The new <a href="https://www.apartments.com.au/new-apartments/yarraville-green-42-stephen-street-yarraville-vic-3013">Yarraville Green</a> development in Melbourne's inner west is showing that landscaping can be just as influential as architecture, with buyers responding strongly to the garden-first approach adopted from the outset by developer Excelon Projects and the project's design team.

Excelon appointed Six Degrees Architects and landscape architects SBLA to work collaboratively on the development, with a brief to create "a sustainable, design-led building with a focus on community."

That approach has resonated with buyers. According to Next Chapter Director Tom Hirini, who is leading the sales campaign, the landscaped communal garden has become one of the project's defining features, alongside its boutique scale and European-inspired cluster housing concept.

Local downsizers, right-sizers and established families already living in Yarraville and surrounding suburbs have accounted for the majority of purchasers.

[smartcode_project:default project_id=144913 project_image_fid=297740]

Yarraville Green will comprise 53 homes, including apartments and townhomes, arranged around the shared central garden to maximise connections to the landscaped open space. Parking has been moved underground, allowing the ground plane to be dedicated to greenery, pedestrian movement and communal spaces.

The landscape extends well beyond passive planting. Productive garden beds, a pergola, communal gathering spaces, garden sheds and a pet wash have all been integrated into the masterplan, creating spaces designed to encourage everyday interaction between residents.

[smartcode_project:default project_id=144913 project_image_fid=297741]

The interiors continue Excelon's focus on craftsmanship, incorporating bespoke elements by Melbourne artisans including leadlight detailing by Adadaz, hand-turned timber hardware by Auburn Woodturning and blown-glass lighting by Ruth Allen.

Sustainability has also been embedded throughout the project, with Yarraville Green targeting an average 7-star NatHERS energy rating through passive design principles, rooftop solar servicing common areas and rainwater harvesting for landscape irrigation.

[smartcode_project:default project_id=144913 project_image_fid=297735]

Construction continues to progress at Yarraville Green, with structural works well underway and framing works approaching completion under builder Balmain &amp; Co. The project remains on track for completion in mid-2027.

Apartments at Yarraville Green are currently priced from $625,000, while townhomes start from $1.4 million.

[smartcode_project_cta:default project_id=144913]

Joel Robinson

Garden-led design drives buyer demand at Yarraville Green

National diversified developer Fortis has officially launched Crest &amp; Walker, its latest Brisbane apartment development, with construction now underway on the 20-storey Newstead project.

Award-winning builder BINAH has commenced construction on the Bureau^Proberts-designed building, which will deliver a limited collection of 65 two and three-bedroom apartments on Kyabra Street.

[smartcode_project:default project_id=145922 project_image_fid=373556]

The project marks Fortis' fourth active residential development in Brisbane, following River House, which is nearing completion, alongside projects in New Farm and Hamilton as the national developer continues to expand its South East Queensland pipeline.

Fortis General Manager – Development Queensland Dan Boman said Crest &amp; Walker reflects the developer's long-term commitment to delivering design-led residential projects in Brisbane's established inner-city suburbs.

"We're proud to be strengthening our presence in Brisbane with Crest &amp; Walker, particularly in such a sought-after lifestyle destination as Newstead," Boman said.

"Every Fortis project is shaped by its context, and we approach each one with the respect and care it deserves.

"Our focus is always on creating places that feel connected to their neighbourhood and elevate the everyday experience for residents. Newstead continues to evolve as one of Brisbane's most sought-after urban communities, and Crest &amp; Walker reflects our ambition to contribute meaningfully to that story."

[smartcode_project:default project_id=145922 project_image_fid=373559]

Positioned between Gasworks Plaza and James Street, <a href="https://www.apartments.com.au/new-apartments/crest-walker-newstead-12-kyabra-street-newstead-qld-4006">Crest &amp; Walker</a> has been designed as a boutique residential address offering privacy and generous living spaces within one of Brisbane's most established lifestyle precincts.

The building features a contemporary brick podium softened by integrated landscaping, while the upper levels are characterised by restrained architecture and enduring materiality. Interiors have been designed to maximise natural light, acoustic performance and long-term liveability.

[smartcode_project:default project_id=145922 project_image_fid=373583]

Residences comprise spacious two and three-bedroom floorplans, with two-bedroom apartments priced from $1.55 million and three-bedroom, half-floor residences from $3.95 million.

Residents will have access to a wellness-focused rooftop featuring a swimming pool, sauna, steam room, landscaped dining spaces and outdoor lounge areas overlooking Newstead and the Brisbane CBD.

[smartcode_project:default project_id=145922 project_image_fid=373571]

Sales are being managed by Slaite Projects, with Fortis expecting strong demand from owner-occupiers seeking a high-quality, design-focused apartment in one of Brisbane's most tightly held inner-city suburbs.

Completion of Crest &amp; Walker is slated for late 2028.

[smartcode_project_cta:default project_id=145922]

Fortis expands Brisbane pipeline with launch of Crest & Walker in Newstead

The enormity of delivering a true skyscraper in Australia's new development market is often overlooked.

It has taken the best part of a decade since plans for Chevron One were first unveiled, but the 41-storey tower is now complete, with residents collecting their keys and moving into what has become one of the Gold Coast's most recognisable new landmarks.

Rising 127 metres above Chevron Island, Chevron One stands almost twice as high as any other building on the island. Its scale places it alongside the trio of towers at Jewel, arguably the last truly significant addition to the central Gold Coast skyline when they were completed around six years ago.

While there are several developments underway around a similar height to Chevron One, they are more concentrated within clusters of the highest towers in the city. The fact Chevron One sits within a developing precinct, looking back at the other high-rise developments in Surfers Paradise and Broadbeach, makes it a different proposition altogether. It will certainly become a reference point on the Gold Coast skyline.

[smartcode_project:default project_id=6515 project_image_fid=68833]

Developer Bensons Property Group is behind the 41-storey tower, which has 229 apartments, along with an exhaustive list of resident amenity spread across what is the largest development site ever assembled on Chevron Island.

The tower has been the talk of the town for years, says Ray White Projects Gold Coast agent Caitlin Rosenboom, who is selling the remaining apartments.

"People have been watching Chevron One go up for years," Rosenboom says, adding that many prospective buyers have been surprised by the scale of the views once they step inside.

"It's only when they walk through a completed apartment that they truly understand the position of the building," Rosenboom says.

"The views are jaw-dropping. Whether you're looking east over the ocean, across Surfers Paradise, along the river systems or out to the hinterland, every level offers something different but equally impressive."

[smartcode_project:default project_id=6515 project_image_fid=360215]

One of Chevron One's defining advantages is its location on the eastern side of Chevron Island on Stanhill Drive, a position which protects the views forever.

"There's only one row of houses between Chevron One and the water, and the height restrictions along the river means views from Chevron One can never be built out,"&nbsp;Rosenboom says.

While new apartment developments continue to emerge across the Gold Coast, Rosenboom says opportunities to secure a completed apartment with this level of outlook are becoming increasingly rare.

"The size of the site is something that would be incredibly difficult to replicate today," she says.

"That's allowed Chevron One to deliver the sort of amenity, open space and resident facilities that very few projects can offer. There are not many completed apartment buildings on the Gold Coast right now that can compete with the combination of scale, quality and amenity."

[smartcode_project:default project_id=6515 project_image_fid=68839]

There's around 2,000 sqm of amenity solely for the use of residents of Chevron One. Club One features a uniquely shaped swimming pool that mirrors the footprint of the building itself, set within a extensively landscaped gardens. There's also an indoor pool and spa, a fully equipped gym with a Pilates room, a yoga garden, a bookable private dining area and lounge that can host up to 30 people, and a 24-hour concierge service.

As for the buyers, Rosenboom is fielding enquiry from everywhere: Sydneysiders and Melburnians looking at the new and off-the-plan market following the changes in the Federal Budget, as well as those looking to relocate, through to South East Queenslanders seeking either a permanent home or a weekender bolthole.

"The Gold Coast lifestyle continues to resonate with people relocating from the southern states, and when they see the views and the quality of what's been delivered at Chevron One, it becomes very easy for them to understand the appeal," Rosenboom says.

A diverse mix of one, two and three-bedroom apartments remain available, with each offering "something a little different", be it the orientation and views, configuration, or level, to suit a wide variety of buyers.

The remaining apartments are ready to inspect in person, by appointment.

[smartcode_project_cta:default project_id=6515]

A decade in the making: Residents to move into Chevron One as construction wraps up

A general rule of thumb in new apartment developments is that the penthouses get the rooftop.

It's a formula that's become commonplace across Australia's apartment market. Residents might have access to a pool, gym or barbecue facilities on a dedicated lower level, but the most desirable outdoor spaces are typically reserved for the highest-priced homes at the top of the building.

<a href="https://www.apartments.com.au/developers/sherpa-property-group">Sherpa Property Group</a> has taken the opposite approach.

Rather than dedicating the rooftop to a handful of buyers, the Gold Coast developer has made it the centrepiece of its Flourish collection, creating expansive shared spaces from the best vantage point in the building.

The philosophy has reached its most ambitious expression at <a href="https://www.apartments.com.au/new-apartments/flourish-soleira-palm-beach-1150-1160-gold-coast-highway-palm-beach-qld-4221">Flourish Soleira</a> in Palm Beach, where two rooftop precincts connected by a skybridge will deliver one of the most extensive lifestyle offerings seen in a residential apartment project on the Gold Coast.

[smartcode_project:default project_id=150017 project_image_fid=374053]

"We're seeing a clear move toward developments that offer more than just an apartment," Sherpa Group founder Christie Leet said.

"People want spaces that support how they actually live, whether that's working from home, staying active, or spending time with family and friends.

"That's where amenity becomes critical. It's not just about what's included, but how those spaces are designed to be used every day."

[smartcode_project:default project_id=150017 project_image_fid=374052]

The breadth of amenity has already attracted buyers across multiple demographics. Younger first home buyers have been drawn to Soleira's one-bedroom apartments, a product rarely delivered in Palm Beach, while families have responded to practical inclusions such as the shallow children's pool adjoining the main lap pool and the extensive communal recreation areas.

Instead of a single rooftop, Soleira delivers two distinct lifestyle zones.

[smartcode_project:default project_id=150017 project_image_fid=372547]

The southern rooftop has been dedicated to wellness, featuring a gym, yoga and Pilates studio, work-from-home facilities, a wellness centre, spa, and hot and cold plunge pools.

The northern rooftop focuses on recreation and entertaining, incorporating a heated resort-style pool, private dining rooms, pizza ovens, barbecues, a golf simulator, children's recreation areas, and what is expected to be the Gold Coast's first rooftop basketball court, which will also double as a squash court.

[smartcode_project:default project_id=150017 project_image_fid=374054]

Beyond the rooftops, Soleira will introduce 1,500 sqm of curated retail beneath the towers, creating one of Palm Beach's first genuinely mixed-use lifestyle precincts where cafés, restaurants and convenience retail become part of residents' everyday lives.

Sherpa has also retained management rights across the development, allowing it to oversee the long-term operation of the building through a 24-hour concierge model. The developer is also exploring additional revenue streams within the precinct aimed at helping offset ongoing body corporate costs for residents.

[smartcode_project:default project_id=150017 project_image_fid=370962]

While Soleira is the largest project Sherpa has delivered, the rooftop-first philosophy has been evolving for several years.

It began with <a href="https://www.apartments.com.au/new-apartments/amargo-6-12-sixth-avenue-palm-beach-qld-4221">Flourish Amargo</a>, the first project released under the Flourish brand. Rather than competing at the ultra-luxury end of the market with oversized half-floor and full-floor residences, Sherpa focused on creating lifestyle-driven apartments supported by resort-style shared spaces.

Amargo introduced more than 800 sqm of rooftop amenity, combining wellness facilities, heated pools, entertaining areas, cabanas, pizza ovens and private dining spaces into what was designed as an extension of residents' homes rather than a facility used only occasionally.

[smartcode_project:default project_id=146527 project_image_fid=366550]

That approach continued with Flourish Oasis, where the same amenity-led philosophy was refined into a more boutique development. Strong demand from Sherpa's growing VIP database saw much of the project sold before it reached the broader market, reinforcing buyer appetite for apartment communities centred around shared lifestyle experiences.

Flourish Amargo is slated for completion mid-way-through next year, with Oasis to be delivered by late 2027. Flourish Soleira is expected to complete in 2030.

[smartcode_project_cta:default project_id=150017]

Sherpa takes amenity to the sky as Flourish Soleira captures booming Palm Beach demand

As apartment living continues to evolve across Sydney's growth corridors, the quality and distribution of shared spaces is increasingly shaping how residents experience home. Rather than functioning as add-ons, amenities are being embedded into the daily rhythm of a building, supporting everything from quiet retreat to social interaction, often within a single vertical community.

At <a href="https://www.apartments.com.au/new-apartments/aeris-melrose-park-nursery-street-melrose-park-nsw-2114">Aeris</a> in Melrose Park, this approach is resolved through a layered amenity offering that unfolds from ground level through to its upper podium. Developed by <a href="https://www.apartments.com.au/developers/sekisui-house-australia">Sekisui House Australia</a> in partnership with Hankyu Hanshin Properties, the project introduces 468 apartments across two towers and a mid-rise building, positioned at the highest point of the broader masterplan.

[smartcode_project:default project_id=426 project_image_fid=359199]

The amenity experience begins at street level, where two courtyards sit within a landscaped setting that connects residents to the wider network of parks and green spaces. These green spaces are not isolated pockets but part of a wider pedestrian network that links Aeris to the surrounding <a href="https://www.apartments.com.au/developments/melrose-park-nsw-2114">Melrose Park</a> precinct, including Central Park, future schools, and the Town Centre opening in July 2026. The result is a transition that moves from public to private without abrupt boundaries, allowing residents to pass through shaded, tree-lined environments before reaching the building itself.

Moving upward, the focus shifts to the level five podium, where the primary communal facilities are concentrated. This space brings together a 16-metre swimming pool, outdoor seating areas, and a communal BBQ zone arranged to take advantage of elevated outlooks. Seating is positioned beneath pergolas, creating pockets of shade that extend the usability of the space throughout the day. The pool edge aligns with views toward the wider district, reinforcing the sense of elevation that defines the project’s positioning.

In the adjacent building, this is complemented by quieter, more contemplative spaces, including an outdoor cinema set within the same level. Positioned to operate primarily in the evening, it introduces a different tempo to the shared environment, shifting from daytime activity to after-hours use without requiring separate zones.

[smartcode_project:default project_id=426 project_image_fid=360299]

The podium also accommodates an intimate private resident gym. Located on the lower levels, it gives residents convenient access to fitness facilities without leaving the building.

Above, the elevated podium sky deck extends the amenity offering, providing additional open-air spaces with elevated outlooks across the surrounding landscape. While more restrained in program, this upper level reinforces the project’s vertical progression, from ground-level greenery to elevated outlook, allowing residents to move between distinct spatial conditions within a single address.

This distribution of amenities reflects a deliberate response to how residents use space across the day. Sekisui House Australia Sales and Marketing Director Peter Kalaf points to the role these shared areas play in shaping buyer demand. Aeris has been conceived as more than a collection of apartments, with the podium pool, gym and outdoor cinema forming part of a broader lifestyle offering that extends the home beyond each individual residence.

[smartcode_project:default project_id=426 project_image_fid=360300]

What distinguishes Aeris is not the inclusion of these elements individually, but how they are arranged in relation to one another. Active, social, and passive spaces are layered vertically rather than separated, allowing residents to choose between them without leaving the building or moving far from their apartment. This proximity supports both routine use, such as a morning swim or evening workout, and more occasional gatherings, whether around the BBQ area or within the cinema setting.

The amenity design also sits within a broader framework of connectivity across Melrose Park. The Melrose Park Town Centre, anchored by Coles and Dan Murphys, features a mix of retail, dining, health and lifestyle offerings, bringing everyday convenience closer to residents. By the end of the year, more than five hectares of parks and open space, equivalent to around seven football fields of green space on residents' doorstep, will further enhance the precinct, allowing the internal facilities at Aeris to operate as an extension of the wider neighbourhood rather than a substitute for it.

Construction at Aeris continues to gather momentum, with ground floor slabs expected to be completed in late 2026 before the first sections of the buildings begin to rise above ground.

[smartcode_project_cta:default project_id=426]

Elevated amenity anchors daily life at Aeris, Melrose Park

China

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GUEST OBSERVER
A QUICK OVERVIEW OF CHINA’S DEBT
International estimates of China’s debt levels vary widely. The Bank for International Settlements (BIS) estimated China’s debt at around 255 percent of GDP in Q1 2016. In contrast, the International Monetary Fund (IMF) recently reported a lower estimate – at around 225 percent of GDP. Both of these measures are based on China’s official Aggregate Financing data – which (as we’ve previously noted) captures only some of the country’s shadow banking sector – the major contributor to debt growth since 2012.
WIDE RANGE OF DEBT ESTIMATES 
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Our estimate of debt draws on a broader measure of shadow banking, combined with bank loans and corporate and government bonds. This produces a much larger value for debt– at almost 323 percent of GDP in Q2 2016 – a level that places China among the highest debt advanced economies – an unprecedented position for a still developing economy. Risks related to shadow banking are distributed unevenly across the financial sector – with the IMF reporting that smaller banks are far more exposed (in terms of capital buffers) than the big four state-owned banks.
The majority of the debt sits in China’s corporate sector, particularly State-Owned Enterprises (SOEs), which effectively ties the strategies of authorities in managing the debt to the broader challenges of SOE reform. Misallocation of debt to SOEs has contributed to excess production capacity in a number of sectors – particularly heavy industry – as well as expanding the debt-to-GDP ratio.
Standard &amp; Poor’s notes that China’s private sector leverage declined in 2015, while SOE leverage continued to grow. Median SOE debt levels in 2015 were six times earnings (EBITDA), meaning that a large amount of cash flow would be required to service debt, reducing the amount available for re- investment or debt reduction.
DEBT BY SECTOR 
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Earlier this year, the IMF estimated that the potential losses from the corporate loan portfolios of China’s banks could be around 6.9 percent of GDP – an estimate that the organisation described as conservative, given that it excluded potential additional risks related to shadow banking exposures.
WARNING SIGNS DON’T GUARANTEE
CRISIS
In many respects, China’s financial system is shielded in ways other countries are not – allowing credit to accumulate rapidly (near or above the BIS danger level since 2009) without yet enduring a crisis. Domestic banks are relatively well capitalised, maintaining an internationally high reserve ratio (as mandated by Chinese authorities) and have a strong deposit base.
This means that banks are less reliant on international wholesale funding – which has a tendency to be withdrawn during periods of high risk concerns – while remaining capital controls restrict the capacity of residents from migrating their wealth (albeit not completely prevent it, as capital outflows in recent years demonstrate).
That said, the stability of funding is beginning to weaken – with banks increasingly using the short term interbank market. According to IMF’s October Global Financial Stability Report, wholesale funding (primarily domestic interbank and repo markets) provided over 30% of total bank funding in 2015, up from around 18% in 2014, with smaller banks particularly reliant on these sources. The short term nature of this funding is mismatched to the longer term loans to corporates.
CHINA’S FUNDING STABILITY DECLINING 
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Despite the relatively shielded nature of the financial sector, these characteristics do not mean that China’s government can afford to ignore the debt issue (particularly as funding stability declines), but provides them with some time to appropriately address it. 
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HOW CAN CHINA ADDRESS THE GROWING 
DEBT RISK? 
In the short term, Chinese authorities should seek to control, rather than reduce the debt-to-GDP ratio – as severe cuts to credit necessary to produce the latter would likely lead to a sharp slowdown in economic growth. Standard &amp; Poor’s estimates that banks would require around RMB 11.3 trillion in recapitalisation if current credit growth rates persisted for the next five years. Controlling the debt issue will require increasing the efficiency of lending, particularly reducing the share of funding directed to SOEs. 
The IMF note a range of measures that Chinese authorities should consider – noting that a comprehensive response to the debt issue, while it is still manageable, offers the greatest chance for success. These include imposing harder budget constraints on SOEs, restructuring or liquidating highly indebted firms and managing losses across a range of parties, including the government where necessary. The IMF also recommends introducing social assistance for displaced workers and encouraging the entry of private firms across the economy. 
Plans to restructure SOEs have focussed largely on mergers and partial privatisation. Allowing firms to swap debt for equity (a policy approved by China’s State Council in early October) is one way to address the debt issue, but poorly performing, highly indebted firms are unlikely to be attractive opportunities for investors – particularly those still scarred by the 2015 share market bubble burst. Similarly there are concerns that banks could be forced to swap bad loans for equity in so-called zombie firms, achieving little in terms of restructuring. Harder decisions around the weakest SOEs – including liquidation – must be considered. This would require the development of a sound and consistent bankruptcy framework understood by all market participants. 
Greater competition is also a way to improve the efficiency of lending – particularly if banks are incentivised to lend to more innovative private sector firms. SOEs continue to enjoy preferential barriers to entry in a range of industries – including fast growing service sectors such as communications. Greater market access for private banks in the finance sector would likely contribute to reducing SOEs share of corporate debt – as profit rather than relationships would likely drive lending decisions. 
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Warnings from the BIS and IMF have elevated concerns around China’s corporate debt levels. While the nature of China’s financial markets provides authorities with some additional time to address the issue, urgent reform to SOEs and increased competition across the economy will be necessary to avoid a medium term financial crisis. 
Gerard Burg is senior economist, Asia for NAB and can be contacted <a href="https://www.nab.com.au" target="_blank">here</a>.
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jchancellor-FAypfDUnLy

China’s authorities must manage debt to avoid a financial crisis

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As in other emerging market economies, incomplete information prevents a full assessment of the fiscal buffers in China, according to IMF's latest report.
However, preliminary estimates suggest the general government’s net financial worth could range between 0 and a negative 23 percent of GDP, better than that in other emerging market economies.
Nonfinancial assets may provide additional buffers, but the extent of contingent liabilities and age-related spending increases are important sources of vulnerability.
With high and rising corporate debt and potential contingent liabilities from the financial sector and state-owned enterprises (IMF 2016d), it is important to assess the strength of the general government’s balance sheet in China to facilitate a necessary adjustment.
While it is often difficult to estimate the general government’s net financial worth in emerging market economies given the dearth of information especially on the asset side, in the case of China, shortcomings in data on the fiscal accounts and an intricate network of cross-financing make this task particularly challenging:
• Liabilities. Until recently, a significant amount of liabilities associated with off-budget local infrastructure spending, which benefited from implicit or explicit government guarantees, was not included in debt aggregates. Under the 2015 budget law, aimed at improving transparency of local government finances, about 20 percent of GDP of these liabilities have been explicitly recognized as part of China’s general government debt, resulting in a doubling of the debt ratio. An additional 12 percent of GDP has been recognized as contingent government liabilities. Nevertheless, there may be other off-budget contingent liabilities incurred in 2015, estimated at 5 percent of GDP, that have yet to be acknowledged.
• Assets. Available estimates suggest that the general government’s largest financial asset is related to its participation into state-owned enterprises (Chinese Academy of Social Science 2015; Xu and Zhang 2014; People’s Bank of China), but detailed data about the government’s total holding of equity in state-owned enterprises is not publicly available.
A first attempt to estimate the general government’s net financial worth suggests that it is between a positive 3 percent and a negative 23 per- cent of GDP, better than the negative 24 percent on average in other emerging market economies (Figure 1.1.1). In particular, at the end of 2015, financial liabilities amounted to 38–55 percent of GDP (depending on whether off-budget and contingent liabilities are included).
Financial assets (comprising deposits in financial institutions—5 percent of GDP—and equity holdings in state-owned enterprises) are estimated at between 32 and 41 percent of GDP. This wide range is related to significant uncertainties regarding the valuation of state-owned enterprises, as many of them are not traded.
<a href="/images/2016/10/24/China.jpg" target="_blank">Click to enlarge</a>
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On the basis of these enterprises’ net asset positions, the government’s equity holdings could be worth around 36 percent of GDP.2 A more conservative assumption based on their profitability would reduce this estimate to 27 percent of GDP.
 The general government’s net financial worth may not, however, give a full picture of the available buffers. Ideally one would like to look at the public sector (including the central bank), but limitations of available data on public corporations, including estimates of the value of implicit government guarantees, preclude a full assessment.
In addition, other nonfinancial assets and other contingent liabilities of the general government should be accounted for. For example, the value of land ownership (a nonfinancial asset) estimated by computing the net present value of net use right fees for the next 25 years could be up to 51 percent of GDP. On the other hand, under current policies, estimated increases in age-related spending (following the methodology in Clements and others 2015) would amount to 128 percent of GDP in net present value terms.
Also, contingent liabilities such as potential losses on corporate loans from rapid and inefficient credit expansion may put further pressure on the fiscal accounts (April 2016 Global Financial Stability Report). Additional losses can be expected in other parts of the financial system, especially in shadow credit products.
Limited information makes it difficult to manage risks and can lead to markets’ overreaction to policy changes. From that perspective, a priority for China should be to strengthen its fiscal risk analysis and management framework, starting with a clear and transparent identification of assets, liabilities, and exposures.
Full implementation of the 2015 budget law would be a step in this direction. Once risks are identified and quantified, tools to mitigate risks (including limits on exposures, regulations, and a mechanism to transfer risks) could be considered, along with decisions about risk provisions, contingency budgeting, and buffer funds.
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j.ballantyne1990-6AQqhLzZaK

What we know about the general government’s balance sheet in China: IMF

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Chinese developers are now in a better place to repay existing debt due to improved access to credit, robust housing sales in upper tier cities and increased 'destocking' in lower tier cities, according to a new report from CBRE.
The report, China Real Estate Debt: An Assessment of Credit Risk in the Chinese Property Market also stated smaller developers remain challenged.
Dr Henry Chin, head of research for CBRE Asia Pacific said developers are positive on the longer-term prospects of China’s real estate sector in upper tier cities despite the cloud of rising debt levels.
"Supported by the introduction of more transparent financing channels, improving bank lending underwriting critieria and a revival of the national housing market in upper tier cities, much of the systematic risk in the real estate sector has been mitgated,” said 
Canon Yau, senior director, Capital Advisors, CBRE Asia Pacific said despite the availability of alternative domestic financing channels in China, developers should be prepared for the possibility of future policy changes as well as an interest rate reversion that may subsequently impact their cost of capital and debt maturity exposure.
“For small and medium-sized developers, we advise a longer-term view on refinancing plans by exploring strategic partnerships or forming joint ventures with investors to reduce concentration risk.
"As the government seeks to create more transparent financing channels, the introduction of asset backed securitization markets will provide opportunities for property companies to expedite the repatriation of funds," he said.
“For small and medium-sized developers, we advise a longer-term view on refinancing plans by exploring strategic partnerships or forming joint ventures with investors to reduce concentration risk.
"As the government seeks to create more transparent financing channels, the introduction of asset backed securitisation markets will provide opportunities for property companies to expedite the repatriation of funds."
CBRE’s report reveals that, despite favorable funding conditions, potential risk factors still remain in China’s real estate debt market which include the developers’ ability to repay debt, sustainability of residential sales, postponing rather than resolving debt and over-leveraging among regional developers.
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jonathanchancellor-7SQnKwU6yx

Improving credit landscape driving Chinese developers: CBRE

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Knight Frank has published its third Chinese Outbound Real Estate Investment Report titled Changing Currents, Rising Tides.
Riding on last year’s strong momentum, the waves of Chinese outbound capital continued in major real estate markets around the world in H1 2016, with more to come through the rest of the year.
Global gateway locations have seen undiminished interest from Chinese investors, who are driven by Chinese economic and policy factors and are attracted by favourable local market conditions in gateway cities.
China’s capital outflow control has been a push factor so far, but it could prove to be a double-edged sword.
Stringent requirements have made it difficult for some investors to secure foreign exchange clearance.
According to Knight Frank’s Head of Research and Consulting, Australia Mr Matt Whitby, “The volume of Chinese investment in Australia is down considerably year-on-year because of a lack of mega-deals in the first half, as large deals such as the Investa portfolio dragged the 2015 number higher.
“Amid competition from other Asian buyers, however, there is a strong Chinese appetite for en-block commercial properties in both Sydney and Melbourne, attracted by rental growth supported by strong tenant demand and a supply shortage,” said Mr Whitby.
<ul>
<li>Chinese capital outflow continued strongly in H1 2016, with a total of US$10.7 billion invested. Although showing a 13.6 percent drop compared to H1 2015 this should be considered in the context of some of the biggest real estate deals in Chinese outbound investment history early last year, such as the US$1.9 billion purchase of New York’s Waldorf Astoria Hotel. While overall investment is somewhat softening, we saw strong growth of Chinese capital inflow in a number of key gateway cities.</li>
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In Australia, with the absence of mega-deals such as last year’s CIC’s record breaking purchase at US$1.8bn for an office portfolio, the volume of office deals dropped 65 percent and hotel deals dropped 42% YoY. Investment in development sites stabilised. Nonetheless, Chinese and other Asian capital remain drawn mainly to Sydney and Melbourne’s office markets given their short supply and rental growth prospects. One important observation is that Chinese developers are now looking to diversify into income producing properties.</li>
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<li>In Australia, Chinese investors and developers spent US$1.7bn in Australia in 1H 2016 – a 37 percent decline year-on-year. With the absence of mega deals, such as CIC’s record-breaking purchase at US$1.8bn for an office portfolio (AUD2.45bn), the volume of office deals dropped 65% and hotel deals dropped 42% year-on-year. Meanwhile, investment in development sites stabilised.</li>
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<ul>
<li>Chinese outbound investment as a whole was gaining momentum as we crossed the half-year mark, with the biggest push coming from the Chinese economy itself. Global gateway locations have seen undiminished interest from Chinese investors, helped by favourable local market conditions like market depth, rental growth prospects, and in the case of London, a cheaper UK pound.</li>
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<li>However there are challenges ahead. China’s capital outflow control was designed to prevent the erosion of the country’s vast foreign exchange reserves, but its stringent requirements have made it difficult for some investors, mainly smaller ones, to obtain foreign exchange clearance. Some sizeable investors have invested through overseas subsidiaries, but these subsidiaries may run out of funds if the grip on foreign exchange reserves is not loosened.</li>
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According to Knight Frank’s Head of Asian Markets, Australia Dominic Ong, “Chinese and other Asian capital continues to be drawn mainly to the office markets in Sydney and Melbourne. Tenant demand from various sectors remains strong, but lack of supply has caused rents in both cities to rise and vacancies to fall. Yields, meanwhile, have been tightening, but are still above long-term bond yields.
“Fewer buying opportunities, coupled with the positive rental outlook, have already attracted large Chinese private developers such as Poly Group and Shanghai Shenglong to the office market. Since June there have been a number of major deals in the making, which will underpin the investment market outlook for 2016.
“Activity has picked up in the past few months. Some of the most recent transactions in Australia from Chinese buyers include 15 Help Street, Chatswood which sold for AUD43.8m to One Pro Investment Group; 20 Bridge Street, Pymble which sold for AUD78m to YuHu; 210 George Street, Sydney sold for AUD160m to Poly Group; and 61 Lavender Street, Milsons Point sold to Aqualand for AUD110m,” said Mr Ong. <a href="/images/2016/10/19/Chinese%20investment%20in%20major%20gateway%20cities.jpg" target="_blank">Click to enlarge</a>
 <img src="/images/2016/10/19/Chinese%20investment%20in%20major%20gateway%20cities.jpg" alt="">
Mr Whitby said, “The US is now firmly established as the most important destination for Chinese capital, having attracted US$5.1 billion worth of Chinese investment in H1 2016, up 21 percent year-on-year (YoY).
“The Australian market meanwhile showed a 37% YoY decline due to the absence of mega-deals we saw last year.”
Paul Hart, Executive Director, Greater China at Knight Frank said, “Meanwhile, Chinese investment in the UK showed an impressive YoY increase of 75 percent in H1. The interest in the British capital has not diminished even after the Brexit vote as the market saw a number of major transactions taking place since then. Closer to home, Hong Kong saw US$1.68 billion worth of Chinese investment in H1, a minor volume drop YoY. However we have seen a number of large deals since July which will enhance the whole year result.”
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<li>In the US, New York attracted 80% of Chinese investment in the US. A large share of this (62 percent) was in office deals, as Chinese institutional capital continued to chase trophy assets. Major hubs on the west coast, such as San Jose and Seattle, also drew interest from Chinese investors. As the Fed-led low interest-rate environment persists, Chinese investors will continue to favour tangible assets such as real estate.</li>
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<li>In the UK, the economy’s perceived stability and London’s status as an international financial centre contributed to the UK’s 75 percent YoY increase in Chinese investment before Brexit. Private banks and conglomerates became a key part of the investment landscape, which was previously dominated by large insurance companies. Chinese investors’ interest in the city seemed unabated after Brexit, with a number of major office transactions completing since July.</li>
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<li>Hong Kong has attracted Chinese investors thanks to increased financial cooperation and its position as the international financial centre closest to China mainland. Currency and stock connect schemes between Hong Kong and the Mainland attracted new investor and tenant demand. Owning office space is an attractive option due to Hong Kong having the world’s highest office rents. Meanwhile, the city’s residential land market also offers better value than some hotly-contested Chinese markets.</li>
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<ul>
<li>Feeling the pressure from the RMB’s steady devaluation against the US dollar, Chinese investors, particularly private conglomerates, have tended to invest aggressively in hard assets. The demand for real estate has coincided with strong appetite in other investments.</li>
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Bunny Wang, Senior Director, Head of International Capital Markets and International Project Marketing, China, Knight Frank, believes that Chinese investors will continue to be interested in the traditional gateway markets.
She notes that the buying spree that resulted from the RMB’s steady devaluation against the US dollar bodes well for gateway markets, at least in the short term.
Furthermore, despite talk of a prolonged slowdown, China’s GDP growth has stabilised at above 6.5 percent.
She believes one of the main ways the central government will achieve its GDP growth target is through infrastructure investment and real estate market-led consumption.
Given the highly competitive domestic real estate market, many investors and developers are keen to diversify their investment overseas.
David Ji, Director and Head of Research and Consultancy, Greater China at Knight Frank, believes that China’s capital outflow control could present some risks.
Stringent requirements for foreign exchange clearance aside, he believes that the prospect of high land prices in the country’s major cities would encourage the seeking of overseas opportunities.
But the complicated processes and planning issues in gateway markets could diminish the willingness of Chinese investors to explore those markets more deeply.
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Chinese real estate investment in Australia was down YoY, however activity has recently picked up again

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Riding on last year’s strong momentum, the waves of Chinese outbound capital continued in primary real estate markets around the world in the first half of 2016, according to Knight Frank.
Looking at the total volume, the US$10.7 billion invested actually represents a 13.6 percent drop compared to the same period last year.
But this should be considered in the context of some of the biggest real estate deals in Chinese outbound investment history early last year, such as the US$1.9 billion purchase of New York’s Waldorf Astoria.
Nevertheless, Chinese investment was gaining momentum as we crossed the half-year mark. Since June there have been deals in the making that promise to turn 2016 into another productive year.
<a href="/images/2016/10/19/Chinese%20global%20real%20estate.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/19/Chinese%20global%20real%20estate.jpg" alt="">
The US market attracted US$5.1 billion worth of Chinese investment in the first half of the year, up 21 percent year-on-year (YoY).
Chinese investors, like most international investors, are again focusing primarily on the major markets, especially New York, which attracted 80 percent of Chinese investment in the US. Remarkably, the amount of Chinese capital invested in New York from January to June was equivalent to 81 percent of Chinese capital invested in the city in all of 2015.
<a href="/images/2016/10/19/Top%20Chinese%20real%20estate.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/19/Top%20Chinese%20real%20estate.jpg" alt="">
A large share of this (62 percent) was in office deals, as Chinese institutional capital continued to chase trophy assets. A joint venture involving China Life, for example, bought the PaineWebber Building in New York for US$1.65bn. Both CIC and HNA group also splashed out on New York offices this year.
<a href="/images/2016/10/19/Sector%20share.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/19/Sector%20share.png" alt="">
Major hubs on the west coast, such as San Jose and Seattle, also drew interest from Chinese investors, particularly hi-tech-related development sites and industrial properties. For example, LeEco acquired the former Yahoo site, where it reportedly plans to set up regional headquarters.
As the Fed-led low interest-rate environment persists, Chinese investors, like all investors chasing yield, will continue to favour tangible assets such as real estate in the next few years. Added to this is the slow devaluation of the renminbi against the US dollar, which has resulted in a sense of urgency for Chinese investors to invest in USD-denominated assets.
<a href="/images/2016/10/19/Location%20share.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/19/Location%20share.jpg" width="400">
Some investors may wait for the coast to clear regarding the presidential election, but barring a major political upset, the US should see slow but stable GDP growth of around 2 percent, according to IMF’s latest forecast. This will put the US ahead of other developed countries, where the danger of a recession continues to linger.
Added to this advantage is the significant market depth, not just in New York, but in a score of coastal hubs and high-tech centres, making the US the foremost investment destination 2,700 for Chinese capital.
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<img src="/images/2016/10/19/Chinese%20real%20estate.jpg" width="400">
In the six months leading up to the Brexit vote, London, which drew the lion’s share of Chinese investment in the UK, saw a number of large en- block deals, which contributed to the US$1.7bn in total volume, a whopping 75% uptick year on year.
Even though there were only a limited number of transactions, London’s status as a key international financial centre and the perceived stability of the UK economy definitely contributed to this tremendous growth.
<a href="/images/2016/10/19/Top%20Chinese%20real%20estate%202.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/19/Top%20Chinese%20real%20estate%202.jpg" alt="">
One interesting aspect of these deals is that private banks, developers and conglomerates such as Baosheng Bank and Fosun became noticeable part of the investment landscape, which was crowded last year with major Insurance companies. This is partly because they are able to make decisions more quickly. They tend to favour the City and West End over Canary Wharf, partly because of pricing.
Even after the Brexit vote, Chinese investors’ interest in London seems undiminished, as there have been a few major office transactions since July. For example, through its majority-controlled SRE group, China Minsheng Investment Corp, said to be China’s largest private investment conglomerate, bought Societe Generale’s London headquarters for GBP84.5 million (US$110 million) in September. Meanwhile, Vanke reportedly bought London’s Ryder Court for GBP115 million (US$149 million) through Hong Kong-listed Vanke Overseas.
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<img src="/images/2016/10/19/Chinese%20real%20estate%202.jpg" width="350">
While economists have torn up their previous forecasts of a UK recession, the negotiation process for Brexit will still mean increased political uncertainty in the short term.
During this period we expect overseas buyers to focus on Central London, particularly districts popular with technology and media firms, instead of looking at the wider UK. The fall in the value of the pound and recent yield softening has made London more attractive than some other global hubs.
Chinese investors and developers spent US$1.7bn in Australia in H1 2016, a 37 percent decline YoY. With the absence of mega-deals, such as CIC’s record breaking purchase at US$1.8bn for an office portfolio, the volume of office deals dropped 65 percent and hotel deals dropped 42 percent YoY. Meanwhile, investment in development sites stabilised.
Despite this, Chinese and other Asian capital continues to be drawn mainly to the office markets in Sydney and Melbourne. Tenant demand from various sectors remains strong, but lack of supply has caused rents in both cities to rise and vacancies to fall. Yields, meanwhile, have been tightening, but are still above long-term bond yields.
<a href="/images/2016/10/19/Top%20Chinese%20real%20estate%203.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/19/Top%20Chinese%20real%20estate%203.jpg" alt="">
Fewer buying opportunities, coupled with the positive rental outlook, have already attracted large Chinese private developers such as Poly Group and Shanghai Shenglong to the office market. Since June there have been a number of major deals in the making, which will underpin the investment market outlook for 2016.
<a href="/images/2016/10/19/Top%20Chinese%20real%20estate%203.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/19/Chinese%20real%20estate%205.jpg" width="400">
Despite its relatively smaller market, Hong Kong has attracted Mainland investors because of its role as the international financial centre closest to the Mainland and the increased financial cooperation between the two sides.
<a href="/images/2016/10/19/Chinese%20real%20estate%204.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/19/Chinese%20real%20estate%204.jpg" width="350">
In H1 2016, Hong Kong attracted over US$1.68bn worth of Chinese investment, down only 9% from the US$1.86bn recorded in the same period last year.
Since last year, a series of currency and stock connect schemes between Hong Kong and the Mainland have attracted new tenant demand from across the border. As Hong Kong office rents remain the highest in the world, any opportunity to own a trophy Grade A office asset in the CBD cannot be ignored.
Following Evergrande’s US$1.6bn purchase of the MassMutual building last year, Everbright group dished out US$1.28bn on the Dah Sing Financial Centre in H1 2016. In July, Cheung Kei Group, a private developer from Shenzhen, bought the East Tower of One Harbour Gate in Kowloon for US$580 million.
<a href="/images/2016/10/19/Top%20Chinese%20real%20estate%204.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/19/Top%20Chinese%20real%20estate%204.jpg" alt="">
Thanks to the severe shortage of en-block Grade A office buildings for sale, any property offered for sale is guaranteed to attract Mainland institutional investors and prominent developers, who are willing to pay higher prices.
The Hong Kong residential land market also offers better opportunity than some of the hotly contested Mainland markets. As witnessed in a recent land auction, Mainland developers are prepared to pay a higher premium in order to secure market share in the city and take advantage of anticipated growth in residential prices.
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Chinese outbound real estate investment changing currents, rising tide: Knight Frank

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<div class="column">GUEST OBSERVER</div>
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<div class="column">Financial stability has become more important to the RBA, with an increased emphasis on financial stability in the updated policy agreement with the Treasurer.</div>
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<div class="column">In the Financial Stability Review, the RBA is more worried about the rapid growth in the already high level of debt in China, where our recent analysis highlights the downside risk this poses to Australia’s outlook. The RBA thinks local banks are in good shape, where household-related risks have “lessened a little” since April. The RBA thinks risks have increased for property development, particularly given the huge increase in the supply of apartments in Brisbane and Melbourne, and mining-related areas.
The main points from the Financial Stability Review were:
China’s high and rapidly rising debt is a key concern.</div>
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<div class="column">The “potential for a disruptive adjustment in China remains pronounced, given the ongoing increase in debt [is occurring] at a time when the pace of economic growth has [slowed]”. The financial system has become “increasingly large, opaque and interconnected” and easier policy aimed at stabilising the economy has fuelled the rapid growth in debt. China still has policy options to boost growth, but many of these would likely boost debt further, which “could increase the risks to longer-term reform and stability”.</div>
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 European and Japanese banks remain under pressure.</div>
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<div class="column">European banks are struggling given low profits, bad debts, and weak stock prices. Low/negative rates are pressuring net interest margins for banks in Japan and other advanced economies.</div>
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 Australian banks are performing well and remain “resilient to possible shocks”. Local banks have high capital and leverage ratios and have strengthened their liquidity positions. Banks have scaled back some international exposures and their exposure to the mining-related sector is small and falling (Asian bank balance sheets are the ones most exposed to mining and commercial property). Bad debts are up from low levels, mainly reflecting lending to households and companies in mining areas and the New Zealand dairy sector.</div>
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 Risks related to households have “lessened a little” since April given improved serviceability metrics, tighter lending standards, and slower growth in credit. Even so, the RBA notes that: 1) house prices are up “a little” in recent months in Sydney and Melbourne; 2) the ratio of debt to income is up; and 3) non-performing home loans have increased in mining areas, which are a small part of bank mortgage books. Local risks are centred on property development and mining areas.
The risks relate to: 1) the huge increase in the supply of apartments in Brisbane and Melbourne over the next couple of years; and 2) the search for yield boosting Sydney and Melbourne commercial property, and resource-related weakness in Perth and Brisbane.
For apartments, there are signs of longer settlement times and valuations falling below contract prices, while developers expect settlement failures will increase. Assessing the health of developers is hard because of the importance of unlisted and foreign developers.
Banks have tightened up on: 1) lending to borrowers who rely on foreign income, which may weigh on demand in the short term; and 2) property developers, which could help forestall future oversupply, although some developers are turning to non-banks. For commercial property, the RBA is worried that the current low level of yields may prove unsustainable if global interest rates rise and/or foreign demand declines.
The RBA also notes that APRA is reviewing bank commercial property lending practices, including for residential development, with the aim of improving lending standards. 
Kieran Davies is an economist for ANZ and can be contacted <a href="https://www.anz.com/personal/" target="_blank">here</a>.
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RBA sees Chinese and Australian apartments risks to financial stability: ANZ

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Two in five Hongkongers would emigrate if they got the chance with Australia the second most preferred destination, a survey has found.
The Hong Kong Institute of Asia- Pacific Studies of the Chinese University of Hong Kong conducted a telephone survey of 710 people aged 18 or above to gauge public views on emigration.
It found 39 percent indicated they wanted to emigrate with 11 percent of this group were taking action to make preparations.
The most preferred destinations, ranked by popularity, were Taiwan, Australia and Canada, according to the survey.
Dissatisfaction with governance was the major factor as to why people wanted to leave with 11 percent reflecting they were unhappy with the government, chief executive or high-ranking officials when asked about their intention to emigrate.
Overcrowded living conditions came second with 10 percent, followed by too much political dispute or social cleavage and slow economic growth or bad economic prospects.
The survey also found that 57 percent of those who had a tendency to leave the SAR were youths, aged 18 to 30 - then 26 percent being aged 51 or older. 
Eddie Kwan King-hung, founder of EK Immigration Consulting, said he has observed more emigration inquiries in the past two to three years, especially after the Occupy protests in 2014.
However, he said not many people could meet the requirements set by the popular destinations noting Australia currently takes immigrants with a Significant Investor Visa with a requirement of at least A$5 million (HK$29 million).
Kwan said Taiwan has become Hongkongers' new favorite place as there is almost no language barrier, and the island only requires an investment of NT$6 million (HK$1.5 million), sufficient for operating businesses such as a bed and breakfast or restaurants.
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Australia second most preferred destination of Hongkongers

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A survey by Chinese international property portal Juwai.com has discovered how much international real estate professionals and agents really know about China and Chinese buyers, polling 1,402 international real estate professionals from 63 nations to find out.
According to Juwai international agents already working with Chinese buyers do have some basic knowledge of the country and can identify the Chinese flag (84 percent did so correctly) and the president’s face (75 percent did so), and they know that the US is the most popular country for Chinese buyers (67% were correct) .
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<img src="/images/2016/10/04/Screen%20Shot%202016-10-04%20at%202.32.47%20PM.png" alt="">
The survey said nearly 10 percent of respondents believe that the current leader of China is Kim Jong-un (who is actually the current dictator of N. Korea) or Mao Zedong (the founder of the People’s Republic of China, who died in 1976).
Juwai.com president of the Americas Matthew Moore said the overall correct answer rate was 48 percent, but in Canada it was only 50 percent.
"Canada did OK, but not that well considering it is a top five country for Chinese investment," he said.
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 "Real estate professionals in Cyprus, Turkey, France and Germany did better than those in Australia.   
“Australia was only the ninth-ranked country, in terms of the knowledge its international real estate professionals have about the Chinese buyers.   
 "That said, Australians did better than agents of other English-speaking countries, like New Zealand, the UK, the US and Canada.   
 "The countries that ranked best are located in Asia, of course. The second-best ranking countries were in Europe. English-language countries like Australia ranked third.   
“It's true that being able to recognize the Chinese flag might not make much of a difference when it comes to successfully working with Chinese buyers. But we find these simple questions are an indicator of whether real estate professionals have invested time and energy in learning about and building relationships with potential buyers from China.    
“Being able to understand and relate to the buyers that operate in your market is vitally important."
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Aussie agents wising up to China and Chinese buyers

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Chinese billionaire Wang Jianlin has issued a warning on the Chinese property market.
It's the "biggest bubble in history," he told CNNMoney.
<div id="ie_column">The problem, according to Wang, is that prices keep rising in major Chinese metropolises like Shanghai but are falling in thousands of smaller cities where huge numbers of properties lie empty.</div>
"I don't see a good solution to this problem," he said.
"The government has come up with all sorts of measures -- limiting purchase or credit -- but none have worked."
"The problem is the economy hasn't bottomed out," Wang said.
"If we remove leverage too fast, the economy may suffer further. So we'll have to wait until the economy is back on the track of rebounding -- that's when we gradually reduce leverage and debts."
He says he's not worried about the prospect of a "hard landing".
Wang has been warning of trouble in the Chinese property market for a while with his Dalian Wanda Group, which has developed huge malls and office complexes across China, has been gradually cutting back on its real estate business.
His business has key property assets overlooking Sydney Harbour at Circular Quay and on the Queensland Gold Coast.
Wang is the richest man in China, according to Forbes and Hurun Report data from 2015.
<a href="https://money.cnn.com/2016/09/28/investing/china-wang-jianlin-real-estate-bubble/" target="_blank">Click here to see his full video interview.</a>
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Chinese billionaire Wang Jianlin issues biggest housing bubble warning

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GUEST OBSERVER 
In July, China tier-1 property prices saw a further moderation in the pace of annual price growth; in tier-2 and tier-3, growth (again) inched higher, remaining at a much lower level than tier-1.
For new housing, 51 cities reported price gains in the month of July, down from 55 in June and a peak of 65 in April. But that is still well up on the number of cities reporting monthly gains a year ago (30 in July 2015). 16 cities reported monthly price declines, although that is also better than July 2015’s 29 cities.
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The secondary market has not seen as strong an improvement over the past year, a net 51 cities reporting monthly gains in July versus 41 a year ago and a peak of 54 four months ago (in March). 12 cities are currently experiencing price declines, compared to 17 a year ago. 
Splitting the 70 cities into the three development tiers, tier-1 continues to experience a robust pace of price growth, an average of 27.0 percent/yr for new housing and 29.3 percent/yr for the secondary market. Versus April’s peaks of 31.5%yr and 36.1%yr, that is still best characterised as a modest deceleration. 
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Within this tier, a normalisation is continuing: 
Shenzhen new property price growth has slowed from 62.5 percent/yr in April to (a still very strong) 40.9 percent/yr; meanwhile, Shanghai price growth has plateaued circa 28 percent/yr, as has Beijing and Guangzhou (albeit nearer 20 percent/yr). 
Similar trends are apparent in the established or secondary markets: Shenzhen slowing from 60.6 percent/yr in March to 33.9 percent/yr currently, and Beijing from 37.3 percent/yr in April to 32.1 percent/yr; Shanghai and Guangzhou price growth has been broadly unchanged in recent months, respectively 30 percent/yr and 20 percent/yr.
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Moving on to the less developed and wealthy tier-2 cities, new and established housing saw annual price growth of 7.8 percent/yr and 6.7 percent/yr in July. Both markets still remain in an uptrend, albeit a very modest one. 
This is even more the case in tier-3, where new and secondary house prices have risen just 3.8 percent/yr and 2.4 percent/yr over the past year. 
Clearly activity is concentrated in the most established and wealthy markets, where there is likely to be a greater speculative element. The problem is that these are not the cities with the greatest growth potential. 
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Further on aggregate activity, we note finally that momentum in housing sales and starts has already turned down. 
The outlook for real estate investment in late-2016 and into 2017 is fragile and unlikely to provide a significant contribution to aggregate growth.
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<div class="section">Elliot Clarke is senior economist, Westpac and can be contacted <a href="https://www.westpac.com.au" target="_blank">here</a>.</div>
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