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

Joel Robinson

Garden-led design drives buyer demand at Yarraville Green

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

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

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

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

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

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

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

Elevated amenity anchors daily life at Aeris, Melrose Park

Bubble

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Reserve Bank of Australia research has suggested that house prices would have to continue to rise at the same rate as over the last six decades for property owners to be as well off financially as renters.
Home ownership is more attractive the longer a house is owned, because transactions costs are amortised over a longer period, it concluded.
Assuming real house prices increased at the historical 2.4%, after inflation, buying beats renting when the owner held for more than eight years.
But with the 1.7% rate, after inflation, experienced over just the past 10 years, owning only beat renting over an ownership period longer than 30 years.
“Consistent with conventional wisdom, households expecting to move again in a few years’ time are better off renting, unless they believe they can sell the property for an unusually large capital gain,” the 45 page research paper said.
"We find that if real house prices grow at their historical average pace, then owning a home is about as expensive as renting.
"If prices grow more slowly, as some forecasters predict, the framework used in this paper suggests that the average home buyer would be financially better off renting.
"We decompose house prices into contributions from rents, interest rates and expected capital gains, which may help policy makers in the detection of housing bubbles.
"Recent data do not show signs of a bubble," the RBA researchers Ryan Fox and Peter Tulip suggested.
Given that individual circumstances vary, the paper noted that no-one should base personal investment decisions solely on the estimates. 
The key limitation within the paper, the RBA noted was that it focused on owner-occupied purchases, as investors in housing may be better off because of tax reasons.
The RBA also noted non-financial benefits such as security of tenure, pride of ownership and freedom to renovate.
Real house prices have increased at an average annual rate of slightly less than 21⁄2 per cent since 1955.
"If this rate of appreciation is expected to continue then our estimates suggest that houses are fairly valued.
"Forecasting house price growth is subject to considerable uncertainty.
"That said, many observers have suggested that future house price growth is likely to be somewhat less than this historic average.
"In that case, at current prices, rents, interest rates and so on, the average household is probably financially better off renting than buying."
It noted overfall prices were overvalued in the early 2000s, becoming undervalued in the second half of the decade, then switching back to overvalued following the global financial crisis. 
The discussion paper series is intended to make the results of the current economic research within the Reserve Bank available to other economists. Its aim is to present preliminary results of research so as to encourage discussion and comment. 
The views expressed are those of the authors and not necessarily those of the Reserve Bank. 
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jchancellor-FAypfDUnLy

No property bubble, but RBA pinpoints the possible future wisdom in renting

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If Sydney’s growth continued at the high levels being seen before, then it could have been the beginning of bubble conditions and price drops, according to Residex’s John Edwards.
Discussing new research from Onthehouse that noted residential capital growth rates for May were at lower levels that expected, Edwards expressed his relief.
“With any luck, the statistics will continue on this new trend of lower rates of growth over the next few months. Housing markets, particularly Sydney, were moving to a “boom” like performance,” said Edwards.
“This was dangerous and could have led to a “bubble” and a severe correction if it continued. The slowing of the market at this point in time suggests that we are going to avoid this outcome. Having said this, the Sydney market is still overvalued and in reality too expensive,” he said.
In many areas across Australia, <a href="/news/brisbane-catching-up-but-overvalued-sydney-still-strongest-of-the-capital-cities-onthehouses-john-edwards">houses and units experienced negative growth rates for the month</a> – although overall national house growth was recorded at 0.36% in May. This compares to 1.71% in the last quarter. Units dropped nationally by 0.23%, compared to 1.17% growth over the quarter.
In Sydney, house growth was subdued at 0.24%, but remains 17.42% up over the last 12 months. House values in Melbourne dropped 0.03%, although still clocked in 9.45% growth over 12 months.
In fact, over the month, Country Western Australia recorded the highest house price growth rate with a 2.38% result. Perth, however, had the biggest house price decline, with a 1.9% fall.
In the Northern Territory, units grew the most by 1.53%, with unit values falling the most in Country Tasmania, by 2.73%.
These figures have Edwards a little more comfortable that growth rates will be subdued in the future.
“The data from May is not sufficient on its own to confirm that this lower rate of growth is about to be a new feature, but my best guess is that this will in fact be the case,” he said.
He also notes the Sydney unit market is likely passed its peak, with 2.81% growth for the quarter ending May.
House and land may not be quite at this point.
However, it is not as clear that the house and land market has arrived at the same position. 
“The Sydney house and land assets are more often traded via the auction market and hence clearance rates are potentially a lead indicator for this sector. In recent weeks, auction clearance rates in Sydney have been softer – our calculations indicate that the Sydney clearance rate was 68% for the week ending 14 June. This figure suggests a market that is now slowing.”
Turn the page for the full details of house and unit price movements across Australia.
<hr class="system-pagebreak">
<img src="/images/2014/06/19/residex-june-19-one.jpg" alt="">
Source: Onthehouse.com.au
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jduke-EHk3XBmHkn

Sydney market overvalued, with “bubble” potential: John Edwards

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GUEST OBSERVATION
Australia’s house prices are grossly overinflated – if you believe <a href="/expert-insights/buying/imfs-min-zhu-are-we-watching-the-same-movie-again-with-house-price-rises-preceding-a-crisis">the International Monetary Fund’s recent analysis</a>.
It says radical <a href="https://www.imf.org/external/np/speeches/2014/060514.htm" target="_blank">policies</a> are required to deflate this emerging housing bubble, such as a stamp duty on house purchases by foreign residents and government imposed controls on bank lending for housing.
The IMF’s analysis of global house prices – especially with respect to countries like Australia - is misleading. It has focused on two measures of housing affordability: the ratio of house prices to household incomes and the ratio of house prices to rents. On both measures Australia’s house prices are one of the highest in the developed world – higher than the US and almost all of Europe.
In Australia the house price to income ratio is 30% above its historical average, behind only Canada and Belgium among the 22 advanced countries chosen by the IMF. Similarly, the current growth in house prices of 7% in Australia is the 7th highest among the 22 chosen countries.
But the IMF has ignored the <a href="https://www.ahuri.edu.au/themes/housing_affordability" target="_blank">preferred measure</a> of housing affordability, at least in Australia, which is the proportion of income spent on housing costs. For home buyers (not renters) this is best measured by repayments on hew housing loans as a percentage of household disposable income. This measure is now around the average of the last 30 years for Australia at a little over 20%, and falling due to low and stable interest rates.
The typical standard variable housing rate has been at 5.95% since August 2013, which is the lowest rate on record except for a brief period at the depths of the global financial crisis (GFC) in 2009.
Also households are not piling up debt to buy houses like they were before the GFC. Household debt has been flat as a proportion of income since 2007. And household saving is at the highest level for 25 years.
What’s wrong with this picture?
This is not a picture of unsustainable house price growth in Australia. The same generally applies globally given that interest rates are typically even lower than they are in Australia.
It is true that house prices are going up globally, having slumped after the GFC. But even on the IMF’s figures global house prices are still 5% to 10% below their peak in 2007 – and even lower relative to other prices which have gone up over that time.
The IMF is wasting its time asking central banks to worry about house price growth. Central banks in the US, Europe and now Japan are deliberately pumping new money into the economy, and have cut their official interest rates to virtually zero in the hope of stimulating spending and jobs growth in the face of anaemic economic growth. Australia’s Reserve Bank has not had to resort to this, but for others, cheap money and plenty of it is the only policy they have left, given that government debt has reached unsafe levels in most countries preventing them from spending their way to stronger growth. Average government debt in OECD countries is now 110% of national economic output of goods and services.
However, as the famous analogy goes, cheap money is like pushing on a string. It won’t make households spend or businesses invest if they don’t have confidence in their economic prospects. Instead the money goes into assets like housing and the stock market, pumping up those asset prices. Central banks are relaxed about this. Indeed it is deliberate in the hope that rising wealth (on paper at least) will encourage consumption and investment spending. The risk of a housing or stock market bubble is seen as the lesser of two evils – the price that must be paid to try to stimulate spending on goods and services and to create jobs.
Foreign investors are not to blame
One of the IMF’s suggestions – a stamp duty on foreign purchases of investment properties – may have populist appeal to Australians who are worried about Chinese buyers inflating house prices here. It may appeal to the Australian government for this reason as well as being a revenue raising measure – and it is something they could do independently of any Reserve Bank action. But such a policy has dubious merit on balance.
Foreign investment, whether it is in domestic real estate or manufacturing or mining, tends to increase national wealth. If a foreign resident is willing to pay an Australian owner more for their asset than any Australian resident, why shouldn’t the owner sell? The owner’s, and Australia’s, wealth rises. The Australian dollar also rises which transfers income to all Australians since they can now buy goods and travel overseas more cheaply.
Of course not everybody wins. Potential buyers of Australian assets – in this case houses – find that they are more expensive than they otherwise would be. In simple dollar terms, the gains to the winners outweigh the losses to the losers – so in principle the losers can be compensated through the tax and subsidy system.
In short, Australia doesn’t have a house price bubble. Nor probably does the rest of the world at the present time. However even if it did, central banks would not likely do anything about it until their economies start to grow more strongly.
Ross Guest is professor of economics and national senior teaching fellow at Griffith University.
This article was originally published on <a href="https://theconversation.com">The Conversation</a>.
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rguest-QX7SdCCSpj

Memo to the IMF: There is no housing bubble

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Ian Macfarlane, the governor of the Reserve Bank of Australia from 1996 to 2006, doesn’t think there's an Australian housing bubble.
"We do have an affordability problem, it makes it tough for young people to acquire a house in a desirable area.
"This is characteristic of every major city in the world that has desirable job opportunities. London, Paris, Berlin, New York, Hong Kong, Singapore," he told the recent Morningstar Investment Conference where he was asked his views on a potential residential property bubble in Australia.
"I think we faced a risk in 2003, not 2014. In 2003, we had lending for housing and prices rising at 20%, half of it speculative lending, negatively geared. 
"There were seven prime time television programmes on how to get rich in property.  Since then, on average, house prices have risen at the same rate as household income.
"For that reason, I don’t think we have a bubble," he said as reported by the <a href="https://cuffelinks.com.au" target="_blank">cufflinks </a>website.    He said the affordability problem was partly due to negative gearing making it tough for young people to acquire a house in a desirable area.
"Some of our policies make that worse, such as the extreme leniency we show towards negative gearing, but I don't think there is a bubble." 
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No Australian housing bubble, but negative gearing-induced affordability issues: Former RBA governor Ian Macfarlane

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So what do property bubbles and the Loch Ness Monster have in common you might ask?
Just like Nessie they are rarely sighted (if at all), and even then they are just suggested as possibly looking like one. In Australia we have had just the occasional sighting which generally fails the credibility test when the facts are more closely examined.
The truth is that very few people in Australia have actually ever seen a property bubble given most can’t even define what exactly one is or does. I was sitting down this week with my business colleague Steve Patrick and had a deep debate about what actually a property bubble is? Given that we have both been selling real estate for around 30 years we are more than qualified to offer an explanation.
Have we seen one? Yes – in 1988 and nothing since then has come even close to resembling that property colossus and there is a very strong possibility we may never see one again in Australia. Collectively, it is our opinion that a property bubble is where property prices double over a two-year period. What makes 1988 all the more confronting is that the official cash rate back then was at the all-time high of 17.5%.
We also need to bear in mind that there were a number of events that led to this historic event.
Back on October 19, 1987 stock markets around the world crashed. It started in Hong Kong and spread west to Europe, decimating the United States where the Dow Jones Industrial Average dropped 508 points to 1738.74 which was (22.61%). This was later to be known worldwide as Black Monday. Most noticeable was the movement of monies directly into the real estate markets – this was to become the greatest financial disaster Australia had ever experienced given I would argue these combined losses were far greater than those suffered during the global financial crisis (GFC).
For this to happen it is most clear that property prices back then were significantly undervalued (which they aren’t today). In those days everything in Sydney went to public auction and for weeks and months at mid-week auction days it was common to see as many as 250 to 300 properties auctioned on the one day. Yes – they would start at 10am and the hammer was still dropping at 10pm that night. Forget Super Saturday’s that’s about 3,000 auctions each week in Sydney alone and this went on for months.
As it turned out, 1988 was also Australia’s bicentenary which marked 200 years since the arrival of the first fleet of British convict ships at Sydney in 1788. Back then the only bubbles we encountered were those of champagne bottles popping as the nation celebrated – any excuse for a party.
Like most big parties they are usually followed by that traditional hangover, which was in Australia’s case the “recession we had to have”. The major change was the ownership on the certificate of title changing to banks becoming the new owners. Property prices then fell by approximately 30 to 50% depending on the price demographic.
It is interesting to note that over the GFC the largest property losses were at or about the 30% level, although it should also be noted that property prices had been on a steady incline as against a boom that was experienced in the late – 1980s.
Yes we had experienced mini-booms (better known as high transaction levels) in 2000, 2004 and 2007 although nothing compared to what we saw in 1988. So one can’t blame those commentators who believe they have seen a property boom simply because they were not born or can’t remember the mammoth boom of the late 1980’s.
Given where we are today and what we now know, there is a very strong possibility we may never again see a property boom to equal that of the late 1980s as today we don’t see or construe property values as being undervalued.
So for all those who are claiming we are entering a property bubble there are others who believe that there is a much stronger chance of sighting the Loch Ness monster.
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Why property bubbles are like the Loch Ness monster

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Steve Keen has recently noted there was no end of commentary about China's real estate bubble, with an even split between those who sense it may pop at any moment and others who argue it never will.
"The alternative ploy -- that it doesn’t exist -- doesn’t get [the] same airing that it did in the US before the subprime crash," he suggested.
"Instead, the “it’s a bubble, but it won’t burst” case is that the bubble is too important to China’s continued growth to be allowed to burst, and -- unlike the US -- China has the wherewithal to keep it going, at least for a while. 
Keen said he had deliberately refrained from the China discussion, preferring to work from data he trusted.
"Until recently there was no publicly available data on China’s debt levels, which is a key metric for me; fortunately that has been remedied recently by the Bank of International Settlements.
"But I also wanted to see the phenomena first hand before I commented," <a href="https://www.debtdeflation.com/blogs/2014/04/21/a-china-bubble/" target="_blank">he told readers on his Debtwatch website</a>.
"Anecdotal and eyewitness evidence counts for something."
Keen reported with photos that many apartment blocks were uninhabited, and uninhabitable as the concrete shells existed, but nothing had been finished internally -- pipes existed but no taps; electrical wiring but no fittings; and so on.
So he has uploaded photos of a typical apartment in a complex of a dozen or so 30-plus storey buildings in a fourth-tier town in Sichuan. It has been in this state for a year, and the owner of this flat -- who intends on living there ultimately -- is in no hurry. On its own that apartment isn’t so remarkable. But all the flats in the building were in the same state, as were the facilities: to catch a lift, you have to bang on the doors to let the operator know you want to be picked up.
Figure 1: Finished building, empty apartments <img class="field-wysiwyg-media" src="https://1.static.australianindependentbusinessmedia.com.au/sites/default/files/styles/full_width/public/Keen1.png?itok=hrlFsgvP" alt="Graph for The trouble with China's hot property " title="The trouble with China's hot property ">
"This is where the “uh-oh” bells began to chime: there was a clear disconnect between the speed with which this particular development had obviously gone up -- see the brickwork in Figure 2 -- and the snail’s pace at which the entire complex was now being finished," he noted.
Figure 2: A not so finished finish <img class="field-wysiwyg-media" src="https://2.static.australianindependentbusinessmedia.com.au/sites/default/files/styles/full_width/public/Keen2_1.png?itok=69MAOZdJ" alt="Graph for The trouble with China's hot property " title="The trouble with China's hot property ">
"This was a set of about a dozen high-rises, and yet the workforce that was doing the finishing was miniscule -- I think I captured about 20% of it in Figure 3."
Figure 3: Industrious… not! <img class="field-wysiwyg-media" src="https://1.static.australianindependentbusinessmedia.com.au/sites/default/files/styles/full_width/public/Keen3_2.png?itok=YbONJfer" alt="Graph for The trouble with China's hot property " title="The trouble with China's hot property ">
He suggested the paradox between the rapid sprouting of buildings and the snail’s pace of their completion in the explanation by an expat Australian as while prices were rising -- since the longer the project took to finish, the more it would be worth. 
"It can be very misleading to apply Western thinking to the Chinese situation, because some things that happen in China have no parallel in the West."
Pointing to one such Chinese idiosyncrasy - the link between property development and industrial expansion that comes from enterprises established by local councils.
"And where do the councils get the money to build these factories?
"From selling land on the periphery of the council’s domain to developers.
"And where do the developers get the money to buy the land?
"From the formal and shadow banking systems.
"All is well as long as the property prices keep rising, but a downturn will mean that the councils can’t continue papering over the cracks."
He concluded that he had more faith in China’s capacity to respond to bursting property and credit bubbles than he had in the US prior to its bubble bursting.
But after the blog was posted on the <a href="https://www.businessspectator.com.au/article/2014/4/21/china/trouble-chinas-hot-property" target="_blank">Chinese Spectator </a>website readers have quickly advised that much of what Keen alluded to was actually long the cultural norm in China.
"As an investor you would not decorate as the culture is the new owner would rip it all out," one comment said. 
Lance Deegan, another reader, also said it was "normal practice in China for apartments to be sold as empty shells."
"It's true there was still a lot of unoccupied apartments but the buildings were certainly not empty - they were filling up.
<div>
<div>"Unfortunately, Steve, I have to say that it sounds like you have succumbed to the same "China is full of empty cities" meme whereas the reality is a bit more nuanced," the comment concluded.</div>
</div>
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Steve Keen's China property bubble postcard snaps

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With Sydney and Melbourne’s rising dwelling prices across much of last year, Australia’s property commentators are again looking at the possibility that our price growth is due to a bubble.
The economic phase is largely characterised by prices that have inflated beyond fundamental property values.
Those who have diagnosed a bubble in our housing market are either realists or fear mongers, depending on who you ask. Property Observer took the issue to a panel of economists and industry analysts, asking:
<ul>
<li>What are the warning signs of a growing bubble in the housing market? 
</li>
<li>Is Australia experiencing a property bubble?</li>
</ul>
Arek Drozda – Independent property market analyst
Firstly, let’s define a bubble in more precise terms since there are many different approaches to describe this phenomenon.  I prefer the simple definition that a bubble is “trade in high volumes at prices that are considerably at variance with intrinsic values”.
By this measure, the Australian residential property market is far from bubble territory. In particular:
<ol>
<li>The last time we experienced really high volumes of residential property transactions was in late 2006 and 2007. Despite reports of the biggest ever number of weekend auctions, the total volume of property transactions in 2014 is still subdued in comparison. </li>
<li>This period (up to March 2008) also coincided with high prices and, most importantly, purchase affordability was at its lowest since early 1990’s.</li>
</ol>
The reason for low affordability was that the cost of buying (comprising of mortgage payments, council and water rates as well as other expenses associated with owning a property) ballooned to proportions far exceeding the pace of rises in personal incomes, making property prices at that time “considerably at variance with intrinsic values”. Simply, housing market was in a bubble then.
<blockquote>
"Australia's residential property market is far from bubble territory" - Arek Drozda
</blockquote>
Despite the recent gains in property prices, purchase affordability in 2014 remains at historically high level (not far from 2009 level when Australia and the world were in the depths of the global financial crisis). 
Therefore, there should not be any concern about the bubble until the volume of property transactions reaches 2007 levels and until there is a significant drop in affordability. Prices and interest rates still have a lot of room to move before this will happen.
<img src="/images/2014/04/22/shane-oliver-profile.jpg" alt="" style="float: right;">
Shane Oliver – Head of investment strategy and chief economist, AMP Capital 
The characteristics of a bubble in the housing market are a combination of overvaluation in terms of the prices relative to fundamentals, excessive credit growth, with signs that investors are piling in using borrowed money and finally self-perpetuated exuberance, where past price gains are feeding current price growth.
We saw that in the major capital cities in Australia going into 2000, 2003 and 2004. We had many years of strong price gain. Housing related credit growth was above 20%, and property spruikers like Henry Kay were out in force. The market had become well and truly overvalued.
Some of those indicators are in place now. Housing prices are overvalued in comparison to wages and rental income, both in comparison to Australia’s history and on an international basis.
But we’re not seeing the debt driven frenzy that we saw ten years ago. Credit growth is in single digits, and we’re not seeing the degree of exuberance we saw a decade ago. Cooking shows still out-rate the home development shows.
In Australia, two cities are in double digits but the other capital cities are seeing growth under 5%.
Sydney was perhaps the most bubbly of all the property markets a decade ago, and it’s the one that had the weakest experience in the last decade, starting with the western suburbs in 2004 and 2005. So there’s a degree of catch up going on in Sydney, which partly reflects a return to confidence.
Average capital city growth is above 10%, but that growth is dominated by Sydney, which is up around 15% or 16%.
There are several things investors need to be worried about with Sydney. Firstly, there are probably better opportunities in the states than in Sydney right now.
Secondly, we have seen a strong recovery triggered by a reduction in interest rates, and they’re likely to be raised again, probably later this year.
<blockquote>
"We’re not seeing the debt driven frenzy that we saw 10 years ago" - Shane Oliver
</blockquote>
Thirdly, rental yields are quite low, so investors getting into property need to accept that they are a lot more dependent on capital growth to get double digit returns, if that’s what they’re expecting.
The term ‘bubble’ conjures up images of some sort of crash, a la some parts of the US, Europe and Japan in recent times, particularly around the GFC. But I don’t think we’re at that point yet. Rates will go up, and capital growth will soften but prices probably won’t crash. The important thing is for investors to have realistic capital growth expectations.
<img src="/images/2014/04/22/soos-profile.jpg" alt="" style="float: right;">
Philip Soos – Property market economist and housing bubble researcher 
The first thing you’ve got to do is define what a bubble is. And with all property analysis it’s such a vacuous term.
I take the definition of economist Hyman Minsky. He defined an asset bubble as when the rent from an asset, or income from an investment, cannot pay down principal, interest and the running expenses. That means they’re making an income loss. The only way for an investor to make a profit is through capital gain.
That occurred in 2001 onwards when investors on aggregate became negatively geared in Australia. But it’s been worthwhile for most, because the capital gains have been enormous, especially in Melbourne.
There are three requirements of a housing bubble. Firstly, an increase in real housing prices. Secondly, an increase in the debt used to purchase houses, the mortgage debt to GDP [gross domestic product] ratio. That’s something that Steve Keen has popularised. And thirdly, net rental income losses.
<blockquote>
"Right now, we’re seeing the largest bubble on record" - Philip Soos
</blockquote>
You can also see a bubble through other indicators such as price to income, price to rent, total land values to GDP, the value of housing stock to GDP. There’s also the Kavanagh-Putland index – the total value of property sales on an annual basis relative to GDP – and the debt to cashflow ratio, which compares housing debt to income flows, or net rental income.
Right now, we’re seeing the largest bubble on record. In the post-war period we had two major bubbles. First was coming out of the war in 1974. That was a small housing bubble. It collapsed and gave us a severe recession.
In the late 80s, there was a massive commercial real estate bubble which gave us the early 90s recession. With those two bubbles, real prices and private debt moved up. The same trends are present today, but the trends are much greater now.
Housing prices began to lift off in 1996 and peaked in real terms in 2010 – we’ve never had such a sustained growth in housing prices.
If and when it the bubble bursts, it’s going to induce a pretty severe economic downturn. We’ve never had anything quite like a bubble of this size. The biggest one we’ve seen prior was in the 1880s, when there was a bubble in Melbourne and Sydney. When it burst in the 1890s, it destroyed the economy and produced a depression worse than the one seen in the 1930s.
Article continues on next page. Please click below.
<hr class="system-pagebreak">
 
<img src="/images/2014/04/22/cashmore-proifle.jpg" alt="" style="float: right;">
Catherine Cashmore - Independent market analyst
People buy property based on expectations of future growth. 
The prices buyers are paying in some areas of Melbourne indicate a sense of exuberance – a bullish expectation that the good times will continue. 
This is not just evident in the residential sector, but the commercial sector also. Time on market has reduced, reserves are being surpassed, auction clearance rates are holding up despite the increased number of listings, lending data is still indicating we're on an upward trajectory – the list goes on.
As is the case in any cycle, the tide is quick to change if purchasers feel growth prospects will not be realised for the period of time they intend to hold the investment – and we do face significant headwinds in the local economy. 
This could be the result of a number of economic forces which usually act in combination – i.e., not one rate change alone but rather a series of projected rate hikes, job insecurity, fluctuations in the stock market, a report indicating a change to housing policy, restrictions on lending, lower wage growth, and so forth.  
<blockquote>
"Inevitably, the tide will turn" - Catherine Cashmore
</blockquote>
Buyers will move in sentiment faster than vendors.  Vendors have typically gone through a period of conditioning prior to placing their dwelling on the market. Therefore they are 'set' on achieving a price. Hence the market often stagnates at the turn of a cycle, and housing data can often miss the true drop in prices should vendors be forced to sell. 
This growth phase has a number of forces behind it.  In Sydney and Melbourne (not so much other states), wealth coming into the country from Asia (by way of migrants and off shore lending) is significant and should not be overlooked. I go into further detail <a href="/expert-insights/investing/we-need-to-direct-foreign-investment-in-real-estate-effectively-not-stop-it">here</a>. Our loan data doesn’t pick this up. 
However, money being poured into infrastructure by the current administration, and the boom in building activity, will also bear an upward influence on land prices, although not necessarily on individual unit prices, which are subject to oversupply in city areas.
Inevitably the tide will turn. However, if you're asking me for a 'crash' prediction, while I have no doubt we will experience one, we are, in my opinion, a way from it yet. 
As for why prices are as high as they are, and the impacts this has on society as those on the fringes are increasingly forced out (as I point out <a href="/expert-insights/buying/the-widening-inequality-and-economic-growth-gap-what-does-this-mean-for-housing">here</a>),  I would advise reading <a href="/expert-insights/investing/looking-at-our-housing-market-through-foreign-eyes">my latest article</a>, which addresses the matter in detail.  
Harley Dale – Chief economist, Housing Industry Association <img src="/images/2014/04/22/harley-dale-profile.jpg" alt="" style="float: right;">
Price increases for residential property are being driven by Sydney and Melbourne. There is evidence that the price recovery is broadening, but overall growth outside our two largest capitals is modest. We don’t have a classic bubble scenario in Australia where a frenzy of speculative activity is rife and widespread.
Price increases in Sydney reflect the response to what was a severely supply-constrained market for nearly a decade, although we wouldn’t want to see current rates of growth sustained for a long period. The rate of growth in Melbourne should ease.
<blockquote>
"We exaggerate price weakness when it occurs, but then lament a reversal to price growth" - Harley Dale
</blockquote>
In general our population is increasing and our economy is growing, albeit not at the trend pace we would prefer.
We will see some broadening of dwelling price growth relative to that which is currently evident.
We don’t want to see the situation get out of control, but it isn’t.
We exaggerate price weakness when it occurs, but then lament a reversal to price growth. Let’s just carefully assess how prices behave over the course of this year and stop sensationalising the issue.
<img src="/images/2014/04/22/wilson-profile.jpg" alt="" style="float: right;">
Andrew Wilson – Senior economist, Australian Property Monitors 
A bubble is certainly a nebulous concept because it is something that’s not really defined – other than the fact it ranks with other nightmare bedtime stories as a frightening concept for investors.
The reality is a lot different from the fear. The perception is that unsustainable growth leads to a collapse in housing prices.
That’s not the experience of the Australian housing market. In Australia, our market has been characterised by strong periods of growth, followed by moderate price corrections.
We’ve rarely seen any period of annualised price decline, and when we do it’s at very minor levels, with decline rarely over 5% in any year, while we see double figure growth at times.
We about the housing market in cycles, like the business market. And of course they’re very closely related in terms of their underlying drivers.
<blockquote>
"As Mr Clinton once said, 'It’s the economy, stupid'.” - Andrew Wilson
</blockquote>
If we look at the bottom of a cycle, in Australia the trough is always higher than the previous trough point. So the underlying trend is always upwards.
If the trough point is lower than the previous one, we should be concerned, because we’d be seeing a more exaggerated bubble shape.
So we actually have moderation in the correction phase - we have more of a “wave” shape rather than a bubble shape, and the thing that drives that is the underlying upward trend in our economic cycles.
We have income growth, with competition for labour putting upward pressure on income, which gives us the capacity to pay for houses, and we’ll continue to have that with a healthy economy.
That pattern will continue unless there is some catastrophic economic event. But we’ve had very strong downturns in economic activity before and we didn’t see that any bubbles burst.  
We have a rigid financial environment, which reflects risk aversion from banks. We don’t have a market for lending like the U.S. had, with a lot of speculative lending, which can give us that bubble shape.
As long as our economy continues to grow and as long as we have a rigid and risk adverse financial system, we won’t see a housing bubble.
We also have an underlying shortage of property in most centres. Those that have the biggest property shortages tend to have the more modest corrections, and don’t have the same peaks and troughs of those markets that have a more abundant supply line.
As Mr Clinton once said, “It’s the economy, stupid”.
And as long as the economy continues to be a strong performer in terms of economic growth, we’ll avoid any steep declines in housing prices.
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