<p>Malaysian developer <a href="https://www.apartments.com.au/developers/s-p-setia">SP Setia</a> is the latest to jump into St Leonards booming Transport Oriented Development precinct.</p>

<p>The developer, which has previously delivered Sapphire by the Gardens apartment development in Melbourne, identified the Atchison Street site in 2023. It filed a Scoping Report around 12 months ago, and now has revealed the designs for the new&nbsp;40-storey mixed-use tower.</p>

<p>The State Significant Development Application covers <a href="https://next-portal.urban.com.au/projects/14650/summary">20-22 Atchison Street</a>, a 1,374 sqm site positioned between St Leonards Station and the new Crows Nest Metro station.</p>

<p>Designed by <a href="https://www.apartments.com.au/architects/cox-architecture">COX Architecture</a>, the project would deliver 181 apartments, above a four-storey commercial podium, five basement levels, and new public domain works along Mitchell Street. The apartment mix comprises 35 one-bedroom apartments, 39 one-bedroom-plus-study apartments, 85 two-bedroom apartments, and 22 three-bedroom residences.</p>

<p>The proposal has been lodged as a shop-top housing development under the NSW Government’s TOD planning pathway, which allows increased density around key transport infrastructure. The site sits within the recently rezoned Crows Nest Accelerated TOD Precinct.</p>

<p><img alt="First look: SP Setia targets St Leonards skyline with 40-storey TOD tower" data-entity-type="file" data-entity-uuid="b799673d-48e2-46b0-801a-0e33a9330100" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/atchinson%20site.png?VersionId=dPh0UfwfaHpbFL1R7H1cbZNbIW0CHbCC" /></p>

<p>SP Setia acquired the Atchison Street site as part of its continued expansion into the Australian apartment market. In comments made to City &amp; Country (The Edge Malaysia) in 2023, SP Setia President and CEO Datuk Choong Kai Wai described the acquisition as “a strategic move” aligned with the group’s post-pandemic market recovery strategy.</p>

<p>“Our target for this exceptional development is local and overseas buyers, including first-home buyers, downsizers and investors,” Choong said.</p>

<p>The tower has been designed as a slender vertical form rising from a mixed-use podium, with COX Architecture positioning the development as a response to the evolving St Leonards and Crows Nest skyline.</p>

<p>“The purpose of the project is to facilitate the delivery of high-quality housing at a strategically located site and deliver a built tower outcome that is consistent with the desired future character of St Leonards and aligns with the TOD controls,” the design report stated.</p>

<p><img alt="First look: SP Setia targets St Leonards skyline with 40-storey TOD tower" data-entity-type="file" data-entity-uuid="b1a85eee-76f7-436c-a6da-73ba827b9b13" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/atchinson%20entry.png?VersionId=dA9jHGPMcm.dDbwk4QfxqWiY5bfh3UVt" /></p>

<p>The podium would incorporate retail uses fronting Atchison Street, commercial tenancies, landscaped communal areas, and pedestrian improvements along Mitchell Street. Vehicle access and loading would be consolidated via Atchison Lane.</p>

<p>Residents would have access to more than 665 sqm of communal indoor and outdoor spaces, while the development proposes 96 parking spaces across five basement levels.</p>

<p>The proposal also includes a commitment for 10 per cent of residential floor space to be allocated toward affordable housing through a monetary contribution.</p>

<p>COX said the tower form responds directly to the emerging high-density character of the precinct while seeking to maximise solar access, cross ventilation, and outlook from apartments.</p>

<p><img alt="First look: SP Setia targets St Leonards skyline with 40-storey TOD tower" data-entity-type="file" data-entity-uuid="2163f85c-f63b-4be3-aafa-f8763976cec5" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Article%20Feature%20Image%20%28Grid%29_5.png?VersionId=WiAmtIKJ6.ZQ41EtYEQ1fol7AeorKBlL" /></p>

<p>“The building is orientated towards north,” the Apartment Design Guide compliance report noted, adding that the tower’s slim form was driven by the constrained inner-urban site dimensions.</p>

<p>The design also incorporates landscaped setbacks and communal open space at podium level, intended to soften the interface with surrounding streets and improve pedestrian amenity.</p>

<p>The project adds to a growing wave of redevelopment proposals reshaping St Leonards and Crows Nest following the opening of the Sydney Metro City line and the NSW Government’s push for higher-density housing around major transport nodes.</p>

<p>Last week Stockland filed plans just down the road. They want to build a <a href="https://www.apartments.com.au/new-apartments/601-pacific-highway-st-leonards-nsw-2065">52-storey tower on Pacific Highway</a>.</p>

<p><em>Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/first-look-stockland-plans-52-storey-538-apartment-st-leonards-tower">First look: Stockland plans 52-storey, 538-apartment St Leonards tower&nbsp;</a></em></p>


Joel Robinson

First look: SP Setia targets St Leonards skyline with 40-storey TOD tower

<p><a href="https://www.apartments.com.au/developers/urban-property-group">Urban Property Group</a> has revealed plans for a new mixed-use tower at 10 Dangar Street, Wickham, advancing a proposal that would reshape the southern gateway to Newcastle’s city centre with one of the city’s tallest residential buildings.</p>

<p>The State Significant Development proposal, now on exhibition, seeks approval for a <a href="https://www.apartments.com.au/new-apartments/bowline-10-dangar-street-wickham-nsw-2293">43-storey tower</a> immediately adjacent to the Newcastle Interchange. The project would deliver around 200 apartments, including 42 affordable housing dwellings, alongside 99 co-living units, a 171-room hotel, retail space, and new public domain integrated through the site.</p>

<p>The scheme marks a significant escalation of plans previously approved for the site. Urban Property Group took over the prominent 2,904 sqm parcel, where excavation and demolition had already commenced under an earlier consent for a 14-storey mixed-use development.</p>

<p><img alt="First look: Urban Property Group unveils Newcastle’s next supertower at Wickham interchange" data-entity-type="file" data-entity-uuid="58a96dd9-407f-4d20-86b4-94e4bfeef74b" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/wickham%20podium.png?VersionId=LGlf08pdFGAZDzvx_CXC4XakHNZRuEE0" /></p>

<p>Designed by <a href="https://www.apartments.com.au/architects/sjb-architects">SJB</a>, the tower has been conceived as a landmark transit-oriented development anchored to the Newcastle Interchange precinct. The proposal includes 245 build-to-sell apartments across a mix of one, two, and three-bedroom residences, as well as two penthouses. Fifteen apartments and one operational unit are earmarked for NDIS housing. The co-living component would add a further 99 units, while the podium would accommodate retail uses and hotel facilities.</p>

<p>SJB said the site presents “a valuable opportunity to anchor the precinct by setting the standard for design, active ground planes and character at the key southern gateway.”</p>

<p>The architecture responds directly to the site’s position beside major transport infrastructure and within one of Newcastle’s fastest-evolving urban renewal precincts. The tower form sits above a sculpted podium designed to frame new public spaces, including a through-site pedestrian link connecting Station Street to Hannell Street, landscaped plazas, and activated retail edges.</p>

<p><img alt="First look: Urban Property Group unveils Newcastle’s next supertower at Wickham interchange" data-entity-type="file" data-entity-uuid="a7bd6ff0-f7db-4ce8-a6dc-ea56e72c6149" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/wickham%20lanne.png?VersionId=xzf39VADyhj7zBQY2I9fx9vI62u2tuSb" /></p>

<p>The design report describes the project as part of the broader transition of Wickham into “a vibrant, high-quality mixed-use urban precinct” that leverages proximity to the station, open space, and regional connectivity.</p>

<p>A detailed public art strategy has also been prepared for the development. The strategy positions the project as “a transit-oriented development of state significance at the gateway to Newcastle’s city centre” and outlines a series of integrated artworks responding to Newcastle’s industrial and transport heritage.</p>

<p>Creative Road’s curatorial framework for the project, titled Unveil, draws on “stratified surfaces, carved volumes, and light-filled apertures” while referencing Newcastle’s transformation from an industrial city into a contemporary education and technology hub.</p>

<p><img alt="First look: Urban Property Group unveils Newcastle’s next supertower at Wickham interchange" data-entity-type="file" data-entity-uuid="77a882bb-14b1-4d28-99ff-9438e39508c0" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/wickham%20site.png?VersionId=cevgo_vN0eKPK78P8YcEu3mKPLkpFqE7" /></p>

<p>The proposal is being advanced through the NSW Housing Delivery Authority pathway after being declared State Significant Development in June 2025. The accompanying scoping report states the development aims to “maximise the site’s proximity to the Newcastle Interchange by delivering transit-oriented development” while increasing housing supply and affordable housing provision within the Newcastle LGA.</p>

<p>Urban Property Group’s plans align with the long-term strategic vision established under the Wickham Master Plan, which identified the interchange precinct as suitable for substantial uplift in height and density. The current proposal would significantly intensify that vision, positioning the tower among the tallest developments proposed for Newcastle.</p>

<p>The site sits immediately north of the Newcastle Interchange, bounded by Dangar Street, Hannell Street, and Charles Street. It is surrounded by a rapidly growing cluster of residential towers and mixed-use projects that have emerged following the completion of the light rail and transport interchange.</p>


First look: Urban Property Group unveils Newcastle’s latest tower at Wickham interchange

<p>Bottega House has completed settlement of a landmark riverfront site in Macquarie Street, St Lucia, representing its first major Brisbane development.&nbsp;</p>

<p>Positioned on the banks of the Brisbane River, the <a href="https://www.apartments.com.au/new-apartments/180-macquarie-street-st-lucia-qld-4067">premium site at 180 Macquarie Street</a> features uninterrupted river frontage in one of Brisbane’s most tightly held residential precincts.&nbsp;</p>

<p>The proposed development, currently under assessment with Brisbane City Council, has been designed by <a href="https://www.apartments.com.au/architects/plus-studio">Plus Studio</a> with interiors by <a href="https://www.apartments.com.au/interior-designers/mim-design">Mim Design</a> and will deliver a boutique collection of premium residences positioned specifically for owner occupiers and downsizers.&nbsp;</p>

<p>The residences are set to redefine luxury apartment living in the area, with a focus on architectural quality, refined finishes, landscape integration and elevated amenities including curated wellness facilities, resort-style pools and recreation spaces rarely seen in the local market.&nbsp;</p>

<p>Exclusive sales for the project will be led by Keenan &amp; Byrne, ahead of an anticipated launch later this year.&nbsp;</p>

<p>Bottega House Managing Director Nick Malloch said the project reflects the group’s ambition to deliver a highly curated residential offering within one of Brisbane’s most tightly held precincts.&nbsp;</p>

<p>“This is an incredibly rare riverfront opportunity and one we have approached with a long-term perspective,” Malloch said.&nbsp;</p>

<p>“Our vision from the outset was to create a boutique collection of residences that feel more like private homes than traditional apartments, with generous proportions, refined finishes and exceptional amenity throughout."</p>

<p>Malloch says there is a&nbsp;lack of premium owner-occupier stock of this quality in the market, particularly for downsizers wanting space, privacy and a true lifestyle offering without compromise.&nbsp;</p>

<p>"Demand is expected to be strong given the scarcity of premium riverfront opportunities of this nature within Brisbane’s inner-west."&nbsp;</p>


Bottega House secures landmark riverfront site in St Lucia 

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<p data-end="157" data-start="0">The arrival of the first piling rig officially marks the commencement of construction at SIERA’s new beachside apartment development, Exhale, in Northcliffe.</p>

<p data-end="459" data-start="159"><a href="https://www.apartments.com.au/new-apartments/exhale-surfers-paradise-8-enderley-avenue-surfers-paradise-qld-4217">Exhale</a>, a glass-encased tower featuring 54 large-scale apartments at 8 Enderley Avenue, is SIERA’s third Gold Coast development. It follows the recently completed PIPIS Bilinga beachfront project, which achieved suburb-record prices, and the soon-to-be-completed Chevron Island development, Tapestry.</p>

<p data-end="459" data-start="159">[smartcode_project:default project_id=112661 project_image_fid=359603]</p>

<p data-end="651" data-start="461"><a href="https://www.apartments.com.au/developers/siera">SIERA</a> Founder and Managing Director Brent Thompson said the arrival of the piling rig represented a significant milestone for the development, which is scheduled for completion in late 2028.</p>

<p data-end="950" data-start="653">Over the next month, around 260 piles are expected to be installed as work progresses on the basement structure. The building is anticipated to rise above ground level early next year, before unveiling its sculptural glass curtain wall, developed in collaboration with specialist façade engineers.</p>

<p data-end="1081" data-start="952">“The façade was designed to maximise panoramic coastal views while creating a distinctive architectural identity,” Thompson said.</p>

<p data-end="1081" data-start="952">[smartcode_project:default project_id=112661 project_image_fid=355935]</p>

<p data-end="1307" data-start="1083">Designed by BDA Architecture, Exhale will comprise just 54 two- and three-bedroom residences across 26 levels, a level of low-density living rarely delivered in this beachside pocket between Surfers Paradise and Broadbeach.</p>

<p data-end="1522" data-start="1309">The project has been conceived as a resident-only building, with no short-stay accommodation permitted. SIERA says the model is intended to appeal to long-term owner-occupiers rather than transient holiday demand.</p>

<p data-end="1522" data-start="1309">[smartcode_project:default project_id=112661 project_image_fid=361052]</p>

<p data-end="1714" data-start="1524">Residences have been designed with large-format layouts and expansive glazing, with most apartments featuring more than 30 metres of glass frontage to maximise natural light and ocean views.</p>

<p data-end="1945" data-start="1716">The amenity offering spans two levels and centres on wellness and lifestyle, including a heated magnesium pool, sauna, yoga and Pilates studio, gymnasium, private dining facilities, cinema lounge, and dedicated surfcraft storage.</p>

<p data-end="1945" data-start="1716">[smartcode_project:default project_id=112661 project_image_fid=359607]</p>

<p data-end="2220" data-is-last-node="" data-is-only-node="" data-start="1947">More than half of the apartments have already sold. SIERA has also opened a sales gallery for Exhale at its Chevron Island commercial premises, near its Tapestry tower and the site of its second Chevron Island apartment development, which is slated to launch in early 2027.</p>
</section>
</section>

<p>[smartcode_project_cta:default project_id=112661]</p>


SIERA kicks off construction at Northcliffe tower Exhale

<p data-end="320" data-start="79">Local Little Bay residents, along with buyers from premium postcodes across Sydney’s affluent Eastern Suburbs, have dominated purchases in developer-builder Urban Property Group’s first Eastern Suburbs apartment development, <a href="https://www.apartments.com.au/new-apartments/este-little-bay-jennifer-street-little-bay-nsw-2036">ESTE Little Bay</a>.</p>

<p data-end="638" data-start="322">The $250 million coastal project, one of the first new developments in the area in several years, has proven particularly popular with downsizers, especially those from Coogee and Bondi. One Double Bay downsizer paid $4.7 million for a four-bedroom penthouse, setting a new local apartment price record in the process.</p>

<p data-end="864" data-start="640">Buyers have been attracted to the combination of coastal tranquillity, premium design and amenity-rich neighbourhood living. The walkable village setting, along with proximity to three of Sydney’s leading golf courses, New South Wales Golf Club, St Michael’s Golf Club and The Coast Golf Club, has also been a key drawcard.</p>

<p>[smartcode_project:default project_id=112343 project_image_fid=352689]</p>

<p>Built across two low-rise buildings designed by <a href="https://www.apartments.com.au/architects/hill-thalis-architecture-urban-projects-pty-ltd">Hill Thalis</a> and set along a lush, landscaped green spine, designed by leading landscape architect <a href="https://www.apartments.com.au/landscape-architect/arcadia-landscape-architecture">Arcadia</a>, ESTE Little Bay offers a collection of one, two, three and four-bedroom residences with interiors by Richards Stanisich.</p>

<p><a href="https://www.apartments.com.au/developers/urban-property-group">Urban Property Group</a> Sales Director, Tom McIvor said the response to ESTE has been "nothing short of extraordinary."</p>

<p>“Buyers have been quick to recognise ESTE as a rare opportunity to invest in a coastal sanctuary that offers both seclusion and connectivity to the heart of Sydney,” McIvor said.</p>

<p>[smartcode_project:default project_id=112343 project_image_fid=352687]</p>

<p><a href="https://www.apartments.com.au/project-marketer/srm-residential">SRM Residential</a> Senior Director, <a href="https://www.apartments.com.au/project-marketer/srm-residential">Clayton Ross</a> said the local market has responded incredibly well, driven by ESTE’s exceptional location and the rarity it offers.</p>

<p>“We’ve seen strong interest from a variety of buyer groups, all of whom are drawn to the exclusivity and quality of the build and construction by the 4.5-star iCIRT-rated builder / developer, Urban Property Group. There’s truly nothing else like it along Sydney’s coastline.”</p>

<p>[smartcode_project:default project_id=112343 project_image_fid=352690]</p>

<p>The project also includes robust buyer protections, including Resilience Insurance’s Latent Defects Insurance, providing 10 years of structural cover, and an independent iCIRT-rating of the developer.</p>

<p>“The iCIRT-rating adds another layer of confidence,” Ross added. “Buyers see it as a safeguard for their investment and their lifestyle.” A highlight of ESTE’s offering is its exclusive wellness amenities, including a heated rooftop infinity pool and outdoor heated spa, a state-of-the-art Technogym fitness centre, and a sauna.</p>

<p><a href="https://www.apartments.com.au/new-apartments/este-little-bay-jennifer-street-little-bay-nsw-2036">ESTE Little Bay</a> is topped out and is on track to complete towards the end of 2026, with residents moving in before Christmas.</p>

<p>[smartcode_project_cta:default project_id=112343]</p>


Eastern Suburbs buyers snap up ESTE Little Bay apartments

Brexit

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<p><img src="https://counter.theconversation.edu.au/content/57114/count.gif" alt="The Conversation" width="1" height="1"></p>
<p>GUEST OBSERVER</p>
<p>For the second time in the space of ten days, it appears that betting markets and pollsters have got it wrong. First, despite odds showing a 90 percent likelihood of “Remain” winning, the UK voted to “Leave” the European Union in its June 23 referendum.</p>
<p>Now, a mammoth federal election campaign has resulted in political stalemate in Australia, and the result will not be known until Tuesday at the earliest.</p>
<p>Clearly, the repercussions of a hung parliament are not as wide-ranging as “Brexit” and we are unlikely to see Canberra’s streets flooded with protesters. However, when Australian markets open on Monday they will still be faced with a high degree of political uncertainty. Investors do not tend to react favourably to such ambiguity.</p>
<h2>Investors reduce risk under political uncertainty</h2>
<p>Investors tend to respond in one of two ways. The most-common situation is for the political uncertainty to manifest in higher levels of market volatility and a flight to quality as investors try to reduce their exposure to risk.</p>
<p>This was what we witnessed post-Brexit: Australian stockmarkets and the dollar fell by more than 3%, while “safe” government bond yields hit an all-time low.</p>
<p>An alternative is for markets to become locked in stasis – where investors sit on their hands, unsure as to whether they should buy or sell. Market liquidity falls and asset prices become resistant to change.</p>
<p>This is effectively what happened following the hung parliament of August 2010. In the aftermath of that election, stock prices remained within a tight trading range and the dollar hardly budged over the course of the following week.</p>
<p>When the result of the 2016 election is finally known, it appears that the outcome will be either a minority Coalition government or a hung parliament. The Senate is likely to be more fractious than prior to the election.</p>
<p>Talk has already started about potential unrest among the conservative faction of the Liberal Party who supported former prime minister Tony Abbott. There is even discussion of an election re-run if the parliament proves ungovernable. Clearly, this uncertainty could linger for months.</p>
<h2>Concerns for jobs and growth</h2>
<p>The likelihood of a lengthy period of uncertainty is important. It means it will be difficult to pass any economic or budgetary reforms. Without such reforms, it is unlikely the budget will return to surplus in the near future (if ever) and it becomes more likely that the AAA credit rating will be lost.</p>
<p>This creates multiple concerns for Australian financial markets, and the broader economy. A credit rating downgrade will likely increase the cost of funding for Australia’s banks.</p>
<p>The Big Four banks will be particularly impacted given the significant role that offshore funding plays in their balance sheet management. This will mean higher interest rates for borrowers – which would not be beneficial for the housing market.</p>
<p>A prolonged period of uncertainty will make it difficult for firms to finalise investment decisions. At a time when the economy is still attempting to transition away from the boom in mining investment this will dent economic growth and employment. So much for “jobs and growth”.</p>
<p>Essentially, this is a recipe for a “risk-off” environment of declining stockmarkets and a depreciating Australian dollar. It is also likely that the market will price a higher likelihood of a reduction in the RBA target rate at the July or August meeting. This will further aid a continued rally in relatively safe government bonds (bond prices rise as yields fall).</p>
<p>If you consider the ongoing political uncertainty resulting from Brexit and the forthcoming US presidential elections in addition to the federal election, then months of nervous markets may lay ahead.</p>
<p><em><span class="fn author-name">Lee Smales is s</span>enior lecturer, Finance, Curtin University and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/lee-smales-104586" target="_blank">here</a>.</em></p>
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jchancellor-FAypfDUnLy

Hung parliament may lead to investor uncertainty

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<p>I was reading a piece this week at <em>MacroBusiness</em> where it was pointed out that it has been 24 years since we went through the global recession.</p>
<p>Then eight years later we went into the Tech Wreck, then  eight years after that we hit the Global Financial Crisis (GFC) and now  eight years on we have hit Brexit – or as Australians will soon call it Bex – it (as it will probably cause some major headaches.)</p>
<p>Whilst Australia continues to post some very positive data, we need to pay closer attention to the data post June 30 as we now enter a period of uncertainty. Having said that, this should also be viewed as an exciting time as it is now clear that every eight years businesses need to adapt and recalibrate in order to survive.</p>
<p>One statistic we can’t hide from when the GFC hit in 2007 is that debt has grown much faster than GDP in every country. Some may say that this is an economic consequence as globally cash rates have been crashing down where in Australia we sit at a record low 1.75 per cent. Furthermore, many commentators are now stating that the cash rate in Australia will come down even more as a direct result of Brexit.</p>
<p>Whenever an economy reaches that financial standoff, and investors hate uncertainty, we need to be overly protective of investors as they are a particular and crucial economy driver. So there needs to be closer scrutiny as to why the ALP want to change the Negative Gearing goal posts, which will definitely drive up rents, and why the NSW Government wants to drive foreign investors from our property markets with their 4 per cent surcharge plus a 0.75 per cent land tax surcharge on residential real estate only.</p>
<p>Makes one seriously question exactly where governments expect the new buyers to evolve from? The real estate industry is hearing foreign investors are moving away from our markets in droves. Once again we need to be mindful of Brexit and life and results after June 30. Australia is now all but guaranteed that lending will now tighten, which is a good thing, however if we cast our minds back to the GFC we kept hearing two words – “green shoots”.</p>
<p>The sad part about emerging “green shoots” is that governments immediately see them as a new form of taxation – this in turn will bring about market stagnation which is the last thing our economy needs.</p>
<p>Having said that, existing property markets, otherwise known as the established household markets, are now 60 per cent down when compared to property listings two years ago. This is good news for established houses – we are now seeing record low listings which only strengthens the markets. For example, when I go back five years for Mosman houses you will see the pattern that has emerged.</p>
<ul>
<li>30 June 2011 – 97 houses on the market in Mosman</li>
<li>30 June 2012 – 80 houses on the market in Mosman</li>
<li>30 June 2013 – 68 houses on the market in Mosman</li>
<li>30 June 2014 – 63 houses on the market in Mosman</li>
<li>30 June 2015 – 43 houses on the market in Mosman</li>
<li>30 June 2016 – 42 houses on the market in Mosman</li>
</ul>
<p>What this tells us, and we should point out that these results are reflective across Sydney, is that since the GFC homeowners are taking advantage of record low cash rates by paying down debt faster. On the flip side they are renovating over selling as they see no economies of scale in donating a few hundred thousand dollars to our NSW Government in the form of Stamp Duty. In other words, the Stamp Duty component is then redirected to home renovations.</p>
<p>The NSW Government will recognise very quickly that it has a cash flow problem when the effect of the new surcharge stamp duty and the already declining established markets see the property market transactions coming to an abrupt halt. Don’t be surprised to see a total back-flip with the foreign buyer surcharges but not the land tax.</p>
<p>As for the established household markets the NSW Government should look at the amount of stamp duty previously paid on the past acquisition and give that household a 33 per cent deduction from the next stamp duty so long as that household has been in that property between five and ten years.</p>
<p>In business you offer incentives – it’s a shame governments struggle with the concept of that word.</p>
<h5>MOSMAN – 2088</h5>
<p>Number of houses on the market this time last year – 36</p>
<p>Number of houses on the market last week – 48</p>
<p>Number of houses on the market this week – 42</p>
<p>Number of apartments on the market this time last year – 33</p>
<p>Number of apartments on the market last week – 41</p>
<p>Number of apartments on the market this week – 33</p>
<h5>CREMORNE – 2090</h5>
<p>Number of houses on the market this time last year – 3</p>
<p>Number of houses on the market last week – 11</p>
<p>Number of houses on the market this week – 7</p>
<p>Number of apartments on the market this time last year – 16</p>
<p>Number of apartments on the market last week – 18</p>
<p>Number of apartments on the market this week – 17</p>
<h5>NEUTRAL BAY – 2089</h5>
<p>Number of houses on the market this time last year – 2</p>
<p>Number of houses on the market last week – 10</p>
<p>Number of houses on the market this week – 10</p>
<p>Number of apartments on the market this time last year – 39</p>
<p>Number of apartments on the market last week – 22</p>
<p>Number of apartments on the market this week – 23</p>
<p><em>ROBERT SIMEON is a director of </em><em><a href="https://www.rwm.com.au/" target="_blank" title="RWM" rel="nofollow">Richardson Wrench Mosman and Neutral Bay</a> </em><em>and has been selling residential real estate in Sydney since 1985. </em></p>
<p><em>He has also been writing real estate blog </em><em><a href="https://www.rwm.com.au/news/" target="_blank" title="Virtual Realty News" rel="nofollow">Virtual Realty News</a> </em><em>since 2000.</em></p>
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Time for governments to roll out incentives: Robert Simeon

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<p><span>GUEST OBSERVER</span></p>
<p><span>Brexit has delivered a shock to global financial markets. </span><span>Australia’s </span><span>markets have, however, seen much smaller moves than elsewhere, particularly in Europe. </span></p>
<p><span>This partly reflects that commodity prices have held up well, with the iron ore price above its pre-Brexit referendum level. The AUD is down from USD0.76 to USD0.74, but the fall in the AUD is largely explained by strength of the USD. </span></p>
<p><span>The market</span><span>’s </span><span>reaction seems consistent with the apparent limited economic significance of the UK for Australia. Britain </span><span>takes only 2.8 percent of Australia’</span><span>s exports and, although financial connections are larger, recent net capital inflows to Australia have mostly come from </span><span>Asia. In short, Australia’</span><span>s economic story is much more about Asia than about Britain or Europe. To the extent that Brexit affects Australia, it is mostly through an impact it could have on growth in Australia's major trading partners in Asia. We see Brexit as unlikely to trigger a cash rate cut from the RBA this month. </span></p>
<p><span>Locally, economic focus will shift to the federal election this weekend (2 July), with current polling suggesting a tight race. The latest </span><span>Newspoll </span><span>show the Coalition slightly ahead, at 51:49 on a </span><span>‘</span><span>two-party preferred basis</span><span>’</span><span>, although a 2pt lead is within the margin of error. We see the election as unlikely to have market implications, although the desire to be apolitical could explain the central bank</span><span>’</span><span>s recent reluctance to give much policy guidance (see </span><span>Australian Election Observer</span><span>, 17 June 2016). </span></p>
<p><span>More generally, Au</span><span>stralia’</span><span>s growth remains strong, business conditions are at high levels, jobs growth has continued and house prices are rising. Last weeken</span><span>d’</span><span>s consumer confidence and housing auction clearance rates remained high, despite the Brexit vote. We expect continued solid growth, although inflation remains low. </span></p>
<p><span>W</span><span>e continue to see the RBA’</span><span>s next potential trigger as the Q2 CPI print, due on 27 July. Our central case sees a 25bp cash rate cut in August, after a low CPI print. </span></p>
<p><a href="/images/2016/07/01/Screen%20Shot%202016-07-01%20at%2010.06.02%20AM.png" target="_blank"><span>Click to enlarge</span></a></p>
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<p><span>What does ‘</span><span>Brexit</span><span>’ </span><span>mean for Australia? </span></p>
<p><span>Brexit has had a large impact on global financial markets, although the local effect has been smaller than elsewhere. </span><span>Australia’</span><span>s equity market sold off only modestly and the AUD has fallen, but the decline can be fully explained by strength of the USD rather than weakness of the AUD. Commodity prices have held up well, with the Bloomberg commodity price index broadly unchanged since prior to the Brexit vote and up 13% year-to-date. Iron ore prices have risen since the Brexit vote. </span></p>
<p><span>The more limited local market impact reflects the relatively small economic significance of the UK to Australia. The UK only accounts f</span><span>or 2.8% of Australia’</span><span>s exports (Chart 2). The rest of the European Union accounts for 4.6</span><span>% of Australia’</span><span>s exports, so a wider effect of Brexit on Europe could be more significant. However, this event would only be a big deal for Australia if it significantly affects Asia, as 74% </span><span>of Australia’</span><span>s exports go to Asia.</span></p>
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<p><span>Although trade linkages are small, Australia has more significant financial exposures to the UK. The UK accounts for 16% of the stock of foreign investment in Australia and a similar share of Au</span><span>stralia’</span><span>s investment abroad is in the UK. The UK accounts for 11% of Australian-owned banks</span><span>’ </span><span>offshore exposures on an ultimate risk basis. However, much of the recent growth in capital inflows into Australia has been coming from growing links to Asia (Chart 2). </span></p>
<p><span>For the RBA, it is likely that the comparatively muted local financial market response to Brexit and the small trade linkages to the UK are the most important elements for monetary policy. The other key issue will be </span><span>the effect that the UK’</span><span>s recent, post-Brexit vote, sovereign rating downgrade could have on the AUD. S&amp;P has downgraded the UK by two notches, from triple-A to AA. Australia retains a triple-A rating, and is one of only nine countries with a triple-A rating from all three major rating agencies. </span><span>Australia’</span><span>s strong rating could put unwanted upward pressure on the AUD at a time when a competitive currency is needed to support growth. </span></p>
<p><span>Local growth is strong and housing prices are rising </span></p>
<p><span>On the latest readings local growth has remained solid running into Q2, following the strong GDP print for Q1 (1.1% q-o-q). Surveyed business conditions remained at around post-global financial crisis highs in June and capacity utilisation has recently also picked up strongly (Chart 3 and 4). Should the lift in capacity utilisation prove persistent, it may be expected to motivate non-mining firms to ramp up their investment plans, which is a much needed next stage of the rebalancing of growth following the end of the mining investment boom. </span></p>
<p><span>The lift in capacity utilisation and business conditions also helps to explain continued jobs growth in recent months. Employment growth is running at around 2.0% y-o-y, which has been </span>enough to keep the unemployment rate steady at around 5.7% in the past couple of months (Chart 5).</p>
<p>As activity has picked up, local firms have, so far, been choosing to take on more labour, rather than increase investment to meet demand. At some point, they may start to need to increase investment to support a continued pick-up in local production. The improvement in the labour market may also, at some point, start to put some upward pressure on wages growth, which could lift local inflation.</p>
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<p><span>For the RBA, another factor that could discourage a near-term cash rate cut is the recent re- acceleration of house price growth (Chart 6). Housing prices rose by 8% y-o-y in June (based on daily data), up from a rate of 6% y-o-y in March. However, given that loan approvals have been weaker recently, housing supply is coming online and the prudential settings remain tight, we expect that housing price growth will slow in coming quarters (for more on this see </span><span>Downunder Digest: Australian housing is still set to cool</span><span>, 21 June 2016). Nonetheless, the RBA may want a bit more evidence that the re-acceleration does not persist before cutting again.</span></p>
<p><a href="/images/2016/07/01/Screen%20Shot%202016-07-01%20at%2010.09.59%20AM.png" target="_blank"><span>Click to enlarge</span></a></p>
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<p><span>The Q2 CPI print on 27 July is all important </span></p>
<p><span>Although we expect the RBA to be on hold on 5 July, our central case is for a 25bp cut on 2 August. This view depends on the Q2 CPI print, which is due on 27 July. Keep in mind, the almost singular motivation for the cash rate cut in May, was the significant downside surprise to the Q1 CPI print, which pushed underlying </span><span>inflation to well below the RBA’</span><span>s 2-3% target band (Chart 7). On a q-o-q and y-o-y basis, the first quarter underlying inflation print was the lowest result since inflation targeting began in 1993 (Chart 8). </span></p>
<p><a href="/images/2016/07/01/Screen%20Shot%202016-07-01%20at%2010.11.30%20AM.png" target="_blank"><span>Click to enlarge</span></a></p>
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<p><span>In our view, if the Q2 print shows underlying inflation below the bottom edge of the 2-3% target band on a quarterly basis, that is, below 0.5%, we see the RBA as likely to cut in August. As our current forecast is for the average of trimmed mean and weighted median to be 0.45%, our central case is for the RBA to cut in August. A higher print will make a cut less likely, although much will then depend on other economic developments. </span></p>
<p><span>Australia’s </span><span>election has little bearing on the RBA </span></p>
<p><span>Australia will hold a federal election on 2 July. The latest </span><span>Newspoll </span><span>shows the current Liberal/National coalition, led by Prime Minister, Malcolm Turnbull, slightly ahead of the Labor Party, led by </span><span>Bill Shorten, at 51:49 on a ‘two</span><span>-</span><span>party preferred basis’</span><span>, although a 2pt lead is within the margin of error. Perhaps more interestingly, the Coalition is currently leading in more of the marginal electorates. All in all, however, the polls suggest it will be a tight race. </span></p>
<p><span>The market implications of the election are expected to be limited. Neither major party is proposing radical reforms. Both major parties agree on the fundamental economic framework, supporting a floating currency, independent central bank, free flow of capital and trade. For more on the economic policies of each party, see </span><span>Australian Election Observer</span><span>, 17 June 2016. </span></p>
<p><span>For the RBA the election is unlikely to make any difference to its approach to policy. However, on the margin, a desire to remain apolitical may help to </span><span>partly explain the central bank’</span><span>s reluctance to provide much guidance in its recent statements. Keep in </span><span>mind that the RBA’</span><span>s recent statements have not included an explicit easing bias. </span></p>
<p><span>We expect the RBA’</span><span>s post-meeting statement to note that the board is waiting for more information, particularly on prices, thus suggesting that the Q2 CPI print will be of key focus for the RBA in determining its next move.</span></p>
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<p><span> <em><a href="https://www.about.hsbc.com.au/hsbc-in-australia/management-team" target="_blank">PAUL BLOXHAM</a> IS CHIEF ECONOMIST (AUSTRALIA AND NEW ZEALAND) FOR HSBC. </em></span></p>
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Brexit unlikely to trigger a cash rate cut from the RBA in July: HSBC's Paul Bloxham

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<p><span>GUEST OBSERVER</span></p>
<p><span>Sales activity and price growth in the prime London residential market have both slowed since mid-2014. The EU referendum has been only one of a number of headwinds which have impacted the market. </span></p>
<p><span>The UK election, the threat of a Mansion Tax, the imposition of higher rates of stamp duty as well as the additional rate for investors and second home buyers, have all conspired with the EU vote to dampen market sentiment. </span></p>
<p><span>The very strong volume of sales seen at the end of Q1, bolstered by the impending </span>additional rate of stamp duty, was bound to weigh on deal levels in Q2, but it is fair to speculate that at least part of the decline since April has related to market uncertainty caused by the referendum.</p>
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<p><span>There is no doubt that the vote in favour of Brexit will generate a period of renewed uncertainty in the prime London residential market. Some demand, especially from investors, will be delayed and in some cases redirected to other markets – although the significance of these trends should not be overstated. </span></p>
<p><span>Demand for prime London property rests on a wide range of drivers – most of which are unaffected by the referendum decision: the scale of London’s business cluster, depth of skills, education, lifestyle and language. It is not easy to identify an obvious alternative destination for investors despite short-term nervousness. </span></p>
<p><span>On the eve of the vote the pound sat 14% below its mid-2014 peak meaning pricing in the prime market was more attractive for dollar buyers. While a further weakening </span>of the pound could increase inward investment, this impact will be constrained by the fact that around 80 percent of central London buyers are UK residents.</p>
<p><span>It seems a reasonable assumption to make that interest rates will be lower for longer, despite the risk of imported inflation from a weaker pound. While the long-term benefit of ultra-low interest rates on the housing market may be questionable, in the short- term they will act to underpin demand especially for equity rich buyers with access to the best funding rates. </span></p>
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<p><span>The prime country house market will be similarly impacted by the result. However while the market has performed relatively well over recent years, following a slow recovery immediately after the financial crisis, prices have not tracked London to date and there is scope for some out- performance in the short to medium term. </span></p>
<p><span>While we are entering a period of renewed uncertainty in the UK and London market, ongoing issues around EU and especially Eurozone stability, which will be highlighted in the run up to French and German elections, are likely to counter this risk and shore-up London’s safe- haven appeal. </span></p>
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<p><span><em>Liam Bailey is partner, Global Head of Research for Knight Frank and can be contacted <a href="https://www.knightfrank.com/research" target="_blank">here</a>.</em></span></p>
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The factors dampening UK residential market sentiment: Knight Frank's Liam Bailey

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<div>GUEST OBSERVER </div>
<div>
<p>There is no doubt that the vote in favour of Brexit will generate a period of renewed uncertainty, but mainly in the UK and Europe. Some demand, especially from investors and businesses (hiring and investing), will be delayed and in some cases redirected to other markets.</p>
<p>Demand for Australian property may actually benefit (as a safe haven) as globalinvestors pause in directing capital into Europe and our demand rests on a wide range of drivers – most of which are unaffected by the referendum decision: the scale of Australia’s business clusters, depth of skills, education, lifestyle and language etc. </p>
<p>However it must be said that the world is entering a period of renewed uncertainty inthe UK and London market, and ongoing issues around EU and especially Eurozone stability, which will be highlighted in the run up to French and German elections. Uncertainty and instability is bad for financial markets and capital investment, so let’s see what impact it may have on borrowing costs and business/consumer confidence here in Australia. </p>
<p>The UK has long been a destination for Asian (Chinese mainly) real estate investors, with the attraction of the strong liquidity, stable governance, transparency and clear title. With the decision to exit the European Union, for existing Asian property owners, the fall in the pound will impact the repatriation of any income returns, as well as the gains on any disposal.</p>
<p>Although there is likely to be more volatility in the market, ultimately most investors are looking to the long term – so will continue to hold their assets, in the hope that any short-term instability will eventually subside when more clarity of the UK’s role in Europe is determined.</p>
<p>The decision, however, could also present a buying opportunity for owners not already set, as the significant drop in the value of the pound, as in 2009, could lead to an uptick of interest by Asian investors, who, over the last few months have adopted a wait-and-see approach to the referendum – and will now see their buying power increase significantly.</p>
<p>As stated above, Chinese, Singaporean and Hong Kong investors especially, looking at both residential and commercial properties, could also start to look even harder at markets like Australia over the remainder of 2016 until the dust settles in UK/Europe.</p>
<p>Regarding interest rates, an interest rate cut of 25 basis points is a strong possibility at the UK Monetary Policy Committee’s July meeting, or perhaps earlier if required. We may also see a return of quantitative easing, if there are signs that investment is deteriorating. I think the RBA is now even more likely of cutting rates, either in July or more likely in August once the inflation number comes through.</p>
<p>Uncertainty for businesses is the biggest threat to Australia in a very global world. It is therefore inevitable that business behaviour will be stifled over the short-term and delays in occupier decision making will persist. </p>
<p>Despite this, over the medium-term there are reasons to be positive. First, the pessimistic scenarios highlighted during politicised campaigns often fail to emerge. Second, as the dust settles, and the UK and global economy stabilises, businesses will reconnect with the fundamental qualities of Australia as a business location; ranging from corporate tax rates, to the large consumer market, to the highly skilled worker base, to the lifestyle.</p>
<p><em>Matt Whitby is Head of Research &amp; Consulting, Australia, Knight Frank and can be contacted <a href="https://www.knightfrank.com.au" target="_blank">here</a>.</em></p>
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Potential impact of Brexit in Australia: Knight Frank's Matt Whitby

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<p style="text-align: left;" align="center">GUEST OBSERVER</p>
<p>There is no doubt that the vote in favour of Brexit will generate a period of renewed uncertainty in the prime London residential market.</p>
<p>Some demand, especially from investors, will be delayed and in some cases redirected to other markets – although the significance of these trends should not be overstated. </p>
<p>Demand for prime London property rests on a wide range of drivers – most of which are unaffected by the referendum decision: the scale of London’s business cluster, depth of skills, education, lifestyle and language.</p>
<p>It is not easy to identify an obvious alternative destination for investors despite short-term nervousness.</p>
<p>While we are entering a period of renewed uncertainty in the UK and London market, ongoing issues around EU and especially Eurozone stability, which will be highlighted in the run up to French and German elections, are likely to counter this risk and shore-up London’s safe haven appeal.</p>
<p> </p>
<p><em>Liam Bailey is partner, Global Head of Research for Knight Frank and can be contacted <a href="https://www.knightfrank.com/research" target="_blank">here</a>.</em></p>
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Brexit and the impact on prime London real estate investments: Knight Frank's Liam Bailey

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<div class="column">GUEST OBSERVER</div>
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<div class="column">The past week has been dominated by first the anticipation that Britain would vote to Remain within the EU that saw “risk on” in financial markets and shares rally followed by an abrupt move to “risk off” as the referendum saw the Leave vote win by 52 percent to 48 percent.</div>
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<div class="column">The vote to Leave poses risks: to the UK economy which will also face a period of political instability with PM Cameron to step down by October and pro-EU Scotland pushing for another independence referendum; to Eurozone stability over fears that some Eurozone countries may seek to follow the UK; and hence to global growth.</div>
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<div class="column">It also threatens to add momentum to a move away from economic rationalist policies in favour of populism and a reversal of globalisation which would be a negative for long term global growth.</div>
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<br>Reflecting the worries about the impact on the UK and more significantly Europe financial markets reacted sharply in “risk off” fashion on Friday with the British pound (-8.1 percent), British shares (-3.1 percent), the Euro (-2.4 percent) and Eurozone shares (-8.6 percent) down sharply and this seeing global share markets down generally along with the Australian dollar. Safe haven assets such as bonds, the $US, Yen and gold have all benefitted.</div>
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<div class="column">This could have further to go in the short term until some of the dust settles. A concern is that a rising $US in response to safe haven demand will weigh on the Renminbi (sparking new fears of capital outflows from China), commodity prices and emerging countries taking us back to the global growth fears we saw earlier this year.</div>
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<br>However, it’s worth putting all of this in perspective. First the moves in some markets seen on Friday were exaggerated because the moves that occurred during the first four days of the last week when markets thought Remain would win had to be reversed. So, for example, while Eurozone shares fell 8.6 percent on Friday they only fell 2.6 percent over the last week.</div>
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<div class="column">Over the week as a whole US shares lost 1.6 percent, Japanese shares lost 4.2 percent, Chinese shares fell 1.1 percent and Australian shares fell 1 percent. Bad but not monumental. Believe it or not the British share market actually rose 2 percent over the last week. While the British pound fell 8.1 percent on Friday it only fell 4.7 percent over the week as a whole and the $A actually rose 1 percent last week. It was similar with bonds and oil – big moves on Friday but only modest moves over the week</div>
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<br>Second, Britain has only started down a process to exit and has a long way to go yet. It will first need a new PM then later this year formally notify its intent to exit which will then kick off a negotiation process that will then take up to two years to complete. This will determine the ultimate impact on the UK economy – either it will retain free trade access to the EU but have to continue to allow the free movement of people, agree to EU rules and regulations and contribute to its budget or forgo free trade altogether. At this stage its hard to see which way this will go. But the point is that for some time the UK will still be in the EU. </div>
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<br>Third, while the Brexit vote will likely trigger a guessing game as to which Eurozone country will try and follow its lead and ask for a similar referendum it’s doubtful that Eurozone countries will actually seek to leave because the hurdle to leave the Eurozone is higher than Britain leaving the EU as it will mean adopting a new currency, paying higher interest rates, etc. Just think of Greece despite its woes over the last few years consistently deciding to stay in the Eurozone. Countries to watch though are Italy following the recent success in municipal elections of the Eurosceptic Five Star Movement and maybe Spain given the success of Podemos.</div>
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<br>Fourth, the Brexit vote is unlikely to be akin to a Lehman moment because conditions are radically different. Lehman came after a long period of global strength and a credit boom where liabilities and exposures were opaque. That is not the case now and Brexit has been talked about endlessly so is not the surprise Lehman was.</div>
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<br>Finally, central banks have quickly adopted a “whatever is necessary” stance to provide liquidity to markets and support their economies, notably the Bank of England which is already providing £250bn. The ECB is monitoring the situation but its liquidity measures (eg TLTRO) are probably more than enough at present. The more important point is that global monetary policy will remain easier for longer. The Fed certainly will be slowed further in raising rates because it won’t want to put more upwards pressure on the $US which is being boosted by safe haven demand. A G7 Statement decrying excessive currency volatility has arguably given Japan close to a green light to intervene to stop the Yen rising much further. Expect more BoJ easing soon which should help Japanese shares.</div>
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<br>I am not so confident about British assets given the long period of uncertainty the UK will now face both economically and politically. However, the global bout of “risk off” underway is likely to provide a buying opportunity as Europe is likely to hang together, global monetary policy is likely to be even easier than previously thought and the global economy is likely to continue to see modest growth.</div>
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<br>Given that only 2.7 percent of Australian exports go to the UK and that the Leave victory is unlikely to plunge Europe into an immediate recession the main impact on Australia will be on financial markets. This could affect short term confidence and may add to the case for the RBA to cut interest rates again particularly if banks increase their mortgage rates out of cycle due to higher funding costs flowing from an increase in lender caution.</div>
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<div class="column">That said we expect the RBA to cut rates again anyway and a falling $A will continue to provide a shock absorber for the Australian economy. Overall, Brexit barely changes the risk of recession in Australia which remains low.</div>
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<br>The key for investors is to either look through the short term noise caused by the Brexit decision or look for investment opportunities that it throws up as investment markets become oversold.</div>
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<br>Just finally on Europe, the last week saw the German constitutional court approve the validity of the ECB's Outright Monetary Transaction (OMT) program, which partly underpins Draghi's 2012 commitment to do "whatever it takes" to preserve the Euro. This is a big relief because its rejection would have put a cloud over the ECB’s ability to respond to any turmoil in peripheral bond markets that may flow from the Brexit vote.</div>
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<br>Now on to other things!</div>
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<br>In Australia, the big event in the week ahead will be the Federal election (Saturday). Each side of politics is offering very different visions for the size of government:</div>
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<div class="column">Labor is focussed on spending more on health and education and in the process allowing the size of the public sector to increase, funded by tax increases on higher income earners (retention of the budget deficit levy and cutbacks in access to negative gearing, the capital gains tax discount and superannuation). The ALP would also undertake a royal commission into banking and intervention in the economy is likely to be higher than under a Coalition government.<br><br>By contrast the Coalition is focussed more on containing spending, and encouraging economic growth via company tax cuts and mild reforms. Despite the Coalition’s tilt to “fairness” with its super reforms it’s committed to keeping taxes down. It does plan to reinstate the Australian Building &amp; Construction Commission but even with the double dissolution election it’s unclear whether it will get enough votes to do this.</div>
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<br>At this stage the polls suggest the Australian election is too close to call. But it’s a big ask to see the ALP become the first opposition in 85 years to regain government after just one term as it will need to win 19 seats. As such betting agencies have the Coalition as favourite. However, the big issue may be what happens in the Senate with there being a good chance that the Greens and minority “parties” control the balance of power again acting as a huge constraint on the government, which would mean another de facto minority government, ie more of the same. Which in turn mean poor prospects for getting government spending under control over the next three years and for implementing serious productivity enhancing economic reforms.</div>
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<br>Over the 7 weeks since the election was called the Australian share market has fallen 3.1 percent. The next table shows that 8 out of 12 elections since 1983 saw shares up 3 months later with an average gain of 4.8 percent. This may partly reflect relief at getting the election out of the way.</div>
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<div class="column"><strong>Major global economic events and implications</strong></div>
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<br>Fed Chair Janet Yellen’s congressional testimony didn’t really add much. The key is that the Fed is “proceeding cautiously” to give it time to assess whether the US economy and inflation is on track with its expectations and given global uncertainties. Uncertainty and market turmoil flowing from the Brexit outcome is likely to further delay the Fed in terms of raising rates again.</div>
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<br>US economic data was mostly good. While durable goods orders were weak, the June manufacturing PMI rose, home prices rose, home sales were strong, jobless claims fell sharply and home prices continue to rise. And the US’s top 33 banks passed a Fed stress test indicating that they have enough capital to withstand a severe economic shock (involving unemployment doubling to 10 percent.) In other words they are in good shape to withstand any shock flowing from Brexit.</div>
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<br>The Eurozone composite business conditions PMI fell slightly in June with a decline in services (on Brexit fears?) offsetting a gain in manufacturing. It remains at a level consistent with moderate growth though.</div>
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<br>Japan’s manufacturing conditions PMI rose just 0.1pt to a still weak 47.8 in June indicating that growth in June quarter is still struggling.</div>
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<br>A couple of Chinese business conditions surveys moved in opposite directions for June with one up solidly and a small business PMI weakening. So bit of a wash there.</div>
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<br><strong>Australian economic events and implications</strong>
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<br>In Australia, the minutes from the last RBA Board meeting added little that was new with the RBA neutral and on the sidelines for now. However, our view remains that lower inflation and a too high $A on ongoing Fed delays will still see more easing ahead with the next cut likely in August. Meanwhile Australian economic data over the last week was uneventful. March quarter house prices fell slightly according to the ABS but more timely private sector data suggests a renewed pick up since then particularly in Sydney.</div>
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<div class="column">While population growth has slowed from its 2% peak late last decade to 1.4 percent last year it’s still contributing to solid underlying demand for housing. NSW and Victoria are the top states for population growth, and flowing partly from this house price growth. Which in turn partly explains the good state of their budgets. Finally, skilled vacancies continue to see reasonable growth telling us that the labour market remains solid.</div>
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<br><strong>What to watch over the next week?</strong>
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<br>The focus in the week ahead will no doubt see continued reaction to the Brexit referendum, particularly given an EU leaders’ summit on Tuesday and Wednesday.<br>In the US, expect to see a further gain in home prices and a slight rise in consumer confidence (Tuesday), solid growth in personal spending and a slight rise in the core private consumption deflator to 1.7 percent for the year to May, but a slight fall in pending home sales (all Wednesday) and a slight rise in the ISM manufacturing conditions index (Friday) to around 51.5 (Friday).</div>
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<br>In the Eurozone expect bank lending (Monday) and economic confidence readings for June (Wednesday) to remain around levels consistent with continued moderate economic growth. Core inflation data for June (Thursday and unemployment data (both Friday) will also be released. The outcome of the Spanish election on Sunday may also add to short term uncertainties regarding the Eurozone.</div>
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<br>In Japan, expect a slight fall in industrial production (Thursday), a deterioration in the June quarter Tankan survey reflecting the recent earthquake and continued softness in household spending but the jobs market (all Friday) is likely to remain solid helped by the falling workforce. Core inflation (also Friday) is expected to fall to 0.6 percent yoy in May.<br>In Australia, apart from Saturday’s election, expect the trend in new home sales (Wednesday) to remain modestly down, ABS job vacancies for the 3 months to May to rise consistent with monthly vacancy data and continued moderate credit growth (Thursday) and a slight softening in home price momentum in June (Friday) according to CoreLogic. The AIG’s manufacturing conditions PMI (Friday) will also be released.</div>
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<br><strong>Outlook for markets</strong>
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<br>The aftermath of the Brexit vote could see more volatility in shares in the short term. However, beyond near term uncertainties, we still see shares trending higher this year helped by relatively attractive valuations, ultra easy global monetary conditions and continuing moderate global economic growth.</div>
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<br>Lower and lower bond yields point to a soft medium term return potential from them, but it’s hard to get too bearish in a world of fragile growth, spare capacity, low inflation and ongoing shocks like Brexit. That said, the recent bond rally has taken bond yields to ridiculously low levels leaving them at risk of a sharp snapback at some point.</div>
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<div class="column">Commercial property and infrastructure are likely to continue benefitting from the ongoing search for yield by investors.</div>
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<br>Capital city dwelling price gains are expected to slow to around 3 percent over the year ahead, as the heat comes out of Sydney and Melbourne thanks to toughening lending standards and pockets of oversupply. Prices are likely to continue to fall in Perth and Darwin, but price growth may be picking up in Brisbane.</div>
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<br>Cash and bank deposits offer poor returns.</div>
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<br>While the Brexit outcome knocked the $A lower, it’s still higher than it should be and the longer term downtrend looks likely to continue as the interest rate differential in favour of Australia narrows as the RBA continues cutting and the Fed eventually resumes hiking, commodity prices remain in a secular downswing and the $A sees its usual undershoot of fair value. The $A is still likely to fall to around $US0.60 in the years ahead.</div>
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<br>Eurozone shares lost 8.6 percent on Friday night and the US S&amp;P 500 lost 3.6 percent in response to the Brexit vote. However, since the Australian share market largely responded to the Brexit outcome on Friday, ASX 200 futures actually rose 3 points or 0.1 percent indicating a basically flat start to trade for the Australian share market on Monday.</div>
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<div class="column"><em><span><a href="https://www.propertyobserver.com.au/https://plus.google.com/110172465327488162875?rel=author" target="_blank">SHANE OLIVER</a></span> is head of investment strategy and economics and chief economist at <a href="https://www.ampcapital.com.au/home" target="_blank">AMP Capital</a> and is responsible for AMP Capital's diversified investment funds.</em></div>
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