Southern Cross Station anchors the western end of <a href="https://www.apartments.com.au/developments/melbourne-vic-3000">Melbourne</a>’s CBD, connecting metropolitan and regional rail with tram and bus interchanges in one of the city’s busiest transport corridors.&nbsp;

Just metres away, <a href="https://www.apartments.com.au/new-apartments/640-bourke-street-melbourne-640-bourke-street-melbourne-vic-3000">640 Bourke Street</a>&nbsp;will place residents in the heart of the city, with immediate access to Spencer Street trams, a growing mix of retail, hospitality and cultural venues, and a neighbourhood evolving into a lively residential precinct.

Developed by <a href="https://www.apartments.com.au/developers/far-east-consortium">Far East Consortium</a>, the 68-storey project integrates a sculptural glass tower with the heritage-listed Eliza Tinsley Building on a 2,765 sqm site.&nbsp;

Designed by <a href="https://www.apartments.com.au/architects/rothelowman">Rothelowman</a>, the development replaces a previously approved scheme for 813 apartments with a refined offering of just over 600 larger-format residences, responding to a growing owner-occupier demand for spacious city living.

The location sits within a dynamic pocket undergoing significant transformation. Marvel Stadium and the Docklands waterfront are less than 10 minutes away on foot, offering both sports and leisure attractions.&nbsp;

Bourke Street Mall, Queen Victoria Market, and the State Library are all within walking distance, while Flagstaff Gardens, Melbourne’s oldest park, provides a green escape just to the north.

[smartcode_project:default project_id=509 project_image_fid=335425]

Proximity to some of the city’s largest employers and education hubs, including the courts precinct, legal chambers, RMIT, and major hospitals, makes 640 Bourke Street an appealing residential address for professionals, families and students alike.

Education opportunities span all levels. Nearby, Haileybury City Campus offers private schooling just a short walk from 640 Bourke Street. Just beyond the CBD fringe, Carlton Gardens Primary School, one of Melbourne’s oldest state primary schools, and Docklands Primary School provide convenient government schooling options.

Higher education is equally accessible. RMIT University’s city campus spans multiple buildings just a few blocks away, while the University of Melbourne’s Parkville campus is easily reached via tram along Swanston or Elizabeth Streets.

Victoria University’s City Queen campus, focused on law and business, is also close by, positioning 640 Bourke Street within walking distance of three of Melbourne’s major tertiary institutions.

[smartcode_project:default project_id=509 project_image_fid=335414]

The neighbourhood’s retail tapestry continues to evolve into something distinctly local and walkable. Just steps away, Woolworths Metro on Bourke Street ensures that everyday essentials are easily within reach.&nbsp;

For larger shopping trips, Spencer Outlet Centre on Spencer Street and QV Melbourne on the opposite side of the CBD broaden the offering with supermarkets, fashion, dining and specialty stores.

The lane-to-lane vibe unfolds beautifully in nearby arcades and alleys. Hardware Lane, with its European-style red-brick paving and alfresco dining, pulses with jazzy evenings and casual lunches.

A few minutes north, Howey Place and Centre Place offer leafy, boutique-lined lanes where hidden cafés and niche retailers congregate under historic glass-covered cloisters.

Completing this tapestry is the newly opened Mecca “beauty playground” on Bourke Street. Spanning 4,000 sqm over three levels, the flagship blends immersive retail within an art-deco heritage setting.

[smartcode_project:default project_id=509 project_image_fid=335415]

This finely grained network of shops, eateries, arcades and service outlets defines the everyday lifestyle at 640 Bourke Street - further enriched by over 3,000 sqm of resident amenity including a Turkish-inspired pool, gym, co-working rooms and private cinemas.&nbsp;

Now selling from $640,000 to $3.95 million, with off-the-plan stamp duty concessions available until October 2026. Prospective buyers can visit the on site display gallery which has&nbsp;fully built one, two, and three-bedroom apartments.

[smartcode_project_cta:default project_id=509]

Joel Robinson

640 Bourke Street: A heritage address at the heart of Melbourne

Lower North Shore development specialists&nbsp;<a href="https://www.apartments.com.au/developers/abadeen-group">Abadeen</a>&nbsp;has topped out its new local apartment development,&nbsp;<a href="https://www.apartments.com.au/new-apartments/northcote-collective-naremburn-2-6-northcote-street-naremburn-nsw-2065">Northcote Collective</a>.&nbsp;

Located in the tightly held suburb of <a href="https://www.apartments.com.au/developments/naremburn-nsw-2065">Naremburn</a>, Northcote Collective is a collection of just 58 one-, two-, and three-bedroom apartments designed by award-winning architects Rothelowman.&nbsp;

The building is just a five to 10 minute walk from the heart of Crows Nest and the new&nbsp;St Leonards and Crows Nest Metro stations. Abadeen has also brought doorstep convenience, with a ground-floor retail offering on Northcote Street.

Northcote Collective is being delivered by&nbsp;<a href="https://www.apartments.com.au/builders/decode">Decode</a> — an iCIRT-rated construction company well regarded in the new development industry.

[smartcode_project:default project_id=114189 project_image_fid=272840]

“This is an important and exciting moment for Northcote Collective, and we’re proud to celebrate this milestone with our partners, consultants, and future residents,” said Justin Brown, Executive Chairman and Founder of Abadeen.&nbsp;

“From the outset, our vision was to create something truly special for Naremburn — homes that respect the character of the neighbourhood while elevating the standard of Lower North Shore living. With connectivity to transport, retail on the doorstep and a true village lifestyle, this milestone also comes at a perfect time when buyer confidence is returning to the market. I am incredibly proud of our team and of Decode for their dedication in helping us bring this vision to life.”

[smartcode_project:default project_id=114189 project_image_fid=272865]

The development is two-tiered, with two rooftops for residents. The taller building has an impressive rooftop pool, a rare inclusion in the new Sydney apartment market. The level, with panoramic views, also includes an entertaining terrace with barbecue facilities.

Local downsizers and young professionals are showing the strongest interest in the development, with recent improvements in the property market — supported by three rate cuts in 2025 — boosting borrowing power and buyer confidence.

Auction activity across Sydney surged by almost 30 per cent in recent weeks, with clearance rates above 70 per cent — signalling a renewed wave of buyer demand.

Northcote Collective will welcome buyers in 2026.

[smartcode_project_cta:default project_id=114189]

Abadeen tops out Northcote Collective in Naremburn

Sunshine Coast-based <a href="https://www.apartments.com.au/developers/devcon-property-group">Devcon Property Group</a> has acquired one of Maroochydore’s most prominent development sites for $12 million unlocking the potentialfor a mixed-use project in the Cotton Tree precinct.

&nbsp;

The 4,178 sqm site at 41–43 Aerodrome Road—well known locally as the former home to one of Australia’s last Sizzler restaurants—was sold via an off-market expressions of interest campaign by Colliers agents Nick Dowling and Baydn Dodds. More than 70 targeted buyer groups were approached, resulting in multiple competitive offers for the property.

Devcon Property Group Managing Director Michael Kain said the acquisition was a strategic move in line with the company’s focus on delivering high-quality projects in prime coastal locations.&nbsp;

“We’re excited about the possibilities this site, in one of the Sunshine Coast’s most iconic beachside &nbsp;communities, offers for a broad range of development outcomes,” Kain said.

“Its location, ocean view potential, and proximity to the Maroochydore CBD and beach make it an &nbsp;outstanding development prospect. Our plans are to refurbish the existing building and then review &nbsp;development options for the remainder of the site.”&nbsp;

<img alt="Aerodrome Rd site overlooking Beach (Large)" data-entity-type="file" data-entity-uuid="a29dc4ed-68c1-4bec-a4fc-283063dcde1e" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Aerodrome%20Rd%20site%20overlooking%20Beach%20%28Large%29.jpg?VersionId=b0WxJWevmLoAfCP4YvGImZpR3rSCJJ9L" />

Colliers Special Projects Manager Baydn Dodds said the sale reflected the ongoing strength of the &nbsp;Sunshine Coast’s development site market, particularly for projects capable of achieving water views. &nbsp;

“Sites of this scale, in walkable beachside locations with ocean views, are tightly held and continue to attract significant interest from both local and national developers,” Baydn Dodds said. &nbsp;

“Holding a prominent position as the former home to one of Australia’s last Sizzler restaurants and more recently occupied by Rashays, the prime site is located just 150 metres from Maroochydore Beach.&nbsp;

“With stunning ocean view potential, located in one of the Sunshine Coast’s best known iconic &nbsp;beachside communities, within steps of shops, cafes and the beach it is no surprise that there was strong interest in the site. The transaction highlights the ongoing depth of demand for well-located &nbsp;mixed-use sites across the Sunshine Coast.”&nbsp;

Colliers Sunshine Coast Managing Director Nick Dowling said the transaction reinforced the &nbsp;Sunshine Coast’s status as one of Australia’s most active development markets.&nbsp;

“The combination of strong population growth, lifestyle appeal, and infrastructure investment is &nbsp;driving demand for quality development opportunities,” Nick Dowling said. &nbsp;

“The Sunshine Coast is one of only three markets nationally to record an increase in crane numbers, &nbsp;reflecting the strength of the region’s construction pipeline.&nbsp;

“Opportunities like this are rare and continue to generate strong buyer interest in the region.”&nbsp;

The Sunshine Coast development market is booming, with several high-profile developers like Cube Developments, Gardner Vaughan Group, and RCQ, planning developments in the region.

Devcon buys Sunshine Coast’s former Sizzler site for new apartment development

Sydney House, the residential redevelopment of the landmark City Tattersall building on Pitt Street in the Sydney CBD, will officially launch to the market this month.

The $800 million development, a joint venture between&nbsp;Singapore-listed <a href="https://www.apartments.com.au/developers/first-sponsor">First Sponsor</a>&nbsp;and leading Melbourne-based developer&nbsp;<a href="https://www.apartments.com.au/developers/icd-property">ICD Property</a>, will see a glass tower with 241 apartments and a 135-room hotel built above the restored heritage-listed podium.

[smartcode_project:default project_id=12428 project_image_fid=312145]

The apartments will offer&nbsp;rare northeast-facing views across the sparkling Sydney Harbour and Hyde Park, all positioned above a luxury hotel with exclusive access to premium amenities and five-star lifestyle services.

Internationally acclaimed architecture firm&nbsp;<a href="https://www.apartments.com.au/architects/bvn-architecture">BVN Architecture</a>&nbsp;handled the design for the residential component and the interiors for the hotel, while&nbsp;<a href="https://www.apartments.com.au/architects/fjc-studio">FJC Studio</a>&nbsp;focused on the heritage podium.

[smartcode_project:default project_id=12428 project_image_fid=6670]

First Sponsor’s CEO, Neo Teck Pheng, together with ICD Property’s CEO, Matthew Khoo commented that the joint venture team was ecstatic to bring this extraordinary project to market as the first opportunity for those looking to secure their ultimate CBD luxury residence elevated by premium hotel amenities, including select premium services designed for effortless living.

“<a href="https://www.apartments.com.au/new-apartments/sydney-house-194-204-pitt-street-sydney-nsw-2000">Sydney House</a> will offer a sophisticated expression of modern CBD living, capturing panoramic vistas to Sydney’s most beloved icons, including the Sydney Harbour Bridge as well as Hyde Park out to the North and South Heads,” Khoo said.&nbsp;

&nbsp;

[smartcode_project:default project_id=12428 project_image_fid=312146]

Mr Neo expressed that the reinterpretation of the heritage podium levels will feature an elegant heritage bar and restaurant, along with luxurious hotel and function facilities, enhancing the experience for residents. The historical features will be reborn, ensuring that these grand, opulent spaces will once again be enjoyed, appreciated and celebrated by residents, Sydneysiders as well as interstate and international visitors alike.

Managing sales for the project, SRM Residential Partner Tim Rees said that the team has received an overwhelming response to date, largely from local downsizers and upgraders looking for the ultimate lifestyle purchase.&nbsp;

“Once completed in late 2027, Sydney House will be Sydney CBD’s newest icon blending modern architecture with historic grandeur located in one of the most prestigious enclaves of the CBD,” Rees said.&nbsp;

“Pitt Street is arguably the most significant street in all of Sydney. Just a stone’s throw from Circular Quay, Sydney Opera House, Hyde Park and Darling Harbour, Sydney House offers seamless connection with the CBD and beyond. Pitt Street Mall is literally across the road and there is an abundance of dining and cultural venues in close proximity. The outlook from Sydney House will be breathtaking with views of Hyde Park and Sydney’s famous iconic landmarks on offer.

“Following the trend of other global cities such as New York, London, Paris and Tokyo, luxury inner city apartment living with access to premium hotel amenities is the new ‘trophy home’ for wealthy downsizers or empty-nesters who aren’t looking to slow down, as they want to live in the heart of the action.”

[smartcode_project:default project_id=12428 project_image_fid=350624]

The project boasts a prime CBD location surrounded by the city’s most premium shopping centres including David Jones and Westfield Pitt Street as well as some of Sydney's best restaurants, bars,&nbsp;pubs, theatres, museums, art galleries, and parks.

Residents will be able to access the newly opened Sydney Metro Gadigal Station, located within a block from Sydney House. This station provides connectivity to Martin Place (one min), Barangaroo (three mins) and North Sydney (11 mins) as well as Chatswood and Macquarie University through to Castle Hill and Norwest. With services every four minutes during peak times, the Sydney Metro provides the ultimate convenience with 21 stations from Tallawong to Sydenham.

One of Sydney’s leading residential construction companies, particularly in premium off the plan luxury residences, Richard Crookes Constructions, will complete the project in late 2027.&nbsp;

Price guides at Sydney House include one-bedroom apartments from $1.5 million, two-bedroom apartments from $2.3 million and three-bedroom apartments from $5 million.

[smartcode_project_cta:default project_id=12428]

Set to bring next level luxury to Sydney CBD’s prestige property market

Buyers set for first chance at Sydney House, Sydney CBD's newest landmark tower development

Joint venture partners&nbsp;<a href="https://www.apartments.com.au/developers/amalgamated-property-group">Amalgamated Property Group</a>&nbsp;(APG)&nbsp;and&nbsp;<a href="https://www.apartments.com.au/developers/base-developments">Base Developments</a>&nbsp;have kicked off construction&nbsp;on its second Gold Coast apartment tower, Affinity Broadbeach, which is due for completion in early 2028.

More than 50 per cent of the 180 two- and three-bedroom apartments have sold, with buyers particularly impressed by&nbsp;the spacious and functional floor plans, close proximity to the beach, premium inclusions, and expansive resort-style amenities.

APG has just released a new limited collection of three-bedroom skyhomes with three living rooms and four bathrooms.

[smartcode_project:default project_id=107690 project_image_fid=323744]

Graham Potts, Principal and Founding Director Amalgamated Property Group, said the strong demand for <a href="https://www.apartments.com.au/new-apartments/affinity-broadbeach-40-46-chelsea-avenue-broadbeach-qld-4218">Affinity Broadbeach</a> highlights a genuine need for affordable luxury residential developments on the Gold Coast.&nbsp;

“It’s exciting to see construction kick off on this sought-after project which is set to create a new benchmark in luxe coastal living on the Gold Coast," Potts said.

"Buyers are attracted by the seamless blend of convenience and elegance that Affinity offers, together with the knowledge that our 20-years of industry experience ensures we continue to deliver homes to the same high standards our reputation has been built on."

Capital Construction Queensland, the inhouse construction arm of APG, is handling the building. Potts says having the internal build capability provides buyers with confidence in delivering a high-quality building, referencing Amaya Broadbeach which is nearing completion nearby.

[smartcode_project:default project_id=107690 project_image_fid=323199]

Carly Cottam, CEO of <a href="https://www.apartments.com.au/project-marketer/motiv">MOTIV</a> Group which is selling Affinity, says there's a clear undersupply of property across Southeast Queensland and an even greater shortage of well-designed, spacious residences.

"That’s why Affinity has attracted such strong demand," Cottam says.

"Every detail, from the intricate finishes to the intelligent spatial planning, has been crafted for the discerning owner-occupier. Beyond the residences, the amenity is designed as a true extension of the home."

&nbsp;

[smartcode_project:default project_id=107690 project_image_fid=6678]

Affinity’s superior amenities are resonating with buyers who are impressed by the range on offer, from the expansive outdoor heated pool, to the state-of-the-art gym, steam and sauna facilities, outdoor entertaining terraces, and a business centre.

"The offering reflects exactly what buyers are seeking when right-sizing or upgrading - spacious residences complemented by curated residential amenity, all within moments of the beach and vibrant retail and dining precincts,” Cottam added.

[smartcode_project:default project_id=107690 project_image_fid=6676]

Dennis Milin, Principal of Base Developments and Milin Builders, and Director of Capital Constructions Queensland, said the team is excited to deliver another collection of premium homes in the heart of Broadbeach.

"With more than three decades of proven success in construction and development, our award-winning portfolio across the ACT and NSW speaks for itself, now further demonstrated by the strong progress at Amaya Broadbeach on First Avenue in Queensland,"&nbsp;Milin said.

“In partnership with a highly regarded team of designers, engineers and trades, and supported by our experienced Gold Coast construction professionals, we remain committed to delivering projects defined by quality, timeless design and uncompromising standards."

Early works at Affinity are already advancing, with guide walls for shoring and bulk excavation underway.

[smartcode_project:default project_id=107690 project_image_fid=323196]

With a proven track record in large premium projects, APG has been developing residential and commercial property across Australia for more than 20 years. APG and Base Developments are the same duo behind the successful Amaya Broadbeach, currently under construction on First Avenue and due for completion in early 2026, as well as a number of other successful joint developments in Canberra, including Botanical in Turner, Kiara in Narrabundah, Ivy in Woden, and the three-tower Oaks precinct in Phillip.

APG is currently building The Eastbourne, 349 homes, a premium office building, and a retail and dining precinct at ANZAC Park East.

[smartcode_project_cta:default project_id=107690]

Amalgamated Property Group and Base kick off construction at Affinity Broadbeach

Bis Shrapnel

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The upturn in demand for residential land in the major eastern state centres is expected to begin to peter out over 2017/18 as the new housing market faces emerging headwinds, according to leading industry analyst and economic forecaster, BIS Oxford Economics.
According to the company’s Outlook for Residential Land 2017 to 2022 report series, residential lot production in Sydney, Melbourne and South East Queensland is around its peak in this cycle and will begin to fall away. In contrast, demand for land in Adelaide and Perth has been weakening and will continue to soften.
However, BIS Oxford Economics senior manager and report series author, Angie Zigomanis, said that the forecast downturns in the eastern state centres are likely to be moderate. New supply in these markets has been more pronounced in the unit/apartment sector, with markets continuing to experience a deficiency of detached house stock that is likely to continue to underpin demand.
Nevertheless, new housing demand has still risen to high levels. Sydney is estimated to have recorded its highest level of residential land production over 2016/17. Lot production in Melbourne peaked in 2014/15 but has remained close to this peak in the subsequent two years. Similarly, the Brisbane, Gold Coast and Sunshine Coast markets have been experiencing a moderate upturn since 2013/14 after an extended period of weakness.
“Steady price growth in houses in the initial stages of the housing construction upturn improved land price affordability and shifted some demand from the established house market, to the new house and land market,” said Zigomanis.
“This not only encouraged a greater percentage of home purchasers to opt for a new house over an established one, but also established house owners to sell up and upgrade to a new, larger house.”
In contrast to the strength of the eastern state capitals, the Adelaide land market has softened considerably, in line with weak population growth and a subdued local economy. Lot production in 2016/17 was well below its peak and there are few key economic drivers on the horizon.
Meanwhile, the Perth market continues to struggle both in absorbing the declines in mining investment and in broadening its economic base. Migration and population growth have fallen to well below their pre- mining boom levels. Despite easing lot production, dwelling supply has remained well above underlying demand adding to a significant dwelling oversupply, which will weigh on any cyclical upturn in the coming years.
<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/2017/12/7/lot-production-chart.jpg" alt="">
Lot production in the main east coast capital cities and the Gold and Sunshine Coasts has been underpinned by solid population growth and a housing deficiency, and has been facilitated by record- low interest rates that drove new house demand.
Zigomanis states that the rise in new housing activity is now easing some of the demand pressures in the market, while the deterioration of housing and land price affordability will impact demand for new houses and consequently limit the next round of lots produced.
“Most markets saw house price growth outpace land price growth through the early stages of the upturn, which improved the value proposition for a new house”, said Zigomanis. “That said, land prices have now largely caught up and this gap will have narrowed, making new housing less attractive.”
As a result, many cities are expected to see demand for land and lot production decline over 2017/18 and 2018/19.
Land production in Sydney was estimated at 11,300 lots in 2016/17; its highest level in the past 25 years. Although a sizeable dwelling deficiency is still estimated to be in place in Sydney, it is now being eroded by new dwelling supply. Meanwhile, the house and land price growth through the upturn has seen affordability diminish, as evidenced by rising net outflows of population from Sydney. This is expected to see lot production begin to ease back from 2017/18.
Record population growth has been the main driver of demand for new houses and land in Melbourne. Together with affordable land, this has also seen lot production sustained at record levels since 2014/15.
“However, there have been significant rises in land prices in Melbourne in 2017, and this has seen new house affordability deteriorate,” said Zigomanis. “While lot production is likely to remain high in 2017/18 as recent pre-sales of residential lots are delivered, the resultant weaker demand will cause lot production to fall away from 2018/19.”
After bottoming out at a 20-year low of 4,800 lots in 2012/13, the resultant undersupply in Brisbane initiated an upturn that has been supplemented by strengthening net interstate migration inflows, with an estimated 9,400 lots created in 2016/17. A further rise is forecast in 2017/18, before significant oversupply in the Brisbane apartment market plays through to demand for new housing.
The Gold Coast and Sunshine Coast markets have followed the lead of Brisbane. A weak market and emerging dwelling deficiency saw lot production rise from a low base in 2013/14 through to a peak in 2016/17. Both markets arguably benefit from migration from Brisbane, Sydney and, to an extent, Melbourne, as affordability becomes increasingly constrained in those cities.
Lot production in Adelaide has been more moderate than the eastern state centres. Low interest rates and modest house price growth has supported some buyer demand. However, slowing economic conditions and easing population growth are now weighing on the market.
Similarly, lot production in the Perth market is now falling after a peak in 2014/15. The decline in mining-related investment has caused net interstate migration to shift from an inflow to an escalating outflow, while overseas migration has fallen. Consequently, demand for new houses has slumped, impacting the land market.
Through the upturns in all markets, developers have sought to keep land affordable and maintain margins by steadily reducing the size of the lots sold. However, it appears that median lot sizes have stabilised in most cities in the past two-to-three years. This suggests there is a lower limit to what the market will absorb. Moreover, it makes the economics of development more challenging as rising costs cannot be met by further reductions to the size of lots.
An expected softening in house price growth over 2017/18 and 2018/19 is expected to play through to land prices, which in turn will make it more difficult for developers to maintain margins as construction costs continue to escalate. Together with recent solid rises in land prices making affordability more challenging, and strong construction alleviating some of the undersupply pressures, most markets are expected to experience an easing in lot production in the next two-to-three years.
Separately, changing lifestyle choices and affordability preferences have also seen greater demand for medium and high density dwellings, at the expense of new houses, across the country.
The downturn in new dwelling supply will eventually see a rising deficiency re-emerge in most markets. Together with an expected acceleration in economic growth by the turn of the decade, this will underpin rising demand through the next cycle. 
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jrobinson-rf4aSBido9

Emerging headwinds will dampen demand for new houses and land across the major centres: BIS

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Australia’s building market, a main driver of growth, is expected to decline over the next three years led by a drop in residential starts, says a new report by BIS Oxford Economics.
Residential starts are expected to fall 31 percent as key markets move into oversupply, according to the Building in Australia 2017-32 report.
Further, the BIS report says that the value of national building commencements peaked in 2015/16 at $107.3 billion (in constant 2014/15 prices), up 22 percent in real terms since the end of the resources investment boom in 2012/13. 
While a similar value of commencements is estimated for 2016/17, the report forecasts a cumulative 17 percent decline in the real value of commencements over the three years to 2019/20.
The report comes close on the heels of another BIS report that the muted retail industry will continue to struggle in the face of tough economic conditions and investment risks in the sector are higher. 
FIGURE 1: VALUE OF TOTAL BUILDING COMMENCEMENTS 
CONSTANT 2014/15 PRICES, $MILLIONS 
<a href="https://www.propertyobserver.com.au/images/2017/08/10/BISFig1.png" target="_blank" style="font-size: 12.16px;">Click to enlarge</a>
 <img src="https://www.urban.com.au/images/2017/08/10/BISFig1.png" alt="">
A soft economy, weak household income growth and subdued consumer spending will continue for some years, while Amazon’s entry will only add to the challenges to Australian retailers and shopping centres, says Retail Property Market 2017 to 2027. 
“The record breaking residential building boom is already turning, offsetting growth in starts for non-residential building through 2016/17,” said Adrian Hart, associate director of Construction, Maintenance and Mining at BIS Oxford Economics.
Residential building starts will decline sharply in the next two years, particularly in the investor-driven apartments segment, as supply catches up to underlying demand. 
BIS expects the total residential market to fall by around 31 percent over the next three years.
The decline will be even sharper for the number of private high density apartments getting underway nationally, being close to 50 percent.
FIGURE 2: NUMBER OF DWELLING COMMENCEMENTS 
<a href="https://www.propertyobserver.com.au/images/2017/08/10/BISHousing2.png" target="_blank">Click to enlarge</a>
 
<img src="https://www.urban.com.au/images/2017/08/10/BISHousing2.png" alt="">  
Figure 3: Dwelling Stock Deficiency, Thousands 
<a href="https://www.propertyobserver.com.au/images/2017/08/10/BISHousing3.png" target="_blank" style="font-size: 12.16px;">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/08/10/BISHousing3.png" alt="">
“Overall the slump will be similar in percentage terms to the residential downturns in the mid-1990s and the introduction of the GST in 2000/01,” the report said.
The economic forecaster’s outlook for residential building activity is more bearish than that included in the 2017/18 Commonwealth Budget, as well as last week’s RBI statement during its rate decision announcement.
The central bank has kept rates at a record low of 1.50 percent for a year now.
In the statement, Reserve Bank Governor Philip Lowe said the “current high level of residential construction is forecast to be maintained for some time, before gradually easing”.
“It may not be as rosy as all that,” said Robert Mellor, managing director at BIS Oxford Economics.
“Our dwelling demand/supply analysis indicates that all states with the exception of Victoria and New South Wales are either in balance or oversupply,” said Hart.
Dwelling completions are ahead of underlying demand over the next two years, implying a national residential stock surplus by 2018/19 despite New South Wales still being undersupplied.
“While high density dwellings do take longer to complete than traditional detached dwellings, when the end comes it will be very swift,” said Mellor.
“The high proportion of investor activity is another risk factor as investor sentiment can turn quickly. Overall, we expect 2017/18 will be the peak in high density residential completions, but that part of the market will slump around 50 percent in the subsequent two years. By contrast, a milder decline is forecast for detached houses. The saving grace is that the floor in residential commencements is likely to be higher than in previous busts.” 
Commercial property, however is a different story.
The Building in Australia report forecasts the value of non-residential building commencements to rise further in 2017/18 – following a cumulative increase of 25 percent over the past two years. 
“Improved economic conditions along the eastern seaboard are driving new commercial and industrial developments, particularly in New South Wales and Victoria,” said Hart.
“Offices, retail and accommodation commencements have been very strong, although the latter two segments will run out of puff in coming years given the project pipeline and fundamental demand drivers. By contrast, education and health segments are poised for further growth in commencements given a range of large tertiary education and hospital projects about to get underway.” 
However, the total value of non-residential building commencements is expected to ease later this decade, joining the downturn in residential starts.
“Except for a few sub-segments, the current upswing in non-residential building commencements is unlikely to be sustained over the next few years,” said Hart.
Weaker prospects for growth in retail sales will see a narrower pipeline for retail projects, while a tripling in accommodation starts since 2012/13 may also push activity in this segment over the top, resulting in a correction, added Hart.
Barring offices, transport buildings (eg. railway stations and airport terminals), health and education, most other non-residential building segments are expected to experience flat or declining commencements activity over the remainder of the decade.
BIS said the looming downturn in building commencements would be a strong challenge to achieving the three per cent growth targets for the Australian economy outlined in the 2017/18 Federal Budget.
“The strong growth in building commencements since 2012/13 provided a welcome boost for the Australian economy at a time when resources-related investment and construction activity fell heavily,” said Hart.
“But with residential building activity in particular now set for a sharp decline – along with its multiplier impacts on industries such as construction, manufacturing and retail – the Australian economy will need new investment drivers to support growth and employment.”
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j.ballantyne1990-6AQqhLzZaK

Residential building starts to plunge 31 percent in three years: BIS Oxford Economics

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There is no relief on the horizon for the muted retail industry due to tough economic conditions and investment risks in the sector are higher, according to forecaster BIS Oxford Economics’ latest report.
A soft economy, weak household income growth and subdued consumer spending will continue for some years, while Amazon’s entry will only add to the challenges to Australian retailers and shopping centres, says Retail Property Market 2017 to 2027. 
“While the spectre of large scale shop closures, declining retail employment and abandoned shopping centres that we see in the US is unlikely to be repeated to the same extent in Australia, the risks associated with retail property investment are arguably higher than at any time in the past,” it says. 
Returns are expected to vary significantly from centre to centre, while some will fail, it cautions. 
Report author Maria Lee observed that the retail environment remains challenging against the backdrop of a difficult economic transition—away from an economy underpinned by a resources boom and back to more broadly balanced growth. 
“This is proving to be a long, hard slog. We expect retail expenditure to remain muted for the next three years,” she said. 
Shopping centres will struggle to match the pace of aggregate turnover growth due to heightened competition from additional retail floorspace and the continued growth of online sales—now given fresh impetus by the expansion of Amazon. 
Other challenges in converting turnover growth to additional centre income include over-rented shops, high leasing incentives, poorly performing anchor tenants and pressure on retailer profit margins. 
In addition, changing consumer spending patterns means centres must constantly be reinvigorated — and this involves spending money, it concludes.
“We forecast shopping centre net income growth to barely keep pace with inflation over the next five years, with probably more downside than upside risks to those forecasts” says Lee. 
On a positive note, however, BIS Oxford Economics said retail property remains in high demand among investors, with the dollar value of transactions seemingly held back only by a lack of stock for sale. 
Meanwhile, existing owners are pumping large sums of money into (often defensive) refurbishment/expansion projects. Competition for assets is driving yield compression, thereby boosting centre values and total returns. Average yields for regional, sub-regional and neighbourhood centres are all below pre-GFC levels. 
“We can’t see much further yield firming from here. If anything, the main risk is in the opposite direction” said Lee. 
Putting income and yield forecasts together, BIS Oxford Economics forecasts modest IRRs of below 7% over a five-year investment horizon, with considerable variation from centre to centre. 
Some centres are at risk of losing anchor tenants and/or specialty retailers and will underperform. Even for stronger centres, Lee notes that “even experienced shopping centre managers may have trouble in dealing with what are arguably the toughest conditions yet in retail property investment.” 
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Retail property investment risks higher than ever: BIS Oxford Economics 

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Stricter regulation around lending and more levies on foreign buyers was likely to impact apartment demand in inner Sydney, according to BIS Oxford Economics.
Surging prices had also pushed yields to long-term lows, but this price growth is now slowing, the economic forecaster suggested. f
Foreign buyers still however prefer to invest in Australia given the stable political environment, while local investors still benefit from low interest rates, said BIS. 
It noted that while oversupply concerns had been voiced for Melbourne and Brisbane, Sydney’s new apartment supply had already peaked at 3,698 completions in 2015, falling to 2,521 last year, and it was likely to remain largely steady at 2352 in 2016-17.
Though demand is expected to be weaker ahead, new Sydney supply is set to surge over the three years to 2019-20, with completions averaging 4,650 apartments a year over the period.
About 2,800 units were already under construction, with other large projects locked in and pre-selling, the research said.
Occupier demand mainly came from three groups — students, particularly overseas, young adults in white-collar employment, and empty nesters. 
Vacancy rates have been tight for more than a decade, after falling below the balanced market rate of 3 per cent in inner Sydney in June 2005, as demand outstripped construction for much of this time, The Australian reported.
Vacancy rates also tightened to 1.7 per cent in February 2017 after rising to 2.6 per cent in June 2015. 
Meanwhile with price increases, yields on the median two-bedroom apartment dropped to an estimated 4.17 per cent at June 2017. The median two-bedroom unit rent in inner Sydney was an estimated $745 in June, with the median price at $930,000, said BIS.
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Apartment demand in inner Sydney likely to weaken as tougher regulation bites

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UK-based advisory firm Oxford Economics has acquired a controlling stake in leading Australian analytics and forecasting firm BIS Shrapnel for an undisclosed sum, which the former says will make it the largest independent economics research firm in the world. 
The new organisation will be named BIS Oxford Economics and will see the merger of BIS Shrapnel  with the Australian arm of Oxford Economics. BIS Shrapnel generally focuses on the building, construction, property and mining sectors.
“This investment by Oxford Economics sees the merging of BIS Shrapnel’s deep knowledge of the Australian and New Zealand economies with Oxford Economics’ detailed understanding of the global economy,” said Robert Mellor, managing director, BIS Oxford Economics.
The new firm will be better able to assess market trends and quantify the impacts for its clients at the global, national and city levels, said a media release.
“The acquisition brings together Oxford Economics’ rigorous global modelling and analytical framework with BIS Shrapnel’ expertise across the Australian economy, in particular in forecasting investment cycles,” said Adrian Cooper, chief executive officer and chief economist, Oxford Economics.
“This agreement expands the Oxford Economics Group to more than 300 staff globally, making it the largest independent economics research firm in the world, and allows us to support our clients in understanding economic trends and their impacts both domestically and globally.”
Highlighting this, Mellor added that “major political, social and economic events in nations abroad have profound global impacts – look no further than Brexit or Trump”.
The new entity will operate from BIS Shrapnel’s existing offices in Australia. Robert Mellor will lead BIS Oxford Economics, with Dr Frank Gelber to remain Chief Economist and Director.
All of BIS Shrapnel's staff will be retained.
 
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