Perth’s new apartment market recorded its strongest quarter of sales since Q4 2021, with 412 apartments sold in Q1 2026 and a record quarterly sold value of $537 million, according to Urbis’ latest Apartment Essentials results.

Urbis said the March quarter result reflects strong, highly product‑specific demand across both ends of the market, from more attainable projects delivering at scale, through to premium stock being absorbed by equity‑rich downsizers.&nbsp;

David Cresp, Partner at Urbis, said the key story in Perth is not demand, it is the market’s ability to convert demand into delivered housing.&nbsp;

“This is the strongest sales quarter since Q4 2021, and it reinforces that demand in Perth is real and it’s local,” David Cresp said. “But the task now is delivery, turning that demand into projects that can actually be built and completed.”&nbsp;

[smartcode_project:default project_id=110291 project_image_fid=302785]

<h2>Affordable product leads, premium demand remains resilient</h2>

Sales in Q1 were led by more affordable projects, with The Boulevard (SKS Group) recording 115 sales in the quarter, the presentation noting this is only the second time a single project has surpassed 100 quarterly sales. The project was able to offer more affordable housing product right next to a train station.&nbsp;

Palmyra West (Finbar) also delivered strong results with 28 sales in Q1, following 84 sales in Q4, with an average price of under $800,000, underscoring depth of demand for well‑located, attainable new stock.&nbsp;

At the premium end, Urbis said downsizer demand is continuing, with the results highlighting Romeo (Applecross, Finbar) recording 75 sales and reaching almost 50% sold in one quarter.

Jual (Shenton Park, Celsius Property) also posted a strong quarter with 28 sales, reaching 39% sold in one quarter.

Urbis noted that Perth apartment demand is not speculative, not investor‑led, and not uniform, describing it as localised, often equity‑driven and highly product‑specific, a pattern reflected in the polarisation between strong “attainable” performers and premium downsizer product.&nbsp;

[smartcode_project:default project_id=148957 project_image_fid=364102]

<h2>Prices underpinned by costs, and the delivery risk is growing</h2>

Urbis said pricing pressure is cost not demand‑driven: construction costs and delivery risk are now a central constraint, with the results noting build costs remain elevated and volatile, and that energy, fuel and labour uncertainty weigh on feasibility.

David Cresp said a growing challenge for private Build‑to‑Sell developers is simply securing a builder in the current environment.

“Developers are really feeling the pressure from a building market that was operating at capacity and securing a builder is challenging,” David Cresp said, adding that even where a builder can be secured, “trying to get to the price that makes the development financially viable is incredibly challenging in the current market.”&nbsp;

Urbis’ broader WA commentary also notes that industry remains at or above capacity with lot and housing creation, and that many builders are limiting new sales to manage stretched workforces and fixed‑price contract pressures, conditions that flow directly into apartment feasibility and delivery timing.

[smartcode_project:default project_id=108869 project_image_fid=317905]

<h2>Supply: improving later, but still constrained, and Perth lags eastern benchmarks</h2>

While near‑term supply remains constrained, Urbis’ forecast shows completions lifting “Supply is forecast to be back above 1,500 apartments per annum for the first time since 2019”, with 1,775 completions forecast for 2026, and volumes remaining above that level over the following years.&nbsp;

Looking further ahead, completions are forecast to reach 2,500 in 2028, with the report noting 32% of that total is social/affordable, reflecting the role of government‑supported delivery in rebuilding the pipeline.&nbsp;

However, Urbis said Perth remains behind comparable markets on pipeline scale. In a national comparison of projects under construction, the report shows under construction Perth Build‑to‑Sell (BTS) at 3,446 apartments versus the Gold Coast at 7,922. Mr Cresp said “The challenge for Perth is how to we grow the delivery pipeline”.

Urbis’ conclusion is that Perth’s market is increasingly defined by product discipline and delivery certainty, with the research identifying “delivery certainty is key” and calling out builder risk and procurement models as core success factors, alongside “timing and staging”.&nbsp;

Joel Robinson

Perth apartment sales hit strongest pace since late 2021 as builder capacity tightens

<a href="https://www.apartments.com.au/developers/sammut-developments">Sammut Group</a> has secured development approval for its latest Brisbane apartment project, marking the Sydney developer’s next step in expanding its Queensland pipeline following the success of its debut Gold Coast development, Coast.

The approved project at <a href="https://www.apartments.com.au/new-apartments/44-glen-road-toowong-qld-4066">44 Glen Road, </a><a href="https://www.apartments.com.au/developments/toowong-qld-4066">Toowong</a> will deliver a 15-storey riverfront apartment building with 42 residences, significantly increasing the scale of the site’s previous approval for a smaller luxury scheme. Designed by Bureau^proberts, the development will comprise a mix of predominantly four-bedroom and two-bedroom apartments positioned to maximise Brisbane River and city views.

Sammut Director Julian Sammut said the group had been actively searching Brisbane for several years before identifying Toowong as the right fit.

“Brisbane was the right step for Sammut,” Sammut said.

“With the success of Coast we thought we should definitely look to do more in Queensland alone. We then pushed up to look at Brisbane. We've been looking for I'd say two to three years actually and it was hard to find the right location.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screenshot%202025-12-23%20at%203.27.14%E2%80%AFPM.png?VersionId=dYAVIL7qdcGA8ojvkslSrLjczXFejSSx" />

Sammut said suburbs including New Farm and Teneriffe were considered before the group ultimately focused on Toowong due to its strong downsizer demographic and limited supply of developable riverfront land.

The site was acquired off-market after what Sammut described as a lengthy negotiation and planning process, with the developer pursuing an uplift to the original approval.

“We are DA approved now which is very exciting,” Sammut said.

“We've had our change approval come through and we've obviously doubled the height, 15 storeys plus rooftop. We've got 42 amazing apartments that are going to be coming to market soon.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-23%20at%203.27.26%E2%80%AFPM.png?VersionId=ohkRkY0dIZlqdfME2EZePsCQavRiBadE" />

Bureau^proberts said the design responds to Toowong’s evolving urban character, balancing contemporary apartment living with the area’s established residential identity.

“A place where traditional Queensland living has taken place for centuries; Toowong is seeing a shift of contemporary influence, commercial and retail hubs mixed with well-considered residential offerings – all the while maintaining its character and charm,” the architect noted in planning documents submitted to Brisbane City Council.

The architecture practice said the project’s form was shaped by its riverfront setting, flood considerations, neighbouring building scales, and view corridors.

“They said the mix of four and two-bedroom apartments capture the ‘fundamental qualities of Queenslander living,’ translated into the context of a contemporary subtropical building.”

The development sits just off Coronation Drive within walking distance of Toowong’s retail precinct and the upgraded Regatta ferry terminal, while also benefiting from proximity to the incoming green bridge connection to West End. Sammut said the accessibility and amenity offering were central to the site’s appeal.

The approval adds to growing residential activity along the Toowong riverfront, joining nearby projects including Consolidated Properties’ Monarch Residences and Spyre Group’s ARC Residences.

Sammut secures approval for debut Brisbane apartment development in Toowong

Developer Lanevick is heading back into Sydney’s apartment market after focusing more heavily on the luxury townhouse and terrace sector in recent years.

Lanevick, founded and directed by Steve Maroun, is expecting to receive approval in the coming months for a new apartment development in Gladesville, with the aim to launch it to the market later this year.

The 51-apartment project, designed by Studio Johnston, will comprise a mix of one-, two-, and three-bedroom apartments positioned toward the Hunters Hill downsizer market.

“Traditionally it’s been difficult for people in that market to downsize because there just hasn’t been the right product available,” Maroun said.

“We’re targeting buyers who might have 30 to 40 per cent of their house value sitting in the bank after downsizing.

“They still want good spacious entertaining areas, they still want quality design, but they also want flexibility and the ability to enjoy life a bit more after working hard for a long time.”

The project sits near Boronia Park and within close proximity to the Parramatta River foreshore, an area Maroun says offers more of a Hunters Hill lifestyle than a traditional apartment precinct.

“From a lifestyle perspective, it’s really more Hunters Hill than Gladesville,” Maroun said. “You’re close to the foreshore, close to parklands, and still connected back into the village precinct.”

From level four and above, apartments will capture water views&nbsp;toward Sydney Harbour. Communal amenity will include rooftop entertaining areas, wellness spaces, and a gym tailored toward owner-occupier buyers.

“We’ve really designed these apartments around that buyer coming from the Hunters Hill LGA and what they’re actually looking for in their next chapter.”

The proposed development has also been designed to respond to the changing character of the broader Gladesville town centre, where a growing number of mixed-use and residential proposals are expected to emerge over the coming years.

“Gladesville presented a rare opportunity to deliver a genuinely design-led residential project within an evolving lifestyle precinct, just moments from the growing Gladesville town centre, and we’ve approached the project with a strong focus on architecture, liveability and long-term community value,” Maroun said.

Maroun said Lanevick saw a first-mover advantage within the precinct as planning controls continue to evolve to accommodate greater housing density.

“We think there’s a real opportunity there that hasn’t really been serviced properly yet,” he said.

“There’s going to be a broader evolution of the whole Gladesville village precinct over time, particularly with more activation and mixed-use outcomes.”

The Venus Street proposal will include a commercial and retail component at ground level designed to contribute to that evolving streetscape activation.

“A big part of the thinking was how do you activate that area properly and create more vibrancy and amenity, which is what Hunters Hill has been looking for,” Maroun said.

Lanevick’s focus since 2020 has largely been on smaller-scale luxury townhouse and terrace developments. The developer recently completed Royale Randwick, also designed by Studio Johnston, where prices reached $3.65 million. The project was featured in the UDIA NSW 2026 Professional Development Prospectus and was also named a finalist for Development of the Year.

&nbsp;

Lanevick to cater for Hunters Hill downsizers with new Gladesville apartment development

Property developer One Living, backed by former Macquarie banker turned investment manager Chris Green’s investment firm, has unveiled plans to bring more institutional capital into housing to help address the national supply crisis.

The New York-based investor has focused his firm, GreenPoint Partners, on addressing the supply shortage hitting middle market housing in Australia.

It is backing the new One Living business to develop more than 1000 units along the eastern seaboard. The new firm is starting with a development on Mona Vale Road, on the border of Mona Vale and Pymble, in Sydney’s Northern Beaches, with around 140 apartments planned. They are eyeing off more sites across the city.

With cost pressures rising in the industry, One Living’s model is to be a vertically integrated developer-builder, so it can respond directly to the housing gap by removing the cost inefficiencies embedded in traditional residential delivery.

“We are building a platform designed to operate at scale and starting in a market where there’s a clear need for quality, attainable housing,” One Living joint managing director Joseph Scuderi said.

“It’s that missing middle – it’s that attainable end of housing… that’s what most Australians invest into and what Australians can actually afford.”

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="798dfa93-4941-4db6-a696-31e9dc18e81c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.31.50%E2%80%AFPM.png?VersionId=mKBqi5C_DmeiXS.AtJkcR8LQIxqCqmFi" />

GreenPoint Partners brings years of experience assembling and scaling real estate operating businesses across major markets. And Green sees a big opportunity in Australia.

“For its size, sophistication and importance to the community, Australia’s living sector has remained largely under-institutionalised, which represents significant opportunity,” Green said. “GreenPoint identified that gap, assembled the right team, and is backing One Living to build a platform that is aligned to market needs.”

Green said being a builder-developer would give the company the capacity and flexibility it required to deliver reasonably-priced homes.

“We want it to be at that attainable level; not super high end luxury but at that attainable level,” he said.

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="74a5344a-4b26-4d4a-ada3-056b1220be77" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.32.15%E2%80%AFPM.png?VersionId=vY8hXHO4reBMdO8ZXMWCNtGZJofUPQ3j" />

&nbsp;

One Living will undertake a component of affordable housing in its schemes, which it will own and operate, and it could also run build-to-rent on some sites.

Green praised local policy settings.

“The NSW government is being very supportive, strategic and pragmatic in terms of how do we generate more supply of housing,” he said. “We think it’s actually positive for development and the bit that’s been lacking at that attainable level is that it’s lots of relatively small private developers, whereas we want to create an institutional platform.”

One Living is also&nbsp;looking at high-density projects and could take on more institutional funding in the future.

“The way we will be able to achieve economies of scale is through size,” Green added.

One Living enters Sydney's new apartment market with Northern Beaches site acquisition

It's been several years since there's been an opportunity to buy a brand new townhome in Melbourne's coastal suburb of Mordialloc. Even apartment developments in recent times have been few and far between in the area.

Local developer LDS Property identified the gap in new housing, securing a site on White Street, directly opposite&nbsp;Woodlands Golf Club Mordialloc. They've recently launched&nbsp;<a href="https://www.apartments.com.au/new-townhouses/wm-residences-mordialloc-102-white-street-mordialloc-vic-3195">WM Residences</a>, just 13 townhouses which they have already started building.

Projects by Buxton Director Heath Thompson, who is selling WM Residences, says the townhouses x that perfect middle ground be

"Mordialloc residents have had limited options to downsize within the suburb, often forcing them to look elsewhere despite long-standing ties to the area," Thompson says.

"With very little comparable new supply coming to market, projects like WM Residences are well placed, particularly as buyers look to capitalise on current conditions amid constrained supply."

[smartcode_project:default project_id=134646 project_image_fid=6109]

The development, designed by regarded architecture firm&nbsp;<a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a>,&nbsp;adopts a deliberately restrained architectural approach, focusing on simplicity, durability and liveability rather than overt design gestures.

The boutique scale is central to the offering. With only 13 three-bedroom residences, each home is configured to prioritise functional layouts and everyday use, supported by private terraces and secure two-car garages.

Ewert Leaf’s design response leans into a calm, neutral material palette. Interiors are defined by oak flooring, white walls and soft finishes, creating a consistent and understated backdrop. The approach avoids trend-driven detailing in favour of longevity, with an emphasis on natural light and spatial clarity.

[smartcode_project:default project_id=134646 project_image_fid=6110]

Beyond aesthetics, the homes are designed to meet contemporary performance expectations. Each residence targets a minimum 6-star energy rating, incorporating double glazing, comprehensive insulation and all-electric Bosch appliances.

The project’s location supports a walkable coastal lifestyle, sitting within close proximity to Mordialloc’s foreshore, Main Street retail strip and the train station. Local cafés and dining venues, including Suburbia Deli and Hendriks Café, are within a short walk, reinforcing the area’s established neighbourhood character.

[smartcode_project:default project_id=134646 project_image_fid=6116]

While <a href="https://www.apartments.com.au/developments/mordialloc-vic-3195">Mordialloc</a> is often defined by its beach and pier, the project taps into other areas of day to day living, offering easy access to local food, casual dining and transport, rather than positioning itself purely as a lifestyle retreat.

WM Residences reflects a continued trend across Melbourne’s coastal suburbs towards smaller-scale, design-led townhouse developments, particularly on infill sites where proximity to amenity is already established.

With construction commenced prior to its market entry, the project aligns with a growing preference among buyers for developments with visible progress and defined delivery timeframes.

[smartcode_project_cta:default project_id=134646]

WM Residences fills gap in Mordialloc townhouse market

Amp Capital

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EXPERT OBSERVER
It’s nearly two years since the Reserve Bank of Australia last changed interest rates when it cut rates to a record low of 1.5% in August 2016.
That’s a record period of inaction – or boredom for those who like to see action on rates whether it’s up or down.
Of course, there are lots of views out that the RBA should be doing this or that – often held and expressed extremely – and so it’s natural that such views occasionally get an airing.
This is particularly so when the RBA itself is not doing anything on the rate front.
And so it’s been this week with a former RBA Board member arguing that the RBA should raise rates by 0.25% to prepare households for higher global interest rates and that the RBA should consider ditching its inflation target in favour of targeting nominal growth.
Our view – rates on hold at least out to 2020. Our view for some time is that the RBA won’t raise interest rates until 2020 at the earliest.
In terms of growth, a brightening outlook for mining investment, strengthening non-mining investment, booming infrastructure spending and strong growth in export volumes are all positive but are likely to be offset by topping dwelling investment and constrained consumer spending.
As a result, growth is likely to average around 2.5-3% which is below RBA expectations for growth to move up to 3.25%.
This in turn means that spare capacity in the economy will remain high – notably unemployment and underemployment at 13.9% – which will keep wages growth low and inflation down.
<img src="https://www.urban.com.au/images/2018/6/29/Oliver%20chart%201.JPG" alt="">
 
On top of this house prices likely have more downside in Sydney and Melbourne over the next two years, banks are tightening lending standards which is resulting in a defacto monetary tightening and the risks of a US-driven trade war are posing downside risks to the global growth outlook.
As such we remain of the view that a rate hike is unlikely before 2020 at the earliest and can’t rule out the next move being a cut.
Raising rates to prepare for higher rates makes no sense
Against this backdrop, raising rates just to prepare households for higher global rates would be a major policy mistake.
It would be like shooting yourself in the foot so you can practice going to hospital.
Some might argue that given high household debt you might miss the foot and hit something more serious – but I wouldn’t go that far! 
What’s more it’s not entirely certain that outside the US higher global rates are on the way any time soon – particularly given the risks around a global trade war, the European Central Bank looks unlikely to be raising rates until 2020 and with Japanese inflation falling again a Bank of Japan rate hike looks years away.
The RBA needs to set Australian interest rates for Australian conditions not on the basis of other global economies that are in different stages in the cycle – notably the US which has unemployment and underemployment of just 7.6% in contrast to Australia where it’s 13.9%.
Raising rates when there is still high levels of labour market underutilisation, wages growth is weak and inflation is at the low end of the inflation target would just reinforce low inflation expectations – causing businesses and households to question whether the RBA really wants to get inflation and wage growth back up to be more consistent with the inflation target and run the risk of a slide into deflation next time there is an economic slowdown. 
The RBA has already provided numerous warnings that sooner or later rates will go up, effectively helping to prepare households that such a move may come and in recent times banks have raised some mortgage rates, albeit only slightly.
Last year’s bank rate rises were in response to regulatory pressure and recently they have been in response to higher short-term money market funding costs as the gap between bank bill rates and the expected RBA cash rate has blown out by around 0.35% relative to normal levels.
This has further reminded households of the risk of higher interest rates.
Nor does changing the inflation target suggestions to change the inflation target or move to some other target for the RBA get wheeled out every time we run above or below the target for a while but its served Australia well.
When it’s above for a while like prior to the Global Financial Crisis some wanted to raise it, when it’s below for a while some want to cut it.
And there are regular calls to move to something else like nominal growth targeting.
But the case to change the target is poor.
The 2-3% inflation target interpreted as to be achieved over time has served Australia well.
It’s low enough to mean low inflation, it’s high enough to allow for the tendency of the measured inflation rate to exceed actual inflation (because the statistician tends to understate quality improvement) and to provide a bit of a buffer before hitting deflation.
And the achievement of it over time means the RBA does not have to make knee-jerk moves in response to under or overshoots because it can take time to get back to target.
Shifting to a nominal GDP or national income growth target would be very hard for Australia for the simple reason that nominal growth in the economy moves all over the place given swings in the terms of trade which the RBA has no control of.
It would have meant much tighter monetary policy into 2011 than was the case and even easier monetary policy a few years ago when the terms of trade fell.
In short it would mean extreme volatility in RBA interest rates. 
And in any case, nominal GDP or income growth is made up of two different things – inflation and real growth – so targeting just the aggregate could lead to crazy results for example if the target is 4.5% the RBA could get 4.5% inflation and say it hit its target!
Which would be nuts. 
Finally, while low rates risk inflating asset price bubbles it’s worth noting that apart from Sydney and Melbourne home prices, the period of low rates has not really led to a generalised asset price bubble problem in Australia.
And in any case as we have seen recently in relation to Sydney and Melbourne property prices - which are now falling (despite still ultra-low interest rates!) - the asset price problem where it does arise can be dealt with via macro prudential controls on lenders.
Arguably, if we had moved faster on the macro prudential front around 2014-2016 then the east coast housing markets would have been brought under control earlier and rates could have come down faster in Australia and we could now be in a tightening cycle… but that’s all academic!
Bottom line The bottom line is that the RBA should stick to its inflation target and ignore those arguing for a premature rate hike.
Our assessment is that this is just what it will do and that rates will be on hold for a long while yet.
In the meantime, the debate about rates will no doubt rage on.
Continuing low interest rates in Australia will mean term deposit rates will stay low, search for yield activity will still help yield-sensitive unlisted investments like commercial property and infrastructure (albeit it’s waning) and an on-hold RBA with a tightening Fed is likely to mean ongoing downward pressure on the Australian dollar as the interest rate differential goes further into negative territory.
<img src="https://www.urban.com.au/images/2018/6/29/Oliver%20chart%202.JPG" alt="">
 
While a crash in the $A may concern the RBA, we saw in both 2001 when it fell to $US0.48 and 2008 when it fell from $US0.98 to $US0.60 in just a few months that the inflationary consequences of a lower $A are not what they used to be and in any case the RBA would likely welcome a fall to around $US0.65-0.70. 
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soliver-smf6LQXgW9

The RBA won’t raise interest rates until 2020 at the earliest: Shane Oliver

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AMP Capital remains in ongoing discussions with Lendlease and Multiplex over the tender for construction of its Quay Quarter Tower.
Lendlease has quoted at $70 million over budget, according to the AFR's Street Talk column.
</div>
<div>AMP Capital still has an aim of getting construction underway next year, it added.</div>
<div>
Tenants in the existing building are due out this Friday.
The 49-storey office building at 50 Bridge Street will be rebuilt as Quay Quarter Tower.
The $1 billion tower, designed by Danish firm 3XN, is due to open in 2020.
The chief operating officer of real estate at AMP Capital, Louise Mason, has previously said revitalising the precinct was paramount to Sydney’s future as a global city.
“Quay Quarter Sydney provides an opportunity to reimagine the urban landscape of Circular Quay,” she said.
The Quay Quarter Sydney precinct will span two inner city blocks over a site area of around 11,000 square metres and incorporates a mix of commercial, retail and luxury residential.
50 Bridge Street is jointly owned by investors in the AMP Capital Diversified Property Fund (ADPF) and the AMP Capital Wholesale Office Fund (AWOF).
Street Talk noted super fund giant REST was the frontrunner to take out the stake in the redevelopment of 50 Bridge Street.
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j.ballantyne1990-6AQqhLzZaK

AMP Capital still seeking construction tender for Quay Quarter Tower

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AMP Capital has received Stage 2 Development Application (DA) approval to refurbish Sydney’s first skyscraper, 33 Alfred Street, Circular Quay, from the City of Sydney.
Built in 1962, 33 Alfred Street has local heritage listing and is an iconic part of Sydney’s harbour skyline.  
The work, which is due to start in 2021, will include refreshing the building’s façade as well as modernising its services and interior while maintaining its heritage characteristics and reinstating lost building features. 
Once complete, the building will be premium grade, with improved environmental performance. The Alfred Street building is targeting a 5 Star NABERS rating and a 5 Star Green Star v3 rating.
AMP Capital real estate chief operating officer Louise Mason spoke on the redevelopment approval.
“We are delighted to have received approval for the redevelopment of 33 Alfred Street from the City of Sydney, who we have consulted with on this project for more than two years.  After 55 years, it’s time to upgrade the building and give it new life for many more decades of service. 
“This work will make 33 Alfred Street one of Sydney’s most highly sought-after, premium-grade office buildings.  However, it will still be recognisable as one of the most loved and distinctive buildings at Circular Quay, the gateway to Sydney.” 
AMP Capital has been advised by architect JPW.  33 Alfred Street is jointly owned by investors in the AMP Capital Diversified Property Fund and the AMP Capital Wholesale Office Fund.
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jrobinson-rf4aSBido9

AMP Capital receives go ahead to revitalise historic 33 Alfred Street, Sydney

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GUEST OBSERVER
Australian dwelling price growth is continuing to moderate with the recent CoreLogic data showing that home price growth across Australia has slowed to 7.0% over the year to October (annual price growth was running around 10-11% a few months ago). Sydney price growth is rolling over (see chart below). 
  <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/2017/11/2/Diana1.jpg" alt="">
Melbourne home price growth is also moderating, but at a slower pace than Sydney because population growth remains strong in Melbourne.
The latest population data showed that interstate migration remains very high into Victoria and Queensland (see chart below) which suggests that home buyers are seeking alternatives to Sydney given the general lack of home and land affordability.
 <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/2017/11/2/Diana2.jpg" alt=""> 
Home price growth is still negative in Perth, but is picking up pace and Hobart has seen a big turnaround in price growth.
The reasons for slowing prices at the moment are due to tighter lending restrictions on banks and higher mortgage rates to enforce APRA rules around investor lending, affordability pressures in Sydney and Melbourne and a big lift in new supply of dwellings (particularly apartments across the east coast).
These pressures are going to continue in the near-term, particularly with a further lift in new dwellings on the market.
So, national home price growth will remain under pressure, especially in Sydney and Melbourne where there is going to be a further big lift in new supply.
While it was necessary to take some steam out of the housing market given the high concentration of investors in the market, slower home price growth is a risk for the consumer spending outlook because households savings have been used up as wealth (related to housing) has boomed.
A rate hike from the Reserve Bank in the near-term would be undesirable as it would put further downward pressure on dwelling prices at a time when wages growth is still soft.
Diana Mousina is senior economist at AMP Capital.
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Australian housing market update: AMP Capital's Diana Mousina

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Residential property price growth is expected to slow as the heat comes out of the Sydney and Melbourne markets, according to AMP Capital’s latest market update.
Meanwhile, the search for yields amid poor returns from cash and bank deposits is expected to continue to benefit unlisted commercial property and infrastructure, at least in the near term.
AMP Capital chief economist Shane Oliver also noted that while Australian consumers remain sceptical about shares as the “wisest place for their savings” their interest in superannuation has picked up, likely in response to recent super reforms which allow for large one-off contributions before the financial year ends on June 30. 
Something similar was seen in a decade earlier in 2007, he said.
He also said that even amid the scepticism around real estate that has been around for more than a year now, prices haven’t stopped growing in Sydney and Melbourne’s property markets.
<a href="https://www.propertyobserver.com.au/images/2017/06/19/AMPSNAPSHOT.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/19/AMPSNAPSHOT.png" alt="">
The recent strength in jobs data, consistent with forward-looking labour market indicators, along with solid business conditions partly offset other recent more negative data such as falling consumer confidence and poor wages growth. 
“The jobs data and the NAB survey support the RBA in leaving interest rates on hold for now,” Oliver said. 
“But given softer data for growth, consumer spending, housing construction, non-mining investment and wages growth, our view remains that there is more risk of another rate cut than a rate hike in the next 12 months or so. “
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jonathanchancellor-7SQnKwU6yx

Property prices expected to slow as heat comes out of market: AMP Capital

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Investment firm AMP Capital has got a commitment of $100 million from the Australian government’s Clean Energy Finance Corporation (CEFC) for its green office fund. 
CEFC’s investment would go to the AMP Capital Wholesale Office Fund (AWOF), which is aiming to be carbon neutral by 2030.
The fund has a portfolio of 12 properties, which includes Quay Quarter Sydney and Australian Technology Park, which is targeting a 6 Star Green Star and 5.5 star NABERS rating once completed.
Other existing premium commercial office assets include 200 George Street in Sydney and 700 Bourke Street in Melbourne, which was recently awarded a 6 Green Star Performance rating, becoming the fourth building in Australia to achieve the rating.
“Having achieved the 6 Green Star Performance rating for 700 Bourke Street, AMP Capital is now focusing on achieving Green Star Performance ratings for all other wholly-owned assets in 2017,” AWOF fund manager Nick McGrath said.
CEFC’s investment in AWOF indicates investor appetite for demonstrably sustainable portfolios, AMP said in a press release.
AWOF drew in more than $700 million in equity investment in 2016. 
CEFC Investment Funds lead Rory Lonergan said the CEFC investment in the $4.7 billion AMP Capital fund would help accelerate the development of world-leading energy efficient commercial property portfolios in Australia.
“AMP Capital was selected for this mandate due to the quality and performance of the AWOF portfolio and AMP Capital’s broader commitment to achieve long-term sustainable outcomes,” Lonergan said.
“There is enormous opportunity to reduce emissions from buildings and to really push the boundaries of energy efficiency in the property sector.  With this investment, the CEFC is pleased to support AMP Capital in its objective to deliver net zero emissions across the commercial property portfolio.”
 
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AMP Capital gets $100 million commitment from government-backed green bank

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Tom Dixon’s London-based design firm Design Research Studio has been named the winner of AMP Capital’s interior design competition for the lobby and connected facilities of Quay Quarter Tower.
Four design firms were invited to participate in the two-month long competition, but Design Research Studio stood out for their reputation, design aesthetic and aspirational concepts, said AMP Capital’s chief operating officer real estate, Louise Mason.
“We used this competition to specifically seek out globally pre-eminent designers of lifestyle spaces such as hotels, clubs, restaurants, bars and co-working spaces, who can bring a completely different perspective to how we would normally view, and therefore design, a commercial lobby,” Mason said.
Dixon’s recent work includes the interiors for Mondrian London Hotel, Shoreditch House, Bronte Restaurant on the Strand in London's West End and McCann Worldwide Headquarters in New York.
The firm is also known for their design of the lighting installations for Bennelong restaurant at Circular Quay, Sydney.
3XN were appointed as the lead design architects for the 49-floor tower at 50 Bridge Street, Sydney last year.
The Quay Quarter Sydney precinct will span two inner city blocks over a site area of around 11,000 square metres and incorporates a mix of commercial, retail and luxury residential.
“The QQT lobby will be both the statement address for the tower and the nexus between the activated streetscape of Quay Quarter, the retail marketplace offering and the tower above,” Mason said.
“Together the lobby, retail podium and tower will provide a series of connected spaces that meet a range of user needs.
“Quay Quarter Tower will be an attractor of key talent into the future and provide a vibrant marketplace of experiences where people will have more opportunities to choose how and where they work and interact with their colleagues and customers.”
50 Bridge Street is jointly owned by investors in the AMP Capital Diversified Property Fund (ADPF) and the AMP Capital Wholesale Office Fund (AWOF).
Subject to final investor approvals, construction is expected to commence in 2018 and will take approximately three years to complete.
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Tom Dixon to design AMP Capital's Quay Quarter Tower lobby

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AMP Capital's managing director of shopping centres Bryan Hynes is stepping down after just over nine years in the role.
In his time in the top job Hynes has grown AMP Capital's shopping centres portfolio from $4 billion to $10 billion.
The portfolio now has 27 centres throughout Australia and New Zealand which generates more than $7.9 billion in annual sale.
Hynes had spent 18 years at AMP Capital, holding senior roles including Warringah Mall general manager and head of retail asset management.
As of January 1 2017 AMP Capital's head of shopping centre development Mark Kirkland will take over the role.
AMP Capital's global head of real estate Carmel Hourigan said that Marks skill set will help the company target their next phase of growth.
“With 27 years of major project experience in the property sector, 24 years of which have been focused on retail, Mark brings an impressive skill set to take our Shopping Centres business to the next phase of growth. 
“Mark has been instrumental in the successful delivery of Pacific Fair and Macquarie Centre and has contributed heavily to the efforts we have undertaken to maximise the value of the existing portfolio and enhance performance for our investors.
“Now that AMP Capital has delivered these successful developments on the east coast and will be turning our attention to developments in Western Australia, it is the right time to refocus the business under new leadership and I am pleased we have such a strong internal candidate in Mark. 
She also acknowledged Bryan's contribution over the last nine years.
“I would like to acknowledge Bryan’s significant contribution to our business, most recently leading the team in the delivery of award-winning developments at Pacific Fair and Macquarie Shopping Centres. 
"I would like to thank Bryan for the legacy he has created and his efforts in ensuring AMP Capital is best positioned to capitalise on opportunities within the real estate market.”
  
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Bryan Hynes, AMP Capital's managing director of shopping centres, is stepping down

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Exchange Tower has bucked the market trend with its leasing activity in Perth's challenging office market.
The vacancy in the building has dropped below 15%, an improvement from the rate of more than 37% earlier this year.
Exchange Tower is a 40-level, premium-grade office tower located just off St Georges Terrace in the heart of the Western Australian capital and in close proximity to Elizabeth Quay and Perth’s major shopping malls.
As part of the ongoing investment in Exchange Tower by joint owners the AMP Capital Wholesale Office Fund (AWOF) and Western Australia-based property investor Primewest, works have commenced for a significant refurbishment of the ground floor lobby with plans underway for upgrades of the forecourt and lifts.
The world’s sixth largest accounting group, RSM, has committed to lease 3,281 square metres of space over three high-rise levels in Exchange Tower and will also take signage rights after negotiating a long- term lease in the building.
RSM’s move is one of four major new deals in Exchange Tower, with international engineering group ARUP, multinational technology company Fujitsu and national law firm Moray and Agnew also relocating to the building.
ARUP is leasing 1,500 square metres of space on level 14, Fujitsu is taking 1,309 square metres on level 9 and Moray and Agnew is leasing 1,092 square metres on level 30.
Other recent new tenants include Quayside Chambers, Viva Energy and WTP. The moves follow a targeted leasing campaign managed by Ian Edwards, Knight Frank.
Exchange Tower is already home to some of Perth’s leading commercial and public institutions including Patersons, Morgan Stanley, Bell Potter, Allen &amp; Overy, Bain, Ministerial &amp; Parliamentary Services, Mitsubishi, Mitsui and Knight Frank.
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Perth’s Exchange Tower secures key leasing deals in tough market

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Housing matters a lot in Australia. Having a house on a quarter acre block is part of the "Aussie dream".
Housing is a popular investment destination and the housing cycle is a key component of the economic cycle and closely connected to interest rate movements.
But in the last 15 years or so it has taken on a darker side as a surge in house prices that started in the late 1990s has led to poor affordability and gone hand in hand with surging household debt. Reflecting this, predictions of an imminent property crash bringing down the Australian economy have been repeated ad nauseam since 2003.
The big picture view on Australian residential property is well known. First, Australian housing is expensive.
According to the 2016 Demographia Housing Affordability Survey the median multiple of house prices in cities over 1 million people to household income is 6.4 times in Australia versus 3.7 in the US and 4.6 in the UK. In Sydney it’s 12.2 times and in Melbourne it’s 9.7 times.
The ratios of house price to incomes and rents are at the high end of OECD countries and have been since 2003.
Second, the surge in home prices has gone hand in hand with a surge in household debt, which has taken Australia’s household debt to income ratio from the low end of OECD countries 25 years ago to now around the top.
This can be seen in the next chart which shows the deviation in the house price to income ratio against its long term average for Australia against the ratio of household debt to income.
The shift to overvaluation and high debt mostly occurred over the 1995-2005 period.
<a href="https://www.propertyobserver.com.au/images/2016/10/20/Surging%20house%20prices.jpg" target="_blank">Click to enlarge</a>
<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/2016/10/20/Surging%20house%20prices.jpg" alt="">
While it’s common to look for scapegoats to blame for high home prices and debt the basic driver looks to be a combination of the shift from high to low interest rates over the last 20-30 years which has boosted borrowing and buying power and the inadequacy of a supply response (thanks to tight development controls, restrictive land release and lagging infrastructure) to suppress the resultant rise in the ratio of prices to incomes.
The following chart shows a cumulative shortfall of over 100,000 dwellings relative to underlying demand had built up by 2014.
<a href="https://www.propertyobserver.com.au/images/2016/10/20/Home%20construction.jpg" target="_blank">Click to enlarge</a>
<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/2016/10/20/Home%20construction.jpg" alt="">
The surge in prices and debt has led many to conclude a crash is imminent. But we have heard that lots of times over the last 10-15 years. Several considerations suggest a crash is unlikely.
First, we have not seen a generalised oversupply and at the current rate we won’t go into oversupply until around 2017-18.
Second, despite talk of mortgage stress the reality is that debt interest payments relative to income are around 2004 levels.
Third, Australia has still not seen anything like the deterioration in lending standards seen in other countries prior to the GFC.
In fact in recent years there has been a decline in low-doc loans and a reduction in loans with high loan to valuation ratios.
<a href="https://www.propertyobserver.com.au/images/2016/10/20/Tightening%20lending%20standards.jpg" target="_blank">Click to enlarge</a>
<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/2016/10/20/Tightening%20lending%20standards.jpg" alt="">
Finally, it is dangerous to generalise. While property prices have surged 60% and 40% over the last four years in Sydney and Melbourne, they have fallen in Perth to 2007 levels and have seen only moderate growth in the other capital cities.
To see a property crash – say a 20% plus average price fall – we probably need to see one or more of the following:
<ul>
<li>A recession – much higher unemployment could clearly cause debt servicing problems. This looks unlikely though. 
</li>
<li>A surge in interest rates – but rate hikes are unlikely until 2018 and the RBA knows households are more sensitive to higher rates, so it’s very unlikely rates will reach past highs. 
</li>
<li>Property oversupply – as noted above this would require the current construction boom to continue for several years.</li>
</ul>
However, the risks on the supply front are clearly rising in relation to apartments where approvals to build more apartments are running at more than double normal levels.
<a href="https://www.propertyobserver.com.au/images/2016/10/20/Apartment%20surge.jpg" target="_blank">Click to enlarge</a>
<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/2016/10/20/Apartment%20surge.jpg" alt="">
Due to the rising supply of units, vacancy rates are trending up and rents are stalling, making property investment less attractive.
Nationwide price falls are unlikely until the RBA starts to raise interest rates again. This is unlikely before 2018, at which point we are likely to see a 5% or so pullback in property prices as was seen in the 2009 and 2011 down cycles.
Anything worse would likely require much higher interest rates or recession both of which are unlikely. However, it’s dangerous to generalise:
<ul>
<li>Sydney and Melbourne having seen the biggest gains are more at risk and so could fall 5-10% around 2018.</li>
</ul>
<a href="https://www.propertyobserver.com.au/images/2016/10/20/Divergent%20property%20market.jpg" target="_blank">Click to enlarge</a>
<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/2016/10/20/Divergent%20property%20market.jpg" alt="">
<ul>
<li>Price growth is likely to remain negative in Perth and Darwin as the mining boom continues to unwind but this should start to abate next year. 
</li>
<li>The other capitals are likely to see continued moderate growth and a less severe down cycle in or around 2018. 
</li>
<li>But units are at much greater risk given surging supply and this could see unit prices in parts of Sydney and Melbourne fall by 15-20% as investor interest fades as rents fall.</li>
</ul>
Slowing momentum in building approvals points to a slowdown in the dwelling construction cycle ahead.
While this might be delayed into 2017 as the huge pipeline of work yet to be done is worked through, slowing dwelling investment combined with a slowing wealth affect from rising home prices mean that contribution to growth from the housing sector is likely to slow.
However, as this is likely to coincide with a fading in the detraction from growth due to falling mining investment and commodity prices it’s unlikely to drive a slowing in the economy.
<a href="https://www.propertyobserver.com.au/images/2016/10/20/Dwelling%20investment%20to%20slow.jpg" target="_blank">Click to enlarge</a>
<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/2016/10/20/Dwelling%20investment%20to%20slow.jpg" alt="">
However, a likely decline in rents (as the supply of units hits) will constraint inflation helping keep interest rates low for longer.
There are several implications for investors:
<ul>
<li>Firstly, over the very long term residential property adjusted for costs has provided a similar return to Australian shares. Its low correlation with shares, lower volatility but lower liquidity makes it a good portfolio diversifier with shares. So there is clearly a role for property in investors’ portfolios.</li>
</ul>
<a href="https://www.propertyobserver.com.au/images/2016/10/20/Long%20term%20asset.jpg" target="_blank">Click to enlarge</a>
<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/2016/10/20/Long%20term%20asset.jpg" alt="">
<ul>
<li>Secondly, there remains a case to be cautious regarding housing as an investment destination for now. It is expensive on all metrics and offers very low income (rental) yields compared to other growth assets. This means a housing investor is more dependent on capital growth. 
</li>
<li>Thirdly, these comments relate to housing in aggregate and right now it’s dangerous to generalise. Apartments in parts of Sydney and Melbourne are probably least attractive but for those who want to look around there are pockets of value. 
</li>
<li>Finally, investors need to allow for the fact that they likely already have a high exposure to Australian housing. As a share of household wealth its nearly 60%. Once allowance is made for exposure via Australian shares it’s even higher.</li>
</ul>
Shane Oliver is head of investment strategy and chief economist at <a href="https://www.ampcapital.com" target="_blank">AMP Capital</a>.
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