High-profile apartment defect cases have changed the way many NSW buyers approach purchasing, putting greater scrutiny on building quality, strata records and the parties behind a development before a contract is signed.

The industry buyers are assessing today, however, is also different from the one in which cases such as Opal Tower and Mascot Towers emerged.

NSW has introduced a series of regulatory measures aimed at strengthening oversight of apartment construction, including Building Commission NSW, the Residential Apartment Buildings Act 2020 and the Strata Building Bond and Inspections Scheme. Under the latter, developers are required to lodge a bond, with independent inspections forming part of the process for identifying defects in new strata developments.

Those changes provide another layer of protection, but they haven't removed the importance of buyer due diligence.

[smartcode_project:default project_id=5743 project_image_fid=372394]

For purchasers considering an apartment, that means looking beyond the residence itself. Building and strata history, strata reports, the track record of the builder and developer, the condition of common property and any known or planned expenditure by the owners corporation can all form part of assessing a building before purchase.

Whether the development is already complete can also materially change what can be assessed.

An off-the-plan purchaser is necessarily buying before the finished product exists. A completed apartment, by comparison, can be walked through before contracts are signed, allowing the purchaser to see the finishes, common areas and broader building as they have actually been delivered rather than relying solely on plans and renders.

It also removes exposure to some of the uncertainties that exist between an off-the-plan purchase and completion, including construction delays, cost pressures and builder insolvency during the delivery period.

[smartcode_project:default project_id=5743 project_image_fid=927]

<a href="https://www.apartments.com.au/project-marketer/equitifund-group">Projects by Equitifund</a> National Sales Director Ben Hamblett said that greater focus on tangible evidence is increasingly evident among apartment purchasers.

“The biggest shift we're seeing is buyers wanting proof, not promises,” Hamblett said.

“That's exactly why we deal in completed stock - you can inspect the building before you commit - and why we've backed every purchase with a cash bond against special levies.”

At <a href="https://www.apartments.com.au/buildings/the-lennox-parramatta-12-phillip-street-parramatta-nsw-2150">The Lennox</a> in Parramatta, that emphasis on a completed, inspectable product is already in place.

The 413-apartment, 46-level tower at 12 Phillip Street is being marketed by Projects by Equitifund, allowing prospective purchasers to inspect the residences, common areas and resident facilities before committing.

[smartcode_project:default project_id=5743 project_image_fid=375255]

The Lennox also introduces another layer to the due-diligence conversation through Strata Surety.

The vendor-funded arrangement provides purchasers with a cash-backed bond held in their own solicitor's trust account from settlement. According to Equitifund, the bond covers any special levy raised during the applicable cover period and is provided at no cost to the purchaser.

Special levies can create an unexpected cost for apartment owners where an owners corporation needs funding beyond its existing strata contributions. Under NSW strata law, a special levy requires approval by owners at a general meeting.

Equitifund Executive Chairman Greg Huxley said Strata Surety was designed to provide something more concrete than reassurance about that potential exposure.

“Buyers have every right to ask hard questions about strata risk - the industry has given them plenty of reasons to,” Huxley said.

“Our answer isn't a reassurance, it's a bond. Strata Surety puts real money behind that confidence, held by the buyer's own solicitor, not by us.”

[smartcode_project:default project_id=5743 project_image_fid=375281]

For The Lennox, its completed status also means purchasers can assess not only the apartment itself, but a building that has already been occupied and operating for several years.

Completed in 2021, the $300 million development, designed by <a href="https://www.apartments.com.au/architects/marchese-partners">Marchese Partners</a>, comprises one, two, three and four-bedroom apartments, with open-plan living areas extending to private balconies. Interiors incorporate engineered timber flooring, stone benchtops and integrated appliances, while many upper-level residences have views across the river and surrounding district.

Its established amenity can similarly be inspected in operation. Resident facilities include the Watermark precinct with a 20-metre pool, outdoor terrace, barbecue areas, gym, fitness studio and conference room, while ground-floor retail addresses the river walk and surrounding public space.

The Lennox is also home to the Southern Hemisphere's first fully robotic residential car park, which has now operated for several years. Its nine-level basement combines three conventional parking levels with six automated levels, accommodating 327 vehicles using technology from German firm Lödige Industries.

[smartcode_project:default project_id=5743 project_image_fid=925]

The riverfront address puts The Lennox close to much of central <a href="https://www.apartments.com.au/developments/parramatta-nsw-2150">Parramatta</a>'s existing infrastructure, including Parramatta Station, Westfield Parramatta, Parramatta Park, and the Church Street dining precinct.

The remaining apartments form part of a limited release secured by Equitifund, following the sale of the majority of residences before and shortly after completion.

The regulatory environment around NSW apartment construction has changed considerably since the defect cases that reshaped public discussion around the sector. For purchasers, however, regulation is only one part of the equation. The ability to investigate a building's history, review its strata position and, where possible, inspect what has actually been delivered remains central to making an informed apartment purchase.

At The Lennox, its completed status provides that opportunity before contracts are signed, while Strata Surety adds a financial backstop against special levies beyond the protections already provided under NSW strata law.

[smartcode_project_cta:default project_id=5743]

Joel Robinson

Buying with confidence: What NSW apartment buyers should check beyond the defect headlines

Too often, heritage buildings become the podium for a contemporary tower. At <a href="https://www.apartments.com.au/new-apartments/623-collins-607-623-collins-street-melbourne-vic-3000">623 Collins</a>, <a>Sterling Global</a> challenged its design team to reverse that process.

The brief to <a href="https://www.apartments.com.au/architects/plus-studio">Plus Studio</a> was deliberately simple: "Don't design around the heritage. Design from it." It became the philosophy behind a project that draws inspiration not only from two landmark heritage buildings, but from Collins Street itself, a street layered with architectural history and civic significance.

That philosophy has shaped one of <a href="https://www.apartments.com.au/developments/melbourne-vic-3000">Melbourne</a> CBD's most considered residential projects, where the 1924 State Savings Bank and neighbouring Batman's Hill Hotel have become the architectural foundation for 623 Collins rather than remnants preserved beneath a new development.

[smartcode_project:default project_id=145324 project_image_fid=372749]

Rather than approaching the site as a blank canvas, <a href="https://www.apartments.com.au/developers/sterling-global">Sterling Global</a> saw the existing buildings as the beginning of the story.

"Sites like this rarely become available," the developer said.

"623 Collins wasn't simply an opportunity to develop a prominent CBD site. It was an opportunity to restore and reimagine one of Melbourne's important heritage landmarks while contributing to the continued evolution of Collins Street. For us, the existing buildings weren't constraints. They were the beginning of the story."

Instead of mimicking the ornate heritage architecture, Plus Studio studied the proportions, rhythm and craftsmanship of the original buildings before translating those characteristics into a contemporary 42-storey tower.

[smartcode_project:default project_id=145324 project_image_fid=372748]

"The brief challenged us to create a contemporary landmark that respected Melbourne's architectural history without becoming nostalgic," Plus Studio said.

"Rather than mimicking heritage, we sought to understand its proportions, rhythm and material language before translating those qualities into a distinctly contemporary architectural expression."

The practice says the State Savings Bank and Batman's Hill Hotel became the project's primary source of inspiration, allowing the heritage buildings and contemporary architecture to exist "in conversation rather than contrast." Generous planted terraces further soften the transition between old and new, creating elevated green spaces while reinforcing the dialogue between the restored podium and the contemporary tower.

That dialogue continues throughout the interiors, where Melbourne designer Fiona Lynch developed a material palette inspired by the idea of alchemy, balancing contrasting materials that reference both the Neo-Grec detailing of the original bank and contemporary urban living. The result is a series of spaces that feel timeless rather than trend-driven.

[smartcode_project:default project_id=145324 project_image_fid=354343]

The project will deliver 316 residences across four collections, Heirloom, Signature, Reserve and the Penthouse Collection, with each responding differently to its position within the building, from the restored heritage podium through to the upper levels of the tower. The Heirloom Residences retain defining heritage elements including original heritage windows, generous proportions and high ceilings, while the tower introduces contemporary homes with expansive layouts and elevated views.

Amenities have likewise been designed to support long-term city living rather than short-stay convenience. Residents will have access to concierge services, wellness facilities including a pool, cold plunge, sauna, steam room and gym, alongside private lounges, entertaining spaces and dedicated resident clubs.

Sterling Global says that approach is resonating with buyers seeking permanence rather than novelty.

[smartcode_project:default project_id=145324 project_image_fid=354347]

According to the sales team, purchasers are looking for enduring architecture, generous floorplans, heritage character and long-term value, with many commenting that 623 Collins "doesn't feel like another apartment development" because of the way the architecture has been curated around the site's history.

Situated on the prominent corner of Collins and Spencer streets, the project occupies one of Melbourne's most recognisable gateway sites, marking the western entrance to the city's best-known street. For Sterling Global, it also reflects a broader shift in city-making.

"Rather than maximising development yield, the project embraces adaptive reuse as a design philosophy, allowing heritage to inform architecture, interiors and the overall resident experience," the developer said.

"The result is a building that feels uniquely connected to Melbourne."

[smartcode_project_cta:default project_id=145324]

How Sterling Global designed 623 Collins from Melbourne's history

Avant Townhomes is adding to Ivanhoe’s family-sized housing options with <a href="https://www.apartments.com.au/new-townhouses/three-82-ivanhoe-382-upper-heidelberg-road-ivanhoe-vic-3079">Three 82</a>, a collection of just 16 four-bedroom townhomes on Upper Heidelberg Road.

The <a href="https://www.apartments.com.au/developers/intrapac-property">Intrapac Property</a> townhome division has taken a contemporary approach to the traditional family home, pairing larger floorplans with the lower-maintenance format of a townhouse.

[smartcode_project:default project_id=152069 project_image_fid=374394]

Designed by <a href="https://www.apartments.com.au/architects/arcadia-studio">Arcadia</a>, with landscaping by Landsite, the homes feature generous open-plan living and dining areas that connect directly to outdoor spaces, with layouts also designed to maximise natural light and privacy.

Natural stone is used throughout the interiors, including in kitchens that pair stone surfaces with bespoke cabinetry, considered storage and SMEG appliances.

The four-bedroom layouts include built-in wardrobes and a main bedroom with its own ensuite, while family bathrooms service the additional bedrooms. Each home also includes a lock-up double garage and intercom entry.

[smartcode_project:default project_id=152069 project_image_fid=374399]

Energy efficiency has been incorporated into the design through solar panels, double glazing and reverse-cycle heating and cooling, with the homes targeting 7-star energy ratings.

Rather than incorporating extensive communal facilities, Three 82 has been conceived around private residential amenity, with the 16-home scale keeping the focus on individual homes and their own indoor and outdoor spaces.

The development is located at 382 Upper Heidelberg Road, around one kilometre from Ivanhoe Village's cafés and retail and a short drive from Eaglemont Station and Ivanhoe Station.

[smartcode_project:default project_id=152069 project_image_fid=374393]

Several of Ivanhoe's established schools are also nearby, including Ivanhoe Girls' Grammar and Ivanhoe Grammar School. The address also provides access to the suburb's parklands and the wider Yarra River corridor.

<a href="https://www.apartments.com.au/project-marketer/nelson-alexander">Nelson Alexander</a> has been appointed to handle sales.

Construction is underway and progressing well, with Three 82 currently tracking toward completion in Q2 2027.

[smartcode_project_cta:default project_id=152069]

Three 82 brings boutique four-bedroom townhome collection to Ivanhoe

Builder-developer&nbsp;<a href="https://www.apartments.com.au/developers/graya">Graya</a> has secured a prime Newstead site from fellow developer Fraser, subsequently lodging plans for The Silo, a major mixed-use residential project in Newstead designed around a new public laneway linking the James Street precinct with the wider Gasworks and Newstead neighbourhood.

Proposed for the corner of Chester and Morse streets, the <a href="https://www.apartments.com.au/architects/bureauproberts">Bureau^Proberts</a>-designed project places its strongest emphasis at ground level, where retail, landscaping and a new cobblestone pedestrian connection would open the site to the surrounding neighbourhood. The design team describes The Silo as “more than a residential building”, positioning the development as an extension of Newstead’s public realm rather than a standalone apartment tower.

“A new cobblestone laneway and landscaped connection between James Street and Gasworks unlock a missing pedestrian link, improving walkability and stitching together two of Brisbane’s significant urban destinations,” Bureau Proberts said in its Urban Design Report.

<img alt="First look: Graya plans The Silo as new pedestrian link between James Street and Gasworks" data-entity-type="file" data-entity-uuid="0ea1b06a-75f5-40a5-b2c5-33c97bc86052" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/silo%20bldg.png?VersionId=KmjsAtNePu57_B31EM_DJ5T6KPJHtcmo" />

The Silo is planned as a mixed-use development incorporating apartments alongside a bar and centre activities including food and drink outlets, indoor sport and recreation, office and retail uses.

Architecturally, Bureau Proberts has conceived the building as a collection of vertically expressed, stepping forms rather than a single uniform tower. The composition rises from an articulated podium before being broken by a triple-height landscaped recreation level, with the upper section becoming more compact before terminating in a landscaped rooftop garden.

The project's name and architectural language draw directly from Newstead's industrial history. Patterned off-form concrete is proposed as the principal façade material, complemented by slender metal rod balustrades and extensive planting. The cylindrical and vertically ribbed elements give the building its silo-like expression, while curved balconies and planted edges introduce a softer subtropical layer.

“The Silo reinterprets its robust forms, scale and materiality through a contemporary subtropical architectural expression, creating a building that acknowledges its industrial legacy, while responding to the way the precinct is occupied today,” Bureau^Proberts said.

The recreation level is one of the defining breaks in the tower. Plans include a lap pool, mature subtropical planting and shared resident facilities within an elevated communal garden. Landscaping continues through the podium and onto the rooftop, where a further garden forms what the architects describe as a “subtropical crown” to the building.

<img alt="First look: Graya plans The Silo as new pedestrian link between James Street and Gasworks" data-entity-type="file" data-entity-uuid="f8451036-35a4-49a9-8d88-2ef4438eba3d" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Silo%20Lane.png?VersionId=h8N31_rYmCEqoNrpt4kbYVQhJGZn60LH" />

At street level, the development has been designed to establish a more permeable block. Retail and hospitality tenancies address the public realm, while landscaped pedestrian spaces lead into the new laneway connection. Renders in the design report show the proposed “Silo Lane” as a substantial opening through the podium, framed by cylindrical concrete forms with cascading planting above.

The Silo continues Graya's move into larger apartment developments after building its reputation across high-end residential projects in Brisbane and the Gold Coast.

Graya buys Frasers Newstead site, plans The Silo between James Street and Gasworks precincts

<a href="https://www.apartments.com.au/developers/wickton">Wickton</a>’s completed Linacre Rise development in Hampton is giving Bayside downsizers the opportunity to move into a spacious apartment near the beach, with the developer covering stamp duty for a limited time.

The 27-residence development has been designed for buyers who want to simplify their living arrangements without giving up the space, warmth and quality associated with a long-term family home. Most apartments have already been secured by Bayside locals, leaving a select collection of two and three-bedroom residences and penthouses available.

Two-bedroom apartments are priced from $1.275 million, three-bedroom residences from $2.25 million and penthouses from $3.375 million, with the completed homes available to inspect and move into now.

[smartcode_project:default project_id=95289 project_image_fid=366760]

<a href="https://www.apartments.com.au/buildings/linacre-rise-hampton-8-10-linacre-road-hampton-vic-3188">Linacre Rise</a> occupies an elevated position on one of <a href="https://www.apartments.com.au/developments/hampton-vic-3188">Hampton</a>’s quiet, tree-lined streets, around 250 metres from the bay and 500 metres from Hampton’s village centre. Its setting gives residents access to the beach, local cafés, shops and Hampton Train Station while retaining the feel of an established residential neighbourhood.

Architecture and interiors by <a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a> draw on the warmth and permanence of traditional brickwork, with the building integrated into terraced landscaping by <a href="https://www.apartments.com.au/landscape-architect/john-patrick-landscape-architects">John Patrick</a>. Ground-floor apartments are elevated above the street and include private garden courtyards, while several upper-level residences have generous balconies and outlooks toward the bay.

Inside, the residences favour natural materials and generous proportions. Herringbone-pattern European oak flooring, natural stone benchtops, premium joinery and Swiss V-ZUG appliances are among the key inclusions, while integrated storage has been incorporated across kitchens, bathrooms, studies and living areas.

The kitchens have been planned as practical spaces for both everyday use and entertaining, with substantial island benches, detailed cabinetry and adjoining dining and living zones. Full-height wardrobes, plush bedroom carpeting and carefully considered lighting reinforce the residential character Wickton sought to retain for buyers moving from larger homes.

[smartcode_project:default project_id=95289 project_image_fid=366769]

A Linacre Rise purchaser said the completed apartment had delivered the space, outlook and construction quality they had been seeking.

“The unit is very light, has views to die for over the bay, all construction materials and fittings are premium quality, we have secure parking for three cars, EV charging at very competitive rates, the neighbours are friendly and there is just a lovely ambiance about the place,” the purchaser said.

Environmental features include solar panels, shared electric vehicle charging stations, rainwater harvesting for toilet flushing and landscape irrigation, double-glazed windows and water-efficient fixtures and appliances.

[smartcode_project:default project_id=95289 project_image_fid=366762]

The development was built by Balmain &amp; Co, with Wickton managing the broader development process through its in-house team.

For downsizers, the project’s completed status removes much of the uncertainty associated with buying off the plan. Purchasers can inspect the finished apartments, understand their outlook and proportions, and move in without waiting for construction to conclude.

The remaining selection includes north-oriented balconies, corner configurations and penthouses with elevated bay views. The developer-paid stamp duty initiative is available for a limited time, with potential savings of up to $200,000 depending on the residence purchased.

[smartcode_project_cta:default project_id=95289]

Limited-time stamp duty offer at completed Linacre Rise apartments in Hampton

Prominent New Zealand apartment and hotel operator, <a href="/developers/safari-group">Safari Group</a>, is offering up a prime investment opportunity for Australians to purchase off the plan in one of the world’s most popular ski destinations.

They recently took to market Mountain Oak Queenstown Apartments, in the growing precinct of Remarkables Park in Frankton, near the airport and at the foot of The Remarkables - the mountain range the locals like to call “The Remarks”.&nbsp;

Sydney investors have shown interest in the one, two and three-bedroom apartments that secure high-season occupancy six months over the year, primarily over summer and winter months.

They average 90 per cent occupancy across their portfolio over January, February, March, August, November and December, while shoulder season months of April, July, September and October are still occupied 70 per cent of the time, with the growing appeal of Queenstown becoming not just a hotspot for the snow, but a lifestyle destination.

Even in the low seasons of May and June, occupancy levels reach around 40 per cent.

<img alt="Safari Group’s Mountain Oak Apartments brings new investment potential to Queenstown" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_auto/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Ext_Cam15_Sunny.jpg?VersionId=SJAROUM_1s.Tr5ciMk4EEj5oAt_Vewmv" />

Safari’s Safari Hotels arm can also manage the holiday letting for an investor, from the listing on holiday accommodation websites such as Airbnb and Booking.com to the cleaning and maintenance of the investment. They’ve been in the short stay management business for 15 years and offer 24/7 support for investors, an important convenience benefit for any overseas investor

Another major drawcard for Australians is that New Zealand doesn’t have a stamp duty policy - so the entry price of NZ$639,000 (AU$586,000), is all that is payable on completion.

<img alt="Safari Group’s Mountain Oak Apartments brings new investment potential to Queenstown" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/313_Livingv2_WEB.jpg?VersionId=nV229fM0ZeYpoxOrX372HyGjfwY_LR8c" />

Safari is starting construction of the 141 apartments in Q2 this year, with a two-year build estimated to complete in mid-to-late 2027.<img alt="" data-entity-type="" data-entity-uuid="" height="15" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXczFpFAb7WuA6f4f9TtKWcqXyNwR8qqtakWv352ERkpqNlP3KwIo8YKxw67jZNHfpjEGIZGv5MQTbnvLZwNt8iu9IVdOrswOjCvBZ4zhSoOOLrpt6etVEZTN1gkBho0r_R72zdHNA?key=yq3daOanqHSb88QFd8jGYKdb" title="Click and drag to move" width="15" />​

The apartments will feature modern amenities and contemporary designs with expansive windows capturing sweeping views of The Remarkables mountain range.&nbsp;

Interiors are equipped with modern finishes, premium appliances, and secure electronic key-locked doors, ensuring a comfortable living experience for residents and guests alike.

With its strategic location near Coronet Peak and Cardrona Alpine Resort, as well as key retail and dining precincts such as Market Street, Five Mile Shopping Centre, and Remarkables Market, Mountain Oak offers a strong proposition for investors seeking high rental yields and capital appreciation in one of New Zealand’s most sought-after locations.&nbsp;

Queenstown’s sustained demand for visitor accommodation and rental properties is underpinned by a shortage of housing options, attracting both local and international buyers.

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

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Just like many others I have been trying to make some sense of our property markets – so I went back to 1990 (yes I was selling way back then) to look at what the market was doing.
Why, you might ask?
Well, back then the Reserve Bank of Australia (RBA) had the cash rate at 17.50% (today, it's at 2.50%). Back then we were selling un-renovated mansions on Prince Albert Street for $1,050,000 (that was the top-end back then) with semi-detacheds on Dalton Road fetching $275,000. A nice home on Wolseley Road with Balmoral views would set you back $485,000 and an apartment on Mandolong Road sold for $125,000; and yes, all these homes were in <a target="_blank" href="/news">Mosman</a>.
Pause for a moment and your attention would be diverted to the prices of the real estate – with little attention to the highest ever cash rate in Australia’s history – 17.50%. A cash rate seven times higher than the cash rate today – and even more frightening, it was just before the “recession we had to have”. This saw the cash rate in January 1990 drop from 17.50% to 4.75% in July 1993.
My point being that with a cash rate of 2.50%, why are there not more sellers in the market engaging in their long-term real estate strategies? <a title="Sydney property listings reach post – GFC low: SQM Research" href="https://www.propertyobserver.com.au/news/sydney-property-listings-reach-post-gfc-low-sqm-research/2014020567578" target="_blank">Sydney property listings reach post-GFC low, according to SQM Research</a> – January saw 20,080 listings in the city, a decrease of 3–4% from December. The previous low in listings for Sydney was recorded by SQM in January 2010, when 20,687 properties were listed. So the mystery is that the market in January 2014 is much stronger than back in January 2010 – so why are there fewer vendors?
The cash rate in January 2010 was 3.75% then in March it went to 4.00% to then peak in November 2010 at 4.75% with the RBA then easing the cash rate down in November 2011 to 4.50% to now where it sits at 2.50%.
Only when one actually extrapolates this data that the question is just how much attention the consumer pays to the cash rate – given it does not appear to be reflective in market sentiment. Based on that analysis it is clear that there is not a strong argument/interest for which direction the RBA will go when they next meet. Rather why are property owners ignoring the strongest selling conditions we have seen (in Sydney) since 2004?
Now there are a thousand upon thousand conspiracy theories – I prefer to call them myths, mysteries and market manipulations. The dominant buyer appears to be very high on the discussion index at the moment and that is the Chinese buyer. I looked at our deal book for 2013 and our sales to Chinese buyers made up less than 5% of our total transactions in that year. We don’t do any project marketing of new blocks of apartments, where in that demographic they make up over 80% of the transactions.
Maybe we should take a closer examination of the Significant Investor Visa (SIV) that was launched on November 24, 2012? 
From an article entitled "<a title="China’s Great Wall of visa money " href="https://www.businessspectator.com.au/article/2014/2/5/china/chinas-great-wall-visa-money" target="_blank">China’s great wall of visa money </a>"– "new analysis from real estate advisory arm of Korda Mentha has revealed that the government’s significant investment visa scheme is booming, with the numbers of approved visas growing exponentially in the second half of 2013."
There has been a significant spike in the number of SIV approvals since the Coalition government came into power last September. There were only 15 approvals in the first eight months of 2013 under the Labor government. The number of approvals surged nearly 600% in the first two months of the new government. Is it a mystery or a myth that this is because the Abbott government does not have a Housing Minister and these statistics will go unchecked?
In 2013, the highest house sale was Altona – Wunulla Road Point Piper for $52 million. For the first time in years the only other property to sell outside the Eastern Suburbs for Sydney’s Top 20 sales in 2013 was Julian Street, Mosman which was sold by Richardson &amp; Wrench Mosman &amp; Neutral Bay (RWM) for $13.9 million. From the Sydney Top 20 sales in 2013 just four went to Chinese buyers – so don’t believe everything you read in the newspapers, or hear from real estate agents for that matter. I would call that market manipulation.
In 2014, we have seen three houses listed with 60 million plus price expectations in Sydney’s Eastern Suburbs with a common theme in the media that they are chasing the Chinese buyers.
Nobody knows with any great certainty what lies ahead for our property markets in 2014. Rest assured there will be plenty of myths, mysteries and market manipulations. We do know from anecdotal evidence that at the top-end they don’t pay any attention to the cash rate either. On the other end of the market spectrum the lower end of the markets are fixated by the cash rate for obvious financial reasons.
Nothing can still explain why what should be a feast market has ended up as a famine.
Robert Simeon is a director of <a rel="nofollow" target="_blank" href="https://www.rwm.com.au/" title="RWM" style="font-size: 14px;">Richardson  Wrench Mosman and Neutral Bay </a>and has been selling residential real estate in Sydney since 1985. 
He has also been writing real estate blog <a rel="nofollow" target="_blank" href="https://www.rwm.com.au/news/" title="Virtual Realty News">Virtual Realty News</a> since 2000. 
The RWM real estate model has sold in excess of $1 billion in database sales globally.
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robertsimeon-hRNTwJyXkQ

What should be a feast market has ended up as a famine

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Work in the future will no longer be a place you go, but a thing you do. With new ways of working evolving, modern office environments need to be flexible and responsive to change to attract talented staff and boost productivity.
However, property is traditionally an inflexible resource, with buildings lasting longer than many companies. While the average office lease in Australia is around six years, larger firms typically take out 10 or 15 year terms with extension options. In a good quality, well maintained office fit out, many of the fittings and furnishings can wear well for nearly 15 years.  In comparison, product life cycles for many industries are now less than two years and technology is changing our lives in ways we could have barely imagined even seven years ago when the iPhone first debuted.
When considering renewing or relocating your office, you need to think long-term about whether your workplace actually supports the way people work and how your business will react to change.
For starters, many of the key decisions, like building selection and the amount of space need to be made several years prior to occupation.
This presents a real challenge for project teams as they gaze into their crystal balls and predict the future. Both in terms of internal questions, like what markets their organisation will be operating in and its consequent labour force composition, plus external questions like the direction technology is heading and what sort of workplace prospective staff will expect. Colliers International's research team has had a crack at identifying what might be on the horizon that could affect the way we design and use office space. We don't claim to be futurists and aren't in the business of predicting disruptive technologies so our point of departure is what we are starting to see today.  
Here are the seven forces transforming your office:
1. The new world economic order
Prevailing weak economic conditions leading to a focus on cost reduction and in many cases making employees more accommodating of changing and constrained working conditions. At the same time, organisations are becoming hyper competitive in order to survive, meaning the facilitation of product and process innovation has become paramount.  
2. Demographic change
The need to balance differing generational expectations at work and deliver work life balance. Ageing populations in many economies, combined with other factors such as weaker economic growth, are challenging traditional notions of apprenticeship, skill mastery and graceful retirement.  
3. Technology
Having enabled and created the expectation of a mobile and connected distributed workforce, we now need to think differently about the role and functional requirements of office buildings.  
4. Health and well-being
Healthy workers are more productive and effective workplace Arrangements can facilitate this in many ways.  
5. The regulatory environment
Restrictions and obligations on business activity are becoming tougher in many parts of the world. Sometimes this goes counter to what we hope to achieve through our workplace strategy.  
6. Sustainability
We have a duty to the planet and future generations to limit our environmental footprint at individual, business and community levels. We also need to make our organisations more resilient in the face of increasing severe weather and other events related to the impacts of climate change. Workplace strategy can play a significant part in this goal.  
7. Urban planning
Given the foregoing trends, how must our cities, buildings and workplace expectations adapt? I'll be examining each of these forces over a series of posts in the coming weeks. 
David McEwen is a management consultant working at the intersection of workplace strategy, sustainability and technology with <a href="https://www.colliers.com.au/%E2%80%8E" target="_parent" rel="nofollow">Colliers International</a>.
You can connect with David on <a href="https://www.linkedin.com/profile/view?id=9321351&amp;locale=en_US&amp;trk=tyah&amp;trkInfo=tas%3Adavid" target="_blank">LinkedIn</a>.
This article first appeared on <a target="_blank" href="https://www.colliers.com.au/News.aspx">Colliers International News</a>.
 
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dmcewan-RAeaafS4AZ

The seven forces that are transforming your office

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Just $200 million was given in first home buyer grants across NSW last year.
<a target="_blank" href="https://www.osr.nsw.gov.au/sites/default/files/file_manager/fhog_apps_received_3.pdf">It was the lowest year on record</a>. The aim of attracting first home buyers into new homes - not established ones to boost construction - has allowed the state government to get the good idea headlines, but then saved millions in the budget bottom line.
Click to enlarge
<a rel="shadowbox" href="/images/stories/2014/02/12/chart-two-feb-12-big.gif" title="Click to enlarge"><img src="/images/stories/2014/02/12/chart-two-feb-12-small.gif"></a>
Source: NSW Office of State Revenue statistics
 
The list is an interesting mix of old and new, of greenfields and increased urban density.
<a target="_blank" href="/news">Parramatta</a> buyers topped the list of recipients with around $5.4 million in grants in the 2150 postcode. Parramatta, one of Sydney's oldest locations is undergoing a transformation with major residential projects including <a target="_blank" href="https://vbycrown.com.au">V by Crown</a> headlining its renaissance. 
The $300 million “vertical village” was officially launched in 2012, with construction of the 27-storey tower – set to be Parramatta’s tallest building – well underway. V by Crown recently reached $150 million in sales, with more than 270 apartments sold up since the project was launched in 2012.
<a target="_blank" href="/news">Spring Farm</a>, which sits second on the list of recipient postcodes at 2570, is one of the newer suburbs on the south-western rural/urban precinct. 
Spring Farm is surrounded by <a target="_blank" href="/news">Elderslie</a> to the north, <a target="_blank" href="/news">Narellan Vale</a> to the northeast, <a target="_blank" href="/news">Mount Annan</a> to the east and <a target="_blank" href="/news">South Camden</a> in the south. Until recently it principal land use has been the poultry production by the Tegal family and Neville Clinton, along with extensive orchards and vineyards along the floodplain of the Nepean River. 
The first urban development in Spring Farm was in the Ettlesdale Road area in the 1960s. In 2006 the population of the Spring Farm was 287 predominantly made up of young families with 44% of the population under 25 years of age.  
The area is planned to have around 3,900 housing lots with three separate developers, the Cornish Group with 1100 lots, Landcom 1,400 lots and Mirvac, 450 lots.
I noticed Mirvac recently sold a seven hectare holding to the Starhill Property Group for $7 million last November. In 2008 at Mirvac's Ayre three-bedroom, two-bathroom townhouses were for sale starting from $335,000. House-and-land packages in Mirvac's Ayre started from about $357,000 in 2012. 
Lots of land have been selling at around $200,000 plus since the first Spring Farm estate was opened in 2007 off Richardson Road.
<a target="_blank" href="/news">Arncliffe</a> and <a target="_blank" href="/news">Waterloo</a> were the most established suburbs in the top 20 postcode recipient list.
<a target="_blank" href="/news">Woollongong</a>, with $2.1 million in grants, rounded out the list.
The top 20 postcodes securing around $71 million of the total funding which is a mix of the grant and stamp duty concessions.
There were around 9,500 recipients who secured the mix of grants.
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Click to enlarge
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Source: NSW Office of State Revenue statistics
news@propertyobserver.com.au
 
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jchancellor-FAypfDUnLy

Just $200 million in NSW first home grants last year

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RP Data has been tracking the average number of days properties take to sell and the average vendor discount since the beginning of 2005.  Both measures have recorded a significant improvement throughout 2013 and the average number of days on the market is currently at a historically low level.
<img style="margin: 0px auto 15px; padding: 3px; border: 1px solid #e6e6e6; outline-width: 0px; background-color: rgba(255, 255, 255, 0.701961); max-width: 100%; text-align: center; height: auto; display: block; vertical-align: bottom;" height="171" width="470" src="https://blog.rpdata.com/wp-content/uploads/2014/02/VEE.jpg" alt="VEE" class="aligncenter size-full wp-image-2859">
Average vendor discount excludes properties sold at auction and those which have sold above their list price and measures the difference between the first advertised price and the ultimate selling price of a home.  The figure is then expressed as a percentage.  As at December 2013, the average discount for a capital city house was -5.7% and for a unit it was -5.5%.  At the same time in 2012, discounting levels were recorded at a much higher -6.9% for houses and -6.3% for units.  The current levels of vendor discounting are the lowest they have been since early 2010 for houses and mid to late 2010 for units.
An analysis of sales across the combined capital cities found that over the final quarter of 2013, 29.5% of all houses and 37.5% of all units sold transacted at a price which was at or higher than the original list price.  These figures were greatly improved from the 25.3% for houses and 30.8% for units at the end of the September 2013 quarter.  Although a relatively high proportion of properties are selling above the list price, the majority of homes continue to experience price negotiation and ultimately sell at a reduction from their original list price.
<img style="margin: 0px auto 15px; padding: 3px; border: 1px solid #e6e6e6; outline-width: 0px; background-color: rgba(255, 255, 255, 0.701961); max-width: 100%; text-align: center; height: auto; display: block; vertical-align: bottom;" height="171" width="470" src="https://blog.rpdata.com/wp-content/uploads/2014/02/TOM.jpg" alt="TOM" class="aligncenter size-full wp-image-2860">
The average time (days) on market figure excludes properties sold at auction and is measured by looking at the difference between the first advertised date of the property and the contract date once sold.  Based on a data series from the beginning of 2005, the average days on market figures for the combined capital cities are at historic lows of 38 days for houses and 35 days for units.  At the same time in 2012 the average days on market for capital city houses was recorded at 56 days and for units it was 53 days.
With homes seeing lower levels of reductions to the original list price it is no wonder that we are seeing an improvement in the average number of days on market.  Lower discounting levels mean that buyers and sellers are generally able to come to an agreement on price quicker.
<img style="margin: 0px auto 15px; padding: 3px; border: 1px solid #e6e6e6; outline-width: 0px; background-color: rgba(255, 255, 255, 0.701961); max-width: 100%; text-align: center; height: auto; display: block; vertical-align: bottom;" height="174" width="470" src="https://blog.rpdata.com/wp-content/uploads/2014/02/VEE-by-TOM.jpg" alt="VEE by TOM" class="aligncenter size-full wp-image-2861">
Looking at the level of discounting taking place in the market across the average time on market we see that well priced new stock is selling quickly at a very low discount level.  Across house and unit sales, homes that sold in less than 30 days had an average vendor discounting level of -3.3% in December 2013. 
At the same time, those homes that sold between 30 and 60 days had an average discount of -4.7%, -4.9% was the average discount for homes selling between 60 and 90 days, homes sold between 90 and 120 days on the market had an average vendor discount of -7.2% and homes which sold after more than 120 days had a typical discount of -8.5%. 
The data highlights the importance of setting an appropriate initial list price. Homes which are appropriately priced sell quickly and with a low level of discounting, whereas the longer you keep the property on the market it generally results in a larger discount in order to achieve the sale.
The improvement in both discounting and time on market is reflective of the broader housing market conditions.  Property transactions have increased measurably over the past year and home values have also risen.  These conditions are reflective of the increasing level of competition for those properties available for sale and have undoubtedly contributed to the improved discounting and time on market figures.
With mortgage rates likely to remain at their current low levels over the coming months and housing market activity likely to rebound from its usual December and January slumber, we would anticipate that discount levels will potentially improve further over the first half of 2014. The average time on market is also likely to remain at current low levels.
From a sellers perspective, setting an attractive initial list price will help to ensure that the selling process is a quick one and who knows, you may be one of the circa one third of the market that is selling their homes for more than their initial list price.
Cameron Kusher is senior research analyst at <a target="_blank" rel="nofollow" href="https://www.myrp.com.au/">RP Data</a>.
 
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ckusher-ujnxiKuFQs

About a third of homes selling above listed price - vendor discounting to fall further

Palm Beach v Portsea: Jonathan Chancellor and Margie Blok offer 30-plus insights

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Two leading international economists have forecast a property bust, if interest rates stay low and house prices continue to rise faster than wages growth.
Former top government economist Quentin Grafton has signalled the growth in house prices is a concern.
“While I am cautious enough not to claim there is a ‘boom’ that inevitably implies a bust, the recent growth in the national median house price of 9% in 2013 (14% in Sydney) is of concern, especially when it is about three times greater than nominal wage growth (and also inflation),” he will say in a speech to the Australian Bureau of Resources and Energy Economics.
“Should the house price growth spurt continue for much longer there could be an overshoot that may create an ‘overhang’.”
Australia’s ratio of house prices to income is the second highest in the world, although it remains slightly below its peak.
Grafton, now a professor with the Australian National University’s Crawford School says Australia has had one of the most rapid rises in nominal house prices of all developed countries since 1997.
Australia also has a household debt-to-income ratio of around 150%.
“The risk is that if Australia were to continue its historically low interest rates (the cash rate is at 2.5%), the housing price surge will continue,” Grafton says.
It’s unlikely the Reserve Bank will lower the official cash rate again, choosing on Tuesday to keep interest rates on hold. However, the RBA is still faced with a need to keep rates low enough to support economic growth.
“Successfully achieving all of these objectives simultaneously while avoiding a housing price boom, and in the midst of competitive devaluations from key trading partners, is a big ask of any central bank,” Grafton says.
“Given that Australia’s major banks borrow 30-40% of their funds from offshore capital markets, any rapid fall in house prices would pose a dilemma for the big four banks and would likely result in an Australian-made credit crunch.”
A UBS survey of bank chief financial officers released yesterday revealed banks are lowering their lending criteria, offering more competitive mortgages and discounting fees.
“Loan officers indicated lending standards have been loosened materially in both mortgages and large corporate lending over the last six months,” the report says.
“In housing, improved market prospects and competition were cited as the factors driving a loosening in standards. This has led to a material reduction in both price and fees in mortgage lending.”
Grafton’s predictions are not as dire as other forecasters, with United States demographer and economist Harry Dent saying this week Australian property prices will fall between 30-50%.
Dent says Melbourne and Sydney will be the worst affected and the crash will likely occur if the stock market suffers major losses or the Chinese property market declines.
“Bubbles ultimately peak when the people buying can’t afford to buy it,” he says as quoted by <a target="_blank" href="https://www.news.com.au/finance/real-estate/us-demographer-predicts-hit-to-aussie-home-prices/story-fndba8uq-1226816510923">News.com.au</a>.
“I see it like a popcorn popper, different markets are bursting at different times … but all of real estate in coastal cities all around the world is greatly overvalued and they're all going to burst whether it be 30 per cent or 40 per cent ... or 90 per cent in the worst case.”
Dent predicts the “China bubble” will burst next year and when it does, Australia will be the hardest hit.
“I see real estate going down 60-65% in the US, it's probably more like 30-50% in Australia, but that's still enough for you to say, ‘Hey why would you go buying real estate?’” he says.
Dent accurately predicted the 2008 GFC, but Australian Property Monitors senior economist Andrew Wilson told SmartCompany there will always be doomsday predictions when the market is doing well.
“These predictions are no surprise because there is a revival in the market at the moment. However they’re fruitless. They suggest catastrophic outcomes, but the underlying fundamentals and the historical evidence suggests this won’t occur,” he says.
“Equating incomes with house prices lacks relevance. The real issue is income versus mortgage repayments. The evidence clearly shows the average income required to pay a mortgage in most capitals is about 25% of weekly disposable income and that’s remained the same for a number of decades.”
Wilson says the only way there will be a major crash in house prices is if there is another global financial crisis “unlike what we’ve ever seen before”.
“We have a very rigid lending environment which is another factor in insuring a resilient housing market over the median to long term,” he says.
“Banks are competing more vigorously for market share at the moment which is pushing mortgage rates down…. But interest rate levels are really only where they were in 2008. They haven’t dropped to levels you might associate with a higher risk.”
This article first appeared on <a href="https://www.SmartCompany.com.au" target="_blank">SmartCompany.</a>
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yredrup-o4Anfe78KF

Economists warn of a property bust if interest rates stay too low

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Sydney prices skyrocketed last year, Harry Dent is <a target="_blank" href="https://www.propertyobserver.com.au/news/property-crash-is-like-popping-popcorn-especially-in-melbourne-harry-dent/2014020567560">diagnosing bubbles</a> all over the country and housing affordability is on everyone's mind. So Property Observer has turned to a range of industry experts for their thoughts on whether Australian property is overvalued.
Cameron Kusher – Senior research analyst, <a href="https://www.rpdata.com/">RPData<img style="float: right;" alt="cameron_kusher_new" src="/images/stories/2014/02/07/cameron_kusher_new.jpg" height="150" width="120"></a>
IF YOU'RE COMING TO AUSTRALIA FROM OVERSEAS, YOU MIGHT THINK OUR PROPERTY IS OVERVALUED – BUT THERE ARE GOOD REASONS FOR IT.
I don’t think you can say that the market is overvalued here in Australia. When you’re looking at examples of other countries, property here does look expensive. But there are good reasons why property prices are high in certain capital cities. Our population is so centralised, and job opportunities are centralised to a few capital city marketplaces – so there’s lots of competition for available stock. Plus there’s the fact that the supply of new housing and land for new housing is very restricted by our government, through their land releases.
So if you’re coming to Australia from overseas, you might think our property is overvalued – but there are good reasons for it.
Whether or not the price of Australian property is beneficial, and to whom, is another question for another day.
 
Catherine Cashmore – Market analyst<img style="float: right;" src="/images/stories/2013/12/12/CatherineCashmoreProfile.jpg" alt="CatherineCashmoreProfile" height="150" width="125">
YOU'D BE HARD PUSHED TO FIND ACCOMMODATION ON THE FRINGES OF OUR CAPITAL CITIES FOR LESS THAN SIX TIMES MEDIAN INCOME
It's important to draw a distinction between property and land.
The raw cost of 'building' a home has seen very little increase over the past decade or so - and therefore is not overvalued. However - due to housing policy that encourages speculation into the established sector, and fails to ensure fringe land identified for residential development, is sold close to its agricultural value - the cost of an average subdivided plot has increased more than tenfold.
Meanwhile, in the late 1990s a typical first homebuyer’s budget would have secured a modest family home, in a reasonably facilitated suburb, for three times median income. Today you’d be hard pushed to find accommodation on the fringes of our capital cities for less than six times median income, and in Sydney, it's closer to 10 times.
To some extent, lower mortgage serviceability rates buffer the effects for initial owners who generally work out how much they can borrow month to month, rather than concentrating on the total outstanding amount.
However, for prices to continue to increase, thereby inflating the 'entry cost' further, the system relies on debt being 'ever more affordable' to keep afloat, and the risk of still having outstanding mortgage debt to service upon retirement is significantly higher.
Today - due to the costs of an initial purchase, buyers enter the market later, have less time to pay off their mortgage, and often will end up reaching into their ‘super’ account upon retirement to clear the debt - after which, they obviously don't want to see the price of their biggest asset - which has been a chain around their neck in terms of monthly mortgage repayments - drop.
To some extent, it's a self perpetuating circle - voting for a politician who recognises an economy that relies on 'ever rising' house prices, is one that is ultimately set to fail, by way of an eventual sharp correction, is therefore not desirable for many owners.
But are prices overvalued?
<ol start="1">
<li>Land prices are inflated to multiples what they would be if used for other purposes - with sites often 'land banked' in lieu of any development </li>
<li>Yields are generally low - averaging around 4% for a unit and 3.5% for a house. </li>
<li>First homebuyers are having to find inventive ways to 'enter' the market if they want to gain a foothold onto the onerous housing ladder - borrowing a deposit, or being 'first time investors' and capitalising on family assistance to do so. </li>
<li>Mortgage/household debt has gone from 30% - or one third - of disposable income in the 70s, to almost one-and-a-half years disposable income today.</li>
</ol>
Therefore, ‘Yes!’ land is overvalued. But will people keep buying it?
Of course - land is a necessity to all business and commerce, as well as our personal needs - and whilst buyers are able to service the debt, there will always a market for it.
However, take careful note - as time progresses, and values increase, this significantly valuable resource will increasingly fall into the hands of  'those who can' and not necessarily 'those who need' – and the consequence of such, does not take much intelligence to guess.
Article continues on next page. Please click below.
 
 
<hr class="system-pagebreak">
Terry Ryder – <a target="_blank" href="https://hotspotting.com.au/">hotspotting.com.au<img style="float: right;" src="/images/stories/2013/10/25/Terry-Ryder-for-profile.jpg" alt="Terry-Ryder-for-profile"></a>
THE ONLY CLAIMS THAT AUSTRALIAN HOMES ARE "OVER-VALUED" COMES FROM INDIVIDUALS OR ORGANISATIONS WITH ULTERIOR MOTIVES
Australian property values are pretty much where they should be, relative to the strength of the economy, the wealth levels of the nation, the low rate of unemployment, the absence of over-supply (except in specific sub-markets) and the low level of interest rates.
Both regular affordability indexes (HIA-CommBank and REIA-AdelBank) says that affordability levels are the best they have been in 10 years. An ABS report found that, relative to incomes, our house prices are at the same levels as in 1995 and the Reserve Bank has stated on a number of occasions that Australian house prices are unremarkable by world standards.
The only claims that Australian homes are "over-valued" come from individuals or organisations with ulterior motives, mostly from the US, including the Demographia report which is published by a developer lobby group campaigning for a major relaxation of regulations "retracting" developer activity and the very strange Harry Dent who makes his living by making doomsday predictions, not one of which have ever come to pass.
 
Louis Christopher – Managing director, <a target="_blank" href="https://sqmresearch.com.au/">SQM Research<img style="float: right;" alt="Louis-Christopher-profile" src="/images/stories/2013/12/12/Louis-Christopher-profile.jpg" height="150" width="125"></a>
THERE HAVE BEEN TIMES WHERE THE MARKET HAS BEEN MUCH MORE OVERVALUED THAN IT IS NOW
The overall market is, in our opinion, only modestly overvalued. But it’s a difficult question to answer, for many reasons.
For example, if credit is turned off tomorrow, we’d have a crash in this country. And on that basis, you could say “the market is overvalued.” But assuming we continue to have low interest rates, the data suggests to me that we’re only modestly overvalued.
Looking at house price changes in comparison to total income changes – that metric suggests that property is slightly overvalued – and that’s one of the reasons that we’ve been relatively bullish on the market.
Of course if we had a cash rate at 6%, I’d say the market is overvalued, and we’d be due for a correction. One of my concerns is that the market is sensitive to interest rate changes, particularly with the number of investors in the market at the moment. When we get an interest rate rise, I believe it will negatively influence the market in a fairly significant way. Markets would be fairly susceptible to a 50 basis point increase.
But if interest rates stay the same, we only have a little bit of overvaluing. Sydney’s starting to look that way, but in the scheme of things I’ve seen worse, particularly back in 2003. I’d say it’s only moderately to modestly overvalued.
Hobart’s looking undervalued at this point in time, and Brisbane’s looking neutral – neither undervalued nor overvalued. The Gold Coast is starting to look quite undervalued now, and we’re expecting a pickup in their market.
In Adelaide, we don’t think the market’s going to do much. It’s at fair value, considering issues to do with the economy. Perth is looking a little overvalued, given that we know what’s happening with the downturn. Darwin is also looking overvalued, to an extent. And Melbourne’s only modestly overvalued.
But we don’t believe that the market in general is excessively overvalued, assuming the global economy remains in the current status quo.
You could argue that property expensive, but if I looked at the data from the last 20 years, there have been times where it’s been much more overvalued than it is now – particularly in 2003.
jrichardson@propertyobserver.com.au
 
 
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jrichardson-uRX5hFdKfN

Is Australian property overvalued? The experts have their say

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Despite talk of a housing bubble in Australia, house prices have been flat in real terms over the past six years since the pre-financial crisis peak in December 2007. The weighted average of established house prices in Australia’s capital cities has just kept pace with inflation, according to the <a target="_blank" href="https://abs.gov.au/ausstats%5Cabs@.nsf/mediareleasesbyCatalogue/CEE35CDA94704AB0CA257A4C00126898?Opendocument">Australian Bureau of Statistics</a> house price index.
Much discussion has focussed on short-term factors that have supported housing prices since the crisis: Chinese buyers, low interest rates, the switch from shares into property by investors, and the renewed willingness to take on debt since households and investors have repaired their balance sheets post-crisis.
But we need to bear in mind potential long-term drivers of house prices, one of which is population ageing. We’ve known about population ageing in Australia and other developed countries for a long time. It’s like the Queen Mary - we can see it coming from a long way off, but it’s difficult to turn around.
Predicting house prices
There have been some over-hyped predictions about the potential effect of population ageing on house prices in the past. The so-called “asset meltdown” hypothesis was fuelled by some influential <a target="_blank" href="https://www.nber.org/papers/w2794">US</a> <a target="_blank" href="https://piketty.pse.ens.fr/files/PoterbaRESta2001.pdf">economists</a>. They said that the retiring Baby Boomers would sell down their assets, like housing and shares, to pay for their retirement, causing asset prices to plunge. The infamous Mankiw and Weil paper, for example, predicted that US house prices could fall by up to 40% as the baby boomers started to retire between 1990 and 2007. Suffice to say, this didn’t happen!
My <a target="_blank" href="https://econpapers.repec.org/article/blaausecr/v_3a43_3ay_3a2010_3ai_3a3_3ap_3a240-253.htm">research</a> for Australia suggests such a prediction is way out of the ball park (as are many other predictions of calamitous change to be wreaked by population ageing – but that’s a topic for another day). That said, ageing will affect house prices. But it will be a slow-burn effect, occurring gradually over several decades, and the magnitude will be modest.
According to our <a href="https://econpapers.repec.org/article/blaausecr/v_3a43_3ay_3a2010_3ai_3a3_3ap_3a240-253.htm">analysis</a> based on both econometric estimation using historic data as well as predictions from a household behavioural model, ageing will cause house prices to be lower than they otherwise would be, by somewhere between 3% and 25% over the next 35 years.
Two factors drive the effect of ageing on house prices in Australia. First is the declining population share of 35 to 59 year olds who have the highest incidence of property purchases, including both investment and owner-occupied housing. Investment housing has increased as a share of total housing purchases in the last two decades according to <a target="_blank" href="https://www.rba.gov.au/Statistics/Bulletin/D05hist.xls">data</a> from the Reserve Bank of Australia, and it is the 35 to 59 year olds who tend to be housing investors.
Second, older people may trade down in order to release housing equity to support their retirement. The latter effect has, however, become weaker as households have the ability to <a target="_blank" href="https://theconversation.com/your-home-as-an-atm-home-equity-a-risky-welfare-tool-22000">withdraw equity</a> in their house without needing to sell it, through facilities such as equity redraw loans and reverse mortgages.
Housing bubbles and baby booms
The link between house prices and demographic change could also run the other way: from house prices to the population age distribution.
High house prices tend to reduce fertility rates according to the <a target="_blank" href="https://www.nber.org/papers/w17485">international evidence</a>, at least among non-home owners, although it may increase fertility among existing home owners. High house prices reduce the affordability of children for non-home owners, but increases the affordability for existing home-owners by increasing their wealth. In fact given financial and emotional investment in both housing and childbirth it stands to reason that these decisions are related in quite complex ways, and depend on government policies in the areas of family assistance and housing affordability. I plan to investigate these relationships for Australia with co-authors from Macquarie University and the ANU.
One of the lessons from economics is that it’s very risky to extrapolate from the past by drawing straight lines from historic data into the long-term future, for two reasons: the economy has powerful self-correcting forces that we tend to underestimate; and unexpected shocks – Donald Rumsfeld’s “unknown unknowns” – can throw the data off course for a considerable period of time.
This was the fate of Mankiw and Weil’s prediction of a possible 40% fall in US house prices over 20 years – in fact house prices rose dramatically over that period. Compared with the slow-burning effect of population ageing, events like financial booms and crises have a much greater potential to cause swings in house prices over the short to medium term – say five to ten years. And this is the period that matters for most people.
The long term is interesting and we should keep an eye on it. But we’d do well to remember the maxim of the great economist John Maynard Keynes who said: “In the long run we are all dead”.
Ross Guest is head of the department of accounting, finance and economics and professor of economics at Griffith University.
 He is an adjunct professor with the Australia and New Zealand School of Government (ANZSOG) and a national senior teaching fellow with the Australian Government Office for Learning and Teaching.
This article was originally published at <a href="https://theconversation.com">The Conversation</a>. 
 
<img alt="The Conversation" height="1" src="https://counter.theconversation.edu.au/content/22750/count.gif" width="1">
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rguest-QX7SdCCSpj

How will Australia's aging population affect house prices?

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Hi Margaret, 
Can you tell me what has happened to unit rentals in Sydney over the past two years? 
Your advice is appreciated.
Kind regards, 
Peter
 
Hi Peter,
This is almost like asking ‘how long is a piece of string!
‘Sydney’ is a very large place and unit rentals can vary greatly from area to area, depending on many things including current demand, current and future supply, housing affordability, demographics and population growth.
For example, rents in <a href="/news">Double Bay</a> are 15% higher than last year while those in <a href="/news">Mosman</a> are 2% lower.  <a href="/news">Cronulla</a> sits 1% lower than last year while <a href="/news">Alexandria</a> sits 3% higher.  <a href="/news">Woolloomooloo</a> is 7% lower while <a href="/news">Parramatta</a> is 4% higher.
As an investor, it's crucial that you have a wider view of what you are buying and you must consider many aspects alongside potential rental yield. Look at areas where the population is growing faster than average but relatively few new developments are planned.
Consider buying in suburbs which have a lot of future infrastructure plans and where it seems that the services required by the demographics of the area are considered and being supplied.
And, more importantly, don’t buy a unit just because it seems to have a good yield, or it feels like a ‘cheaper’ way to get into the market.  In some areas the units grow better than the houses and in others the reverse is true. 
This is related to the kinds of people who live there – in family oriented areas houses will always get better growth and better yields, while in areas targeting couples or singles it will most likely be the units which present the better buy. 
Buying the wrong property type for the demographics could lead to a bad investment in an area which otherwise might have presented a good opportunity.
Regards,
Margaret
Margaret Lomas is a best-selling author and writes and hosts the popular 'Property Success With Margaret Lomas' and heads up the panel on 'Your Money, Your Call', both on Sky News.
She is the founder of <a rel="nofollow" target="_blank" href="https://destiny.com.au/dotnetnuke/en-au/home.aspx">Destiny</a>.
Have a property question? <a target="_blank" href="mailto:askmargaret@propertyobserver.com.au">Ask Margaret!</a>
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What has been happening with Sydney unit rentals recently?

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A rebound in activity across Australia’s property market is having a flow on effect to other industry sectors; particularly dwelling approvals where, based on recently released Australian Bureau of Statistics (ABS) results, throughout 2013 there were 177,418 residential dwelling approvals.
Australia’s economic reliance is transitioning away from the resources sector to housing construction where according to the ABS building approvals data, there has been a sharp rebound in dwelling approvals through 2013. This is exactly what the RBA was hoping for.
Based on the ABS results, there were 177,418 residential dwelling approvals in 2013; the annual number of dwelling approvals was 15.7% higher over the year which represented the greatest annual increase since January 2011. The 177,418 dwelling approvals was also the greatest number of approvals since January 2011.
A valuable point of interest in the ABS data is that a vast majority of dwelling approvals continue to be granted to the private sector, with the public sector playing little part in the construction of new homes. Over the year, 98% of all dwelling approvals were to the private sector, which is encouraging.
The improvement across the housing sector is important for a number of reasons.
Housing construction is one of the key economic pillars that policy makers are looking towards to assist with the economic transition away from mega-infrastructure projects related to the resource sector which is winding down. Additionally, housing construction provides a significant multiplier effect on the Australian economy, providing more jobs and demand for building materials, home furnishings, appliances and white goods.
Points of interest - house and unit approvals:
• More approvals were granted for units at 77,909 approvals – an increase of 23.4% over the year
• 99,508 house approvals – an increase of 10.4% over the year which was the greatest annual increase since October 2010.
<img src="/images/stories/2014/02/06/kusher-feb-6-one3.gif" alt="kusher-feb-6-one3" height="221" width="470">
Looking specifically at the 77,909 unit approvals, this was the greatest number of annual unit approvals on record. As a result, units also accounted for a record high 43.9% of all dwelling approvals throughout 2013. Placing the heightened level of unit approvals into perspective, 10 years ago 32.6% of all approvals were for units whereas 20 years ago, they accounted for 30.0% of approvals.
Clearly, there is a significant push towards higher density development and this is particularly the case within capital cities.
While 43.9% of national dwelling approvals were for units in 2013, across the combined capital cities the figure was recorded at 52.3%.
<img src="/images/stories/2014/02/06/kusher-feb-6-two.gif" alt="kusher-feb-6-two" height="236" width="470">
Looking across the individual capital cities, all recorded more than half of all approvals for units over the year:
• Sydney (69.2%)
• Melbourne (53.7%)
• Brisbane (57.5%)
• Darwin (63.2%)
• Canberra (67.2%)
• Elsewhere 33.6% of Adelaide approvals were for units, 22.1% in Perth and 25.6% in Hobart.
<img src="/images/stories/2014/02/06/kusher-feb-6-three.gif" alt="kusher-feb-6-three" height="233" width="470">
The results also show that more than 50% of approvals have been for units in Sydney since 1992, in Melbourne since mid-2012 and in Brisbane since early 2003. Sydney has for a long time had a focus on higher levels of densification whereas it is a relatively new phenomenon across other capital cities.
The shift to more unit approvals over houses is indicative of ongoing densification of our capital cities as well as developers seeking to utilise land parcels to their highest and best use which is often multi-level development.
<img src="/images/stories/2014/02/06/kusher-feb-6-four.gif" alt="kusher-feb-6-four" height="236" width="470">
On a state by state basis, dwelling approval increases have been broad-based where approvals are -4.1% lower than a year ago in Victoria (after a strong run up in approvals during 2009/10) and -8.7% lower in Hobart. In all other states, approvals are higher than a year ago; the largest increases were located in: New South Wales (27.7%), Queensland (22.0%), South Australia (22.6%), Western Australia (32.3%), Northern Territory (47.5%) and Australian Capital Territory (41.1%).
Tasmania is the only state where home values continue to trend lower and Victorian dwelling approvals have been elevated over recent years while other states have recorded low levels of approval.
Overall the ABS results are encouraging and highlight that dwelling approvals are increasing. Based on the trend, it looks as if the housing pipeline is set to continue growing.
Ongoing densification across select capital cities is also reflective of changing lifestyle patterns and growing demand for inner city living. Based on this, we would expect that the proportion of unit approvals will continue to grow as the population increases and many property purchasers show a preference for living closer to the centre of cities at more affordable prices than those available for detached houses.
Cameron Kusher is senior research analyst at <a target="_blank" rel="nofollow" href="https://www.myrp.com.au/">RP Data</a>.
 
 
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