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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I’ve made a few enemies over the last half decade by suggesting that we wouldn’t see a dramatic housing bust in Australia. 
We did get a moderate cyclical downturn in 2011 and early 2012 but prices have rebounded across the country. Price gains are actually accelerating in the major metropolises of Melbourne (+6.31% quarter on quarter) and especially Sydney where prices are up by 6.6% in just trhee months according to RP Data.
<img style="display: block; margin-left: auto; margin-right: auto;" src="/images/stories/2013/09/13/rp-data-sept-10.jpg" width="470" height="378" alt="rp-data-sept-10">
<a imageanchor="1" href="https://3.bp.blogspot.com/-gbcMDZ1ycKc/Ui9H2BDfeGI/AAAAAAAAKOQ/jqIXMlXacEY/s1600/RPD.jpg"></a>
Source: RP Data
Updating views
The housing debate can all get a bit silly and childish at times, for we’re all right some of the time and we’re all wrong some of the time. Anyone who pretends otherwise is delusional. All that really matters is that views are updated when new information and evidence comes to light.
Detractors of John Maynard Keynes famously complained that some opinions expressed by him subtly shifted over the years. On being accused of being inconsistent by a senior government official Keynes replied simply:
“When my information changes, I alter my conclusions. What do you do, sir?”
In any case, there are plenty of markets such as in Adelaide and regional Australia where the housing market 'rebound' (if you can even call it that) has been very weak in spite of the record low cash rate. Brisbane's market has also been soft although I believe it is improving.
<img src="/images/stories/2013/09/13/wargent_sept_13_two.gif" width="400" height="319" alt="wargent_sept_13_two" style="display: block; margin-left: auto; margin-right: auto;">
In my opinion, most regional markets have had their day. I’d find it very hard to look at the below chart and say with a straight face that prices in remote locations and regional centres are going to outperform household income growth in the decade ahead.
<img src="/images/stories/2013/09/13/wargent_sept_13_three.gif" width="400" height="359" alt="wargent_sept_13_three" style="display: block; margin-left: auto; margin-right: auto;">
There is still a lot of talk about positive cash flow investing in Australia, though I’m not sure why given the cheap cost of credit. If yield is the prime motivation for an investor, I wouldn’t even be looking at Australian residential property at all – you can get far better yields elsewhere such as in industrial, commercial or retail properties.
Even as an overseas investor, with a 25% deposit I can source mortgage capital in Britain at ~3.50% per annum (locals can fix at a much lower rate) leading to an enormous reverse yield gap – it’s possible to buy residential properties even close to London where the rental income is double the interest repayments and costs, and where prices are set to soar thanks to government policies aimed at causing just that outcome.
And if income is your primary goal, you’re probably trying to turn residential property into something it isn’t supposed to be. There are a range of other asset classes and investments where stronger income can be sought.
Investing out in the regions might have been a workable strategy from circa 1990-2005 as the above chart shows, but strategies and views need to be updated as conditions change. 
Australia's markets have already experienced the leveraging up phase seen in other developed countries. As the major cities grow in size and mature they are moving into the next phase, which is where residential property increasingly begins to be seen as an investment asset class, particularly in the inner suburbs.
Contrary to popular belief, Australia’s employment is not all about the mining sector - rather healthcare, construction, retail trade, manufacturing and other services are the big employment sectors.  Property investors should follow jobs growth, population growth, and particularly, follow the wave of speculative investment capital, both domestic and from overseas.
The combination of these signals and metrics are currently pointing to Sydney as the outperformer.
Outstanding returns?
For property investors to achieve outstanding returns, they could try a punt on a mining town, but the higher returns might only be achieved with a commensurate level of risk through investing in an area which is reliant upon one industry (sincerely, best of luck).
Historically, investors have done better when they hold for the longer term as this gives prices the opportunity to grow and compound, and therefore they may be better advised to seek out areas with a diversity of employment and very strong, sustained population growth such as is found in the four major capital cities.
The Aussie economy has added 123,000 jobs in the past 12 months but it’s very much a Sydney story with more than half of that amount being added in Sydney (+64,000) but Adelaide shedding jobs (-10,200) and seeing its unemployment rate rise all the way to 7.1%. No surprise, then, that Adelaide’s housing market continues to struggle while Sydney is booming.
In fact, Sydney appears increasingly likely to enter a rampant speculation phase – <a target="_blank" href="https://www.news.com.au/realestate/a-plain-house-in-an-average-suburb-has-sold-for-2385-million-as-desperate-buyers-keep-blowing-their-budgets/story-fncq3era-1226714027139">a property sold in Eastwood at the weekend for $1 million above its reserve price</a> and <a target="_blank" href="https://www.news.com.au/realestate/news/sydney-surges-into-spring-with-852-per-cent-auction-clearance-rate/story-fnd91nhy-1226715072364">crumbling hovels in the inner west</a> are fetching $900,000. Auction clearance rates have been hitting way above the arbitrary 'boomtime' 80% level and the real silly season of spring is barely even upon us.
It’s not different here
There have been a thousand articles written in Australia over the last few years explaining why "it’s not different here". 
In fact, I tend to agree. We'll likely end up with two-speed markets as Australia's population grows, with very expensive prime-location capital city suburbs which remain wildly out of whack with property prices elsewhere.
<a target="_blank" href="https://www.propertyobserver.com.au/residential/how-current-trends-can-indicate-where-to-invest-in-property-for-the-future-mark-armstrong/2012112758142">Experienced property voices have pointed out</a> that as Australian cities balloon in size, home ownership rates are likely to fall unless revised legislation is put in place to prevent the trend from  unfolding. High rates of home ownership don't, incidentally, always equate to lower prices and stability - in fact, higher rates of ownership are often synonymous with dramatic boom-bust cycles. Singapore, for example, has state policies and 40 year mortgages which encourage a home ownership rate of above 90%, but the city remains crushingly expensive.
Check out home ownership rates in cities like Tokyo, Hong Kong, London, Singapore, New York, Bangkok, Seoul, Geneva, Paris – they all hover around 50% or significantly lower, and that’s where Sydney and Melbourne are headed in the absence of legislative intervention.
The only surprising thing by the prospect of falling home ownership rates in Sydney and Melbourne is that anyone is surprised. If we pump up the Australian population relentlessly at a rate of 1.5% per annum or above as appears to be the 'grand plan' but fail to tackle supply-side reforms (and let’s face it, as a nation, broadly speaking, we are failing to do so), with a workforce changing jobs and careers more frequently than ever before, we can expect falling home ownership rates.
Notably, close to half of all mortgage financing activity in New South Wales is now for the purposes of investment, which is the highest level ever recorded for any state.
Cash rate mean reversion
With sub-trend economic growth forecast, declining mining capital expenditure, a stubborn Australian dollar at above 93 cents, steadily increasing unemployment and inflation remaining benign, in the normal course of events one would be looking for a falling cash rate, but elevated levels of real estate speculation in Sydney and Melbourne could potentially jam a stick into the spokes.
The RBA appears to have been of the opinion all along that rising dwelling prices are a necessary pre-condition in order to stimulate dwelling construction, so it should be little surprise that we have seen a housing market rebound, but the Reserve certainly won’t want asset prices to spiral uncontrollably.
Dedicated housing market crashniks have been squealing for an interest rate hike for months now, but it remains doubtful that they’ll get one until there is conclusive evidence that the unemployment rate has stopped ticking upwards.
The implied yield curve has quickly shifted in the past 24 hours to pointing at December 2014 for an effective increase in the official cash rate to a (still historically low) 2.75%, though if we’re fortunate the economy, confidence and labour markets will prove stronger than that and the next rate rise will be some time earlier in 2014.
Either way, Sydney property prices will doubtless have long since bolted by the time interest rate hikes are able to apply any sort of effective handbrake to growth.
Infamously, professor Steven Keen called a property bust back in 2008, forecasting a 40% crash in prices. By the time this upward property cycle finally reverses, prices may well indeed have moved by 40% in Sydney, but sadly not in the direction he predicted.
 
<hr>
 Pete Wargent is the co-founder of <a rel="nofollow" target="_blank" href="https://allenwargent.com/">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a rel="nofollow" target="_blank" href="https://petewargent.blogspot.com/">blogger</a>.
His new book '<a rel="nofollow" target="_blank" href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx">Four Green Houses and a Red Hotel</a>' was released on 1 September 2013.
 
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The housing bust that never was: Pete Wargent

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What a difference a week makes given Australia has a change of leadership and – woe and behold – all of Australia’s problems are removed.
If only it were that easy although consumer confidence is a key factor. National Australia Bank’s (NAB) monthly business survey, conducted prior to the September 7 federal election, showed <a href="https://www.businessspectator.com.au/news/2013/9/10/australian-news/business-confidence-surges-august-nab" target="_blank">business confidence rose</a> nine points to six, up from the -3 in August 2013.
NAB chief economist Alan Oster said while an August rate cut and lower dollar may have helped sentiment “it appears more important were political factors – including an expectation of political change and more certainty about the future policy framework.” From the election results it is most clear that Tony Abbott has a clear mandate to reform that he must fulfill and the consumer backlash will be unforgiving should there be attempts to block and delay.
In all probability the Labor party will find itself in opposition for the next six years where it is hoped in time they will learn from the mistakes they made over the past six years. Since the election it is pleasing to note that all three ratings agencies have reconfirmed Australia’s AAA credit ratings.
Following the election of a majority government this should see <a href="https://www.news.com.au/business/housing-key-to-retail-recovery-deloitte/story-e6frfm1i-1226716490137" target="_blank">retail spending pick up</a> in the September quarter, with a more sustainable improvement kicking into 2014/15. Consumers just want to read and hear good news and it was a good news week – Westpac Melbourne Institute Index of Consumer Sentiment increased by 4.7% in September to 110.6, its highest point since December 2010.
So where to now with interest rates being a good start. I really can’t see any more cash rate reductions by the Reserve Bank of Australia given the change in government. Chris Joye makes some very interesting revelations when he wrote about <a target="_blank" href="https://www.afr.com/p/blogs/christopher_joye/why_we_should_be_worried_about_australia_9gqc2CPE2hrAcikkRvyOGM" title="Why we should be worried about Australia’s housing market">why we should be worried about Australia’s housing market</a>:
"The RBA’s rate cuts have gone too far. And if they stay this low for too long, there is a real chance Australia could, belatedly, have an acute housing crash with real consequences for the economy.
"While this is not my current central case, several factors give me pause. The first is that households have not really deleveraged despite much spruiking about our “cautious consumers”.
"This highly leveraged consumer is an artefact of Australia’s even more leveraged banking system. The major banks are leveraged about 80 times across their $1 trillion home loans books. Put differently, they are only holding about $1.25 of true loss – absorbing capital against every $100 – as opposed to the “risk – weighted” value of their assets.
"A third issue is that the banking system is under tremendous pressure to maintain its internationally lofty returns on equity.
"A stunning 33% of new home loans are today being advanced with LVR’s greater than 80%. In some countries they don’t even allow banks to lend at these levels, period.
"A final concern is Australia’s housing supply challenge. We do need to build many more new homes to accommodate the circa 15 million additional residents that will live here within 35 years."
<ul></ul>
Click to enlarge
<a title="Click to enlarge" href="/images/stories/2013/09/13/simeon-sept-13-one-big.jpg" rel="shadowbox"><img src="/images/stories/2013/09/13/simeon-sept-13-one-small.jpg"></a>
Source: RP Data, Australian Financial Review
The release this week by the Housing Industry Authority revealed <a href="https://www.macrobusiness.com.au/2013/09/hia-sees-construction-green-shoots/" target="_blank">residential building approvals</a> have embarked on what can be best described as a variable path of recovery over the past 12 months, illustrated by the graph below. With the 2012/13 financial year recently concluded, and the first update to approvals in the new financial year generating much comment and conjecture, it seems timely to conduct a comprehensive update on residential building approvals across the country.
Total residential building approvals reached 158,111 in the financial year 2012/13 quite a modest increase of 5.5 % on the very weak year that was 2011/12. Following two consecutive monthly declines at the end of 2012/13, approvals started the new financial year with a partial recovery, increasing by 10.8% in the month of July 2013.
Click to enlarge
<a title="Click to enlarge" href="/images/stories/2013/09/13/simeon-sept-13-two-big.jpg" rel="shadowbox"><img src="/images/stories/2013/09/13/simeon-sept-13-two-small.jpg"></a>
People quickly forget that the mining boom enticed many from our building industry where today, as mining projects slow down, these very same builders are back doing what they did before the mining boom.
Well, Mosman stock levels went backwards this week despite a change in government. If you look at the volume of houses on the market this time last year to this week our Mosman houses are down 36% and Mosman apartments down 40%.

<hr>
Robert Simeon is a director of <a style="font-size: 14px;" rel="nofollow" target="_blank" href="https://www.rwm.com.au/" title="RWM">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 style="font-size: 14px;" 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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Change of leadership not a fix-all, but signs for economy positive: Robert Simeon

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We've recently seen buyer's agents come out against the National Rental Affordability Scheme.
Firstly, wHeregroup's buyer’s agent, director and location researcher, Todd Hunter, said he would "<a target="_blank" href="https://www.propertyobserver.com.au/news/id-rather-stick-a-fork-in-my-eye-than-buy-nras-todd-hunter/2013090464795">rather stick a fork in (his) eye rather than buy an NRAS property</a>."
Following this article, Propertyology's managing director, and Australia's Buyer's Agent of the Year in 2012 and 2013, Simon Pressley,  told Property Observer that he believes that <a target="_blank" href="https://www.propertyobserver.com.au/residential/another-expert-comes-out-against-nras/2013091064942">NRAS properties are "terrible investments"</a>.
After Property Observer published these two articles we put a call out to property professionals, and readers, to have their say about the other side of this investment.
The responses we received were varied and outspoken, including this opinion piece in <a target="_blank" href="https://www.propertyobserver.com.au/trends/my-response-to-nras-naysayers-adrian-jenkins/2013091264998?utm_source=po&amp;utm_medium=aida&amp;utm_campaign=news">repsonse to NRAS nay-sayers</a> by Adrian Jenkins, who is director of a private company, NRAS Australia,  that specialises in listing and providing information about NRAS properties.
Here are some of the highlights of our responses:
<a target="_blank" href="https://www.propertynetwork.com.au/">Property network</a>'s Stephen Lazar:
NRAS can make for an excellent investment opportunity for property investors if, and only if, the property stacks up on its own merits and you would invest in that property if it did not have NRAS. Then with NRAS as an added benefit you should grab it if your due diligence meets your investment strategy.
Think about it this way, with the income tax one would save (eg. around $7,000 through negative gearing + $10,350 tax credit per annum) within just over 2.5 years you would have ‘gotten back’ your original 10% deposit, the property remains cash flow positive and part of your financial planning is 10% paid for by someone else.
Your readers should be aware that your previous two articles were over generalised, included emotion and also contained some inaccuracies and should not let misinformation cloud their due diligence when looking for an investment property that meets their investment objectives.
NRAS because we are at the tail end of the current 40,000 licences issued is in high demand  but not all NRAS properties make for good investment opportunities, review the fundamentals that underpin the property and make an informed decision without the emotion.
<a target="_blank" href="https://www.meridiengroup.com.au/">Meridien Group</a>'s David Brown:
Consistently, NRAS can be shown to deliver a superior cash-flow outcome to a non-NRAS property. The extra cash-flow can then be directed towards either reduction of private debt or towards secondary investments.
It is the net bottom line – after costs, after discounts, after rebates and tax credits etc. that needs to be evaluated. I agree that the management costs are excessive but do not agree about exit strategies for the investor or the net bottom line benefit.
If an investor has an NRAS property they have a formula for annual rental reviews and the NRAS rebate also has annual indexation. Most property managers and landlords hold back on rent increases as they don’t like to rock the boat with a good tenant and therefore short-change themselves on their potential returns. The annual review program in NRAS is good and there are market reviews in years one, four and seven which makes sure that the market rental is in step with prevailing yields. This is a lot better than the amateur way things are done in general.
In our analysis of NRAS v non-NRAS the net cash-flow advantage is $135 per week in favour of NRAS. Given the point I made above about increasing rents, the net advantages for NRAS v non-NRAS are even greater and we estimate that there is a gap of $60,000 to $80,000 in cash for the investor to re-invest for a secondary benefit.
The selling prices of NRAS properties are generally consistent with other properties. We all know how vigilant the valuers have been lately so if the properties are over-priced, then it all falls down like a pack of cards when the valuers come into the game. We all know that the main channel for NRAS sales is via investment property agents and marketers that have fees above standard real estate commissions – but so what? If the deal stacks up then what does it matter?
There are extra costs to developers for NRAS property and these are on the increase. Submission/application fees are paid up-front to some consortiums and if the application does not get approval then that is just burnt money. There are also fees paid to the consortiums for each registration. On top of this, the lead times for approvals and the holding costs associated with that are not inconsiderable either.
Another major benefit is that the state and commonwealth governments essentially underwrite a considerable part of the investment via the negative gearing benefits and the NRAS rebates – both of which are tax free. Over 10 years, the aggregate of these payments can be around $200,000 which is about 50% of the typical contract price for an NRAS property.
From my perspective, NRAS provides higher returns for lower risk and that is why we like it for our clients. And, our clients like it and are coming back for more.
<a target="_blank" href="https://www.regardingmarketing.com.au/">Regarding Marketing</a>'s Trudi McConnell:
Like all investment there is the good, the bad and the ugly.  I have been fortunate enough to have had several viewpoints of NRAS having held a number of consulting positions across the scheme – buyer, seller, developers and consortium consultant.  There are a number of entities out there doing all sorts of unscrupulous things, but there are number of them that are not.  Just to correct the statements in the recent article;
1.	The tax free incentive is $10,350 currently and indexed to CPI.
2.	Apples with apples, the fees are charged at the achieved rent, including the reporting and tax certificates, and the property managers do not or should not charge a letting fee.  Comparatively these would see a real comparison to mainstream property management fees.
3.	It is not the federal government's core industry to run rent roles – not for profit consortiums have been tasked with this service and they do a damn good job for both tenant and investor at the extent that a number of purchasers who bought into the scheme at the outset are now in a position to purchase more NRAS properties and are doing so over and over again.
4.	Banks are lending to 90% now and are extremely supportive of the scheme. It was not the scheme that the lenders had issue with, it was the head lease arrangement which has now been replaced with a management agreements across the board.
5.	There is no price discrimination for a NRAS vs non NRAS.	There is no evidence of resales as buyers / investors do not buy them to sell them.  They buy them for the tax right offs over 10 years.
7.	Like any property investment, the buyer needs to feel comfortable about capital growth in the area, the property configuration, location, rental demand etc. if everything else stacks up, then NRAS is a bonus.
8.	Not all NRAS property developers pay those copious commissions.  At the end of the day, (at least in Queensland), the commissions need to be disclosed.  Valuer practise is to wipe commissions off the final valuation. If these are too high, the property will never settle.
I urge all buyers to do due diligence, check the developer, check the seller, check the property and check the consortium.  NRAS is a fantastic investment if it’s done right.
<a target="_blank" href="https://www.moretonbayhousing.com.au/">Moreton Bay Region Housing Company</a>'s Sean McCreanor:
I am an NRAS investor and have been investing in property for 20 years.  One of our companies, Moreton Bay Region Housing Company Ltd manages a large number of NRAS properties for our investor clients.  We have been involved with the NRAS scheme since its inception and have a very detailed knowledge of the scheme and different NRAS models.
The NRAS scheme currently offers investors $10,350 per annum indexed to the rent component of CPI over 10 years.  The $10,350 is paid via a 75% tax credit from the ATO ($7,762.50) and 25% is paid by the state government ($2,587.50).  In Queensland, the state government component is paid in cash.
The $10,350 is tax free indexed over 10 years to rent component of CPI - resulting in more than $110,000 tax free over a 10 year period.  In return for this tax benefit the investor needs to rent their property at 80% or less of the market rent.
The NRAS tenants can earn between $45,956 per annum for a single person up to$109,264 per annum for a couple with three children.  The scheme is targeted at low to moderate income households.
The management fees we charge investors vary between NRAS models.  Some of the models mandate a particular fee structure.  The lowest NRAS fee we charge is 8% of the discounted NRAS rent - which is the equivalent of 6.4% of the market rent.  The highest fees charged by some models are 13% but these generally cover all costs - let fees, postage &amp; petties, relet fees, break lease fees, bank fees, etc.
When investors are looking at NRAS properties they need to consider the usual property investment criteria plus a number of other important factors:
1. How does the price compare with other local properties of the same type?
2. Would I buy the property without NRAS?
3. What is the sales commission and marketing fee?
4. What is the NRAS management model and how flexible is it?
5. What are the ongoing NRAS fees and charges?
6. How many NRAS properties are in the project/in the area?
With a good property, in a quality location and low management fees, the NRAS incentive increases the after tax yield significantly.
As with all property purchases, investors need to be careful and ensure all the facts are known before they proceed with the investment decision.  There are spruikers in the market pushing a range of property investments - coal seam gas, mining towns, off-the-plan apartments, NRAS, etc.  Investors should be seeking full disclosure and sellers providing full disclosure on all property investments.
Accountant, investor and Property Observer reader Kevin Gatto:
 I have read a few articles regarding negatives on NRAS. I have purchased two NRAS properties and I am for it. I am an accountant and I have researched this , looked at it upside down, sideways , etc to make sure there are no loopholes that I have missed. I purchased one in Marrickville, the complex being built near the station on the old RSL site. Cost: $420,000  (one-bedroom apartment). I believe it was a fair price because the real estate agent selling via the pricelists to the public was selling for the same price.
The numbers are as follows: Market rent say $450. NRAS discount at 20% is $90. Therefore tenant able to rent at $360 per week. Benefit - no shortage of tenants, nil vacancy factor, who wouldn't want to rent something at 20% less that market rental? The $90 loss per week is tax deductible, so in my pocket I lose $59 per week or $3,068 per year
I receive a tax free credit of $10,350 per year. Benefit - so I am in front by $7,282 per year. NRAS compliance costs e.g. annual certificate is approx 7% of the incentive so $724.50, again tax deductible so loss to me of $474.54. I choose what tenant rents it, just like any other rental property investment. 
My agents commissions cost is 8-10% of the rental, little bit more than standard rental property. Benefit - the incentive is indexed by rental CPI each year. Therefore this financial year it is tax free $10,350, if the CPI is 4%, you will receive $11,642 after three years, or $12,592 after five years etc. This is adjusted three times during the 10 years when a valuation is done on the rental. The NRAS scheme is optional meaning you can opt out during the scheme with notice if you want to. I ask myself, with the above figures, why would you want to.
What this all means is, the typical rental property loses between $60 to $120 per week, so an NRAS one makes the same property $30 to $90 per week positive
As with any asset purchase, taxation considerations should not be the main driver in the purchasing decision.With property purchases, location, price , growth etc should be the reasons and NRAS adds a bit more cream to the cashflow.
With NRAS, I have two properties , one in Marrickville NSW, the second on Mackay Queensland, and they will bring in to me close to $300 per week positive cash flow, after negative gearing tax benefits , and the tax free incentives received. I can buy and forget, I don't need to put money into it, it is self funding, therefore it gives me time on my side for capital growth to kick in.
Hopefully the above has convinced you that it is not a bad scheme.  What is also interesting is that the same properties for rent can be listed at two different rentals with the non-NRAS one listed at a higher rent and would be subject to competition by the nras rent due to the 20% discount.e.g Marrickville would be listed at $450 per week, while the NRAS one would be listed at $360 per week. Which one would you prefer to rent?
Reader email (owns NRAS properties):
- I agree that maybe the capital gains over time will be questionable on some properties, but a fair reasonably priced property in a fairly well placed location eventually wins. So do your research.
-	I intend to hold onto this for longer than 10 years. At which point, it will no longer be an NRAS property, therefore negating any need for legals to sell up.
- Yes, the costs incurred through NRAS add up, but your return is still higher that the outlay. I am watching it work for me as we speak.
I did meet with a buyer's agent recently and his opinion was exactly the same as this article. It was also obvious that he could not make any money from an NRAS transaction. I also met up with a financial planner and they steered me away from property in favour of shares. The banks financial planner makes no money in commissions if you buy property. The one thing they both have in common if you ask me is that they will both give advice that will favour their wallet.
Buyer's agent Sebastian James (responding via a Somersoft call out):
As a buyer's agent myself I certainly don't disregard NRAS, I just feel it is more suited to those with a debt reduction strategy and belief that the market as a whole will be subdued over the next decade or so due to limited credit growth, as the guaranteed returns therefore become an attractive option.
Whilst this is not an argument I subscribe to, I understand the logic behind the thought process.
Lastly I think its important to note that not all NRAS properties are a like, and unfortunately for every one good NRAS company which pre vets the opportunity on its own merits and conducts upfront vals, there are countless others who don't, and simply seek to generate the biggest profit margin, regardless of the inferior quality product they are offering.
Ultimately this majority creates a generally negative viewpoint on the subject as a whole, at least that is my perception of the matter.
 
<hr>
Next week we'll put some experts head-to-head for a comprehensive debate on the matter, and we'll share even more of the opinions flooding into our inboxes.  
If you'd like to weigh in further on the debate, either for or against, email <a target="_blank" href="mailto:%20jduke@propertyobserver.com.au">jduke@propertyobserver.com.au</a> 
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Readers respond in defence of NRAS

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The election is finally out of the way and the government has a big agenda ahead of it. Right out of the gates it has announced a tax review, a financial services review, a competition review, and a review of government spending.
Importantly, the government has said that it will consult with and wants to hear from the people of Australia. This is a smart move - the expectation of a Coalition victory last week was cause in itself for improvements in confidence, and when confidence is lifted, so is spending and other factors that bolster economic activity.
So this new government brings the promise of change, but how, when, and where will they start?  I wonder which changes the general public would put through. I’m talking about the plumber in Parramatta working 12 hours a day six days a week, or the retired couple in Frankston who has seen their superannuation wither away. What would these people urge on the new government if they had the access and influence? What would you say to our new Treasurer, Joe Hockey, if you could spend the next month as his adviser?
Firstly, I wouldn’t assume Joe wouldn’t listen: he grew up in a family of small business owners and understands the plights of the average Australian well. This understanding is already evident in the Coalition’s commitment to reducing company tax rate by 1.5% and cutting regulatory burden on business.
So where would you start if you had the opportunity to speak up about the issues that matter to you?
I did a quick survey on Twitter and found that taxes were indeed at the forefront of most people’s minds. Simply put, most people think there’s too many of them and that they’re too high.
But which ones would you reduce, which would you scrap and which part of the system would you reform?
Most people understand that the political stability and regulatory structure we operate doesn’t come free. That means the tax system has to raise requisite amounts of cash before it concerns itself with fairness or efficiency. It’s a balancing act.
It’s the same with red tape. We all want an easier way of operating our businesses and creating the best possible opportunities for our families, but what red tape do we advise Joe Hockey to cut? What regulation actually makes sense and where are we tied up in unnecessary bureaucracy? When you start cutting the red tape, where do you stop?
Competition is another agenda item that affects us all. Market dominance by large conglomerates can hurt smaller businesses, which generally means that prices rise and choice reduces. This affects both business owners and consumers in industries from banking to manufacturing to supermarkets. So how we can bolster competition to create a more even playing field?
As we move past all negativity and criticism that comes with campaigning and into the command of a new government with fresh policies, now is a good time to speak up.  I worked with the Treasurer when he was Minister for Financial Services and I can tell you that this guy is not only smart and experienced, he listens.
This is probably the time to speak up. I’d love to hear your ideas.

<hr>
Mark Bouris is executive chairman of <a href="https://www.ybr.com.au/" rel="nofollow" target="_blank">Yellow Brick Road</a>, a financial services company offering home loans, financial planning, accounting and tax, and insurance.
You can contact Mark on <a target="_blank" href="https://twitter.com/markbouris">Twitter</a>.
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Confidence in new government a great start: Mark Bouris

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A surging Australian dollar to near three-month highs overnight will help to bring a big dose of realism to all this talk of expectations and confidence driving a weak Australian economy higher. As US economist Paul Krugman said, the "fairies of confidence" and the "imps of expectations" are nothing but ephemera in the greater scheme of things, there to wave their wands when all else fails. We saw this yesterday when the sharp rise in business confidence in the National Australia Bank's August business survey, but little or no impact on weak trading conditions.

Today it was a big rise, to a three-year high, in the Westpac/Melbourne Institute Consumer Sentiment survey for September, the highest level since late 2010 (when which government was in power? Why the Gillard government).

All agree the economy is waiting for the confidence fairy to emerge and convince consumers to spend, business to invest and jobs to be created. Just a sprinkle of confidence dust and the economy will be surging. If you were in the UK in 1992 after John Major unexpectedly won, you would have seen Rupert's papers pushing this line -- "Cash Happy Shoppers Celebrate Tory Win" was one Sun headline. Before, of course, Black Wednesday arrived in September that year. Before the bad times.

Much of this "confidence" stuff is economic gobbledygook -- like Tony Abbott's line that Australia is now "open for business". Improving expectations and confidence among business and consumers is imprecise and hard to formalise, and has minimal correlation with real-world outcomes.

And since the poll there has been a surge in the value of the Australian dollar -- not because of the Coalition win, but because of more evidence that the Chinese economy has stopped weakening and is now probably just starting to grow again. It underlines what Abbott, new treasurer Joe Hockey and Andrew Robb (temporary finance minister until Arthur Sinodinos has his Senate spot confirmed) ignored for the past two years: the fact that offshore investors view Australia and the dollar as proxies for the Chinese economy.

Australia is now the most exposed of all major economies to the health of the Chinese economy and, with the fifth most traded currency in the world, it's been easy for investors offshore to bet against China (go short) or go long and believe the China story. There's been a battle between the shorts and the longs, and from May onwards the shorts won. The combination of both, plus the August interest rate cut from the Reserve Bank, saw the Aussie dollar hit a low of 88.48 US.

But with Chinese economic data for July and economic better than expected, there is now a growing belief that China is recovering. Demand for the dollar is up and the currency is over 93 US cents, the highest since late June. Should China continue to recover, the Aussie dollar will rise, even if the Fed reveals next week a timetable to end its $US85 billion a month in spending.

If that happens, Abbott and Hockey will only be able to sit and watch with the same sense of frustration as Julia Gillard and Wayne Swan as a strengthening Aussie dollar starts to put a stranglehold on the economy and the budget's revenue base. Helping this is the virtuous circle of good economic management by successive governments and the RBA; we have low inflation, reasonable growth, rising labour productivity and low interest rates that have resulted from the high dollar/ high credit rating and good economic management by the federal government, and especially the Reserve Bank.

"This could very well emerge as a flash point between the new government and the regulators. House-price booms always end in tears in Australia."

This is a positive feedback loop. Like the Gillard government, Abbott will be an unwilling bystander to the fallout from years of solid, successful management of the economy and creative policy measures during the GFC.

One thing that is more within the control of policymakers is housing. The picture on housing construction has been mixed -- it looked like the sector was recovering from its post-GFC lull this calendar year, until growth tapered off. But Australian Bureau of Statistics data released on Monday showed a 2.4% rise in loan approvals (for both existing and new housing) to 52,204 in July, compared to 50,983 in June. The number of loans approved for the purchase of existing homes was 43,809 in July, the highest since 2009.

There's also solid demand for new homes, with the number of loans to finance new home construction 5265 in July. But the number of loans to buy a just-built new home was 3131 in July, the highest since March 1979. July's rise means the number of home loans approved has risen for seven months in a row, thanks to solid demand from investors (many self-managed super funds) for existing homes or off-the-plan units or apartments.

Growth in demand for new homes is what the RBA has been aiming for as part of its goal of an economy transitioning from a mining investment boom. But demand for existing homes is more problematic. House prices are now up 10% in some markets in the past year. The last thing the economy needs is a housing boom which distorts the economy and brings higher interest rates. Already APRA has signalled concerns about the rising number of home loans where the loan-to-valuation ratio is 90% or more, and has told banks to start being tough on these high LVR loans. APRA and the RBA could very well start trying to "lean against" the surge in the prices of established houses.

The RBA believes in confidence and expectations that flow from consumers feeling more wealthy as asset prices rise, but members also know that contains the seeds of the next, unwanted crisis if left alone for too long. This could very well emerge as a flash point between the new government and the regulators. House-price booms always end in tears in Australia.

Revenue-pressed states want the boom (for higher stamp duty revenues) and News Corp Australia and Fairfax media want the house price boom to continue because their online real estate businesses are the only area of growth for their troubled empires -- that's why newspapers have been talking up house price movements, auction results and other fluff for the past six months. As the ABS data shows, there's a recovery underway, but it is not doing as much to stimulate demand for new house construction as it is for existing homes and apartments.

If anything this home-price - rather than new-home - boom may become the most pressing problem for the economy, rather than the value of the dollar.

 
<hr>
 This article was originally published on <a target="_blank" href="https://www.crikey.com.au">Crikey</a>.
 
 
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Our biggest economic problem could be a housing price boom

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With seven buyers in the room, the Westpac Bank branch at 26 Hall Street Bondi Beach sold at auction this week for $6,426,000.
Colliers International agents Matthew Meynell and Brian McInally had given a $5.5 million reserve price to the Cooley Auctions who took around 75 bids for the investment property.
Its sale priced represented an approximate 4.93% yield.
Bidding had opened at $4 million on the highly desirable investment with its 512 square metre net lettable area.
Its leased to Westpac on a 5 + 5 year lease at a net $317,000 annual income. There was an apartment on top of the bank.
The site has a FSR 2:1 and 13 metre height limit.
It's a 200 metre walk to Bondi Beach.
"Due to its prime location and exceptional development potential, it will feature as one of the key eastern suburbs investment sales of 2013," the marketing said.
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Bondi's Westpac Bank branch sells

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The Aus Property Forum has tweeted out that there's a 'fear of missing out epidemic' sweeping the property market.
<a target="_blank" href="https://twitter.com/OzPropertyForum"><img alt="TWEETOFDAYNEW_sept_12" height="152" width="470" src="/images/stories/2013/09/12/TWEETOFDAYNEW_sept_12.png"></a>
Certainly, sentiment around property is back up and we're seeing investors and home buyers keen to buy again. However, their other comment, around Sydney buyers blowing their budget, just calls to attention how important it is as an investor to keep an eye on the numbers.
Even in a suburb you think will boom, look at the deal analytically, set your price and be ready to walk away. Even a hotspot suburb can't necessarily help you if you pay too much.
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Excitement causing buyers to blow budget

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Stats from Australian Property Monitors (APM), a supplier of property pricing information, has revealed that if it hasn’t happened already, by 2014 the median price for a house in Sydney will exceed $700,000.

This secures the city as the world’s second most unaffordable housing market when compared to the likes of the USA, Canada, Ireland, New Zealand, the UK and China.

For other states, the numbers are much easier to digest.

But if you’re a prospective first-home buyer wanting to purchase a house in Sydney, these stats mean a $140,000 deposit if you don’t want to incur <a href="https://www.finder.com.au/lenders-mortgage-insurance" target="_parent">Lender’s Mortgage Insurance</a> (LMI), which is generally exempt when your deposit is at least 20% of the value of the property. And add about $50,000 for <a href="https://www.finder.com.au/cost-of-buying-property" target="_blank">upfront costs</a> such as stamp duty, application and valuation fees and removalist services - the list goes on.

While investors and owner-occupiers are clearly the winners, confidence isn’t strong in the first-home buyer corner. But that doesn’t necessarily mean that young Aussies should fear the property market. The trick is that you will need to look at your situation and create a strategy to enter the property market.

The first-home owners grant (FHOG) can be useful if the conditions favour your situation, that is, if you’re buying a ‘new home’. Considering that Sydney is suffering a housing shortage and new dwellings are below the government target, some may not be able to take advantage of these grants.
 
One way to go about this is to take a shortcut and have your parents <a href="https://www.finder.com.au/home-loan-guarantors" target="_blank">go guarantor</a> (but only if your folks are willing to help). This means that your parents’ property will be used as security for your home loan, allowing you to get a home loan with a 5% deposit, plus you can save on LMI. However, you have added pressure to avoid defaulting on the loan because your parents will be liable for your debt.

If you don’t have the luxury a guarantor, then you will have to show the banks evidence of genuine savings.  This means that the banks need to see that you’ve made regular savings to reach your current deposit for a property. The good news is you can add the LMI to your principal, which means that you can borrow up to<a href="https://www.finder.com.au/low-deposit-home-loans" target="_blank"> 95% of the property’s value</a>. The bad news is paying back your LMI throughout the life of your home loan means you essentially pay back double the amount. But whether this is worth getting a home loan early or not is entirely up to you.

Another option that is increasingly popular among first-home buyers is to skip the whole process altogether and go straight into investing. Many Gen Y’ers are renting while their primary place of residence has been rented out for cash flow and an investment. By taking advantage of interest-only loans, they buy time and capital gains. Better yet, some even expand their property portfolio further, paving the way to financial independence.

Regardless of what your decision is, it all comes down to having a <a href="https://www.finder.com.au/saving" target="_parent">savings plan</a> in place, even if you only need to save a 5-10% deposit. If you want greater returns from your savings plan, then you will need to cut back on other living costs.

A deposit is like getting your foot through the door, it’s the first step. Everything gets easier after that, especially with online tools and resources to help you compare, find better deals, and understand the property and home loan market.

 
<hr>
 Michelle Hutchison is the spokesperson at <a href="https://www.finder.com.au/">finder.com.au</a>
 
 

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First-home buyers should not fear the property market: Michelle Hutchison

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Is there a tipping point in real estate? When it comes to the balance of the rental market I think there is. And I think we might have just reached it. By ‘it’ I mean that fleeting moment when the affordability and rental outlay comes into balance. It is a very delicate balance that occurs very rarely and I predict will not last long. Right now we are seeing an increase in renters looking to take advantage of the low interest rates and purchase their own property. For many, mortgage repayments are in line with rental payments. Sure rates have been low for a while now but it seems many long-term renters are only now finding the confidence to get out and invest. Perhaps they are motivated by a fear that rental availability and affordability may be set to decline. At the same time we are also seeing rapidly growing interest from property investors looking for buy-to-let opportunities. They have seen the steady increase in demand and are keen to get into the market while prices are still reasonable.  And that’s why the balance we are seeing right now is so rare and so fleeting. Demand from both the investor and the first-time buyer will quickly tip that balance. The question is which way? I think that is dependent predominantly on the mood of the investors. Will investors baulk at higher prices and withdraw from the market with a view that the rental returns will not be sufficient to fund the purchase? Or will they continue to see value in servicing the rental market and therefore be prepared to invest even as prices rise?

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Ewan Morton is managing director of the Sydney based <a target="_blank" href="https://www.mortonandmorton.com.au/" rel="nofollow">Morton &amp; Morton</a>.
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We've reached the tipping point of a balanced rental market: Ewan Morton

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One of Fremantle's oldest shopping centre’s - the iconic Atwell Arcade - has been put up for sale for the first time in 100 years, with price expectations of up to $10 million
The arcade, which fronts High Street Mall and Adelaide Street, sits on three separate titles and has a combined site area of 2,403 square metres.
The extended Atwell family has had an interest in the properties on this site dating back to the late 1890s. Major improvements, which include establishing the current arcade linkage, between High Street Mall and Cantonment Street were completed in the late 1970s.
The appointed selling agents are Miles Rowe &amp; Chas Moore from <a href="https://commercialpropertysearch.savills.com.au/151189/Sale/Fremantle/120-High-Street" target="_blank">Savills</a>. Among the tenants in the retail property are Culleys Bakery and Tea Rooms and City Beach.
The agents said the property provided a secure income stream to an investor, with opportunities to remix the tenancy profile.
Expressions of interest close on 3 October.
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