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

Joel Robinson

Garden-led design drives buyer demand at Yarraville Green

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

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

The enormity of delivering a true skyscraper in Australia's new development market is often overlooked.

It has taken the best part of a decade since plans for Chevron One were first unveiled, but the 40-storey tower is now complete, with residents collecting their keys and moving into what has become one of the Gold Coast's most recognisable new landmarks.

Rising 127 metres above Chevron Island, Chevron One stands almost twice as high as any other building on the island. Its scale places it alongside the trio of towers at Jewel, arguably the last truly significant addition to the central Gold Coast skyline when they were completed around six years ago.

While there are several developments underway around a similar height to Chevron One, they are more concentrated within clusters of the highest towers in the city. The fact Chevron One sits within a developing precinct, looking back at the other high-rise developments in Surfers Paradise and Broadbeach, makes it a different proposition altogether. It will certainly become a reference point on the Gold Coast skyline.

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Developer Bensons Property Group is behind the 40-storey tower, which has just shy of 230 apartments, along with an exhaustive list of resident amenity spread across what is the largest development site ever assembled on Chevron Island.

The tower has been the talk of the town for years, says Ray White Projects Gold Coast agent Caitlin Rosenboom, who is selling the remaining apartments.

"People have been watching Chevron One go up for years," Rosenboom says, adding that many prospective buyers have been surprised by the scale of the views once they step inside.

"It's only when they walk through a completed apartment that they truly understand the position of the building," Rosenboom says.

"The views are jaw-dropping. Whether you're looking east over the ocean, across Surfers Paradise, along the river systems or out to the hinterland, every level offers something different but equally impressive."

[smartcode_project:default project_id=6515 project_image_fid=360215]

One of Chevron One's defining advantages is its location on the eastern side of Chevron Island on Stanhill Drive, a position which protects the views forever.

"There's only one row of houses between Chevron One and the water, and the height restrictions along the river means views from Chevron One can never be built out,"&nbsp;Rosenboom says.

While new apartment developments continue to emerge across the Gold Coast, Rosenboom says opportunities to secure a completed apartment with this level of outlook are becoming increasingly rare.

"The size of the site is something that would be incredibly difficult to replicate today," she says.

"That's allowed Chevron One to deliver the sort of amenity, open space and resident facilities that very few projects can offer. There are not many completed apartment buildings on the Gold Coast right now that can compete with the combination of scale, quality and amenity."

[smartcode_project:default project_id=6515 project_image_fid=68839]

There's around 2,000 sqm of amenity solely for the use of residents of Chevron One. Club One features a uniquely shaped swimming pool that mirrors the footprint of the building itself, set within a extensively landscaped gardens. There's also an indoor pool and spa, a fully equipped gym with a Pilates room, a yoga garden, a bookable private dining area and lounge that can host up to 30 people, and a 24-hour concierge service.

As for the buyers, Rosenboom is fielding enquiry from everywhere: Sydneysiders and Melburnians looking at the new and off-the-plan market following the changes in the Federal Budget, as well as those looking to relocate, through to South East Queenslanders seeking either a permanent home or a weekender bolthole.

"The Gold Coast lifestyle continues to resonate with people relocating from the southern states, and when they see the views and the quality of what's been delivered at Chevron One, it becomes very easy for them to understand the appeal," Rosenboom says.

A diverse mix of one, two and three-bedroom apartments remain available, with each offering "something a little different", be it the orientation and views, configuration, or level, to suit a wide variety of buyers.

The remaining apartments are ready to inspect in person, by appointment.

[smartcode_project_cta:default project_id=6515]

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

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

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

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

Elevated amenity anchors daily life at Aeris, Melrose Park

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GUEST OBSERVER
Following the end of the mining boom, Australia’s growth has been rebalancing towards housing and the services sectors. The first part of the rebalancing act involved a significant rise in housing prices and housing construction. 
Housing prices have risen by 30 percent since mid-2012, led by Sydney and Melbourne. Most of the rampup in building has been apartments in the major cities. 
The housing market is now cooling, as a result of tighter prudential settings and the boost to housing supply.
<a href="/images/2016/04/22/Screen%20Shot%202016-04-22%20at%208.43.29%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/22/Screen%20Shot%202016-04-22%20at%208.43.29%20AM.png" alt=""> 
Although the housing upswing has been a necessary part of the rebalancing act, it also drove a rise in household debt. The household debt-to-income ratio has risen from 167 percent in 2011 to 186 percent in 2015. Australian household debt levels are among the highest in the world. However, high household debt is not, in itself, a problem, as long as the debt is held by households that can service it. In Australia, the distribution is fairly favourable, with high income earners holding most of the debt.
Institutional features also matter. In Australia’s case, all mortgages are full recourse, significantly reducing the incentive to default. Australia does not have sub-prime mortgages. Australian households also use their mortgage to save, given the tax benefits available for doing so. This has meant that the average mortgage is currently more than 2.5 years pre-paid, leaving households with a significant equity buffer to draw down, if needed. The prudential regulator has also been tightening lending standards over the past 18 months, particularly for investors, reducing the risks involved with the new lending. Loan-to-valuation ratios on new loans have fallen.
We expect housing price growth to remain subdued in coming quarters. We see some risk that apartment prices could fall, given signs of over-supply of apartments, particularly in Melbourne and Brisbane. However, we view these apartment markets as somewhat segmented from the detached housing market. Significant foreign investment in new apartments also limits domestic financial system exposure.
Overall, we see mortgage debt as generally well distributed to households that can  afford to continue to service it and see the financial stability risks as moderate.
Australia’s housing market is cooling 
National housing prices have been broadly steady over the past six months, following strong growth over recent years (Chart 1). 
The slowdown has been most vivid in Sydney and Melbourne, where housing prices have been flat since October, following annual average growth of 10 percent and 6 percent over the previous four years (Chart 2). Housing price growth has been much more modest in the rest of the country at around 3 percent a year over the same period.
Apartment prices have generally risen by less than detached housing prices in recent years, and are slowing down by more than detached housing prices in some of the major markets.
The slowdown reflects a range of factors, including tighter prudential settings, particularly for investors, and rising housing supply. We expect these factors to continue to constrain housing price growth in coming quarters and forecast that national housing price growth will run at low single-digit rates this year and into 2017, following growth of around 10% in 2015 (see Downunder Digest: Australia’s housing market cools, 11 December 2015).
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<img src="/images/2016/04/22/Screen%20Shot%202016-04-22%20at%208.45.21%20AM.png" alt="">
Household debt has risen, but it’s the distribution that matters
The housing price boom has led to rising household debt. The household debt-to-income ratio has increased from 167% in 2011 to 186% in 2015, mostly led by a pick-up in lending to investors (Chart 3 and 4). This makes Australian household debt levels amongst the highest in the developed world (Chart 5). Of course, given the rise in housing prices, the household debt-to-asset ratio has been more subdued: it has actually fallen from 24% in 2011 to 22% in 2015.
<a href="/images/2016/04/22/Screen%20Shot%202016-04-22%20at%208.46.38%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/22/Screen%20Shot%202016-04-22%20at%208.46.38%20AM.png" alt="">
High household debt levels can make an economy more vulnerable in the face of a shock.
However, it is unusual for the high debt levels, in themselves, to be the driver of a downturn. The US sub-prime crisis was a rare example of this situation. Importantly though, even in the US, it was not the level of aggregate debt that mattered most, but the distribution of debt. In Australia’s case, most of the debt is held by higher income households. Numbers for 2010 showed that, at that time, around 72% of the household debt was held by the top 40% of income earners (Chart 6). Less than 4% of the debt attributed to the lowest 20% of earners.
Australia’s financial system also has institutional features that help to reduce the risk that household debt could become concerning. For a start, all mortgages are full recourse.
Australia’s tax system also favours paying down mortgages ahead of schedule as interest payments and expenses on owner-occupied properties are not tax-deductible. 
The latest numbers suggest that the average mortgage in Australia is currently over 2.5 years pre-paid, leaving households with a significant buffer in the face of the risk of rising unemployment.
Lending standards were tightened as investor borrowing rose
Despite these factors, the strong rise in lending to housing investors through 2013-15 raised concerns that the new lending could increase the risk to the overall mortgage book. Concerns increased partly because the ramp-up in debt was quite geographically concentrated in New South Wales and, to a lesser degree, Victoria, and because the strong investor interest was helping to fuel double-digit housing price growth in these markets (Chart 7).
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<img src="/images/2016/04/22/Screen%20Shot%202016-04-22%20at%208.48.14%20AM.png" alt="">
As a result of these concerns, the authorities tightened prudential settings. This included: requiring the banks to test new borrowers for a higher mortgage rate than offered; requiring the banks to slow the growth in their lending to investors to below 10% y-o-y; and, requiring the banks to hold more capital (which saw effective mortgage rates rise). Tighter prudential settings have seen a clear pullback in lending to investors (see Chart 7). There has also been a fall in the proportion of lending at loan-to-valuation ratios of over 90% and a decline in ‘interest only’ loans (Chart 8). This should help to reduce the risks associated with recent new lending.
Apartment over-supply presents a risk
To the extent that there are risks, the key focus is on the apartment markets in the major cities. Apartment building has picked up substantially in the major cities (Chart 9). Importantly, our view remains that the national detached housing market is not over-supplied, which means the overall housing market is not yet showing signs of being over-supplied (see Downunder Digest: Australia’s housing supply ramp-up, 9 September 2015). As Chart 9 shows, there has only been a modest rise in construction of detached dwellings in recent years.
<a href="/images/2016/04/22/Screen%20Shot%202016-04-22%20at%208.49.28%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/22/Screen%20Shot%202016-04-22%20at%208.49.28%20AM.png" alt="">
The risk of a potential over-supply of apartments is largest in Melbourne and Brisbane, where apartment building has been at record highs as a share of the existing stock (Chart 10). There is also some risk of over-supply in Perth, where apartment building has been strong.
To some degree, the detached and apartment markets are segmented, given the lack of perfect substitutability. For example, buyers of detached dwellings in the suburbs tend to be quite different from buyers of inner-city apartments. So a possible decline in apartment prices, due to over-supply, would not necessarily translate into a matching fall in detached housing prices.
This is particularly the case, given that there has only been a limited pick-up in detached home building in recent years. The tightening of prudential settings and falls in loan-to-valuation ratios also help protect the financial system from any decline in apartment prices as new borrowers would need to see larger price declines before they fell into negative equity.
Strong foreign investor involvement in the major city apartment markets, particularly from China, may also limit the exposure of the domestic financial system to the impact of any falls in apartment prices in these markets. Government approval numbers show that there has been a strong rise in foreign purchases of new dwellings in Australia over the past year (Chart 11).
<a href="/images/2016/04/22/Screen%20Shot%202016-04-22%20at%208.50.41%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/22/Screen%20Shot%202016-04-22%20at%208.50.41%20AM.png" alt="">
Many of these purchases are off-the-plan apartments, partly because foreigners are restricted to purchasing newly constructed dwellings.
In its recent semi-annual financial stability review, the Reserve Bank of Australia (RBA) noted that ‘the Australian banking system has little direct exposure to Chinese investors’. Foreign buyers may also have different motivations for purchasing, with some looking to invest in property as a store of value, rather than for speculation. This could limit the willingness of foreign investors to divest, even in the event of some capital losses.
Falling apartment prices could also put pressure on developers’ balance sheets, with many of the apartments having been sold ‘off the plan’. Again, the RBA recently noted that its liaison suggested that ‘settlement failures have, to date, remained uncommon and are generally expected to increase significantly only if housing prices fall substantially’.
Related risk in commercial property
Global demand for commercial property assets has also somewhat displaced Australia’s commercial property market. Commercial property prices have risen well ahead of rents in recent years, as global investors ‘search for yield’ pushes Australian yields down to global levels, which are around historical lows. The ramp-up in commercial property prices (and fall in yields) has come despite office vacancy rates that remain elevated, with particularly sharp increases in Brisbane and Perth.
This could have a bearing on the domestic apartment market as there may be some substitutability between office and apartment buildings. A retreat in commercial property prices could put some downward pressure on apartment prices. However, much like the apartment market, foreign investor involvement in the commercial property sector has been significant, which could limit the risks to the domestic financial system.
Mortgage loan arrears are still falling
Finally, it is worth noting that mortgage loan arrears have continued to fall since their peak in 2011 and are at very low levels (Chart 12). What is most interesting is that arrears continued to decline despite the rise in the unemployment rate over recent years. This is likely to reflect the support from falling interest rates over that period. The recent decline in the unemployment rate should help to support loan servicing and potentially limit concerns about household debt levels.
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<img src="/images/2016/04/22/Screen%20Shot%202016-04-22%20at%208.51.42%20AM.png" alt="">
Paul Bloxham is chief economist (ANZ) for HSBC . Daniel Smith is economist. They can be contacted <a href="https://www.about.hsbc.com.au/hsbc-in-australia/management-team" target="_blank">here</a>.
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jchancellor-FAypfDUnLy

Australia’s rising household debt and should we worry? HSBC's Paul Bloxham

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It didn’t take long for some property commentators to start declaring that the Sydney market was crashing when last week clearance rates came in at 65.1%.
The fools have been released from the asylum when you closely scrutinise this data where Sydney consists of approximately 700 suburbs, so are they all crashing? I looked up Mosman’s clearance rate for last week and it came in at a respectable 87.5% which is hardly crashing as some would have you believe. Don’t get me wrong it is clear that the Sydney real estate market is correcting rather than crashing – this is not a bad thing either.
The problem for some is that intellectually they can’t differentiate between the strong investment market over the owner occupier market, with the investment market cooling at a much more rapid pace due to lending restrictions and consumer sentiment adjustments – which are long overdue.
Many consumers who are chasing investment properties should be quite concerned about what’s around the corner and I’m not referring to banks increasing their respective lending rates. The Reserve Bank of Australia (RBA) can stand aside for the moment because on Melbourne Cup day should it decide to lower the cash rate the major banks won’t be following suit with Westpac, CBA, NAB and ANZ hiking their rates just in the last week. As soon as one moves inevitably the others will all follow although it would be highly unlikely that Westpac will be the next to increase rates.
All eyes should now be on the Australian Taxation Office (ATO) who have now taken over the responsibility of being Australia’s property watchdog. In 39 days the amnesty period for illegal property acquisitions expires and then we will start to see how many have deliberately broken the laws by purchasing Australian real estate – my tip is this will be huge where we can expect 2016 to be the year of the Divestment Order.
This may surprise you that there is a much larger property investigation that will have a significant impact on Australia’s property industry. That being Student Visa Holders who are allowed to purchase a property whilst completing their tertiary studies on the proviso that when they have completed their degrees the subject property must then be sold. The only problem is that Australia’s Foreign Investment Review Board (FIRB) who are entrusted to monitor such acquisitions have never actually followed through so we now have no idea how many thousands of properties this includes.
To make matters worse on 18 December 2008, the Rudd Government changed the policy where Student Visa Holder residents in Australia are no longer subject to a $300,000 limit on the value of an established dwelling as their residence. This then saw some students acquiring multi – million dollar residences. Also temporary residents were not required to notify FIRB of any intended acquisitions for established dwellings that were to be their principal place of residence.
Again we are talking about thousands and thousands of transactions where many will now end up with Divestment Orders.
The RBA this week declared in its biannual Financial Stability Review that “Recent investigations by regulators have revealed that standards were somewhat weaker than had originally been thought.” In that case any significant increase in property volumes onto the market would see prices coming down as these are established properties, so unlike off–the–plan properties where 100% can be sold offshore to non-Australian residents.
We are now seeing the housing price growth at its slowest pace since 2012 – which explains why the ATO have a duty of care when they start issuing Divestment Orders. We can also expect to see many households fixing interest rates on their respective mortgages.
A positive sign for those renting, when last Friday the Australian Bureau of Statistics finally got around to updating Australia’s housing occupancy data (the last release was in 2013), the proportion of those renting has edged up to 31.4% with 63.4% of Australians renting being under 35. To further identify just how big the investment market for real estate in Australia is, 1.5 million households now own investment properties on top of their principal place of residence.
Whilst the finger is clearly pointed at negative gearing (I will address that next week) when it was introduced in the late 1990’s, approximately 40% of houses were owned outright with only 28% renting.
The issues are clear in that we have problems with policy making, and that requires urgent attention although this has not been helped with actual mortgage interest rates falling from 7.1% to 4.7% over the past five years.
Property is all about supply vs demand – supply is what we need to be paying closer attention to, so watch the ATO with great interest. Who would have ever thought the ATO would play a central position with Australia’s property markets.
<h5>MOSMAN – 2088</h5>
• Number of houses on the market this time last year – 104 • Number of houses on the market last week – 61
• Number of houses on the market this week – 64
• Number of apartments on the market this time last year – 65
• Number of apartments on the market last week – 59
• Number of apartments on the market this week – 60
<h5>CREMORNE – 2090</h5>
• Number of houses on the market this time last year – 19
• Number of houses on the market last week – 9
• Number of houses on the market this week – 10
• Number of apartments on the market this time last year – 32
• Number of apartments on the market last week – 23
• Number of apartments on the market this week – 22
<h5>NEUTRAL BAY – 2089</h5>
• Number of houses on the market this time last year – 7
• Number of houses on the market last week – 13
•Number of houses on the market this week – 10
• Number of apartments on the market this time last year– 51
• Number of apartments on the market last week – 32
*Number of apartments on the market this week – 33
 
ROBERT SIMEON is a director of <a href="https://www.rwm.com.au/" target="_blank" title="RWM" rel="nofollow">Richardson Wrench Mosman and Neutral Bay</a> and has been selling residential real estate in Sydney since 1985.  He has also been writing real estate blog <a href="https://www.rwm.com.au/news/" target="_blank" title="Virtual Realty News" rel="nofollow">Virtual Realty News</a> since 2000. 
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Concerns about upcoming Divestment Orders: Robert Simeon

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The property markets in Sydney and Melbourne have gone too far in being overvalued, AMP Capital Investors' chief economist Shane Oliver said at the Asia-Pacific Banking &amp; Finance's breakfast in Sydney this week.
The markets were overvalued despite higher property prices being driven by "fundamentals."
"Interest rates are at record lows and [are] lower than the 1950s - before Marcia Brady was born. The market has gone too far, is overvalued and there is a high degree of euphoric buying," he said.
Sydney property prices have risen close to 20% in the past 12 months and Melbourne, 12%. 
Dr Oliver said the bubble characteristic of  'fear of missing out' had set in and buyers, particularly in Sydney, had become irrational," he said.
Another bubble characteristic of flipping – speculative quick buying and re-selling of properties - wasn't as evident he said, as "it's quite hard to flip in Australia given high selling costs."
While the Australian "property bubble" will not burst, Dr Oliver said the frenzy must slow.
Dr Oliver dismissed the idea that foreign buyers were responsible for driving property prices up.
"They're just the sideshow, just as self-managed super funds and negative gearing are. They are contributors but the greater problem is the lack of supply of housing."
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Shane Oliver sees bubble FOMO - fear of missing out - signs in irrational overpaying 

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ANZ deputy chief executive Graham Hodges told a federal parliamentary inquiry into home ownership last week ANZ did not see any housing bubble.
The rapid rise in house prices in Sydney in the past couple of years had followed a long period of flat prices from the 2000s to around late 2010, he noted.
"I think these price movements do tend to go a little bit in waves, but clearly it's an expensive city to buy a house in," he told the inquiry on Friday.
"It certainly does affect affordability, but we wouldn't say it's necessarily a bubble."
The ANZ submission said the housing sector continued to see considerable activity and new investment, and was performing more strongly than much of the rest of the Australian economy.
"Housing price rises, especially in Sydney and Melbourne where foreign investment in residential real estate is greatest, are attributable to a combination of factors: underlying demand for housing, positive market sentiment, and the construction industry responding to these conditions.
"Outside Sydney and Melbourne, housing sales, prices and construction are more subdued.
"The housing market in these regions reflects the flat economic conditions and does not benefit from strong investor demand."
It advised in the absence of an unexpected sharp economic downturn, ANZ remained optimistic about the housing market outlook.
"Supply continues to be tight relative to demand and an extended period of low interest rates is expected."
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ANZ doesn't see housing bubble

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The opening statement made by Lindsay David for the House of Representatives Standing Committee on Economics Inquiry into Home Ownership.
To be frank, the evidence suggests that on the back of irrational exuberance, Australia is experiencing what can only be described as a classic debt-financed speculative housing bubble with every metric that evidenced the bubble in the US and Ireland present within our economic system today.
To put things in perspective, between the June quarter 1996 (when real housing prices first began to rise) and the December quarter of 2014, real housing prices rose by approximately 131%.
But over this same period, inflation rose by 60%, our population grew by 30%, real GDP by 79%, real rents by 21% and real household income by 39%. In short, the growth of housing prices has completely outstripped all economic fundamentals except for the expansion of household debt.
Over the same period, total household liabilities boomed from 54% relative to GDP to 118%. And today, Australian households now owe creditors close to $2 trillion and rising. Never has our household sector been as indebted as it is today.
Between 2002 and mid-2015 the mortgage books at the Big 4 banks, NAB, ANZ, CBA and Westpac grew by 388%, 435%, 475% and 554% respectively.
In 2002, just the size of the mortgage books at the Commonwealth Bank and Westpac combined was equivalent to 18% of GDP. Today, its stands at 44% of GDP and continues to rise.
In 2002, the mortgage book of Westpac suggests that for every dollar it had loaned to an owner occupier, it had lent 45 cents to property investors. By April 2015, the proportion rose to 81 cents.
It is truly surprising these patterns of rapid growth have not been of profound concern to the RBA, APRA or Treasury over this thirteen-year period for where data is freely available and states the blatantly obvious.
Australia has spent the better part of fifteen years avoiding the primary reason as to why house prices have boomed above fundamentals such as rents, incomes, inflation and GDP – which happens to be debt-financed speculation.
Our grossly undercapitalized, overleveraged, foreign funds-reliant banking system has artificially stimulated demand for real estate in what is an unaffordable market by consistently lending irrational sums of debt to owner-occupiers and investors. The public is also caught up in a mania of irrational exuberance, which combined explains why housing prices across Australia are as high as they are today. The evidence outlined in our submission suggests this to be the case.
To put it into perspective how expensive land is across Australia, you can find cheaper blocks of land per square meter on the hills of Malibu, California with a view of the Pacific Ocean than you can find in locales like Alice Springs or St Marys. Representatives, this is not normal, and quite frankly, laughable if the matter was not so serious.
For too long, Australian policymakers with authority and regulatory power have ignored all the warning signs pointing to a credit-fuelled housing bubble. Yet, over the years have implemented various policies to stimulate the price of housing and the rapidly growing risk home owners and property investors accumulate in order to keep house prices abnormally high whilst making various interventions that stick out like a sore thumb every time household credit expanded below a perceived comfort level.
LINDSAY DAVID is the author of <a href="https://blog.australiaboomtobust.com/2015/02/lindsay-davids-new-book-print-central-bankers-bubble-now-available/">Australia: Boom to Bust and Print: The Central Bankers Bubble.</a> David holds an MBA from IMD Business School and recently founded <a href="https://www.lfeconomics.com/about">LF Economics</a>.
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A classic debt-financed speculative housing bubble: Lindsay David

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The Nobel Prize for Economics 2002 winner, Professor Vernon Smith says both Sydney and Melbourne are in a property bubble, but queries whether it will burst as badly as the US bubble.
Debt will be the key to the outcome, with Australia's flexible mortgages helping ameliorate the danger, Professor Smith said.
"It is amazing how people get carried away in the bubble," he says. "Then all of a sudden it's over and they are petrified."
He will explain more tonight in his address at the Macquarie Graduate School of Management dinner on global property prices and the Australian property market.
"You have a pretty good bubble in Sydney and Melbourne," he told Robert Harley at the Australian Financial Review on his research so far on the recent price spurt.
"It is hard to believe it is very sustainable."
He says housing bubbles are commonplace in history and most of the time they're not devastating.
He noted in the US in the recent Great Recession, similar to the Depression "it was what I like to call a balance sheet recession with property values falling against fixed long term debt.
"Total equity in all US homes peaked in 2006 at something over $US13 trillion, then hit $5.5 trillion," he noted adding in the 1930s Depression, when housing equity declined by 33 per cent, it took 13 years to recover.
"We came out of the Depression with right lessons … but the rules got eroded." 
Professor Smith acknowledged the tight supply, the rental market resilience and mortgages on only 5.3 million of Australia's 9.5 million homes.
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Noble Prize economics winner says Sydney and Melbourne in property bubble

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It was almost six months ago that a WA mining town home auction shocked the nation.
The ABC reported on a Port Hedland February auction where the fibro cottage was passed in at auction for $360,000 unsold.
Its highest offer reflecting 2006 price levels.
Immediately after the auction came its declared $600,000 asking price, then $590,000 in March.
It had last traded four years ago for $1.3 million, and before that at $870,000 in 2009 and at $350,000 nine years ago in 2006. 
This month it had yet another asking price reduction - down from $470,000 to<a href="https://www.janfordrealestate.com.au/1928630/" target="_blank"> $435,000</a>. 
The three bedroom, one bathroom 1960s house sits in the heart of the Western Australian mining town. It is within the business and commercial district, opposite developments and not far from the boat ramp, Marapikarrinya Park, and fishing wharf.
<img src="/images/2015/06/17/700_headland.jpg" alt="" style="line-height: 1.3em;">
Real estate agent Barry Walsh at Jan Ford Real Estate told the ABC the top February bid was a sign the mining boom's construction phase had tapered off.
Negotiations continue for the sale of the cottage with 145 square space on its 600 square metre block.
It was initially listed for private treaty sale in June 2013 at $1.42 million.
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Port Hedland asking prices fall further

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The ANZ Asian analyst Martin Whetton does not believe the pricking of the sharemarket bubble in China will seriously affect Chinese buying of Australian apartments and dwellings when asked by Business Spectator's Robert Gottliebsen. 
RG: Do you think that the Asian investors and the Chinese investors will keep pumping money in to our apartments?
MW: Well yeah, probably they will. I guess, if you look at the perspective of the size of how much money there is in China and, as I said before, about 20 per cent of the household wealth is tied up in property and equities. If more of the household wealth was tied up in property outside of the country, if they were to say we don’t want to own Chinese property anymore, we don’t want to own Chinese equities, and they had that liquidity themselves, I guess a relatively liquid asset like Australian property would be something that is still appealing to them. It’s still a market that’s going up for them at the moment and with the size of the Chinese population, I think there probably still would be some encouragement for that to happen.
At the same time, I guess you could argue if they ran out of money, which I don’t think is a hugely strong argument at this point, but if they were to run out of money, then there would be a slowing down of the natural number of people coming in from China to buy in the property market. I think the pace of that would slow naturally anyway, not through any discouragement from the state governments, at least on the east coast, who are swimming in the revenues of property turnover, but probably for the moment I would say you’re still going to get some buoyancy from China.
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ANZ's Martin Whetton sees no halt by China in Australian property acquisitions

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Business commentator David Koch has called time of the "incredible run in this country over the last decade."
And he says that doesn't mean that property is a bubble that's about to pop.
"The days of breakneck growth in capital city property prices are coming to an end… as we've seen in Perth, Brisbane and Adelaide residential property prices can fall.
"The booms in Sydney and Melbourne are now running out of steam," he wrote in his Daily Telegraph column.
"While we don't think there is a nationwide property bubble, Sydney and Melbourne are definitely looking overheated," he wrote.
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David Koch says Sydney's home price growth running out of steam 

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News Ltd columnist Alan Kohler says it will take nothing short of a recession to bring Australian house prices down.
Australian house prices were not in a bubble, but instead, in a "new normal" and are not going to come down on their own, the columnist said.
But he noted Deloitte Access Economics’ latest economic outlook where director Chris Richardson said: “The chance of a recession is higher now than it’s been for quite some time. China’s economy is the key.”
Alan Kohler referenced the RBA's recent comments:
“…there are no examples internationally of large falls in nominal housing prices that have occurred other than through significant reduction in capacity to pay (e.g. recession and high unemployment).”
And: “There is no mechanism to get a large and sustained level shift down in prices while a substantial fraction of the population can -- safely and sustainably -- service the obligations involved in paying the higher price.”
Finally: “…there is no example in Australia or internationally where supply expansion on its own generated housing price declines of a similar order of magnitude to the increases in prices seen in some Australian cities in recent years.”
Noting what’s happening in China, Alan Kohler suggested there is no chance of interest rates going up, so serviceability is only likely to improve.
"In fact, rates are more likely to come down further to try to prevent a recession here."
Kohler concluded the one bright spot was the big increase in the supply of apartments, which has resulted in smaller price rises among apartments than house, especially in Melbourne.
"Those who own a house already are winners; those who don’t will have to buy a flat."
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