeting. Not so at the May meeting.
The Reserve Bank has confirmed that economic growth will strengthen over the next couple of years to above 3 percent – faster than the “speed limit” of just under 3 percent. And inflation will increase as the economy strengthens. In short, don’t expect a cut in official rates.
But while rate cuts are off the agenda, the Reserve Bank is by no means flagging rate hikes. The Reserve Bank Board could have highlighted a lift in “upstream” business inflation, but it stayed silent. So for now the Reserve Bank is happy with where the economy is, and where it is going. 
There also seems a quiet confidence about the outlook for home prices, with the Reserve Bank of the view that the additional supply of apartments coming on stream will rebalance supply with demand in eastern capital cities.
Perspectives on interest rates
The Reserve Bank has left the cash rate at 1.50 percent. The previous move was a rate cut in August 2016 (25 basis points). There have now been 12 rate cuts since November 2011, with the Reserve Bank cutting rates from 4.75 percent to 1.50 percent.
The Reserve Bank had previously lifted rates seven times from October 2009 to November 2010 – a total of 1.75 percentage points, from 3.00 percent to 4.75 percent.
<a href="https://www.propertyobserver.com.au/images/2017/05/02/Screen%20Shot%202017-05-03%20at%208.00.11%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/05/02/Screen%20Shot%202017-05-03%20at%208.00.11%20AM.png" alt="">
What are the implications of today’s decision?
The next move in interest rates is more likely to be a rate hike than a rate cut. But in our view, policy settings are unlikely to change over 2017, so any rate hike is still some way off. The Reserve Bank believes inflation will consolidate in the 2-3 per cent target band. And economic growth is expected to lift over the year.
The forecasts are updated on Friday. Add in the fact that growth rates of home prices are still firm in many capital cities and it is clear that rate cuts are off the agenda.
Then there is the global environment. Global economic growth continues to improve and deflationary risks have receded. The US is lifting interest rates. And there are early signs that the Euro zone will reduce stimulus later this year. So the global environment supports the domestic policy leaning.
The Reserve Bank is expected to maintain its neutral policy stance for now. Inflation is still low, economic indicators are more mixed and the higher Australian dollar is acting as a modest cap on economic growth. 
Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx">CommSec</a>.
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cjames-5S2v74qSNK

Reserve Bank expects stronger growth and prices: Craig James

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At its meeting today, the Board decided to leave the cash rate unchanged at 1.5 percent.
Conditions in the housing market continue to vary considerably around the country, the board noted.
"Prices have been rising briskly in some markets and declining in others.
"In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years.
"Rent increases are the slowest for two decades.
"Growth in housing debt has outpaced the slow growth in household incomes.
"The recently announced supervisory measures should help address the risks associated with high and rising levels of indebtedness."
Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.
Tim Lawless, head of research, CoreLogic said the decision was widely expected. 
"While a broad range of economic factors would have been discussed at the meeting, the housing market would have been front and centre in the conversation," he said.
"Capital city dwelling values have increased by almost 10 percent since the latest round of rate cuts in May and August last year, led by gains of around 13 percent in Sydney and Melbourne. 
"Since the latest round of rate cuts, inflation has edged higher, with headline inflation moving back into the RBA’s target range of 2 percent to 3 percent for the first time since the September 2014 quarter.
"However inflation increases were driven largely by forces that are exogenous to domestic demand, including a 6 percent increase in the price of fuel, and a 2.5 percent administered increase in electricity prices.
"Coupled with continued low wage growth, this indicates that private and household demand may still be weak despite the higher inflation figures, warranting the maintenance of a low cash rate.
"Meanwhile, the surge in housing prices and rebound in investment related credit growth has caused some concern. 
"Importantly, CoreLogic’s home value indices showed capital city dwelling values were virtually flat over the month of April; a stark change from the previously strong growth trend and perhaps hinting that the housing market could be moving through its peak rate of growth. 
"The softer housing market result comes after mortgage rates have been rising since September last year, despite the stable cash rate setting. 
"According to the latest RBA data, the average discounted variable mortgage rate for investor loans has shifted 25 basis points higher since August last year, which is equivalent to a typical RBA rate hike. 
"The three year fixed rate for investor loans is 30 basis points higher and discounted variable rates for owner occupiers have also shifted 10 basis points higher since August. 
"Further rises in mortgage rates are a potential outcome, considering the renewed focus from the Australian Prudential Regulation Authority (APRA) on curbing interest only lending, and maintaining their 10 percent speed limit on investment credit growth.
"With household debt levels at record highs, and the large majority of this debt related to housing, higher mortgage rates have the potential to take some heat out of the market, particularly from the investor segment. 
"A housing market slowdown would relieve one of the key concerns the RBA has relating to financial stability, however the Reserve Bank would likely be seeking confirmation of a slowdown from a longer trend of slower capital gains and lower credit growth."
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jonathanchancellor-7SQnKwU6yx

Steady for 8th meeting, RBA holds at May 2017 meeting

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Statement by Philip Lowe, Governor: Monetary Policy Decision
At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.
There has been a broad-based pick-up in the global economy since last year. Labour markets have tightened further in many countries and forecasts for global growth have been revised up. Above-trend growth is expected in a number of advanced economies, although uncertainties remain. In China, growth is being supported by increased spending on infrastructure and property construction, with the high level of debt continuing to present a medium-term risk. The improvement in the global economy has contributed to higher commodity prices, which are providing a significant boost to Australia’s national income. Australia’s terms of trade have increased, although some reversal of this is occurring.
Headline inflation rates have moved higher in most countries, partly reflecting the higher commodity prices. Core inflation remains low. Long-term bond yields are higher than last year, although in a historical context they remain low. Interest rates have increased in the United States and there is no longer an expectation of additional monetary easing in other major economies. Financial markets have been functioning effectively.
The Bank’s forecasts for the Australian economy are little changed. Growth is expected to increase gradually over the next couple of years to a little above 3 per cent. The economy is continuing its transition following the end of the mining investment boom, with the drag from the decline in mining investment coming to an end and exports of resources picking up. Growth in consumption is expected to remain moderate and broadly in line with incomes. Non-mining investment remains low as a share of GDP and a stronger pick-up would be welcome.
Indicators of the labour market remain mixed. The unemployment rate has moved a little higher over recent months, but employment growth has been a little stronger. The various forward-looking indicators still point to continued growth in employment over the period ahead. The unemployment rate is expected to decline gradually over time. Wage growth remains slow and this is likely to remain the case for a while yet.
The outlook continues to be supported by the low level of interest rates. Lenders have announced increases in mortgage rates, particularly those paid by investors and on interest-only loans. The depreciation of the exchange rate since 2013 has also assisted the economy in its transition following the mining investment boom. An appreciating exchange rate would complicate this adjustment.
Inflation picked up to above 2 per cent in the March quarter in line with the Bank’s expectations. In underlying terms, inflation is running at around 1¾ per cent, a little higher than last year. A gradual further increase in underlying inflation is expected as the economy strengthens.
Conditions in the housing market continue to vary considerably around the country. Prices have been rising briskly in some markets and declining in others. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Rent increases are the slowest for two decades. Growth in housing debt has outpaced the slow growth in household incomes. The recently announced supervisory measures should help address the risks associated with high and rising levels of indebtedness.
Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.
 
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jchancellor-FAypfDUnLy

Watch the additional east coast capital city apartment supply: RBA Governor Philip Lowe's May 2017 statement

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Creating more housing could make property more accessible to first home buyers, while the official cash rate is likely to remain unchanged at today's RBA board meeting, according to finder.com.au.  
The survey shows all 34 experts and economists are expecting the Reserve Bank to hold the cash rate at 1.5 percent for May 2017.  
Graham Cooke, Insights Manager at finder.com.au, says despite the survey results, rate changes have not been uncommon at this time of year.  
“In the last seven years, the Reserve Bank has cut rates five times in May. By this time of year, inflation and GDP data is released and the Bank has enough confidence to make a move. However, economists are universal in expecting no movement tomorrow,” he said. 
 "When providing cash rate forecasts, the majority of panelists surveyed (78 percent, 25) expect the next move to be a rise. This is a slightly down compared to last month (86 percent), but it still indicates strong sentiment for a future increase."
<div><button class="_at_6 o365button" type="button"><img src="https://lh6.googleusercontent.com/K07Klxsp0kNbmbbDThi3IhSWcMPeoAxpR6TDkdNTKTvCpXT19Iean6oJ2RkiUGu-OYVTjIMxuIkKqMPQbFrhnqvEBJwXaD4JFvTHSwYiHsWUejWhAWmUkg_aDhXWWrw_xYYoUyI" alt="rise2.jpg" width="434" height="206"></button></div>
 Of the experts and economists predicting a rate rise, the vast majority (81 percent, 22) believe the rise won’t happen until 2018, with most of this group (15) not expecting a rise until April 2018 at the earliest. Given the current economic climate, panelists were asked if locking in a fixed-rate home loan for the next five years was a good idea. The responses were largely affirmative with 72 percent of respondents indicating it was a good time to fix. Mr Cooke says fixing mortgage rates now could be a wise move. “Fixed home loans provide certainty, and there are some competitive rates available on the market today, despite some lenders <a href="https://www.finder.com.au/home-loan-interest-rate-changes-for-april-2017?utm_source=pr_pressrelease_internal&amp;utm_campaign=4cd5cd00dd-EMAIL_CAMPAIGN_2017_04_28&amp;utm_medium=email&amp;utm_term=0_5921dab448-4cd5cd00dd-295349757" target="_blank" rel="noopener noreferrer">increasing fixed rates recently</a>.  “The expectation across the board is that rates will rise in the next year, so locking in a low rate now could help you manage your repayments both now and into the future,” he says. Of the minority (7) who believe a rate cut is on the horizon, all bar one economist predict the cash rate will go no lower than 1.0%. The exception is Jordan Eliseo of ABC Bullion who expects an eventual low of 0.75%. With respect to improving housing affordability for first home buyers, creating more supply is the most favoured solution, supported by 97% (29) of the panelists. Mr Cooke says creating more housing should put downward pressure on property prices. “If the government works to establish more housing supply, this could remove heat from the property market as dwelling prices fall. For first home buyers, this could mean that saving for a deposit and committing to a purchase will become more attainable.  “Having said that, the most recent data indicates that growth in values may be slowing in cities such as Sydney, so any new supply will need to be carefully monitored,” he says. Eleven (37%) experts and economists recommended getting rid of or reducing negative gearing, while eight (27%) said eliminating or <a href="https://www.finder.com.au/stamp-duty?utm_source=pr_pressrelease_internal&amp;utm_campaign=4cd5cd00dd-EMAIL_CAMPAIGN_2017_04_28&amp;utm_medium=email&amp;utm_term=0_5921dab448-4cd5cd00dd-295349757" target="_blank" rel="noopener noreferrer">reducing stamp duty</a>could make housing more affordable.  Interestingly, five panelists (17%) cited increasing the first home buyer grant and allowing property purchases through superannuation as measures to improve Australia’s housing affordability issue. Here’s what our experts had to say: Jordan Eliseo, ABC Bullion (Hold): "The RBA remains in no rush to cut interest rates, despite the fact that most economic data has been soft, and inflation remains well controlled. Financial stability concerns are still a factor, though we remain of the view that there is more downside to come for rates in the next 12 months." Shane Oliver, AMP Capital (Hold): "Worries about excessive home prices and debt growth prevent a cut, but low underlying inflation and wages growth prevent a hike and meanwhile growth is okay." Alison Booth, ANU (Hold): "Key indicators suggest this." John Hewson, ANU (Hold): "[We are] waiting on budget." Darryl Gobbett, Baillieu Holst Ltd (Hold): "The RBA would see Australian inflation as moving in line with its longer term view, particularly with the signs of rising inflation, albeit from a very low base, overseas. In addition, the RBA would still see the potential systemic risks from increased household debt of cutting rates as being higher than any potential benefits." Kishti Sen, BIS Oxford Economics (Hold): "Domestic demand remains weak." Paul Dales, Capital Economics (Hold): "The rise in underlying inflation in the first quarter has reduced the need to cut interest rates further, especially when lower rates would boost the still hot housing market. " Michael Blythe, CBA (Hold): "Low inflation says no need to raise rates. Hot housing markets says don't cut rates." Savanth Sebastian, CommSec (Hold): "The Reserve Bank doesn’t need to cut rates again with inflation trending higher, rather than lower. And there are doubts that rate cuts would actually do much in terms of driving the economy higher and lifting inflation. But similarly rate hikes are off the agenda. Given the slow growth in wages and range-trading in global oil prices, it is unlikely to result in a change to the domestic inflation landscape." Dr Andrew Wilson, Domain Group (Hold): "Although momentum building for a rate cut, no clear case yet. RBA increasingly pincered between its narrative of high house price growth, a clearly weakening economy and independently higher mortgage rates." Saul Eslake, Economist (Hold): "Both current and prospective conditions remain much as they have been at recent meetings - 'underlying' inflation below target but heading in the right direction; unemployment and other indicators of 'spare capacity' in the labour market higher than the RBA wants - so no case for raising rates; but also too much risk of fuelling further house price inflation to warrant cutting rates any further." Mark Brimble, Griffith Uni (Hold): "While broad economic indicators suggest the economy needs further support, the concerns re certain elements of the credit and housing markets is likely to keep the RBA on the bench." Shane Garrett, Housing Industry Association (Hold): "No particular advantage in changing rates one way or the other at this stage." Alex Joiner, IFM Investors (Hold): "No justification to move - inflation data for Q1 was inline with the RBA's forecasts" Michael Witts, ING Bank (Hold): "The broader economy is progressing in line with the RBA's expectations. The recent increases in housing loan rates especially for investors will slow this segment of the market." Leanne Pilkington, Laing+Simmons (Hold): "Again, there are insufficient drivers to force the Reserve Bank to adjust rates at this time. While recent inflation figures appear to suggest the economy is moving in the right direction, concerns around demand for employment remain, and the forthcoming Federal budget is yet to go under analysts' microscopes. Against this background, we believe the prudent course is for the Reserve Bank to hold." Nicholas John Gruen, Lateral Economics (Hold): "They're not sure of what to do." Matthew Tiller, LJ Hooker (Hold): "Despite the recent rise in inflation, ongoing strong property price growth should ensure the RBA holds steady over the short term." Stephen Koukoulas, Market Economics (Hold): "RBA continues to misread inflation, unemployment, wagers and growth. It should cut but it won't." Michael Yardney, Metropole Property Strategists (Hold): "The recently released inflation figures, while moving into the RBA's target range, are on the low side. Until job numbers improve it would be safe to assume the RBA won’t be hiking interest rates to slow the property markets down. On the other hand they can't afford to drop rates and fuel our property markets." Mark Crosby, Monash University (Hold): "The RBA will wait another month or two to evaluate global developments and assess the probability of a new US rate rise before considering raising." Emily Dabbs, Moody's Analytics (Hold): "Inflation pressures are strengthening, full-time employment has improved, and high household debt continues to pose a risk to financial stability" Jessica Darnbrough, Mortgage Choice (Hold): "The latest economic data suggests the Australian economy is tracking along quite nicely at the moment. Inflation has bounced slightly higher, the unemployment rate remains relatively low, and consumer confidence continues to sit around the point where optimists and pessimists are in equal number. With that said, I don't think there is anything out of the ordinary happening at the moment that would force the Reserve Bank to adjust its stance on monetary policy. " Christopher Schade, MyState Bank (Hold): "The hurdle for another cut is high. While inflation remains subdued and the outlook for economic growth over the next couple of years is slightly below trend, interest rate settings in Australia are very accommodative and remain appropriate at their current level. The RBA appears particularly reluctant to deliver further cuts in light of the very buoyant housing market in certain regions." Alan Oster, NAB (Hold): "[The] RBA [is] stuck between cutting for the broader economy and house price pressures" Jonathan Chancellor, Property Observer (Hold): "All the numbers are settling into place nicely." Matthew Peter, QIC (Hold): "Housing market risks constrain any attempt to lower the cash rate. Growth and inflation remain tepid constraining any thought of a rate hike." Noel Whittaker, QUT (Hold): "No reason to move either way." Christine Williams, Smarter Property Investing (Hold): "Even though the major banks have chosen to increase, for the most part our resources, unemployment rates and retail sectors have not seen an increase." Steven Milch, Suncorp (Hold): "Growth and inflation [are] gradually firming but not yet warranting higher rates." Brian Parker, Sunsuper (Hold): "Inflation figures provide no great reason for RBA to change their views." Clement Tisdell, UQ-School of Economics (Hold): "No reason to change." Nicki Hutley, Urbis (Hold): "Growth and inflation remain well-behaved" Bill Evans, Westpac (Hold)
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j.ballantyne1990-6AQqhLzZaK

Finder.com.au predict the RBA will hold

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GUEST OBSERVER
Australian inflation is back in the RBA’s target range.
Employment has increased, and so have house and share prices. Internationally, President Trump’s first 100 days in office continue to raise eyebrows and put policy makers and economists on edge.
Domestically, the federal budget takes centre stage. In an attempt to balance all these competing forces, the RBA Shadow Board remains convinced that the cash rate should remain at its current level. It attaches a 57 percent probability that this is the appropriate setting. The confidence attached to a required rate cut equals 3%, while the confidence in a required rate hike equals 40 percent.
Inflation in the March quarter rose to 2.1 percent, back within the Reserve Bank of Australia’s official target range of 2-3 percent.
Worryingly, Australia’s seasonally adjusted unemployment rate remains at 5.9 percent, according to the Australian Bureau of Statistics. However, full-time employment rose by nearly 75,000 and the labour force participation rate edged up from 64.56 percent to 64.78 percent.
There is no new data on wages growth, which remains subdued. The Aussie dollar, relative to the US dollar, continues to be range-bound, most recently trading around 75 US¢ mark. Yields on Australian 10-year government bonds dropped slightly, from 2.7 percent to 2.58 percent. Domestic share prices followed global stock markets upward.
International news is dominated by electoral uncertainty and geostrategic posturing. In particular, the sabre-rattling by the leaders of North Korea and US are cause for concern. An intensification of this conflict will likely unsettle global financial markets, with implications for the Australian market also.
Domestically, the housing crisis is attracting increasing attention, with the Treasurer acknowledging that the crisis extends not only to mortgagees but also to renters.
The big unknown is this month’s budget. It will likely include a housing package yet big reforms such as changes to negative gearing and capital gains tax concessions are off the table. The government’s announcement to fast-track last year’s $50 billion infrastructure plan will generate a sizeable fiscal stimulus.
The Shadow Board’s preference to keep the interest rate on hold has strengthened slightly, from 54 percent in April to 57 percent. It attaches an unchanged probability of 3 percent that a rate cut is appropriate and a 40 percent probability (43 percent in April) that a rate rise, to 1.75 percent or higher, is appropriate.
The probabilities at longer horizons are as follows: 6 months out, the estimated probability that the cash rate should remain at 1.50 percent equals 23 percent, three percentage points up from the previous round.
The estimated need for an interest rate decrease has fallen for the second time in a row, from 6 percent to 4 percent, while the probability attached to a required increase equals 73 percent (74 percent in April).
A year out, the Shadow Board members’ confidence that the cash rate should be held steady equals 17 percent (16 percent in the previous month), while the confidence in a required cash rate decrease remains unchanged at 4 percent and in a required cash rate increase dropped 81 percent to 79 percent.
For more information <a href="https://cama.crawford.anu.edu.au" target="_blank">click here.</a>
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No need for pre-budget rate change: Shadow RBA

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ANZ bank has reported a $3.4 billion cash profit for the six months to March 31 and lifted interest rates on home loan deals.
The profit figure is down from previous expectations of $3.5 billion.
ANZ's move to lift interest rates on home loan deals follows the Commonwealth Bank and Westpac, who increased interest rates on both owner occupier and investor loans.
Owner occupiers and investors with interest-only fixed rate deals may be hit with increases of 0.4 percent on 2, 4, and 5 year fixed owner occupier interest-only loans the rates will rise on the bank’s Breakfree products.
Three-year owner occupier interest-only loans will rise by 0.3 percent to 4.49 percent.
For investors on a three-year fixed-rate interest-only Breakfree deal the rate will rise 0.3 percent 4.69 percent.
The three-year fixed rate owner occupier principal and interest deal will fall by 0.2 percent to 3.99 percent.
On a three-year fixed rate investor principal and interest deal the rate will fall by 0.1 per cent to 4.44 percent.
Mozo spokeswoman Kirsty Lamont said the increases by ANZ are a result of the financial regulator, the Australian Prudential and Regulation Authority limiting their interest-only lending.
“With the Federal Reserve jacking up rates in the US and inflation just scraping within the Reserve Bank target, we expect a cash rate increase in the next 12 months which means these fixed rates are unlikely to be around for a long time,” she said.
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ANZ six month profit down, lifts some interest rates

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GUEST OBSERVER
This will be the traditional Board meeting being held one week before the Commonwealth Budget on May 9.
The Board is certain to hold rates steady.
In fact Westpac has argued consistently since May last year that, after an expected cut in August 2016, rates would be held steady for the remainder of 2016 and 2017.
Earlier this year we extended that view with the expectation that the Bank would also hold rates steady through 2018. 
In the minutes to the April Board meeting the Bank surprised somewhat by emphasising the importance of the major competing forces on rates: “The Board judged that developments in the labour and housing markets warranted careful monitoring over coming months.”
Since that statement key news items have been around the employment report and the inflation report.
The employment report for March printed much stronger than expected – 60,900 jobs added including a 74,500 rise in full time jobs. However the unemployment rate remained at 5.9 percent – well above the 5.0 percent level accepted as 'full employment'.
That theme of excess capacity was prominent in the March inflation report. The report was highlighted by falling prices for clothing &amp; footwear; household contents &amp; services; cars; audio visual &amp; computing; and international travel. Underlying inflation rose just 0.4 percent for an annual pace of 1.8 percent.
Overall, while the employment report may have been somewhat welcome to the spectre of spare capacity in the economy weighing on inflation; labour markets and wages would still be a concern for the authorities.
The situation around housing markets is more unclear with uncertainty around the impact of new macro prudential policies – a 30 percent cap on the proportion of new loans that are 'interest only' (currently 62 percent of investor loans and 23 percent of owner occupier loans are interest only).
The last time macro prudential policies were adopted, in 2015, they were very successful in slowing house price growth. These earlier measures included slowing annual growth in investor housing credit to a 10 percent target and were complemented by an effective increase in the mortgage rate of 27bps. Sydney dwelling price inflation slowed from 20 percent to 0 percent (on a 6mth annualised basis) while Melbourne prices slowed from 14 percent to 5 percent. This impact was curtailed by the May and August rate cuts in 2016.
Arguably the Board might regret those cuts given the resurgence in house price growth through the second half of 2016 and 2017.
Our call for steady rates assumes the persistence of the excess capacity in goods; services; and labour markets as exemplified in recent data releases without any threatening collapse in house prices – rather a gradual slow down through the remainder of 2017 and 2018. A sharp retraction along the lines of 2016 is still highly unlikely to draw further rate cuts from the Bank given the experience of 2016/17.
Our major interest will be in the growth and inflation forecasts along with some more colour to the risks.
Key growth forecasts in the February SoMP were: GDP growth in calendar 2017: 2.5 percent -3.5 percent; GDP growth in calendar 2018: 2.75 percent- 3.75 percent.
We believe the Bank will see growth prospects as unchanged since February although there may be a 'one off' adjustment for the impact of cyclone Debbie in the June quarter (some official estimates of a 0.25 percent 'hit' have been mentioned).
Of more importance will be the 3.25 percent (mid- point) forecast for 2018. Westpac is surprised at the Bank's persistent optimism. We expect the housing construction cycle to have clearly 'rolled over' by then with the terms of trade also in retreat. We expect growth in 2018 of around 2.5 percent.
Other factors that are also likely to weigh on growth in 2018 are the impact on business and household balance sheets of high energy prices, and intensifying political uncertainty. A lower AUD will contribute a welcome offset (USD 0.65 'target' in 2018).
The IMF recently released upward revised growth forecasts for Australia – 3 percent in 2017 and 3 percent in 2018 (year average measures). The 2017 forecast is higher than the RBA’s year average forecast of 2.5 percent but we expect the Bank to hold its forecasts steady. 
We do, however, expect that the Government will adopt a higher growth forecast in the May 9 Budget, raising the 2017-18 financial year number from 2.75 percent to 3 percent, in line with the IMF.
Inflation forecasts are also expected to be unchanged: current underlying inflation is running at 1.8 percent annual. RBA forecasts are 1.5-2.5 percent in both 2017 and 2018. These forecasts are 0.5 percent below the target 2-3 percent but not sufficiently awry to demand a policy change, particularly since the forecast to June 2019 indicates a return to the 2-3 percent target band.
Underlying assumptions around the AUD are also unlikely to warrant any forecast changes with the February forecasts using USD 0.76 compared to the likely USD 0.75 in the May forecasts. 
In the February SoMP the discussion on 'housing risks' centred on the downside: "history shows that sentiment can turn quickly.” Of course prices have continued to boom in the interim – we expect ongoing nervousness in the May SoMP emphasising the risks associated with a further intensification of macro prudential controls.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>. 
 
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Expect ongoing emphasis on housing risks: Westpac's BIll Evans

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Remarks at CEDA’s 2017 NSW Property Market Outlook Sydney 
Thank you for the opportunity to be part of today’s event. My remarks today come, unsurprisingly, from a prudential perspective. Property prices and yields, planning rules, the role of foreign purchasers, supply constraints, and taxation arrangements are all important elements of any discussion on property market conditions, and I’m sure the other speakers today will touch on most of those issues in some shape or form. But I’ll focus on APRA’s key objective when it comes to property: making sure that standards for property lending are prudent, particularly in an environment of heightened risk. 
Sound lending standards 
Our recent activity in relation to residential and commercial property lending has been directed at ensuring banking institutions maintain sound lending standards. Our ultimate goal is to protect bank depositors – it is, after all, ultimately their money that banks are lending. Basic banking – accepting money from depositors and lending to sound borrowers who have good prospects of repaying their loans – is what it’s all about. Of course, banking is about risk-taking and it is inevitable that not every loan will be fully repaid, but with appropriate lending standards and sufficient diversification, the risk of losses that jeopardise the financial health of a bank - and therefore the security offered to depositors - can be reduced to a significant degree. The banking system is heavily exposed to the inevitable cycles in property markets, and our goal is to seek to make sure the system can readily withstand those cycles without undue stress. 
Our mandate goes no further than that. We also have to take many influences on the property market - tax policy, interest rates, planning laws, foreign investment rules – as a given. And there are credit providers beyond APRA’s remit, so a tightening in one credit channel may just see the business flow to other providers anyway. For those reasons, there are clear limits on the influence we have. Property prices are driven by a range of local and global factors that are well beyond our control: whether prices go up or go down, we are, like King Canute, unable to hold back the tide. 
Of course, that is not to ignore the fact that one determinant of property market conditions is access to credit. We acknowledge that in influencing the price and availability of credit, we do have an impact on real activity - and this may feed through to asset prices in a range of ways. But I want to emphasise that we are not setting out to control prices. Property prices will go up and they will go down (even for Sydney residential property!). It is not our job to stop them doing either of those things. Rather, our goal is to make sure that whichever way prices are moving at any particular point in time in any particular location, prudentially-regulated lenders are alert to the property cycle and making sound lending decisions. That is the best way to safeguard bank depositors and the stability of the financial system. 
Residential property lending 
APRA has been ratcheting up the intensity of its supervision of residential property lending over the past five or so years. Initially, this involved some fairly typical supervisory measures: 
<ul>
<li>in 2011 and again in 2014, we sought assurances from the Boards of the larger lenders that they were actively monitoring their housing lending portfolios and credit standards; </li>
<li>in 2013, we commenced more detailed information collections on a range of housing loan risk metrics; </li>
<li>in 2014, we stress-tested around the largest lenders against scenarios involving a significant housing market downturn; </li>
<li>also in 2014, we issued a Prudential Practice Guide on sound risk management practices for residential mortgage lending; and  </li>
<li>we have conducted numerous hypothetical borrower exercises to assess differences in lending standards between lenders, and changes over time. </li>
</ul>
These steps are typical of the role of a prudential supervisor: focusing on the strength of the governance, risk management and financial resources supporting whatever line of business is being pursued, without being too prescriptive on how that business should be undertaken. 
But from the end of 2014, we stepped into some relatively new territory by defining specific lending benchmarks, and making clear that lenders that exceeded those benchmarks risked incurring higher capital requirements to compensate for their higher risk. In particular, we established quantitative benchmarks for investor lending growth (10 per cent), and interest rate buffers within serviceability assessments (the higher of 7 per cent, or 2 per cent over the loan product rate), as a means of reversing a decline in lending standards that competition for growth and market share had generated. 
I regard these recent measures as unusual, and not reflective of our preferred modus operandi. We came to the view, however, that the higher-than-normal prescription was warranted in the environment of high house prices, high household debt, low interest rates, low income growth and strong competitive pressures. In such an environment, it is easy for borrowers to build up debt. Unfortunately, it is much harder to pay that debt back down when the environment changes. So re-establishing a sound foundation in lending standards was a sensible investment. 
Since we introduced these measures in late 2014, investor lending has slowed and serviceability assessments have strengthened. But at the same time, housing prices and debt have got higher, official interest rates have fallen further and wage growth remains subdued. So we recently added an additional benchmark on the share of new lending that is occurring on an interest-only basis (30 per cent) to further reduce vulnerabilities in the system. 
Each of these measures has been a tactical response to evolving conditions, designed to improve the resilience of bank balance sheets in the face of forces that might otherwise weaken them. We will monitor their effectiveness over time, and can do more or less as need be. We have also flagged that, at a more strategic level, we intend to review capital requirements for mortgage lending as part of our work on establishing ‘unquestionably strong’ capital standards, as recommended by the Financial System Inquiry (FSI). 
Looking at the impact so far, I have already noted that our earlier measures have helped slow the growth in investor lending (Chart 1), and lift the quality of new lending. Serviceability tests have strengthened, although as one would expect in a diverse market there are still a range of practices, ranging from the quite conservative to the less so. Lenders subject to APRA’s oversight have increasingly eschewed higher risk business (often by reducing maximum loan -to -valuation ratios (Chart 2)), or charged a higher price for it. For example, there is now a clear price differential between lending to owner -occupiers on a principal and interest basis, and lending to investors on an interest -only basis (Chart 3) . And as a result of our most recent guidance to lenders, we expect some further tightening to occur. 
<img src="https://www.urban.com.au/images/2017/04/28/APRAChart1.png" alt="">
<img src="https://www.urban.com.au/images/2017/04/28/APRAChart2.png" alt="">
<img src="https://www.urban.com.au/images/2017/04/28/APRAChart3.png" alt="">
Looked at more broadly, the most important impact has been to reduce the competitive pressure to loosen lending standards as a means of chasing market share. We are not seeking to interfere in the ability of lenders to compete on price, service standards or other aspects of the customer experience. We do, however, want to reduce the unfortunate tendency of lenders, lulled by a long period of buoyant conditions, to compete away basic underwriting standards. 
Of course, lenders not regulated by APRA will still provide competitive tension in that area and it is likely that some business, particularly in the higher risk categories, will flow to these providers. That is why we also cautioned lenders who provide warehouse facilities to make sure that the business they are funding through these facilities was not growing at a materially faster rate than the lender’s own housing loan portfolio, and that lending standards for loans held within warehouses was not of a materially lower quality than would be consistent with industry-wide sound practices. We don’t want the risks we are seeking to dampen coming onto bank balance sheets through the back door. 
Commercial real estate lending 
For all of the current focus on residential property lending, it has been cycles in commercial real estate (CRE) that have traditionally been the cause of stress in the banking system. So we are always quite interested in trends and standards in this 5 area of lending . And tighter conditions for residential lending will also impact on lenders’ funding of residential construction portfolios – we need to be alert to the inter - relationships between the two. 
Overall, lending for commercial real estate remains a material concentration of the Australian banking system . But while commercial lending exposures of APRA - regulated lenders continue to grow in absolute terms, they have declined relative to the banking system’s capital (partly reflecting the expansion in the system’s capital base ). Exposures are now well down from pre -GFC levels as a proportion of capital, albeit much of the reduction was in the immediate post -crisis years and, more recently, the relative position has been fairly steady (Chart 4) . 
<img src="https://www.urban.com.au/images/2017/04/28/APRAChart4.png" alt=""> 
The story has been broadly similar in most sub -portfolios, with the notable exception of land and residential development exposures (Chart 5). These have grown strongly as the banking industry has funded the significant new construction activity that has been occurring, particularly in the capital cities of Australia’s eastern seaboard. At the end of 2015, these exposures were growing extremely rapidly at just on 30 per cent per annum , but have since slowed significantly as newer projects are now being funded at little more than the rate at which existing projects roll off (Chart 6). 
<img src="https://www.urban.com.au/images/2017/04/28/APRAChart5.png" alt="">
<img src="https://www.urban.com.au/images/2017/04/28/APRAChart6.png" alt="">
(As an aside, this is one reason why we opted not to reduce the 10 per cent investor lending benchmark for residential lending recently. There is a fairly large pipeline of residential construction to be absorbed over the course of 2017, and there is little to be gained from unduly constricting that at this point in time.) 
In response to the generally low interest rate environment, coupled with relatively high price growth in some parts of the commercial market , low capitalisation rates 6 and indications that underwriting standards were under competitive pressure, we undertook a thematic review of commercial property lending over 2016. We looked at the portfolio controls and underwriting standards of a number of larger domestic banks, as well as foreign bank branches which have been picking up market share and growing their commercial real estate lending well above system growth rates. 
The review found that major lenders were well aware of the need to monitor commercial property lending closely, and the need to stay attuned to current and prospective market conditions. But the review also found clear evidence of an erosion of standards due to competitive pressures - for example, of lenders justifying a particular underwriting decision not on their own risk appetite and policies, but based on what they understood to be the criteria being applied by a competitor. We were also keen to see genuine scrutiny and challenge that aspirations of growth in commercial property lending were achievable, given the position in the credit cycle, without compromising the quality of lending. This was often being hampered by inadequate data, poor monitoring and incomplete portfolio controls. Lenders have been tasked to improve their capabilities in this regard. 
Given the more heterogeneous nature of commercial property lending, it is more difficult to implement the sorts of benchmarks that we have applied to residential lending. But that should not be read to imply we have any less interest in the quality of commercial property lending. Our workplan certainly has further investigation of commercial property lending standards in 2017, and we will keep the need for additional guidance material under consideration. 
Concluding remarks 
So to sum up, property exposures – both residential and commercial – will remain a key area of focus for APRA for the foreseeable future. Sound lending standards are vital for the stability and safety of the Australian banking system, and given the high proportion of both residential mortgage and commercial property lending in loan portfolios, there will be no let-up in the intensity of APRA’s scrutiny in the foreseeable future. But despite the fact the merit of our actions are often assessed based on their expected impact on prices, that is not our goal. Prudence (not prices) is our catch cry: our objective is to make ensure that, whatever the next stage of the property cycle may bring, the balance sheet of the banking system is resilient to it.
Wayne Byres is Chairman of the Australian Prudential Regulation Authority
 
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Prudential perspectives on the property market: Wayne Byres

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The New South Wales government leads the country in property tax increases, according to the Property Council of Australia which cited the latest ABS data, adding further pressure on house prices amid the hot debate on affordability.
Taxes on property increased by 16 per cent, or $2.4 billion in NSW in 2015/16, leading Australia in terms of property tax hikes. Over the last five years, revenue from property taxes in NSW rose by 64.9 per cent, or $6.7 billion, the data shows.
The state’s tax share bolstered last year’s national property tax revenue where property taxes hit a record $49.5 billion across Australia. 
The PCA says the state government is leaning on the property industry to prop up its spending. 
“This a podium finish NSW does not want; with housing affordability the number one issue for this premier and her leadership team, it is concerning that they continue to squeeze the industry dry and are swimming in property tax revenue,” NSW executive director Jane Fitzgerald said.
“Higher taxes on property means higher house prices and more strain on first home buyers - this government is simply throwing fuel on the fire.
“With the average house price in NSW at around $900,000 and in parts of Sydney at well over $1 million, we need to be reducing taxes on the property industry, not leading the nation in terms of tax hikes.”
<img src="https://www.urban.com.au/images/2017/04/28/NSWtax.png" alt="">
Over the past five years, revenue for property based stamp duty in NSW has doubled to more than eight billion dollars from around four billion dollars.
“When will enough be enough and we look at tax reform in this state to reduce the burden on the industry and look at sustainable, long term revenue streams rather than property taxes that rise and fall with the market,” said Fitzgerald.
“The upcoming state budget must be brave and bold and contain tax reform that releases the financial pressure on the people of NSW.”
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NSW leads Australia in property tax hikes: PCA

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Annual inflation has crept back into the Reserve Bank of Australia's 2-3 per cent target range for the first time in 3 1/2 years after a jump in education, health and transport costs.
CBA noted inflation is essentially comfortable.
"To be more precise, inflation has bottomed, and is lifting - albeit at a very modest pace.
"In fact inflation has only crept into the lower end of the Reserve Bank’s target 2-3 per cent inflation band for the first time in 2½ years."
Justin Smirk at Westpac noted rising fuel prices were there, as was the usual seasonal bump in education and health as well as the jump in power bills.
"And we did see a bit of a lift in dwelling prices (which now includes attached dwellings) associated with strong jumps in Sydney and Brisbane which added to the expected lift in electricity prices.
"However, as we noted in our preview, there was clear risk that the recent appreciation in the AUD, along with intense competition in the retail space, would limit the upside risks and, in fact, could present some downside risks to our forecasts.
"In the end this came through with falling prices for clothing &amp; footwear household contents and services, car prices, audio visual &amp; computing &amp; international travel.
"All up core inflation rose just 0.4%qtr/1.8%yr with a six month annualised pace of just 1.8% year," he noted.
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