<p>Toorak's dress circle St Georges Road, home to some of the city's priciest homes, is set for a rare new apartment development.</p>

<p>Blood Diamond Group, an entity tied to Tina Brandi, wife of David Brandi who has been a prolific bidder on The Block over the years, has filed plans for an ultra-exclusive development across an amalgamated 3,662 sqm site at <a href="https://www.apartments.com.au/new-apartments/104-106-st-georges-road-toorak-vic-3142">104 and 106 St Georges Road</a>.</p>

<p>The proposal would replace two existing homes on the riverfront site with a five-level apartment building cascading down the steeply sloping land toward the Yarra River. Designed by Charles Wright Architects, the development has been carefully shaped around the site’s topography and river environs, with the upper levels stepping back to reduce visual bulk from both St Georges Road and the Yarra corridor.</p>

<p>Planning documents describe the proposal as “a site layout and building typology that is consistent with the emerging character of the area and which provides exceptional amenity for future residents without compromising that of neighbouring properties.”&nbsp;</p>

<p><img alt="First look: Blood Diamond Group unveils riverfront apartment plans for Toorak Pavilion" data-entity-type="file" data-entity-uuid="ea19a17e-7528-4fa8-b727-05f2f7c025e5" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Toorak%20pavilion%20a_0.png?VersionId=rZ2IjdoUL_UrRl1sZ4wZHnQXbYUaEmUQ" /></p>

<p>The scheme comprises 12 apartments, including 10 three-bedroom residences, one one-bedroom apartment, and a substantial split-level five-bedroom penthouse. A 624 sqm communal rooftop terrace will crown the building, while three undercroft levels embedded into the hillside will accommodate apartments and basement parking.</p>

<p>The design leverages the site’s dramatic northern outlook across the Yarra River, with living areas and balconies oriented toward the water. A central atrium running the full height of the building is intended to draw natural light deep into the residences and improve internal amenity.</p>

<p>Landscape architecture by <a href="https://www.apartments.com.au/landscape-architect/jack-merlo">Jack Merlo Design &amp; Landscape</a> will play a major role in softening the built form, particularly along the river edge where significant setbacks have been introduced. The proposal includes a minimum 30-metre setback from the Yarra River boundary, preserving a substantial landscaped buffer between the development and the waterway.</p>

<p>While a mature English Oak near the front of the site is proposed for removal, the plans retain a large English Elm closer to the riverfront, alongside other established vegetation in the lower section of the property.</p>

<p><img alt="First look: Blood Diamond Group unveils riverfront apartment plans for Toorak Pavilion" data-entity-type="file" data-entity-uuid="ed3bf19b-5bc7-482f-bde7-41f709a13c3a" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Toorak%20pavilion%20b.png?VersionId=SG_kBGu4rOaSPY8FtVcmPJfSCrstuOfg" /></p>

<p>Architecturally, the building adopts strong horizontal forms with expansive glazing and curved balcony edges facing the river. Planning documents note the upper levels “adopt a receding form” to ensure the building responds appropriately to the Yarra River environs overlay controls.&nbsp;</p>

<p>The surrounding streetscape is characterised by large contemporary homes embedded into the hillside, many presenting as modest one or two-storey forms to the street before expanding toward the river frontage below. The planning report notes this established pattern heavily influenced the massing strategy for Toorak Pavilion.&nbsp;</p>

<p>Until the recent sale of the landmark Clendon Road mansion Coonac for around $130 million, St Georges Road held the state's most expensive home, the $80,000,088 derelict "Ghost House" mansion that was bought by crypto king Ed Craven.&nbsp;</p>

<p>Blair House, also on St Georges Road, sold for $74.5 million in 2022.</p>


Joel Robinson

First look: Toorak Pavilions slated for dress circle St Georges Road

<p data-end="205" data-start="54">Six months after a development site on Kangaroo Point’s Shafston Avenue sold for $6.55 million, plans have been lodged for a 23-storey apartment tower.</p>

<p data-end="443" data-start="207">A company named JMT Mega Capital, understood to be interstate investors when the 1,222 sqm double block traded late last year through Patona Property, is proposing an 84-apartment development in place of the existing low-rise buildings.</p>

<p data-end="694" data-start="445">The slender tower at <a href="https://www.apartments.com.au/new-apartments/212-220-shafston-avenue-east-brisbane-qld-4169">212–220 Shafston Avenue</a>, overlooking the Brisbane River, has been designed by <a href="https://www.apartments.com.au/architects/aplus-design-group">Aplus Design Group</a>. It will comprise a mix of one-, two- and three-bedroom apartments above six basement levels, topped by rooftop resident amenities.</p>

<p><img alt="First look: 23-storey Kangaroo Point tower planned for Shafston Avenue riverfront precinct" data-entity-type="file" data-entity-uuid="7e17ba9e-553e-42ef-92b6-22081671521a" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/podium_3.png?VersionId=hlVUf99vrOjUs.vhQs0qV0DhOncUy9T8" /></p>

<p>The development has been designed as a vertically articulated tower with recessed balconies, curved façades and planted edges intended to soften its scale within the evolving Shafston Avenue skyline. In the submitted Urban Design Report, Aplus Design Group said the tower had been “shaped with a slender vertical expression, articulated façades, recessed balcony zones, integrated planting and a clearly defined podium relationship, helping to reduce perceived bulk and create a more elegant contribution to the Shafston Avenue streetscape and broader Kangaroo Point skyline.”</p>

<p>The scheme comprises 84 apartments, including 25 one-bedroom units, 34 two-bedroom apartments and 25 three-bedroom residences. A total of 104 car spaces are proposed across six basement levels, including resident, visitor and accessible parking.</p>

<p>Residents will have access to rooftop communal open space and shared amenities, while the development also incorporates deep planting zones and subtropical landscaping throughout the podium and tower levels. The project includes 35 per cent communal space coverage across the site and a 17.5 per cent deep soil zone allocation to support urban greening outcomes.</p>

<p>The application exceeds the mapped building height under the Kangaroo Point Peninsula Neighbourhood Plan and is being assessed under Brisbane City Council’s impact assessment pathway. The design team argues the additional height is supported by the site’s strategic inner-city location, existing high-density zoning, and proximity to transport and employment hubs.</p>

<p>“The design has been developed to make better use of a well-serviced urban site within an established high-density residential setting, while improving the street presentation and overall quality of the public realm interface,” the report states.</p>

<p><img alt="First look: 23-storey Kangaroo Point tower planned for Shafston Avenue riverfront precinct" data-entity-type="file" data-entity-uuid="1ab44b1e-ff45-4bf3-8da8-8aa0cd79db33" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/site_10.png?VersionId=tSxeGekZOqj1e9g3PEn_yFoC3taKDp3U" /></p>

<p>The proposal adds to a growing pipeline of apartment developments reshaping Kangaroo Point ahead of the 2032 Brisbane Olympic Games, with demand continuing to strengthen for new housing supply in well-connected inner-city precincts.</p>

<p>Mosaic has nearly sold out its under-construction <a href="https://www.apartments.com.au/new-apartments/the-bedford-by-mosaic-16-30-prospect-street-kangaroo-point-qld-4169">The Bedford by Mosaic</a>&nbsp;and <a href="https://www.apartments.com.au/new-apartments/the-carter-by-mosaic-77-linton-street-kangaroo-point-qld-4169">The Carter</a>,&nbsp;while Pikos recently completed <a href="https://www.apartments.com.au/buildings/skye-residences-by-pikos-kangaroo-point-8-river-terrace-kangaroo-point-qld-4169">Skye Residences</a> nearby. Pikos is also delivering <a href="https://www.apartments.com.au/new-apartments/gaia-kangaroo-point-108-lambert-street-kangaroo-point-qld-4169">Gaia</a>, over 230 three- and four-bedroom apartments on Lambert Street.</p>


First look: 23-storey Kangaroo Point apartment tower planned for Shafston Avenue riverfront precinct

<p>A new 25-storey apartment tower proposed for Mercer Street would push Geelong’s western gateway skyline higher, with Morphy Birrell Property Group lodging plans for a project directly beside one of the city’s most significant heritage streetscapes.</p>

<p>The <a href="https://www.apartments.com.au/architects/fk-australia">FK</a>-designed development at <a href="https://www.apartments.com.au/new-apartments/65-67-mercer-street-geelong-vic-3220">65-67 Mercer Street</a> has now been referred to Victoria’s Planning Minister. The site sits opposite the Geelong rail corridor and immediately south of the heritage-listed St Peter and Paul’s Catholic Church and Ashby Hall precinct.</p>

<p>Rather than compete with the neighbouring ecclesiastical buildings, the proposal adopts a sculpted podium intended to reference the materiality and scale of the heritage context. Planning documents note the design draws cues from the “dark stone brick” church and surrounding masonry buildings, while the tower above transitions into a softer, curved form oriented toward Corio Bay and the Geelong waterfront.</p>

<p><img alt="First look: Morphy Birrell Property Group targets 25-storey Geelong tower beside landmark church precinct" data-entity-type="file" data-entity-uuid="b797d10c-d4a6-47af-b8df-1aeaa3b382be" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/public%20square.png?VersionId=QGIpcz1x1hKB6lQLl2iobyHqb6PS2Ztc" /></p>

<p>The development forms “Stage 5” of Morphy Birrell Property Group’s broader Mercer Street precinct strategy, following the completion of the 21-storey Miramar tower on Cavendish Street and several additional approved redevelopment stages nearby. Planning consultants Ratio said the proposal “represents an exemplary development outcome” aligned with the strategic ambitions for Central Geelong’s continued urban renewal.</p>

<p>The mixed-use project would replace an existing low-rise commercial building and surface parking area on the 3,320 sqm corner site. FK’s urban context report describes the proposal as a residential development comprising apartments, resident amenities, commercial space, and integrated landscaping positioned to maximise bay views and northern sunlight access.</p>

<p>Renders show a deeply articulated tower with curved balconies stepping above a lower masonry podium that frames a landscaped forecourt facing Mercer Street. The design intentionally preserves sightlines toward the adjacent church buildings, with the podium scaled to reinforce the heritage edge before the tower recedes upward.</p>

<p><img alt="First look: Morphy Birrell Property Group targets 25-storey Geelong tower beside landmark church precinct" data-entity-type="file" data-entity-uuid="2bdca91e-66f7-4ac7-8baa-2f93bd5b564e" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/geelong%20site.png?VersionId=QOhbino4ZgzKYw5dW3QE14E.2yq.Sv87" /></p>

<p>The planning report highlights the site’s strategic location within 400 metres of key Geelong destinations including Cunningham Pier, the Geelong Station precinct, Deakin University, and the convention centre. Bus services run directly along Mercer Street, while the Corio Bay foreshore sits around 100 metres north of the site.</p>

<p>The proposal arrives amid accelerating redevelopment across central Geelong, where planning policy continues to encourage higher-density housing close to transport infrastructure and the waterfront. Mercer Street in particular has emerged as a focal point for taller apartment development due to its proximity to Geelong Station, the bay, and major civic infrastructure.</p>


Morphy Birrell Property Group targets 25-storey Geelong tower beside landmark church precinct

<p>Development giant&nbsp;<a href="https://www.apartments.com.au/developers/hamton">Hamton</a> and joint venture partner Hostplus have revealed the next residential stage of their $3 billion Moonee Valley Park masterplan, lodging plans for 512 more apartments within the precinct on surplus racecourse land at 110 Wilson Street, Moonee Ponds.</p>

<p>The proposed development, dubbed&nbsp;<a href="https://www.apartments.com.au/new-apartments/trackside-house-110-wilson-street-moonee-ponds-vic-3039">Trackside Gardens</a>&nbsp;in the planning application, follows the <a href="https://www.apartments.com.au/news/vic/first-look-exclusive-hamton-and-hostplus-reveal-sixth-stage-of-moonee-valley-park-masterplan">recent unveiling of the sixth-stage Cox Place Precinct</a> and continues the long-running transformation of the Moonee Valley Racecourse into one of Melbourne’s largest urban renewal projects.</p>

<p>Positioned on the north-eastern edge of the racecourse adjacent to CityLink, Trackside Gardens will comprise three residential buildings rising between 61.8 metres and 86.4 metres within a heavily landscaped precinct shaped by Hamton’s Nature Based Cities framework.</p>

<p>The project forms part of the broader Moonee Valley Park redevelopment being delivered by Hamton, Hostplus and the Moonee Valley Racing Club, which is reshaping the 40-hectare racecourse site into a mixed-use neighbourhood with housing, retail, commercial space, hotels, parkland and community infrastructure.</p>

<p>Trackside Gardens sits separately to the recently proposed Cox Place Precinct, a five-building stage comprising around 1,100 residences, two build-to-rent buildings, two build-to-sell towers, retail, office space, and a hotel overlooking the racetrack. Together, the projects continue to accelerate housing delivery across the precinct.</p>

<p><img alt="First look: Hamton expands Moonee Valley Park masterplan with 512-home Trackside Gardens precinct" data-entity-type="file" data-entity-uuid="5fc1941e-52d3-41c6-abc4-0f13fe8ae5ea" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/DA%20Edits%20%281%29.png?VersionId=7qwRHq5dcvXWNot2hNOgoQhN2GIWudNK" /></p>

<p>Designed by <a href="https://www.apartments.com.au/architects/dko-architecture">DKO Architecture</a> with landscape architecture by Tract, Trackside Gardens has been conceived as a botanical-style residential precinct prioritising canopy planting, communal green space, and vertical landscaping.</p>

<p>“The architectural vision for the proposed development centres around buildings in a botanical park setting that champions the important role of nature,” the planning submission states.</p>

<p>“The proposal incorporates principles of biophilic design, with landscape and environmentally sustainable development influencing the ultimate design response of the buildings and prioritising the ground plane to ensure a high amenity for both occupants and visitors.”&nbsp;</p>

<p>Trackside Gardens will deliver 512 apartments across the three buildings, alongside 518 basement car spaces and 523 bicycle spaces. Around 20 per cent affordable housing is proposed across the broader North East Precinct, equating to around 158 dwellings.&nbsp;</p>

<p>The affordable housing component will be concentrated within the Wilson East building, while the remaining apartments are expected to be delivered as build-to-sell residences.</p>

<p>Trackside Gardens has been designed around Hamton’s Nature Based Cities initiative, founded by Executive Chair Paul Hameister OAM in partnership with the University of Melbourne, Urbis, Ark Resources and Tract. The initiative promotes integrating higher-density urban development with significant biodiversity, tree canopy and landscape outcomes.</p>

<p><img alt="First look: Hamton expands Moonee Valley Park masterplan with 512-home Trackside Gardens precinct" data-entity-type="file" data-entity-uuid="89353449-7b3c-42fd-8fd8-8bf64a5ef80f" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Article%20Feature%20Image%20%28Grid%29_4.png?VersionId=X8jRt0P2L7fIWjLhfX6gPknXToXIBeLj" /></p>

<p>A comprehensive landscape strategy would introduce deep soil planting, vertical greening, communal gardens, and new pedestrian links throughout the site.</p>

<p>Planning documents state the development is targeting a 5 Star Green Star Buildings rating, a 7.5-star average NatHERS rating, and “Exemplary” Nature Based Cities certification.&nbsp;</p>

<p>The proposal joins an expanding pipeline of approved and proposed buildings within Moonee Valley Park, including the recently launched Eveline apartments and the approved Grandstand North and South towers.</p>

<p>Hamton has increasingly focused on precinct-scale, nature-led communities across Melbourne’s middle-ring suburbs, with projects spanning Hawthorn, Kew, and Moonee Ponds.</p>


Hampton unveils Trackside Gardens, latest stage of $3 billion Moonee Valley Park masterplan

<p>The Paul Gedoun-led <a href="https://www.apartments.com.au/developers/ss-projects">S&amp;S Group</a> has achieved another milestone in its $1 billion transformation of Rainbow Bay on the southern Gold Coast with the completion of the company’s third project in four years, the $160 million <a href="https://www.apartments.com.au/buildings/esprit-217-227-boundary-street-coolangatta-qld-4225">Esprit</a> residences.</p>

<p>Delivered by <a href="https://www.apartments.com.au/builders/hutchinson-builders">Hutchinson Builders</a> and designed by <a href="https://www.apartments.com.au/architects/cottee-parker-architects">Cottee Parker Architects</a>, Esprit buyers have now moved into the 94 apartments across two interconnected buildings at 217-227 Boundary Street.</p>

<p>The successful settlement of Esprit marks another astounding chapter in the S&amp;S story, which launched its highly successful Flow apartments three years ago and created its own ultra-luxury branded fingerprint on an area craving new luxury residences.</p>

<p>Most early purchasers have secured gains of well over $1 million since the project launched in 2021.&nbsp;</p>

<p>[smartcode_project:default project_id=102921 project_image_fid=172129]</p>

<p>S&amp;S Projects Founding Director Paul Gedoun said the completion of Esprit reflects sustained demand for premium apartments in tightly held coastal locations.&nbsp;<br />
&nbsp;&nbsp; &nbsp;<br />
“Esprit has attracted buyers seeking a combination of quality design, considered amenity and a location that is becoming increasingly difficult to replicate,” said Gedoun.</p>

<p>“We identified some years ago that Rainbow Bay is a unique market where supply of luxury residences is limited, and we see the settlements in Esprit further underpinning this thinking - that for both owner-occupiers and investors.”&nbsp;</p>

<p>[smartcode_project:default project_id=102921 project_image_fid=172174]</p>

<p>A key feature of the development is ‘Club Esprit’, a 1,000sqm residents-only rooftop level combining wellness and recreation, believed to be a first for the Gold Coast, and which is fast becoming a signature of the S&amp;S brand.</p>

<p>Positioned to capture views across Snapper Rocks, Rainbow Bay and the Tweed River, the rooftop includes a 25-metre lap pool, gym, yoga lawn, sauna and steam facilities, ice bath, private dining spaces, outdoor cinema and landscaped areas for residents.&nbsp;</p>

<p><a href="https://www.apartments.com.au/project-marketer/pezet-matheson">Pezet Matheson</a> Director Jayde Pezet, who led the sales campaign for Esprit and S&amp;S’s Flow and Awaken apartments, said the project’s performance reflects both the strength of the product and the depth of demand for premium apartments on the southern Gold Coast.&nbsp;</p>

<p>“In some cases, we’ve seen values double since launch, which is a clear reflection of how tightly held Rainbow Bay has become and the level of demand for well-executed projects in this market,” said Pezet.&nbsp;</p>

<p>“Buyers recognised early what S&amp;S Projects was delivering here, and that conviction has been rewarded as the project has progressed towards completion.”&nbsp;</p>

<p>[smartcode_project:default project_id=102921 project_image_fid=214819]</p>

<p>Esprit offers a mix of two- three and four-bedroom apartments and sits within walking distance of the beachfront, cafés and local amenities, reinforcing its appeal as both a lifestyle and investment destination.</p>

<p>The project is the third completed by S&amp;S Projects in Rainbow Bay, following Flow Residences and Awaken Residences, which together have contributed to the suburb’s emergence as one of the Gold Coast’s most sought-after coastal pockets. &nbsp;</p>

<p>S&amp;S Projects is continuing its investment in the area with Radia, a $215 million development currently under construction.&nbsp;</p>

<p>[smartcode_project:default project_id=102921 project_image_fid=172175]</p>

<p>Gedoun said the completion of Esprit signals continued confidence in the southern Gold Coast market.&nbsp;</p>

<p>“We’ve seen strong interest in well-located, high-quality apartments, particularly in areas where future development opportunities are limited."</p>

<p>“That’s been a key factor in the performance of Esprit and the broader Rainbow Bay market”.</p>

<p>[smartcode_project_cta:default project_id=102921]</p>


Owners move in as Esprit completes at Rainbow Bay

<p>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.</p>

<p>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;</p>

<p>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.</p>

<p>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.</p>

<p>Even in the low seasons of May and June, occupancy levels reach around 40 per cent.</p>

<p><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" /></p>

<p>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</p>

<p>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.</p>

<p><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" /></p>

<p>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.<span><span><span><span><span><span><span><span><span><span><span><span><span><span><span><span><span><span><span><span><span><span><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" /></span></span></span></span></span></span></span></span></span></span></span></span></span></span></span></span></span></span></span></span></span></span><span><span><span><span><span><span>​</span></span></span></span></span></span></p>

<p>The apartments will feature modern amenities and contemporary designs with expansive windows capturing sweeping views of The Remarkables mountain range.&nbsp;</p>

<p>Interiors are equipped with modern finishes, premium appliances, and secure electronic key-locked doors, ensuring a comfortable living experience for residents and guests alike.</p>

<p>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;</p>

<p>Queenstown’s sustained demand for visitor accommodation and rental properties is underpinned by a shortage of housing options, attracting both local and international buyers.</p>


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

<html><body>
<div id="post-body-8750789597338754868" class="post-body entry-content">
<div>If there's a subject that I get more emails about than anything else it's the supply of new apartments in Sydney.</div>
<div> </div>
<div>When prices take off you should generally expect a supply response as more projects become viable, until eventually the new supply kills the up-cycle.</div>
<div> </div>
<div><a href="/images/2016/09/22/8.3%20PROPERTY%20CONSTRUCTION%20CYCLE.jpg" target="_blank">Click to enlarge</a></div>
<div><img src="/images/2016/09/22/8.3%20PROPERTY%20CONSTRUCTION%20CYCLE.jpg" alt=""></div>
<div> </div>
<div>And after a period of under-building you only need a working pair of eyes to see that this is taking place in Sydney.</div>
<div> </div>
<div>But instead of drawing conclusions based on emotions or pre-determined 'crashnik' conclusions, let's take a look at what the actual numbers say to see whether we can draw some more specific inferences. </div>
<div><strong><span style="text-decoration: underline;"> </span></strong></div>
<div><strong><span style="text-decoration: underline;">Approvals boom</span></strong></div>
<div> </div>
<div>The first thing to note is how far approvals are tilted towards the multi-unit sector in Sydney today, partly as a result of the constrained supply of land close to the city and the Pacific Ocean.</div>
<br>There were some 55,458 approvals over the year to May 2016 - almost double the level of three years ago - and almost exactly two-thirds of these were multi-units at 66 per cent.<br><br><a href="/images/2016/09/22/A2.jpg" target="_blank">Click to enlarge</a>
</div>
<div class="post-body entry-content">
<img src="/images/2016/09/22/A2.jpg" alt=""><br><br><div>When looking at the individual LGAs the most striking point of note is just how many approvals there have been in western areas such as Camden, Blacktown, Parramatta, and Liverpool, as well as in the increasingly populated Hills District.</div>
<div> </div>
<div>Incidentally, the Sydney LGA actually covers an enormous area and more than thirty inner ring suburbs, so it's generally expected that there would be the highest number of approvals in that LGA.</div>
<br><a href="/images/2016/09/22/A3.jpg" target="_blank">Click to enlarge</a>
</div>
<div class="post-body entry-content">
<img src="/images/2016/09/22/A3.jpg" alt=""><br><br><div>When the weight of new apartment supply hits home there is likely to be fallout in some of these western suburban localities.</div>
<div> </div>
<div>It's also noticeable how remarkably few approvals there have been in some of the blue chip LGAs such as Mosman, Hunters Hill, Manly, and Woollahra. </div>
<div><strong><span style="text-decoration: underline;"> </span></strong></div>
<div><strong><span style="text-decoration: underline;">Completions lag</span></strong></div>
<br><div>If the impact of the supply response has been muted to date, then the next chart explains why. </div>
<div> </div>
<div>Despite a 21 per cent year on year increase in annual approvals, annual net dwelling completions have increased by only 3 per cent to 30,901 in the year to May 2016 (with a slightly lower 62 per cent of these being multi-unit dwellings).</div>
<div> </div>
<div>While this is an improvement in completions of about one third over the past three years, it needs to be acknowledged that the Greater Sydney population growth is now tracking at abou<span>t <span>~</span>85,00</span>0 per annum (while the cyclical low for completions in 2009 was cataclysmically bad, and the lowest nadir since 1953).</div>
<div> </div>
<div class="separator"><a href="/images/2016/09/22/A1.jpg" target="_blank">Click to enlarge</a></div>
<div class="separator"><img src="/images/2016/09/22/A1.jpg" alt=""></div>
<br><div>This implies that as I have concluded here previously the ratio of dwelling completions to population growth in Sydney was still tracking at below its long run average at least until 31 May 2016.</div>
<div> </div>
<div>And although population growth in Sydney is higher today than it was in the past, there have been 10 years since 1950 where more net dwelling completions were notched up than there were over the past year. </div>
<div class="separator"> </div>
<div class="separator">A prime reason for the supply response being slower than through preceding market cycles is that multi-unit projects on brownfield sites requiring land remediation take a great deal longer to complete than turnkey detached housing developments on greenfield land. </div>
<div class="separator"> </div>
<div class="separator">The number of net dwelling completions remains almost comically low in the blue chip LGAs of the eastern suburbs and lower north shore - with NIMBYism clearly alive and well - but supply is starting to hit its straps in some of the aforementioned higher-density LGAs.</div>
<div class="separator"> </div>
<div class="separator"><a href="/images/2016/09/22/A4.jpg" target="_blank">Click to enlarge</a></div>
<div class="separator"><img src="/images/2016/09/22/A4.jpg" alt=""></div>
<div> </div>
<div><strong><span style="text-decoration: underline;">Where the pipeline will hurt</span></strong></div>
<div> </div>
<div>The widening gap between approvals and completions means that there are more dwellings under construction in Sydney than has ever been the case before in any Australian city. </div>
<div> </div>
<div>In particular, there is a concentration risk in play with so many of the dwellings under construction being high-rise apartments. </div>
<div> </div>
<div>Take a look at the figures for Parramatta, for example, where there have been 8,646 multi-unit approvals since July 2012 but only 4,946 net dwelling completions. </div>
<div> </div>
<div>That's one heck of a potential supply pipeline, with more units due to come online in adjoining LGAs as well. </div>
<br><div class="separator"><a href="/images/2016/09/22/A5.jpg" target="_blank">Click to enlarge</a></div>
<div class="separator"><img src="/images/2016/09/22/A5.jpg" alt=""></div>
<br><strong><span style="text-decoration: underline;">The wrap</span></strong><br><br><div>These data lag by a few months, and they show that despite having had relatively little impact to date Sydney's supply response is poised like a coiled spring. </div>
<div> </div>
<div>Up until the end of May 2016 net dwelling completions had barely increased from the prior year in tracking at around 30,000.<br><br>However, there is a record number of dwellings in the under construction phase, so this will be one data series to watch closely. </div>
<div> </div>
</div>
<div class="post-footer">
<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
</div>
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Sydney apartment completions lag: Pete Wargent

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<p>The number of full office floors (Premium and A Grade) vacant across Australia’s capital city office markets has dropped over the last 12 months in line with slightly better overall total vacancy figures, according to recent research by Savills Australia.</p>
<p>The overall figures, however, masked a mixed bag of results with Sydney and Melbourne showing the biggest falls and Brisbane with a total office vacancy of 16.9 percent – its worst result in more than 25 years – paradoxically reporting an 11 percent fall in the number of full floors available, while Perth and Adelaide followed the script with rises.</p>
<p>Savills’ Prime Full Floor Availability Report assesses each Premium and A grade building in each city on a floor-by-floor basis highlighting which floors are available for lease, now and in the near future, in each building including those under construction and refurbishment. </p>
<p>According to Savills national head of Research Tony Crabb, the figures further confirm the recovery in Sydney and Melbourne’s office markets whilst underlining the negative impact the end of the mining investment boom continues to have on the Perth market.</p>
<p>He said Brisbane was at first glance an anomaly, but evidence of an uptick in leasing suggested the figures could be a bellwether for a more positive market there.</p>
<p>Office demand had bounced back over the last 12 months with 117,437 square metres of leasing activity (&gt; 500 square metres) in the Brisbane CBD,  up 27 percent on the 12 months prior, said state director-Office Leasing in Brisbane, John McDonald.</p>
<p>“There’s no doubt that the CBD market has turned the corner and the full floor figures reflect that with 32,000 square metres of prime space being filled this year alone,” said McDonald.</p>
<p>He said competitive rents and incentive packages attracting fringe and suburban tenants to the CBD and state government leases had been key drivers with childcare, health, and education and incubator businesses prominent.</p>
<p><a href="/images/2016/09/15/Screen%20Shot%202016-09-15%20at%2010.29.37%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/09/15/Screen%20Shot%202016-09-15%20at%2010.29.37%20AM.png" alt=""></p>
<p> </p>
<p><strong>Sydney trending well</strong></p>
<p>The 14 per cent decrease to 260 full floors available in Sydney had been expected given the much stronger demand over the last 18 months, said Crabb. In the last 12 months, 38 full floors had either been filled, partially occupied or committed to and it was unlikely the market would see a dramatic fall given backfill space and new developments would add to the numbers.</p>
<p>He said that while the downward trend was positive, it was a timely reminder for larger tenants with looming lease expiries, particularly in Sydney and Melbourne.</p>
<p>“What the figures show for tenants is that their options are diminishing. It’s not panic stations just yet but the trend is downward and that means that tenants with lease expiries on the horizon need to do their homework to identify just what is going to be available in their preferred location,’’ he said.</p>
<p>Crabb said in Melbourne the general consensus was that with leasing up 17 percent on last year a recovery was well under way and that Victoria’s strong economic growth, underpinned by rapidly increasing population, would see that trend continue.</p>
<p>The report found 831 full floors were vacant across the Adelaide, Brisbane, Melbourne, Perth and Sydney CBD office markets in August 2016, down from the 883 floors vacant in August 2015. <strong><br></strong></p>
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Full office floor vacancy in capital cities trending down: Savills Australia

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<p>An investor has paid $820,000 for a Hawthorn, Melbourne office suite through Teska Carson’s Tom Maule. </p>
<p>The property, 12-14 Cato Street, features a 193 square metre office suite with an open plan layout, meeting room, and board room, and six under cover car spaces. It was sold subject to a monthly lease at $4315 a square metre.</p>
<p>Tom Maule said strata office suites in the most desirable inner suburbs were very popular with small investors, including SMSFs, and owner-occupiers.</p>
<p>"These type of properties are very popular with a host of buyers looking for a more attractive yield than is available with other investment classes at the moment, particularly with borrowing rates so low," he said.</p>
<p>"The property attracted quite a good level of interest due to the very high standard of accommodation in what has historically been a very desirable address for both commercial and residential users."</p>
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Investor snaps up Hawthorn office suite

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<p>The Peppers Airlie Beach resort in North Queensland is on the market through an expressions of interest closing Thursday 20 October with price estimations between $15 million and $17 million, according to reports.</p>
<p>The resort, 9A Hermitage Drive Airlie Beach offering includes 56 self-contained freehold strata titled 1, 2 &amp; 3 bedroom apartments and 3 x 4 &amp; 5 bedroom villas with ocean views.</p>
<p>The receivership sale will be handled by CBRE Hotels and PRD Nationwide Airlie Beach on behalf of McGrathNicol.</p>
<p>Features of the property include Management Letting rights business for up to 106 apartments in the complex, resort facilities such as infinity swimming pool, gymnasium and Endota Spa.</p>
<p>CBRE agent Wayne Bunz said there was already significant interest in the area, pointing to the recent sale of Club Croc, Daydream Island and South Molle Island. </p>
<p>"We have been inundated with enquiries for leisure assets of late, particularly from mainland China," he said. </p>
<p>"Investors are looking to enter key leisure markets and capitalise on their potential for future growth, particularly in light of the softening Australian dollar, which is creating favourable market conditions for the local tourism market."</p>
<p>The $80 million resort was developed in 2009 by Josh Thompson's Latitude Development Group, which was placed in the hands of receivers McGrathNicol in March, according to the Australian Financial Review.</p>
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Receivers' sale for Peppers Airlie Beach Resort, QLD

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<p>A Hong Kong based developer has paid $8.8 million for a Southbank development site.</p>
<p>It comes with plans for a $80 million Fender Katsalidis designed, 38 level residential tower.</p>
<p>Savills agent Nick Peden brokered the <a href="https://commercialpropertysearch.savills.com.au/256601/Sale/Southbank/18-Moray-Street" target="_blank">18 Moray Street deal</a> with Clinton Baxter and Jesse Radisich at $20,000 a square metre of land and $70,000 per apartment.</p>
<p>"The sale set a strong new benchmark for Southbank land," Peden said. </p>
<p>“The transaction clearly demonstrates the ongoing appeal of the Melbourne market to Asia-based developers wishing to undertake projects to meet the needs of our rapidly growing population, and the price reflected that."</p>
<p>The 446 square metre corner site had a permit for a 124 apartments.</p>
<p>The sale was finalised promptly on unconditional cash terms and subject to two short term leases returning $120,000 per annum net.</p>
<p>He said the site was one of the last major permit-approved development opportunities within the prized Crown Casino precinct.</p>
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Savills sells Southbank Fender Katsalidis tower site for $8.8 million

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<p>A freehold commercial property on Sydney’s famous Coogee Beach leased to a cafe recently changed hands for $3.35 million.</p>
<p>The property at 252 Coogee Bay Road is three levels.</p>
<p>It returns $173,900 + GST p.a. </p>
<p>Zoned B2 Local CTR with fully licensed cafe/restaurant, the property has potential for further development subject to council approval. </p>
<p>The land area is about 140 sqm with a floor area of nearly 240 sqm.</p>
<p>The selling agent was Mark Fragias of Ray White who marketed it as "situated on iconic Coogee Beach with prominent Coogee Bay Road location and metres from Ardent Street facing North/South and positioned directly opposite major commercial landmark Coogee Bay Hotel."</p>
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Cafe on Coogee beach changes hands for $3.35 million 

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<p id="U6138376166711oG" data-removed-style="font-weight:normal;font-style:normal;">A Brunswick landmark has been listed for sale by negotiation with a $3.5 million price tag.</p>
<p id="U613837616671YR" data-removed-style="font-weight:normal;font-style:normal;">The 1903 Federation Free Style building at <a href="https://www.realcommercial.com.au/property-offices-vic-brunswick-501942650" target="_blank">307 Victoria Street</a> features a warehouse, showroom and penthouse.</p>
<p data-removed-style="font-weight:normal;font-style:normal;">It has housed designer printing business Papers Of Distinction since 1997, founded by vendor Jillian Houlihan.</p>
<p id="U613837616671IpB" data-removed-style="font-weight:normal;font-style:normal;">Set on the Boase St corner, the 529sq m property has Art Nouveau detailing, including tulip mouldings.</p>
<p data-removed-style="font-weight:normal;font-style:normal;">It was also formerly the United Friendly Societies medical dispensary building.</p>
<p id="U613837616671kCH" data-removed-style="font-weight:normal;font-style:normal;">IRC Property Group agent Raff De Luise said most of the potential buyers planned to live in the two-bedroom penthouse and operate their business beneath.</p>
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jchancellor-FAypfDUnLy

Brunswick warehouse, showroom and penthouse for sale

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<p>The iconic Turn In Motel, the first motel built in Warrnambool during the late 1950s, has been sold for $613,000.</p>
<p>The 15 unit motel rooms all had kitchens.</p>
<p>It had been listed at $629,000 through Wilson Real Estate.</p>
<p>The Verdon Street premises last sold at $290,000 in 1998. </p>
<p>The two star $80 a head motel was featured in the south west Victorian <a href="https://www.bluestonemagazine.com.au/2014/10/26/turning-in-to-the-turn-in-motel/" target="_blank">Bluestone</a> website magazine. </p>
<p>There are around 60 hotels in the town.</p>
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The iconic Turn In Motel, Warrnambool sold

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<p style="text-align: left;" align="center">SPONSORED POST</p>
<p>For some time now, Australia has featured at the forefront in the growth of green buildings, a trend which has been reinforced with the recent Global Real Estate Sustainability Benchmark results.</p>
<p>However, while Australia’s premium office market moves toward the next building evolution in optimising human health and wellness, the mid-tier office market is yet to see any notable shifts in energy and emissions reduction.</p>
<p><strong>Mid-tier office challenges and opportunities</strong></p>
<p>The breadth and size of this market is compelling. The Australian Sustainable Built Environment Council’s recent Low Carbon High Performance report cites mid-tier offices are estimated to make up 52 million square meters of the 64 million square meters of office space nationally.</p>
<p>Policy makers have taken this into account and have started to focus more heavily on investigating the associated challenges and opportunities facing this sector. One of the resulting reports has been the 2015 Mid-tier Commercial Office Buildings in Australia (‘Pathway’) report produced by Green Building Council of Australia, following extensive collaboration between government and industry stakeholders.</p>
<p>This report shone a light on the complex barriers affecting change - notably the lack of knowledge, capital, resources and time faced by building owners / managers with respect to the adoption of energy efficiency measures. </p>
<p><img src="/images/2016/09/21/700_light.jpg" alt=""></p>
<p><strong>Carrot and stick approaches</strong></p>
<p>Drawing on some of the recommendations contained within the Pathway report, there have been a number of recent policy and program developments. A planned reduction in the threshold for the Commercial Building Disclosure program in mid-2017 is expected to see a good deal more small building owners being legally required to measure and disclose the energy efficiency of their assets. While there is potential for this scheme to work, it will be heavily influenced by tenant demand for green office space at this end of the market.</p>
<p>At the other end of the carrot and stick approach lies the need for targeted financial incentives:   </p>
<ul>
<li>Sustainability Victoria’s Energy Efficient Office Buildings Program was aimed at mid-tier office buildings through matched funding grants of up to $150K.</li>
</ul>
<ul>
<li>NSW’s Office of Environment and Heritage has recently initiated the ‘No More Average Buildings’ program, which provides financial assistance for energy efficiency improvements in buildings with low NABERS Energy ratings. </li>
</ul>
<ul>
<li>At a national level, there are calls to consider measures such as ‘green depreciation’ in which tax breaks could help drive greater investment in energy efficiency measures when building refurbishment works are carried out.  </li>
</ul>
<p><strong>Efficiency in a global context</strong></p>
<p>Looking around the world, locations such as the United States, European Union and Japan are aiming to achieve net zero energy performance for their respective commercial buildings in the next few decades.</p>
<p>In the United Kingdom, by mid-2018, it will be unlawful for commercial building owners to lease poorly performing buildings, which at current estimates represent close to 20 percent of the national market.</p>
<p>The penalties for non-compliance with the legislation are expected to be considerable, but balanced against this is the provision of grants and subsidies to assist building owners. With talk of the energy-efficiency bar being raised in subsequent years, this new approach in the UK is sure to provide an interesting litmus test for other jurisdictions around the world, including Australia, to consider.</p>
<p><em>This article was written by Dale O’Toole, Savills Manager of National Sustainability. Savills is a leading global real estate service provider offering the full spectrum of services from strategic advice to managing assets and projects and transacting deals. To learn more about Savills sustainability services, visit <a href="https://www.savills.com.au/services-and-sectors/savills-earth.aspx" target="_blank">savills.com.au/earth</a>.</em></p>
<p> </p>
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Energy efficiency in the mid-tier market: should we be dangling the carrot or brandishing the stick?

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<p>At the end of 2014, the Australian Prudential Regulation Authority (APRA) wrote to mortgage lenders reinforcing what they saw as sound mortgage lending practices. </p>
<p>The key points from that letter were that serviceability policy limits should be based on mortgage rates at least 2 percent above the product loan rate with a minimum floor assessment of 7 percent. </p>
<p>The second point was that APRA was going to impose a speed limit on investment credit growth to lenders of 10 percent per annum. It is important to note investment credit refers to total outstanding mortgages not new lending.</p>
<p>The impact of these policies was likely to be that as interest rates fell, more buyers weren’t encouraged into the market because mortgages were being granted based on the ability to repay a mortgage at 7 percent interest which was well above standard rates at that time.  The other impact was that the 10% cap on investor housing credit growth would slow demand from the investment segment as there was less new lending to go around.</p>
<p>While the serviceability limits mean that new first time buyers are unlikely to come into the market as interest rates fall, it does nothing to discourage current owners from buying investment properties or upgrading homes.  Given that the vast majority of home loans are on a variable rate, interest rate cuts have an almost immediate impact on household budgets. </p>
<p>While the serviceability limits won’t result in marginal purchasers entering the market, as interest rates have come down it appears that home owners that weren’t previously considering buying an investment property or upgrading have come out of the woodwork and decided to purchase.</p>
<p><a href="/images/2016/09/21/Chart-1-1-580x176.jpg" target="_blank">Click to enlarge</a></p>
<p> <img src="/images/2016/09/21/Chart-1-1-580x176.jpg" alt=""></p>
<p>It is somewhat difficult to gauge exactly how effective the serviceability changes have been, but the 10% cap on investor housing credit led to a significant decline in growth in lending to that market segment.  Shortly following the implementation of the investor lending cap we also saw lenders place an interest rate premium on investment mortgages.  This muddied the waters somewhat because a lot of mortgages which were previously designated as investment mortgages were reclassified as owner occupier mortgages. </p>
<p>Nevertheless, annual investor housing credit growth peaked at 10.8 percent in May 2015 according to Reserve Bank data and the latest data shows that it has slowed to growth of 4.8% over the year to July 2016.  Investor housing credit growth has slowed dramatically since its recent peak following these curbs and over the past year has increased at its slowest annual pace since November 2009.</p>
<p><a href="/images/2016/09/21/Chart-2-1-580x210.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/09/21/Chart-2-1-580x210.jpg" alt=""></p>
<p>Housing finance data which tracks new lending, has showed a bounce in new lending to investors over the three months to July 2016.  Over that period, the monthly value of investment lending has increased by 9.2 percent from $10.8 billion in April 2016 to $11.8 billion in July 2016, new lending to investors is at its highest level since August 2015.  With investor housing credit growth well below 10 percent per annum, it is clear that lenders have scope to now offer more lending to the investment segment and clearly there are investors grabbing that opportunity.  </p>
<p>But why is this the case when you have a record supply of new housing under construction, record low rental yields and a historically weak rental market? We are about to delve into some possible reasons why, for some investors, housing investment still makes sense however, investors looking to purchase residential properties should be aware of the potential risks on the horizon.</p>
<p><strong>Capital growth</strong></p>
<p><a href="/images/2016/09/21/Chart-3-1-580x211.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/09/21/Chart-3-1-580x211.jpg" alt=""></p>
<p>Since the current growth phase commenced in June 2012, combined capital city home values have increased by 39.9%.  As the above chart shows, the growth has been very uneven with Sydney and Melbourne leading the way in terms of value growth and rises relatively moderate elsewhere.  After such a long growth phase, the question must be asked as to how much longer the growth can continue for in Sydney and Melbourne, particularly considering the affordably obstacles that are becoming more pronounced and the diminishing yield profile caused by the fact that dwelling values are rising at a much faster pace than rents.</p>
<p><strong>Housing supply</strong></p>
<p><a href="/images/2016/09/21/Chart-4-1-580x197.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/09/21/Chart-4-1-580x197.jpg" alt=""></p>
<p>The supply of new housing under construction is at a record-high with an historic high level of units under construction.  The 2011 national Census showed that units were much more likely to be occupied by renters than houses.  At that time, and across homes occupied on Census night, 21.8 percent of houses and 57.8% of units were occupied by renters. </p>
<p>Of course housing choices are likely to have shifted somewhat since that time but the fact is likely to remain that units are much more likely to end up as rental accommodation than houses are.  As a result a large proportion of these units recently built and under construction will end up as rental accommodation.  In many cities we are also already seeing a significant difference in the rate of growth for houses as opposed to units.</p>
<p><a href="/images/2016/09/21/Chart-5-1-580x212.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/09/21/Chart-5-1-580x212.jpg" alt=""></p>
<p>Rental markets are showing the weakest growth conditions on record, in fact, capital city rental rates are -0.5 percent lower over the past year.  In the two cities where the highest level of investment activity is occurring, Sydney and Melbourne, rents are unchanged in Sydney and 2.4 percent higher in Melbourne.  For units specifically, rental rates are 0.7 percent higher over the year across the combined capital cities with rental rates 1.8 percent higher for Sydney units and 1.3 percent higher for Melbourne units.</p>
<p>There is a large supply of housing stock that is going to be added to the market over the coming year(s) in these cities and others.  Most of the supply is in the form of units, which as shown are more likely to be rental properties.  Subsequently it seems as if landlords are set to find it more difficult to keep renters and may have to reduce rents in order to keep their properties tenanted over the coming years.  Higher vacancy rates may be felt by those landlords who own units that are in need of repair or refurbishment as tenants look for higher quality or new rental accommodation that may be more comfortable at a similar rental rate.</p>
<p><strong>Rental returns</strong></p>
<p><a href="/images/2016/09/21/Chart-6-580x209.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/09/21/Chart-6-580x209.jpg" alt=""></p>
<p>Rental yields are expressed as gross figures so the net returns are likely to be much lower than the headline figure.  The gross rental yield has been forced lower over recent years due to little rental growth (and falls in some areas) coupled with comparatively high levels of home value growth. As a result, at the end of August 2016 the combined capital cities gross rental yield was recorded at an historic low 3.3 percent with figures of 3.0 percent in Sydney and 2.9 percent in Melbourne.  </p>
<p>A couple of things to note about the yield figures; firstly they assume that a property is occupied for 100 percent of the year and secondly they are based off current values, most investors would not borrow 100 percent of the loan value for an investment property.  Given these two points, lower than 100 percent occupancy would reduce the yield however, borrowing less than 100% of the property’s value would increase the yield.</p>
<p>As pointed out earlier, units are much more likely than houses to be used for rental accommodation and there is a record pipeline of unit stock under construction.  Gross rental yields for units specifically are higher than those for houses and recorded at 4.1 percent for combined capital city units, 3.9 percent in Sydney and 4.0% in Melbourne.  Each of these figures are at historic lows and have trended lower over recent years.  Nevertheless, when you factor in a level of equity used to purchase investment properties the returns are still far superior to most other asset classes.</p>
<p><strong>Total returns</strong></p>
<p>Click to enlarge</p>
<p><img src="/images/2016/09/21/Chart-7-580x208.jpg" alt=""></p>
<p>When you factor in rental returns and capital growth, the total returns from residential property remain attractive.  Over the past year, total gross returns across the combined capital cities have been recorded at 10.7% with each capital city other than Perth and Darwin recording total returns in excess of 7.0% over the past year. Since home values ended their most recent declines in May 2012, combined capital city total returns have been recorded at 62.7% and no capital city has recorded returns of less than 25% over the period</p>
<p><strong>Other asset classes</strong></p>
<p>A major reason why investors remain attracted to residential property is due to the fact that with low interest rates and low economic growth internationally, returns have reduced.  Based on the most recent end of month data, 10 year Australian Government bonds were yielding 1.88 percent, 1 year term deposit rates were 2.65 percent and total returns from the ASX 200 were 9.3 percent.  The safe investment classes of bonds and term deposits are providing extremely low returns.  At the same time total returns from equities have been much stronger however, equities are a more volatile asset class than housing.</p>
<p>While the housing market has provided relatively strong investment returns over recent years and may continue to provide comparatively strong returns over the coming years, there are certainly some headwinds that investors need to be aware of.  Keep in mind too that the purchase cost of a residential property is significantly greater than investing in other asset classes.  The additions to housing supply underway and the weakening rental market should provide a level of caution for investors. </p>
<p>Given the cost of housing and the looming challenges we would expect that although there is likely to be some further uplift in investment demand it is unlikely to result in growth in investor credit to head back towards the 10%pa speed limit.  Investors will also need to be much more selective around which properties they choose given achieving strong returns are seemingly going to be more difficult to achieve over the coming years given the looming headwinds described within.</p>
<p><em>Cameron Kusher is research analyst for CoreLogic. You can contact him <a href="https://blog.corelogic.com.au/about/">here</a>.</em></p>
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