&nbsp;

Developer GURNER™ Group has revealed $1.65 billion in residential sales nationally across the 12 months to December 2025, driven largely by the continued momentum of its Docklands wellness-focused precinct, Elysium Fields.

The sales result was generated across seven projects in Victoria and New South Wales, headlined by Elysium Fields, GURNER™’s $2.75 billion mixed-use precinct planned for Harbour Esplanade in Docklands.

The project has recorded more than $500 million in sales across the first three towers, equating to around 580 apartments sold.

The first tower, Helios, has now sold out of its 240 private residences, with GURNER™ preparing to release a premium penthouse collection comprising 15 three-bedroom penthouses in coming weeks.

[smartcode_project:default project_id=144441 project_image_fid=370975]

Elysium Fields is being developed on the long-held 20,000 sqm Docklands site at 208-226 Harbour Esplanade, which had remained undeveloped for more than two decades prior to GURNER™ taking over the project around four years ago.

Construction has now commenced across four towers ranging between 18 and 30 storeys, with Hamilton Marino and Maxcon appointed as builders.

Once complete, the precinct is expected to comprise around 1,100 residences, alongside retail, hospitality and public realm uses integrated throughout the site.

[smartcode_project:default project_id=144441 project_image_fid=370981]

Designed by Fraser &amp; Partners in collaboration with GURNER™ Design House, the project has been positioned around the developer’s broader focus on wellness-led residential living.

“We don’t sell apartments. We create a true luxury lifestyle that simply doesn’t exist elsewhere in the market today,” Founder and Executive Chairman Tim Gurner said.

“To deliver that requires an extraordinary level of detail, coordination and discipline across multiple verticals, from design and hospitality through to wellness and service.”

“We’ve always believed that living extends far beyond the physical residence. It’s about how you feel the moment you arrive, how you live day-to-day, and the ecosystem that supports that.” 
[smartcode_project:default project_id=144441 project_image_fid=370977]

The project’s design places a heavy focus on landscaping, wellness amenities and biophilic design principles.

Plans include around 3,700 sqm of landscaped gardens and open space throughout the precinct, alongside a retail and dining offering spanning approximately 5,000 sqm.

The broader public realm strategy centres around what GURNER™ describes as the “Path of Life”, an urban forest and landscaped pedestrian environment intended to connect the various buildings and wellness spaces across the precinct.

The apartments themselves will incorporate a range of wellness-focused inclusions, including purified air and water systems, circadian lighting, antimicrobial surfaces, and optional in-home wellness upgrades.

[smartcode_project:default project_id=144441 project_image_fid=370980]

Gurner said the company’s experience through its Saint Haven wellness clubs had directly informed the residential offering now being incorporated into Elysium Fields.

“We’re seeing a clear global shift toward longevity, performance and proactive health,” Gurner said.

“Our role is to deliver that in a way that feels seamless, highly private and beautifully resolved within the environments we create.”

A large component of the wellness offering is planned through the resident amenity and health facilities proposed within the precinct.

That includes plans for bathing and recovery facilities spread throughout the towers, incorporating mineral pools, saunas, steam rooms, flotation therapy, red light therapy and wellness lounges.

The developer is also seeking approvals for what it describes as a “reverse ageing medical clinic” within the precinct.

[smartcode_project:default project_id=144441 project_image_fid=370978]

According to project information released by the group, the proposed facility would include cryotherapy, IV infusion therapy, infrared and dry saunas, PEMF beds, MRIs, DEXA scans, brain scans and blood analysis services.

Within the first tower, Helios, residents will also have access to a dedicated amenity offering known as the Sky Private Club.

The upper 15 levels of the building will include private lounges, dining spaces, rooftop amenities and optional private wellness studios integrated within residences.

The Helios tower itself comprises 260 apartments ranging between 60 sqm and 300 sqm, including a collection of penthouses.

That includes a planned two-storey penthouse spanning around 600 sqm with uninterrupted bay views.

The Elysium Fields precinct is being delivered in partnership with Digital Harbour Holdings, a consortium that includes the Liberman family, which controls the development rights across the Docklands site.

[smartcode_project:default project_id=144441 project_image_fid=370979]

The sales result comes as GURNER™ continues expanding its national development pipeline beyond Victoria.

“We have a strong pipeline across Australia and are now focused on scaling into key markets including New South Wales and Queensland, while continuing to build on our Melbourne base,” Gurner said.

“We currently have more than $3 billion in the market, growing to over $5 billion by October, and expect to materially outperform last year in the 2026 calendar year.”

The result also reflects the continued strength of the upper-end apartment market in Melbourne, particularly for owner-occupier-focused product with large-scale amenity and lifestyle offerings.

[smartcode_project_cta:default project_id=144441]

Record result anchored by the Group’s “utopian” Elysium Fields precinct – defying market headwinds in Docklands.

Joel Robinson

Elysium Fields drive Gurner to $1.65 billion in apartment sales over 2025

National Australia Bank (NAB) will fund <a href="https://www.apartments.com.au/new-apartments/palmera-residences-gold-coast-18-garfield-terrace-surfers-paradise-qld-4217">Palmera</a>, a $1 billion, 52-level luxury residential tower being developed by Central Equity in one of the Gold Coast’s most tightly held coastal locations at Northcliffe.

The project, launched recently by <a href="https://www.apartments.com.au/developers/central-equity">Central Equity</a>, one of Victoria’s largest private residential developers, comes at a time when construction funding for large residential developments has become increasingly competitive as lenders tighten exposure to the sector.

Multiplex has been appointed the builder, and construction is now underway.

[smartcode_project:default project_id=108274 project_image_fid=365784]

Since its first project, Central Equity has delivered more than 85 residential developments with a combined end value exceeding $8 billion.

Palmera reflects Central Equity’s growing focus on the Gold Coast luxury apartment market and continues a relationship between Central Equity and NAB that dates back to the late 1980s, when the bank funded one of Melbourne’s earliest inner-city residential towers at a time when high-rise apartment living in the CBD was largely unproven.

“NAB’s funding of Central Equity’s $36 million CBD development in the late 1980’s to the financing of the billion-dollar tower today highlights the long-term relationship between the two organisations in delivering major residential projects” said Central Equity Founder and Chairman Eddie Kutner.

He said NAB’s early support was instrumental in helping establish the company’s development model.

“When we commenced our first residential tower in the late 1980s the concept of funding off-the-plan apartments was still largely untested in Australia,” Kutner said.

“NAB recognised the opportunity early and supported the project when others were uncertain. That relationship has now continued for more than 37 years across many developments.”

[smartcode_project:default project_id=108274 project_image_fid=365771]

Central Equity was established in 1987 when Melbourne’s CBD and Southbank precinct were still dominated by warehouses and commercial buildings. Fewer than 100 residents lived in Southbank at the time, and large-scale residential development in the inner city was not widely considered.

Recognising changing demographics and lifestyle preferences, the company began developing high-rise residential projects designed to bring permanent residents into the city centre.

Central Equity has provided accommodation for approximately 40,000 residents across Melbourne’s CBD and Southbank, while also incorporating supporting infrastructure including essential lifestyle facilities like retail spaces, childcare facilities and neighbourhood activity centres.

Central Equity has spent many years assembling the Palmera development site on the corner of Garfield Terrace and Frederick Street in Northcliffe, creating a supersite of around 3,300 sqm.

The developer said the Palmera apartment tower reflects its long-term view of the Gold Coast as a growing and increasingly diversified economy.

[smartcode_project:default project_id=108274 project_image_fid=365768]

Supported by infrastructure including the light rail network, major road upgrades expanded education, hospital and medical facilities and continued expansion at the Gold Coast Airport with more internation and domestic flights.

Positioned in the tightly held Northcliffe precinct, the 52-level tower will deliver 347 apartments, targeting buyers seeking a high-end coastal lifestyle, from downsizers to interstate investors.

Designed by Marchese Partners with interiors by DBI, Palmera has been conceived as a next-generation residential offering, featuring a collection of oversized apartments, with premium three-bedroom residences offering sweeping northern views stretching from Surfers Paradise through to Burleigh Heads.

[smartcode_project_cta:default project_id=108274]

NAB funds $1 billion Surfers Paradise apartment development, Palmera

Two years after completing one of the newest developments in North Sydney, developer <a href="https://www.apartments.com.au/developers/aqualand-australia">Aqualand</a> is turning its attention to the rapidly evolving St Leonards apartment market.

The developer, which completed AURA by Aqualand on North Sydney's Walker Street, has lodged plans for a 5,918 sqm site at <a href="https://www.apartments.com.au/new-apartments/33-37-herbert-street-st-leonards-nsw-2065">33-37 Herbert Street, St Leonards,</a> seeking approval for a pair of residential towers rising above a shared podium opposite Royal North Shore Hospital.

The proposal forms part of the broader transformation underway across the St Leonards-Crows Nest precinct, where former industrial and commercial sites are increasingly being redeveloped into high-density mixed-use projects tied to major transport infrastructure.

<img alt="Aqualand" data-entity-type="file" data-entity-uuid="2cc428cf-fe70-4cac-9cd5-264ad53af62c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.51.56%E2%80%AFAM.png?VersionId=otKSnHtbjAvAddOnovyXQMgcAwE6DMe1" />

According to the planning documents, the site sits “within the St Leonards–Crows Nest Strategic Centre, identified by the NSW Government as a key area for accommodating future jobs and housing across Sydney.”

The proposal has been designed by fjcstudio, formerly FJMT Studio, and is being progressed through the State Significant Development pathway due to its scale and affordable housing provision.

The scheme would comprise 413 apartments, including 46 affordable housing units, alongside retail and commercial uses fronting Herbert Street. The project would also include communal open space, landscaping, a swimming pool, gymnasium, children’s play areas and podium-level resident amenities.

Planning documents show the development would consist of a part-13, part-39 storey tower form positioned above a four-storey podium.

“The development comprises a unified podium that activates the street interface, and two setback towers to accommodate new housing supply while maintaining an appropriate human scale at ground level,” fjcstudio noted in its Design Report.

The northern and southern towers have been shaped to respond to the surrounding skyline while also limiting overshadowing impacts to nearby public open space, particularly Talus Reserve.

The design report said the differing tower heights were intended to “contribute to a varied skyline while responding to the surrounding built form context and solar access considerations.”

<img alt="Aqualand" data-entity-type="file" data-entity-uuid="36da62dc-ff9e-41f2-a7e3-7be38373751c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.51.45%E2%80%AFAM_0.png?VersionId=Mo6Rp2r.XRLTzIfg_PEEpw8NepDH8UBs" />

The site sits directly opposite Royal North Shore Hospital and within walking distance of both St Leonards Station and the new Crows Nest Metro station.

While the site itself sits just outside the formal Crows Nest Transport Oriented Development boundary, the planning documents repeatedly reference its alignment with the broader TOD objectives reshaping the Lower North Shore.

“The site is located adjacent to St Leonards Station and in close proximity to Crows Nest Metro which is within the Crows Nest Transit Orientated Development Accelerated Precinct which has been identified by the NSW Government to support housing delivery,” the Design Verification Statement noted.

According to fjcstudio, the project has been designed to respond to the broader transition occurring across St Leonards, where increasing residential density is being concentrated around transport infrastructure and employment hubs.

“The broader precinct is undergoing significant change, with a mix of existing mid-rise buildings and newer high-density developments,” the report stated.

“Recent and approved projects indicate a consistent shift toward taller built form, typically organised as tower-and-podium typologies with more active ground levels.”

The proposal includes close to 6,000 sqm of retail and commercial space across the ground floor and podium levels, designed to create a more activated street edge along Herbert Street.

Aqualand’s plans would also introduce a landscaped podium shared between the two towers, with communal open space in the form of a podium rooftop designed to support resident interaction and improve urban greening outcomes. The scheme would also introduce pocket parks at the northern and southern ends of the site, including a landscaped area at the corner of Herbert and Ella streets designed to improve pedestrian amenity and soften the streetscape.

&nbsp;

The proposal is being progressed through the NSW Government’s Housing Delivery Authority pathway, which was introduced to accelerate housing supply across the state. The application was declared State Significant Development in April 2025 following an expression of interest process.

<img alt="Aqualand" data-entity-type="file" data-entity-uuid="faf6d97d-2671-454f-b85a-fe1c6a7be608" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.51.49%E2%80%AFAM.png?VersionId=diVd28OBVr5.YV.7prrOz.uAanwwwm7a" />

St Leonards has been particularly active with new developments in recent weeks. Developer SP Setia’s <a href="https://www.apartments.com.au/news/nsw/first-look-sp-setia-targets-st-leonards-skyline-with-40-storey-tod-tower">plans for a new 42-storey tower</a> recently went on exhibition through the same pathway, while <a href="https://www.apartments.com.au/news/nsw/first-look-stockland-plans-52-storey-538-apartment-st-leonards-tower">Stockland’s 52-storey tower proposal</a> was also recently unveiled.

Aside from the St Leonards project, which is expected to take around nine months to move through the approvals process ahead of a potential 2027 launch, Aqualand is also preparing to launch Boronia, a new apartment project in Roseville comprising around 111 apartments on Larkin Street.

The developer also has approvals in place for the next stage of the Barangaroo precinct, which will feature new residential, retail, hospitality and community uses, alongside a new metro entry across the five-hectare site.

More than 50 new retail destinations are planned for Central Barangaroo, alongside a 270-metre-long boulevard connecting Hickson Park to Nawi Cove. Together with Harbour Park, more than 50 per cent of the precinct will comprise public open space and parkland.

First look: Aqualand joins St Leonards apartment party

<section data-scroll-anchor="false" data-testid="conversation-turn-5" data-turn="user" data-turn-id="e65dbe94-e3b6-47f7-b62a-9cbb30c9bf79" data-turn-id-container="e65dbe94-e3b6-47f7-b62a-9cbb30c9bf79" dir="auto">Time &amp; Place’s plans to transform the former David Jones factory building in Surry Hills into a mixed-use residential precinct have gone on exhibition through the NSW Government’s In-fill Affordable Housing pathway.</section>

<section data-scroll-anchor="false" data-testid="conversation-turn-6" data-turn="assistant" data-turn-id="request-WEB:f4d533b7-64a5-413d-86fd-5c99649c2b73-2" data-turn-id-container="request-WEB:f4d533b7-64a5-413d-86fd-5c99649c2b73-2" dir="auto">
The Marlborough House proposal, lodged for the <a href="https://www.apartments.com.au/new-apartments/marlborough-house-47-97-marlborough-street-surry-hills-nsw-2010">47-97 Marlborough Street</a> site, would see the adaptive reuse of the heritage-listed warehouse building alongside the construction of new residential additions and a separate apartment building on the northern portion of the site.

The proposal seeks approval for 172 apartments across three buildings, including 15 per cent affordable housing managed by a community housing provider for at least 15 years from occupation.

<img alt="Marlborough" data-entity-type="file" data-entity-uuid="5d1d3c2a-bf13-47d6-a335-7c01102cdee1" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.29.36%E2%80%AFAM.png?VersionId=cjMYrbR.BLUlWH4dar0RVDDo0bG.u2YT" />

Interior view from the Northern Building Penthouse overlooking the park

&nbsp;

The redevelopment is planned for the prominent 3,413 sqm site bounded by Marlborough Street, Goodlet Street and Lansdowne Street, directly opposite Eddie Ward Park and around 200 metres from the Surry Hills light rail stop.

Time &amp; Place acquired the former David Jones building in 2024, marking the first time the property had changed hands in around 50 years.

Designed by Wardle, the proposal centres around the adaptive reuse of the former David Jones factory, originally constructed between 1913 and 1935 in the Inter-War Chicagoesque architectural style.

Wardle noted in its Architectural Design Report that the building “occupies a significant place in the industrial and cultural history of Surry Hills” and at its peak was “the largest department store manufacturing facility in Australia, employing over 800 people and fuelling the growth of Sydney’s fashion and retail industries.”

The practice said the project positions itself “not as an isolated intervention, but as a contributor to the civic, social, and architectural grain of the precinct.”

The proposal would deliver 75 apartments within the retained southern heritage building, 59 apartments within the central addition, and a further 38 apartments within the new northern building fronting Lansdowne Street.

Planning documents show the scheme would comprise a mix of heritage apartments, new-build apartments, townhouses and penthouses.

<img alt="Marlborough" data-entity-type="file" data-entity-uuid="57758518-40a3-4b83-958c-d06e96a2cffa" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.29.42%E2%80%AFAM.png?VersionId=VerlX9ST5xgBi8.1_YRsqdWTJeT6ygjs" />Interior View of the Heritage Building Apartment

The development would also include a ground-floor retail tenancy on the corner of Marlborough and Lansdowne streets, rooftop communal open space, a landscaped pedestrian link along the western edge of the site, and basement parking accessed from Lansdowne Street via a car stacker system.

&nbsp;

The scheme emerged from a competitive design process run by Urbis, with Wardle ultimately selected as the winning architect ahead of FJC Studio, TZG, Architectus and Wilkinson Eyre.

The Design Integrity Panel later described several aspects of the Wardle scheme as fundamental to the project, including “the stepped character of the new addition to the north of the site”, the landscaped western pedestrian link, and the “garden arrival” experience separating the original Marlborough House from the heritage addition.

Wardle’s design heavily references the site’s industrial and heritage history, while also responding to the surrounding Surry Hills streetscape.

The Architectural Design Report describes Surry Hills as “a finely grained neighbourhood with beautiful and expressive brickworks throughout the suburb,” with the proposal introducing a material palette intended to sit comfortably alongside the existing warehouse fabric and neighbouring terraces.

The report also outlines the project’s relationship with Eddie Ward Park and the broader landscape context of the area.

“Marlborough House occupies a site of deep cultural memory and the neighbouring Eddie Ward Park is of local ecological significance, where natural systems, topography, and stories have long shaped human experience,” Wardle noted in the report.

The architects said the proposal sought to “rebind built form to Country” through landscape, materiality and the adaptive reuse of the heritage structure.

<img alt="Marlborough House" data-entity-type="file" data-entity-uuid="9ae3f2f9-c85f-477a-a6f8-b43f6cb97c41" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.29.53%E2%80%AFAM.png?VersionId=B.qUCLqRvJOR.n9CvYcTpaknIX9LuqKZ" />

The project is also being progressed under the NSW Government’s in-fill affordable housing provisions, allowing developments that include affordable housing to access additional height and floor space incentives.

Under the plans, 2,593 sqm of the project’s floor space would be dedicated to affordable housing, slightly exceeding the required 15 per cent threshold.

In its Design Excellence Strategy, Urbis said the project aimed to “sensitively adapt and enhance the heritage-listed building on site through alterations and additions that preserve its historical significance” while delivering “high-quality market and infill affordable housing development in Surry Hills.”

Time &amp; Place has been one of the most active developers nationally in the last 12 to 24 months. Late last year they completed&nbsp;The Queensbridge in&nbsp;<a href="https://www.apartments.com.au/developments/southbank-vic-3006">Southbank</a>, a mixed-use tower with 353 apartments and a hotel. They are currently selling Park Modern, 246 apartments near the famous Botanic Gardens in&nbsp;<a href="https://www.apartments.com.au/developments/south-melbourne-vic-3205">South Melbourne</a>, and have future projects, <a href="https://www.apartments.com.au/new-apartments/the-wilmot-173-burke-road-28-hope-street-glen-iris-vic-3146">The Wilmot</a>&nbsp;in&nbsp;<a href="https://www.apartments.com.au/new-apartments/glen-iris-vic-3146">Glen Iris</a>, the redevelopment of the Northcote Plaza, and another tower in South Melbourne.

The developer broke into Sydney just a few years ago with Two Tides in Manly. They have another project nearby, which is at the ultra-luxury end of the market on&nbsp;<a href="https://www.apartments.com.au/buildings/shoreline-manly-beach-89-90-north-steyne-manly">North Steyne</a>, fronting the beach.

It is also continuing to work through the <a href="https://www.apartments.com.au/news/nsw/first-look-time-place-settles-on-design-for-the-chimes-potts-point-redevelopment">redevelopment of The Chimes building</a> on Macleay Street in&nbsp;<a href="https://www.apartments.com.au/developments/potts-point-nsw-2011">Potts Point</a>, as well as a project on <a href="https://www.apartments.com.au/news/nsw/time-place-to-take-on-mosman-apartment-market">Mosman's Redan Street</a>.
</section>

First look: Time & Place unveils Marlborough House redevelopment designs for former David Jones warehouse in Surry Hills

The residential transformation of St Kilda Road is set to continue into with more new apartment plans for the sought-after boulevard.

Wing Tai Asia has lodged plans for a major residential tower at 464-466 St Kilda Road, replacing the former VACC House with an 18-storey mixed-use development designed around a retained heritage podium and a sculpted contemporary tower.

The proposal, prepared under Victoria’s Significant Residential Development with Affordable Housing pathway, would deliver 325 apartments and ground-floor retail across the prominent 4,653 sqm boulevard site in Melbourne’s St Kilda Road North Precinct.

The project centres on the adaptive reuse of the site’s heritage-listed VACC Building, an eight-storey office designed by Bernard Evans that has occupied the address for decades. Planning documents state the development would involve “carefully dismantling and conserving off-site the original metal fabric of the podium visible from St Kilda Road,” before reinstating it as the defining frontage of the new scheme.

Above the restored podium, Wing Tai is proposing a curvilinear residential tower. The scheme includes 172 one-bedroom apartments, 63 two-bedroom apartments, 66 three-bedroom apartments, and 24 four-bedroom apartments, alongside two ground-floor food and beverage tenancies fronting St Kilda Road.

The tower has been designed with substantial articulation and variable setbacks to minimise perceived bulk and maintain view corridors along the boulevard. Urbis, which prepared the planning report, said the design “has been significantly articulated through a curvilinear design” with “an interplay with materials, façade expression and depth” to create visual separation and visual interest.

The proposal also includes 254 basement car spaces, landscaped pedestrian links connecting St Kilda Road and Queens Lane, and a biophilic landscape strategy featuring canopy trees, raised planters, cascading greenery and a glass oculus pool overlooking the eastern frontage.

Planning documents confirm the $270.1 million development will contribute 3 per cent of project costs to the Social Housing Growth Fund as part of the application process.

Wing Tai acquired the St Kilda Road property in 2018 alongside Abacus Property Group for $95.38 million, before later consolidating ownership of the site. The property previously served as the Victorian Automobile Chamber of Commerce headquarters for around 60 years.

The transformation of the St Kilda Rd boulevard is already beginning to materialise, with a number of high-profile projects recently completed, launched, or approaching launch as developers continue to back the long-term appeal of the precinct.

Among the most notable recent completions is Louise by Samuel Property Group, just off the strip on Queens Lane, the same pocket Hirsch &amp; Faigen recently launched The Queensbury. Mirvac is too on the same street with The Albertine, which is approaching completion.

Dexus recently secured approval for its slice of St Kilda Road, while Gurner also has approved plans for the precinct.

Wing Tai unveils 325-apartment St Kilda Road tower on former VACC House site

APRA

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GUEST OBSERVER
The RBA continues to face a tricky trade-off. Low interest rates are needed to support the rebalancing of growth towards the non-mining sectors and encourage the AUD to fall. At the same time, low rates are also stoking a housing price boom in some cities, particularly Sydney (up 40% in three years) and to a lesser degree Melbourne (up 24%). 
In response to this challenge, the Australian Prudential Regulation Authority (APRA) has been turning up the dial on lending standards, particularly as growth in lending to housing investors has been running ahead of the 10% target pace. Most of the major banks have reduced discounts on lending rates to housing investors in recent weeks as a result. Of course, this comes at the same time that the RBA has delivered another 25bp cut, on 5 May, so broader financial conditions are looser.  
With the APRA more focused on managing the financial cycle, the RBA may be able to increasingly shift the balance of its focus to supporting the real economy. This month brought further signs of rising household demand: dwelling approvals are lifting and thisis feeding through to retail sales. However, the capital expenditure survey still shows few signs that non-mining businesses are prepared to ramp up their investment plans, which is the next stage of the rebalancing act. The labour market looked more promising, withsigns of an improving business sector outlook, although it is too early to be confident.
The Federal budget, delivered in early May, included measures that were a bit more supportive of growth than last year’s budget and drove a modest increase in consumer sentiment. The AUD has also fallen, as the USD has appreciated, which is helpful for growth, although, on our estimates, it still remains too high for the RBA’s comfort.
We expect the RBA to be on hold in coming months as the central bank watches for the impact on local economic activity of the 50bp of cuts already delivered this year, monitor the impact of the APRA’s tightening measures on the financial cycle, and hopes for a lower AUD.
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<img src="/images/2015/05/29/700_hsbc1.jpg" alt="" width="738" height="327">
Weak business investment outlook holding back growth
This month brought more signs that growth is still running at a below-trend pace and that this may continue for some time yet. Although the rebalancing of growth, from being led by mining investment to being supported by non-mining sectors, is underway, it has been slow.
Housing construction has been picking up strongly and retail sales have been rising, but this is yet to feed through to a pick-up in non-mining businesses investment intentions, which is the next stage of the rebalancing act. This month’s Q1 capital expenditure survey continued to report that non-mining businesses see their investment falling in financial year 2015-16 (Chart 1). There are a range of potential reasons for this weak outlook, including that business confidence has remained subdued (for more on this see: Downunder Digest: Australia’s weak investment outlook, 25 May 2015).
Labour market data look better, but are they believable?
On a more positive side, this month’s labour market data continued to suggest some improvement. According to the monthly survey, employment was growing at 1.5% y-o-y in April and there has been an even stronger pick-up in total hours worked, which is often a precursor to a further rise in jobs growth. 
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The budget is less of a drag, but the AUD is still too high
This year’s budget, delivered in early May, saw fiscal policy settings move in the right direction to be less of a drag on growth than before, although, according to our estimates, the budget still was not an outright stimulatory setting. The government backed away from its previous austerity plans and allowed the budget deficit to expand in line with its lower tax revenue estimates. The budget also contained a planned boost to childcare subsidies and a tax cut for small businesses. As a result, the fiscal impulse should be less of a drag on the economy than estimated in last year’s budget (Chart 3).
However, the AUD still remains too high for the RBA, which means it remains a headwind to the rebalancing of growth towards non-mining sectors. We think the RBA would be more comfortable with the AUD around USD0.70 or 10% below the current level (Chart 4).
Asset price worries see the APRA tighten lending standards
With a pick-up in non-mining business investment needed, and the RBA trying to get the AUD to depreciate to assist the rebalancing process, the cash rate was cut to a new record low of 2.00% earlier this month.
However, very low interest rates are also driving a strong pick-up in a number of asset prices, particularly housing prices in Sydney and to a lesser extent in Melbourne, as well as strong growth in commercial property prices. Sydney housing prices are growing at a y-o-y pace of 15% and are up 40% over the past three years, with most of the activity being driven by property investors (Chart 5 and 6).
In the face of growing risks of asset price misalignments, the Australian Prudential Regulation Authority (APRA) has been turning up the dial on lending standards since late 2014. The dial appears to have beentightened up further in recent weeks, following March credit data, which showed system-wide lending to investors growth of 10.4% y-o-y, above the APRA’s preferred ceiling of 10% growth (introduced in December 2014). In recent weeks, Australia’s major banks have reduced discounts on lending rates to housing investors, which seems likely to reflect the prudential regulator’s tightening.
<a href="/images/2015/05/29/700_hsbc3.jpg" target="_blank">Click to enlarge</a> 
<img src="/images/2015/05/29/700_hsbc3.jpg" alt="">
APRA has also announced that it has further measures available to use, if necessary: including additional oversight, potentially increasing capital requirements on lending, and applying strict limits (rather than soft targets) on particular types of lending (‘macro-pru’).
The RBA needs to balance the financial cycle and the real economy
With the APRA more focused on managing the financial cycle, the RBA may be able to increasingly shift the balance of its focus to supporting the real economy. Nonetheless, comments by the RBA’s Deputy Governor, Philip Lowe, following a recent speech, highlight that the central bank still has concerns about asset prices. He noted that ‘household debt is high, property prices are very high, household income growth is slow, the unemployment rate has drifted up – all those things would suggest there has been an increase in the level of risk, particularly as people have bought property for investment purposes’.
Having just delivered a further 25bp cut in the cash rate earlier this month, we expect the RBA to be in ‘watch and wait’ mode. The RBA will be watching for signs that lower interest rates and the government’s more positive budget message could drive a lift in business confidence, which may eventually translate into a pick-up in business investment over time. The central bank will also be watching for signs that the APRA’s tighter lending standards may see a pull-back in the pace of growth in the Sydney and Melbourne housing markets and particularly reducing investor’s appetite for involvement.
Finally, the RBA will continue to wait for the AUD to fall further. It is clear that the central bank would prefer an AUD depreciation to do the work for it in terms of further supporting the rebalancing of growth. However, if the AUD does not fall, the recent tightening by the APRA may allow the RBA to consider further cuts without excessive concern about overinflating asset prices.
<a href="https://www.about.hsbc.com.au/hsbc-in-australia/management-team" target="_blank">Paul Bloxham</a> is Chief Economist (Australia and New Zealand) for HSBC. 
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po-LsXgBTHBmX

Sydney's property prices and the RBA's tricky trade off: HSBC's Paul Bloxham

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May 2015 marks a new era in Australian real estate. The rolling out of a variety of measures by banks to tighten credit policy on loans for investment properties will cause unintended and harmful consequences. From higher interest rates, to bigger deposits, and tougher loan serviceability assessments, we have already seen a number of banks bow to the pressure applied by Australia's banking regulator, APRA.
While I can't say that some form of change came as a great surprise I must say that I am bemused. It highlights just how out of touch regulators are with the real world and the distinct lack of initiative and lateral thinking that people in high places have.
APRA's concern directly relates to the two consecutive years of 15% price growth in Sydney's property market. In addition to being worried about the general sustainability of Sydney's market, the concern ~ understandably so ~ is the size of Sydney investor's debt (the median property value is about to tip $1 million; that’s a lot of coin to put down on a single asset).
Propertyology has publicly expressed concern about Sydney's market for a year or so. In our article titled <a href="https://mail.privatemedia.com.au/owa/redir.aspx?SURL=TmOKAgIe3oZ2VdJTROX84_z_q1nl0_QOLLtsovUkaDsi-YYWxWbSCGgAdAB0AHAAOgAvAC8AdwB3AHcALgBwAHIAbwBwAGUAcgB0AHkAbwBsAG8AZwB5AC4AYwBvAG0ALgBhAHUALwB3AHAALQBjAG8AbgB0AGUAbgB0AC8AdQBwAGwAbwBhAGQAcwAvADIAMAAxADQALwAwADQALwAyADAAMQA1AC0AMAAyAF8AUAByAG8AcABlAHIAdAB5AG8AbABvAGcAeQBfAFMAeQBkAG4AZQB5AE8AdQB0AGwAbwBvAGsALgBwAGQAZgA.&amp;URL=http%3a%2f%2fwww.propertyology.com.au%2fwp-content%2fuploads%2f2014%2f04%2f2015-02_Propertyology_SydneyOutlook.pdf" target="_blank">House-Of-Cards</a> we warned that intervention by APRA was a distinct possibility. Now it has happened.
But Propertyology's bemusement is due to the broad brush implementation of changes to credit policy.
Here's an important message which I (again) want to give to the 20% of Australia's population who reside in Greater-Sydney - that includes a majority of this country's regulators, policy writers, CEO's, and  commentators. WE DO NOT HAVE A PROPERTY BOOM IN AUSTRALIA. Did you read that? Understand what it means?
Property markets in locations where the other 80% of Australians live are performing perfectly normal. Of the other capital cities, Melbourne and Brisbane are currently the strongest (a typical property has grown 5-8% over the last year). Right now, properties in Perth and Darwin are starting to lose value. Adelaide, Hobart and Canberra have grown by 1-5%. What boom?
Applying tighter credit policies across 100% of the market in attempt to address a concern in 20% of the market is akin to a doctor prescribing antibiotics to an entire classroom because one kid has a chest infection.
Propertyology would argue that there has never been a safer, more viable time to invest in Australian real estate over the last decade than right now (ex-Sydney)!
World economies in general are in a recovery phase. Markets are less volatile now than at any time over the last ten years. The Australian investor's household budget is supported by the lowest interest rates we've seen in our lifetimes. Population growth remains strong. Economic development potential for Australia in the Asian Century is incredibly exciting.
When not prescribed properly, antibiotics can cause harmful side effects. One example is state and local government budgets where the <a href="https://mail.privatemedia.com.au/owa/redir.aspx?SURL=2XH9AEyRtmYccatq2LmX4LBHiXlNoF0CD2tf_Xv59G8i-YYWxWbSCGgAdAB0AHAAOgAvAC8AdwB3AHcALgBwAHIAbwBwAGUAcgB0AHkAbwBiAHMAZQByAHYAZQByAC4AYwBvAG0ALgBhAHUALwBjAGEAbQBlAHIAbwBuAC0AawB1AHMAaABlAHIALwA0ADIAOAAyADIALQB5AHQAYwAtAG0AYQB5AC0AMgAwAC0AbwBiAHMAZQByAHYAZQByAC0AcAByAG8AcABlAHIAdAB5AC0AcgBlAGwAYQB0AGUAZAAtAHQAYQB4AC0AcgBlAHYAZQBuAHUAZQAtAHMAdQByAHAAYQBzAHMAZQBzAC0ANAAwAC0AYgBpAGwAbABpAG8AbgAtAGMAYQBtAGUAcgBvAG4ALQBrAHUAcwBoAGUAcgAuAGgAdABtAGwAIwAuAFYAVwBFAG4AXwBLAEYASQB6AGIAMAAuAHQAdwBpAHQAdABlAHIA&amp;URL=http%3a%2f%2fwww.propertyobserver.com.au%2fcameron-kusher%2f42822-ytc-may-20-observer-property-related-tax-revenue-surpasses-40-billion-cameron-kusher%23.VWEn_KFIzb0.twitter" target="_blank">wide range of taxes on property transactions contributed 48.7%</a> of total combined revenue in 2013/14.
And then there’s the unsustainable reliance that Australians have on taxpayer-funded pensions (we are forking out $400 million per day, and growing). Encouraging people to invest during their 45 years in the workforce is the logical solution to living a comfortable lifestyle when they exit the workforce.
What is it with those who carry on as if 'investment' is a dirty word?
Legislators are right to be concerned about Sydney and the future household budgets of those who have invested there. But markets tend to have a way of smoothing themselves out soon enough. Antibiotics weren't needed when Brisbane property values grew 30%+ in 2003.
If intervention is considered necessary now those people in their ivory towers would have been wiser to cap loan-to-value ratios just on Sydney property. But, then again, the words 'legislator' and 'common sense' never go together.
Notwithstanding the lazy credit policy changes, property market fundamentals remain unchanged. Many markets across Australia are entering the recovery and upswing stages of the cycle. Propertyology is actively buying properties in a variety of regional locations across the country and a couple of pockets within capital cities.
Right now is one of the best periods for property investors for some years. But, you'll need to have a strategy to deal with the unwanted side-effects of the recklessly prescribed antibiotics.
 
<a name="_GoBack" href=""></a>Simon Pressley is Managing Director of Propertyology, a REIA Hall Of Fame Inductee, property market analyst, accredited property investment adviser, and Buyer’s Agent. <a href="https://mail.privatemedia.com.au/owa/redir.aspx?SURL=rC2QG79lYWrMWvVdgzlx1bfCD77gHA38Bdx1AxmR8cgi-YYWxWbSCGgAdAB0AHAAOgAvAC8AdwB3AHcALgBwAHIAbwBwAGUAcgB0AHkAbwBsAG8AZwB5AC4AYwBvAG0ALgBhAHUALwBtAG8AcgBlAC0AdABoAGEAbgAtAGEALQBiAHUAeQBlAHIAcwAtAGEAZwBlAG4AdAAvAA..&amp;URL=http%3a%2f%2fwww.propertyology.com.au%2fmore-than-a-buyers-agent%2f" target="_blank">Propertyology works exclusively with property investors</a> to purchase properties in strategically chosen locations all over Australia.
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spressley-sBoeMhannA

What is it with those who carry on as if 'investment' is a dirty word? Simon Pressley

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The RBA deputy governor Philip Lowe says recent measures from banking regulator, the Australian Prudential Regulation Authority (APRA) were having a "positive, albeit modest, effect".
"In the past couple of weeks you've seen a number of banks say they're requiring larger deposits for investor loans, they're offering smaller discounts on interest rates and smaller rebates, they're requiring higher serviceability levels," Dr Lowe said at yesterday's Thomson Reuters regulatory summit in Sydney.
But he added that the use of macroprudential tools can only be pushed so far.
"This is an issue that's very clearly on our radar screen. How far can you push the tighter regulation of the banking system without causing the same volume of loans to be made but just through a different financial intermediary," Dr Lowe said.
"In the '70s and the '60s we had a lot of the tools that are currently in vogue and we ended up getting rid of them was because what happened was that institutions found out ways of getting around the rules.
"Finance is very flexible and people are very good at moving the money from the people who have it to the people who want it."
He said Australia has not experienced rapid growth in non-bank loans yet, but any tougher regulations would make that far more likely.
"Maybe a few more loans are being made through non-bank lenders than through the banking system as a result of the tougher requirements, but it's very much at the margins," he said.
"But it's a margin that we do need to watch very carefully, and history tells us that if you make the incentive too misaligned between the banks and the non-banks then the funding will follow to the non-banks."
"My conversations with a number of banks around the country [suggest] the various APRA measures are having an effect," he said. 
"The measures so far seem to be having a positive albeit modest effect and it is worthwhile seeing how those play out.
"My subjective assessment would be the level of risk in bank mortgage portfolios has risen over the past couple of years."
Dr Lowe said the RBA was watching the steps taken in New Zealand.
"We follow these issues very carefully. Of course New Zealand's not the only country that's implemented some type of macroprudential regulation," he said.
"The number of countries that have done that over recent times is very large and so we watch, study the experience of other countries carefully."
"It is entirely appropriate that (Australian) households are careful as well because the level of risk there, while I don't think it is extreme, it has picked up and both financial institutions and households need to respond to that," he told the conference in Sydney.
"Household debt is high, property prices are very high, household income growth is slow, the unemployment rate has drifted up – all those things would suggest there has been an increase in the level of risk, particularly as people have bought property for investment purposes.
"In that environment, it is entirely appropriate [the banking regulator] APRA has a very close dialogue with financial institutions about the risks in those portfolios, and makes sure there are plenty of buffers there in case things don't turn out so well."
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jchancellor-FAypfDUnLy

RBA warns on heightened level of property investment risk

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The latest commercial property borrowing data has been released by the Australian Prudential Regulation Authority (APRA) for the March 2015 quarter. Quarterly ADI Property Exposures contains information on ADIs’ commercial property exposures.
ADIs’ commercial property exposures were $234.2 billion, an increase of $15.1 billion (6.9%) over the year. 
Commercial property exposures within Australia were $193.3 billion, equivalent to 82.5% of all commercial property exposures.
<div class="page" title="Page 6">
<div class="layoutArea">
<div class="column">
As shown in<a href="https://www.apra.gov.au/adi/Publications/Documents/1503-QAPES-March-2015.pdf" target="_blank"> Figure A</a> (below):
 
<img src="/images/2015/05/27/Screen%20Shot%202015-05-27%20at%201.17.10%20PM.png" alt="">
<ul>
<li>major banks held $202.3 billion of commercial property exposures, an increase of $6.6 billion (3.4%) on 31 December 2014 and $12.3 billion (6.5%) on 31 March 2014;</li>
<li>other domestic banks held $14.0 billion, a decrease of $0.4 billion (2.7%) on 31 December 2014 and an increase of $1.5 billion (11.7%) on 31 March 2014;</li>
<li>foreign subsidiary banks held $4.1 billion, an increase of $0.2 billion (5%) on 31 December 2014 and a decrease of $0.9 billion (17.8%) on 31 March 2014;</li>
<li>foreign branch banks held $13.4 billion, an increase of $0.3 billion (2%) on 31 December 2014 and $2.3 billion (20.7%) on 31 March 2014;</li>
<li>building societies held $211 million as at 31 March 2015, a decrease of $25 million (10.7%) on 31 March 2014; and</li>
<li>credit unions held $309 million as at 31 March 2015, a decrease of $38 million (10.8%) on 31 March 2014.</li>
</ul>
The largest property exposures were office property ($70.3 billion) and retail property ($53.8 billion). These represented 30% and 23% of all exposures respectively.
Impaired commercial property exposures were $1.6 billion at 31 March 2015 and specific provisions and security held for commercial property were $1.6 billion. 
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</div>
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APRA numbers show $234 billion in commercial property lending

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Mortgage broker John Symond says he is worried that the APRA investor home loan lending crackdown will have unintended consequences given the huge increase in non-Australian residents buying property.
"I am just worried that there is not going to be unintended consequences here because you might find these foreign investors have even a bigger go because regular Australians are going to find it tougher to get through the hoops to be able to borrow money to buy an investment property, in most cases their future nest egg" John Symond, the founder and chairman of Aussie Home Loans said.
"I lot of these people are bringing money from China," he told Ross Greenwood on the 2GB Money News program last night.
 "Without picking on the Chinese, they have had a huge spike on new housing something like $12 billion in last 12 months - now this doesn't come under APRA as a lot bring money from China. 
"They are certainly help driving the pricing up and driving the shortage of properties available for first home buyers and people looking to buy their home in Australia.
"It is not just the Chinese there are other foreign investors who love Australia," he said.
The latest lending data suggests lenders are generally meeting the 10% growth restraint sought by APRA, though some still to sufficiently rein in the pace of investor loans.
It has been suggested more than 82% of investor lending remains within APRA’s macro prudential growth target (not materially above 10%).
While a number of lenders are comfortably below this range (around 12% of market share) and have scope to increase their exposure to housing investors, some lenders are tracking well above APRA’s macro prudential target growth range. 
The 10 per cent benchmark is not a hard limit, but is a key risk indicator for supervisors in the current environment. 
The benchmark has been established after advice from members of the Council of Financial Regulators, taking into account a range of factors including income growth and recent market trends.
ADIs with greater than $1 billion of residential term loans held 98.4% of all residential term loans as at 31 March 2015. These ADIs reported 5.3 million loans totalling $1.28 trillion.
Of these loans: the average loan size was approximately $243,000, compared to $235,000 as at 31 March 2014; $479.1 billion (37.4%) were interest-only loans; and $30.1 billion (2.3%) were low-documentation loans.
 
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Chinese buyers to benefit from APRA crackdown on local borrowers: John Symond

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<div class="entry">
April 24th, 2015 was a significant date in the Australian property investment landscape. Why? On this date, APRA (the Australian Macro Prudential Authority – an institution who helps regulates the rules of play for banks and other kinds of lenders) implemented some new rules / codes of conducts for lenders to adhere to.
The new rules mean that for some lenders who previously had very liberal lending rules and practices for local Australian property investors; had to tighten them up to comply with APRA’s policies.
Whilst it is still early days; we have seen a number of “Big 4″ lenders, as well as many other tier #2 and tier #3 lenders, begin to implement more restrictive borrowing rules for investor-based loans.
These have come in all shapes and sizes, such as (but not limited to):
- Restricting maximum LVR (loan to value ratio) allowance for ‘investment’ category mortgages from, say, 90/10 to 80/20. Part and parcel with this has been some lenders refusing to allow LMI (Lender’s Mortgage Insurance) as a capitalised cost on to loans at those higher (say, 90/10) LVR ratios.
- Removal of discounted interest rate package deals for their mortgage products; again, for investor-only mortgages (many lenders have retained discounts for owner-occupied, or PPOR – Principal place of residence – loan products)
- In light of further interest rate cuts from the RBA in recent months; some lenders have; whilst passing on rate ‘cuts’ not actually reduced their ‘calculation of repayment capability’ for mortgage applicants. What this means is, let’s say when interest rates were 0.50 basis points higher, several months ago, and lenders were calculating an applicant’s serviceability based on a scenario where interest rates spiraled to say, 7% (they run these calculations as standard for all applicants); typically when RBA rates drop by 0.50 basis points; so too should the lender’s serviceability calculation assumptions (I.e. their calculation should be using a rate of say 6.50%, not 7%). However, lenders in recent months have maintained say that 7% figure in that calculation.
These changes have substantial implications for would-be property investors: 
1) The reduced LVR allowance by lenders means borrowers need to cough up more initial deposit. Say you wanted to borrow to buy a $300K investment property. Some lenders at 90/10 LVR acceptance would only require your $30K (10%) deposit, plus purchase costs. A drop to 80/20 means borrowers need to find another $30K to make up a $60K deposit.
2) Removal of discounted interest rates also is a deterrent to first-time investors entering the market, as their interest repayments will now be slightly higher than what home owners pay. There could thus be a cooling of investors being active in many markets throughout Australia.
3) For investors who remain active or don’t perceive the above two changes to inhibit their ambitions; they’ll continue with their property investment purchases. However, they simply won’t be allowed to borrow as much. If banks are calculating serviceability based on a higher ‘worst case scenario’ forecast; the banks won’t lend as much. To some investors, this could be the difference between being allowed to buy a $500K investment property, to now only perhaps $320K – $350K. If this eventuates, this will be a game-changer in the market as it’ll wipe a lot of the Sydney and Melbourne potential investor buyers out (who can play in the Sydney and Melbourne markets with &gt;$350K, these days) and into lower-median markets such as Brisbane, Adelaide, Hobart, and some regional centers.
The role of foreign investors in amongst APRA rules for local lenders: 
And what of the foreign investors? What will be the effect on foreign investor demand of APRA-inflicted local bank and non-bank lender restrictions on investment-based loans? This is hard to infer with any kind of concrete certainty; due to all data relating to foreign residential property investors (including actual volumes of them; types of financing etc.) not being readily available to the public.
As such, there is already speculation and confusion on just how many foreign investors are using the following kinds of financing for their Australian purchases:
a) Pure cash from overseas sources/local funds, to buy (no loans required). In this instance; APRA regulations on local lenders will have zero consequence on foreign buyers; or;
b) Financing/loans given by their local country’s lenders (in these instances; the lending rules imposed by APRA on local Australian institutions don’t apply – meaning foreigners may continue to have access to great cost-efficient mortgage products, for the purchase of Australian property); or;
c) Foreign buyers who are accessing local Australian lender mortgage products. For this type of foreign buyer; the APRA rules will have the same consequence as for local buyers.
When comparing drivers for foreign investors to local investors, we must be mindful that there are so many more variables beyond purely the loan or finance structure of choice, that affects their overall attraction to buying property in this country. For instance; exchange rates, FIRB levies or taxes they must pay, the type and condition of the housing stock they have access to, to purchase, are just a few of the many other factors related to foreign investor demand in this country’s residential housing stock.
So – and I must stress this is pure speculation based on the resources and news I’ve been reading on this subject – there are two quite likely outcomes I would speculate as a result of the tighter APRA rules on local lenders, in regards to the effect of these on foreign investor interest in the market, and on residential property values as a result:
1) Local buyers (investors, not home owners) get scared off and this takes a substantial amount of ‘heat’ out of 'most' markets. I say ‘most’, because the exception (as in; the markets that will still remain hot despite the APRA rulings) will be the foreign-investor ‘obsessed’ postcodes around Australia. These are the suburbs built in areas where foreign buyers and local buyers alike; both highly desire to purchase in. I say this because though we don’t know what foreign investors are using what finance structures; a more consistent and reliable metric of measurement here, is the actual postcodes they take interest in buying within.
2) Or, more markets will remain hot anyway. Why? Because those wannabe local first home buyers (FHB’s) who were thinking of applying the recently growing strategy of ‘Keep renting and buy an investment property now instead of a home; to kick start some growth so I can have enough money for a home deposit later on’, will throw that strategic approach straight out the window and say ‘nope, forget investment, the APRA rules don’t make it worth the effort; I’m going to go for that home purchase straight off the bat; better rates, discounts, and possibly LVR’s (depending on their chosen lender…) so I might as well go ‘all-in’ and buy my dream home’. 
Unfortunately, for FHB’s who want to buy into suburbs that also happen to double as hotbeds for foreign buyers; the same bubbling of high housing prices will remain, and continue further. However, in this instance, opportunity could present for FHB’s buying in non-foreign-buyer postcodes, as the local investor volumes will dilute, which should deflate the bubble in those other postcodes enough to help FHB’s.
So, if either of these outcomes eventuate, I think it can only be a good thing for FHB’s, and less so for local investors. Foreign investors will likely remain unperturbed in their relentless pursuit of the postcodes that they so desire.
This means that in postcodes where the top 10-20 schools are, per-state (the ones where the Chinese investors specifically, are most active); prices will likely remain as high as ever.
 Cameron McEvoy is a NSW-based property investor and maintains a blog, Property Correspondent. He can be contacted <a href="https://www.propertycorrespondent.com.au/contact-us/" target="_blank">here</a>. 
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cmcevoy-Go82SmsJA9

Liberal local lending rules tightened: Cameron McEvoy

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Non-bank lenders are set to be flooded with interest from investor borrowers as loans from the Big 4 dry up in response to pressure from APRA, the loan comparison website, Mozo forecast. 
“Non-bank lenders are likely to reap the rewards of investors being turned away by the big banks,” said Mozo home loan expert, Steve Jovcevski. 
“Some investors are having applications rejected, resulting in a flurry of panicked refinancers flooding the market, especially those settling on properties as early as this week.”
“In particular, those who have bought properties off the plan will get a rude shock when it comes to financing their purchases,” he said.
"Mozo’s advice for investors is to look beyond the big four to non-bank lenders to secure an investor loan.  
"Out of 83 lenders on Mozo, 48 are non-bank lenders and not strictly under regulation by APRA," he said. 
The average Big 4 variable rate is 4.69% while the top rate from a non-bank lender is a low 3.98%. 
Top 5 non-bank loan rates:
<table border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="top" width="133">
Lender
</td>
<td valign="top" width="85">
Rate
</td>
<td valign="top" width="99">
Comparison rate
</td>
<td valign="top" width="99">
Max LVR 
</td>
</tr>
<tr>
<td valign="top" width="133">
Homestar
</td>
<td valign="top" width="85">
3.98%
</td>
<td valign="top" width="99">
4.01%
</td>
<td valign="top" width="99">
95%
</td>
</tr>
<tr>
<td valign="top" width="133">
Loans.com.au
</td>
<td valign="top" width="85">
3.98%
</td>
<td valign="top" width="99">
4.00%
</td>
<td valign="top" width="99">
90%
</td>
</tr>
<tr>
<td valign="top" width="133">
iMortgage
</td>
<td valign="top" width="85">
4.04%
</td>
<td valign="top" width="99">
4.08%
</td>
<td valign="top" width="99">
90%
</td>
</tr>
<tr>
<td valign="top" width="133">
Newcastle Permanent
</td>
<td valign="top" width="85">
4.09%
</td>
<td valign="top" width="99">
4.45%
</td>
<td valign="top" width="99">
80%
</td>
</tr>
<tr>
<td valign="top" width="133">
State Custodians
</td>
<td valign="top" width="85">
4.09%
</td>
<td valign="top" width="99">
4.42%
</td>
<td valign="top" width="99">
80%
</td>
</tr>
<tr>
<td colspan="4" valign="top" width="417">
Based on a $300k loan amount. Loans available to investors and owner occupiers.
Source: Mozo.com.au as at 22/5/15
</td>
</tr>
</tbody></table>
“Not being strictly regulated by APRA doesn’t mean it will be a walk in the park, these lenders will still be cautious as a result of the actions of the majors,” said Jovcevski.
“If you were looking to buy as an investment, it might mean a trip back to the drawing board to save more.”
“Across the board, serviceability measures will be more stringent so it’s even more important to have a solid savings history and a good payment record. Worst case scenario you may need to lower your purchase budget in order to borrow with an 80% LVR,” said Jovcevski. 
For information on property loans, rates and more, visit Mozo.com.au or <a href="http://propertyobserver.com.au/forward-planning/tools/ebooks-and-webinars/42368-get-loan-savvy-expert-tips-for-a-first-time-investment-or-refinancing-loan-in-a-free-ebook" target="_blank">click here</a> for the free Property Observer eBook, Get loan-savvy – tips for a first time, investment or refinancing loan, which helps you decide on a home loan that meets your requirements.
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Mozo forecast non-bank lenders to reap shocked off the plan borrowers in APRA crackdown

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The past few weeks have seen banks tighten up lending conditions for property investors – either charging higher interest rates or imposing lower loan to valuation ratios or both.
This is in response to increasing pressure from the banking regulator APRA (ie the Australian Prudential Regulation Authority) demanding that the 10% cap on property investor lending growth that it announced last December be adhered to. 
Those who have been around for a while might wonder what is going on. Isn’t this what used to happen in the dim dark days before the enlightenment of financial regulation in the 1980s. The answer is yes and the term “macro prudential regulation” – in reference to using prudential controls on lending to influence the economic cycle - is just a fancy term for what went on in the past. 
So why has it made a comeback? And will it work?
The focus on varying prudential controls to achieve macro-economic outcomes was quite common up until the early 1980s but went the way of the dodo when it was concluded that it was only leading to distortions in the financial system, as people found a way around them.
So while financial system regulators, like APRA, continued to ensure that prudential standards were met, from the mid 1980s varying interest rates to control the housing and economic cycle became the norm. And this worked reasonably well.
The last major boom in Australian property prices ended around 2004. This was a cracker and saw average home prices around Australia rise an average of nearly 15% per annum over the five years to the end of 2003; a massive surge in housing related credit with property lending growing 21% and property investor lending growing 30% in 2003; this in part was fuelled by property spruikers running property investment seminars on a grand scale; and there was little doubt that house price gains were being extrapolated off into the future in investors’ minds and that this in turn was driving more investment.
<img src="/images/2015/05/26/oliver1.jpg" alt="">
(Source: CoreLogic RP Data, AMP Capital)
The surge into 2003 took the property price to household income ratio from around three times to around five to six times and saw real property prices go from well below trend to well above.
As a result concern about a property bubble and poor housing affordability came to the fore. It was “cooled down”, not by prudential controls but by a combination of “jawboning” by then RBA Governor Ian Macfarlane warning against the dangers of property speculation and then the start of an interest rate tightening cycle as the economy improved. The collapse of a high profile property spruiker’s business and poor home affordability also helped. 
But while the prudential regulator made sure that lending standards were being maintained, prudential controls were not varied to achieve macro-economic outcomes.
This time is a bit different for several reasons. 
<ul>
<li>First, property price gains are nowhere near as strong – over the last five years average capital city home prices have risen at just 3.5% pa. For Sydney it’s just 6.5% pa. </li>
<li>Second, the gains are not broad based – while Sydney home prices are up 14.5% over the year to April, for the other capital cities the gain is just 1.7%. </li>
<li>Third, credit growth is running at a fraction of what was seen in 2003 with total housing related credit up 7.3% over the year to March and investor credit up 10.4%.</li>
<li>Finally, unlike in 2003 and 2004 the economy is much weaker. Back then growth had been picking up after a soft patch and was being helped by a super low $A, households happy to take on more debt – remember the line about households having an ATM in their living room - and the start of the mining boom. Now the economy has been sub-par for several years as the mining boom is unwinding. In fact, the rest of the economy needs very low interest rates.</li>
</ul>
But of course its never that simple as the RBA and regulators are aware that expressed relative to household income both home prices and household debt levels are already very high – having never really unwound from the surge into 2003-04. And so they are fearful of letting low interest rates drive them much higher given the risk to the financial system and economy should they then fall sharply.
So to balance all these cross currents there has been a return to using macro prudential controls in order to allow the low interest rates that the economy as a whole needs but at the same time to keep a lid on the property market.
Will it work? Only time will tell on this one. APRA is pretty adamant that it wants to see growth in property investment lending slow into the second half of the year and if lenders don’t tow the line then tougher action is likely. So my feeling is that it probably will work and we should expect to see a slowing in the availability of credit for property investors and as a result some slowing in home price growth in Sydney (maybe back to around 8% pa) and to a lesser degree Melbourne over the next year. However, a downturn in property prices will likely have to await the start of interest rate hikes maybe late next year or in 2017.
However, there are several risks around this. APRA’s 10% “cap” on property investor lending growth could prove too lax and on the other side its hard to know when such regulatory tightening has gone too far in which case the property market could slow more than expected. There is also a danger that it hits cities that are weak anyway (basically all the capital cities except Sydney and Melbourne). And longer term, lenders and borrowers may try to find a way around such prudential controls. 
But hopefully by then the economy will have returned to normal and we can go back to relying on interest rates to control the property cycle.
<a href="https://www.propertyobserver.com.au/https://plus.google.com/110172465327488162875?rel=author" target="_blank">SHANE OLIVER</a> is head of investment strategy and economics and chief economist at <a href="https://www.ampcapital.com.au/home" target="_blank">AMP Capital</a> and is responsible for AMP Capital's diversified investment funds. 
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Back to the past to control the property cycle: Shane Oliver

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If APRA enforce’s the assessment of a new mortgage holder’s ability to pay down their mortgage obligations the right way, it would cause a heavy blow to the Australian economy. The base assumption is that mortgage stress starts when more than 30% of household income is used to pay down the mortgage. Most households with new financing are already experiencing this stress at record low rates.
In Australia’s instance, and based on after tax income, households would only be able to borrow 3.64x the household income (unless the household already has other debt commitments) if the 7% servicability rule was to be property enforced. The only way to safely assure that new mortgage holders would be able to absorb 7% interest on a new mortgage is if it is based on the ability of the mortgage holder to manage 7% interest rates after income tax and all other debts taken into considerations have been factored in….unless you allow for dodgy measurements which Australian lenders are good at using.
<img src="/images/2015/05/25/lf_economics.jpg" alt="">As the above figure illustrated, this would mean one heck of deleveraging event in Australia if new borrowers borrow significantly less than the previous borrowers which would break down Australia’s Ponzi household lending business. Had the RBA not taken abnormal measures to save the housing market now on two occasions in the last seven years, Australia would not be in this problem so far down the road. Until then, hardly a shred of chance APRA will act tough. Like it’s associates at the RBA, talk is talk and data is data. And both have been managing a bubble, not an economy. That’s what the data tells us.
Lindsay David is the author of <a href="https://www.amazon.com.au/Australia-Australian-Credit-Property-Bubble-ebook/dp/B00JJ7UW0S/ref=sr_1_1?ie=UTF8&amp;qid=1410612321&amp;sr=8-1&amp;keywords=australia+boom+to+bust" target="_blank">Australia: Boom to Bust</a> and <a href="https://www.amazon.com/Print-Central-Bankers-Lindsay-David-ebook/dp/B00TMHEDBY/ref=sr_1_1?ie=UTF8&amp;qid=1423979661&amp;sr=8-1&amp;keywords=print+the+central+bankers+bubble" target="_blank">Print: The Central Bankers Bubble</a>. David recently founded <a href="https://www.lfeconomics.com" target="_blank">LF Economics</a> and holds an MBA from IMD Business School. He blogs at <a href="https://blog.australiaboomtobust.com" target="_blank">Australia Boom to Bust.</a>
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APRA won't act tough, just talk on property investor lending: Lindsay David

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<div>GUEST OBSERVER</div>
<div> </div>
<div>So what's going on with APRA currently?</div>
<div> </div>
<div>Firstly, the changes are not targetted at homeloans taken to purchase your homes. Rather, there is pressure on the lenders to tighten their policies for lending against, and to buy, investment properties.</div>
<div> </div>
<div>Lending to property investors is way past the speed limit, particularly in Sydney &amp; Melbourne. APRA have made it clear that the banks need to be more careful.</div>
<div>The capital aqequacy ratio's for the banks will also increase. What this effectively does it make it more expensive for banks to lend to investors.</div>
<div> </div>
<div>NAB, CBA &amp; Westpac have already announced to us that investors will not be offered discounts better that is what is published. As you know, us brokers often get discounts 30 or 40 points better than what the banks advertise. Thankfully, we expect our capacity to get much better-than-published rates will still apply to home loans for places you will live in.</div>
<div> </div>
<div>St George is one of my favorite banks, in large part due to their flexibility for investors. They have pre-warned iChoice of forthcoming changes too. For those of you wanting to land a better rate on your investment loan, or perhaps to unlock some equity, these are probably things you should be considering to do immediately, like right now. And the $1,250 Refinance Rebate is still alive. The mortgage industry is ready for a few busy weeks ahead.</div>
<div> </div>
<div>Once all the changes have been implemented, we will see stricter servicing calculations and pressure to reduce interest-only loans and 'cash-out' (equity unlocking). Also, several lenders have already ceased exceeding 80% LVR for investment property loans. On that note, it is important for anyone you know that may have a pre-approval in place for an investment property. Pre-approvals arent always what they seem to be.</div>
<div> </div>
<div>It's being branded a 'mini-GFC' but at the end of the day, it seems like we are simply going back to the old days, where speculative investment loans are harder to get and are not priced the same as your owner-occupied home loan.</div>
<div> </div>
<div>At the end of the day, the concerns held by APRA are to protect our system should we in fact be at 12 o'clock on the property cycle. You can be assured that we at iChoice are on our front foot with all changes and will kep you posted, and are more than happy to advise based on your individual goals and circumstances.</div>
<div> </div>
<div>Jason Khoury is the principal at iChoice. He can be contacted <a href="mailto:jason@ichoice.com.au" target="_blank">here</a>.</div>
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