<p>Repeat buyers are one of the strongest measures of confidence in any apartment development.</p>

<p>At <a href="https://www.apartments.com.au/new-apartments/era-newcastle-west-124-126-bull-street-newcastle-west-nsw-2302">ERA</a> in Newcastle West, some purchasers are returning to <a href="https://www.apartments.com.au/developers/gwh">GWH</a> after living at the developer's One Apartments. Their decision to purchase again was driven by the quality of life they found after moving into their first GWH home.</p>

<p>Keith Wilton had spent years living in a house in East Maitland before deciding it was time for a change. Apartment living had always been on his radar, but he was selective about what he wanted.</p>

<p><iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen="" frameborder="0" height="315" referrerpolicy="strict-origin-when-cross-origin" src="https://www.youtube.com/embed/FH_1EzB-1vs?si=XScVlP1ERsTDJoME" title="YouTube video player" width="560"></iframe></p>

<p>"I had some boxes I wanted to tick," he says.</p>

<p>Keith points to the open-plan design, generous outdoor areas and considered inclusions as key reasons One Apartments worked for him.</p>

<p>“One of those things was a nice indoor open plan area, but also I wanted a nice outdoor open area that I could entertain on in summer or Christmases or birthdays,” he says.</p>

<p>He also found value in the smaller details, from integrated appliances to shared resident spaces including the pool, cinema and rooftop areas.</p>

<p>[smartcode_project:default project_id=135096 project_image_fid=356818]</p>

<p>After comparing several developments, he chose One Apartments because of GWH's longstanding local reputation and his own experience working with the developer on a commercial project more than a decade earlier.</p>

<p>"I knew that they were local, that the quality of the build was going to be up there. I'd looked at other apartment complexes around and close by, and I just knew that here was a better decision location wise."</p>

<p>Today, Keith says the move has completely changed how he experiences Newcastle.</p>

<p>"I enjoy living in this location because it's more of a lifestyle change. That Newcastle city living where you can walk to restaurants and bars and even beaches and parks and even shopping across the road."</p>

<p>[smartcode_project:default project_id=135096 project_image_fid=356828]</p>

<p>Beyond the location, he says it's the sense of community that has surprised him most.</p>

<p>"Everyone loves living here because they chose to live here, but everyone looks out for each other. It's a real great community feel here."</p>

<p>For Aimee and Lyle Goodman, the journey started almost by chance.</p>

<p><iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen="" frameborder="0" height="315" referrerpolicy="strict-origin-when-cross-origin" src="https://www.youtube.com/embed/tsioMLcnjas?si=zq-ys3JuWpfa5hFv" title="YouTube video player" width="560"></iframe></p>

<p>The couple happened to be having coffee in Newcastle when they noticed the site where One Apartments was about to begin construction.</p>

<p>"We were aware GWH was planning a development," Aimee says. "We made one phone call and things moved pretty quickly after that."</p>

<p>As busy business owners, they initially thought apartment living would simply reduce the maintenance that came with larger homes. Instead, it fundamentally changed how they spent time together.</p>

<p>"We actually catch up more as a family now," Aimee says.</p>

<p>"We've had homes with big yards and lots of space, but everyone ended up in different rooms. Here we'll have dinner together, the kids can play, and we spend far more quality time together."</p>

<p>[smartcode_project:default project_id=135096 project_image_fid=356829]</p>

<p>Lyle says their confidence came from GWH's reputation within Newcastle's building industry.</p>

<p>"I know people who've worked across different apartment projects, and whenever GWH came up the feedback was always the same. They're rock solid. They're quality."</p>

<p>That confidence only grew throughout the buying process.</p>

<p>"One of the things that really impressed us with GWH was the whole process, was the communication," Lyle says. "It was consistent, it was regular, there was no problem if we had some weird questions, there was no problems in getting answers."</p>

<p>[smartcode_project:default project_id=135096 project_image_fid=351104]</p>

<p>Aimee says one moment stood out.</p>

<p>"The project actually finished on time. We realised we needed to hurry up and sell our house because everything was happening exactly when they said it would."</p>

<p>The positive experience at One Apartments ultimately gave all three buyers the confidence to purchase again with GWH, this time at ERA.</p>

<p>Their confidence reflects what many buyers are seeking in today's apartment market. Location remains important, but so too does certainty around delivery, quality and long-term liveability.</p>

<p>[smartcode_project:default project_id=135096 project_image_fid=356822]</p>

<p>ERA builds on those foundations with 280 one, two and three-bedroom apartments across two landmark towers in <a href="https://www.apartments.com.au/developments/newcastle-west-nsw-2302">Newcastle West</a>.&nbsp;</p>

<p>Designed by <a href="https://www.apartments.com.au/architects/fk-australia">Fender Katsalidis</a>, the project will include more than 2,000 square metres of resident amenities, including a resort-style pool, gym, sauna, private cinema and rooftop entertaining spaces overlooking the harbour and coastline.&nbsp;</p>

<p>The development is also within walking distance of the Newcastle Interchange, Honeysuckle, Darby Street, the harbour foreshore, restaurants, retail and the city’s beaches, continuing the walkable lifestyle that existing GWH buyers say has transformed how they live.</p>

<p>[smartcode_project:default project_id=135096 project_image_fid=356826]</p>

<p>For Keith, the appeal remains straightforward.</p>

<p>"You feel at home even before you've moved into your home."</p>

<p>For Aimee, the change is measured in time.</p>

<p>“I just felt like I had more time,” she says.</p>

<p>[smartcode_project:default project_id=135096 project_image_fid=351102]</p>

<p>Construction at ERA is now underway, with more than half of the residences already sold and limited two and three-bedroom apartments remaining in the East Tower release. Priced from $980,000 for two-bedroom residences and $1.46 million for three-bedroom residences, buyers can secure an apartment with a 10 per cent deposit, with premium homes offering ocean views from Level 8 and harbour views from Level 10.</p>

<p>ERA is also backed by Resilience Insurance's 10-year Latent Defects Insurance policy, providing protection against structural or waterproofing defects for 10 years after completion. The project is anticipated to be completed in early 2028.</p>

<p>[smartcode_project_cta:default project_id=135096]</p>


Joel Robinson

From ONE to ERA: Why buyers are choosing GWH again in Newcastle West

<p>Virgate Property Group is preparing to commence construction of Verdé, its new apartment development in Melbourne's Arts Precinct at Southbank, following a strong run of sales that has seen more than half of the project's 173 apartments secured.</p>

<p>Verdé has attracted a broad mix of first home buyers, owner-occupiers upgrading from nearby inner-city suburbs and investors, with younger owner-occupier couples aged between 28 and 45 accounting for the strongest enquiry. Many are already living in Southbank, South Melbourne, Albert Park, Port Melbourne, South Yarra and the CBD.</p>

<p>"Verdé is located in one of the most desirable pockets of southern Melbourne," Blair Property Group Director Darren Blair, who is managing sales at Verdé, said.</p>

<p>"It's within walking distance of the Arts Centre, Royal Botanic Gardens, Albert Park Lake, and Southbank's restaurants and retail. It's a great lifestyle location with strong amenity and liveability, which made it a very attractive choice for the project."</p>

<p>[smartcode_project:default project_id=4661 project_image_fid=372549]</p>

<p>Virgate was already familiar with the precinct, having previously delivered the successful Domain House development in neighbouring South Melbourne. That experience gave the developer confidence to acquire the Coventry Street site and continue expanding its presence in Melbourne's inner south.</p>

<p>"We had been keeping an eye on the site and the broader precinct for a few months before deciding to move forward with the acquisition," Virgate said.</p>

<p>The project was ultimately secured in 2020 following feasibility studies, planning assessments and due diligence, with the brief centred on delivering "a high-quality, considered design that feels both refined and fit for purpose."</p>

<p>[smartcode_project:default project_id=4661 project_image_fid=314259]</p>

<p>Designed by <a href="https://www.apartments.com.au/architects/bruce-henderson-architects">Bruce Henderson Architects</a>, Verdé comprises 173 one, two and three-bedroom apartments priced from $599,000. The architecture is distinguished by a faceted glass façade that responds to both the site's outlook and Melbourne's changing light conditions.</p>

<p>According to Bruce Henderson Architects, the coloured glazing gives the building a distinctive identity while also providing privacy and solar shading, with residences oriented to capture views across the bay, city skyline and surrounding parklands.</p>

<p>Inside, <a href="https://www.apartments.com.au/interior-designers/designoffice">DesignOffice</a> has created interiors focused on natural light, efficient planning and enduring materials. Apartments feature engineered oak flooring, natural stone benchtops, floor-to-ceiling glazing and SMEG appliances, while a restrained material palette aims to complement the expansive outlooks rather than compete with them.</p>

<p>[smartcode_project:default project_id=4661 project_image_fid=372550]</p>

<p>Resident amenity has also been designed around everyday functionality rather than occasional use. Facilities include a concierge-serviced lobby, residents' lounge with fireplace, library and co-working space, gym, terrace garden with barbecue facilities, ground-floor café, and package delivery management.</p>

<p>The project's location continues to be one of its strongest drawcards. Positioned on Coventry Street, Verdé sits within walking distance of the National Gallery of Victoria, Arts Centre Melbourne, Royal Botanic Gardens and Albert Park Lake, while Southbank's dining precinct, Sturt Street trams and the new ANZAC Station are all nearby. The surrounding education catchment also includes Melbourne Grammar, Melbourne Girls Grammar, Mac.Robertson Girls' High School and several major university campuses.</p>

<p>The sales team says buyers have responded particularly well to the combination of location, design quality and long-term liveability.</p>

<p>"They're responding really positively to the quality of the design, premium resident amenities and the uninterrupted views. Many also appreciate the location and how connected it is to everything they need."</p>

<p>The ability to secure stamp duty savings before completion has also been a key factor for purchasers, alongside the opportunity to personalise finishes ahead of settlement.</p>

<p>With construction set to commence soon and more than half the apartments already sold, Verdé enters its next phase as one of the Arts Precinct's more established apartment developments, offering remaining buyers an opportunity to secure a residence before construction advances further. Expected completion is scheduled for late 2027.</p>

<p>[smartcode_project_cta:default project_id=4661]</p>


Virgate's Verdé Southbank moves toward construction as sales fly past halfway stage

<p>Downsizer-focused apartment development Kooyongkoot in Hawthorn has been recognised at the 2026 Better Future Melbourne Design Awards, taking home Gold and Silver awards in two categories.</p>

<p><a href="https://www.apartments.com.au/new-apartments/kooyongkoot-hawthorn-1-kooyongkoot-road-hawthorn-vic-3122">Kooyongkoot</a>, currently being delivered by developer PQD and designed by Cera Stribley, received Gold in the Interior Design – Proposed category and Silver in the Architecture – Proposed category.</p>

<p>The dual recognition reflects the design approach behind the boutique development on prestigious Kooyongkoot Road, where the focus has been on creating homes for downsizers seeking the space, quality and functionality of a detached house within a low-rise apartment building.</p>

<p>Rather than maximising apartment numbers, <a href="https://www.apartments.com.au/developers/pqd">PQD</a> and <a href="https://www.apartments.com.au/architects/cera-stribley-architects">Cera Stribley</a> limited the development to just 18 residences, allowing for larger floorplans, greater privacy, generous landscaping and expansive communal spaces.&nbsp;The majority of the apartments also benefit from corner aspects, allowing for dual sources of natural light.</p>

<p>Now around 70 per cent complete and on track for completion in November 2026, Kooyongkoot will comprise a mix of garden residences, ter​race apartments, sub-penthouses, and is crowned by two half-floor penthouses with direct lift access and private rooftop terraces.</p>

<p>[smartcode_project:default project_id=102717 project_image_fid=355297]</p>

<p>The Silver Award for Architecture recognised the way the building responds to its prominent corner position at the ent​rance to Hawthorn's Scotch Hill precinct, one of Melbourne's most established residential neighbourhoods.</p>

<p>Rather than competing with the grand homes that line Kooyongkoot Road, the architectural approach focused on restraint and longevity, using curved brickwork, generous landscaping and carefully considered proportions to integrate with the existing streetscape.</p>

<p>"The form feels fluid and timeless, as though shaped by the landscape itself – architecture that belongs, rather than competes," said Chris Stribley, Co-Founder and Managing Principal of Cera Stribley.</p>

<p>The judging submission also highlighted practical innovations throughout the building, including lift cores servicing only nine homes each, a central landscaped lightcourt designed to bring daylight and ventilation into the building, and fully enclosed private storage rooms with lighting, power and shelving to better accommodate residents transitioning from larger family homes.</p>

<p>[smartcode_project:default project_id=102717 project_image_fid=355293]</p>

<p>The Gold Award for Interior Design recognised the project's focus on long-term liveability rather than display-home aesthetics.</p>

<p>According to the awards submission, the interiors were designed from the inside out, prioritising how homes would function over decades of daily use through generous proportions, practical storage, durable natural materials and flexible layouts.</p>

<p>The specification includes natural stone throughout, upgraded acoustic glazing, V-ZUG appliances and fully enclosed storage rooms, alongside an amenity offering focused on wellness, entertainment and everyday convenience.&nbsp;</p>

<p>Residents will have access to a gym and yoga studio, a wellness centre featuring traditional and infrared saunas, a cold therapy shower and treatment room, as well as a residents' lounge and golf simulator/cinema room for entertainment.&nbsp;Kooyongkoot has also considered the everyday convenience of its residents by offering a private carwash and pet wash facilities on site as well as dedicated parcel lockers and oversized fully enclosed storage rooms.&nbsp;</p>

<p>[smartcode_project:default project_id=102717 project_image_fid=355303]</p>

<p>The project's attention to detail has already resonated with buyers. Earlier this year, Kooyongkoot recorded one of Boroondara's highest apartment sales when an $8 million penthouse was purchased by a Melbourne CEO downsizing from a nearby family home.</p>

<p>"Every detail feels deliberate, from the overall design down to the smallest touches," the purchaser said.</p>

<p>"The level of quality and refinement is exceptional, but what really sold it was how liveable it felt... It felt like a place where everything had been considered, not just a luxury building."</p>

<p>[smartcode_project:default project_id=102717 project_image_fid=355304]</p>

<p>Sustainability also formed a key part of both award submissions. Kooyongkoot is targeting a minimum 7.5-star NatHERS rating across all residences, supported by passive design principles, high-performance glazing, EV charging infrastructure, water reuse systems and a wellness model focused on lower-energy dry facilities rather than pools and large wet areas.</p>

<p>Located within walking distance of Scotch College, Methodist Ladies' College, Koo​yong Lawn Tennis Club, Aubur​n Village and Camberwell Junction, Kooyongkoot continues to target owner-occupiers looking to remain in Melbourne's inner east without compromising on space or quality. A limited selection of two, three and four-bedroom residences remains available, with prices starting from $1.9 million.</p>

<p>[smartcode_project_cta:default project_id=102717]</p>


Kooyongkoot wins Gold and Silver at Better Future Melbourne Design Awards

<p>New apartment supply has become increasingly constrained across <a href="https://www.apartments.com.au/developments/parramatta-nsw-2150">Parramatta</a> in recent years, with fewer projects progressing through to completion as development conditions have become more challenging.</p>

<p>It makes <a href="https://www.apartments.com.au/developers/novm">NOVM</a>'s 2021-completed <a href="https://www.apartments.com.au/buildings/the-lennox-parramatta-12-phillip-street-parramatta-nsw-2150">The Lennox</a> one of the most recently completed residential towers on the Parramatta River, and among the newest apartment developments in Sydney's second CBD.</p>

<p>With the project largely completed before the sharp escalation in construction costs and inflation following the pandemic, The Lennox is now offering pricing that would be difficult to replicate in a comparable new development in Parramatta today, or across much of Western Sydney.</p>

<p>The majority of the 413 apartments at The Lennox sold before and shortly after completion. A limited release of the remaining apartments has recently been brought to market by capital partner <a href="https://www.apartments.com.au/project-marketer/equitifund-group">Equitifund</a>, with entry-level pricing from $700,000 and two-bedroom apartments available from under $1 million.</p>

<p>Rising above the Parramatta River at 12 Phillip Street, The Lennox comprises one, two, three and four-bedroom apartments, appealing to first home buyers, young professionals, families, downsizers and interstate investors seeking a completed apartment in one of Australia's fastest-growing economic centres.</p>

<p>[smartcode_project:default project_id=5743 project_image_fid=372394]</p>

<p>Rather than positioning Parramatta as an alternative to Sydney's CBD, Equitifund believes the city has reached a point where it stands on its own merits.</p>

<p>"Parramatta is no longer simply an alternative to Sydney CBD, it's becoming a destination in its own right," Equitifund Executive Chairman Greg Huxley said.</p>

<p>"The Lennox captures that evolution with a level of quality and amenity that's difficult to match at its price point."</p>

<p>[smartcode_project:default project_id=5743 project_image_fid=953]</p>

<p>Designed by <a href="https://www.apartments.com.au/architects/marchese-partners">Marchese Partners</a>, the tower responds directly to its riverfront setting through expansive glazing and open-plan layouts that maximise views across the Parramatta River and city skyline. Interiors feature engineered timber flooring, stone benchtops, stainless steel appliances and floor-to-ceiling glazing, while generous balconies extend the living spaces outdoors.</p>

<p>Marchese Partners says the project was conceived to balance high-quality apartment living with practical, long-term functionality, pairing larger, efficient floorplans with amenities more commonly associated with five-star hotels.</p>

<p>That emphasis continues through the resident facilities, which include a 20-metre rooftop swimming pool, fully equipped gym and wellness spaces, full-time concierge, a residents' lounge, function room, private lifts, secure basement parking and rooftop communal areas overlooking the Parramatta River. Ground-floor boardwalk retail and dining further activate the riverfront and integrate the building into the surrounding public realm.</p>

<p>[smartcode_project:default project_id=5743 project_image_fid=925]</p>

<p>Australian housing and finance group Equitifund has secured the remaining apartments, believing there are few completed apartment opportunities in Parramatta that offer the same combination of location, amenity and pricing.</p>

<p>Equitifund National Sales Director Ben Hamblett says buyers are increasingly recognising that premium apartment living no longer needs to come with Sydney CBD pricing.</p>

<p>"The Lennox is where aspirational living becomes attainable," Hamblett said.</p>

<p>"Wake to river and mountain views, step into Sydney's Second CBD, and arrive home to resort-calibre amenities, all without the harbour price tag."</p>

<p>Hamblett says owner-occupiers are also attracted by the convenience of having Westfield Parramatta, Church Street's dining precinct, Parramatta Park, Riverside Theatres, Western Sydney University and major transport connections all within walking distance.</p>

<p>"At The Lennox, lifestyle is not an afterthought, it is the foundation."</p>

<p>[smartcode_project:default project_id=5743 project_image_fid=5374]</p>

<p>The Lennox places residents within walking distance of Parramatta Square, Westfield Parramatta, Church Street Eat Street, Parramatta Station, the ferry wharf, Light Rail, the future Sydney Metro West, Parramatta Park and CommBank Stadium, reinforcing Parramatta's position as one of Australia's most connected metropolitan centres outside Sydney's CBD.</p>

<p>Equitifund says buyers visiting the display suite consistently comment on the quality of the finishes, generous floorplans, river and skyline views, and the walkability of the location. The project has attracted a broad mix of local professionals, upsizers, downsizers, buyers relocating from Sydney's inner suburbs and interstate investors seeking long-term growth opportunities.</p>

<p>That demand aligns with Parramatta's continued evolution as an economic powerhouse. Equitifund Research and Market Insights specialist John Bekiaris says sustained population growth, infrastructure investment and expanding employment opportunities continue to support long-term housing demand across the city.</p>

<p>"Parramatta has evolved from a satellite city into one of Australia's most important economic centres. Population growth, infrastructure investment and employment are all supporting sustained long-term housing demand."</p>

<p>[smartcode_project_cta:default project_id=5743]</p>


The apartment price gap drawing Sydney buyers west

<p>A luxury beachfront apartment at Rainbow Bay has more than doubled in value since it sold off the plan six years ago, setting a new local apartment record in the process.</p>

<p>The three-bedroom apartment in the Flow development on Petrie Street, the first of four new projects locally by Paul Gedoun's S&amp;S Projects, has sold for $7.4 million, after originally selling for $3.27 million when the project launched in 2020.</p>

<p>The seventh-floor apartment, comprising 187 sqm of internal living space and a 54 sqm balcony overlooking Froggies Beach and Snapper Rocks, was purchased by a local family.</p>

<p>The transaction was negotiated by Pezet Matheson director Kerry Pezet and equates to more than $30,000 per sqm.</p>

<p>Pezet said the sale reflected the limited opportunities to buy into the boutique beachfront development.</p>

<p>"The sale highlights the rarity of opportunities within the boutique beachfront development, where residences seldom become available," Pezet said.</p>

<p>"Flow is one of the Gold Coast's most tightly held buildings. Buyers from our database move quickly when residences become available, and achieving an off-market sale at $7.4 million demonstrates the depth of demand for property of this calibre."</p>

<p><img alt="Flow" data-entity-type="file" data-entity-uuid="c585b206-2130-4eee-a50c-3f27c51a7c70" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-06%20at%208.33.25%E2%80%AFPM.png?VersionId=m3pHRDV62Y3fvN.XQuQHq.52ilTWpRLf" /></p>

<p>Flow was the first of four luxury apartment developments delivered by Paul Gedoun's S&amp;S Projects at Rainbow Bay and was completed in 2023.</p>

<p>Positioned on the beachfront overlooking Snapper Rocks, the residence includes three bedrooms, three bathrooms, a powder room and views stretching north along the coastline towards Surfers Paradise.</p>

<p>Pezet Matheson Residential principal Mitchell Lambert said buyers continued to prioritise quality beachfront apartments in tightly held locations.</p>

<p>"Flow Residences offers a rare combination of elevated beachfront positioning, architectural excellence, comprehensive resident amenity and premium finishes, which is exactly what discerning purchasers are seeking," Lambert said.</p>

<p>"The transaction further reinforces Rainbow Bay's reputation as one of Australia's premier coastal lifestyle destinations, where limited supply and growing demand continue to support strong market performance."</p>

<p>Pezet Matheson originally marketed and sold out Flow off the plan, making the latest transaction a return to one of the project's original buyers.</p>

<p>Paul Gedoun is selling his third project, <a href="https://www.apartments.com.au/new-apartments/radia-rainbow-bay-271-boundary-street-coolangatta-qld-4225">Radia Rainbow Bay</a>, after recently completing, and selling out, <a href="https://www.apartments.com.au/buildings/esprit-217-227-boundary-street-coolangatta-qld-4225">Esprit</a>. He has plans for a <a href="https://www.apartments.com.au/news/qld/first-look-s-s-projects-proposes-88-apartment-wellness-tower-at-coolangattas-boundary-street">fourth building</a>, 88 apartments on <a href="https://www.apartments.com.au/new-apartments/209-213-boundary-street-coolangatta-qld-4225">Boundary Street</a>.</p>


Rainbow Bay apartment doubles in price since off the plan sale during pandemic

APRA

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<h3 class="x_post-title x_entry-title"> </h3>
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<div>APRA released its quarterly property exposure figures today for the period ended 30 September 2016.</div>
<div> </div>
<div>If there has been a slowdown in lending, sheesh, it's hard to make out from the chart. </div>
<div> </div>
<div>Total domestic residential property exposures increased by +7.9 percent from a year ago to a new high of $1.46 trillion.</div>
<div> </div>
<div>Exposures are now some +130 percent higher than they were in 2008.</div>
<div> </div>
<div>The growth in exposure to investors has been stopped in its tracks, however, with new loans to investors down 14 per cent from a year ago. </div>
<div> </div>
<div>However, owner-occupier loans stepped in to breach the gap, with exposures rising by +12.9 percent over the year to September, and the value of new loans to homebuyers rising by some +14 percent. </div>
<div> </div>
<div>In short, lenders have switched focus from investors to homebuyers.</div>
<div> </div>
<div><a href="/images/2016/12/01/APRA1.jpg" target="_blank">Click to enlarge</a></div>
<br><div class="x_separator"><img src="/images/2016/12/01/APRA1.jpg" alt=""></div>
<br><div>The regulator has taken a number of measures to limit riskier lending.</div>
<div> </div>
<div>For example, loans of 90 percent or higher loan-to-value ratio (LVR) are now just 8.5 percent of the market, down from 22 percent in 2009. </div>
<div> </div>
<div>Thus, most borrowers are using substantial deposits, whether borrowed from parents or from existing loans (some may even be saving deposits, who knows?!). </div>
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<div><a href="/images/2016/12/01/APRA2.jpg" target="_blank">Click to enlarge</a></div>
<div> </div>
<div><img src="/images/2016/12/01/APRA2.jpg" alt=""></div>
<div class="x_separator"> </div>
<br><div>Low-doc loans and loans approved outside serviceability are also now a small segment of lending.</div>
<div> </div>
<div>There has been a sharp pullback in the number and value of interest only loans over the past year, with this sector of the market dropping by 15 per cent from a year ago. </div>
<div> </div>
<div><a href="/images/2016/12/01/APRA3.jpg" target="_blank">Click to enlarge</a></div>
<br><div class="x_separator"><img src="/images/2016/12/01/APRA3.jpg" alt=""></div>
<br><div>Buried in the small print there were some upward revisions to previously reported interest only loans reported by one institution. </div>
<div> </div>
<div>While exposures to investors has decreased, there does not seem to be much clarity surrounding the categorisation of outstanding loans (as evidenced by previous revisions), and as such in aggregate there may be more investors in the market than implied.  </div>
<div> </div>
<div>The average loan size over the year increased from $244,000 to $255,000. </div>
<div> </div>
<div>
<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
</div>
<div> </div>
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pwargent-M4siyDbqQY

Lenders switch focus from investors to homebuyers

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<h3 class="post-title entry-title"> </h3>
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<div>Won't spend too much time on this, as the Financial Aggregates figures relate to before APRA's latest round of changes and therefore the landscape has once again shifted. </div>
<div> </div>
<div>The Reserve Bank's latest figures showed credit growth of 0.3 percent in February, following on from a result of just 0.2 percent in January. </div>
<div> </div>
<div>Housing credit increased by 0.6 percent in the month, but both business and personal credit growth were negative.</div>
<div> </div>
<div><a href="https://www.propertyobserver.com.au/images/2017/04/4/RBA1.jpg" target="_blank">Click to enlarge</a></div>
<div> </div>
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<div> </div>
<div>Over the year to February housing credit increased by 6.4 percent down from 7.3 percent a year ago, with investor credit rising a notch further to 6.7 percent. </div>
<div> </div>
<div>Annual credit growth slowed to 5 percent from 6.6 percent a year ago.</div>
<div> </div>
<div><a href="https://www.propertyobserver.com.au/images/2017/04/4/RBA2.jpg" target="_blank">Click to enlarge</a></div>
<br><div class="separator"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/04/4/RBA2.jpg" alt=""></div>
<div> </div>
<div>Business credit growth in particular has slowed from 6.5 percent a year ago to just 3.7 percent.</div>
<div> </div>
<div>There are many ways to fund business expansion,of course, but this doesn't necessarily bode well for the business investment outlook. </div>
<div> </div>
<div><a href="https://www.propertyobserver.com.au/images/2017/04/4/RBA3.jpg" target="_blank">Click to enlarge</a></div>
<br><div class="separator"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/04/4/RBA3.jpg" alt=""></div>
<br>As a result, housing now accounts for a record 61.7 percent of outstanding credit.</div>
<div class="post-body entry-content"> </div>
<div class="post-body entry-content">
<a href="https://www.propertyobserver.com.au/images/2017/04/4/RBA4.jpg" target="_blank">Click to enlarge</a><br><br><div class="separator"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/04/4/RBA4.jpg" alt=""></div>
<br><div>There was a further $1 billion of housing loan purpose switching taking the total switched to owner-occupier from investor loans since July 2015 to $50 billion. </div>
<div> </div>
<div><a href="https://www.propertyobserver.com.au/images/2017/04/4/RBA.jpg" target="_blank">Click to enlarge</a></div>
<br><div class="separator"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/04/4/RBA.jpg" alt=""></div>
<br>And housing credit outstanding increased to $1.65 trillion by February 2017.<br><br>More measures have since been taken to slow the creation of new interest-only loans.</div>
<div class="post-body entry-content"> </div>
<div class="post-body entry-content">
<p class="p1"><span class="s1">PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank"><span class="s2">AllenWargent</span></a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank"><span class="s2">blogger</span></a>.</span></p>
<p class="p2"><span class="s3"><em>His latest book is </em><a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank"><span class="s2"><em>Four Green Houses and a Red Hotel</em></span></a><em>.</em></span></p>
</div>
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Housing credit growth slows

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<div><span>APRA released its latest Monthly Banking Statistics for June 2017 yesterday, detailing information on the banking business of individual banks within the domestic market.</span></div>
<div><span> </span></div>
<div><span>Further strong mortgage growth of +0.63 per cent was reported taking the total for outstanding housing loans to a fresh high of $1.57 trillion.</span></div>
<div><span> </span></div>
<div><span>The figures officially reported were $1,107,754 million (+0.73 per cent) for owner-occupier mortgages and $552,270 million (+0.44 per cent) for investment mortgages outstanding.</span></div>
<div><span> </span></div>
<div><span>Thus investment mortgages now officially account for 35.2 per cent of banking loan books, classification issues notwithstanding. </span></div>
<div><strong><span style="text-decoration: underline;"> </span></strong></div>
<div><strong><span style="text-decoration: underline;">Investor loan books</span></strong></div>
<div> </div>
<div>Looking specifically at investor loans, it's clear that none of the major banks is close to the arbitrary 10 per cent 'speed limit' or annual growth cap imposed by the regulator.</div>
<div> </div>
<div>As you can see, of the major lenders Westpac Banking Corporation (WBC) is ramping up its investment loan exposure at the present time. </div>
<p><a href="https://www.propertyobserver.com.au/images/2017/08/04/banks.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/08/04/banks.jpg" alt=""></p>
<div>Indeed, Westpac (WBC) is presently expanding both sectors of its mortgage book, and has the largest exposure to investment loans overall at $146.8 billion, although Commonwealth Bank of Australia (CBA) has a more substantial loan book in aggregate.</div>
<p><a href="https://www.propertyobserver.com.au/images/2017/08/04/APRA3.jpg" target="_blank">Click to enlarge</a></p>
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<div class="separator"> </div>
<div>Although the majors have wound back growth in investment loans, some other lenders continue to exceed the 10 per cent growth cap comfortably.</div>
<div> </div>
<div>Additionally certain lenders have loan books that are exposed to markets at risk of mortgage arrears, including regional Queensland.</div>
<p> </p>
<p class="p1"><span class="s1">PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank"><span class="s2">AllenWargent</span></a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank"><span class="s2">blogger</span></a>.</span></p>
<p class="p2"><span class="s3"><em>His latest book is </em><a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank"><span class="s2"><em>Four Green Houses and a Red Hotel</em></span></a><em>.</em></span></p>
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No major bank is close to APRA'S 10 percent mortgage growth speed limit

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<p>The Australian Prudential Regulation Authority (APRA) has today released a speech, ‘Enhancing Australia’s superannuation system: a vision of a sustainable future’, delivered by deputy chairman Helen Rowell to the 2017 ASFA Conference in Sydney this morning.<br><br>In her speech, Rowell presented a vision for a stronger superannuation system that meets the ongoing needs of its members, and explained how changes to the prudential framework will help to deliver this.<br><br>Mrs Rowell’s comments included: <br><br></p>
<ul>
<li>‘APRA is also taking steps to make sure that the prudential framework supports trustees delivering quality outcomes for superannuation fund members, complementing the Government’s proposed reforms. We will shortly release a consultation package outlining proposed revisions to the prudential framework, including changes to promote greater transparency, especially around expenditure, and implement member outcomes assessments for all funds.’</li>
<li>‘…the changes proposed in our upcoming consultation package are designed to put pressure on poor performers – irrespective of industry segment – to lift their game or, if the needed improvement is not possible within a reasonable timeframe, to gracefully exit the industry.’<span class="Apple-converted-space"> </span>
</li>
<li>‘…at what point does the level of choice become more a headache than a help? It seems legitimate to ask why the industry offers members an average of nearly 200 investment options when many funds have a significant proportion of members in their default MySuper products and hence relatively few members in each o&gt;f the many choice investment options on offer.’</li>
<li>‘Our preliminary analysis of outcomes across the industry using a wide range of metrics suggests, however, that there may be some correlation between enhanced member outcomes and board composition. The trustees with outcomes at the better end of the industry, on average, appear to be those that have appointed independent or non-affiliated directors.’</li>
</ul>
<p>The full speech is available on the website at:<span class="Apple-converted-space"> </span><br><a id="LPlnk11598" href="http://www.apra.gov.au/Speeches/Pages/Enhancing-Australias-superannuation-system.aspx" target="_blank">http://www.apra.gov.au/Speeches/Pages/Enhancing-Australias-superannuation-system.aspx</a></p>
<p> </p>
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jonathanchancellor-7SQnKwU6yx

Enhancing Australia’s superannuation system, a vision of a sustainable future: APRA's Helen Rowell

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<p>The Australian Prudential Regulation Authority (APRA) released its December 2015 quarterly data on property exposures by Australian authorised deposit-taking institutions (ADIs).</p>
<p>The data is always interesting to analyse in order to get further insight into the current state of the mortgage market.</p>
<p>The first data point is residential term loans to households which have a total outstanding balance of $1.384 trillion which has increase by 8.9% over the past year. The total value of outstanding owner occupier loans is $884 billion having increased by 12.8% over the past year and accounting for 63.9% of all outstanding loans. The remaining 36.1% of outstanding loans are to investors, having increased by 2.6% year-on-year to $500 billion. </p>
<p>Growth in outstanding loans has tilted away from investors to owner occupiers.  After year-on-year growth in investor loans peaked at 18.2% in March 2015 it has slowed to 2.6% growth while owner occupier credit troughed at an annual rate of 2.2% in March 2015, before rebounding to the current annual rate of 12.8% (the fastest annual growth rate since June 2010).</p>
<p><a href="/images/2016/03/Chart-1-3-580x204.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/03/Chart-1-3-580x204.jpg" alt=""></p>
<p>In terms of the types of loans outstanding, 42.3% have an offset facility, 39.3% are interest-only, 0.2% are reverse mortgages, 2.0% are low documentation loans and 0.1% are other non-standard loans.  The year-on-year change across these loan types has been recorded at: +22.0% for loans with an offset facility, +11.6% for interest-only loans, +1.6% for reverse mortgages, -16.6% for low documentation loans and -5.7% for other non-standard loans.  Importantly, the value of outstanding residential loans for low-documentation loans is now at a record low.</p>
<p><a href="/images/2016/03/Chart-2-3-580x207.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/03/Chart-2-3-580x207.jpg" alt=""></p>
<p>The data highlights that the average outstanding balance on a residential loan is $248,800, up by 1.0% over the quarter and by 4.4% year-on-year.  Reverse mortgages ($95,700), low-documentation loans ($192,800) and other non-standard loans ($195,900) all have much lower outstanding balances.  Meanwhile, loans with offset facilities ($303,700) and interest-only loans ($330,000) have significantly higher outstanding balances. </p>
<p>The year-on-year changes to the outstanding loan balances have been recorded as follows: +7.2% for loans with an offset facility (fastest year-on-year growth since June 2011), +4.9% for interest-only loans, +2.8% for reverse mortgages (slowest year-on-year growth on record), -1.5% for low-documentation loans and -6.8% for other non-standard loans.  The data shows a slowing in the growth of outstanding loan values for reverse mortgages while riskier lending types (low-documentation and other non-standard) have seen an ongoing fall in outstanding loan amounts.</p>
<p>While the previous data looked at the total value of residential mortgages outstanding, the following data focuses on new residential mortgages over the final quarter of 2015.</p>
<p>Over the December 2015 quarter there was a record-high $98.130 billion worth of new residential mortgages approved, $69.091 billion worth were owner occupied with the remaining $29.040 billion being for investment purposes.  Year-on-year the value of new owner occupier loans is 28.8% higher, its greatest change on record, while investor mortgage lending is -24.9% lower, its largest fall on record.</p>
<p><a href="/images/2016/03/Chart-3-3-580x212.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/03/Chart-3-3-580x212.jpg" alt=""></p>
<p>Looking at the types of mortgages approved over the quarter: a record low 0.3% were low-documentation, 37.0% were interest only which was its lowest proportion since March 2013, 0.1% were other non-standard loans, 47.4% were originated by third parties and 3.7% were loans approved outside of serviceability.</p>
<p>Focussing on the year-on-year change; low documentation loan approvals are -41.8% lower (their largest year-on-year fall since March 2013), interest-only loan approvals are -11.0% lower (their largest year-on-year fall since March 2009), other non-standard loan approvals are up 28.2% (their largest year-on-year increase since December 2013), third party originated loans are up 6.2% and loans approved outside of serviceability are up 41.3%.  The data indicates there has been a significant pull-back in low-documentation loans and interest-only loans. </p>
<p>At the same time, non-standard and loans approved outside of serviceability are rising significantly which may be a potential point of concern for APRA.  Although they make-up a small overall proportion of lending it will be something to keep a close watch on over the coming quarters especially since both have also recorded a quarterly increase.</p>
<p><a href="/images/2016/03/Chart-4-3-580x207.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/03/Chart-4-3-580x207.jpg" alt=""></p>
<p>Finally the data breaks out new lending by loan-to-value-ratio (LVR) bands.  Over the quarter, 23.4% of all new loans had an LVR of less than 60%, 53.4% had an LVR of between 60% and 80%, 14.5% had an LVR of 80% to 90% and 8.7% had an LVR of more than 90% which was its lowest proportion on record. </p>
<p>Looking at the year-on-year changes, the value of lending for LVRs of less than 60% was 16.1% higher, LVRs of between 60% and 80% increased 6.1%, LVRs of 80% to 90% increased 14.3% and LVRs greater than 90% fell by -20.1% which was the largest year-on-year fall June 2010.  Based on the data it is clear that lenders have been tightening lending requirements over recent quarters which has led to a sharp decline in new mortgage lending for LVRs above 90%.</p>
<p>Overall the data indicates that the market is responding to regulatory changes in the lending space implemented over the past year.  There is less new lending to high LVRs, fewer low documentation and interest-only mortgages being written. </p>
<p>On the other-hand some other potentially more risky lending types such as non-standard and outside of serviceability loans are continuing to rise.  It will be interesting to see whether APRA starts to look to crack-down on some of these types of lending in order to ensure stability within the mortgage market.</p>
<p><em>Cameron Kusher is research analyst for CoreLogic RP Data. You can contact him <a href="https://blog.corelogic.com.au/about/">here</a>.</em></p>
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ckusher-ujnxiKuFQs

APRA data shows a further tightening of lending standards: Cameron Kusher

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

<html><body><div id="post-729" class="post">
<div class="entry">
<p><span>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.</span></p>
<p><span>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.</span></p>
<p><span>Whilst it is still early days; we have seen a number of “Big 4</span><span>″</span><span> lenders, as well as many other tier #2 and tier #3 lenders, begin to implement more restrictive borrowing rules for investor-based loans.</span></p>
<p><span>These have come in all shapes and sizes, such as (but not limited to):</span></p>
<p><span>- 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.</span></p>
<p><span>- 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)</span></p>
<p><span>- 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.</span></p>
<p><span>These changes have substantial implications for would-be property investors: </span></p>
<p><span>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.</span></p>
<p><span>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.</span></p>
<p><span>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.</span></p>
<p><span>The role of foreign investors in amongst APRA rules for local lenders: </span></p>
<p><span>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.</span></p>
<p><span>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:</span></p>
<p><span>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;</span></p>
<p><span>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;</span></p>
<p><span>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.</span></p>
<p><span>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.</span></p>
<p><span>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:</span></p>
<p><span>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.</span></p>
<p><span>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’. </span></p>
<p><span>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.</span></p>
<p><span>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.</span></p>
<p><span>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.</span></p>
<p> 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>.<span style="line-height: 1.3em;"><br></span></p>
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cmcevoy-Go82SmsJA9

Liberal local lending rules tightened: Cameron McEvoy

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<p><span style="line-height: 1.3em;">Heading into the new season, changes to funding by APRA will have an immense effect on all the developments that are due to compete for investment purchases of off-plan apartments.</span></p>
<p><span>Spring will be the start of the wick being lit for the eventual ‘POP’.</span></p>
<p><span>However APRA is not the only leveler of the market: I believe “property valuers” will begin to cover their backs as they dish-out valuations. They have already started to do so, as they become more and more aware of the glut of property now being completed. Coupled with this are rental guarantees and inflated commissions.  </span></p>
<p>Here's my top five tips for spring. </p>
<p><strong>1. Owner occupiers should sell, sell, sell.</strong></p>
<p><span style="line-height: 1.3em;">Investors shouldn't buy off-plan properties and if they really want to get in; waiting till the end of the year means they will reap greater rewards as there will be close to 60,000 properties completed across Sydney and Brisbane alone. </span></p>
<p><strong>2. First home buyers should consider stable property, not new</strong></p>
<p><span style="line-height: 1.3em;">First home buyers should approach and rent where they want to live as rentals across Sydney are lowering in price monthly and vacancy rates are also increasing monthly. Invest where money will be made; there are hubs outside of city centres with great steady capital growth possibilities and great low vacancy rates. </span></p>
<p><strong>3. Some BUT NOT ALL regional towns have and will continue to perform well for a few years to come</strong></p>
<p><span>Some of the markets we have identified and have purchased property in have: steady capital growth, on average 6% yields + and vacancy rates well below 1.5%. </span><span style="line-height: 1.3em;">The great appeal for some of my young family is also the great entry points with some properties below $200,000 making it manageable and not such a burden. </span></p>
<p><strong>4. Parramatta will be flooded with new apartments as they complete in the next 1-4 months</strong></p>
<p><span>Properties in the Inner West of Sydney are also taking longer to rent out as renters have a greater choice. The western suburbs outside of Parramatta have had a huge build-up of granny-flats as well as new apartments. Again putting pressure on achieving yields and renting property out quickly. </span></p>
<p><strong>5. Stablished homes are primed for achieving great sales figures </strong></p>
<p><span>Many buyers are still convinced that Sydney is hedged from a property bubble pop. I see a new development proposal just about every day and it startles me that the mainstream media still report under-supply running out of land and huge population growth. Frankly, I see the opposite. </span></p>
<p><span style="line-height: 1.3em;"> </span></p>
<p><em><span>EDWIN ALMEIDA</span> is licensee in charge of <a href="https://www.just-think.com.au/" target="_blank">Just Think Real Estate</a>.<a href="https://www.just-thin.com.au/"><br></a></em></p>
<p><em>He is also the creator of <a href="https://www.youtube.com/user/JustThinkProperty" target="_blank">Oz Real Estate.TV</a> and a presenter for <a href="https://propertyinvestingvault.com/" target="_blank">propertyinvestingvault.com</a>.</em></p>
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Springtime property valuers best cover their backs: Edwin Almeida's five tips for spring 2015 

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<p>APRA reported that residential housing loan ADI exposures continued to power on, up to $1.49 trillion in the December quarter (and beyond $1.5 trillion in January).</p>
<p>Owner-occupied loans totalled $971 billion, comprising 65 percent of outstanding residential property exposures, an increase of $86.5 billion or 9.8 percent from the prior year.</p>
<p>Meanwhile, the total of outstanding investor loans was $522.4 billion (the balancing 35 per cent of outstanding exposures), for an increase of $23.5 billion or 4.7 percent from last year.</p>
<p>New investment loan approvals were down by 5.8 percent from the prior year, yet still accounted for a punchy 34.2 percent of total new residential loans. </p>
<p>Loans to investors appear very likely to be the target of a crackdown as 2017 rolls on.</p>
<p>As I looked at in a little more detail here, each of the major lenders appear likely to be approaching the speed limit for the growth in their mortgage books, including those that have lodged revisions to historical figures (since these will be adjusted for). </p>
<div id="post-body-5935845614051499789" class="post-body entry-content">
<a href="https://www.propertyobserver.com.au/images/2017/03/06/A1.jpg" target="_blank">Click to enlarge</a><br><div class="separator"> </div>
<div class="separator"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/03/06/A1.jpg" alt=""></div>
<strong><span style="text-decoration: underline;"><br></span></strong><br><div><strong><span style="text-decoration: underline;">Impairment rise for ADIs</span></strong></div>
<div><span> </span></div>
<div><span>I'm not going to provide much detailed analysis or opinion on this site, but it is worth noting the following from APRA's reported headline figures for ADIs.</span></div>
<div><span> </span></div>
<div><span>-impaired facilities and past due items as a proportion of gross loans and advances was 0.92 percent as at Q4 2016 (an increase from 0.86 percent in the prior year);</span></div>
<div><span> </span></div>
<div><span>-specific provisions hit $7.3 billion at Q4 2016, an increase of $0.8 billion or 12.9 percent from the prior year; and</span></div>
<div><span> </span></div>
<div><span>-specific provisions as a proportion of gross loans and advances was 0.24 percent at Q4 2016, an increase from 0.22 percent in the prior year.</span></div>
<div> </div>
<div>To summarise:<br><br>
</div>
<div class="separator"><a href="https://www.propertyobserver.com.au/images/2017/03/06/APRA.jpg" target="_blank">Click to enlarge</a></div>
<div class="separator"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/03/06/APRA.jpg" alt=""></div>
<div><em><span style="text-decoration: underline;"> </span></em></div>
<div><em><span style="text-decoration: underline;">Source: APRA </span></em></div>
<div> </div>
<div>This should demand your attention, since it indicates that the cyclical low for impairments has now passed. </div>
<br><div><strong><span style="text-decoration: underline;">Change to new lending</span></strong></div>
<div> </div>
<div>APRA's figures show that riskier "low doc" and other non-standard lending now comprise only a small and decreasing share of the residential mortgage market, which is a positive development.</div>
<div> </div>
<div>Furthermore, most new loans have a loan to value ratio (LVR) of 80 per cent or lower, meaning that - theoretically at least - the majority of new buyers have a significant buffer built in to their purchase. </div>
<div class="separator"> </div>
<div class="separator"><a href="https://www.propertyobserver.com.au/images/2017/03/06/A3.jpg" target="_blank">Click to enlarge</a></div>
<br><div class="separator"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/03/06/A3.jpg" alt=""></div>
<div> </div>
<div><span>A potential challenge to this case is that in many instances those using 20 percent deposits have likely sourced their deposits from existing residential property assets, and therefore the risk in such loans may be higher than it appears at first blush. </span></div>
<div><span> </span></div>
<div><span>Interest-only loans, while accounting for a smaller share of the market than has previously been the case, still represent a very significant chunk of new lending at 36.6 percent (even if the total of interest-only lending for the quarter of $162 billion represents a decrease of 10.5 percent from the prior year).</span></div>
<div><span> </span></div>
<div><a href="https://www.propertyobserver.com.au/images/2017/03/06/A2.jpg" target="_blank"><span>Click to enlarge</span></a></div>
<br><div class="separator"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/03/06/A2.jpg" alt=""></div>
<br><div>The inherent risk here is that when these loans reach the end of their interest-only period the repayments may jump higher in the event that the loan cannot be rolled over into a new interest-only period, a point which has aroused the scrutiny of short sellers.</div>
<div> </div>
<div>Summarily, residential property exposures now comprise a very significant sum of interest-only mortgages in Australia. </div>
<div> </div>
<div><a href="https://www.propertyobserver.com.au/images/2017/03/06/PARA2.jpg" target="_blank">Click to enlarge</a></div>
<div> </div>
<div class="separator"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/03/06/PARA2.jpg" alt=""></div>
<div> </div>
<div><em><span style="text-decoration: underline;">Source: APRA</span></em></div>
<div> </div>
<div>If mortgage rates were to rise, of course, then these risks may be multiplied. </div>
<div> </div>
<div>
<p class="p1"><span class="s1">PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank"><span class="s2">AllenWargent</span></a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank"><span class="s2">blogger</span></a>.</span></p>
<p class="p2"><span class="s3"><em>His latest book is </em><a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank"><span class="s2"><em>Four Green Houses and a Red Hotel</em></span></a><em>.</em></span></p>
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APRA reports non-performing loans on the rise

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<p>First application Loan-to-Valuation Ratio (LVR) Index from Veda and CoreLogic reveals improved financial security for Australian lenders.</p>
<div>
<p>The national average of application loan-to-valuation ratio (LVR) across Australia is currently tracking at 74.3%, according to the new Index from property data and analytics experts CoreLogic, and Veda, Australia and New Zealand’s leading provider of consumer and commercial data and insights and a wholly-owned subsidiary of Equifax. </p>
<h3>Application Loan-to-Valuation Ratio National</h3>
<p><a href="/images/2016/11/30/2016-11-04--loanvaluation--image2.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/11/30/2016-11-04--loanvaluation--image2.jpg" alt=""></p>
<p>Released tomorrow for the first time, the Index draws on the CoreLogic median dwelling values compared against the median residential loan application amount from Veda.  The result is a timely indicator of application loan-to-valuation ratios across Australia over time. </p>
<p>The CoreLogic and Veda measure of application LVRs provides a geographically specific indication on mortgage leverage at a granular level at the time of application. </p>
<p>While the current application LVR is 1.7 percentage points higher than in 2011 (72.6 percent), it is significantly lower than when it peaked in 2013, when the average application LVR was measured at 78.9 percent.</p>
<p>Moses Samaha, Veda’s General Manager of Commercial and Property Solutions, said the new Index would leverage Veda and CoreLogic’s data and insights to provide more detailed analysis of market conditions. </p>
<p>“We are excited to be partnering with CoreLogic to offer more detailed insight into the housing market and level of leverage households are typically committing to,” Mr Samaha said. </p>
<p>“In the past 12 months to September, we have seen the national median dwelling valuation rise 5.5% and the median residential loan enquiry amount rise 3.4%,” Mr Samaha added. </p>
<p>Geographically, the application LVR trend is being driven downwards by higher equity levels and substantial household wealth across the premium housing markets of Australia, particularly in Melbourne and Sydney. However, Sydney has recently experienced an upswing in average application LVRs. </p>
<h3>Application Loan-to-Valuation Ratio Sydney Median</h3>
<p><a href="/images/2016/11/30/2016-11-04--loanvaluation--image1.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/11/30/2016-11-04--loanvaluation--image1.jpg" alt=""></p>
<p>“It’s common for capital cities with weaker housing market conditions to experience an increase in average application LVR. For example, Perth’s application LVR has jumped from 72.8 prcent to 77.1 percent in the past five years, sitting 2.8 percentage points above the national average,” Mr Samaha said.</p>
<h3>Application Loan-to-Valuation Ratio Sept 2011 v Sept 2016</h3>
<p><a href="/images/2016/11/30/2016-11-04--loanvaluation--image4.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/11/30/2016-11-04--loanvaluation--image4.jpg" alt=""></p>
<p>“Sydney dwelling values have increased by almost 95% since the beginning of 2009 which has created a large amount of equity for those who have owned a dwelling during this time.  High equity is likely one of the key factors that has pushed application LVRs lower in Sydney and to a lesser extent, Melbourne,” Mr Samaha added. </p>
<p>Average application LVRs in the other capital cities show mixed results. Application LVRs in Canberra and Hobart have leveled off recently on the back of improving housing market conditions. Brisbane has also seen the application LVR trend lower, reducing from a peak of 80.5% in October 2013 to the current reading of 77.7 percent. </p>
<p>According to the Veda and CoreLogic findings, the trend towards lower application LVR estimates since 2013 can be attributed to a number of factors.  </p>
<p>The increasing volume of refinancing and mortgage top-ups for renovations or home extensions is likely to be a key factor driving application LVR measurements lower.  </p>
<p>First home buyers are also likely to be impacting the data. According to Australian Bureau of Statistics housing finance data, the number of first home buyers as a proportion of all owner-occupier housing finance commitments has declined from approximately 17 percent in early 2013 to a recent low of 12.9% in March 2016. First home buyers generally have smaller deposits and their lack of activity in the market may be pushing overall application LVR’s lower. </p>
<p>Tim Lawless, Head of Research at CoreLogic Asia Pacific, said the level of application LVR is an indicator of prudent lending standards and financial stability. </p>
<p>“Regulators and policy makers are likely to see the lower application LVR as a positive outcome, which is reflective of a more considered and prudent lending regime,” Mr Lawless said. </p>
<p>“One of the factors contributing to lower application LVRs is the heightened risk assessment many lenders are applying to select housing markets, whereby larger deposits are required to offset higher lending risk.  </p>
<p>“Markets where dwelling values have shown substantial and rapid growth, where supply levels are high, or markets with disproportionate exposure to singular industries, such as mining towns, are typically being assessed by lenders as higher risk. Lenders in these markets are demanding lower LVRs to help minimise their own risk,” Mr Lawless added. </p>
<p>The data from CoreLogic and Veda supports a similar trend in LVR reported by Australian Prudential Regulation Authority, which shows LVRs originating between 60 and 80 percent have comprised a larger proportion of lending.</p>
<p><em>Tim Lawless is head of the CoreLogic research and analytics team and can be contacted <a href="https://blog.corelogic.com.au/author/timlawless/" target="_blank">here</a>.</em></p>
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