Repeat buyers are one of the strongest measures of confidence in any apartment development.

At <a href="https://www.apartments.com.au/new-apartments/era-newcastle-west-124-126-bull-street-newcastle-west-nsw-2302">ERA</a> in Newcastle West, some purchasers are returning to <a href="https://www.apartments.com.au/developers/gwh">GWH</a> after living at the developer's One Apartments. Their decision to purchase again was driven by the quality of life they found after moving into their first GWH home.

Keith Wilton had spent years living in a house in East Maitland before deciding it was time for a change. Apartment living had always been on his radar, but he was selective about what he wanted.

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"I had some boxes I wanted to tick," he says.

Keith points to the open-plan design, generous outdoor areas and considered inclusions as key reasons One Apartments worked for him.

“One of those things was a nice indoor open plan area, but also I wanted a nice outdoor open area that I could entertain on in summer or Christmases or birthdays,” he says.

He also found value in the smaller details, from integrated appliances to shared resident spaces including the pool, cinema and rooftop areas.

[smartcode_project:default project_id=135096 project_image_fid=356818]

After comparing several developments, he chose One Apartments because of GWH's longstanding local reputation and his own experience working with the developer on a commercial project more than a decade earlier.

"I knew that they were local, that the quality of the build was going to be up there. I'd looked at other apartment complexes around and close by, and I just knew that here was a better decision location wise."

Today, Keith says the move has completely changed how he experiences Newcastle.

"I enjoy living in this location because it's more of a lifestyle change. That Newcastle city living where you can walk to restaurants and bars and even beaches and parks and even shopping across the road."

[smartcode_project:default project_id=135096 project_image_fid=356828]

Beyond the location, he says it's the sense of community that has surprised him most.

"Everyone loves living here because they chose to live here, but everyone looks out for each other. It's a real great community feel here."

For Aimee and Lyle Goodman, the journey started almost by chance.

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The couple happened to be having coffee in Newcastle when they noticed the site where One Apartments was about to begin construction.

"We were aware GWH was planning a development," Aimee says. "We made one phone call and things moved pretty quickly after that."

As busy business owners, they initially thought apartment living would simply reduce the maintenance that came with larger homes. Instead, it fundamentally changed how they spent time together.

"We actually catch up more as a family now," Aimee says.

"We've had homes with big yards and lots of space, but everyone ended up in different rooms. Here we'll have dinner together, the kids can play, and we spend far more quality time together."

[smartcode_project:default project_id=135096 project_image_fid=356829]

Lyle says their confidence came from GWH's reputation within Newcastle's building industry.

"I know people who've worked across different apartment projects, and whenever GWH came up the feedback was always the same. They're rock solid. They're quality."

That confidence only grew throughout the buying process.

"One of the things that really impressed us with GWH was the whole process, was the communication," Lyle says. "It was consistent, it was regular, there was no problem if we had some weird questions, there was no problems in getting answers."

[smartcode_project:default project_id=135096 project_image_fid=351104]

Aimee says one moment stood out.

"The project actually finished on time. We realised we needed to hurry up and sell our house because everything was happening exactly when they said it would."

The positive experience at One Apartments ultimately gave all three buyers the confidence to purchase again with GWH, this time at ERA.

Their confidence reflects what many buyers are seeking in today's apartment market. Location remains important, but so too does certainty around delivery, quality and long-term liveability.

[smartcode_project:default project_id=135096 project_image_fid=356822]

ERA builds on those foundations with 280 one, two and three-bedroom apartments across two landmark towers in <a href="https://www.apartments.com.au/developments/newcastle-west-nsw-2302">Newcastle West</a>.&nbsp;

Designed by <a href="https://www.apartments.com.au/architects/fk-australia">Fender Katsalidis</a>, the project will include more than 2,000 square metres of resident amenities, including a resort-style pool, gym, sauna, private cinema and rooftop entertaining spaces overlooking the harbour and coastline.&nbsp;

The development is also within walking distance of the Newcastle Interchange, Honeysuckle, Darby Street, the harbour foreshore, restaurants, retail and the city’s beaches, continuing the walkable lifestyle that existing GWH buyers say has transformed how they live.

[smartcode_project:default project_id=135096 project_image_fid=356826]

For Keith, the appeal remains straightforward.

"You feel at home even before you've moved into your home."

For Aimee, the change is measured in time.

“I just felt like I had more time,” she says.

[smartcode_project:default project_id=135096 project_image_fid=351102]

Construction at ERA is now underway, with more than half of the residences already sold and limited two and three-bedroom apartments remaining in the East Tower release. Priced from $980,000 for two-bedroom residences and $1.46 million for three-bedroom residences, buyers can secure an apartment with a 10 per cent deposit, with premium homes offering ocean views from Level 8 and harbour views from Level 10.

ERA is also backed by Resilience Insurance's 10-year Latent Defects Insurance policy, providing protection against structural or waterproofing defects for 10 years after completion. The project is anticipated to be completed in early 2028.

[smartcode_project_cta:default project_id=135096]

Joel Robinson

From ONE to ERA: Why buyers are choosing GWH again in Newcastle West

Virgate Property Group is preparing to commence construction of Verdé, its new apartment development in Melbourne's Arts Precinct at Southbank, following a strong run of sales that has seen more than half of the project's 173 apartments secured.

Verdé has attracted a broad mix of first home buyers, owner-occupiers upgrading from nearby inner-city suburbs and investors, with younger owner-occupier couples aged between 28 and 45 accounting for the strongest enquiry. Many are already living in Southbank, South Melbourne, Albert Park, Port Melbourne, South Yarra and the CBD.

"Verdé is located in one of the most desirable pockets of southern Melbourne," Blair Property Group Director Darren Blair, who is managing sales at Verdé, said.

"It's within walking distance of the Arts Centre, Royal Botanic Gardens, Albert Park Lake, and Southbank's restaurants and retail. It's a great lifestyle location with strong amenity and liveability, which made it a very attractive choice for the project."

[smartcode_project:default project_id=4661 project_image_fid=372549]

Virgate was already familiar with the precinct, having previously delivered the successful Domain House development in neighbouring South Melbourne. That experience gave the developer confidence to acquire the Coventry Street site and continue expanding its presence in Melbourne's inner south.

"We had been keeping an eye on the site and the broader precinct for a few months before deciding to move forward with the acquisition," Virgate said.

The project was ultimately secured in 2020 following feasibility studies, planning assessments and due diligence, with the brief centred on delivering "a high-quality, considered design that feels both refined and fit for purpose."

[smartcode_project:default project_id=4661 project_image_fid=314259]

Designed by <a href="https://www.apartments.com.au/architects/bruce-henderson-architects">Bruce Henderson Architects</a>, Verdé comprises 173 one, two and three-bedroom apartments priced from $599,000. The architecture is distinguished by a faceted glass façade that responds to both the site's outlook and Melbourne's changing light conditions.

According to Bruce Henderson Architects, the coloured glazing gives the building a distinctive identity while also providing privacy and solar shading, with residences oriented to capture views across the bay, city skyline and surrounding parklands.

Inside, <a href="https://www.apartments.com.au/interior-designers/designoffice">DesignOffice</a> has created interiors focused on natural light, efficient planning and enduring materials. Apartments feature engineered oak flooring, natural stone benchtops, floor-to-ceiling glazing and SMEG appliances, while a restrained material palette aims to complement the expansive outlooks rather than compete with them.

[smartcode_project:default project_id=4661 project_image_fid=372550]

Resident amenity has also been designed around everyday functionality rather than occasional use. Facilities include a concierge-serviced lobby, residents' lounge with fireplace, library and co-working space, gym, terrace garden with barbecue facilities, ground-floor café, and package delivery management.

The project's location continues to be one of its strongest drawcards. Positioned on Coventry Street, Verdé sits within walking distance of the National Gallery of Victoria, Arts Centre Melbourne, Royal Botanic Gardens and Albert Park Lake, while Southbank's dining precinct, Sturt Street trams and the new ANZAC Station are all nearby. The surrounding education catchment also includes Melbourne Grammar, Melbourne Girls Grammar, Mac.Robertson Girls' High School and several major university campuses.

The sales team says buyers have responded particularly well to the combination of location, design quality and long-term liveability.

"They're responding really positively to the quality of the design, premium resident amenities and the uninterrupted views. Many also appreciate the location and how connected it is to everything they need."

The ability to secure stamp duty savings before completion has also been a key factor for purchasers, alongside the opportunity to personalise finishes ahead of settlement.

With construction set to commence soon and more than half the apartments already sold, Verdé enters its next phase as one of the Arts Precinct's more established apartment developments, offering remaining buyers an opportunity to secure a residence before construction advances further. Expected completion is scheduled for late 2027.

[smartcode_project_cta:default project_id=4661]

Virgate's Verdé Southbank moves toward construction as sales fly past halfway stage

Downsizer-focused apartment development Kooyongkoot in Hawthorn has been recognised at the 2026 Better Future Melbourne Design Awards, taking home Gold and Silver awards in two categories.

<a href="https://www.apartments.com.au/new-apartments/kooyongkoot-hawthorn-1-kooyongkoot-road-hawthorn-vic-3122">Kooyongkoot</a>, currently being delivered by developer PQD and designed by Cera Stribley, received Gold in the Interior Design – Proposed category and Silver in the Architecture – Proposed category.

The dual recognition reflects the design approach behind the boutique development on prestigious Kooyongkoot Road, where the focus has been on creating homes for downsizers seeking the space, quality and functionality of a detached house within a low-rise apartment building.

Rather than maximising apartment numbers, <a href="https://www.apartments.com.au/developers/pqd">PQD</a> and <a href="https://www.apartments.com.au/architects/cera-stribley-architects">Cera Stribley</a> limited the development to just 18 residences, allowing for larger floorplans, greater privacy, generous landscaping and expansive communal spaces.&nbsp;The majority of the apartments also benefit from corner aspects, allowing for dual sources of natural light.

Now around 70 per cent complete and on track for completion in November 2026, Kooyongkoot will comprise a mix of garden residences, ter​race apartments, sub-penthouses, and is crowned by two half-floor penthouses with direct lift access and private rooftop terraces.

[smartcode_project:default project_id=102717 project_image_fid=355297]

The Silver Award for Architecture recognised the way the building responds to its prominent corner position at the ent​rance to Hawthorn's Scotch Hill precinct, one of Melbourne's most established residential neighbourhoods.

Rather than competing with the grand homes that line Kooyongkoot Road, the architectural approach focused on restraint and longevity, using curved brickwork, generous landscaping and carefully considered proportions to integrate with the existing streetscape.

"The form feels fluid and timeless, as though shaped by the landscape itself – architecture that belongs, rather than competes," said Chris Stribley, Co-Founder and Managing Principal of Cera Stribley.

The judging submission also highlighted practical innovations throughout the building, including lift cores servicing only nine homes each, a central landscaped lightcourt designed to bring daylight and ventilation into the building, and fully enclosed private storage rooms with lighting, power and shelving to better accommodate residents transitioning from larger family homes.

[smartcode_project:default project_id=102717 project_image_fid=355293]

The Gold Award for Interior Design recognised the project's focus on long-term liveability rather than display-home aesthetics.

According to the awards submission, the interiors were designed from the inside out, prioritising how homes would function over decades of daily use through generous proportions, practical storage, durable natural materials and flexible layouts.

The specification includes natural stone throughout, upgraded acoustic glazing, V-ZUG appliances and fully enclosed storage rooms, alongside an amenity offering focused on wellness, entertainment and everyday convenience.&nbsp;

Residents will have access to a gym and yoga studio, a wellness centre featuring traditional and infrared saunas, a cold therapy shower and treatment room, as well as a residents' lounge and golf simulator/cinema room for entertainment.&nbsp;Kooyongkoot has also considered the everyday convenience of its residents by offering a private carwash and pet wash facilities on site as well as dedicated parcel lockers and oversized fully enclosed storage rooms.&nbsp;

[smartcode_project:default project_id=102717 project_image_fid=355303]

The project's attention to detail has already resonated with buyers. Earlier this year, Kooyongkoot recorded one of Boroondara's highest apartment sales when an $8 million penthouse was purchased by a Melbourne CEO downsizing from a nearby family home.

"Every detail feels deliberate, from the overall design down to the smallest touches," the purchaser said.

"The level of quality and refinement is exceptional, but what really sold it was how liveable it felt... It felt like a place where everything had been considered, not just a luxury building."

[smartcode_project:default project_id=102717 project_image_fid=355304]

Sustainability also formed a key part of both award submissions. Kooyongkoot is targeting a minimum 7.5-star NatHERS rating across all residences, supported by passive design principles, high-performance glazing, EV charging infrastructure, water reuse systems and a wellness model focused on lower-energy dry facilities rather than pools and large wet areas.

Located within walking distance of Scotch College, Methodist Ladies' College, Koo​yong Lawn Tennis Club, Aubur​n Village and Camberwell Junction, Kooyongkoot continues to target owner-occupiers looking to remain in Melbourne's inner east without compromising on space or quality. A limited selection of two, three and four-bedroom residences remains available, with prices starting from $1.9 million.

[smartcode_project_cta:default project_id=102717]

Kooyongkoot wins Gold and Silver at Better Future Melbourne Design Awards

New apartment supply has become increasingly constrained across <a href="https://www.apartments.com.au/developments/parramatta-nsw-2150">Parramatta</a> in recent years, with fewer projects progressing through to completion as development conditions have become more challenging.

It makes <a href="https://www.apartments.com.au/developers/novm">NOVM</a>'s 2021-completed <a href="https://www.apartments.com.au/buildings/the-lennox-parramatta-12-phillip-street-parramatta-nsw-2150">The Lennox</a> one of the most recently completed residential towers on the Parramatta River, and among the newest apartment developments in Sydney's second CBD.

With the project largely completed before the sharp escalation in construction costs and inflation following the pandemic, The Lennox is now offering pricing that would be difficult to replicate in a comparable new development in Parramatta today, or across much of Western Sydney.

The majority of the 413 apartments at The Lennox sold before and shortly after completion. A limited release of the remaining apartments has recently been brought to market by capital partner <a href="https://www.apartments.com.au/project-marketer/equitifund-group">Equitifund</a>, with entry-level pricing from $700,000 and two-bedroom apartments available from under $1 million.

Rising above the Parramatta River at 12 Phillip Street, The Lennox comprises one, two, three and four-bedroom apartments, appealing to first home buyers, young professionals, families, downsizers and interstate investors seeking a completed apartment in one of Australia's fastest-growing economic centres.

[smartcode_project:default project_id=5743 project_image_fid=372394]

Rather than positioning Parramatta as an alternative to Sydney's CBD, Equitifund believes the city has reached a point where it stands on its own merits.

"Parramatta is no longer simply an alternative to Sydney CBD, it's becoming a destination in its own right," Equitifund Executive Chairman Greg Huxley said.

"The Lennox captures that evolution with a level of quality and amenity that's difficult to match at its price point."

[smartcode_project:default project_id=5743 project_image_fid=953]

Designed by <a href="https://www.apartments.com.au/architects/marchese-partners">Marchese Partners</a>, the tower responds directly to its riverfront setting through expansive glazing and open-plan layouts that maximise views across the Parramatta River and city skyline. Interiors feature engineered timber flooring, stone benchtops, stainless steel appliances and floor-to-ceiling glazing, while generous balconies extend the living spaces outdoors.

Marchese Partners says the project was conceived to balance high-quality apartment living with practical, long-term functionality, pairing larger, efficient floorplans with amenities more commonly associated with five-star hotels.

That emphasis continues through the resident facilities, which include a 20-metre rooftop swimming pool, fully equipped gym and wellness spaces, full-time concierge, a residents' lounge, function room, private lifts, secure basement parking and rooftop communal areas overlooking the Parramatta River. Ground-floor boardwalk retail and dining further activate the riverfront and integrate the building into the surrounding public realm.

[smartcode_project:default project_id=5743 project_image_fid=925]

Australian housing and finance group Equitifund has secured the remaining apartments, believing there are few completed apartment opportunities in Parramatta that offer the same combination of location, amenity and pricing.

Equitifund National Sales Director Ben Hamblett says buyers are increasingly recognising that premium apartment living no longer needs to come with Sydney CBD pricing.

"The Lennox is where aspirational living becomes attainable," Hamblett said.

"Wake to river and mountain views, step into Sydney's Second CBD, and arrive home to resort-calibre amenities, all without the harbour price tag."

Hamblett says owner-occupiers are also attracted by the convenience of having Westfield Parramatta, Church Street's dining precinct, Parramatta Park, Riverside Theatres, Western Sydney University and major transport connections all within walking distance.

"At The Lennox, lifestyle is not an afterthought, it is the foundation."

[smartcode_project:default project_id=5743 project_image_fid=5374]

The Lennox places residents within walking distance of Parramatta Square, Westfield Parramatta, Church Street Eat Street, Parramatta Station, the ferry wharf, Light Rail, the future Sydney Metro West, Parramatta Park and CommBank Stadium, reinforcing Parramatta's position as one of Australia's most connected metropolitan centres outside Sydney's CBD.

Equitifund says buyers visiting the display suite consistently comment on the quality of the finishes, generous floorplans, river and skyline views, and the walkability of the location. The project has attracted a broad mix of local professionals, upsizers, downsizers, buyers relocating from Sydney's inner suburbs and interstate investors seeking long-term growth opportunities.

That demand aligns with Parramatta's continued evolution as an economic powerhouse. Equitifund Research and Market Insights specialist John Bekiaris says sustained population growth, infrastructure investment and expanding employment opportunities continue to support long-term housing demand across the city.

"Parramatta has evolved from a satellite city into one of Australia's most important economic centres. Population growth, infrastructure investment and employment are all supporting sustained long-term housing demand."

[smartcode_project_cta:default project_id=5743]

The apartment price gap drawing Sydney buyers west

A luxury beachfront apartment at Rainbow Bay has more than doubled in value since it sold off the plan six years ago, setting a new local apartment record in the process.

The three-bedroom apartment in the Flow development on Petrie Street, the first of four new projects locally by Paul Gedoun's S&amp;S Projects, has sold for $7.4 million, after originally selling for $3.27 million when the project launched in 2020.

The seventh-floor apartment, comprising 187 sqm of internal living space and a 54 sqm balcony overlooking Froggies Beach and Snapper Rocks, was purchased by a local family.

The transaction was negotiated by Pezet Matheson director Kerry Pezet and equates to more than $30,000 per sqm.

Pezet said the sale reflected the limited opportunities to buy into the boutique beachfront development.

"The sale highlights the rarity of opportunities within the boutique beachfront development, where residences seldom become available," Pezet said.

"Flow is one of the Gold Coast's most tightly held buildings. Buyers from our database move quickly when residences become available, and achieving an off-market sale at $7.4 million demonstrates the depth of demand for property of this calibre."

<img alt="Flow" data-entity-type="file" data-entity-uuid="c585b206-2130-4eee-a50c-3f27c51a7c70" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-06%20at%208.33.25%E2%80%AFPM.png?VersionId=m3pHRDV62Y3fvN.XQuQHq.52ilTWpRLf" />

Flow was the first of four luxury apartment developments delivered by Paul Gedoun's S&amp;S Projects at Rainbow Bay and was completed in 2023.

Positioned on the beachfront overlooking Snapper Rocks, the residence includes three bedrooms, three bathrooms, a powder room and views stretching north along the coastline towards Surfers Paradise.

Pezet Matheson Residential principal Mitchell Lambert said buyers continued to prioritise quality beachfront apartments in tightly held locations.

"Flow Residences offers a rare combination of elevated beachfront positioning, architectural excellence, comprehensive resident amenity and premium finishes, which is exactly what discerning purchasers are seeking," Lambert said.

"The transaction further reinforces Rainbow Bay's reputation as one of Australia's premier coastal lifestyle destinations, where limited supply and growing demand continue to support strong market performance."

Pezet Matheson originally marketed and sold out Flow off the plan, making the latest transaction a return to one of the project's original buyers.

Paul Gedoun is selling his third project, <a href="https://www.apartments.com.au/new-apartments/radia-rainbow-bay-271-boundary-street-coolangatta-qld-4225">Radia Rainbow Bay</a>, after recently completing, and selling out, <a href="https://www.apartments.com.au/buildings/esprit-217-227-boundary-street-coolangatta-qld-4225">Esprit</a>. He has plans for a <a href="https://www.apartments.com.au/news/qld/first-look-s-s-projects-proposes-88-apartment-wellness-tower-at-coolangattas-boundary-street">fourth building</a>, 88 apartments on <a href="https://www.apartments.com.au/new-apartments/209-213-boundary-street-coolangatta-qld-4225">Boundary Street</a>.

Rainbow Bay apartment doubles in price since off the plan sale during pandemic

Cameron Kusher

<html><body>
The combined capital city housing markers have seen values increase by 7.0% over the first 11 months of 2014. 
Throughout the whole of 2013, capital city home values increased by 9.8% indicating that the rate of home value growth is likely to be lower this year than last.  On an annualised basis, combined capital city home value growth peaked at 11.5% in April of this year and has slowed to 8.5% over the 12 months to November 2014. 
As we enter 2015 it is our expectation that the housing market will see another year of home value growth, but not likely at the same pace as experienced over the 2014 or 2013 calendar years.  Although this is our base-case scenario, there will still be plenty of potential headwinds to watch out for that may impact on the housing market.
<h3>Unemployment</h3>
The national unemployment rate was recorded at 6.3% in November 2014 which is the highest unemployment rate since September 2002.  The Mid Year Economic and Fiscal Update (MYEFO) was released earlier this week by the federal government.  In the document the government revised up its forecast of the unemployment rate to 6.5% at the end of the current and the next financial year.
It isn’t just the high rate of unemployment which remains a concern.  Over the past year, the majority of new employment has been part-time positions which have increased by 2.5% over the year compared to a 0.7% increase in full-time employment.  The data also showed that in November 2014 the underemployment rate had increased to 8.6% which was its highest on record.  This is reflective of the strong growth in part-time employment, many working part-time would probably like to be working more hours or in full-time employment.
With comparatively high rates of unemployment and growing underemployment it has the potential to impact on housing demand.  If employees become concerned about job security they will be less inclined to commit to purchasing a home.  Furthermore, if employees can work as much as they like and subsequently earn as much as they’d like they may also not be able to purchase a home.
<h3>New APRA steps to reinforce sound residential mortgage lending practices</h3>
Last week APRA (the Australian Prudential Regulation Authority) wrote to all Australian authorised deposit-taking institutions (ADIs).  The letter highlighted further steps that will reinforce sound lending practices. 
Although the note didn’t indicate that any macroprudential tools would be formally implemented, the letter noted that APRA will be increasing supervisory surveillance to reinforce sound lending practices.  This is in response to specific prudential concerns which are detailed below:
<ol>
<li>
Risk profile – higher risk lending such as high loan to income and high loan to valuation ratios, interest-only lending to owner occupiers for lengthy periods and long term lending are of specific concern. APRA is concerned about lenders undertaking larger than normal volumes of lending in these areas. 
</li>
<li>
Investor lending – fast or accelerating credit growth in this space can be a key indicator of growing risk. APRA highlighted that annual investor credit growth that was materially above 10% per annum will be an indicator of increased risk. 
</li>
<li>
Serviceability assessments – APRA is of the view that mortgages should have a serviceability buffer of at least 2% above the loan product rate and with a minimum floor assessment rate of 7%</li>
</ol>
Through these guidelines they have advised the ADIs of the lending environment they expect.  Although there have been no blanket macroprudential tools, the letter is pointed and notes that ADIs that do not adhere to these rules will be under review to stricter lending limits. These guidelines are likely to have an impact on the residential housing market. 
Firstly the very strong growth in investor housing demand over the past two years will likely taper to a more moderate pace.  Secondly, some borrowers who are stretching themselves financially to enter the market may find accessing home loans increasingly difficult due to the new serviceability guidelines.
<h3>Household income growth</h3>
While home values have increased by 8.5% over the 12 months to November 2014, real household incomes have increased by just 0.8%. One wonders how long home value growth can continue to outpace household income growth.  
Over the 10 years to September 2014 nominal home values have increased 52.4% compared to real household income growth of 36.4%.  These two figures are not significantly different and real home value growth has actually been lower than growth in household incomes.  This would seemingly suggest that the current surge in home values, which has started to slow, cannot continue all that much longer without income growth.
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<h3>Consumer sentiment</h3>
According to the Westpac and Melbourne Institute’s monthly measure of consumer sentiment, consumers have been more pessimistic than optimistic for 10 consecutive months.  To put that in perspective, consumers haven’t been this consistently gloomy since the depths of the financial crisis in 2008 and early 2009. 
Further highlighting the consumer gloom the data shows that when respondents were asked about the wisest place for savings 40.3% chose a banks, building societies and credit unions.  This was the highest reading since September 2012. 
Over the past 15 years, an average of 27.5% of respondents have chosen this segment, highlighting the heightened sense of consumer anxiety.  The level of consumer anxiety is more confronting when you consider that those with savings in a financial institution are currently earning virtually no interest with the cash rate sitting at 2.5%.
Consumer sentiment is closely correlated with housing demand.  If consumers are feeling less confident about the overall economic conditions, they are going to be much less likely to make high commitment decisions such as taking out a new mortgage.
<h3>Housing finance commitments</h3>
We have already highlighted that APRA is concerned with the heightened level of investment lending and have provided stricter guidelines for Australian ADIs regarding to this segment of the market.  Housing finance data shows that investors are currently the primary driver of housing demand.
In October 2014, there were $11.7 billion in housing finance commitments to owner occupiers for new loans, $5.4 billion to owner occupiers for refinancing purposes and $12.1 billion to investors. 
Year-on-year, owner occupier new loan commitments are 0.8% higher, owner occupier refinances have risen 18.1% and investment loan commitments are 19.8% higher. Owner occupier new loans and investor loans are a much larger driver than refinances. 
With the new APRA guidelines it looks as if lending to the investor cohort will slow in 2015.  It is unlikely this can simply be replaced by lending to owner occupiers for new loans.  In fact, new lending to owner occupiers has been trending lower since it peaked at $12 billion in lending in November 2013.
If lending to investors slows as owner occupier lending is already doing, it seems that there will be less mortgage demand and subsequently less property transactions.  In turn, this is likely to result in lower levels of capital growth across the housing market.
<h3>Dwelling approvals</h3>
Dwelling approvals have lifted significantly throughout the past two years, providing a significant pipeline of new construction. 
Although dwelling approvals have eased over recent months, over the 12 months to October 2014 there were 197,529 dwelling approvals which is hovering around the highest annual number on record.  On a monthly basis dwelling approvals peaked in January 2014 and although they remain high, they have trended lower.
An important feature of dwelling approvals is that the number of multi-unit dwellings being approved is at near record highs.  There is growing demand for inner city units however, a unit development is typically a riskier development proposition than a detached house and ultimately multi-unit dwelling approvals are less likely to proceed into the construction phase.
If growth in home values slows throughout 2015 along with a slowdown in housing transactions, we may see some of the pipeline of approvals, particularly unit approvals, not actually make it to construction. 
In order to commence construction developers typically require a certain level of pre-sales to begin.  If sales slow, achieving a sufficient level of presales may become more difficult and may potentially jeopardise some of the progress of these projects.
<h3>Recommendations for new foreign investment rules</h3>
The House of Representatives Standing Committee on Economics recently released its findings and recommendations following a review of foreign investment. 
The four key findings of the report were:
<ol>
<li>Recognising there is no accurate or timely data that tracks foreign investment in residential real estate, the Committee recommended the establishment of a national register of land title transfers that records the citizenship and residency status of all purchasers of Australian real estate. 
</li>
<li>Improving the inner workings of the Foreign Investment Review Board (FIRB). 
</li>
<li>Bolstering the compliance and enforcement regime of the foreign investment rules. 
</li>
<li>Recommending an application fee of $1500 for each approval application made to FIRB by non-resident foreign investors in order to fund improved administration and monitoring of the foreign investment rules undertaken by FIRB.</li>
</ol>
The report also recommends the following civil penalties for breaches of the foreign investment framework:
<ul>
<li>Financial penalties to be calculated as a percentage of the property value, rather than restricted to $85,000 as is currently the case; and 
</li>
<li>The regime applies to both foreign investors and any third party who knowingly assists a foreign investor to breach the framework.</li>
</ul>
Although these are just recommendations at this stage, one would hope that the committee’s recommendations do get implemented.  More timely, accurate and reliable data about foreign buyers would certainly seem to be valuable and penalties for those who skirt the rules seems appropriate. 
Importantly, it is unlikely that any of these recommendations would act as a disincentive to foreign investment rather they would result in improved transparency about such investment.
This article continues on the next page. Please click below. 
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<h3>Australian dollar</h3>
In Australia we generally like to compare our currency to the US dollar.  After the end of month peak in the exchange rate of $1.08 in February 2012, the exchange rate has now fallen to $0.849 at the end of November.  Importantly, most of the fall has occurred recently, six months earlier the exchange rate was $0.93.
The fall in the trade weighted index (TWI) has not been as large as the fall relative to the US dollar.  The TWI was recorded at 68.2 at the end of November, down from 71.5 six month ago and a peak of 79.2 in February 2012.  Nevertheless the Australian dollar has weakened.
The lower dollar should provide some support for the Australian economy, making our exports more attractive and providing heightened demand for the struggling manufacturing sector.
We suspect that demand from foreign buyers has grown over recent years.  Furthermore, if the Australian dollar continues to depreciate, it is likely that Australian residential property will potentially become even more attractive for overseas buyers as the relative cost improves.
<h3>Interest rates</h3>
Official interest rates were recorded at 2.5% in December 2014, with no meeting of the Reserve Bank’s board in January they will remain at that level until at least February.  The average standard variable mortgage rate is currently 5.95%, discounted variable rates are 5.1% as are three year fixed rates.
The RBA has repeatedly stated that they believe a period of interest rate stability is the most prudent course.  In an interview with the Australian Financial Review last week Glenn Stevens remarked that any change in interest rates would have to help boost confidence while a cut may do the opposite. 
Nevertheless, over recent months there have been a growing number of economists predicting the next movement in rates would be lower as the overall economic performance slows.  The cash rate futures market is now also pricing in a 25 basis point rate cut to interest rates by June next year.
A lower interest rate would seemingly make investment in housing even more attractive as returns on cash savings reduce further.  Of course, if this were to occur it would likely take place in the face of slowing growth in housing demand and limits on just how much Australian ADIs can lend to the investment segment of the market. As the RBA has previously stated, there are limits to what monetary policy can do. 
Given this, a further 25 basis points cut to official interest rates may make little material difference to the residential property market….of course it could also make a substantial difference.
<h3>Conclusion</h3>
At CoreLogic we are of the view that home value growth will continue in 2015, albeit at a more moderate pace than what we have seen in 2014.  As the above analysis shows there are plenty of factors which will impact on the housing market in 2015, not to mention potentially hundreds of other factors which could impact on the direction of the market. 
It will be important to keep track of the broader economic trends and consider how that may impact on your property in 2015.
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The economic factors to watch that may impact the housing market in 2015

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Combined capital city dwelling values fell by -0.3% in November 2014 according to the CoreLogic RP Data Home Value Index. 
Over the month, values increased in four cities and fell across the remaining four.  Values were higher over the month in Sydney, Brisbane, Perth and Hobart and were lower elsewhere.  Over the first 12 months of the year, combined capital city home values have increased by 7.0%.  As a result, it looks as if home value growth in 2014 will be lower than the 9.8% increase in 2013.
Over the three months to November 2014, combined capital city home values rose by 0.8%.  The results over this period show that the growth in the market is quite narrow with only Sydney (3.1%), Brisbane (1.7%) and Perth (0.4%) recording value rises.  Elsewhere, values fell over the three months by -1.6% in Melbourne, -0.5% in Adelaide, -2.5% in Hobart, -2.1% in Darwin and -3.3% in Canberra.
The rate of home value growth over the 12 months to November 2014 has continued to slow.  After the annual rate of home value growth across the combined capitals peaked at 11.5% in April it has slowed to a rate of 8.5% in November.  The 8.5% growth over the year to November is the slowest rate of annual growth since November of last year.  Sydney continues to be the key driver of capital growth with home values up 13.2% over the past year.  Melbourne has been the second strongest performer with values up 8.3% and Brisbane home values are 6.0% higher.  Elsewhere, values have risen by 2.8% in Adelaide, 1.4% in both Perth and Darwin, 5.2% in Hobart and 1.7% in Canberra.  The annual rate of home value growth is now lower than the recent peak across all capital cities other than Hobart.
Houses have recorded a superior rate of value growth compared to units across the combined capital cities over the past year.  Over the 12 months to November, capital city house values are 8.9% higher compared to a 5.9% rise in unit values.  Across each capital city annual value growth for houses has been greater than that for units over the last year.
Combined capital city home values are now 10.8% higher than they were at their previous cyclical peak in October 2014.  Between October 2010 and May 2012, combined capital city home values fell by a total of -7.7%.  From their low point in May 2012, combined capital city home values have increased by 19.6% however, the value increases have been narrowly based. The greatest rises in values over the current growth phase have occurred in Sydney (31.2%), Melbourne (17.6%), Darwin (17.5%) and Perth (15.5%).  Growth across the remaining capital cities has been much more moderate with values rising 10.6% in Brisbane, 7.4% in Adelaide, 5.2% in Hobart and 4.8% in Canberra.  As the data shows, Sydney has been the primary driver of value growth followed by Melbourne, Darwin and Perth albeit their growth has been somewhat lower than Sydney’s.
CoreLogic estimates that over the third quarter of 2014 there were 53,962 capital city houses and 24,124 capital city units sold across the country.  The number of home sales over the most recent three months is -2.8% lower than over the same period in 2013.  House sales are actually 1.0% higher than a year ago while unit sales are -10.3% lower.  Importantly with so many off –the-plan sales taking place final numbers upon settlement of these projects may revise higher.  Within the individual capital cities, sales over the last three months were lower than a year ago in Sydney, Perth and Canberra but still higher elsewhere.
Selling conditions are still quite favourable in the market however, stock levels are starting to rise and there are variations across the cities.  Discounting levels across the combined capital cities sat at 5.5% while the average time on market is at an all-time low of 36 days.  Remember that the stronger markets of Sydney and Melbourne are having a much greater impact on these figures.  The number of new properties listed for sale across the combined capital cities is now 0.4% higher than a year ago.  Total listings are -2.4% lower than they were a year ago however, they are currently at their highest level since the middle of December last year.  With stock on market rising it will be very interesting to see what happens to time on market and discounting levels over the next few months.
Value growth on an annual basis remains much stronger than rental growth however, the more recent weaker capital growth conditions have seen the decline in gross rental yields stall.  Over the past 12 months, combined capital city rental rates have increased by just 1.9%.  House rents have increased by 1.8% and unit rents are 2.3% higher.  Although rental growth is slow, rental rates have risen over the year in all capital cities except Perth, Darwin and Canberra.  With a strong pipeline of dwellings both under construction and due for commencement it seems likely that the rate of rental growth will remain soft for the foreseeable future.  Gross rental yields across the combined capital cities sit at 3.7% for houses and 4.5% for units. At the same time a year ago they were recorded at 4.0% and 4.7% however, yields have been on hold for the past four months for both houses and units.
As always, there is likely to be a continued variance in performances from city to city and region to region. Much of the growth over the past two and a half years has occurred in Sydney and Melbourne and this appears to be continuing with the rise in values only moderate outside of these cities.  Note that the annual rate of value growth in both Sydney and Melbourne has been slowing over recent months.  Subsequent purchasers and investors are the main drivers of the market currently spurred by the low mortgage rate environment. 
From an investor’s perspective the best opportunity to enter the Sydney, Melbourne or Perth markets has likely passed, especially considering the strong value growth over the past year is now moderating and rental yields are low.  The RBA has also flagged that they are concerned with the level of investment lending taking place in both Sydney and Melbourne and APRA has recently announced greater surveillance of mortgage lending, specifically investor and higher risk lending by the banks. 
It will be interesting to see whether investors start to turn their attention away from cities such as Sydney and Melbourne and towards higher yielding markets that are earlier in their value growth phase such as Brisbane and potentially Adelaide where value growth is now becoming more evident and the cost of housing is significantly lower than in Sydney and Melbourne. 
Of course, with APRA announcing that banks need to limit their growth in investment lending to around 10% per annum we would expect this will have a significant impact on investor demand for mortgages over the coming year.  As a result of these changes and slowing home value growth, investors may potentially start looking at other asset classes. 
RP Data anticipates that the rate of capital growth, particularly in Sydney and Melbourne will continue to moderate over the coming year. We believe that home values will continue to increase over the coming year however, the rate of growth will continue to slow and markets such as Perth, Darwin and Canberra look susceptible to value falls over the coming year.
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The best opportunity to enter the Sydney, Melbourne or Perth markets has likely passed: 2015 market outlook

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The Australian Bureau of Statistics (ABS) published housing finance data for October yesterday. 
The data release coincided with the Australian Prudential Regulation Authority (APRA) sending Australian Authorised Deposit-taking Authorities (ADIs) a letter on Tuesday afternoon.  The letter highlighted that APRA was going to increase surveillance on risky lending and have a specific focus in growth in investor lending by ADIs. 
The October housing finance data showed that the proportion of lending to investors had grown to fresh record highs while owner occupier lending is slowing.
The value of housing finance commitments continues to become much more important than the headline number of commitments.  The reason being that the number of commitments only coves owner occupier commitments, excluding investors completely which are the key driver of the current market. 
Furthermore, with APRA now focused on ADIs not growing housing credit to investors too fast, a focus on the value of lending becomes even more important.
<img class="aligncenter size-full wp-image-4104" src="https://blog.corelogic.com.au/wp-content/uploads/2014/12/Chart-12.jpg" alt="Chart 1" width="500" height="180">
The above chart uses raw (not seasonally adjusted) data and uses a 12 month average to smooth the volatility of the data.  The chart shows an ongoing decline in demand from owner occupier first home buyers and more recently a dip in commitments by owner occupiers that already own a home. 
Across the four borrower types listed you can see that investors now account for the greatest proportion of borrowings from ADIs.  With values continuing to rise across capital city markets clearly they are a key driver of this growth.
<img class="aligncenter size-full wp-image-4105" src="https://blog.corelogic.com.au/wp-content/uploads/2014/12/Chart-22.jpg" alt="Chart 2" width="500" height="181">
The second chart shows the monthly value of housing finance commitments across owner occupier new loans (excluding refinances) owner occupier refinances and investment loans. 
Over the month, owner occupier refinance commitments increased by 3.7%, owner occupier new loan commitments fell by -0.1%, while investment commitments rose by 1.0%. 
Year on year, the increases have been recorded at 18.1% for owner occupier refinances, 0.8% for owner occupier new loans and 19.8% for investment loans.  With $5.4 billion in commitments for owner occupier refinance commitments in October, activity in this space continues to trend higher. Investment lending is also trending higher reaching a record high $12.1 billion in October. 
Meanwhile, owner occupier new loan commitments have actually pulled back a little of late.  After monthly commitments sat at a record high $12.0 billion in November 2013, they have pulled back to $11.7 billion in October 2014.
For only the second month on record, the value of investment loans was greater than the value of owner occupier new loans in October 2014.
<img class="aligncenter size-full wp-image-4106" src="https://blog.corelogic.com.au/wp-content/uploads/2014/12/Chart-32.jpg" alt="Chart 3" width="500" height="180">
As a proportion of the value of all housing finance commitments, investors were steady at a record-high 41.4% in October.  Owner occupier new loans accounted for 40.2% (a new all-time low) and owner occupier refinances accounted for 18.5% of lending, its greatest proportion since August 2012. 
If we just look at new lending, excluding refinances, investment lending reached a new all-time high of 50.8% of total lending in October, more than one in every two loans.  The capital city housing market has been rising since hitting a low point in May 2012 and at that time investor housing finance commitments totalled $6.9 billion and 33.9% of all housing finance commitments. 
Clearly there has been a substantial surge in demand from this segment, recorded at $12.1 billion in October 2014 and 41.4% of all borrowings.
<img class="aligncenter size-full wp-image-4107" src="https://blog.corelogic.com.au/wp-content/uploads/2014/12/Chart-42.jpg" alt="Chart 4" width="500" height="181">
The headline result that gets reported on each month is the number of owner occupier loans.  Although it is a very valuable statistic, it should be read with caution because it is missing a significant proportion of the market, those represented by investors. 
As the above chart shows, much like the data on the value of commitments, the number of owner occupier new loan commitments is now trending lower while refinance commitments trend higher at a  moderate pace.  In October, the number of refinance commitments rose 3.6% while new loan commitments fell by -1.4%. 
Year on year, refinances are 7.5% higher while new loan commitments are -4.2% lower.  The number of new loan commitments most recently peaked at 35,568 in November 2013 and has since fallen by -5.5% to 33,597 commitments in October 2014.  There were 18,123 refinance commitments in October 2014, the highest monthly volume since February 2008.
<img class="aligncenter size-full wp-image-4108" src="https://blog.corelogic.com.au/wp-content/uploads/2014/12/Chart-51.jpg" alt="Chart 5" width="500" height="181">
As investor activity has risen, there has been a sharp drop-off in the number of loans to first home buyers.  Although there is no data to support it, there are plenty of anecdotal suggestions that many first home buyers are choosing to purchase investment properties rather than homes for owner occupation.  Unfortunately, the ABS data only captures those homes purchased by first home buyers for owner occupation. 
Owner occupier first home buyer numbers continue to languish at near record low levels.  The proportion of total owner occupier housing finance commitment to first home buyers hit a record low 11.6% in October 2014.  The number of loans actually rose, up 1.2% over the month however, year-on-year first home buyer commitments are -7.8% lower.
The Reserve Bank (RBA) has already highlighted a number of times that they have some concerns with the heightened level of investment activity, particularly in Sydney and Melbourne.  With the proportion of loans to investors hitting a new record high in September it will further re-iterate those concerns. 
This week, APRA wrote to ADIs highlighting some concerns about lending practices and providing a set of guidelines to ensure prudential standards are maintained.  With investor activity continuing to rise in October, it seems the concerns are well found. 
We may see a further increase in the November data next month however, it is likely that growth in the value of investment finance commitments should start to ease thereafter.
<img class="aligncenter size-full wp-image-4109" src="https://blog.corelogic.com.au/wp-content/uploads/2014/12/Chart-61.jpg" alt="Chart 6" width="500" height="182">
Of course, owner occupier lending demand is already slowing and if/when investment lending follows suit, demand for mortgages should ease and we would expect that it will also continue to contribute to a further slowing of home value growth. It will be interesting to see how the slowing of demand plays out from a new housing perspective. 
With the RBA hopeful that a heightened level of housing construction can help assist the economy as it transitions away from resource investment, as value growth slows some of these projects may be in jeopardy. 
Given most developers are private businesses, they generally need growing demand for housing and some increase in home values to allow enough pre-sales for the project to go ahead. 
We are already seeing sales volumes and home values trending lower, so if demand for mortgages softens further we will potentially see a fall in dwelling commencements despite the fact that there is such a strong pipeline of development in place. 
It will be interesting to see how this plays out in 2015.
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No wonder APRA are concerned: Investment lending continues to surge in October

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This week I'm going to take a look at how current housing market conditions compare with the boom in home values between 2001 and early 2004. 
Immediately a point to note is that the current housing market upswing came off the back of dwelling values falling over the previous two years. If we assume that the previous boom period began at the start of 2001, there had actually been no home value falls prior to its commencement, rather the increase in home values had been more moderate at 6.6% over the 2000 calendar year.
<img class="aligncenter size-full wp-image-4089" src="https://blog.corelogic.com.au/wp-content/uploads/2014/12/Chart-11.jpg" alt="Chart 1" width="500" height="186">
The previous boom ran from the beginning of 2001 until October 2004 across the combined capital cities.  Over that 46 month period, home values rose by a total of 68.1% across the combined capital cities. 
This is a monthly rate of value growth over that period of almost 1.5%.The current rise in capital city home values commenced in June 2012 and up until November 2014 values had been trending higher for 30 months.  Over this 30 month period combined capital city home values have increased by 19.6% or a monthly rate of growth of 0.7%. 
Again it is also important to consider that the current growth phase occurred off the back of values having fallen by -7.4% between October 2010 and May 2012.  After 30 months of growth in the 2001 to 2004 growth period, combined capital city home values were 52.1% higher.
The combined capital city growth really only tells part of the story though.  The capital city housing market isn’t homogenous and growth periods begin and end over different lengths of time.  Because Sydney and Melbourne are the largest cities by some way and given our Home Value Index is weighted to reflect that, the capital city results are influenced much more by these two cities than the other capital cities.
Given there were no home value falls prior to the growth between 2001 and 2004, if we assume that the growth phase stared in January 2001 we see that the growth ran for varying lengths of time. 
In fact in most capital cities, home values continued to rise following October 2004 albeit the rate of growth was more moderate than it had previously been. Looking at home value growth across the cities from January 2001 to October 2004 you can see that the rate of growth varied greatly.  It is interesting to note that Sydney and Melbourne’s rate of value growth over that period was much more moderate than in all other capital cities except Darwin. 
Furthermore, the growth in home values commenced much later and ran for longer in most other capital cities.
Taking a look at the level of value growth over the current growth phase there are quite a few points of note.  Firstly growth has been more moderate than what was recorded over the previous growth phase.  Secondly, while Sydney and Melbourne were two of the weaker growth performers previously, they have been the standout performers across the current growth phase. 
Sydney and Melbourne have been the strongest growth performers, value growth has been moderate elsewhere but particularly weak in Adelaide (3.6%), Hobart (0.0%) and Canberra (4.6%).
<img class="aligncenter size-full wp-image-4090" src="https://blog.corelogic.com.au/wp-content/uploads/2014/12/Chart-21.jpg" alt="Chart 2" width="500" height="177">
To look at the results another way and by way of direct comparison, we should look at the rate of value growth per month.  To determine this I have divided total value growth by the number of months and the results make for some interesting reading.  Between January 2001 and October 2004, the rate of monthly growth across the cities was recorded at: 1.3% in Sydney and Melbourne, 2.3% in Brisbane, 2.0% in Adelaide, 1.4% in Perth, 3.0% in Hobart, 0.7% in Darwin and 2.1% in Hobart. 
Looking to the current growth phase, monthly value rises have been recorded at: 1.1% in Sydney, 0.6% in Melbourne, 0.4% in Brisbane and Darwin, 0.1% in Adelaide, 0.5% in Perth, 0.0% in Hobart and 0.2% in Canberra.  Clearly the growth in home values has been more moderate over the most recent growth phase.
<img class="aligncenter size-full wp-image-4091" src="https://blog.corelogic.com.au/wp-content/uploads/2014/12/Chart-31.jpg" alt="Chart 3" width="500" height="179">
While growth has been more moderate, so too have the number of homes selling.  In both growth phases the number of sales has increased however, in the current market the rise in sales has been much more modest than the rise in 2001-04. 
Over the period from January 2001 to October 2014 there was a total of 1,402,217 capital city house and unit sales or a monthly average of 30,481. 
In comparison, over the period from June 2012 to September 2014 there have been 716,908 house and unit sales or a monthly average of 25,604 sales.  Monthly sales volumes over the current growth phase have been -16% lower than they were between 2001 and 2004 despite a high rate of population growth and development of new housing stock.
<img class="aligncenter size-full wp-image-4092" src="https://blog.corelogic.com.au/wp-content/uploads/2014/12/Chart-41.jpg" alt="Chart 4" width="500" height="178">
Across the individual capital cities the number of monthly sales is lower than over the 2001 to 2004 boom period.  In Sydney monthly sales are -14% lower and elsewhere the differentials are recorded at: -8% in Melbourne, -28% in Brisbane, -12% in Adelaide, -16% in Perth, -35% in Hobart, -4% in Darwin and -31% in Canberra.  So not only has value growth been slower in each capital city this time around, so too has transaction activity.
The lower rate of sales can probably be attributed to the low level of first home buyer participation in the market as well as household savings being much higher than what was recorded between 2001 and 2004.
Article continues on the next page. Please click below.
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Looking at some of the broader economic conditions suggest some sizeable differences between the 2001-04 boom and current market conditions.
At the beginning of 2001 standard variable mortgage rates were recorded at 8.05%.  By the end of the year they had fallen to 6.05% which was the low point for the cycle.  By the time home value growth began to fall standard variable mortgage rates had climbed to 7.05%.  Over the current growth phase, standard variable mortgage rates were 6.85% in June 2012 having fallen from 7.05% the previous months. 
From that level they have fallen to 5.95% and have been on hold at that level for the past 16 months.  Given this for the past 16 months standard variable mortgage rates have been lower than they ever were during the 2001 to 2004 boom.
Housing credit advanced by a total of 89.1% over the period from January 2001 to October 2004 at a rate of 1.9% a month.  Over that period, investor credit expanded at a rate of 2.4% a month, outpacing the 1.7% monthly expansion in owner occupier credit.  Over the current growth period, housing credit has expanded by 13.4% at a rate of 0.5% a month.  Over the period, owner occupier credit has risen by 0.4% a month compared to 0.6% a month for investor credit.
The rate of credit growth really does only tell part of the story because much more is lent for housing now than it was back in the previous boom so you would expect the growth rate to be lower now.  It is important to remember that the cost of housing was also lower at that time so the typical mortgage was much lower than it is today. 
Finally, because the data looks at credit outstanding, if repayment of that credit is being made at a faster pace it will also impact on these figures.  Throughout the 2001 to 2004 boom housing credit expanded at a rate of $6.4 billion a month with owner occupier credit up $4.0 billion a month and investor credit rising $2.4 billion a month. 
Over the current growth phase, housing credit is expanding at a rate of $5.7 billion a month with owner occupier credit rising $2.9 billion a month compared to a $2.8 billion monthly increase in investor credit.  This seems to suggest that housing credit is increasing by only a slightly lower amount currently than it was back in the 2001 to 2004 boom. 
As mentioned before, the biggest influence on this is likely to be the cost of housing now as opposed to then especially when you consider how much lower sales transactions are currently.
Looking at the supply of housing, over the 2001 to 2004 period, an additional 654,253 dwellings were approved for construction at a rate of 14,223 per month.  Over the current phase there have been 436,130 dwelling approvals at a rate of 15,039 per month.  In the current phase the pipeline of approvals has grown at a faster rate of course, the national population is higher so this is certainly a positive outcome.
Unfortunately population growth data is only available each quarter.  Each month we do receive overseas arrivals and departures data which correlates strongly with net overseas migration data.  The other component of population growth, natural increase, does not have as big of an impact on housing demand as overseas migration. 
Over the 2001 to 2004 boom period, there were 603,550 net long-term and permanent arrivals to Australia at a rate of 13,121 per month.  Over the current growth phase there have been 880,120 net long-term and permanent arrivals to Australia at a rate of 31,433 per month.  The data shows that net migration to Australia has been much stronger over the current growth phase compared to the previous phase which creates additional housing demand.
Household finance data highlighting selected ratios from the RBA is only available each quarter but is worthwhile to analyse.  Between December 2000 and September 2004, the ratio of housing debt to household disposable income increased from 78.8% to 118.0%.  Subsequently, household debt to household disposable incomes rose from 95.2% to 137.2% and housing assets to household disposable income rose from 333.4% to 448.3%. 
From June 2012 to June 2014, housing debt to disposable income rose from 130.4% to 137.7% and household debt to disposable incomes rose from 145.2% to 151.1%.  Meanwhile, housing assets to disposable income increased from 393.7% to 433.6%.
In summary, the comparison between the 2001 and 2004 growth phase and the current one shows:
<ul>
<li>Growth in home values has been much more moderate over the current phase than in what was recorded over the housing boom of 2001-04 and this is also the case across all capital cities. 
</li>
<li>The 2001 to 2004 growth phase was broad occurring in all capital cities where the current phase is characterised as being quite narrow, focussed mainly on Sydney and Melbourne. Importantly, the growth trend in the previous growth phase started in Melbourne and Sydney before rippling to the other capital cities. 
</li>
<li>Transaction volumes for houses and units have been significantly lower over the current growth phase compared to the previous phase (despite a larger population and higher overseas migration). 
</li>
<li>Standard variable mortgage rates have typically been much lower over the current growth phase than they were in 2001 to 2004 with rates consistently at record lows for the past 16 months. 
</li>
<li>The rate of growth in housing credit has been much more moderate over the current growth phase compared to the 2001-04 boom phase. 
</li>
<li>Although the rate of credit growth is slower now than before, so too is the value of housing credit increases albeit the gap between 2001 and 2004 and the current phase is much narrower. 
</li>
<li>On a monthly basis we are currently approving more dwellings for construction than we were in 2001 to 2004. Keep in mind that we are also approving a lot more units than we were in 2001 to 2004 and unit approvals have proven to be less likely to ultimately be constructed than houses. 
</li>
<li>Net long-term and permanent arrivals have been significantly greater over the current growth phase than they were between 2001 and 2004. 
</li>
<li>The 2001 to 2004 boom period coincided with a significant rise in housing and household leverage along with a jump in housing assets. Whilst each of these factors have also increased over the current growth phase the slope of the increase has been much more moderate.  Furthermore over the current phase the ratio of housing assets to household income has increased by a greater amount than household and housing debt to disposable income while in 2001 to 2004 it increased at a slower pace.</li>
</ul>
Debate around the sustainability of home value growth over the current growth cycle is healthy and warranted, however some lessons can be learnt from how the housing market performed during an even stronger and longer growth phase over the period from 2001 to 2004. 
As interest rates rose, housing market exuberance was gradually quelled.  Values didn’t plummet, but they did retreat in Sydney and growth rates flattened out in most other cities.  Australian households are now more sensitive to the cost of debt, with the ratio of disposable income to household debt at record highs which means the market will probably respond even more swiftly to any perception of interest changes ahead.
Importantly we are already seeing the housing market move through the peak rate of growth.  The CoreLogic RP Data Home Value Index peaked in April this year and the rolling annual rate of capital gain has been drifting lower since that time. 
Transaction numbers have also levelled, as has the average selling time of a home, the rate of vendor discounting and growth in housing credit. 
Our expectations looking forward are that growth rates will continue to drift lower, at least at a macro level due to natural affordability pressures, compressed rental yields and further warnings on speculative investment from the RBA.
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How does the current growth cycle compare to the 2001 to 2004 boom?

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The Australian Bureau of Statistics (ABS) released building approvals data for October 2014 last week.
<img class="aligncenter size-full wp-image-4077" src="https://blog.corelogic.com.au/wp-content/uploads/2014/12/Chart-1.jpg" alt="Chart 1" width="500" height="179">
The headline data showed that there were 17,062 total dwelling approvals in October 2014.  Total dwelling approvals increased by 11.4% over the month and were 2.5% higher year on year. 
Although there was quite a strong rebound in monthly approvals, they remain -3.7% lower than their recent monthly peak of 17,721 approvals in January 2014.
<img class="aligncenter size-full wp-image-4078" src="https://blog.corelogic.com.au/wp-content/uploads/2014/12/Chart-2.jpg" alt="Chart 2" width="500" height="180">
The large increase in dwelling approvals over the month was driven by the much more volatile unit approvals. 
In October, there were 9,478 houses and 7,584 units approved for construction.  House approvals were -0.3% lower over the month while unit approvals were 30.4% higher.  year on year, house approval have increased by 12.2% while unit approvals have fallen by -7.4%. 
As the second chart shows, the six month trend indicates a slowing of dwelling approval numbers.  The slowing trend in approvals is much more apparent for units whereas house approvals appear to have reached a plateau. 
It is also important to remember that a multi-unit development of units is more risky than developing a single house and ultimately less likely to ultimately be constructed.
<img class="aligncenter size-full wp-image-4079" src="https://blog.corelogic.com.au/wp-content/uploads/2014/12/Chart-3.jpg" alt="Chart 3" width="500" height="177">
Looking at dwelling approvals across the combined capital cities, there were 14,635 approvals in October which was an all-time high. 
Capital city dwelling approvals have increased by 18.5% over the month and are 4.5% higher year on year.  You only have to visit any of the major capital cities to see that there has been a significant surge in construction activity of new homes over recent years. 
The approvals data indicates that the dwelling construction pipeline in these regions is continuing to grow.
<img class="aligncenter size-full wp-image-4080" src="https://blog.corelogic.com.au/wp-content/uploads/2014/12/Chart-4.jpg" alt="Chart 4" width="500" height="178">
One factor that sets apart the capital city market from the national market is the much greater prevalence of unit approvals.  In fact, over the past two years there have generally been more capital city units approved each month than houses. 
In October, there were 7,139 capital city houses and 7,496 capital city units approved for construction.  The 7,139 house approvals were the highest number of approvals over any month since November 1999. 
Monthly unit approvals were at their highest level since October 2013.  Over the month, capital city house approvals increased by 6.8% while unit approvals rose 32.4%.  Year on year, house approvals were up 15.7% while unit approvals are -4.3% lower.
<img class="aligncenter size-full wp-image-4081" src="https://blog.corelogic.com.au/wp-content/uploads/2014/12/Chart-5.jpg" alt="Chart 5" width="500" height="178">
Looking at dwelling approvals across the major capital cities, you can see that approvals are higher than they were a year ago in most cities. 
Dwelling approvals were lower in October 2014 than they were in October 13 in Sydney (-1.6%), Darwin (-42.3%) and Canberra (-43.9%).  Across the remaining capitals, the year on year increase in approvals has been recorded at: 5.3% in Melbourne, 5.6% in Brisbane, 16.3% in Adelaide, 23.4% in Perth and 66.1% in Hobart. 
In Melbourne and Perth dwelling approvals currently sit at near record highs.
<img class="aligncenter size-full wp-image-4082" src="https://blog.corelogic.com.au/wp-content/uploads/2014/12/Chart-6.jpg" alt="Chart 6" width="500" height="178">
House approvals are trending higher across each of the major capital cities.  Although the trend is towards more house approvals year on year approvals are now lower in Adelaide (-17.3%) and Darwin (-1.6%). 
Across the remaining cities, the year on year increase in house approvals have been recorded at: 28.3% in Sydney, 23.8% in Melbourne, 28.4% in Brisbane, 4.5% in Perth, 26.3% in Hobart and 3.8% in Canberra.
<img class="aligncenter size-full wp-image-4083" src="https://blog.corelogic.com.au/wp-content/uploads/2014/12/Chart-7.jpg" alt="Chart 7" width="500" height="178">
Across the major capital cities, the above chart shows that nowadays a much greater number (and subsequently proportion) of units are being approved for construction. 
It is interesting to note that unit approvals are trending sharply lower in Sydney lately while elsewhere they continue to trend higher.  Also note that for most of the past six years Melbourne has been approving a greater number of units than Sydney. 
As mentioned earlier, the unit data tends to be much more volatile than the house approvals data and is reflected in the year on year change in approvals to October 2014.  Over the period, the change in approvals across the cities have been recorded at: -15.3% in Sydney, -6.1% in Melbourne, -8.3% in Brisbane, +84.4% in Adelaide, +117.8% in Perth, +520% in Hobart, -52.6% in Darwin and -58.4% in Canberra.
<img class="aligncenter size-full wp-image-4084" src="https://blog.corelogic.com.au/wp-content/uploads/2014/12/Chart-8.jpg" alt="Chart 8" width="500" height="178">
If we look over the past 12 months, half of all capital city dwelling approvals were for houses.  In fact, the result is only really driven down by the fact that in Adelaide, Perth and Hobart so few units relative to houses have been approved.  In each of the remaining capitals more than 50% of approvals have been for units. 
Units have historically been less likely to ultimately reach completion than houses.  Given the high number of unit approvals over the past two years and the fact that home value growth is now slowing, you do wonder just how many of these units that are approved will actually be constructed in the current cycle.
Dwelling approvals remain at a very high level and with the rate of population growth slowing, it is encouraging to see that supply has responded on the back of low interest rates and some rises in buyer demand and home values. As the rate of value growth slows along with sales activity, it will be interesting to see how much of this stock which is approved will commence and ultimately make it to completion. 
Furthermore, we know that much of the unit stock which is now so prevalent in inner city areas is being purchased by investors.  With capital growth slowing and rental growth slow, this may also impact on some of the future construction of these approved units. 
The Reserve Bank has also flagged that they, along with banking regulators, are looking to curb higher risk lending to investors. 
We don’t yet know what these curbs may be but once implemented they may act as a further deterrent to investors and put into jeopardy some of these inner city unit approvals coming to fruition.
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Approvals data shows supply responding to low interest rates and buyer demand

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Last week the House of Representatives Standing Committee on Economics released their recommendations following their investigation into Australia’s foreign investment framework as it applies to residential real estate. 
The Committee tabled 12 recommendations:
<ol>
<li>The current foreign investment applying to foreign purchases of residential real estate be retained in its current form, utilising the existing legislated prohibitions and restrictions on purchases of established dwellings, and encouraging foreign investment to increase Australia’s supply of new housing. </li>
<li>The Foreign Investment Review Board (FIRB) and the Foreign Investment and Trade Policy Division of Treasury put in place appropriate processes for the purpose of audit, compliance and enforcement of the foreign investment framework.  Such processes must accurately capture audit, compliance and enforcement data for the purpose of oversight of the FIRB and the Australian Treasury. </li>
<li>The government apply a modest administrative fee to the current screening of all foreign purchases of residential real estate, including purchases by temporary residents.  Fees collected should be hypothecated to the Treasury’s Foreign Investment and Trade Policy Division for the purpose of funding audit, compliance and enforcement activities. </li>
<li>
The Government introduce a civil penalty regime for breaches of the foreign investment framework as it applies to residential real estate, with the following features: • Pecuniary penalty orders imposed under this penalty regime to be calculated as a percentage of the property value to act as an effective deterrent; and • The regime to apply to foreign investors and any third party who knowingly assists a foreign investor to breach the framework. Pecuniary penalty orders collected should be hypothecated to the Treasury’s Foreign Investment and Trade Policy Division for the purpose of funding audit, compliance and enforcement activities. 
</li>
<li>The government amend the Foreign Acquisitions and Takeovers Act 1975 to provide that criminal penalties for breaching the foreign investment framework as it applies to residential real estate, apply equally to any third party who knowingly assists a foreign investor in residential real estate to breach the foreign investment framework. </li>
<li>In any instance where a foreign owner divests an illegally held established property, any capital gain from the sale of that property be retained by the government.  Funds collected by this measure should be hypothecated to the Treasury’s Foreign Investment and Trade Policy Division for the purpose of funding audit, compliance and enforcement activities. </li>
<li>Australia’s Foreign Investment Policy be amended to explicitly require a temporary resident to divest an established property within three months if it ceases to be their primary residence. </li>
<li>The government, in conjunction with the states and territories, establish a national register of land title transfers that records the citizenship and residency status of all purchasers of Australian real estate.  This information should be accessible by relevant agencies from a single database. </li>
<li>
The government establish an alert system for the expiry of temporary visas that can be used by the Treasury to issue property divestment orders in cases of non-compliance: • By amending the Migration Act 1958 so that the Department of Immigration and Border Protection must inform the FIRB when a temporary resident departs Australia upon expiry of their visa; and • By establishing effective and timely internal processes at the Treasury to receive and cross-check this information against its property databases to screen for compliance with the foreign investment framework. 
</li>
<li>The government amend the Foreign Acquisitions and Takeovers ACT 1975 to provide that residential property sold under off-the-plan certificates that is marketed for sales overseas, must be marketed in Australia for the same period of time.  Breaches of this requirement should be subject to sanctions under the Act ranging from fines to the cancellation of a sale. </li>
<li>In light of the expected finalisation of the statutory review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 in early 2015, the Committee recommends that the government consider the purchase of residential property by foreign investors as a a possible area of investigation when considering amendments to the legislation. </li>
<li>Treasury’s Foreign Investment and Trade Policy Division make greater use of the databases held by AUSTRAC, and also of other relevant federal and state government databases, to assist the FIRB in its duties and responsibilities. </li>
</ol>
Overall the recommendations are largely within the framework that currently exists, ensuring that foreign buyers only purchase homes which are newly constructed. There are some concerns that the additional administrative fee to screen foreign buyers will act as a disincentive to investment however, reports suggest the fee will only be $1,500. 
In our opinion it is unlikely that such a nominal fee on such a high cost purchase will make a difference.  The introductions for penalties not only for those that purchase non-compliant properties, but also to those that aid such a purchase is also a good step. Any measure that can help to reduce the occurrence of such fraud should be encouraged. 
With the increasing cooperation of state land registries and the development of a national e-conveyancing platform over recent years, the development of a national register of land title transfers that records the citizenship and residency status of all purchasers of Australian real estate is a welcome, important and achievable initiative in order provide increased transparency in relation to foreign investment in real estate through the provision of timely, accurate and reliable data. 
The proposed application of a more severe civil penalty regime to third parties who ‘knowingly assist a foreign investor to breach the framework’ has broad potential application and will be a closely watched development.
It has the potential to extend to real estate agents, banks facilitating the flow of purchase monies from offshore, banks providing mortgage finance and even conveyancers and legal professionals. 
Importantly, the recommendations in the report should not be viewed as a deterrent to continued foreign investment in the Australian housing market, with residential construction activity being a key contributor to Australia’s economic growth, with housing starts in in 2014 now approaching 190,000 units.  
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Foreign buyer review recommendations won't deter investment

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The Australian Prudential Regulation Authority (APRA) released their quarterly Authorised Deposit-taking Institution (ADI) Property Exposures data for September 2014 last week. 
The data always provides a valuable insight into current and historic mortgage lending by domestic ADIs and this quarter’s release was no different.
<img class="aligncenter size-full wp-image-4041" src="https://blog.corelogic.com.au/wp-content/uploads/2014/11/Chart-11.jpg" alt="Chart 1" width="500" height="180">
Based on the value of all outstanding mortgages by households to Australian ADI’s, there was $825.0 billion outstanding to owner occupiers (66.0% of all housing loans) at the end of September 2014 and $425.4 billion to investors (34.0%). 
Over the 12 months to September 2014, the total value of outstanding mortgages to owner occupiers has increased by 7.6% compared to an 11.9% rise in outstanding credit to investors.  This represents the greatest annual increase in owner occupier lending since June 2012 and the greatest rise in investor lending since December 2010. 
Much like other data received more regularly, the chart indicates that there is significantly more momentum in the investor lending space than that for owner occupiers where growth is more moderate.
<img class="aligncenter size-full wp-image-4042" src="https://blog.corelogic.com.au/wp-content/uploads/2014/11/Chart-21.jpg" alt="Chart 2" width="500" height="182">
At the end of September 2014, a record high 36.8% of loans outstanding had an offset facility, up from 34.2% a year earlier.  Also a record high was the 36.8% of all outstanding mortgages which were interest-only, up from 34.6% a year earlier. 
Just 0.2% of all outstanding mortgages were reverse mortgages and 2.7% were low documentation which was down from 3.6% a year earlier and at a record low proportion.  Other non-standard loans accounted for just 0.1% of all outstanding mortgages. 
It seems that more and more mortgagees are accessing offset accounts in order to reduce the interest payable on their mortgages and maximise repayments of the principal while interest rates are so low.  The data also indicates that a high proportion of lenders are accessing interest-only mortgages which seems somewhat counterintuitive at a time when interest rates are so low.
<img class="aligncenter size-full wp-image-4043" src="https://blog.corelogic.com.au/wp-content/uploads/2014/11/Chart-31.jpg" alt="Chart 3" width="500" height="181">
The average balance on all outstanding mortgages at the end of September 2014 was $238,700.  The average balance has increased by 3.0% over the past year. 
Loans with an offset facility ($284,600) and interest-only mortgages ($308,400) have much higher average outstanding loan balances. 
It is interesting to note that the annual growth in average outstanding loan balances has been much more moderate for mortgages with an offset and interest-only mortgages at 2.0% and 2.1% respectively. 
Encouragingly, the data also indicates that outstanding balances are reducing for low documentation and other non-standard loans as they become less common.  Over the past year the average balance has fallen by -3.1% for low-documentation loans and by -6.5% for other non-standard loans. 
With mortgage rates low and fewer of these loan types being written it seems those that have these types of loans are continuing to pay down these mortgages.
<img class="aligncenter size-full wp-image-4044" src="https://blog.corelogic.com.au/wp-content/uploads/2014/11/Chart-41.jpg" alt="Chart 4" width="500" height="179">
Turning the focus to new loans written over the September quarter, 62.6% of the total value of new lending was to owner occupiers and 37.4% was to investors. The proportion of new lending to investors has fallen from a record high of 37.9% in the June 2014 quarter. 
Based on this data it suggests that growth in demand for both owner occupier and investment lending may have peaked. 
Although after having trended lower over the previous two quarters, the annual change in new owner occupier and investment lending bounced in September, recorded at 6.9% and 21.4% respectively.
Article continues on the next page. Please click below.
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<img class="aligncenter size-full wp-image-4045" src="https://blog.corelogic.com.au/wp-content/uploads/2014/11/Chart-51.jpg" alt="Chart 5" width="500" height="181">
Over the September 2014 quarter, 0.7% of new loans approved were low-documentation, 42.5% were interest-only, 0.1% were other non-standard loans, 43.2% were third party originated loans and 3.5% were loans approved outside of serviceability. The 42.5% of new loans which were interest only was down from a record high of 44.0% over the previous quarter. 
 The data also seems to reflect the slowing of growth in investment demand, remember that interest only loans tend to be (but not always) reflective of lending for investment purposes.  
The ADIs seem to be increasing the usage of their broker channels with the 43.2% of loans originated by third parties the highest proportion since June 2008.  
With 3.5% of new mortgages approved outside of serviceability over the September 2014 quarter, this was down from a record high 3.7% over the previous quarter.
<img class="aligncenter size-full wp-image-4046" src="https://blog.corelogic.com.au/wp-content/uploads/2014/11/Chart-6.jpg" alt="Chart 6" width="500" height="180">
Looking at the loan to value ratios (LVR) of loans written over the September 2014 quarter,  25.2% of new loans had an LVR of less than 60%, 41.8% of loans had an LVR of between 60% and 80%, 20.9% had an LVR of between 80% and 90% and 12.1% had an LVR of 90% or more. 
The 12.5% of new loans with an LVR of more than 90% is the lowest proportion since June 2011.  The 25.2% of mortgages with an LVR lower than 60% was the highest proportion in a year. 
This falling proportion of loans above 90% LVR suggests there are proportionally less high-risk mortgages being written.
The data indicates that overall interest-only lending is continuing to rise however, new lending of this type has eased of late. 
Investment lending remains high and continues to ramp-up however, the rate of growth in new lending to investors does appear to have slowed.  Keep in mind that the December data will probably tell us much more given it encapsulates more of the spring selling season. 
Furthermore, after the RBA flagged that they and other regulators are looking at ways to cool investor exuberance with an announcement expected in December we may actually see a run on investor lending over the coming quarter.
It is of course important to remember that although investment lending has ramped up sharply over the past year, there is little to suggest that lending to investors is more risky than lending to owner occupiers.  Bill Evans provided some insight into Westpac’s investment lending late last week.  He noted:
<ul>
<li>Compared to owner–occupier applicants, investment applicants are older (75% over 35 years); have higher incomes and higher credit scores.</li>
<li>65% of investment loan customers are ahead on their repayments and 90+ days delinquencies are 0.37% compared to 0.47% for the full housing portfolio.</li>
<li>Westpac has an interest rate buffer approach to lending linking loan approvals to serviceability at a rate at least 180 basis points above the standard mortgage rate (5%).</li>
<li>All investment loans are full recourse and specific policies apply to holiday apartments and single industry towns.</li>
</ul>
<img class="aligncenter size-full wp-image-4047" src="https://blog.corelogic.com.au/wp-content/uploads/2014/11/Chart-7.jpg" alt="Chart 7" width="500" height="315">
Our concern about the high level of investment lending remains over the fact that investors are targeting the residential property asset class because of its superior returns.  While these returns remain superior demand is likely to persist. 
The concern then arises when other investment classes start to show superior returns will these owners exit the residential property class or remain in it for the long-term? 
As the above chart shows, investor activity is heavily concentrated within the capital city inner-city unit market.  Were many investors to exit the market at a similar time in search of superior returns that could have some serious repercussions for the inner city unit market and potentially the wider housing market too.
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Will investors desert residential property when returns start to dry up?

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According to CoreLogic RP Data's November figures, home price growth is slowing.
<a href="https://www.propertyobserver.com.au/https://twitter.com/cmkusher/status/539223795421421568" target="_blank"><img src="/images/2014/12/01/tweet-dec-1-one.jpg" alt=""></a>
Australian capital price growth was 8.5% higher in last month than in November 2013. While CoreLogic RP Data research analyst Cameron Kusher deemed the year on year growth "healthy", he also noted it was down from the previous peak of 10.5%, recorded in April this year.
Given household annual household income growth has also slowed this year, Kusher is unsurprised at the result.
 
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jrichardson-uRX5hFdKfN

Tweet of the day: Slowing price growth linked to disposable incomes?

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Australia’s property market has experienced a significant shift in lower-end priced properties. The selection for properties under the $400,000 mark is diminishing.  
Rising capital city dwelling values has meant that homes selling at a price below $400,000 has declined and is now down to 39.7% of all sales from 44.1% a year earlier.  
<img src="/images/2014/11/28/kiusher-nov-28-one.jpg" alt="">
Over the 12 months to August 2014, 37.3% of houses and 45.7% of units sold for less than $400,000.  At the same time a year earlier, 42.3% of houses and 48.5% of units sold for less than $400,000.  
Until 2004 the proportion of sales below $400,000 was fairly similar between houses and units.  Since that time the proportion of sales below $400,000 has trended lower however, the rate of decline has been greater for houses than for units.  
<img src="/images/2014/11/28/kiusher-nov-28-two.jpg" alt="">
This significant divergence in individual capital city home values and growth over recent years has also meant a large difference in the proportion of homes selling below $400,000.
Over the past year, the proportion of all house sales occurring below $400,000 has been recorded at: 
<ul>
<li>12.1% in Sydney;</li>
<li>25.1% in Melbourne;</li>
<li>32.4% in Brisbane;</li>
<li>47.9% in Adelaide;</li>
<li>15.3% in Perth;</li>
<li>62.8% in Hobart;</li>
<li>18.5% in Darwin;</li>
<li>7.5% in Canberra.    </li>
</ul>
20 years ago, more than nine out of every 10 house sales across each capital city were below $400,000. Of course over that time wages have increased, interest rates have tended to be much lower and credit has become much more freely available. Nevertheless, the drop in affordable housing across most capital cities has been substantial.  
Across the capital cities, the proportion of total unit sales below $400,000 over the past 12 months was: 
<ul>
<li>23.5% in Sydney;</li>
<li>37.3% in Melbourne;</li>
<li>53.8% in Brisbane;</li>
<li>67.8% in Adelaide;</li>
<li>38.2% in Perth;</li>
<li>82.9% in Hobart;</li>
<li>32.0% in Darwin;</li>
<li>39.0% in Canberra.    </li>
</ul>
Again 20 years ago almost every unit sold was less than $400,000.  While there has been a decline in unit sales under $400,000 across the board it has been markedly larger in markets like Sydney, Melbourne, Darwin and Canberra.  
Dwelling sales data produced by CoreLogic RP Data showed that over time, houses continued to outnumber units. This is the reason why house sales have a bigger influence on the overall result.    
Options for affordable housing supply, particularly in cities such as Sydney, Melbourne, Perth, Darwin and Canberra have sharply reduced over the past two decades.
<img src="/images/2014/11/28/kiusher-nov-28-three.jpg" alt="">
 
Although borrowing for a mortgage has become easier and wages have grown, the supply of lower priced homes drives many lower income earners out of ownership in these cities.
As an example, current figures to the 12 months to August 2014 indicate there has been just 16,345 homes sold below $400,000 in Sydney compared to 97,982 home sales in total. 
With home values continuing to rise in Sydney and Melbourne, we would expect even fewer sales below $400,000 over the coming 12 months. 
<img src="/images/2014/11/28/kiusher-nov-28-four.jpg" alt="">
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Pool of affordable housing in capital cities continues to evaporate

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According to the CoreLogic RP Data Home Value Index results in October 2014, combined capital city home values have increased by 8.9% over the past year. 
The rate of growth is now decelerating after reaching a peak annual growth rate of 11.5% in April 2014.  The two cities which have been the real driver of value growth, Sydney and Melbourne, are also now seeing the rate of value growth slowing.
The RBA has previously stated that as the economy transitions away from mining investment that it was specifically looking for a pick-up in residential property.  To date there has been a pick-up, in buyer demand, as well as home values and dwelling construction however, with value growth having peaked and dwelling approvals now -15% lower than their recent monthly peak will the pick-up in the residential segment of the economy be enough to offset mining?  It is beginning to look increasingly unlikely.
As we have showed, the residential housing sector is still quite strong but is slowing from its peak.  Although approvals have dropped there remains a strong pipeline of housing construction which should continue over the coming years however, the spike in construction could be somewhat short-lived overall.  If we look at the other sectors of the economy, economic data appears to be increasingly turning more negative than positive.
According to Westpac and the Melbourne Institute, consumer sentiment has been mired in higher levels of pessimism than optimism for the past nine months.  The last time pessimism had outweighed optimism for this long was in the middle of the financial crisis.
Last week we learned that wage growth remains benign.  According to the Australian Bureau of Statistics (ABS) the wage price index has increased by just 2.6% over the year to September 2014.  With inflation recorded at 2.3% there is very little real growth in wages at the moment.
With wage growth so low, we are also seeing the highest unemployment rate the country has seen in more than decade.  According to ABS data, the unemployment rate was recorded at 6.2% in October and sits at a level not seen since early 2003.  If employees can’t negotiate a decent pay rise it is not as if businesses are actively seeking employees.
Commodities, which were previously a key driver of the Australian economy have seen prices drop significantly over the past year.  According to the Reserve Bank’s (RBA) monthly index of commodity prices, Australian commodity prices are -16.9% lower over the past year and -38% lower than their July 2011 peak.
Earlier this year Australia had recorded international trade surpluses for three consecutive months.  The monthly trade surplus reached as much $1.4 trillion however, in September the trade deficit had sunk to $2.3 trillion.  This $2.3 trillion figure was the largest monthly trade deficit since November 2012.
According to the National Australia Bank, business conditions have improved sharply.  Their index of business conditions rose by an all-time high 12 points in October to reach its highest level since February 2008.  Although business conditions may be up, confidence across the business sector continues to fall.  In October business confidence fell by a point to its lowest level since August of last year.
Retail trade recorded a somewhat surprising bounce of 1.2% in September.  Although this was the strongest monthly increase since February last year it comes following relatively light increases of 0.7%, 0.4% and 0.1% over the previous three months.  One wonders if it is an outlier. 
In fact, Westpac and the Melbourne Institute asked respondents to their consumer sentiment survey about their spending intentions this Christmas.  The survey results indicated that 38% of respondents were going to spend less and 50% were going to spend the same.  Westpac reported that the net balance (more minus less) of -26% was the worst since 2008 in the middle of the financial crisis.
The latest read on population growth shows that population growth is slowing.  Although growth in the number of new Australians remains strong, population growth over the year to March 2014 was at its lowest level since the year to June 2012. 
Furthermore, the more up-to-date overseas arrivals and departures shows that net long-term and permanent arrivals over the 12 months to September 2014 were at their lowest level since the 12 months to October 2011.  This data would indicate a further slowing of net overseas migration, particularly within the mining states where the slowdown in both overseas and interstate migration has been the most substantial.
The strong rate of population growth has been a significant driver of gross domestic product.  Over the 12 months to June 2014, the Australian economy grew by a quite healthy 3.1%.  Although this headline figure is quite good, on a per capita basis the economy grew by a much lower 1.6%. With population growth slowing we would expect GDP per capital to also slow.
While there are a lot of negatives here, one of the positives recently has been the declining Australian dollar.  At the end of October 2014 the exchange rate with the $US was 88 cents which is much lower than it has been of late.  A lower Australian dollar should help our manufacturers, exporters and tourism however, that will take a while to flow through.
With the housing market and housing approvals seemingly topping out we need some other industries to help with the heavy lifting as commodity prices remain low and the pipeline of larger infrastructure projects related to the resources sector continue to taper away. 
We aren’t sure who or what these industries are but a further devaluation of the Australian dollar would certainly help some of the prime candidates such as tourism, manufacturing and education for overseas students. 
The Reserve Bank has stated that monetary policy has largely done all it can to assist and now it’s up to the government to manage fiscal policy in such a way that can assist the transitioning economy. 
In my mind this can’t come quick enough because the economy is softening and the housing market needs help to manage this transition.
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Cameron Kusher

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