Property developer One Living, backed by former Macquarie banker turned investment manager Chris Green’s investment firm, has unveiled plans to bring more institutional capital into housing to help address the national supply crisis.

The New York-based investor has focused his firm, GreenPoint Partners, on addressing the supply shortage hitting middle market housing in Australia.

It is backing the new One Living business to develop more than 1000 units along the eastern seaboard. The new firm is starting with a development on Mona Vale Road, on the border of Mona Vale and Pymble, in Sydney’s Northern Beaches, with around 140 apartments planned. They are eyeing off more sites across the city.

With cost pressures rising in the industry, One Living’s model is to be a vertically integrated developer-builder, so it can respond directly to the housing gap by removing the cost inefficiencies embedded in traditional residential delivery.

“We are building a platform designed to operate at scale and starting in a market where there’s a clear need for quality, attainable housing,” One Living joint managing director Joseph Scuderi said.

“It’s that missing middle – it’s that attainable end of housing… that’s what most Australians invest into and what Australians can actually afford.”

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="798dfa93-4941-4db6-a696-31e9dc18e81c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.31.50%E2%80%AFPM.png?VersionId=mKBqi5C_DmeiXS.AtJkcR8LQIxqCqmFi" />

GreenPoint Partners brings years of experience assembling and scaling real estate operating businesses across major markets. And Green sees a big opportunity in Australia.

“For its size, sophistication and importance to the community, Australia’s living sector has remained largely under-institutionalised, which represents significant opportunity,” Green said. “GreenPoint identified that gap, assembled the right team, and is backing One Living to build a platform that is aligned to market needs.”

Green said being a builder-developer would give the company the capacity and flexibility it required to deliver reasonably-priced homes.

“We want it to be at that attainable level; not super high end luxury but at that attainable level,” he said.

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="74a5344a-4b26-4d4a-ada3-056b1220be77" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.32.15%E2%80%AFPM.png?VersionId=vY8hXHO4reBMdO8ZXMWCNtGZJofUPQ3j" />

&nbsp;

One Living will undertake a component of affordable housing in its schemes, which it will own and operate, and it could also run build-to-rent on some sites.

Green praised local policy settings.

“The NSW government is being very supportive, strategic and pragmatic in terms of how do we generate more supply of housing,” he said. “We think it’s actually positive for development and the bit that’s been lacking at that attainable level is that it’s lots of relatively small private developers, whereas we want to create an institutional platform.”

One Living is also&nbsp;looking at high-density projects and could take on more institutional funding in the future.

“The way we will be able to achieve economies of scale is through size,” Green added.

Joel Robinson

One Living enters Sydney's new apartment market with Northern Beaches site acquisition

It's been several years since there's been an opportunity to buy a brand new townhome in Melbourne's coastal suburb of Mordialloc. Even apartment developments in recent times have been few and far between in the area.

Local developer LDS Property identified the gap in new housing, securing a site on White Street, directly opposite&nbsp;Woodlands Golf Club Mordialloc. They've recently launched&nbsp;<a href="https://www.apartments.com.au/new-townhouses/wm-residences-mordialloc-102-white-street-mordialloc-vic-3195">WM Residences</a>, just 13 townhouses which they have already started building.

Projects by Buxton Director Heath Thompson, who is selling WM Residences, says the townhouses x that perfect middle ground be

"Mordialloc residents have had limited options to downsize within the suburb, often forcing them to look elsewhere despite long-standing ties to the area," Thompson says.

"With very little comparable new supply coming to market, projects like WM Residences are well placed, particularly as buyers look to capitalise on current conditions amid constrained supply."

[smartcode_project:default project_id=134646 project_image_fid=6109]

The development, designed by regarded architecture firm&nbsp;<a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a>,&nbsp;adopts a deliberately restrained architectural approach, focusing on simplicity, durability and liveability rather than overt design gestures.

The boutique scale is central to the offering. With only 13 three-bedroom residences, each home is configured to prioritise functional layouts and everyday use, supported by private terraces and secure two-car garages.

Ewert Leaf’s design response leans into a calm, neutral material palette. Interiors are defined by oak flooring, white walls and soft finishes, creating a consistent and understated backdrop. The approach avoids trend-driven detailing in favour of longevity, with an emphasis on natural light and spatial clarity.

[smartcode_project:default project_id=134646 project_image_fid=6110]

Beyond aesthetics, the homes are designed to meet contemporary performance expectations. Each residence targets a minimum 6-star energy rating, incorporating double glazing, comprehensive insulation and all-electric Bosch appliances.

The project’s location supports a walkable coastal lifestyle, sitting within close proximity to Mordialloc’s foreshore, Main Street retail strip and the train station. Local cafés and dining venues, including Suburbia Deli and Hendriks Café, are within a short walk, reinforcing the area’s established neighbourhood character.

[smartcode_project:default project_id=134646 project_image_fid=6116]

While <a href="https://www.apartments.com.au/developments/mordialloc-vic-3195">Mordialloc</a> is often defined by its beach and pier, the project taps into other areas of day to day living, offering easy access to local food, casual dining and transport, rather than positioning itself purely as a lifestyle retreat.

WM Residences reflects a continued trend across Melbourne’s coastal suburbs towards smaller-scale, design-led townhouse developments, particularly on infill sites where proximity to amenity is already established.

With construction commenced prior to its market entry, the project aligns with a growing preference among buyers for developments with visible progress and defined delivery timeframes.

[smartcode_project_cta:default project_id=134646]

WM Residences fills gap in Mordialloc townhouse market

&nbsp;

Developer GURNER™ Group has revealed $1.65 billion in residential sales nationally across the 12 months to December 2025, driven largely by the continued momentum of its Docklands wellness-focused precinct, Elysium Fields.

The sales result was generated across seven projects in Victoria and New South Wales, headlined by Elysium Fields, GURNER™’s $2.75 billion mixed-use precinct planned for Harbour Esplanade in Docklands.

The project has recorded more than $500 million in sales across the first three towers, equating to around 580 apartments sold.

The first tower, Helios, has now sold out of its 240 private residences, with GURNER™ preparing to release a premium penthouse collection comprising 15 three-bedroom penthouses in coming weeks.

[smartcode_project:default project_id=144441 project_image_fid=370975]

Elysium Fields is being developed on the long-held 20,000 sqm Docklands site at 208-226 Harbour Esplanade, which had remained undeveloped for more than two decades prior to GURNER™ taking over the project around four years ago.

Construction has now commenced across four towers ranging between 18 and 30 storeys, with Hamilton Marino and Maxcon appointed as builders.

Once complete, the precinct is expected to comprise around 1,100 residences, alongside retail, hospitality and public realm uses integrated throughout the site.

[smartcode_project:default project_id=144441 project_image_fid=370981]

Designed by Fraser &amp; Partners in collaboration with GURNER™ Design House, the project has been positioned around the developer’s broader focus on wellness-led residential living.

“We don’t sell apartments. We create a true luxury lifestyle that simply doesn’t exist elsewhere in the market today,” Founder and Executive Chairman Tim Gurner said.

“To deliver that requires an extraordinary level of detail, coordination and discipline across multiple verticals, from design and hospitality through to wellness and service.”

“We’ve always believed that living extends far beyond the physical residence. It’s about how you feel the moment you arrive, how you live day-to-day, and the ecosystem that supports that.” 
[smartcode_project:default project_id=144441 project_image_fid=370977]

The project’s design places a heavy focus on landscaping, wellness amenities and biophilic design principles.

Plans include around 3,700 sqm of landscaped gardens and open space throughout the precinct, alongside a retail and dining offering spanning approximately 5,000 sqm.

The broader public realm strategy centres around what GURNER™ describes as the “Path of Life”, an urban forest and landscaped pedestrian environment intended to connect the various buildings and wellness spaces across the precinct.

The apartments themselves will incorporate a range of wellness-focused inclusions, including purified air and water systems, circadian lighting, antimicrobial surfaces, and optional in-home wellness upgrades.

[smartcode_project:default project_id=144441 project_image_fid=370980]

Gurner said the company’s experience through its Saint Haven wellness clubs had directly informed the residential offering now being incorporated into Elysium Fields.

“We’re seeing a clear global shift toward longevity, performance and proactive health,” Gurner said.

“Our role is to deliver that in a way that feels seamless, highly private and beautifully resolved within the environments we create.”

A large component of the wellness offering is planned through the resident amenity and health facilities proposed within the precinct.

That includes plans for bathing and recovery facilities spread throughout the towers, incorporating mineral pools, saunas, steam rooms, flotation therapy, red light therapy and wellness lounges.

The developer is also seeking approvals for what it describes as a “reverse ageing medical clinic” within the precinct.

[smartcode_project:default project_id=144441 project_image_fid=370978]

According to project information released by the group, the proposed facility would include cryotherapy, IV infusion therapy, infrared and dry saunas, PEMF beds, MRIs, DEXA scans, brain scans and blood analysis services.

Within the first tower, Helios, residents will also have access to a dedicated amenity offering known as the Sky Private Club.

The upper 15 levels of the building will include private lounges, dining spaces, rooftop amenities and optional private wellness studios integrated within residences.

The Helios tower itself comprises 260 apartments ranging between 60 sqm and 300 sqm, including a collection of penthouses.

That includes a planned two-storey penthouse spanning around 600 sqm with uninterrupted bay views.

The Elysium Fields precinct is being delivered in partnership with Digital Harbour Holdings, a consortium that includes the Liberman family, which controls the development rights across the Docklands site.

[smartcode_project:default project_id=144441 project_image_fid=370979]

The sales result comes as GURNER™ continues expanding its national development pipeline beyond Victoria.

“We have a strong pipeline across Australia and are now focused on scaling into key markets including New South Wales and Queensland, while continuing to build on our Melbourne base,” Gurner said.

“We currently have more than $3 billion in the market, growing to over $5 billion by October, and expect to materially outperform last year in the 2026 calendar year.”

The result also reflects the continued strength of the upper-end apartment market in Melbourne, particularly for owner-occupier-focused product with large-scale amenity and lifestyle offerings.

[smartcode_project_cta:default project_id=144441]

Record result anchored by the Group’s “utopian” Elysium Fields precinct – defying market headwinds in Docklands.

Elysium Fields drive Gurner to $1.65 billion in apartment sales over 2025

National Australia Bank (NAB) will fund <a href="https://www.apartments.com.au/new-apartments/palmera-residences-gold-coast-18-garfield-terrace-surfers-paradise-qld-4217">Palmera</a>, a $1 billion, 52-level luxury residential tower being developed by Central Equity in one of the Gold Coast’s most tightly held coastal locations at Northcliffe.

The project, launched recently by <a href="https://www.apartments.com.au/developers/central-equity">Central Equity</a>, one of Victoria’s largest private residential developers, comes at a time when construction funding for large residential developments has become increasingly competitive as lenders tighten exposure to the sector.

Multiplex has been appointed the builder, and construction is now underway.

[smartcode_project:default project_id=108274 project_image_fid=365784]

Since its first project, Central Equity has delivered more than 85 residential developments with a combined end value exceeding $8 billion.

Palmera reflects Central Equity’s growing focus on the Gold Coast luxury apartment market and continues a relationship between Central Equity and NAB that dates back to the late 1980s, when the bank funded one of Melbourne’s earliest inner-city residential towers at a time when high-rise apartment living in the CBD was largely unproven.

“NAB’s funding of Central Equity’s $36 million CBD development in the late 1980’s to the financing of the billion-dollar tower today highlights the long-term relationship between the two organisations in delivering major residential projects” said Central Equity Founder and Chairman Eddie Kutner.

He said NAB’s early support was instrumental in helping establish the company’s development model.

“When we commenced our first residential tower in the late 1980s the concept of funding off-the-plan apartments was still largely untested in Australia,” Kutner said.

“NAB recognised the opportunity early and supported the project when others were uncertain. That relationship has now continued for more than 37 years across many developments.”

[smartcode_project:default project_id=108274 project_image_fid=365771]

Central Equity was established in 1987 when Melbourne’s CBD and Southbank precinct were still dominated by warehouses and commercial buildings. Fewer than 100 residents lived in Southbank at the time, and large-scale residential development in the inner city was not widely considered.

Recognising changing demographics and lifestyle preferences, the company began developing high-rise residential projects designed to bring permanent residents into the city centre.

Central Equity has provided accommodation for approximately 40,000 residents across Melbourne’s CBD and Southbank, while also incorporating supporting infrastructure including essential lifestyle facilities like retail spaces, childcare facilities and neighbourhood activity centres.

Central Equity has spent many years assembling the Palmera development site on the corner of Garfield Terrace and Frederick Street in Northcliffe, creating a supersite of around 3,300 sqm.

The developer said the Palmera apartment tower reflects its long-term view of the Gold Coast as a growing and increasingly diversified economy.

[smartcode_project:default project_id=108274 project_image_fid=365768]

Supported by infrastructure including the light rail network, major road upgrades expanded education, hospital and medical facilities and continued expansion at the Gold Coast Airport with more internation and domestic flights.

Positioned in the tightly held Northcliffe precinct, the 52-level tower will deliver 347 apartments, targeting buyers seeking a high-end coastal lifestyle, from downsizers to interstate investors.

Designed by Marchese Partners with interiors by DBI, Palmera has been conceived as a next-generation residential offering, featuring a collection of oversized apartments, with premium three-bedroom residences offering sweeping northern views stretching from Surfers Paradise through to Burleigh Heads.

[smartcode_project_cta:default project_id=108274]

NAB funds $1 billion Surfers Paradise apartment development, Palmera

Two years after completing one of the newest developments in North Sydney, developer <a href="https://www.apartments.com.au/developers/aqualand-australia">Aqualand</a> is turning its attention to the rapidly evolving St Leonards apartment market.

The developer, which completed AURA by Aqualand on North Sydney's Walker Street, has lodged plans for a 5,918 sqm site at <a href="https://www.apartments.com.au/new-apartments/33-37-herbert-street-st-leonards-nsw-2065">33-37 Herbert Street, St Leonards,</a> seeking approval for a pair of residential towers rising above a shared podium opposite Royal North Shore Hospital.

The proposal forms part of the broader transformation underway across the St Leonards-Crows Nest precinct, where former industrial and commercial sites are increasingly being redeveloped into high-density mixed-use projects tied to major transport infrastructure.

<img alt="Aqualand" data-entity-type="file" data-entity-uuid="2cc428cf-fe70-4cac-9cd5-264ad53af62c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.51.56%E2%80%AFAM.png?VersionId=otKSnHtbjAvAddOnovyXQMgcAwE6DMe1" />

According to the planning documents, the site sits “within the St Leonards–Crows Nest Strategic Centre, identified by the NSW Government as a key area for accommodating future jobs and housing across Sydney.”

The proposal has been designed by fjcstudio, formerly FJMT Studio, and is being progressed through the State Significant Development pathway due to its scale and affordable housing provision.

The scheme would comprise 413 apartments, including 46 affordable housing units, alongside retail and commercial uses fronting Herbert Street. The project would also include communal open space, landscaping, a swimming pool, gymnasium, children’s play areas and podium-level resident amenities.

Planning documents show the development would consist of a part-13, part-39 storey tower form positioned above a four-storey podium.

“The development comprises a unified podium that activates the street interface, and two setback towers to accommodate new housing supply while maintaining an appropriate human scale at ground level,” fjcstudio noted in its Design Report.

The northern and southern towers have been shaped to respond to the surrounding skyline while also limiting overshadowing impacts to nearby public open space, particularly Talus Reserve.

The design report said the differing tower heights were intended to “contribute to a varied skyline while responding to the surrounding built form context and solar access considerations.”

<img alt="Aqualand" data-entity-type="file" data-entity-uuid="36da62dc-ff9e-41f2-a7e3-7be38373751c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.51.45%E2%80%AFAM_0.png?VersionId=Mo6Rp2r.XRLTzIfg_PEEpw8NepDH8UBs" />

The site sits directly opposite Royal North Shore Hospital and within walking distance of both St Leonards Station and the new Crows Nest Metro station.

While the site itself sits just outside the formal Crows Nest Transport Oriented Development boundary, the planning documents repeatedly reference its alignment with the broader TOD objectives reshaping the Lower North Shore.

“The site is located adjacent to St Leonards Station and in close proximity to Crows Nest Metro which is within the Crows Nest Transit Orientated Development Accelerated Precinct which has been identified by the NSW Government to support housing delivery,” the Design Verification Statement noted.

According to fjcstudio, the project has been designed to respond to the broader transition occurring across St Leonards, where increasing residential density is being concentrated around transport infrastructure and employment hubs.

“The broader precinct is undergoing significant change, with a mix of existing mid-rise buildings and newer high-density developments,” the report stated.

“Recent and approved projects indicate a consistent shift toward taller built form, typically organised as tower-and-podium typologies with more active ground levels.”

The proposal includes close to 6,000 sqm of retail and commercial space across the ground floor and podium levels, designed to create a more activated street edge along Herbert Street.

Aqualand’s plans would also introduce a landscaped podium shared between the two towers, with communal open space in the form of a podium rooftop designed to support resident interaction and improve urban greening outcomes. The scheme would also introduce pocket parks at the northern and southern ends of the site, including a landscaped area at the corner of Herbert and Ella streets designed to improve pedestrian amenity and soften the streetscape.

&nbsp;

The proposal is being progressed through the NSW Government’s Housing Delivery Authority pathway, which was introduced to accelerate housing supply across the state. The application was declared State Significant Development in April 2025 following an expression of interest process.

<img alt="Aqualand" data-entity-type="file" data-entity-uuid="faf6d97d-2671-454f-b85a-fe1c6a7be608" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.51.49%E2%80%AFAM.png?VersionId=diVd28OBVr5.YV.7prrOz.uAanwwwm7a" />

St Leonards has been particularly active with new developments in recent weeks. Developer SP Setia’s <a href="https://www.apartments.com.au/news/nsw/first-look-sp-setia-targets-st-leonards-skyline-with-40-storey-tod-tower">plans for a new 42-storey tower</a> recently went on exhibition through the same pathway, while <a href="https://www.apartments.com.au/news/nsw/first-look-stockland-plans-52-storey-538-apartment-st-leonards-tower">Stockland’s 52-storey tower proposal</a> was also recently unveiled.

Aside from the St Leonards project, which is expected to take around nine months to move through the approvals process ahead of a potential 2027 launch, Aqualand is also preparing to launch Boronia, a new apartment project in Roseville comprising around 111 apartments on Larkin Street.

The developer also has approvals in place for the next stage of the Barangaroo precinct, which will feature new residential, retail, hospitality and community uses, alongside a new metro entry across the five-hectare site.

More than 50 new retail destinations are planned for Central Barangaroo, alongside a 270-metre-long boulevard connecting Hickson Park to Nawi Cove. Together with Harbour Park, more than 50 per cent of the precinct will comprise public open space and parkland.

First look: Aqualand joins St Leonards apartment party

Cameron Kusher

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Last week I highlighted sales by price point across the capital cities. 
The data showed a shortening supply of homes selling at lower price points, in particular within some of our largest capital cities.  This week, I want to investigate what this means for those who don’t already own a home and in particular those that are on lower incomes.
The latest quarterly average weekly earnings data from the Australian Bureau of Statistics (ABS) to November 2013 shows that the average Australian earned $1,114.20 a week. Remember this is the average so plenty of people earn less than this figure which is the equivalent of almost $58,000 a year.
Compared to many other countries, Australia’s average wage is quite high however, so too is the cost of living in Australia and in particular the cost of housing as highlighted last week. With a combined capital city median house price of $580,000 and median unit price of $482,000 an average income is not going to go a long way.
But why is the capital city median price more relevant than the nationwide median which is $490,000 and $440,000 for houses and units respectively? Well it comes down to the fact that you generally need to be employed to secure a mortgage and work towards owning a home. 
The latest labour force data from the ABS shows that Australia had 11.578 million employed persons as at June 2014.  With a 6.0% unemployment rate the total size of the workforce, or to put it another way the number of people with employment or actively looking for employment, is 12.320 million.  
For myriad reasons a proportion of the population is not actively working or looking for work at any given time.  As at June 2014 the employment participation rate was 64.7% meaning that for whatever reason there are an estimated 4.349 million people over 15 years of age that are not actively working or looking for work.
The 2011 Census reported that at that time there were 21.504 million Australian’s living across the six states and NT and ACT. At that time, 65.6% of Australian’s (or 14.1 million) lived in a capital city.  A slightly higher 67.4% of persons reported as being in the workforce (working or actively looking for work) lived in a capital city.  In fact, 58.2% of people in the workforce lived in Sydney, Melbourne, Brisbane or Perth.
If we think how this impacts lower income earners and their prospects of entering into home ownership it’s not simply a case that they can move to another city where housing is more affordable. 
Unfortunately in Australia, jobs, particularly well-paying jobs, are largely located in a handful of major capital cities or on mining sites in the middle of nowhere.  The reality of moving to another capital city or to a regional area where housing is cheaper is not a realistic prospect for many low income earners.
There are still opportunities to purchase lower priced homes across the capital cities however, these opportunities are becoming fewer. If you look at where these lower priced sales are occurring, for houses they are typically located on the outskirts of the city.  Houses on the outskirts of cities, particularly the major capital cities, are inherently cheaper because they are often less desirable than those in well-established suburbs closer to the city centre (although not always). Although housing is cheaper in these areas the cost of doing day-to-day tasks is more expensive. 
If you work in the city, the cost of public transport is higher and if you choose to drive you lose hours in traffic, not to mention the additional cost of fuel and road tolls. Local amenities such as shops, schools and health care tend to not be as abundant in outer suburbs as they are closer to the city centre so it will take residents of these areas longer to access these amenities too. 
Although housing may be more affordable within the outer suburbs, it won’t necessarily make it easier for some lower income earners to afford a mortgage when they factor in all the additional costs of living in that location.
Lower priced housing stock is also available within the unit market however, this too has its shortcomings.  There are becoming fewer lower priced units available in areas closer to city centres.  Unit prices are still generally much lower than that of houses although, most of the newer stock comes with a relatively high price tag these days.  Of course units are also much smaller than a house and you tend to get less (in terms of area) for your money.  While a unit may be practical when your single, a couple or have young children, they become less practical if/when the situation changes and the size of the family grows.  Units also don’t offer the same level of freedom as a house with limitations generally in place with regard to what you can and can’t do both within and to your unit.  Although when you own a home you have to pay for upkeep, in a unit complex you have to contribute strata levies each quarter the cost of which can at times be exorbitant.
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So what realistic option does the person on a lower income have? 
Of course housing should be cheaper on the outskirts of the city (and it is) but even still a lot of lower income earners are not in a position to purchase.  This is partly because although housing is cheaper a mortgage is still going to swallow up a sizeable chunk of their income not to mention the other costs associated with living on the outskirts of the city. 
The commonly recommended solution is to remove urban growth boundaries and cut fees and charges on new developments which would theoretically increase supply and therefore bring down the cost of housing.  But I wonder by how much would it really reduce the cost and would it be significant enough to allow lower income earners to purchase.
I think possibly not and here’s why.
It’s not simply a case that we can fix housing affordability by building more and more homes, if that was the case, lower income earners could just move to a more affordable city.  The issue is more to do with employment and specifically where the jobs are located. Even on the outskirts of the capital cities the cost of public transport and fuel will still eat up a sizeable chunk of lower income earners salaries.
If residents on the outskirts still have to travel to get to their jobs (which often they will) they will often encounter a number of hurdles.  Firstly public transport is often woefully insufficient in these areas.  Anyone who has travelled overseas will know that public transport in our larger capital cities is not of a particularly high standard. The other thing with public transport is that it caters much better to those people living closer to the city centre and transport upgrades often benefit inner city dwellers much more than it benefits those on the outskirts of the city, the ones that need it the most. 
Secondly, the road network also tends to be insufficient on the outskirts of the cities unable to cope with the growing population.  This is due to the fact that governments tend to put the onus of building the roads on the developers and will often not provide the major roads to a new housing area until such time as it is absolutely critical.  Developing the roads before the housing would make these areas much more attractive and accessible.
If we can’t provide sufficient public transport and roads to the housing areas on the outskirts of the city, the greatest assistance we can provide when developing these areas is to accompany this residential development with local jobs for these workers. Travelling to work does not become such an issue for low income earners on the outskirts of a capital city if they can find employment locally.  Not to mention it is imperative to bring amenities such as shops, schools and health care closer by. 
If this were to occur, public transport and investment in new major roads becomes not as vital as it is currently when there are so few employment opportunities locally.
If lower income earners aren’t lumped with the additional burdens of significant public transport, fuel and road toll costs to get to their employment then the burden of a mortgage whilst still difficult does not become a virtual impossibility.
So yes, affordable housing is becoming harder to find in our capital cities and yes, increasing supply of housing will help to improve the opportunities to purchase homes at a lower price.
However, local employment drivers and amenities I believe are just as important, especially seeing as time and time again we have seen insufficient investment in public transport and road infrastructure on the outskirts of the cities. Not to mention that the cost of utilising public transport is extremely restrictive. 
Alternatively we should forget pie in the sky proposals such as fast trains between Brisbane and Melbourne and improve the rail network locally.  Each of Sydney, Melbourne and Brisbane could use a more expansive rail networks which includes more stations, better linkages to suburbs on the outskirts and faster connections between nearby cities. 
Investing in improving links and train speeds to the Central Coast, Newcastle, Wollongong, the Blue Mountains and Bathurst from Sydney, to Geelong, Ballarat and Bendigo from Melbourne and to the Gold and Sunshine Coasts and Toowoomba from Brisbane would no doubt be a much more worthwhile investment.
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ckusher-ujnxiKuFQs

Lower income earners' hopes of owning a home have faded

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There is likely to be a continued variance in performances from city to city and region to region.
Much of the growth over the year has occurred in Sydney, Melbourne and Darwin however, more recently the figures being reported for Brisbane suggests that value growth is experiencing a moderate pick up.
Existing property owners 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 and the now falling rental yields. It will be interesting to see whether investors start to turn their attention away from these cities and towards higher yielding markets that are much earlier in their value growth phase such as Brisbane and Adelaide where value growth is now becoming more evident. They could also potentially start looking at other asset classes.
<img src="/images/2014/07/10/kush-july-11-one.jpg" alt="">
RP Data anticipates that affordability constraints will start to impact on value growth in Sydney and Melbourne throughout 2014 as a proportion of potential buyers continue to be squeezed out of the market as values move higher. We have already seen a slowdown in the rate of value growth across Perth and it seems peak growth has now probably passed in both Sydney and Melbourne as well. Although all price segments of the combined capital city market are shifting higher we are seeing the greatest strength in the broad middle segment and comparatively weaker growth across the more affordable segment.
<img src="/images/2014/07/10/kush-july-11-two.jpg" alt="">
Source: RP Data
Despite the signs that the housing and construction sector is picking up as mining investment slows, it does not mean that the economic changeover will be without its challenges.
Globally, the US economy appears to be picking up and the Chinese economy appears to be experiencing a soft landing in terms of its moderation in economic growth however; there are currently a number of concerns around the Chinese housing market. Even the Eurozone’s prospects appear to be improving.
Federal Treasury is now forecasting that the unemployment rate will peak at 6.5%t and they have cut their economic growth forecast for this year from 2.75% to 2.5%. The anticipated jump in the unemployment rate is a potential risk for the housing market. If home owners start to suffer widespread job losses or potential buyers become concerned about job security this will potentially result in an increase in arrears rates and would likely dampen housing market activity.
Of course, if interest rates were to increase this would likely extinguish some of the current housing market exuberance. The low consumer sentiment reading is also likely to have an impact on the housing market; a more nervous consumer will be less inclined to spend many hundreds of thousands of dollars on a home. Furthermore the high level of investment activity is a further potential pitfall for the market.
If value growth slows or potentially falls there is a risk that many of these investors could look to exit the market at the same time, potentially creating downwards pressure on home values. 
<img src="/images/2014/07/10/kush-july-11-three.jpg" alt="">
Source: RP Data
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The best time to buy in Sydney and Melbourne has passed

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Not long before the Australian Bureau of Statistics (ABS) released building approvals data for May 2014, the Reserve Bank Governor (RBA) Glenn Stevens completed a presentation in Hobart.
Within that presentation Glenn Stevens stated: “It would in my opinion be good, for a range of reasons, if it did persist for a while. If the next couple of years saw an unremarkable performance on prices, and construction staying at the higher levels that will clearly be reached over the coming year, it would be an outcome that would contribute to a balanced growth path for the economy and to housing more people at manageable cost.”
This was made in the knowledge that home values rose by 10.1% over the 20-13/14 financial year and following three consecutive monthly falls in dwelling approvals between February and April 2014.  Luckily the May data which was released last week showed a 9.9% rise over the month.  Dwelling approvals are now 14.3% higher year on year.
<img class="aligncenter size-full wp-image-3440" src="https://blog.rpdata.com/wp-content/uploads/2014/07/Chart-1.jpg" alt="Chart 1" width="500" height="181">
After three consecutive monthly falls in dwelling approvals it was looking as if the much vaunted rebound in housing construction was running out of puff (approval is the initial step before construction can commence).
Of course, we don’t want to get too carried away with a one month bounce but it was encouraging to see that the fall in dwelling approvals has, at least for the moment, not continued. Total dwelling approvals in May were 14.3% higher than a year ago with house approvals 14.0% higher and unit approvals 14.5% higher.
<img class="aligncenter size-full wp-image-3441" src="https://blog.rpdata.com/wp-content/uploads/2014/07/Chart-2.jpg" alt="Chart 2" width="500" height="180">
The data is inherently volatile on a month to month basis so I like to also note the annual number of dwelling approvals. Over the 12 months to May 2014, there were 191,088 total dwelling approvals, 107,291 of which were for houses and 83,799 which were for units. 
The annual number of dwelling approvals is at their highest level since there were 192,614 dwelling approvals over the 12 months to December 1994.  Let’s not understate this, the rebound in dwelling approvals is strong and much needed after years of ongoing insufficient supply additions. 
The challenge from here will be what proportion of these approvals actually end up moving to construction and then ultimately completion.
<img class="aligncenter size-full wp-image-3443" src="https://blog.rpdata.com/wp-content/uploads/2014/07/Chart-31.jpg" alt="Chart 3" width="500" height="180">
Focussing on the capital cities, it is encouraging that there has been a significant rise in dwelling approvals across these areas where supply issues are generally most dire. 
On a rolling annual basis, there were 141,845 capital city dwelling approvals over the 12 months to May 2014.  Of these approvals, 68,455 were for houses while 73,390 were for units.  Note that at a national level dwelling approvals for houses still outnumber units however units outnumber houses in the capital cities highlighting the direction that new development is heading in most of our capital cities.
The annual number of capital city house approvals as at May 2014 was 19.6% higher than over the corresponding 12 month period in 2013. Capital city house approvals are at their highest level since the 12 months to February 2011 when 69,524 houses were approved.  
Capital city unit approvals are 23.4% higher than they were a year earlier and are only slightly lower than their record high level of 73,835 unit approvals over the 12 months to March 2014.
<img class="aligncenter size-full wp-image-3444" src="https://blog.rpdata.com/wp-content/uploads/2014/07/Chart-4.jpg" alt="Chart 4" width="500" height="183">
Across individual capital cities the annual number of dwelling approvals is higher across each city except for Darwin. The greatest annual lift in dwelling approvals has been recorded in Brisbane and Sydney. Anyone that has visited either of these cities recently would have seen plenty of residential construction taking place and it seems that there is a significant additional pipeline of residential construction to come.
<img class="aligncenter size-full wp-image-3445" src="https://blog.rpdata.com/wp-content/uploads/2014/07/Chart-5.jpg" alt="Chart 5" width="500" height="180">
As you can see from the above chart, across each of the major capital cities there has been an upswing in dwelling approvals.  The most significant upswing has occurred in Sydney and Brisbane however, the number of approvals remains much higher in Sydney and Melbourne than in all other cities. 
The number of dwellings approved for construction is at an all-time high currently in Perth, is very close to its record high in Sydney and at its highest level since the 12 months to June 2004 in Brisbane.
<img class="aligncenter size-full wp-image-3447" src="https://blog.rpdata.com/wp-content/uploads/2014/07/Chart-61.jpg" alt="Chart 6" width="500" height="180">
We mentioned earlier about the shift towards unit approvals as opposed to house approvals which is much more prominent in capital cities than nationwide. 
The above chart highlights the proportion of dwelling approvals which are for units as opposed to houses over time.  As already noted over the 12 months to May 2014, 51.7% of all capital city dwelling approvals were for units.  In Sydney (69.4%), Melbourne (52.4%), Brisbane (57.2%), Darwin (58.6%) and Canberra (62.9%) a majority of approvals are for units rather than houses. 
In the remaining three cities 31.1% of approvals are for units in Adelaide, 23.9% in Perth and 13.6% in Hobart. I have little doubt that particularly in Perth we will see a growing proportion of approvals for units rather than houses over the coming years.
The May dwelling approvals data showed an encouraging rebound following three consecutive monthly falls.  Keep in mind that Glenn Stevens wants to see higher construction levels over the next few years and that will be the real challenge. 
If consumer sentiment continues to languish and if and when home value growth slows there will be much less certainty around the viability of new residential developments.  Maintaining high levels of new residential approvals (and construction) over the next few years will be no easy feat.
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Encouraging rebound in dwelling approvals, but how many will end up being constructed?

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The recent release of the May 2014 national housing credit data by the Reserve Bank (RBA) confirmed that outstanding housing credit continued to increase at a moderate pace compared with the historic trend.
However, with housing credit aggregates and household debt also starting to rise, it may raise some alarm bells with the Reserve Bank.
The RBA’s financial aggregate statistics details the amount lent by domestic financial institutions. The latest data to May 2014, shows that outstanding credit grew by 0.4% over the month and is 4.7% higher over the year. The annual increase was comprised of a 6.2% rise in housing credit, a 0.3% increase in other personal credit and a 2.7% increase in business credit. Clearly, housing credit continues to be the main driver of the overall expansion in credit.
<img src="/images/2014/07/04/kusher-july-4-one.gif" alt="">
A breakdown of housing credit data over the 12 months to May 2014 shows that owner occupier housing credit increased by 5.2% and investor housing credit increased by a greater 8.3%. This was the greatest annual rise in owner occupier credit since March 2012 and for investor credit, the rise is the largest since August 2010. Historically, the level of credit expansion is quite low where over the past 20 years, the average annual increase in owner occupier housing credit was recorded at 11.3% and investor credit has averaged 16.0%.
The annual change in owner occupier housing credit reached a recent low of 3.9% between January and March of 2013, which indicates that the recent rise has been quite strong.
<img src="/images/2014/07/04/kusher-july-4-two.gif" alt="">
Investment housing credit troughed at an annual increase of 4.8% in January 2012 and has since increased to 8.3% annual growth. Growth in investment lending has been very strong over the past 18 months and in-line with the growth in home values which has been recorded since mid-2012.
The vast majority of outstanding credit to financial institutions is for housing as opposed to other personal or business loans. As at May 2014, the RBA data shows a record high 60.6% of all credit was for housing, a record low 33.2% was to business and 6.2% was for other personal credit provisions.
With only so much money available to be lent by Australian financial institutions, they are showing a clear preference for mortgage lending. In fact, lending for mortgages has been the preferred option for banks consistently since April 2001, right as the housing market started to boom.
<img src="/images/2014/07/04/kusher-july-4-three.gif" alt="">
The preferential treatment by institutions for mortgage lending over businesses is likely due to the ongoing strong performance of mortgages. The confidence around this is based on no recent long-term mass declines in home values and mortgage arrears rates have remained low.
Furthermore, mortgagees have seen equity in their homes increase and used this to fund alternate investment and in some instances, fund the start-up of small businesses.
Each quarter the RBA publishes data on the ratio of household debt to disposable income.The latest data to March 2014 shows that the ratio of total debt is 149.9% which is its highest since September 2010. The ratio of housing debt was recorded at 135.8% which is its highest on record. With home values rising and credit growing households are taking on additional housing debt.
One would think that this is the most problematic development for the RBA. Household debt levels are already high (much higher than public debt) and although household savings has increased over recent years there has been no significant reduction in household debt levels and they are now rising.
<img src="/images/2014/07/04/kusher-july-4-four.gif" alt="">
With a greater number of people looking to purchase homes we are seeing housing credit once again escalating which has now flowed through to a rise in household debt.
We have no doubt that both RBA and APRA will be keeping a close eye on household and housing debt levels as growth in national home values continues. If debt levels continue to rise it is likely to be a potential cause for concern with households becoming more indebted at a time when interest rates are so low. When interest rates inevitably rise in the future, some households may find it harder to repay that debt.
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Housing credit continues to expand as housing debt climbs

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There are many measures of affordability in the marketplace, sadly I believe that many of these measures fail to accurately depict the affordability or otherwise of housing in Australia.  
The main reason being that housing affordability is an extremely complex issue and many factors drive the affordability of housing. In my future posts I am going to investigate some of these factors and tell you what you should really be asking yourself about affordability when purchasing a home.
Can I start by stating that simplistic means of comparing property prices between countries I believe are ineffective. 
Due to different tax regimes, standards of housing and attitudes to property and wealth accumulation there may be perfectly good reasons why a household is prepared to spend more on housing in Australia for example than they are in the United States.  I think common measures such as the median multiple (ratio of household income to property prices) are not necessarily a good way to measure affordability or otherwise, there are a lot more factors at play.
Interest rates
Interest rates are obviously an important component in determining housing affordability.  When interest rates are lower, interest repayments on home loans are lower and as a result ‘affording’ the repayments on a mortgage should be easier.  Of course, as we are seeing at the moment, lower mortgage rates often encourage higher property values. 
So while it’s true that lower interest rates make housing relatively more affordable, if values are rising and sales increase then it can somewhat off-set the affordability benefit of lower mortgage rates.
Furthermore, the typical home loan in Australia is 25 years and the vast majority of home loans are on a variable rate.  As a result, as the Reserve Bank adjusts monetary policy there is virtually an instant effect on household budgets and balance sheets.  For example, at the moment the standard variable mortgage rate sits at 5.95% however, over the past 10 years the variable mortgage rate has averaged 7.27%, over the last 20 years it has averaged 7.45% and over the past 25 years (the typical home loan length) it has averaged 8.47%. Over the past 25 years, standard variable mortgage rates have been as high as 17.0% and as low as 5.75%.
The point is that interest rates can vary greatly over 25 years and over the life of the loan the current interest rate is not a great means of measuring the cost of a mortgage over its lifetime.
Wages / Income
If you are going to take out a mortgage on a home (as most purchasers do) you are going to need an income and you are going to need some savings.  In Australia there are a number of measures of wages/income and it is difficult to know exactly which one is best to use to measure housing affordability.
The National Accounts measure the ‘Real net national disposable income – chain volume’.  This measure does have a number of shortcomings in that it is not an individual measure and that it includes items that one can’t really spend such as superannuation.  Additionally this data is only available from a national standpoint. 
The Australian Bureau of Statistics (ABS) publishes its wage price index each quarter however, it measures wages only and doesn’t measure income captured from other sources.  The Census is undertaken each five years and does report on the median weekly household income however, the shortcoming here is that it is only updated every five years. 
We also have the Household Income Survey from the ABS however it is only undertaken bi-annually and takes a fairly macro view of household incomes
Unfortunately all of these measures have significant shortcomings which need to be considered when looking at any housing affordability measure.
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Labour force / unemployment
Paying off a mortgage eats up a significant portion of a family’s wage.  Undoubtedly if home values weren’t so high and mortgages weren’t so large disposable incomes would be much greater.  Although labour force data or unemployment statistics need not necessarily be an input into any housing affordability measure they are a key consideration for someone looking to purchase. 
The threat of unemployment means that despite the fact housing may seem affordable it is less likely someone would purchase. Obviously if you are unemployed it is going to be difficult to purchase a home.
Another factor to consider is although measures of income show that over recent years wages and disposable income have increased, what they don’t take into account is how many more women are working nowadays.  Labour force data shows that in May 2014, 54.1% of the workforce was male and 45.9% was female, 30 years ago 62.3% was male and 37.6% was female.  Today, 35.5% of full-time workers are female compared to 28.9% 30 years ago. 
The point here is that although household incomes have increased, a big proportion of the increase is due to the structural change associated with a greater number of women in the workforce.  
The rising prevalence of dual income households means that whereas 20 to 30 years ago couples could afford mortgage repayments on a single wage, today they largely require dual incomes.
Home values / prices
Most measures of housing affordability look at median prices or median values. 
The important thing to remember here is that a median is just the middle value so there are just as many homes worth more and less than that figure.  In fact the median price looks only at the middle value of properties which have sold over a period.
This obviously has significant shortcomings because what is predominately selling could be at the affordable or expensive end of the market and this could bias the median one way or another.  Remember that typically only 5% to 7% of total housing stock transacts in a given year.
Another important consideration here is that a national median measure doesn’t really tell you very much at a localised level.  In Australia, 66% of residents live in a capital city with around 55% in Sydney, Melbourne, Brisbane or Perth. 
Quite simply many residents don’t have a choice but to live in a capital city so if you are trying to determine affordability in Melbourne, the cost of housing in Mildura is of no valuable comparison whatsoever.
Rental rates
If you don’t own a home or pay-off a mortgage you have to live elsewhere, for the most part non-homeowners rent.  The cost of renting is an important consideration when trying to determine housing affordability.  If rents are increasing but home values are flat or falling purchasing a home may start to look a more attractive prospect. 
Once again the challenge with a measure which compares rents to house price (or mortgage repayments) is that it is not a localised analysis.  For example for the cost of renting in Paddington in Sydney you may actually be able to pay off a mortgage in Guildford but to the renter is the opportunity cost of owning their own home and being further away from the city centre, harbour and the beaches worthwhile? 
Who knows but for anyone looking to purchase these are the sorts of questions they need to be asking themselves.
The other key consideration is that the ongoing costs associated with owning a home as opposed to renting are difficult to determine, but they are much more than renting.  As a renter, the ongoing costs generally include: the rent, the bond, electricity, gas (if applicable), cleaning (if you move rentals) and the cost of moving if/when you move. 
As an owner of a home the costs incurred include: the mortgage, electricity, gas, council rates, stamp duty when you purchase, ongoing maintenance of the property, strata fees (if you own a unit) and agent fees if/when you decide to move.  The ongoing costs associated with owning a home are much greater than the ongoing costs of renting.
Who does housing affordability affect most?
Housing affordability affects everyone.  The high cost of housing acts as a disincentive for people to move to more appropriate locations, discourages people from upsizing and downsizing and discourages movement intra or interstate for employment.  The group most affected by housing affordability however is those who don’t as yet own a home.
Again if we think about many of the measures of affordability used they look at typical or median prices values and compare to interest rates and typical wages.  The problem with this approach is that very few people are actually typical.  As a generalisation, most people that rent are younger, starting out their careers. 
There is a high likelihood that their wage is currently lower than the median (although there is a good chance it will increase as they are promoted or move jobs).  If their wage is below the typical wage then they should not be looking to buy the typical (or median house).
Of course there are plenty of renters that earn above average wages but choose not to purchase as well but when trying to tackle the affordability question I think many of the measures that we look at are far too simplistic, but hamstrung by the quality and granularity of income data. 
Housing affordability is an individual thing and none of the measures really tell the true story about how affordable or unaffordable housing in Australia is.  When determining whether you can afford to buy a home I think the most important things to consider are:
<ol>
<li>What are current mortgage rates and at what higher level would I not be able to repay my mortgage?</li>
<li>How secure is my job and what would happen if I was to lose my job for an extended period?</li>
<li>Over the next few years what is the realistic expectations for my wage, will it rise and by how much?</li>
<li>What impact would it have if I found a partner or lost a partner on my ability to repay the mortgage?</li>
<li>If I plan to have children, children cost a lot what impact would that have on my ability to repay the mortgage?</li>
<li>Compared to my current rent and associated costs, how much more is paying off a mortgage and the other day-to day costs of home ownership really going to be and can I afford this?</li>
<li>What am I willing to sacrifice in order to buy a home; lifestyle, location, overseas travel etc?  What is the opportunity cost of buying a home?</li>
</ol>
I am sure there are many more questions to ask when looking to purchase but I think as a start these questions are essential.  I say that the measures of affordability which are readily available should be taken with a grain of sale. 
It’s more important to ask yourself some tough questions about whether or not you can really afford to be a home owner.  If you have any doubt you really need to consider whether it is worth the risk or not.
For what it’s worth, I think that housing affordability is a significant issue for young Australians, particularly those within our capital city markets.  he major problem is that most Australian’s choose to build wealth through property and 23 years of unabated economic growth has on exacerbated this. 
The challenge now is how can you deliver affordable housing for younger Australians without bringing down the cost of existing housing which politically and economically would be detrimental to the overall health of the Australian economy.
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Forget affordability measures and ask yourself some tough questions

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With property buyer competition intensifying as result of more than 12 months of buoyant property market conditions, on average, houses took 80 days to sell while units were taking 75 days over 12 months to March 2014.
For the same period in 2013, houses took 94 days to sell and units took 88 days. Although the typical selling time for both houses and units has reduced, at a national level it remains quite elevated.
Aacross the individual capital cities the annual average time on market has generally fallen over the year.
<img src="/images/2014/06/12/kusher-june-12-one.jpg" alt="">
The cities to record the shortest time on market for houses were Perth at 54 days and Sydney at 59 days. In contrast, the cities to record the longest days on market were Hobart with 90 days and Darwin with 86 days. For units, Sydney at 49 and Perth 56 recorded the shortest days on market, while Hobart and Darwin shared the longest days on market at 96.
At a broader level, council areas where of the top 25 listed for houses, Bassendean in Perth had the shortest average number of days on the market over the year at 32 days. Across each of the council areas listed there has been a fall in the average number of days on the market over the past year.
Turning the focus to the unit market, the trends are similar to those found across houses. All of the areas with the shortest average days on market are within a capital city and all of them are within Sydney, Melbourne or Perth.
<img src="/images/2014/06/12/kusher-june-12-two.jpg" alt="">
Once again, the Perth council area of Bassendean recorded the shortest average number of days on market for units with 27 days; a significant drop from 74 days at the same time a year ago. Across the capital cities, 18 of the 25 areas listed were in Sydney with one Melbourne region listed and the remaining six regions located within Perth.
The fall in average time on market at a national level is a clear sign that the amount of sales is picking up and sellers are becoming more empowered at the time of negotiation.
If there is less scope for negotiation and discounting, you will typically find that a property sells quicker which is the scenario currently at play.
Today’s time-on-market data release also highlights the geographic dispersion of the stronger housing market conditions where in particular, capital cities are generally experiencing a faster rate of sale. This is reflected in the data which shows that selling conditions have been much stronger in Sydney, Melbourne and Perth.
With mortgage rates tipped to remain low for some time yet it is reasonable to expect that we are likely to see a further lowering of the average days on market. There is evidence which suggests peak capital growth conditions have passed in Sydney, Melbourne and Perth so in 12 months’ time the list of fastest selling council areas could look quite different as buyers broaden their horizons and look for opportunities outside of these centres.
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Where are homes selling the quickest?

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Housing finance data for April 2014 was <a href="/expert-insights/finance/first-home-buyers-fall-back-to-record-lows">released this week</a> by the Australian Bureau of Statistics (ABS). 
The headline figure for the number of owner occupier housing finance commitments was flat over the month however, dig a little deeper and there are some differing trends emerging.
<img class="aligncenter size-full wp-image-3337" src="https://blog.rpdata.com/wp-content/uploads/2014/06/Chart-1.jpg" alt="Chart 1">
As mentioned, the number of owner occupier housing finance commitments was flat over the month following on from a -0.8% fall in March. This data is split into commitments for refinance purposes and commitments for non-refinances (or new loans). 
Refinance commitments rose by 0.6% compared to a -0.3% fall in non-refinance commitments.  Non-refinance commitments fell over consecutive months and it was the first time this has happened since December 2012. 
Given the number is a count it is important to look at the trend and it is clear from the first chart that the number of owner occupier commitments, whether it be for non-refinances or refinances is beginning to flatten. 
Year-on-year, refinance commitments are 8.6% higher compared to a 5.7% rise in non-refinance commitments.
<img class="aligncenter size-full wp-image-3338" src="https://blog.rpdata.com/wp-content/uploads/2014/06/Chart-2.jpg" alt="Chart 2" width="500" height="179">
The number of owner occupier housing finance commitments for the construction of new dwellings and the purchase of new dwellings have shown a strong rise recently however, as the above chart shows there has been some recent weakness in commitments for the purchase of new dwellings.
The number of commitments for construction of new is almost three times greater than the number for purchase of new nevertheless, the recent weakness is certainly something to keep track of.
<img class="aligncenter size-full wp-image-3339" src="https://blog.rpdata.com/wp-content/uploads/2014/06/Chart-3.jpg" alt="Chart 3" width="500" height="182">
The data on the number of commitments is important however it is narrow in its scope given it does not include investors. 
From a banking perspective, the value of the funds they are lending is arguably more important than the number of loans written. The total value of housing finance commitments (which includes investor commitments) increased by 1.7% in April and increased by the same amount if you remove refinance commitments.
Over the month, owner occupier refinance commitments were 1.6% higher, owner occupier non-refinance commitments were 1.3% higher and investment loan commitments increased by 2.3%.  As the above chart shows, investment and owner occupier lending is at record high levels whereas non-refinance loan commitments are still -5.7% lower than their previous peak. 
In terms of the value of finance commitments all three segments continue to record a rise and are trending higher. 
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Year-on-year the total value of housing finance commitments are 20.4% higher with owner occupier refinances up 19.1%, owner occupier non-refinances up 13.4% and investment loans 29.8% higher.
<img class="aligncenter size-full wp-image-3340" src="https://blog.rpdata.com/wp-content/uploads/2014/06/Chart-4.jpg" alt="Chart 4" width="500" height="179">
It’s also important to look at the make-up of lending across owner occupiers and investment loans. 
Over the month of April, 43.0% of all lending was to owner occupiers for non-refinances, 39.4% was to investors and 17.6% was to owner occupiers for refinances. As the above chart shows the proportion of lending to investors is high on an historical basis. 
In fact investment lending is sitting at levels not seen since late 2003. It is clear from the data that there is significant demand for housing from investment currently. 
The big question of course is how sustainable is that demand given there was a sharp slowdown in this segment of the market shortly thereafter lending last reached similar heights.
<img class="aligncenter size-full wp-image-3342" src="https://blog.rpdata.com/wp-content/uploads/2014/06/Chart-5.jpg" alt="Chart 5" width="500" height="182">
It is interesting to pair this data with recently released quarterly data from the Australian Prudential Regulatory Authority (APRA) about Authorised Deposit-taking Institutions’ (ADIs) exposure to property.  The latest data showed that interest-only loans accounted for 39.4% of all loans over the quarter (a similar proportion to these investor figures). 
However, the data also suggested that loans with a loan to value ratio (LVR) of more than 90% may be getting harder to find with 13.5% of new loans over the quarter with an LVR of more than 90% which was the lowest proportion since September 2011.
<img class="aligncenter size-full wp-image-3341" src="https://blog.rpdata.com/wp-content/uploads/2014/06/Chart-6.jpg" alt="Chart 6" width="500" height="183">
Focussing on lending to first home buyers, there were 6,074 housing finance commitments to first home buyers in April 2014.  This figure was -7.3% lower over the month and -12.7% lower year-on-year. 
As a proportion of all owner occupier housing finance commitments, first home buyers accounted for an equal record low of just 12.3% of the commitments over the month.
<img class="aligncenter size-full wp-image-3343" src="https://blog.rpdata.com/wp-content/uploads/2014/06/Chart-7.jpg" alt="Chart 7" width="500" height="264">
The RP Data Mortgage Index (RMI) which is an index of mortgage events across RP Data’s proprietary platforms has a strong correlation with housing finance data and is a weekly index.  The RMI predicted a softening of activity some six weeks ago and is indicating a sharp rebound in the housing finance data once the May data is released.  Note that the RMI data is correlated strongly to the raw housing finance data not the seasonally adjusted figures which are referred to elsewhere throughout this post.
The data seems to suggest that the growth in the number of new owner occupier housing finance commitments is starting to, or already has, topped out. There is still plenty of activity in the owner occupier refinance and investment segments of the market.  Of course our chief concern remains the high level of investment activity in the market. 
Total returns from residential property have been strong over the past 12 to 18 months however, we believe that the peak level of capital growth has now passed and rental yields continue to fall. 
Although total returns are still strong they are likely to diminish from here and where will that leave these investors especially if they were simply chasing the short-term value appreciation which has been particularly prevalent in Sydney and Melbourne over the past year. 
The good news is that the higher risk, high LVR loans are reducing however, there are still a lot of instances in which mortgagees are only paying back the interest component of the mortgage.
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Owner-occupier housing finance commitments topping out

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For the first three months of 2014 there were 82,051 house sales and 30,417 unit sales recorded. Sales over the first quarter of this year were much softer than over the last quarter of 2013.
 Regardless, March 2014 managed to record the strongest first quarter for house sales since 2009, and the strongest for units since 2010. House sales were 7.9% higher and unit sales are 4.0% higher than for the same quarter in 2013.
 <img src="/images/2014/06/06/kusher-june-6-one.gif" alt="">
Sales volumes are generally lower over the first quarter of any year compared to the remaining quarters which is largely due to a slowing in housing market activity throughout most of January and often well into February.
Given this, it’s not necessarily best to compare sales between quarters because the housing market acts very differently in each period however, comparing to the same quarter in previous years does provide insight into the comparative performance of the market.
Across individual capital city markets, the annual change in sales is quite varied and dependent upon where each city is within the property cycle.
 <img src="/images/2014/06/06/kusher-june-6-two.gif" alt="">
In the more subdued capital city markets of Brisbane and Adelaide where value growth has been limited, these two cities managed to record the greatest annual rise in sales; up 21.1% and 10.8% respectively. Perth and Canberra on the other hand, have recorded falls in sales over the year, down -8.2% and -4.2% respectively.
By way of the variation between houses and units the pick-up in sales activity year-on-year has been greater for houses (7.9%) than it has been for units (1.2%). Over the first three months of this year, house sales were higher than in the same period last year across each city except for Perth (-5.9%) and Darwin (-6.0%). Focussing on unit sales, sales are lower over the first quarter in Sydney (-1.7%), Perth (-17.6%) and Canberra (-23.9%).
 <img src="/images/2014/06/06/kusher-june-6-thre.gif" alt="">
Historically there has always been a strong correlation between sales volumes and property values. If demand is greater and more homes are selling, the likelihood is that values will rise. Alternatively, if fewer buyers are active in the market selling conditions become tougher and values fall,” he said.
When the number of homes sales across Australia’s capital cities edge below 80,000 on a quarterly basis, values are typically rising by a quarterly rate of less than 2.0%. However, when quarterly sales fall to 70,000, this has generally been a trigger point for values to start falling.
While our March sales volumes data indicates that although sales are higher than they were a year ago, monthly sales activity isn’t as strong as it was at the end of 2013.
With the quarterly rate of home value growth having most recently peaked in September 2013 and quarterly sales having peaked shortly thereafter in November, it will be interesting to watch what happens to sales and values from here.
 <img src="/images/2014/06/06/kusher-june-6-four.gif" alt="">
The May RP Data-Rismark Home Value Index results released earlier this week confirmed that capital city home values fell by -1.9% in May 2014. Although this is likely the result of a seasonal influence on the reading, I question that with quarterly value growth peaking and sales volumes tapering, will volumes continue to ease and value growth continue to moderate? Alternatively, will the second half of the year see a rebound in both sales and values much like occurred over the second half of 2013?
While as yet we don’t know the answer to this question, we do know is that last year values rose by 3.0% over the first six months of 2013 followed by a 6.6% capital gain over the second half. With interest rates set to remain low, it may provide enough stimuli to see values start climbing more rapidly once more. We believe that the strong growth in late 2013 and early 2014 has peaked and although values are likely to keep rising, they will most likely do so at a more moderate pace.
This is largely due to affordability constraints becoming more prevalent in the market and both lower returns and capital growth potential for the investors that have been so active in the market. Adding to this is consumer sentiment, which has been trending lower since September last year.
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March quarter strongest for house sales in five years

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Growing demand for housing close to inner city areas was the topic of a recent speech by The Reserve Bank’s (RBA) head of financial stability, Luci Ellis.
Entitled ‘Space and Stability: Some Reflections on the Housing-Finance System’, Ellis made some valid points relevant to the housing market in her speech.
Ellis’ speech goes some way to explaining why detached housing closer to the centre of a city is much more expensive than for those suburbs located further away. Put simply, Ellis noted in her speech that housing in these areas is in short supply and with high demand due to its convenience to major working nodes. 
Several key points made on housing within the speech were:
<ul>
<li>Housing prices in the inner-ring are becoming more expensive than those in outer areas of our capital cities;</li>
<li>The availability of jobs is becoming even more centralised, particularly within already established working nodes;</li>
<li>There are minimal jobs outside of city areas; it is becoming increasingly difficult to grow smaller cities and few centres outside of the capital cities have job magnets. Given this, when residents are priced out of capital cities and more affordable regional housing options are not a viable alternative.</li>
</ul>
A rise in the popularity of inner-city unit living is driven by a desire to live closer to the city centre at a lower cost than detached housing. Australia has comparatively low density cities with significant price premiums in the most convenient areas of the city.
Ellis’ speech noted that if housing costs rise beyond people's comfort levels, it is not always feasible or attractive for households to respond by moving to cheaper areas, especially if the more affordable options are further away from their place of employment.
The RBA is hopeful that over time the structure of our cities is such that home owners will have more options as to where they can live, rather than having to live in expensive housing closer to working nodes such as current policies often necessitate.
With plenty of commentary around on some of the best performing areas around the country, it’s important to note that this analysis is typically undertaken over a relatively short-time frame of around 10 years, and where it is often reported that new greenfield areas and regional housing markets are better for capital growth than inner city areas.
The nature of new greenfield developments, both within a capital city and in regional areas, can lift prices in these areas from a very low starting point to a much higher new base as the area sees an influx of new modern housing. While over a shorter time frame this may result in heightened levels of median price increases, this is typically a relatively short-term phenomenon.
It also compares to the shift from a much lower quality initial housing product to a far superior newer housing supply.
Below is a list of suburbs that have recorded the largest rise in median selling prices over a 10 year and a 20 year timeframe. Interestingly, Miles and Chinchilla in regional Queensland are the only regional suburbs listed. Elsewhere, the list is dominated by a collection of the most desirable inner city suburbs in Sydney, Melbourne and Brisbane - all with high median prices, and all relatively close to major working nodes .
<img src="/images/2014/05/29/kusher-may-29-chart-one.gif" alt="">
With the population continuing to grow and housing supply insufficient we would expect that inner-city houses will continue to be the best performed over the long-term with significant demand and a short supply available.
Note: Median prices are not the most appropriate measure of a market change because these don’t continually measure the change across the same collection of properties. Median prices look at those properties that transaction over specific periods (which may be dramatically different each year).
The table above shows a strong bias towards regional areas of the country over a shorter time frame, particularly those linked to the resource sector. The rate of compound growth over the 10 years is much higher than those in the second table which looks at the 20 year period and reflects the boom in the mining sector over recent years.
The table below supports comments from the RBA with the list dominated by inner city suburbs.
<img src="/images/2014/05/29/kusher-may-29-chart-two.gif" alt="">
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Reserve Bank’s take on current housing market

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Earlier this week the Australian Bureau of Statistics (ABS) released data which revealed that 46.4% of state and local government taxation revenue over the 2012-13 financial year came from property related taxes.
The data showed that over the year, state and local governments collected a record $35.931 billion in taxes from property related sources.  
In comparison, they collected $20.752 million in taxes from employers, $11,089 million in taxes from the provision of goods and services and $9.638 million in taxes on the use of goods and performance of activities.  As this shows, at a state and local government level property taxes are the largest source of revenue.
<img class="aligncenter size-full wp-image-3293" src="https://blog.rpdata.com/wp-content/uploads/2014/05/Chart-13.jpg" alt="Chart 1">
Source: RP Data, ABS.
The total value of property related taxes increased by 7.2% over the most recent financial year.  In comparison, taxes on employer’s payroll and labour force rose by 5.1%, taxes on the provision of goods and services rose 2.4% and taxes on the use of goods and performance of activities rose 8.6%.
With home values nationally beginning to rise in June 2012, it is clear that state and local government are a major benefactor. With higher home values, taxes such as land tax, municipal rates and stamp duty on conveyances all increase.
<img class="aligncenter size-full wp-image-3294" src="https://blog.rpdata.com/wp-content/uploads/2014/05/Chart-23.jpg" alt="Chart 2" width="500" height="501">
Source: RP Data, ABS.
Of the $35.931 billion in property related tax revenue collected in 2012-13, 40% came from municipal rates and 36% came from stamp duties on conveyances.  Land tax was the only other sizeable contributor to property related tax accounting for 17% of revenue.  Over the year the most significant increase in property related taxes came from stamp duty, up by 16.9%.  The amount of tax revenue collected from municipal rates increased by 6.8%, and land taxes increased by 1.5%.
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Property related tax revenue is only collected by those who own properties. Ultimately every property is owned by someone, some as an owner occupier and some as an investor. 
The taxes levied against property are typically only payable by the owner of the property.  Given this, those who choose to rent rather than own property pay no tax on property.  Not to mention the fact that the cost of renting is typically much lower than the cost of owning, it is no surprise more people are choosing to rent rather than own property.
State and local governments have clearly experienced a significant revenue boost via the improvement in the residential housing market over the year.  Stamp duty in particular has seen a significant rise.  With sales volumes and property values rising there have been more sales to receive stamp duty from and at a higher price which also increases the stamp duty collected. 
Of course, the issue with stamp duty is that it is a tax only collected across those properties which sell.  From a residential perspective this is just 5% to 7% of the total housing stock over a given year.  Stamp duty also acts as a disincentive for home owners to transact property on a more regular basis because it is a tax paid on a new purchase.
Many people have called for the removal of stamp duties which would be a positive move to encourage greater mobility of residents.  Of course state and local governments would lose 36% of their property related tax revenue and 17% of their total taxation revenue. 
Many have called for replacing stamp duty with a blanket land tax, another tax would likely be very unpopular and you’d have to consider how equitable that would be particularly for those who have recently paid stamp duty. 
To put a blanket land tax into perspective to cover the $12.841 billion in stamp duty revenue over the 2012-13 financial year, each residential dwelling would have to pay $1,391.69 based on the ABS estimate of 9,226,900 residential dwellings as at June 2013.  Keep in mind that stamp duty isn’t just payable on residential property transactions.
<img class="aligncenter size-full wp-image-3295" src="https://blog.rpdata.com/wp-content/uploads/2014/05/Chart-33.jpg" alt="Chart 3" width="500" height="163">
Source: RP Data, ABS.
Over the year, stamp duty revenue was higher in each state except for Victoria (-1.4%), Queensland (-6.7%) and the Australian Capital Territory (-3.3%).  New South Wales (21.4%), Western Australia (33.0%) and the Northern Territory (35.5%) recorded the greatest rises in stamp duty revenue. 
According to the RP Data-Rismark Home Value Index, Sydney home values rose by 5.6% over the year, Perth values were 6.0% higher and Darwin values were 6.1% higher.  Conversely, Melbourne home values were 3.4% higher, Brisbane values were just 0.6% higher and Canberra value were 1.1% higher.  Clearly home value rises have a positive effect on stamp duty revenues.
The data highlighted shows that property is the most important source of revenue for state and local governments, accounting for 46.4% of their total taxation revenue.  The issue of course is that these levels of government are looking to constantly grow their revenues. 
The two main sources of property related revenue are rates and stamp duty.  Rates can be grown by encouraging a greater number of ratepayers into a region (create more housing) and stamp duty can only be lifted by changing the rates or encouraging higher prices and/or more sales. 
In certain regions increasing the supply of ratepayers is not possible so it is clear that stamp duty is an extremely important source of revenue. With the housing market recording significant value growth and much higher sales volumes throughout the 2013-14 financial year, no doubt stamp duty revenue will be much higher again. 
The question is can governments continue to rely on property being a one-way bet?  Particularly when the Reserve Bank has repeatedly warned of late that it is not.
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Cameron Kusher

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