The final apartments in the most recently completed new development in Balwyn present some of the largest and most exclusive ever delivered in one of Melbourne’s most established and character-rich neighbourhoods.

Boutique developer&nbsp;<a href="https://www.apartments.com.au/developers/wulff-projects">Wulff Projects</a>,&nbsp;alongside partner <a href="https://www.apartments.com.au/developers/pga-group">PGA Group</a>, has just finished <a href="https://www.apartments.com.au/buildings/threadneedle-balwyn-1-5-threadneedle-street-balwyn-vic-3103">Threadneedle</a>, 17 home-sized residences designed completely for the owner-occupier.

Named after its location on Threadneedle Street, the new project has been shaped by the heritage fabric of Balwyn. It offers two low-rise buildings of eight and nine apartments respectively, designed to emulate traditional standalone homes.&nbsp;

[smartcode_project:default project_id=27816 project_image_fid=355582]

John Scaramuzzino, Director at <a href="https://www.apartments.com.au/architects/bruce-henderson-architects">Bruce Henderson Architects</a>, explains the design intention.

“Given the quiet residential character of the street with many homes dating back to the 1930s and 1940s, we approached Threadneedle wanting to appear less as a collection of apartments and more as a traditional residence. This led to creating not one but two buildings that could “breathe” with larger garden-based apartments functioning more like small homes.”

[smartcode_project:default project_id=27816 project_image_fid=355605]

The north-facing residences are nestled among extensive landscaped gardens by Ben Scott Garden Design, with over one-third of the site dedicated to greenery. The resulting setting is one of calm seclusion, where architecture and landscape work in tandem to offer immediate liveability.

With construction now complete, the final apartments include a top-floor, single-level penthouse residence priced from $2.8 million. This home offers three bedrooms, a dedicated study, two bathrooms plus powder room, and three car spaces with an oversized storage room.&nbsp;

Interiors prioritise spatial comfort and natural light, with three-metre-high ceilings, oversized internal doors and a full-width terrace oriented to the north, east and west.&nbsp;

[smartcode_project:default project_id=27816 project_image_fid=355604]

Floor-to-ceiling double-glazed windows ensure thermal performance across seasons, supported by automated external blinds, zoned heating and cooling, and a fireplace for added ambiance.

Each apartment has been individually designed to maximise privacy and garden outlooks. Kitchens combine refined finishes with practical considerations: stone benchtops, butler’s pantry, full-height joinery and concealed rangehoods.&nbsp;

The inclusion of dedicated home offices responds to contemporary living patterns, while bathrooms feature sculptural bathtubs and brushed nickel fixtures.&nbsp;

[smartcode_project:default project_id=27816 project_image_fid=355590]

Threadneedle also integrates best-practice sustainability measures, achieving a 7 Star average NatHERS rating. Initiatives include solar PV systems, rainwater harvesting for toilet flushing and irrigation, and high-performing building insulation. These elements enhance daily comfort while reducing ongoing maintenance and energy demand.

"We believe Threadneedle sets a new standard of design excellence and building quality for Balwyn,"&nbsp;Scaramuzzino added.

"It’s an architectural response we’re particularly proud of, and one we’re sure residents will be equally proud to call home."

[smartcode_project_cta:default project_id=27816]

Staff Writer

Final homes remaining as Threadneedle, Balwyn completes construction

Joel Robinson

Sydney's top 15 new apartments developments set to launch in 2026

Developer-builder <a href="https://www.apartments.com.au/developers/dasco-australia">DASCO</a> has pushed beyond the now-standard inclusions of rooftop pools and landscaped podiums at its recently launched new Epping project, Senso.

It has laid out over 4,000 sqm of resident-only amenity in a move designed to compete directly with low-density housing on livability, not just density. The result is a development that supports genuine daily use through purposeful spaces distributed across its five-building, 479-apartment precinct.

[smartcode_project:default project_id=134954 project_image_fid=4396]

Two rooftop pools form the anchor of Senso. One is a 27-metre lap pool adjoining a heated spa, designed for everyday fitness rather than just summer leisure. The second sits on a lower podium, allowing different buildings to share in vertical access and reducing crowding during peak times.

It is the secondary spaces that start to distinguish Senso from other large-scale suburban projects. A rooftop cinema is integrated into a landscaped terrace, offering open-air screenings with natural ventilation and passive cooling.&nbsp;

The inclusion of a “sensory walk”, an elevated boardwalk that threads through the site, suggests a rare investment in non-commercial, non-essential amenity: space for quiet movement that doesn’t double as access or traffic circulation.

[smartcode_project:default project_id=134954 project_image_fid=4402]

The gym and wellness centre, often relegated to a small ground-floor room in many builds, takes on more substance here. Residents have access to a fully equipped gym, as well as outdoor yoga areas and meditative zones that integrate greenery and natural light.&nbsp;

The Club Lounge is similarly designed to support multiple use cases, with a private dining terrace, kitchenette, workspace, and lockable wine storage. These aren’t superficial additions; their scale and spatial allocation indicate serious intent for frequent resident use.

[smartcode_project:default project_id=134954 project_image_fid=4391]

Importantly, Senso’s amenities are embedded within a site that spans more than 10,000 sqm, allowing for better separation between spaces and reduced noise spillover, a critical but often overlooked factor in high-density developments. This spatial generosity also enables multiple alfresco kitchens and communal terraces without compromising individual privacy or usable space.

While many developments make claims about lifestyle, few back it with this level of built infrastructure. Senso’s mix of dedicated fitness, wellness, social and passive green spaces suggests a conscious response to the post-pandemic shift in housing expectations, especially among owner-occupiers.&nbsp;

DASCO is one of several leading developers who have taken out Resilience Insurance's Latent Defects Insurance policy, providing buyers with a 10-year structural and waterproofing warranty, and giving them the ultimate peace of mind.

Senso is scheduled for completion in late 2028.

[smartcode_project_cta:default project_id=134954]

The outdoor amenities elevating life at Senso, Epping

Following the proposal by the Minns Labor Government to rezone Parramatta Road to create up to 8,000 new homes, prominent developer Ceerose has gone to the NSW Gov to increase the density of its new mixed-use residential building in Leichhardt.

<a href="https://www.apartments.com.au/builders/ceerose">Ceerose</a>, founded by Edward Doueihi nearly three decades ago, has filed plans for 154 apartments above ground-floor retail at 307-315 Parramatta Road, a key corner site near Norton Street, the main high street strip in Leichhardt.

It's an upsize from the previously approved scheme of 63 apartments across a seven-storey building.

<img alt="Ceerose" data-entity-type="file" data-entity-uuid="ba1ae75b-5f08-43fb-b8d5-3de6d9f6ef71" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-04%20at%2010.31.39%E2%80%AFAM.png?VersionId=yA3hBBLPH4ev7MsAE0_hieXeqiFqBUb7" />

The project is being advanced through the State Significant Development (SSD) pathway, with concurrent rezoning sought to facilitate the proposal. The 10-storey development would rise over a four-level basement and deliver two retail tenancies, one a larger-format offering and the other a smaller “hole in the wall” space, addressing the Parramatta Road frontage. 21 of the apartments are dedicated as affordable housing.

According to the Urban Design Report by Architecture AND, the scheme includes a podium and tower configuration, with a fine-grain, two-storey parapet street wall that references the traditional shopfront rhythm along the corridor. “An elegant tower form is proposed, combined with a characterful two storey frontage... articulating it as two related buildings, providing consistency with the rhythm and grain of Parramatta Road,” the report notes.

The residential component is split across two slender towers set back from the street edge, a design move aimed at preserving solar access and reducing perceived bulk. This massing strategy also seeks to improve residential amenity by focusing scale toward the quieter northern interface, away from Parramatta Road’s noise and pollution.

<img alt="Ceerose" data-entity-type="file" data-entity-uuid="347f2f8f-5d36-4388-b40a-2e77380b9c19" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-04%20at%2010.31.02%E2%80%AFAM.png?VersionId=xvyUE2ujT1lzivXTo.mHBJFF4SmfgLtz" />

Architecture AND has worked with Ceerose on previous Inner West projects, and cites a deep familiarity with the local character. Their design draws heavily on context, heritage, and sunlight access considerations, and engages with the Inner West Council’s “Our Fairer Future” strategic planning framework.

The site spans 2,712 sqm and is located near key intersections with Catherine Street, Hay Street, and Redmond Street. It adjoins a public carpark to the north and is within walking distance of Stanmore and Petersham stations. It is also flagged in state and local planning strategies, including the Parramatta Road Corridor Urban Transformation Strategy, as a suitable candidate for increased density.

Ceerose recently completed The Alex Collective on McEvoy Street in Alexandria, Abbie's Lane in Annandale, and the award-winning Munro House in Elizabeth Bay.

The Parramatta Road corridor is coming to life with the proposed rezoning which is serviced by a significant number of bus, light rail and train routes.

Deicorp is progressing with its $1.8 billion <a href="https://www.apartments.com.au/new-apartments/kings-bay-village-five-dock-53-75-queens-road-five-dock-nsw-2046">Kings Bay Village</a> precinct on Parramatta Road in Five Dock, as is <a href="https://www.apartments.com.au/news/nsw/toga-to-push-on-with-five-dock-mixed-use-masterplan">TOGA further down the street</a>. Those two projects alone will bring nearly 2,000 new homes to Parramatta Road.

First look: Ceerose plots mixed-use Leichhardt development on Parramatta Road

North Sydney's landmark 'SBS Building' on Alfred Street is set to be demolished to make way for a new mixed-use residential tower in the booming North Sydney.

Commercial property group FiveX is behind the plans for a <a href="https://www.apartments.com.au/new-apartments/275-alfred-street-north-north-sydney-nsw-2060">39-storey tower</a>, the latest project to advance under the NSW Government’s Housing Delivery Authority pathway.

They are proposing 184 apartments above retail spaces, which will replace the existing 20-storey commercial building. FiveX was set up more than five decades ago by Joshua and Marko Berger. It is currently led by Joshua's son Lesli.&nbsp;

<img alt="First look: Fivex plans 39-storey residential tower at 275 Alfred Street, North Sydney" data-entity-type="file" data-entity-uuid="2efa0980-53fa-4cca-9f9e-9c3c845d4746" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Article%20Feature%20Image%20%28Grid%29%20%281%29_0.png?VersionId=y_YyPMq3NQLfYRs84pP4os9UgWiMLp75" />

According to the Architectural Design Report by <a href="https://www.apartments.com.au/architects/fjc-studio">FJC Studio</a>, the slender tower form has been deliberately designed to respect the site's transitional setting at the southern gateway to the North Sydney CBD, where high-rise towers give way to lower-scale residential precincts.

"The slender tower form and articulated podium establish a respectful relationship with nearby heritage and low rise buildings, including the Whaling Road Heritage Conservation Area,” the architecture firm noted, adding that the tower “completes a missing link in the urban fabric” while enhancing the Alfred Street streetscape.

The proposed building will include a mix of one-, two- and three-bedroom apartments, with 15 percent of the gross residential floor area allocated as affordable housing. There is an agreement already in place that those apartments will be managed by Evolve Housing.

The project aligns with broader state housing objectives, including the National Housing Accord target of delivering 1.2 million new homes by 2029. The Scoping Report filed with the State Significant Development Application (SSDA) suggests the site "presents no impediments to rapid delivery,” with construction able to commence within 12 months of receiving consent.

North Sydney has been one of the most popular suburbs in Sydney for new and off the plan apartment development, but hasn't had the supply to keep up with demand, until recently.

AURA by Aqualand was, for a long time, the only off the plan apartment building on the market. That completed last year, and has sold the majority of its 386 luxury apartments. Recently ALAND launched <a href="https://www.apartments.com.au/new-apartments/the-walden-173-179-walker-street-north-sydney-nsw-2060">The Walden</a> on the same street, selling over $100 million within just a few hours of its launch, while developer CASA also launched&nbsp;<a href="https://www.apartments.com.au/new-apartments/the-mclaren-north-sydney-45-mclaren-street-north-sydney-nsw-2060">The McLaren</a>&nbsp;in the same precinct.

First look: Fivex plans 39-storey residential tower in booming North Sydney

Financial Debt

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Quite surprising that nothing has been said when last Friday, the Australian government debt ticked just over $475 billion.
For the last twelve months, the government on average has been borrowing $6.35 billion each month, so what happens when they hit the debt ceiling of $500 billion? Will that then bring an end to Australia’s prized membership of the AAA – rated club?
Standard &amp; Poor’s, Moody’s and Fitch have just 9 countries in the AAA club – Australia, Canada, Denmark, Germany, Luxembourg, Norway, Singapore, Sweden and Switzerland. Should our membership be revoked that would mean that borrowing costs would increase overnight, which is not a good sign for the Australian economy. The Australian Taxation Office (ATO) currently estimates that Australian small businesses currently owe $13 billion in unpaid tax debts. Obviously, there is no impact on existing debt although when it comes time to refinance then that would be an entirely different story.
<a href="https://www.propertyobserver.com.au/images/2017/02/20/Screen%20Shot%202017-02-20%20at%209.03.18%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/02/20/Screen%20Shot%202017-02-20%20at%209.03.18%20AM.png" alt="">
With the federal government recently weighing into the housing affordability debacle there are two things that I would immediately implement to critique our housing markets.
The ATO has taken over responsibility for being Australia’s biggest property manager so land banking must be the first point of call. It is estimated that Sydney now has well over 100,000 permanently vacant apartments so they should be rented out to ease the rental crisis. Look at the lost revenues the ATO is missing out on with these land banked properties, where the clear majority are owned by overseas investors. Land banking in Australia must be outlawed.
Reverse the ridiculous off-the-plan ratio back to 50 percent from 100 percent to overseas buyers. We are now going into the ninth year of 100 percent and the only clear impact we are seeing is that foreign investors have become a most dominant player. In 2016, Chinese developers acquired almost 40 percent of the Australian residential sites that were offered to the marketplace. All these properties are offered exclusively to Asia and these properties are not available for local buyers. Reducing the ratio back to 50 percent would have a big impact on housing affordability.
 
<a href="https://www.propertyobserver.com.au/images/2017/02/20/Screen%20Shot%202017-02-20%20at%209.04.36%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/02/20/Screen%20Shot%202017-02-20%20at%209.04.36%20AM.png" alt="">
A recent survey by Roy Morgan Research found that approximately 7 per cent of Australian mortgage holders have little or zero equity in their homes in the twelve months to October 2016. That would equate to approximately 300,000 properties across Australia. Western Australia has the highest number with 54,000, followed by South Australia with 27,000, Queensland with 63,000, Melbourne has 50,000, Victoria has 65,000, NSW has 73,000 and Sydney has 33,000. Tasmania came in with 5,000 – these are concerning numbers when you consider the east coast has enjoyed unprecedented capital appreciation.
<a href="https://www.propertyobserver.com.au/images/2017/02/20/Screen%20Shot%202017-02-20%20at%209.05.32%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/02/20/Screen%20Shot%202017-02-20%20at%209.05.32%20AM.png" alt="">
Since 2009, Sydney home values have doubled and Melbourne have climbed 85 percent. In 2011, less than 10 percent of investors held multiple investment properties, according to Digital Finance Analytics. This has now grown to 16 percent nationally, and on the east coast multiple investment properties is now approximately 18 percent.
Really makes one wonder, just what data our elected politicians and policy makers are actually looking at or quite possibly, they don’t even understand this data?
The most recent data from CoreLogic shows that the rental yields in Sydney and Melbourne are on the decline. For Sydney, houses yield is 2.8 percent and units are 3.8 percent. In Melbourne, houses are 2.7 percent and units are 4.0 percent. It will be most interesting to see just how low these yields will go with all the new developments entering the market. It is quite clear that investors have been enjoying the unprecedented capital growth over rental yields in Sydney and Melbourne, although this is about to change.
With very few alternate investment opportunities, we don’t at this particular point in time expect to see investors retreating out of the market, although we do expect to see carnage in the CBD markets. This should not come as a great surprise as these markets have introduced thousands and thousands of new apartments, and many suburbs have constructed less than one hundred new apartments.
Whatever the case, if you like watching real estate machinations 2017 will keep you highly entertained.
To add to this, the Commonwealth Bank advised mortgage brokers this week, that from February 13, it will cease accepting refinancing applications for investment home loans. Will the other major lenders then follow suit?
ROBERT SIMEON is a director of <a href="https://www.rwm.com.au/">Richardson Wrench Mosman and Neutral Bay</a> and has been selling residential real estate in Sydney since 1985. 
He has also been writing real estate blog <a href="https://www.rwm.com.au/news/">Virtual Realty News</a> since 2000.
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robertsimeon-hRNTwJyXkQ

The ticking time bomb in our property markets: Robert Simeon

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The Agency have again pushed back their debt repayment with their major funder Macquarie.
Earlier this week The Agency, set up in 2017 by a band of former McGrath agents, updated shareholders that they negotiated a two week extension on their debt repayment to their tier one funder.
It pushed the March 31 payment to April 9.
The Agency have negotiated a further extension, with the repayment date now pushed until after Easter, April 14.
"The Board will provide a further update to the market closer to the conclusion of the extension period", the ASX update advised.
The Agency's share price has dropped 20 per cent since the initial announcement, with shares now trading at ¢4, down from ¢5.
In their first debt payment extension notice, The Agency advised it had been in discussions with other credible debt providers regarding refinancing of its primary bank debt.
All non-commissioned staff at The Agency will see their hours cut, effective mid-April, given the reduced workloads due to the ongoing COVID-19 pandemic. 
 
 
 
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jrobinson-rf4aSBido9

The Agency gets funding extension until after Easter

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GUEST OBSERVER
<h1>The number of Australian's with no savings has increased.</h1>
If you needed A$2,000 in a hurry where would you get it? <a href="https://www.csi.edu.au/financialresilience/" target="_blank">70% of those we surveyed</a> said they would ask friends or family, although almost half said that it’s very or fairly unlikely that their social connections could help.
This is just one of the takeaways from our <a href="https://www.csi.edu.au/financialresilience" target="_blank">new report</a>, funded by NAB, that shows financial resilience is declining in Australia. Large numbers of Australians are struggling to meet expenses, pay bills and manage or recover from financial shocks despite two decades of <a href="https://www.rba.gov.au/chart-pack/au-gdp-growth" target="_blank">GDP growth</a>, <a href="https://theconversation.com/income-inequality-ticks-down-as-the-rich-see-their-incomes-fall-abs-83883" target="_blank">declining income inequality</a> and <a href="https://www.csi.edu.au/financialresilience" target="_blank">increasing financial capability</a>.
And while more adults in Australia are reporting regular social contact, and fewer are reporting needing community or government support, the number of Australians needing support but not receiving it has increased from 3.2% to 5.3%.
<iframe style="border: none;" src="https://datawrapper.dwcdn.net/RhNx5/9/" frameborder="0" width="100%" height="400"></iframe>
The problem is especially acute for those on low incomes. A recent <a href="https://www.sprc.unsw.edu.au/research/projects/a-new-healthy-living-minimum-income-standard-for-low-paid-and-unemployed-australians/" target="_blank">report</a> found most low-income households are unable to afford a minimum and healthy standard of living, with their incomes falling short by between A$9 and A$89 a week.
In this week’s <a href="https://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/6530.0Main%20Features72015-16?opendocument&amp;tabname=Summary&amp;prodno=6530.0&amp;issue=2015-16&amp;num=&amp;view=" target="_blank">Household Expenditure Survey</a>, the Australian Bureau of Statistics found that two in every five households are experiencing at least one indicator of financial stress. In households with incomes in the bottom 40%, this ratio increases to one in two.
<iframe style="border: none;" src="https://datawrapper.dwcdn.net/TzNNI/1/" frameborder="0" width="100%" height="400"></iframe>
People on the lowest incomes <a href="https://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/6530.0Main%20Features72015-16?opendocument&amp;tabname=Summary&amp;prodno=6530.0&amp;issue=2015-16&amp;num=&amp;view=" target="_blank">are</a>:
<ul>
<li>12 times more likely to be unable to raise A$2,000 in a week for something important</li>
<li>Five times more likely to be unable to pay a utility bill on time</li>
<li>Ten times more likely to be unable to heat their homes than the highest income households.</li>
</ul>
The lowest income households are also more likely to be socially isolated than the highest income group. For example, they were at least ten times more likely to be unable to afford a special meal once a week or a night out once a month.
<iframe style="border: none;" src="https://datawrapper.dwcdn.net/US8vA/3/" frameborder="0" width="100%" height="400"></iframe>
As you can see in the above graphic, the proportion of Australian adults who are financially secure has decreased significantly between 2015 and 2016, from 35.7% to 31.2%. One in eight Australians (12.6%) now experience severe or high financial stress, up from 11.1%.
In practical terms financial stress may mean a combination of limited or no savings; difficulties meeting everyday living expenses, managing debts and raising funds in an emergency; no direct access to a bank account; no access to appropriate and affordable credit and/or low levels of social support.
When you dig deeper into the data you see this is not a problem of behaviour or financial literacy. The decline in financial resilience has occurred despite a significant improvement in the proportion of people with moderate to high levels of financial knowledge and behaviour (from 50% to 55%).
This includes a knowledge of, and confidence using, financial products and services. And a willingness to seek financial advice and engage in proactive behaviours like saving, budgeting and paying more than required on debts.
<iframe style="border: none;" src="https://datawrapper.dwcdn.net/u21Ej/3/" frameborder="0" width="100%" height="400"></iframe>
This leads to the conclusion that the cause of the decrease in financial resilience is due to a decline in external resources. This means people having enough money to meet living expenses and manage debts, and having access to a bank account, appropriate credit, insurance and being able to access social and community supports when needed.
We can see this by looking at data on savings.
More Australians are saving (up to 60.2% in 2016 from 56.4%). However, as you can see in the chart below, the total amount of savings has declined. Only one in two people had three months or more of income saved (a drop from 51.9% in 2015 to 49.5% in 2016). And people with savings of a month or less increased from 27.3% to 31.6%.
<iframe style="border: none;" src="https://datawrapper.dwcdn.net/Xxy7t/5/" frameborder="0" width="100%" height="400"></iframe>
More Australians are budgeting, too. With 51.6% following a budget in the latest survey as compared to 49.1% in 2015.
The data also shows us that an inability to access appropriate financial products and services affects a large number of Australians. This was mainly driven by increases in the number of people who only had indirect access to a bank account (from 1.2% in 2015 to 2.7% in 2016) and increases in the number of people who had no access to appropriate credit (20.2% in 2015 compared to 25.6% in 2016).
Appropriate and affordable credit is important to assist people who cannot draw on savings when they experience financial shocks, such as the sudden need to replace a washing machine or fridge, or to fix a car needed to get to work.
<iframe style="border: none;" src="https://datawrapper.dwcdn.net/rJeuR/2/" frameborder="0" width="100%" height="400"></iframe>
As we can see, stories of economic growth and declining income inequality aren’t capturing the whole picture. It is important that we don’t overlook the large number of people and households in Australia who are experiencing high levels of financial stress, who are struggling to pay the bills and meet basic living expenses.
Our research shows that large numbers of people and households are not prepared, or adequately supported, should a financial shock (such as an increase in interest rates or a recession) materialise.
<img src="https://counter.theconversation.com/content/84053/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">While most people have strong social support; more appropriate, affordable and accessible financial support from the government, communities and financial institutions is required. This is along with appropriate mechanisms to help identify people most at risk and to cross refer where required.
<a href="https://theconversation.com/profiles/kristy-muir-158422" target="_blank">Kristy Muir</a>, Professor of Social Policy / Research Director, Centre for Social Impact, <a href="https://theconversation.com/institutions/unsw-1414" target="_blank">UNSW</a> and <a href="https://theconversation.com/profiles/axelle-marjolin-161212" target="_blank">Axelle Marjolin</a>, Researcher at the Centre for Social Impact, <a href="https://theconversation.com/institutions/unsw-1414" target="_blank">UNSW</a>
This article was originally published on <a href="https://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/income-inequality-may-be-declining-but-financial-vulnerability-is-increasing-84053" target="_blank">original article</a>.
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j.ballantyne1990-6AQqhLzZaK

Income inequality may be declining but financial vulnerability is increasing

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The aggregate household debt-to-income ratio has increased further in recent years, rising from already high levels according to RBA’s Financial Stability Review 2017.
This has raised concerns about the household sector’s resilience to unexpected declines in income or asset prices.
Debt-to-income ratios vary substantially across households; roughly 30 per cent of households owe no debt, while some other households have debt-to-income ratios that are well above the average.
One important issue for financial stability is the number and characteristics of highly indebted households.
These households are most likely to have difficulty repaying debt and sustaining consumption if their circumstances change.
If the number of highly indebted households is large, their response to adverse income shocks could amplify and propagate an economic downturn, declines in housing prices and losses at financial institutions.
This article outlines some of the characteristics of highly indebted households.
Household-level information on the distribution of debt, income and wealth is available in the Household, Income and Labour Dynamics in Australia (HILDA) Survey, which collects data on owner-occupier mortgage debt every year and provides a detailed breakdown of total household debt every four years (most recently in 2014).
These data indicate that the share of households with very high debt-to-income ratios was little changed between 2006 and 2014 (Graph C1).
<a href="https://www.propertyobserver.com.au/images/2017/04/19/Graph%20C1.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/04/19/Graph%20C1.jpg" alt="">
In contrast, the proportion of households with more moderate debt-to- income ratios increased steadily, while the share of less indebted households declined.
However, because the latest HILDA data on total debt are for 2014, it is not possible to discern whether these trends have continued more recently.
The aggregate ratio of debt to income was overall little changed between 2006 and 2014, but has since risen.
There are several ways to classify household indebtedness.
The approach used here is to classify ‘highly indebted’ households as those with debt-to-income ratios in the top 10 per cent of indebted households in a given survey year.
Over the 10 years to 2014, most households in this group had a debt-to-income ratio above 550 per cent and as a group these households accounted for around 35–40 per cent of total household debt.
While the median debt-to-income ratio of the top 10 per cent of indebted households increased sharply from around 600 per cent to over 750 per cent between 2002 and 2006, it was little changed between 2006 and 2014.
Highly indebted households steadily became more leveraged between 2002 and 2014, with the median debt-to-asset ratio of these households rising from around 50 per cent to just under 60 per cent.
The type of debt owed by highly indebted households was different to that for less indebted households.
Less indebted households mostly had owner-occupier housing debt, while highly indebted households owed a rising share of ‘other’ property debt, most of which was investor housing debt (Graph C2).
<a href="https://www.propertyobserver.com.au/images/2017/04/19/Graph%20C2.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/04/19/Graph%20C2.jpg" alt="">
Between 2002 and 2014, the average share of highly indebted households’ total debt comprised of ‘other’ property debt increased from around 20 per cent to nearly 30 per cent.
The HILDA Survey also includes information on the repayment behaviour of households.
As might be expected, highly indebted households were less likely to be ahead of schedule on both owner-occupier debt and ‘other’ housing debt than less indebted households (Graph C3).
<a href="https://www.propertyobserver.com.au/images/2017/04/19/Graph%20C3.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/04/19/Graph%20C3.jpg" alt="">
Part of the reason is that they tended to have newer mortgage debt that had less time to amortise.
Nonetheless, the share of highly indebted households ahead of schedule on their owner-occupier debt rose between 2006 and 2014, which suggests that, like other borrowers, these households took advantage of low interest rates to pay down debt at a faster rate.
The share of highly indebted households ahead of schedule on ‘other’ property debt was lower, and increased only a little between 2006 and 2010.
This is unsurprising given the greater tax incentives to retain debt on rental properties than on owner-occupier properties.
Around one-quarter of highly indebted households were in the bottom two quintiles for income and wealth, which is a higher share than for less indebted households (Graph C4).
<a href="https://www.propertyobserver.com.au/images/2017/04/19/Graph%20C4.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/04/19/Graph%20C4.jpg" alt="">
Lower-income households tend to devote a higher share of their income to essential living expenses (leaving less income for debt servicing), while households with lower wealth may be less able to sell assets to resolve any difficulties in servicing their debt.
Nonetheless, a relatively small share of the total stock of debt owed by highly indebted households was owed by lower income or lower wealth households.
In 2014, for instance, households in the bottom two income quintiles accounted for only 12 per cent of total debt owed by highly indebted households.
Using HILDA, it is possible to track highly indebted households over time. Households that were highly indebted in a particular year tended to reduce their debt-to-income ratios substantially in subsequent years.
For instance, in 2002 households that were highly indebted had a median debt-to-income ratio of 600 per cent, yet by 2006 the median debt-to-income ratio of these particular households had fallen to below 350 per cent and their debt-to-income ratio had fallen further by 2010 (Graph C5, left panel).
<a href="https://www.propertyobserver.com.au/images/2017/04/19/Graph%20C5.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/04/19/Graph%20C5.jpg" alt="">
The HILDA Survey also includes questions on financial stress experienced by households over the previous year.
There was a broad-based decline in the share of households experiencing episodes of financial stress between 2001 and 2015 (the time span available in the HILDA Survey).
Nonetheless, households that were highly indebted in a particular year had a greater propensity to experience financial stress.
For instance, households that were highly indebted in 2002 were more likely to experience at least one incidence of financial stress in all other years compared with households that were less indebted in 2002 (Graph C5, right panel).
The result also holds true for other cohorts.
This suggests that a greater share of highly indebted households face financial difficulties and are more likely to be vulnerable to events that affect their ability to repay their debt, such as income declines or increases in interest rates.
Overall, these data highlight that highly indebted households can be more vulnerable to negative economic shocks and pose risks to financial stability.
In particular, highly indebted households are less likely to be ahead of schedule on their mortgage repayments and they are more likely to experience financial stress, hence could be more vulnerable to adverse macroeconomic shocks.
The consequent effects of this stress on the broader economy may be exacerbated by the disproportionately large share of investor housing debt owed by highly indebted households.
Heightened investor demand can contribute to the amplification of the cycles in borrowing and housing prices, particularly when this investment is highly leveraged.
Nonetheless, HILDA data also show that much of the debt held by highly indebted households is owed by households with high income and wealth, who are typically better placed to service larger amounts of debt.
Find the RBA's latest Financial Stability Review 2017 <a href="https://www.rba.gov.au" target="_blank">here</a>.
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