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.

<iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen="" frameborder="0" height="315" referrerpolicy="strict-origin-when-cross-origin" src="https://www.youtube.com/embed/FH_1EzB-1vs?si=XScVlP1ERsTDJoME" title="YouTube video player" width="560"></iframe>

"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 2013-2014 dwelling price upswing has triggered a significant drop in rental yields, according to RP Data.
Their research shows rents have failed to keep pace with prices in all capital cities, RP Data research analyst Cameron Kusher noted.
“As a result of values rising faster than rental rates, gross rental yields have fallen over the past year across each capital city,” he said.
<img src="/images/2014/05/22/kusher-may-22-two.gif" alt="">
Sydney and Melbourne were the only mainland capitals were rental growth was greater from 2013 to 2014 than the year prior, but were also the cities where rental yields saw the biggest downturn.
“These two cities also have the lowest yields of all capital cities, at 3.9% and 3.4% respectively,” he said.
Sydney rents rose by 3.7% in the past year, making it the only city where growth outstripped inflation.
By comparison, house prices in the city increased by 16.7% since April 2013.
Rental growth slowed in the other five cities, with Perth seeing the biggest drop.
<img src="/images/2014/05/22/kusher-may-22-four.gif" alt="">
Asking rents in Perth fell by 0.5% over the past 12 months, compared to an increase of 10.4% in the year prior.
Kusher said investors had remained active in the market despite shrinking rental returns.
“Rental growth has slowed markedly and rental yields are falling as value growth significantly outpaces rental growth,” he said.
<img src="/images/2014/05/22/kusher-may-22-three.gif" alt="">
The May RP Data-Rismark Home Value Index reported that combined capital city home values increased by 11.5%. At an individual capital city level, value growth ranged from 1.2% in Canberra to a 16.7% rise in Sydney.
Australia’s combined capital cities recorded an increase in rental rates of 2.4% over the past year.
Sydney, Melbourne and Hobart were the only capital cities where rental growth was greater over the past 12 months than for the previous 12 months. At the other end of the spectrum, growth slowed across five of the eight capital cities with Perth experiencing the most extreme slowdown.
Over the 12 months to April 2013, Perth rental rates had increased by 10.4% compared to a -0.5% fall over the most recent 12 months. 
Kusher suggests that most investors must be chasing capital growth rather than rental return. 
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jchancellor-FAypfDUnLy

Property rental yields fall across all capital cities

<html><body>
While a rise in home values across Australia’s property market has been welcome news for Sydney and Melbourne property owners in particular, the flow on effect hasn’t been so favourable for rental growth and yields.
Rental growth has slowed markedly and rental yields are falling as value growth significantly outpaces rental growth.
<img src="/images/2014/05/22/kusher-may-22-one.gif" alt="">
The May RP Data-Rismark Home Value Index reported that combined capital city home values increased by 11.5%. At an individual capital city level, value growth ranged from 1.2% in Canberra to a 16.7% rise in Sydney. Australia’s combined capital cities recorded an increase in rental rates of 2.4% over the past year.
Sydney, Melbourne and Hobart are the only capital cities where rental growth was greater over the past 12 months than for the previous 12 months. At the other end of the spectrum, growth slowed across five of the eight capital cities with Perth experiencing the most extreme slowdown.
<img src="/images/2014/05/22/kusher-may-22-two.gif" alt="">
Over the 12 months to April 2013, Perth rental rates had increased by 10.4% compared to a -0.5% fall over the most recent 12 months. Sydney was the only city to record an increase in rental rates higher than inflation; up 3.7% over the past year.
With a large percentage of loans now going to investors at a time when the rate of rental growth is slowing would suggest that most investors are chasing capital growth rather than rental return. When you consider that the value growth in our two largest cities (Sydney and Melbourne) has been so strong over the past year, it’s no surprise.
<img src="/images/2014/05/22/kusher-may-22-three.gif" alt="">
Comparing annual value growth and annual rental growth across each capital city, home values rose at a faster pace than rental rates and as a result, rental yields experienced a fall over the year.
It wasn’t surprising to see that the greatest differences between home value growth and rental growth have been recorded in Sydney and Melbourne.
<img src="/images/2014/05/22/kusher-may-22-four.gif" alt="">
As a result of values rising faster than rental rates, gross rental yields have fallen over the past year across each capital city. The largest falls in yields have been experienced across Sydney and Melbourne where value growth has been strongest. These two cities also have the lowest yields of all capital cities at 3.9% and 3.4% respectively.
This highlight that as home values rise, the level of rental growth has not been able to keep pace.
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ckusher-ujnxiKuFQs

Flow on effect of rising home value is slowing rental growth and falling yields

<html><body>
Over the three months to April 1990, the median selling price of a dwelling (a combination of houses and units) across Sydney was recorded at $152,500. 
As at April 2014, the median selling price of a dwelling was $680,000 which represents a 347% increase in selling price over the 24 year period.  Of course a median price is only measured across properties which actually transacted but it is interesting to look at what the median priced home is over time
The following charts will look at the changes in median price over time and the location of median priced sales.  Note that the each dot represents one sale and the red dots indicate house sales while the blue dots represent unit sales.  The buffers shown on the maps represent a 10 kilometre, 20 kilometre and 50 kilometre distance from the Sydney CBD.
Three months to April 1990
<img class="aligncenter size-large wp-image-3252" src="https://blog.rpdata.com/wp-content/uploads/2014/05/Sydney-1990-580x533.jpg" alt="Sydney 1990" width="580" height="533">
The median price of a Sydney home over the three months to April 1990 was $237,000, across the city there was 12 sales at that price over the period, three of which were units and the remaining nine were houses. 
Apart from one sale at <a href="/news">Sylvania</a>, the reaming 11 sales all occurred within a 20 kilometre radius of the city.  For houses, you will note that four of the nine suburbs are located within a 10 kilometre radius of the city and for units, <a href="/news">Epping</a> was the only suburb with a sale outside of the 10 kilometre region.
Three months to April 1994
<img class="aligncenter size-large wp-image-3253" src="https://blog.rpdata.com/wp-content/uploads/2014/05/Sydney-1994-580x537.jpg" alt="Sydney 1994" width="580" height="537">
Moving to April 1994, there were 34 sales at the median price over the three month period and the median price was recorded at $169,000. 
Comparing this chart to the previous chart you see that the median priced house is beginning to move further away from the city centre with only five of the 24 median priced house sales within 10 kilometres of the city centre and five of those 24 sales were located more than 20 kilometres from the city centre.  For units, three of the 10 sales were outside of a 10 kilometre radius of the city, two of which were more than 20 kilometres away.
Three months to April 1999
<img class="aligncenter size-large wp-image-3254" src="https://blog.rpdata.com/wp-content/uploads/2014/05/Sydney-1999-580x540.jpg" alt="Sydney 1999" width="580" height="540">
By April 1999, the Sydney median house price was recorded at $237,000 and over that three month period there was 28 houses sold at that price and 31 units. 
The big shift over the five year period was the fact that none of the median priced house sales were within a 10 kilometre radius and a greater proportion were located more than 20 kilometres from the city than those within 20 kilometres. 
Within a 10 kilometre radius of the city, units where the only sales at the median price however, units transacting at the median price were becoming more common in areas more than 10 kilometres from the city centre.
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Three months to April 2004
<img class="aligncenter size-large wp-image-3255" src="https://blog.rpdata.com/wp-content/uploads/2014/05/Sydney-2004-580x543.jpg" alt="Sydney 2004" width="580" height="543">
The median Sydney dwelling price over the three months to April 2004 in Sydney was recorded at $440,000.
Over the preceding three months there were 62 house sales and 65 unit sales at that price.
Compared to five years earlier there were a few house sales within 10 kilometres of the city centre however, once again the majority occurred more than 20 kilometres from the city centre.  For units, most sales still occurred close to the city centre however, more and more were transacting at the median price further away from the city centre.
Three months to April 2009
<img class="aligncenter size-large wp-image-3256" src="https://blog.rpdata.com/wp-content/uploads/2014/05/Sydney-2009-580x544.jpg" alt="Sydney 2009" width="580" height="544">
By April 2009, the median dwelling price in Sydney was slightly lower than from five years earlier, recorded at $420,000. Keep in mind that from early 2004 to mid-2009 there was no growth in Sydney home values after they fell by around 10%.  
The map is quite similar to the previous one with 102 houses and 103 units sold at the median price. 
Once again only a few house sales were within a 10 kilometre radius of the city with the vast majority occurring more than 20 kilometres from the CBD.  Unit sales were fairly similar and mostly focused within the 20 kilometre radius of the city.
Three months to April 2014
<img class="aligncenter size-large wp-image-3257" src="https://blog.rpdata.com/wp-content/uploads/2014/05/Sydney-2014-580x550.jpg" alt="Sydney 2014" width="580" height="550">
Over the most recent three month period, the median Sydney dwelling price was recorded at $680,000.  Over the three month period (and note these figures will be revised higher) there was 31 house sales at the median price and 40 unit sales. 
Looking at the above map again we see few house sales within a 20 kilometre radius of the city and the median priced unit is pushing further away from the city centre with more and more sales occurring more than 10 kilometres from the CBD.
The analysis is an interesting exercise in how over time, the ‘typical’ home across the city is moving further and further away from the city centre. 
As a result, it is no wonder we are seeing growing levels of higher density development in the major capital cities.  As the typical housing option moves further away from the city centre, those that need or want to be close to the city centre look for more affordable alternatives such as units. 
As the city continues to grow and density in the inner city increases we would expect a further drift outwards of both the typical house and unit sale in Sydney.
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Sydney housing over time: A case study

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The differential between house and unit values is widening across Australia’s capital cities where houses are now recording greater value growth than units.
 Of the top five areas surveyed in each capital city, Peppermint Grove on the banks of the Swan River in Perth holds the greatest differential between capital city unit and house values; house values are 687% (or almost seven times) more expensive than unit values in the suburb.
Centennial Park in Sydney’s eastern suburbs followed and recorded a 523% differential then came the upmarket suburb of Toorak in Melbourne’s inner city at 283%.
Adelaide was a surprise addition with Toorak Gardens recording a differential of 280%, while Ascot in Brisbane recorded 236%. Forrest in Canberra recorded 242%. Lagging behind was Darwin and Hobart with their respective widest differentials of 156% and 105%.
<img src="/images/2014/05/15/kusher-may-15-two.jpg" alt="">
The data shows that at the end of the first quarter of 2014, combined capital city house values were 28% higher than those for combined capital city unit values while for the past 12 months, house values increased by 10.7% compared to a 9.4% rise in unit values. The faster rate of value growth for houses is likely to result in a growing differential between house and unit values.
Across the individual capital cities, house values are higher than unit values in each city with the differentials recorded at: Sydney (40%), Melbourne (40%), Brisbane (27%), Adelaide (31%), Perth (23%), Hobart (12%), Darwin (34%) and Canberra (46%). In most capitals we are seeing this differential widening.
I’m not surprised at the results given the widening gap between houses and units. It’s no real surprise we are seeing a rapid shift to greater development of units as opposed to houses.
More units have been approved for construction than houses in Sydney, Melbourne, Brisbane, Darwin and Canberra. However, it’s important to remember that more houses sell each year than the more affordable alternative which is units. As values rise, the challenge for some buyers is that they become priced out of the detached house market and will then need to divert the attention to more affordable alternatives found in the unit market. Today’s adjacent table listing the Top 5 suburbs highlights this fact well.
While many people aspire to living in desirable inner city areas, the reality is that there is a short supply of detached houses in these areas coupled with plenty of demand. As a result many will never be able to meet these aspirations. The alternative is to look to the unit market where the cost is still going to be comparatively high but is generally significantly lower than that of a detached house.
Units in these suburbs are often older style units which don’t come with modern architecture. Most of these suburbs are long established suburbs and have a fairly limited supply of units, most of which were built many years ago.
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House price growth increasingly higher than unit values

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The Australian Bureau of Statistics (ABS) released housing finance data for March 2014 earlier this week.
The data showed that the number of owner occupier housing finance commitments fell by -0.9% in March.  In value terms, lending to owner occupiers was -1.2% lower over the month and lending to investors was down -0.8%.
<img class="aligncenter size-full wp-image-3222" src="https://blog.rpdata.com/wp-content/uploads/2014/05/Chart-11.jpg" alt="Chart 1" width="500" height="182">
Looking at the break-down of housing finance commitments by value over-time, you can see that on a 12 month average basis, the greatest proportion of lending over the past year has gone to investors (37.7%) followed by: owner occupier subsequent purchasers (non-first home buyers) (36.7%), refinances by owner occupiers (17.6%) and owner occupier first home buyers (7.9%). 
As the above chart shows, investment lending is at its highest level in a number of years and there has previously only ever been one period where investment lending was greater than lending to subsequent purchasers. 
The proportion of lending to first home buyers is at a record low, accounting for an average of 7.9% of the value of finance commitments over the 12 months to March 2014.
<img class="aligncenter size-full wp-image-3223" src="https://blog.rpdata.com/wp-content/uploads/2014/05/Chart-21.jpg" alt="Chart 2" width="500" height="179">
Turning the focus to the monthly data on the number of owner occupier housing finance commitments, as mentioned these were -0.9% lower with refinance commitments down -1.0% and non-refinance commitments falling -0.9%. 
Despite the monthly fall, as the above chart shows, both refinances and non-refinances are trending higher albeit non-refinances in particular remain well below historic average levels.
<img class="aligncenter size-full wp-image-3224" src="https://blog.rpdata.com/wp-content/uploads/2014/05/Chart-31.jpg" alt="Chart 3" width="500" height="182">
Over the month, owner occupier housing finance commitments to first home buyers increased by 12.2% which was the largest monthly rise since May 2012.  Despite the monthly rise, first home buyer commitments remain slightly lower than a year ago (-0.8%). 
As a proportion of total owner occupier finance commitments, first home buyers accounted for 12.6% of commitments in March, up from 12.5% in February but down from 14.1% in March 2013.
<img class="aligncenter size-full wp-image-3225" src="https://blog.rpdata.com/wp-content/uploads/2014/05/Chart-41.jpg" alt="Chart 4" width="500" height="181">
The total value of investment housing finance commitments fell by -0.8% in March 2014 however, it has increased by 27.9% year-on-year.  As mentioned, the proportion of investment commitments has, on average, been higher than owner occupier subsequent purchases over the past year. 
In March, investment finance commitments accounted for 39.1% of total finance commitments.  The level of investment activity remains at a level which is well above average and of a magnitude not recorded since late in 2003.  Although it is hard to bed down any timely and accurate statistics on overseas buyers it is important to note that if foreign buyers are purchasing with funds sourced from abroad, they are not captured in these figures.
<blockquote>
The last time we saw investment activity at these levels we also witnessed a marked slowdown in value growth nationally.
</blockquote>
With the level of investment remaining stubbornly high, it is no wonder that the Reserve Bank continues to repeat its warning that housing in Australia is not a one-way bet.  Obviously low mortgage rates coupled with strong value growth, particularly in Sydney and Melbourne is attracting the attention of investors. 
The potential challenge will be what happens next with investors once value growth slows and mortgage rates rise. 
The last time we saw investment activity at these levels we also witnessed a marked slowdown in value growth nationally. As an example, in Sydney values began falling shortly thereafter and values took five and a half years to return to their previous peaks.  Investors jumping into the market at this time should definitely bear this in mind.
Overall, the monthly read on housing finance data was weak, however, the trend shows that demand for finance is continuing to escalate. In particular, investors and upgraders are really driving the housing market at the moment.
However, the level of activity by owner occupiers purchasing homes (as opposed to refinancing) remains well below average levels.  Obviously the rise in investment lending is to some extent restricting the level of lending to owner occupiers.
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Level of investment remains stubbornly high in housing finance data

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Negative gearing, which allows expenses associated with investments to be off-set against income earnings, is repeatedly referenced in the 2011-2012 Taxation Statistics Report released recently by the Australian Taxation Office (ATO). Some of the most common deductions for residential property are: rental interest, capital works and other costs such as strata levies and depreciation.
The ATO stated that over the 2011/12 financial year there were 9,799,820 million taxable individuals in Australia. Of these individuals, 19.3% or almost one in five owned investment properties.
<img src="/images/2014/05/08/kusher-may-8-one.jpg" alt="">
The proportion of Australian’s that now own an investment property is currently trending higher although there was a slight fall over the most recent year; in 1993/94, 12.9% of taxpayers owned an investment property compared to 19.3%.
It was interesting to see the increase in the proportion of investment property owners that are negatively geared.
<img src="/images/2014/05/08/kusher-may-8-two.jpg" alt="">
The proportion of investors reporting a net loss on investment property increased from just over half (51.0%) in 1993/94 to 66.8% in 2011/12.
Once again, the proportion of negatively geared investors has eased slightly over the most recent year however, less than one third of all owners of residential investment property are actually producing a net profit from that investment.
The 2011/12 taxation statistics show that gross rent from investment properties was recorded at a record high $33.999 billion. The analysis on the deductions claimed from this amount: $24.177 billion, was for rental interest deductions. $2.167 billion was claimed in rent capital works deductions and $15.351 billion was claimed in ‘other deductions’. As a result, the net rental losses on investment property over the 2011/12 financial year were recorded at $7.859 billion.
<img src="/images/2014/05/08/kusher-may-8-three.jpg" alt="">
Although this is a large sum, it has reduced from its peak of $9.064 billion in 2007/08.
Over the 2011/12 financial year, 629,230 individuals recorded a gross profit from their investment properties with the total profit recorded at $5.939 billion or $9,439 per investor per annum. Conversely, 1,266,540 taxpayers claimed a loss, with total losses reaching $13.798 billion. On a per person basis, this equates to $10,895 per annum.
Negative gearing continues to be a contentious issue and feature of the tax system which is unique to Australia.
Another point worth noting is that the data in the 2011 Census shows that the government only owns and rents out around 4.1% of total housing stock; conversely dwelling approvals data shows that a very small proportion of new housing approvals are granted to the public sector.
<img src="/images/2014/05/08/kusher-may-8-four.jpg" alt="">
Looking at these two individual results, it would suggest that the government has little interest in building or managing rental accommodation. This suggests that negative gearing is in place to encourage developers to build new rental accommodation and private individuals to act as landlord for those who aren’t in a position to own their own home.
While it would make sense to apply negative gearing only to newly constructed properties, politically it would likely be unpopular. Furthermore, if negative gearing was to be removed the government would likely have to play more of a role in constructing new homes and managing a portfolio of properties. On balance, they probably see that foregoing almost $8 billion in taxation revenue is more cost effective than developing and managing a greater proportion of new housing stock.
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Slight fall in number of negatively geared property investors

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The Australian Bureau of Statistics (ABS) released dwelling approvals data for March 2014 earlier this week.  Although the monthly reading recorded a fall, the trend of the data showed that the number of approvals is continuing to rise.
<img class="aligncenter size-full wp-image-3203" src="https://blog.rpdata.com/wp-content/uploads/2014/05/Chart-1.jpg" alt="Chart 1" width="500" height="181">
Total dwelling approvals fell by -3.5% (seasonally adjusted) over the month however, they are still 20.0% higher year-on-year. 
House approvals fell by -0.5% over the month compared to a much larger -7.5% fall in the more volatile unit category. 
Year on year both houses and units have recorded a significant increase, up 19.1% and 21.3% respectively.
<img class="aligncenter size-full wp-image-3204" src="https://blog.rpdata.com/wp-content/uploads/2014/05/Chart-2.jpg" alt="Chart 2" width="500" height="179">
The month-to-month index is inherently volatile; as a result we prefer to look at the rolling annual number of approvals.  Over the 12 months to March 2013, there were 188,153 dwelling approvals nationally.  This was the highest annual number of approvals since the 12 months to January 1995.  Annual house approvals outweighed unit approvals with 104,598 and 83,554 approvals respectively.  House approvals are at their highest level since April 2011 while unit approvals are currently at an all-time high.
With interest rates currently set at low levels, population growth quite high and property values rising, developers are becoming more comfortable in seeking applications for new developments.  Of course this is just the approval stage and it will be interesting to see what proportion of these approvals actually make it to commencement in the near-term.
<img class="aligncenter size-full wp-image-3205" src="https://blog.rpdata.com/wp-content/uploads/2014/05/Chart-3.jpg" alt="Chart 3" width="500" height="181">
Across the individual capital city markets the annual number of approvals is also generally trending higher with record high approvals in some capitals.  Following is the annual number of approvals across the capital cities with the annual change in brackets: Sydney 38,436 approvals (35.7%), 42,231 (2.7%) in Melbourne, 19,566 (43.8%) in Brisbane, 8,264 (36.4%) in Adelaide, 24,375 in Perth (45.1%), 770 (5.8%) in Hobart, 1,637 (-23.7%) in Darwin and 5,157 (27.6%) in Canberra. 
As you can see dwelling approvals are generally trending higher over the past year. 
In fact dwelling approvals over the year were at a record high level in Sydney and Perth. 
In Melbourne dwelling approvals are at their highest level since November 2011, Brisbane approvals are at their highest level since July 2004, in Adelaide approvals are at their highest level since August 2011, Hobart approvals are at their highest level since January 2013, Darwin approvals are trending lower and Canberra approvals are at their highest level since February 2012.
<img class="aligncenter size-full wp-image-3206" src="https://blog.rpdata.com/wp-content/uploads/2014/05/Chart-4.jpg" alt="Chart 4" width="500" height="177">
The other interesting evolution of the market is the ongoing rise in prominence of unit approvals. 
The number of unit approvals is at a record high in both Sydney and Brisbane.  As a proportion of all dwelling approvals, more than 50% of all approvals over the past year have been for units rather than houses in Sydney, Melbourne, Brisbane, Darwin and Canberra.  Sydney has consistently approved more units than houses for the past 20 years and both Darwin and Canberra have approved more units than houses consistently since 2010. 
The rising prominence of unit approvals in Melbourne and Brisbane is a relatively new phenomenon with unit approvals over-taking those of houses in Melbourne from August 2012 and in Brisbane from June 2013.
It is encouraging to see that dwelling approvals are trending higher nationally and across most capital cities. 
This is a desired outcome of low interest rates with the Reserve Bank hoping that a pick-up in dwelling construction can somewhat offset falling mining investment.  New dwelling construction also has a significant multiplier effect throughout the economy creating jobs and encouraging additional retail spending.
The main challenge will be that in many cities we are seeing an unprecedented level of units approved for construction.  Certainly demand for units has risen over recent years however, the pipeline of approvals is at record levels which are not yet tested.  Obviously most developments will need a level of presale to trigger finance to commence construction and it will be interesting to see how many of these unit approvals actually make it to construction phase over the coming months and years.
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Highlights from the March 2014 building approvals data

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The Australian Bureau of Statistics (ABS) released Consumer Price Index figures for the March 2014 quarter earlier this week. 
The data showed that over the first quarter of the year inflation was recorded at 0.6%, down from 0.8% over the final quarter of last year.
Over the past year, inflation has been recorded at 2.9%.  The Reserve Bank (RBA) has an annual inflation target of between 2% to 3% over the medium term and although the reading is at the higher end of that band it is still within the range.
<img class="aligncenter size-full wp-image-3147" src="https://blog.rpdata.com/wp-content/uploads/2014/04/Chart-12.jpg" alt="Chart 1" width="500" height="184">
<img class="aligncenter size-full wp-image-3148" src="https://blog.rpdata.com/wp-content/uploads/2014/04/Chart-22.jpg" alt="Chart 2" width="500" height="179">
Interestingly, non-tradable (or domestic inflation) was outside of the target range at 3.1% but has fallen from 4.2% a year ago. On the other hand, tradable (or imported inflation) was recorded at 2.6% up from -0.2% a year ago.
<img class="aligncenter size-full wp-image-3149" src="https://blog.rpdata.com/wp-content/uploads/2014/04/Chart-31.jpg" alt="Chart 3" width="500" height="184">
Turning the focus specifically to housing, the housing component of CPI has increased by 3.6% over the 12 months to March 2014, its lowest annual reading since June 2012. 
Across the housing sub-categories, new dwelling purchases by owner occupiers rose by 2.4% over the year with relatively tame growth also recorded for: maintenance and repair of the dwelling (2.5%), rents (2.9%) and other housing (4.7%).  Water and sewerage recorded the greatest annual rise at 10.8% followed by: property rates and charges (7.9%), gas and other household fuels (6.9%), utilities (6.8%) and electricity (5.2%).
The 2.9% annual increase in rents was the lowest reading since June 2006.  Similarly, the 5.2% annual increase in electricity was the lowest annual rise since June 2007.  On the other hand, the 10.8% annual increase in water and sewerage was the greatest rise since the 12 months to June 2011.
Another important consideration is the impact of inflation on home values.  Calculating ‘real’ home values by adjusting the RP Data-Rismark Home value Index for inflation provides valuable insight.
<img class="aligncenter size-full wp-image-3150" src="https://blog.rpdata.com/wp-content/uploads/2014/04/Chart-41.jpg" alt="Chart 4" width="500" height="178">
As the above chart highlights, once you adjust for the impact of inflation the level of capital growth over the longer term is much lower. 
In fact, when you adjust for inflation, combined capital city home values peaked in the September 2010 quarter and are still -1.8% lower than that level.
<img class="aligncenter size-full wp-image-3151" src="https://blog.rpdata.com/wp-content/uploads/2014/04/Chart-51.jpg" alt="Chart 5" width="500" height="182">
Over the 12 months to March 2014, combined capital city home values have increased by 10.6% however, when you adjust for inflation the rise has been a lower 7.5%. 
Across each city the rate of capital growth over the year is somewhat lower when you adjust for inflation and markets such as Hobart and Canberra which have recorded low levels of value growth have actually recorded value falls.
<img class="aligncenter size-full wp-image-3152" src="https://blog.rpdata.com/wp-content/uploads/2014/04/Chart-6.jpg" alt="Chart 6" width="500" height="184">
Home values across the combined capital cities are currently 7.2% higher than their previous peak according to the RP Data-Rismark Home Value Index. 
However, as mentioned above, when values are adjusted for inflation the story is quite different with values -1.8% lower. 
Across every capital city except for Sydney home values are lower than their previous peak in inflation adjusted terms.
<img class="aligncenter size-full wp-image-3153" src="https://blog.rpdata.com/wp-content/uploads/2014/04/Chart-7.jpg" alt="Chart 7" width="500" height="179">
Looking at the compound annual rate of value growth over the past five, ten and 15 years in inflation adjusted terms you can see some interesting trends.  Sydney home values have increased at an annual rate of 3.6% over the past five years, but earlier soft market conditions have resulted in value growth of just 0.4% pa over the past decade.
Brisbane home values have fallen at a rate of -2.3% per annum over the past five years and over the same period Adelaide home values are -1.0% lower per annum, Perth values have fallen by -0.2% per annum and Hobart values have declined by -3.1% each year. 
Over the past decade, Darwin has been the standout performer with values rising by 5.9% per annum and the weakest market has been Hobart where values have fallen at a rate of -0.1% each year.
With mortgage rates at such low levels and the 10 years of no ‘real’ growth in Sydney home values it goes some way to explaining the rising demand and surging home values. 
Melbourne is also seeing strong capital growth but when compared to Sydney has been a much stronger capital growth performer over the past decade.  Despite a weak five years in terms of capital growth we are yet to really see the housing market heat up in Brisbane and Adelaide. 
In Perth the housing market was strong early in this growth phase however; capital growth is now fading despite the fact that values are still lower in real terms than they were five years ago.
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Inflation remains contained within the RBA's target range

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The Australian Bureau of Statistics has recently released demographic data at a capital city level to June 2013. 
We have <a href="/expert-insights/investing/abs-stats-reveal-population-growth-is-escalating-in-nsw-and-victoria">previously covered the population data</a> however, when the data is paired with dwelling approvals data over the same period there are some very interesting findings.
Over the 12 months to June 2013, the population of the combined capital cities increased by a total of 313,387 persons.  At the same time, there were 114,825 capital city dwelling approvals over the period.  Based purely on the ratio of population growth to dwelling approvals, there was one dwelling approved for construction for every 2.73 residents added to the capital cities.
At a national level, the 2011 Census reported that average people per household at that time was 2.6 persons.  Based on that figure you can see that population growth has exceeded dwelling approvals over the past year.  Of course measuring demand for housing is not quite so simple.  Although it is a bit old now, the former Deputy Governor of the Reserve Bank (RBA) gave a speech entitled ‘Housing and the Economy’ to the National Housing Conference in November 2009, which is available <a href="https://www.rba.gov.au/publications/bulletin/2009/dec/pdf/bu-1209-5.pdf" target="_blank">here</a>.  In the speech he posed the question, ‘Are we building enough dwellings?’  Two of the most interesting revelations from the speech were:
<ol>
<li>A higher proportion of the new dwellings built are simply replacing existing homes that have been demolished.  The RBA estimated that between 2001 and 2006, around 15% of new dwellings built replaced those that had been demolished; 10-15 years earlier that figure was less than 10%. 
</li>
<li>A significant proportion of dwelling investment appears to have gone into holiday homes or second homes.  Census data (2006 Census) shows that the number of dwellings built has exceeded the increase in the number of households by a large margin.  As a result, the ratio of the number of dwellings to the number of households has been rising over time; as at 2006, there were 8% more dwellings in Australia than there were households.  Presumably, most of this surplus reflects holiday houses and second houses.</li>
</ol>
So at a national level, the former Deputy Governor’s speech suggested that in order to cater to dwelling replacements and secondary homes we need to construct 23% more dwellings than the previous simplistic analysis of measuring the rate of population growth compared to approvals.  Also keep in mind here that we are looking at approvals, they won’t necessarily all go on to become commencements and ultimately completions.
An assumption we could make here is that, holiday and second homes are generally more likely to be situated outside rather than inside a capital city.  As a result, the second revelation detailed above is probably not going to have as much of an impact at a capital city level.  Nevertheless we still have to allow for the 15% of homes which have been demolished when looking at the approvals data.
<blockquote>
Maybe it is time to look at ways that we can incentivise developers to bring vacant land to the market quicker rather than banking land and drip-feeding it to the market.
</blockquote>
Across individual capital cities, the 2011 Census reported that on average; Sydney, Brisbane and Darwin had 2.7 persons per household, Melbourne, Perth and the Australian Capital Territory had 2.6 persons per household and Adelaide and Hobart had 2.4 persons per household. 
Returning to the original findings, over the year to June 2013, the capital city population increased by 313,387 persons and 114,825 dwellings were approved for construction.  If we adjust for average household sizes as per the 2011 Census, to match population growth there would have ideally been a slightly higher 119,135 approvals over the year.  If we then further adjust for the assumption that we should approve 15% more homes to replace demolitions, there should have been 137,005 dwellings approved for construction last year, a shortfall of 22,180 capital city approvals.
<img class="aligncenter size-full wp-image-3122" src="https://blog.rpdata.com/wp-content/uploads/2014/04/Chart-11.jpg" alt="Chart 1" width="500" height="181">
As the above chart shows, the supply of new dwelling approvals was generally quite sufficient through the 1990s however, throughout the 2000’s new dwelling approvals have been insufficient in relation to the level of population growth.  We are now seeing rising dwelling approvals on the back of escalating housing demand and rising home values which is encouraging however, it will have to continue for many years to make up for the insufficient supply response over the past decade or so. 
In Sydney and Melbourne, there was one home approved for every 2.72 and 2.48 new residents respectively indicating a level of supply closer to equilibrium with demand over the most recent year.  New supply remains very much insufficient in Brisbane and Perth where one new home was approved for every 3.26 new residents in Brisbane and 3.45 new residents in Perth.
The following charts track the annual population growth and the annual number of dwelling approvals across each capital city.
<img class="aligncenter size-full wp-image-3114" src="https://blog.rpdata.com/wp-content/uploads/2014/04/Syd-chart.jpg" alt="Syd chart" width="500" height="179">
<img class="aligncenter size-full wp-image-3115" src="https://blog.rpdata.com/wp-content/uploads/2014/04/Mel-chart.jpg" alt="Mel chart" width="500" height="179">
<img class="aligncenter size-full wp-image-3116" src="https://blog.rpdata.com/wp-content/uploads/2014/04/Bne-chart.jpg" alt="Bne chart" width="500" height="179">
<img class="aligncenter size-full wp-image-3117" src="https://blog.rpdata.com/wp-content/uploads/2014/04/Adl-chart.jpg" alt="Adl chart" width="500" height="179">
<img class="aligncenter size-full wp-image-3118" src="https://blog.rpdata.com/wp-content/uploads/2014/04/Per-chart.jpg" alt="Per chart" width="500" height="179">
<img class="aligncenter size-full wp-image-3119" src="https://blog.rpdata.com/wp-content/uploads/2014/04/Hob-chart.jpg" alt="Hob chart" width="500" height="179">
<img class="aligncenter size-full wp-image-3120" src="https://blog.rpdata.com/wp-content/uploads/2014/04/Dar-chart.jpg" alt="Dar chart" width="500" height="179">
<img class="aligncenter size-full wp-image-3121" src="https://blog.rpdata.com/wp-content/uploads/2014/04/Can-chart.jpg" alt="Can chart" width="500" height="179">
As the above charts show, the disconnect between the level of population growth and dwelling approvals over the past decade have been greatest within our largest capital cities.  It is no coincidence that these cities are also the regions that have been recording the greatest increase in population over this period.
A further important consideration when looking at the relationship between population growth and dwelling approvals is the type of product that is being developed for the market.  While the city-wide analysis is valuable new housing typically comes in the form of new houses on the outskirts of the city or medium to high density product within the inner city areas. Over time, we are seeing a shift away from greenfield housing development in most capital cities towards infill higher density development.
<img class="aligncenter size-full wp-image-3123" src="https://blog.rpdata.com/wp-content/uploads/2014/04/Chart-21.jpg" alt="Chart 2" width="500" height="182">
Over the year to June 1991, 29.9% of all new dwelling approvals across the combined capital cities were for units as opposed to houses.  In June 2013, 49.7% of all dwelling approvals over the year were for units.  Over the year, there were more units than houses approved for construction in Sydney (66.1%), Melbourne (52.7%), Brisbane (50.1%), Darwin (64.5%) and Canberra (54.9%).  The unit category type includes townhouses and semi-detached homes as well as units. 
The 2011 Census reported that across the separate house category, the most prevalent number of bedrooms is three bedrooms (49.6%) and four bedrooms (32.4%).  When you combine the results for semi-detached and units the most prevalent number of bedrooms is two bedrooms (50.1%) and three bedrooms (28.6%). 
To look at it another way, 88.8% of detached houses have three bedrooms or more compared to 66.9% of units having two bedrooms or fewer.  The point here is that if you are going to deliver more units to the market, they typically have fewer bedrooms and therefore are likely to have a smaller average household size than a detached house would.  As a result, it is likely that as the delivery of units increases there actually needs to be a greater number of units constructed in order to cater for population growth than there would have been if houses were exclusively built.
It is clear for the analysis that particularly within the four largest capital cities there has been a growing deficiency of dwellings approved for construction over recent years when compared to population growth.  Over the past 12 to 18 months there has been a noticeable rise in dwelling approvals however they will have to continue to rise over coming years to make up for the deficiency over recent years.  Particularly in Sydney, Melbourne and Brisbane we are seeing a push to greater density in the inner city areas. 
So how do we fix the supply side problems? 
There are many solutions but I think in the main we need to approve new developments faster, increase developable land both in the inner city and within greenfield areas and reduce the costs of new development to the developer because these costs are ultimately passed on to consumers.  Remember that developers are commercial entities looking to make the best possible returns for shareholders. 
Maybe it is time to look at ways that we can incentivise developers to bring vacant land to the market quicker rather than banking land and drip-feeding it to the market.  Whether that be an additional tax on undeveloped land or some sort of financial incentive to bring stock to the market, I am not sure, but it is clear that particularly within the major capital cities the current conditions are not working and finding a way to increase the supply of new dwellings is imperative.
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Our capital city population is booming but housing supply failing to keep up

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Recently released data from the Australian Bureau of Statistics (ABS) shows that as at June 2013, the rate of population growth in Australia’s capital cities was significantly greater than that of regional markets.
Perth topped the charts as the city to consistently record the fastest rate of population growth with 395,000 new persons moving to Perth between 2006 and 2013. However in raw number terms, the increase in population has been much greater in Melbourne and in Sydney.
Between 1991 and 2013 Sydney added an additional 1,084,169 residents, Melbourne 1,153,248, Brisbane 826,621, Adelaide 198,141 and Perth 746,243.
As at June 2013, ABS reported that almost two out of every five Australian’s (39.4%) lived in either Sydney or Melbourne, however, the proportion of Australian’s living in Sydney or Melbourne fell slightly from 1991 (39.7%). This is largely due to a rising prominence of Brisbane and Perth as population centres.
In 1991, 21.3% of Australian’s lived in Sydney, 18.5% in Melbourne, 8.2% in Brisbane and 7.1% in Perth. By 2013, 20.6% of Australian’s lived in Sydney, 18.8% in Melbourne, 9.7% in Brisbane and 8.5% in Perth. Despite the declining prominence of Sydney, the proportion of Australian’s living within our four largest cities has increased from 55.0% in 1991 to 57.6% currently.
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The rising prominence of Brisbane and Perth as population centres has really emerged over recent years. Obviously the resources sector boom has driven this to some extent with escalating demand for professionals working and associated with this sector.
Darwin was the only other capital city to record an increase in its overall proportion of the national population over the period, shifting from 0.5% in 1991 to 0.6% in 2013.
Adelaide recorded the largest decline in its proportion of population over the period across the capital cities, falling from 6.3% of the national population in 1991 to 5.6% in 2013.
Sydney and Melbourne continued to be the most significant population centres however; Melbourne is catching Sydney quite quickly. In 1991, 3,672,914 persons lived in Sydney and 3,194,707 in Melbourne, a gap of 478,207 persons. By 2013, the gap had reduced to 409,128 persons.
During the same period, regional Queensland was the only regional market to record a greater increase in population than within the capital city. Over the period, Brisbane's population increased by a total of 826,621 persons compared to an 869,231 increase in Regional Queensland’s population.
The surge in population across Regional Queensland is linked to the growth in those markets directly adjacent to Brisbane, Gold Coast and Sunshine Coast.
Regional Queensland’s population has increased due to the ‘sea change’ phenomenon which has seen significant migration and development along the state’s coastal communities.
Over the year, the ABS reported that Australia's population increased by 1.8% with capital city regions recording population growth of 2.1% over the year compared to a 1.2% annual increase in regional population.
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From 1995 onwards, capital city populations have consistently increased at a faster rate than those in regional areas. In June 1991, 64.6% of all Australian’s lived within a capital city and by June 2013 the proportion had risen to 66%.
Almost two thirds (66.3%) of all Australian’s live within a capital city, up from 64.6% in 1991.
Based on the ABS results, Australian’s are showing an ongoing preference to live in capital cities rather than regional markets. This is largely due to job security found in the cities.
With home values rising at a much faster rate in Sydney and in Melbourne than in other capital cities it will be interesting to see over the coming years if we see an outflow of population from Sydney and Melbourne to other more affordable capital city housing markets such as Brisbane and Adelaide.
Of course a key driver of any shift away from Sydney and Melbourne will be providing well-paid jobs and a high quality of life while ensuring that housing remains relatively more affordable than it is within Sydney and Melbourne.
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Cameron Kusher

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