Perth’s new apartment market recorded its strongest quarter of sales since Q4 2021, with 412 apartments sold in Q1 2026 and a record quarterly sold value of $537 million, according to Urbis’ latest Apartment Essentials results.

Urbis said the March quarter result reflects strong, highly product‑specific demand across both ends of the market, from more attainable projects delivering at scale, through to premium stock being absorbed by equity‑rich downsizers.&nbsp;

David Cresp, Partner at Urbis, said the key story in Perth is not demand, it is the market’s ability to convert demand into delivered housing.&nbsp;

“This is the strongest sales quarter since Q4 2021, and it reinforces that demand in Perth is real and it’s local,” David Cresp said. “But the task now is delivery, turning that demand into projects that can actually be built and completed.”&nbsp;

[smartcode_project:default project_id=110291 project_image_fid=302785]

<h2>Affordable product leads, premium demand remains resilient</h2>

Sales in Q1 were led by more affordable projects, with The Boulevard (SKS Group) recording 115 sales in the quarter, the presentation noting this is only the second time a single project has surpassed 100 quarterly sales. The project was able to offer more affordable housing product right next to a train station.&nbsp;

Palmyra West (Finbar) also delivered strong results with 28 sales in Q1, following 84 sales in Q4, with an average price of under $800,000, underscoring depth of demand for well‑located, attainable new stock.&nbsp;

At the premium end, Urbis said downsizer demand is continuing, with the results highlighting Romeo (Applecross, Finbar) recording 75 sales and reaching almost 50% sold in one quarter.

Jual (Shenton Park, Celsius Property) also posted a strong quarter with 28 sales, reaching 39% sold in one quarter.

Urbis noted that Perth apartment demand is not speculative, not investor‑led, and not uniform, describing it as localised, often equity‑driven and highly product‑specific, a pattern reflected in the polarisation between strong “attainable” performers and premium downsizer product.&nbsp;

[smartcode_project:default project_id=148957 project_image_fid=364102]

<h2>Prices underpinned by costs, and the delivery risk is growing</h2>

Urbis said pricing pressure is cost not demand‑driven: construction costs and delivery risk are now a central constraint, with the results noting build costs remain elevated and volatile, and that energy, fuel and labour uncertainty weigh on feasibility.

David Cresp said a growing challenge for private Build‑to‑Sell developers is simply securing a builder in the current environment.

“Developers are really feeling the pressure from a building market that was operating at capacity and securing a builder is challenging,” David Cresp said, adding that even where a builder can be secured, “trying to get to the price that makes the development financially viable is incredibly challenging in the current market.”&nbsp;

Urbis’ broader WA commentary also notes that industry remains at or above capacity with lot and housing creation, and that many builders are limiting new sales to manage stretched workforces and fixed‑price contract pressures, conditions that flow directly into apartment feasibility and delivery timing.

[smartcode_project:default project_id=108869 project_image_fid=317905]

<h2>Supply: improving later, but still constrained, and Perth lags eastern benchmarks</h2>

While near‑term supply remains constrained, Urbis’ forecast shows completions lifting “Supply is forecast to be back above 1,500 apartments per annum for the first time since 2019”, with 1,775 completions forecast for 2026, and volumes remaining above that level over the following years.&nbsp;

Looking further ahead, completions are forecast to reach 2,500 in 2028, with the report noting 32% of that total is social/affordable, reflecting the role of government‑supported delivery in rebuilding the pipeline.&nbsp;

However, Urbis said Perth remains behind comparable markets on pipeline scale. In a national comparison of projects under construction, the report shows under construction Perth Build‑to‑Sell (BTS) at 3,446 apartments versus the Gold Coast at 7,922. Mr Cresp said “The challenge for Perth is how to we grow the delivery pipeline”.

Urbis’ conclusion is that Perth’s market is increasingly defined by product discipline and delivery certainty, with the research identifying “delivery certainty is key” and calling out builder risk and procurement models as core success factors, alongside “timing and staging”.&nbsp;

Joel Robinson

Perth apartment sales hit strongest pace since late 2021 as builder capacity tightens

<a href="https://www.apartments.com.au/developers/sammut-developments">Sammut Group</a> has secured development approval for its latest Brisbane apartment project, marking the Sydney developer’s next step in expanding its Queensland pipeline following the success of its debut Gold Coast development, Coast.

The approved project at <a href="https://www.apartments.com.au/new-apartments/44-glen-road-toowong-qld-4066">44 Glen Road, </a><a href="https://www.apartments.com.au/developments/toowong-qld-4066">Toowong</a> will deliver a 15-storey riverfront apartment building with 42 residences, significantly increasing the scale of the site’s previous approval for a smaller luxury scheme. Designed by Bureau^proberts, the development will comprise a mix of predominantly four-bedroom and two-bedroom apartments positioned to maximise Brisbane River and city views.

Sammut Director Julian Sammut said the group had been actively searching Brisbane for several years before identifying Toowong as the right fit.

“Brisbane was the right step for Sammut,” Sammut said.

“With the success of Coast we thought we should definitely look to do more in Queensland alone. We then pushed up to look at Brisbane. We've been looking for I'd say two to three years actually and it was hard to find the right location.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screenshot%202025-12-23%20at%203.27.14%E2%80%AFPM.png?VersionId=dYAVIL7qdcGA8ojvkslSrLjczXFejSSx" />

Sammut said suburbs including New Farm and Teneriffe were considered before the group ultimately focused on Toowong due to its strong downsizer demographic and limited supply of developable riverfront land.

The site was acquired off-market after what Sammut described as a lengthy negotiation and planning process, with the developer pursuing an uplift to the original approval.

“We are DA approved now which is very exciting,” Sammut said.

“We've had our change approval come through and we've obviously doubled the height, 15 storeys plus rooftop. We've got 42 amazing apartments that are going to be coming to market soon.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-23%20at%203.27.26%E2%80%AFPM.png?VersionId=ohkRkY0dIZlqdfME2EZePsCQavRiBadE" />

Bureau^proberts said the design responds to Toowong’s evolving urban character, balancing contemporary apartment living with the area’s established residential identity.

“A place where traditional Queensland living has taken place for centuries; Toowong is seeing a shift of contemporary influence, commercial and retail hubs mixed with well-considered residential offerings – all the while maintaining its character and charm,” the architect noted in planning documents submitted to Brisbane City Council.

The architecture practice said the project’s form was shaped by its riverfront setting, flood considerations, neighbouring building scales, and view corridors.

“They said the mix of four and two-bedroom apartments capture the ‘fundamental qualities of Queenslander living,’ translated into the context of a contemporary subtropical building.”

The development sits just off Coronation Drive within walking distance of Toowong’s retail precinct and the upgraded Regatta ferry terminal, while also benefiting from proximity to the incoming green bridge connection to West End. Sammut said the accessibility and amenity offering were central to the site’s appeal.

The approval adds to growing residential activity along the Toowong riverfront, joining nearby projects including Consolidated Properties’ Monarch Residences and Spyre Group’s ARC Residences.

Sammut secures approval for debut Brisbane apartment development in Toowong

Developer Lanevick is heading back into Sydney’s apartment market after focusing more heavily on the luxury townhouse and terrace sector in recent years.

Lanevick, founded and directed by Steve Maroun, is expecting to receive approval in the coming months for a new apartment development in Gladesville, with the aim to launch it to the market later this year.

The 51-apartment project, designed by Studio Johnston, will comprise a mix of one-, two-, and three-bedroom apartments positioned toward the Hunters Hill downsizer market.

“Traditionally it’s been difficult for people in that market to downsize because there just hasn’t been the right product available,” Maroun said.

“We’re targeting buyers who might have 30 to 40 per cent of their house value sitting in the bank after downsizing.

“They still want good spacious entertaining areas, they still want quality design, but they also want flexibility and the ability to enjoy life a bit more after working hard for a long time.”

The project sits near Boronia Park and within close proximity to the Parramatta River foreshore, an area Maroun says offers more of a Hunters Hill lifestyle than a traditional apartment precinct.

“From a lifestyle perspective, it’s really more Hunters Hill than Gladesville,” Maroun said. “You’re close to the foreshore, close to parklands, and still connected back into the village precinct.”

From level four and above, apartments will capture water views&nbsp;toward Sydney Harbour. Communal amenity will include rooftop entertaining areas, wellness spaces, and a gym tailored toward owner-occupier buyers.

“We’ve really designed these apartments around that buyer coming from the Hunters Hill LGA and what they’re actually looking for in their next chapter.”

The proposed development has also been designed to respond to the changing character of the broader Gladesville town centre, where a growing number of mixed-use and residential proposals are expected to emerge over the coming years.

“Gladesville presented a rare opportunity to deliver a genuinely design-led residential project within an evolving lifestyle precinct, just moments from the growing Gladesville town centre, and we’ve approached the project with a strong focus on architecture, liveability and long-term community value,” Maroun said.

Maroun said Lanevick saw a first-mover advantage within the precinct as planning controls continue to evolve to accommodate greater housing density.

“We think there’s a real opportunity there that hasn’t really been serviced properly yet,” he said.

“There’s going to be a broader evolution of the whole Gladesville village precinct over time, particularly with more activation and mixed-use outcomes.”

The Venus Street proposal will include a commercial and retail component at ground level designed to contribute to that evolving streetscape activation.

“A big part of the thinking was how do you activate that area properly and create more vibrancy and amenity, which is what Hunters Hill has been looking for,” Maroun said.

Lanevick’s focus since 2020 has largely been on smaller-scale luxury townhouse and terrace developments. The developer recently completed Royale Randwick, also designed by Studio Johnston, where prices reached $3.65 million. The project was featured in the UDIA NSW 2026 Professional Development Prospectus and was also named a finalist for Development of the Year.

&nbsp;

Lanevick to cater for Hunters Hill downsizers with new Gladesville apartment development

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.

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

Capital Growth

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GUEST OBSERVER
The renewed turmoil in global financial markets on worries about global growth has provided a reminder that we remain in an investment environment of constrained capital growth and high volatility. 
This has several implications for investors around interest rates and the yield investments provide.
First, interest rates are likely to remain low for longer: the Bank of Japan has cut interest rates on excess bank reserves to -0.1%, the ECB is likely to ease further, the Fed is backing away from rate hikes and the RBA is more likely to cut rates than increase them.
<a href="/images/2016/02/13/Screen%20Shot%202016-02-13%20at%209.17.04%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/02/13/Screen%20Shot%202016-02-13%20at%209.17.04%20AM.png" alt="">
Second, it reminds us about the importance of the yield an investment provides as opposed to just relying on capital growth.
Third, while a fall in the capital value of an investment is unsettling, the cash flow it provides is generally a lot more stable and becomes relatively more attractive during periods of market declines. But what do we mean by yield? Why is it so important? And where can it be found?
What is investment yield?
The yield an investment provides is basically its annual cash flow divided by the value of the investment.
For bank deposits the yield is simply the interest rate, eg bank 1 year term deposit rates in Australia are around 2.4% and so this is the cash flow they will yield in the year ahead.
<a href="/images/2016/02/13/Screen%20Shot%202016-02-13%20at%209.18.17%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/02/13/Screen%20Shot%202016-02-13%20at%209.18.17%20AM.png" alt="">
For 10-year Australian Government bonds, annual cash payments on the bonds (coupons) relative to the current price of the bonds provides a yield of 2.5% right now.
For residential property the yield is the annual value of rents as a percentage of the value of the property. On average in Australian capital cities it is about 4.2% for apartments and around 2.8% for houses. After allowing for costs, net rental yields are about 2 percentage points lower.
For unlisted commercial property, yields are around 6% or higher. For infrastructure investment it averages around 5%.
For a basket of Australian shares represented by the ASX 200 index, annual dividend payments are running around 5.3% of the value of the shares. Once franking credits are allowed for this pushes up to around 6.9%.
<a href="/images/2016/02/13/Screen%20Shot%202016-02-13%20at%209.20.04%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/02/13/Screen%20Shot%202016-02-13%20at%209.20.04%20AM.png" alt="">
Yield and total return
The yield an investment provides forms the building block for its total return, which is essentially determined by the following.
Total return = yield + capital growth
For some investments like term deposits the yield is the only driver of return (assuming there is no default). For fixed interest investments it is the main driver – and the only driver if bond investments are held to maturity – but if the bond is sold before then there may be a capital gain or loss.
For shares, property and infrastructure, capital growth is a key component of return, but dividends or rental income form the base of the total return. Prior to the 1960s most investors focused on yield, particularly in the share market where most were long-term investors who bought stocks for dividend income.
This changed in the 1960s with the “cult of the equity”, as the focus shifted to capital growth. It was pushed further through the bull markets of the 1980s and 1990s.
Similarly at various points in the cycle real estate investors have only worried about price gains and not rents.
<a href="/images/2016/02/13/Screen%20Shot%202016-02-13%20at%209.21.15%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/02/13/Screen%20Shot%202016-02-13%20at%209.21.15%20AM.png" alt="">
Why yield matters?
In times like the present a focus on the income an investment provides is important. First, with interest rates set to remain low or fall further, bank deposit rates – already at their lowest in Australia since the 1950s – are likely to remain low or go lower.
Our view is that further falls are likely as the RBA is likely to cut official interest rates to 1.75% in the next six months on the back of global uncertainties, sub-par growth and benign inflation. This in turn means an ongoing need to understand and consider alternative sources of yield on offer.
Second, a high and sustainable starting point yield for an investment provides some security during volatile times like the present. For example since 1900 dividends have provided more than half of the 11.6% total return from Australian shares and as can be seen in the next chart their contribution has been stable in contrast to the swings in the capital value of shares.
Dividends are relatively smooth over time. Companies hate having to cut them as they know it annoys shareholders so they prefer to keep them sustainable.
Finally, as baby boomers retire, investor demand for income will likely be high as the focus shifts to income generation.
Alternatives to term deposits for yield
The chart below shows the yield on a range of Australian investments. Yields on global investments tend to be lower.
All of these yields have fallen over the last few years as interest rates have fallen, but as can be seen several of the alternatives do offer much more attractive yields than term deposits.
Australian 10-year bond yields are now around 2.5%. This will be the return an investor will get if they hold these bonds to maturity. They can generate a higher return if yields continue to fall, but they are already very low. Global bond yields are lower, averaging around 1%.
After the house price boom of the past twenty years the rental yield on capital city houses is just 2.8% and that on apartments is around 4.2% and even lower after costs.
Corporate debt is an option for those who want higher yields than term deposits but don’t want the volatility of shares. For Australian corporates, investment grade yields are around 6.5% or less and lower quality corporate yields are higher.
Sub investment grade corporate bond yields in the US are actually now yielding around 9% as worries partly about loans to energy companies have pushed them higher.
Following the turmoil of the GFC Australian real estate investment trusts (A-REITs) have refocused on their core business of managing buildings, collecting rents and passing it on to their investors, with lower gearing. While their distribution yields have declined as rental growth has not kept up with total returns of 15% over the last 5 years, they are still reasonable at 4.8%.
Unlisted commercial property also offer attractive yields, around 6% for a high quality well diversified mix of buildings, but higher for smaller lower quality property. And it doesn’t suffer from the overvaluation of residential property.
Unlisted infrastructure offers yields of around 5%, underpinned by investments such as toll roads and utilities where demand is relatively stable.
Australian shares also fare well in the yield stakes. The grossed up dividend yield on Australian shares at around 6.9% is well above term deposit rates meaning shares actually provide a higher income than bank deposits. In fact the gap is now back to levels seen during the GFC.
Investing in shares of course entails the risk of capital loss.
<a href="/images/2016/02/13/Screen%20Shot%202016-02-13%20at%209.12.17%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/02/13/Screen%20Shot%202016-02-13%20at%209.12.17%20AM.png" alt="">
But a way to minimise this risk is to focus on stocks that provide sustainable above average dividend yields as the higher yield provides greater certainty of return. The next chart compares initial $100,000 investments in Australian shares and one-year term deposits in December 1979.
The term deposit would still be worth $100,000 (red line) and last year would have paid $3200 in interest (red bars).
By contrast the $100,000 invested in shares would have grown to $1.04 million (blue line) and would have paid $50,770 in dividends before franking credits (blue bars). The point is that dividends tend to grow over time (because an investment in shares tends to rise in value) and to be relatively stable compared to income from bank deposits which vary with interest rate settings. 
Key issues for investors to consider
While there is a strong case for investors to focus on investments offering a decent yield there is no such thing as a free lunch.
All of the alternatives come with a risk of volatility in the value of the underlying investment. In the case of shares the key for an investor is to work out whether they want a stable value for their investment in which case bank deposits win hands down or a higher/more stable income flow in which case Australian shares win hands down.
More broadly, in searching for a higher yield investors need to keep their eyes open. It’s critical to focus on opportunities that have a track record of delivering reliable earnings and distribution growth and are not based on significant leverage.
In other words make sure the yields are sustainable. On this front it might be reasonable to avoid relying on some Australian resources stocks where current dividends look unsustainable unless there is a rapid recovery in commodity prices.
 
<a href="https://www.propertyobserver.com.au/https://plus.google.com/110172465327488162875?rel=author" target="_blank">SHANE OLIVER</a> is head of investment strategy and economics and chief economist at <a href="https://www.ampcapital.com.au/home" target="_blank">AMP Capital</a> and is responsible for AMP Capital's diversified investment funds.
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soliver-smf6LQXgW9

Shane Oliver with yields warning

<html><body>
GUEST OBSERVER
The media recently reported that the Australian housing market had ‘peaked in winter’. While Sydney – the market leader – is coming into a downswing, it is not useful to aggregate the market this way.
Historically, the different dwelling markets around the country have not been synchronised. In fact, assuming the economy was performing steadily, the Melbourne and Brisbane markets would be yet to experience peak capital growth before slowing in late 2016. However, economic uncertainly and lending restrictions may prematurely curb growth in these markets.
November 2015 Summary
<a href="/images/2016/01/14/Table_1_November_Summary_v2.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/01/14/Table_1_November_Summary_v2.jpg" alt="" width="768" height="558">
Growth in Melbourne house market is 12.87% in the year to November, which is up from 11.03% in the year to October.
There is a large growth disparity between Melbourne houses and units. Melbourne units performed steadily with annualised capital growth of 6.13%, however values dropped in the month of November (-0.37%). With a difference of 6.74 percentage points between annualised growth in houses and units, Melbourne’s house and unit markets show the largest growth disparity Residex has on record. This is presumably due to large levels of stock in the unit market relative to demand. Graph 1 presents the growth trend.
Click to enlarge
<img src="/images/2016/01/14/Graph_1_Melbourne_Trend.jpg" alt="">
Annual sales figures for Melbourne indicate that houses are the more desired dwelling purchase. Melbourne houses saw the largest volume of sales in the year to November, with 52,530 sales.
Annual growth in Sydney houses was again significant – with values jumping an enormous 20.53%. However, growth in the November quarter was just 2.93% – the lowest result since July 2014 – and while these figures are still very strong, they indicate a clear slowing in this market. Sydney units have also slowed dramatically, with growth for the month of November at just 0.55%.
Despite the slowing of growth in Sydney, 2016 is unlikely to see a market crash due to strong population migration in New South Wales and Sydney feeding dwelling demand. Even a market correction of 10% would still leave Sydney home owners well off after the latest housing boom.
Interestingly, the regional markets of Lake Macquarie, Newcastle and Wollongong have seen enormous capital growth, which is most likely a result of spill over as individuals and businesses seek cheaper rent outside the Sydney Metropolitan.
Dwelling markets across Western Australia continue to struggle. Perth houses fell in value by 2.83% for the year and rents fell a significant 5.43%.
Many unit markets across the country have seen a fall in value in November, as can be seen in Table 1. Dwelling markets usually reflect broader trends in the economy.
Brisbane was expected to be a strong performer in 2015. While the market remained in positive growth, it was very slow and subdued for the Brisbane Metropolitan as a whole. Select markets such as those in close proximity to the CBD and in the south-east performed more strongly.
Continued commodity declines have presented enormous challenges for the mining sector and state government revenues. It is for this reason that care should be taken when considering the economic output of the Adani Mine project and Liquefied Natural Gas (LNG) projects in Queensland. In particular, it should not be assumed that these projects will see long term high capital growth in nearby dwelling markets. This is an important takeaway from recent commodity price crashes.
Indian company Adani is set to go ahead with a coal mine and connecting rail line in Central Queensland’s Galilee Basin. The Queensland Land Court ruled Adani should receive mining leases, however the court agreed that the benefits of the $16 billion project are overstated.
Adani claimed the project would create 10,000 jobs annually from 2024. This has since been revised down to 1,464 full time equivalent jobs. Furthermore, the $22 billion in mining royalties anticipated from the coal mine was based on inflated estimates of the commodity, meaning this figure will be lower.
Challenges also exist for prospects around LNG projects in Queensland, Western Australia and the Northern Territory.
By the time these projects go into operation, the LNG market is forecast to be in a supply glut of approximately 20-30 million tonnes through to 2018, according to Bernstein Research. Oversupply in LNG is partially due to the increase in participating suppliers but also slowed economic growth, especially from China. However, the LNG projects across Australia largely have supply contracts already secured with set prices.
<h2>Economic Outlook</h2>
The Mid-Year Economic and Fiscal Outlook was delivered by Scott Morrison. The government has increased the budget deficit to $37.4 billion over 2015-16, which is greater than the May budget outlook by $2.3 billion.
Despite the budget deficit, Australia still maintains a sustainable level of debt to GDP[1]. So long as debt is at a sustainable level, it is not thought to have a large effect on economic growth relative to other factors such as investment in education.
Employment in Australia seems to be moving in a positive direction, which has surprised many (including me).
Capital investment and commodities have not performed well this year, leading to a huge reduction in revenue for businesses and government alike, and thousands of people losing work.
However, employment and participation in job searching has improved over 2015, which can be seen in Graph 2.
<a href="/images/2016/01/14/Graph_2_Employment-1.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/01/14/Graph_2_Employment-1.jpg" alt="">
The dark blue line indicates where trends in employment began to move favourably. In a recent interview with the Australian Financial Review (AFR), Governor Glenn Stevens suggested this may be because the sectors behind employment growth may not require large amounts of capital investment, such as services, tourism and hospitality.
Uber is one such example of an emerging service where little large scale capital investment is needed, especially from drivers. Uber reportedly employs 15,000 people in Australia.
As a result, Stevens has revised down expected jobless figures and the need to further reduce the cash rate.
However, I would argue that the nature of employment is not enough to provide a wealth effect that would fuel demand strong enough for housing. Wage growth remained at 2.3% in the September quarter and it is likely that a significant portion of new found employment would be part time work.
As documented thoroughly this year, unaffordability persists across the country in both ownership and rent of dwellings. Unaffordability, combined with higher interest rates and low wage growth means that we probably can’t expect the exceptional growth seen this year in any of the major capital city markets in 2016.
Australia’s economy still faces many challenges before returning to strong GDP growth, and many dwelling markets across the country are also likely to see slowed or negative growth in 2016. However, property is a long term game and we have very diverse markets and opportunities throughout the country. I will aim to highlight more of these unique opportunities in 2016.
Eliza Owen is the market analyst for Onthehouse.com.au. She can be contacted <a href="https://www.onthehouse.com.au" target="_blank">here.</a>
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2016 unlikely to see property market crash in Sydney: Onthehouse's Eliza Owen

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GUEST OBSERVER
I was recently reading the latest Residex Best Rent Report, which was released a couple of weeks ago.
There are some notable suburbs in the report showing amazing yields – in fact one suburb in South Australia has a rental yield of over 7% – but the predicted capital growth is not that hot.
That got me thinking… I am often asked what is more important – cash flow or capital growth?
Capital growth versus cash flow has been a hotly contested topic in property investing since the year dot and most people stand firmly in one camp or the other. On the other hand, I have always considered that both are important. After all, if I can achieve both then this allows me to build a portfolio without having large out of pocket expenses each month.
I also believe there is a third way of making even more money.
The Trid3nt Strategy® allows you to make money in three ways; it’s like having a Plan A, B and C.
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Buy below market value. In a fast moving market this can be difficult, however the principle is that by doing your research you can identify opportunities and negotiate to create equity from the start.
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Buy a property with renovation potential. This allows you improve the property so you have the potential to increase the property’s value and rent.
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Buy in an area with good capital growth potential. As an area grows, you will get equity in your home and your property will be worth more when it comes time to sell.
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As you can see, with this approach, rental yield alone is not everything. To be clear, you will not make money from a property based on a 5% to 6% rental yield unless you also have capital growth working for you. This is mainly because the cost of holding a property can quickly gobble up your income.
Costs include interest on your loan, council rates, strata fees, utilities, insurance and property management fees, just to name a few. A strong rental yield is important as it will minimise the amount of money you need to contribute out of your own pocket to cover these costs, hence why it is wise to target a high yielding area that also has good growth predictions.
Although there were many suburbs that interested me in the Residex Best Rent Report, there was one suburb that really stood out for me – Wallsend.
Wallsend is located in the western region of Newcastle (NSW), just 11 km from the city centre. The median house value is an affordable $413,500 with a rental yield of 5.04%. The suburb as a whole is also forecast to grow by an average of 6% per year over the next eight years, meaning it could be worth over $700,000 in eight years’ time. With fixed home loan rates below 4.8% at the moment, the median property in this suburb would not cost much to hold, particularly if you are able to make the most of negative gearing.
What really excited me about Wallsend was the Residex Renovators Report. There are over 95 streets in Wallsend that have renovation potential, where you could make over $50,000 by spending just 10% of the property’s value – generating a 20% profit. What’s more, of the 95 streets, 82 streets had the potential to make over $100,000 from a simple cosmetic renovation.
Before jumping into an investment purchase, it’s important to make sure you can easily rent out your property. There’s two parts to this – rental demand and vacancy rates. In the case of Wallsend, over 29% of the suburb’s population are renters and the vacancy rate is a low 2.6%, so both of these metrics check out.
This may not be the first time you’ve heard of Wallsend in recent weeks. If you have been following the news, you may have heard about the ‘big wet’ in NSW, and subsequently that Wallsend has been hit by floods. This brings me to an important point.
Numbers in isolation only tell part of the story. You need to use reports and predictions in combination with other data to conduct a thorough assessment. I believe as a final part of your research it is extremely valuable to actually hit the streets of the given area you are considering. Get a feel for the area, speak to local real estate agents, business owners, councils and residents to find out what is happening with the economy and if there are any plans for development in the area.
Natural disasters may be unavoidable, but knowing that they can happen and understanding the particular areas that are prone to natural disasters – in this instance flooding – should be part of your analysis.
The recent floods in Wallsend should not discourage you. After all, property is a long term investment. This current situation should remind us that there are always other risks to consider when conducting your research. When looking at a specific property it may pay to speak to insurers to make sure you can get appropriate insurance cover at a reasonable cost.
So, going back to the original question – What is more important yield or growth?
As you can see, rental yield is definitely something that should be considered but it is not everything. Capital growth is also important as it will allow you to sell at a profit. Combining this with renovation you also have the ability to push up the rent in the short term and hence reduce your out of pocket expenses, but the numbers alone are sometimes not enough (as recent events have shown).
The fundamentals, though, ring true. If you buy the right property in the right area and add value through renovation and capital growth, there is even the possibility of creating enough equity to buy another property and replicate your success.
Jane Slack-Smith is founder of Your Property Success and Director of Investors Choice Mortgages and can be contacted <a href="https://yourpropertysuccess.com.au/?Cid=Blog-JSS-Jan16" target="_blank">here</a>.
This article first appeared on <a href="https://www.onthehouse.com.au" target="_blank">Onthehouse.com.au</a>.
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Renovation and capital growth: Jane Slack-Smith

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The standout feature of Domain’s Top 10 prestige beach suburbs list is the remarkably poor performance on capital growth.
The best of them wouldn’t make the Top 10 list for capital growth rates in Melbourne, Perth, Darwin, Sydney or Brisbane – nor the Top 25 list of best performers in regional Australia. 
One of the so-called Top 10, Noosa, has recorded zero growth over 10 years. This helps to confirm our ranking of Noosa as Australia’s biggest real estate lemon.
The Domain list of Top 10 prestige beach suburbs continues a grand tradition of Australian media publishing real estate lists that are pointless, inaccurate or farcical.
It says something about the mediocre performance of these apparently prestigious beachside locations that one of the Top 10 has recorded no growth at all over the past decade. 
It’s the antithesis of investment, which is meant to be about achieving growth. The only thing of value to owners in many of these ritzy locations is the ego trip. Beyond that, they’re crying all the way to the bank.
These locations, which include Brighton in Melbourne, Bronte in Sydney and Cottesloe in Perth, have all the qualities that many people imagine would make them out-performers on capital growth: great beaches, quality restaurants, wonderful amenities and top quality homes. 
Many investors would rue their inability to afford to buy there and grow their wealth. But they need not concern themselves: there’s better capital growth in the middle market areas and the downmarket suburbs, which dominate the Top 10 growth lists in most of our major cities.
Remember that old real estate adage about property doubling in value every 10 years, which means a growth rate averaging better than 7% per year? It’s generally untrue. The best performers achieve it, but most properties do not. And certainly none of the Top 10 prestige beach suburbs have done so.
The No.1 ranked prestige beach suburb for capital growth, which apparently is Brighton in Melbourne, has managed growth averaging just 6.7% per year.
No.2 Portsea, also in Melbourne, recorded growth averaging only 5.55% per year. This is not a stellar performance, although the people who put together the list apparently thought it was.
Byron Bay, which according to Domain Group senior economist Andrew Wilson is “an exceptional market”, has averaged a mediocre 5.4% per year - a growth rate at which it would take over 13 years for values to double.
The bottom half the Top 10 list is made up of suburbs with growth rates that don’t even match inflation. 
Main Beach on the Gold Coast has a growth rate of a little over 1% per year. Palm Beach in Sydney, where the median price is $2.7 million, has managed less than 1% per year.
To put these growth rates into perspective, the best suburbs in Darwin, Perth and Melbourne all have growth rates above 10% per year. The best in Sydney are above 9% per year.
And, outside the capital cities, the Top 25 regional centres all have growth rates of 10% per year or better, with the top four achieving 15%-plus. 
If you’d bought the typical Palm Beach property 10 years ago, you would have paid around $2.46 million and managed capital gains of around $220,000 a decade later. In real terms, you lost money.
If you’d spent that $2.46 million in the best-performing suburbs in Perth, Darwin, Sydney and Melbourne (you could have bought multiple properties in multiple cities for that sum), your capital gain would have been $4.2 million.
Which would you rather have: the prestige - or $4.2 million?
 
Terry Ryder is the founder of <a href="https://www.hotspotting.com.au/" target="_blank">hotspotting.com.au</a>. You can <a href="https://mailto:ryder@hotspotting.com.au" target="_blank">email him</a> or follow him on <a href="https://twitter.com/hotspotting" target="_blank">Twitter.</a> 
 
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Poor capital growth performance for beach retreats: Terry Ryder

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Chief executive of McGrath estate agents John McGrath has said the Australian market is in different stages of recovery related to price ranges, with many metropolitan markets in the very early stages of their growth cycle - at best.
In the McGrath 2015 Report he noted the Sydney and Melbourne have been the star performers with 62% and 32% growth respectively, since the GFC (2009-2015). 
"However, if you look beyond the last few years and review growth in both cities over the last decade, it’s fair to say that longer term growth rates have not been as extraordinary. In fact, Australia’s two biggest cities both underperformed against their usual 10- year growth rates," he said.
"Looking around the country it’s just as clear that many other metropolitan markets are in the very early stages of their growth cycle at best – and in some instances as flat as the proverbial pancake. 
"So if we drill down on Sydney, what seems to be driving this demand? It’s pretty straightforward"
There are five key drivers: 
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Record low interest rates 
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<li>
Increased demand from small investors and SMSFs 
</li>
<li>
An underlying shortage of property coupled with continued immigration 
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<li>
High demand from Chinese buyers 
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<li>
A stable economy (apart from a few recent economic tremors). 
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Sydney and Melbourne star performers: John McGrath

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Six Nicheliving development sites are featured in the top ten of Terry Ryder's Top 20 star performers for long term capital growth over the past ten years.
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The top performer was Beckenham with an annual growth rate of 10% over 10 years. Cloverdale, Willetton, Coolbellup, Langford and Lynwood also featured in the top ten.
Nicheliving director Ronnie Elhaj said it selected Armadale and Kwinana as being among the highest performing Perth suburbs. 
"When it comes to short term growth, two of Nicheliving’s locations – Coolbellup and Langford – were recently identified by REIWA as top performers in 2014," he said.
"With an annual growth rate of 20.2%, Coolbellup was the second highest growth suburb in Perth. Langford rounded off REIWA’s top five highest growth suburbs in Perth with an annual growth rate of 16.1%.
"Focusing on how a 1% or 2% difference in growth could have a major impact on your long- term equity position... Choosing the right investment property can have a particularly strong effect over an extended period of say 5 or 10 years. For example, a property worth $400,000 at an extra 1% capital growth figure compounded annually over 10 years amounts to an additional $46,267.34. And at 2%, that capital growth figure amounts to a staggering $97,349.72, which is a lot of money in anyone’s terms.”
 
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Six Nicheliving development sites on Top 20 list

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Potential investors looking to spend $500,000 in West Australia have plenty of options in the town of Esperance, with the possibility buying two homes in the suburb of Sinclair with change.
<a href="/news">Esperance</a>, located in the south east of Western Australia, is known for tourism, agriculture and fishing.
Castletown is another suburb with potential, according to the Herron Todd White July 2015 Month in Review, with a modern finished home available for under $500,000 returning $400 to $450 in rent per week.
The best return on investment for $500,000 may be found in Nulsen, with the possibility of netting three homes with a rental of $250 apiece per week on average.
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Property investment options abound in Esperance: HTW

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The top 20 locations in Australia for long-term capital growth are all regional locations.
That may surprise many people because the general theme in media is that the capital cities out-perform their regional markets. 
The misconception arises when research houses spit figures out of their computers and rush them off to media without providing any analysis of the realities behind the generalised figures.
A general figure describing growth in regional New South Wales will often produce a low growth figure because there are lots of mediocre small town markets, which drag down the average. The generalised number for regional Queensland will be low because there are numerous markets in decline, thanks to their links to the resources sector and/or developer oversupply. 
But the best individual towns often deliver higher long-term growth than the best of the capital city suburbs.
The latest Hotspotting survey for the Capital Growth Superstars report - examining long-term capital growth rates for every suburb and town in Australia - shows that, once again, the best growth rates are all regional.
The best of the capital cities are two suburbs of Darwin, Gray and Fannie Bay, which average 10.2% per year. But that’s barely good enough to make the Top 20 list for regional Australia.
The Top 20 regional locations have growth rates ranging from 10.2% to 20.7% per year.
Most of them are mining towns, resources regional centres or country towns boosted by recent resources activity. This is despite the sharp decline in prices in many resources-impacted towns over the past 2-3 years.
But the No.1 location in Australia for long-term capital growth is not a mining-related location. It’s the oddly-named Humpty Doo, a town of 6,000 about 40km from Darwin on the road to Kakadu National Park. It has a capital growth rate of 20.7% per year, largely because of growth generated by the outward sprawl of Darwin. 
Newman, an iron ore town in the Pilbara region of WA, is No.2 with a price growth average of 18% per year over the past decade. This is actually a significant drop on the town’s peak, about three years ago, when it averaged 30%-plus as the median price reached $780,000. It has dropped back to $685,000, according to the latest figures, but the growth rate is still the second best in the nation. 
Let’s be clear. I don’t advocate investing in mining towns or mining regional centres. They are just too volatile and too high risk. 
A few short years ago the iconic coal-mining town of Moranbah in Queensland had a long-term capital growth average above 30% per year. Back then its median price was $750,000. Today it’s $250,000 and the capital growth average for the past 10 years is now minus 0.2%. 
In other words, all that capital growth since 2005 has been wiped out and values are now lower than they were 10 years ago.
Moranbah is the most extreme boom-bust story I have encountered in Australian real estate, but there are other mining-impacted locations which have soared and are now very busy plummeting.
Port Hedland once had a median house price above $1.2 million and a capital growth rate close to 30% per year. Today the median is around $800,000 and the capital growth rate has dropped to 11.6%. 
That’s still good enough to rank No.10 in Australia and it means that if you bought there 10 years ago you’re still well in front. But if you bought there three years ago, you’re feeling a tad sick.
Despite the sharp decline in their markets in recent years, mining towns and resources regional centres still have the highest long-term capital growth rates in Australia – other than Humpty Doo. By comparison, the best of the capital city suburbs fade into insignificance.
<a href="/images/2015/07/09/ryder_chart.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2015/07/09/ryder_chart.jpg" alt="">
 
TERRY RYDER is the founder of <a href="https://www.hotspotting.com.au/" target="_blank">hotspotting.com.au</a>. You can <a href="https://mailto:ryder@hotspotting.com.au" target="_blank">email him</a> or follow him on <a href="https://twitter.com/hotspotting" target="_blank">Twitter.</a> 
Terry was recently joined by Property Observer editor at large Jonathan Chancellor for a webinar on why research is the key to successful property investing in 2015. You can download slides and audio from the webinar here.
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