<a href="https://www.apartments.com.au/developers/draycon">Draycon Building</a> is nearing completion of Boutique Chevron Island, a 42-apartment development on the northern end of Chevron Island at 17–19 Parneno Street, with a limited-time offer of fully furnished apartments available.

Now more than 90 per cent complete, <a href="https://www.apartments.com.au/buildings/boutique-chevron-island-17-19-parneno-chevron-island-qld-4217">Boutique</a> has been shaped by one of the Gold Coast’s most tightly held island addresses, where riverfront outlooks and walkable access to Surfers Paradise converge.

For Draycon Building Managing Director Howard Dabit, the appeal of the site was immediate.

“I knew it was a good site as soon as I saw it,” Dabit said.

“The position and location on the north end of <a href="https://www.apartments.com.au/developments/chevron-island-qld-4217">Chevron Island</a>, the way the river swirls around the site basically from the north to the east, it feels like the site is surrounded by the water. The height that we’ve got and the aspect looking north is beautiful. Eighty per cent of the apartments are looking north so they get that drenching sunlight coming in.”

[smartcode_project:default project_id=89709 project_image_fid=360922]

That northern orientation places the development within a stretch of Chevron Island defined by open river aspects and skyline views, while remaining embedded in the suburb’s established village setting.

Chevron Island has increasingly drawn owner-occupiers seeking centrality without the intensity of high-rise beachfront living. Positioned at the geographical centre of the Gold Coast, the island offers direct access to both the beach and key cultural infrastructure while retaining a neighbourhood-scale character.

Connected by bridge to Surfers Paradise, Chevron Island offers walkable access to beaches, riverfront parklands and a revitalised foreshore boulevard animated by walkers and cyclists throughout the day. The Pacific Ocean is only minutes away, reinforcing the suburb’s dual river-and-surf identity.

At the same time, Thomas Drive forms the spine of the island’s village life, delivering cafés, wine bars, casual dining and everyday services within easy reach. Independent grocers, wellness operators and neighbourhood retailers contribute to a community atmosphere that remains distinct from the vertical scale of the beachfront.

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In the opposite direction, the Green Bridge links directly to HOTA – Home of the Arts – placing galleries, performance venues and parklands within walking distance. Weekly markets and major exhibitions draw visitors from across the region, while residents return to a quieter residential pocket at day’s end.

Public transport, including nearby bus routes and the G:link light rail corridor along the coastal spine, strengthens connectivity north and south. Griffith University, the Gold Coast University Hospital precinct and established private schools such as The Southport School are all within a short drive.

Ongoing investment across Surfers Paradise, HOTA and the broader Southport corridor has elevated amenity while preserving Chevron Island’s comparatively low-rise residential character. It is this balance, walkable village atmosphere paired with metropolitan-scale infrastructure, that continues to differentiate the suburb from higher-density beachfront precincts.

Boutique comprises just 42 residences, designed to maximise river and skyline outlooks within this tightly held island setting.

Boutique Chevron Island is slated for completion in April 2026, with prices starting from $1,220,000.

[smartcode_project_cta:default project_id=89709]

Joel Robinson

Draycon Building’s Boutique Chevron Island places 42 residences at the heart of the Gold Coast

Sydney developer <a href="https://www.apartments.com.au/developers/deicorp">Deicorp</a> has secured planning approval for a $300 million residential development in Lindfield, marking the company’s second project on Sydney’s North Shore and its first on the Upper North Shore.

Located on Beaconsfield Parade and designed by DKO Architecture, the state significant development comprises three buildings of up to 10 storeys and will include 399 residences, including 59 affordable homes and 40 adaptable homes.

Residences will range in size from one, two and three bedrooms, with two-bedroom apartments accounting for over 60 per cent of the product make-up. Residents will have access to a broad suite of amenities, including a wellness area, indoor and outdoor recreational spaces, a pool, a gym, a community room and a golf simulator.

In line with Deicorp’s long-standing focus on creating transit-oriented communities, the project is located just 260 metres from the Lindfield Train Station, reinforcing its role in delivering well-connected housing close to established infrastructure, retail and local services.

The inclusion of affordable and adaptable housing supports greater diversity within the local market, while the mix of apartment types responds to demand from downsizers, young professionals and families seeking access to the Upper North Shore.

Deicorp Founder Fouad Deiri OAM said the approval represents an important milestone for both the company and the suburb

“This approval allows us to deliver well-designed homes in a location that is already supported by strong transport and community infrastructure," Deiri said.

"Our focus is on creating places that integrate into their surroundings and provide long-term value for residents, and the broader Lindfield community. Being within walking distance of the station ensures this project supports sustainable growth in the right locations."

Across its portfolio, Deicorp currently has 4,703 apartments under construction, playing a leading role in shaping connected, liveable communities across Sydney.

Its expanding portfolio of Metro-linked developments includes Tallawong Village, <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> in Five Dock, <a href="https://www.apartments.com.au/new-apartments/hyde-metropolitan-sydney-133-141-liverpool-street-sydney-nsw-2000">Hyde Metropolitan</a> in Sydney CBD, <a href="https://www.apartments.com.au/new-apartments/falcon-alexander-crows-nest-8-alexander-street-crows-nest-nsw-2065">Falcon &amp; Alexander</a> in Crows Nest and Showground Village, Castle Hill.

Deicorp purchased the Beaconsfield Paradise site last year. Construction is scheduled to commence in Q2 of 2026 and will be completed in 2029.

Deicorp expands portfolio to nearly 5,000 apartments with Lindfield project

In a joint venture with The Trump Organization, Australia developer Altus Property Group has announced plans to bring a Trump International Hotel &amp; Tower to the Gold Coast, marking the first Trump-branded project in Australia.

"Trump International Hotel &amp; Tower, Gold Coast is our first official project in Australia and reflects our unwavering commitment to delivering world-class luxury experiences in iconic locations around the world," Eric Trump, Executive Vice President of The Trump Organization, said.

"This development exemplifies the Trump brand’s dedication to quality, sophistication, and unmatched service, and we are thrilled to bring this vision to the vibrant Gold Coast community."

The 91-storey building, which will become the tallest in Australia at 335 metres, will feature a&nbsp;285-room luxury hotel bearing the trademark Trump logo. It will also include 272 luxury residential apartments, a three-level podium with an exclusive Beach Club, and over 3,400 sqm of premium commercial, retail, and dining space, revitalizing the central Surfers Paradise precinct.

“Trump International Hotel &amp; Tower, Gold Coast will be a truly unique offering in the Australian market, bringing the prestige and allure of a world-class luxury brand,"&nbsp;Altus founder and chief executive David Young said.

"Altus Property Group is proud of its track record in delivering landmark developments across Australia, and our expertise ensures this project will be an outstanding success."

Trump Hotel heads for the Gold Coast to become Australia's tallest building

More than a century after the Corrimal Coke Works first opened in 1912, the industrial landmark that helped shape the suburb is being reinterpreted as a walkable residential neighbourhood, with Stage One of <a href="https://www.apartments.com.au/new-apartments/the-works-stage-one-27-railway-street-corrimal-nsw-2518">The Works</a> now underway at 27 Railway Street.

For 102 years, the site was central to <a href="https://www.apartments.com.au/developments/corrimal-nsw-2518">Corrimal</a>’s economic and social identity before operations ceased in 2014. Rather than erasing that legacy, developer Legacy Property has embedded it into the masterplan, retaining and reinterpreting elements such as the iconic 1912 brick chimney and sections of the original C1 Coke Oven Battery, alongside the adaptive reuse of the former powerhouse building.

Stage One will introduce 181 apartments across low-rise buildings, offering predominantly two and three-bedroom residences with completion targeted for mid-2027. The scale and configuration reflect a deliberate focus on owner-occupiers, targeting those seeking a lower-maintenance home in a prime location within the northern suburbs of Wollongong.

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Apartments have been designed to maximise natural light and cross-ventilation, with floor-to-ceiling glazing extending living areas onto generous balconies. Engineered timber flooring, induction cooktops and 900mm ovens in larger residences support everyday functionality, while two interior palettes allow buyers to tailor finishes to their preferences. The material selection draws on a restrained coastal language, intended to connect homes to their surroundings rather than compete with them.

The Works forms part of a broader 18-hectare masterplan that will ultimately deliver around 550 dwellings, new parks, and a heritage precinct celebrating the site’s past. More than seven hectares are dedicated to open space, including Southern Park and a Village Green with community gardens and recreation areas. The creek corridor is being rehabilitated with 150,000 native plantings, restoring biodiversity to the site and softening landscape.

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Positioned adjacent to Corrimal Station and within walking distance of Corrimal Town Centre, the precinct places daily essentials, rail connections and local retail within easy reach. Wollongong CBD, including the hospital, university and entertainment venues, sits approximately 6.5 kilometres to the south.

For buyers more familiar with North Wollongong, Corrimal offers a different proposition: a well-established coastal suburb framed by beaches to the east and the escarpment to the west, with a strong sense of local identity shaped in part by the former Coke Works. The Works seeks to reinforce that identity by creating a connected, walkable neighbourhood between coast and escarpment, rather than a standalone apartment complex.

Sustainability underpins the development approach. The Works is targeting Wollongong’s first 5-Star Green Star-rated community, with water-sensitive urban design, recycled materials and energy-efficient buildings integrated across the masterplan. For residents, these measures provide not only environmental benefits but also reduced operational costs and future resilience.

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With construction commenced and display materials available to view, prospective buyers can now engage more directly with the project’s vision, reviewing floorplans, material selections and the broader masterplan in detail. For many local homeowners weighing a move, the opportunity to experience how heritage, landscape and contemporary design intersect may help bridge the gap between familiarity and the next chapter.

As Stage One progresses toward its mid-2027 completion, The Works represents a significant chapter in Corrimal’s evolution, transforming a site that once powered local industry into a walkable residential precinct designed for its next generation of residents.

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Legacy Property’s The Works reimagines Corrimal’s century-old Coke Works

When it comes to developing in Melb​ourne's Bayside region, <a href="https://www.apartments.com.au/developers/lowe-living">Lowe Living</a> knows exactly what buyers want.

With a longstanding presence in the area and a string of sell-out projects, Lowe Living consistently delivers developments that are as sought-after as their predecessors.

Their latest instalment is in <a href="https://www.apartments.com.au/developments/hampton-vic-3188">Hampton</a><a href="https://www.apartments.com.au/developments/hampton-east-vic-3188">&nbsp;East,</a> the same postcode where they have previously delivered Hampton Hill and Oceano. The developer-builder recently commenced construction on its newest project,&nbsp;<a href="https://www.apartments.com.au/new-apartments/marella-hampton-31-35-alicia-street-hampton-east-vic-3188">Marella</a>, a collection of 32 apartments just five minutes from the beach.

Site acquisition is paramount to success. Lowe Living rarely brings a building to market that isn’t within walking distance of essential amenities, whether it be the beach, a prominent retail strip, or a train station. Marella is no exception, located at its Alicia Street address, less than a kilometre from the retail heart of Hampton Street and Hampton Station.

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Equally important to Lowe Living is the architecture.

For Marella, they appointed <a href="https://www.apartments.com.au/architects/cera-stribley-architects">Cera Stribley</a>, who explains that the architectural vision was to create a contemporary reinterpretation of the Californian bungalow, a style that’s iconic to Hampton’s heritage.

"By borrowing, abstracting, and reinterpreting elements of this quintessential style, such as strong datum lines, articulated columns, exposed structures, and roof tiles, our design strikes a balance between modernity and familiarity," says Cera Stribley.

"This approach ensures that the development is not only visually appealing but also contextually sensitive, resonating with Hampton's existing architectural landscape."

[smartcode_project:default project_id=146197 project_image_fid=358499]

The building features terracotta brick, soft cream masonry, and exposed metal detailing, giving it a tactile presence that is intended to weather gently over time.

Internally, the focus on lasting quality continues, with two and three-bedroom residences anchored by sculptural stone kitchen islands, natural light, and clearly defined transitions between living, dining, and outdoor spaces.

The layouts have been carefully designed. Open-plan zones extend to private balconies, with light-filled interiors and generous kitchen proportions, supported by Miele wall ovens, induction cooktops, and integrated fridge-freezers. These are not small apartments rebranded as luxury; they have been designed at scale, with ample storage, hotel-style entry access, and secure basement parking provided as standard.

[smartcode_project:default project_id=146197 project_image_fid=358492]

At the uppermost level, Marella’s Signature Collection penthouses offer city or bay views, large entertaining terraces (some with outdoor spas), and elevated finishes, including fully wrapped stone kitchen benches and a Liebherr wine fridge.

Flexible room arrangements allow for a fourth bedroom or secondary living space, sought-after by both empty nesters who want the space when family visits and families with older children.

[smartcode_project:default project_id=146197 project_image_fid=358498]

A residents’ lounge on the ground floor reinforces the project’s small-community feel. With a fireplace, private dining area, and adjoining terrace, it’s one of several shared spaces that balance amenity with privacy and scale.

Construction has commenced, with completion expected in early 2027.

[smartcode_project_cta:default project_id=146197]

Lowe Living continues Bayside legacy as Marella rises in Hampton

Forecast

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Overall, it’s hard to see a scenario where Australian housing values could fall off a cliff.
For this to happen we would need to see a material about face in labour market conditions, a global shock or a material rise in interest rates– none of which seems to be a likely outcome at the moment.
Without a doubt, housing risks are heighted relative to a year ago. Dwelling values are slipping lower nationally (down 2% since peaking in September last year), mortgage rates are edging higher (up by around 15 basis points from three of the four major banks announcing a rate rise in September) and mortgage arrears have moved off their record lows (but still only around 0.6% of all mortgages are 90+ days in arrears). All this against a backdrop of record high levels of household debt (the ratio of disposable income to household debt reached 190% in March this year), increasing levels of housing supply and rising domestic and global uncertainty.
It should come as no surprise that some commentators are forecasting a substantial reduction in dwelling values. We saw similar forecasts during previous downturns from the likes of Steven Keen, Harry Dent and Jeremey Grantham as well as many others. The most recent dire prediction to get mainstream airplay was from Martin North predicting a 40-45% fall in dwelling values; albeit with only a 20% chance of this occurring. Since airing on 60Minutes, the segment titled ‘Bricks and Slaughter’ has seen the two primary experts featured, Martin North and Louie Christopher, clarifying their televised comments which were apparently presented in an unbalanced context: a presentation of the worst case scenario with no regard for the most likely outcome.
If we look at the current downturn in Australian housing, the trajectory of decline is actually quite unremarkable.
Australia’s largest housing market, Sydney, has seen values fall by 5.6% sincepeaking in July last year; a trajectory that is straight down the middle of previous downturns. During the GFC, Sydney dwelling values fell by 7.0% in the space of twelve months, and the downturn before that (2003-2006) saw values fall 7.1% over the same number of months.
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Australia’s second largest city, Melbourne, has seen values falling since November last year. Since that time the market is down a cumulative 3.5% and the descent has generally been milder relative to previous downturns.
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Even in markets where values have been falling consistently for more than four years on the back of a material weakening in economic and demographicconditions, we haven’t seen values fall by anywhere near 40%. Perth dwellingvalues peaked in 2014 and have fallen by 12.6% and in Darwin where conditions have been even tougher, dwelling values are down 21.8%.
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Recently released housing value forecasts from Moody’s Analytics certainly paints a less gloomy picture of housing markets over the coming years. While, growth is forecast to be subdued relative to previous years, the forecast is for a relatively mild downturn, with national house and unit values returning to mild positive annual growth by the middle of 2019.
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The Moody’s Analytics forecasts are based on an econometric model whichuses CoreLogic’s Hedonic Index data as a base to forecast from. Their upbeat assessment of dwelling values is based on rising business investment, particularly in the non-mining sector, a rise in infrastructure spending, above trend jobs growth, and ongoing low interest rates.
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Of course the outlook for housing conditions is varied across the regions. Bythe end of 2019, Moody’s is expecting every capital city except Hobart (-2.4%) to record a positive annual change in house values, with year on year rises ranging from 4.5% in Canberra and Adelaide to a 0.9% rise in Perth dwelling values.
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Forecasting the movement in asset values is challenging at the best of times. With so much uncertainty at the moment it’s even harder. Several wildcards remain that could have a negative impact on the direction of housing values.
Households are more sensitive than ever to interest rate movements due to the record level of household debt. Roughly, 70% of household debt is housing related, which implies small changes to mortgage rates could have an amplified impact on household balance sheets. Further out of cycle movements in mortgage interest rates could have a negative impact on the market. On the flipside, if the RBA decides to cut the cash rate further (a possible scenario of economic conditions weakened and housing price falls accelerated), this would likely see a rise in housing activity and help to place a floor under housing prices.
There is also the potential for changes to property taxation policies that could have a further dampening effect on investment demand. Based on the value of new housing finance commitments, investors still comprise around 41% of mortgage demand, down from 55% in mid-2015. Investor concentrations remain well above their long term averages across New South Wales (49% of housing finance commitments) and Victoria (41% of housing finance commitments), implying Sydney and Melbourne would have more to lose if investor activity were to drop more substantially. Investors are already being disincentivised by falling prices, mortgage rate premiums and low rental yields; additional disincentives from tax reform could see demand reduce further, creating some slack in the overall demand composition for Australian housing.
In balance, even with mortgage rates edging higher, we are still in the lowestmortgage rate environment since the 1960’s. Population growth remainsstrong and maintaining a consistent migration policy seems to have support from both sides of politics which will continue to support demand for housing. Labour markets are reasonably healthy with unemployment holding at 5.3% and likely to trend lower, underemployment at the lowest rate since May 2014 and jobs growth above the long term trend.
Overall, it’s hard to see a scenario where Australian housing values could fall off a cliff. For this to happen we would need to see a material about face in labour market conditions, a global shock or a material rise in interest rates –none of which seems to be a likely outcome at the moment.
TIM LAWLESS heads up the CoreLogic RP Data research and analytics team and can be contacted<a href="https://blog.corelogic.com.au/author/timlawless/" target="_blank"> here.</a>
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tlawless-5VLUrbAk9s

Is the property market really all that bad? CoreLogic's Tim Lawless

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Westpac economists have gone full circle in their house value forecasting, with prices to soar from December 2021.
They had been expecting between April 2020 and June next year, the national price index to fall by 10 per cent.
But last week they updated their forecasting, stating prices would only drop five per cent between April and June next year.
There have already been -2.3 per cent declines nationally, according to CoreLogic's data.
And now they're forecasting a much stronger rebound, accumulating 15 per cent over the two years from December next year.
"Apart from Victoria, where we expect prices to fall in the December quarter, we expect that in the December and March quarters in the other states, prices will be relatively stable with some upside pressure."
Evans says the June quarter and September quarter 2021 when markets have to deal with $240 billion of deferred loans currently on the balance sheet of the banks.
"That's about 620,000 borrowers, $180 billion in mortgages", Evans says.
"It's our view that risk will be well managed", Evans suggests, adding that there will be restructuring of loans, banks will be patient, and at the time there will be modest downward pressures on prices.
"But broadly speaking, The sort of fears that some of had, that that phase will be a very negative phase for house prices, I think will be unfounded."
Evans says the final phase will be that interest rates are at record lows, the overhang of the deferred loans will be behind us, and the central bank and the government will be focused on the economy, not on constraining bank lending or on over regulation
"That will be a very positive environment for the housing market."
To listed to Westpac economist Bill Evans full update, watch below. 
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jrobinson-rf4aSBido9

Westpac's full circle - forecasting 15 per cent house gains post COVID

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The NAB are forecasting a "very large fall" in Australia's second quarter of 2020, but then there will be an extended period of recovery.
NAB economists Alan Oster and Gareth Spence suggested the -0.3 per cent contraction in Q1 was slightly weaker than they had anticipated, however after the inevitable large Q2 dip, they now see a stronger than previously expected pick up in the second half of 2020.
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"Following the integration of the Q1 national accounts our near term forecasts for growth in 2020 are broadly unchanged," Oster and Spence advised in their most recent research.
"We still expect a large fall in activity in Q2 – a decline 8.5% q/q, before an earlier and stronger than previously expected pickup H2 2020 and continued recovery in 2021."
For the first time, NAB have forecast the GDP in 2022, expecting a 2.8 per cent rise. 
They suggest the GDP won't exceed the Q4 2019 levels until mid 2022.
<h1>Housing</h1>
There's been no revision in the house price forecast from NAB. They're still expecting to see falls of between 10 and 15 per cent over the next 12 to 18 months.
"Higher unemployment, slower wage growth and falls in overseas migration will weigh on prices in capital cities while new supply continues to come online", Oster and Spence said, although added that offsetting the declines will be the impact of lower interest rates and a pullback in construction.
They believe dwelling investment will decline around 15 per cent over the next year or so before levelling out in mid-2021.
"High rates of completion are likely to rapidly erode the pipeline of new dwellings while uncertainty in the housing market will see caution in new commitments going forward.
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"A more significant improvement in approvals will be needed going forward to see a return to growth in dwelling investment. However, as noted the impact of softer prices in the established market and uncertainty about the level of migration going forward may weigh on the development process going forward."
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<h1>Employment</h1>
There's further good news coming from the NAB camp. They've downgraded their forecasted unemployment rate, now suggesting it will peak around 8.5 per cent.
"With labour force participation temporarily impacted by definitional changes to Jobseeker payments and the impact of Jobkeeper in supporting jobs it is likely that the unemployment rate will now peak at a much lower rate – around 81⁄2%.
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"Nonetheless, the impact on the labour market has already been large with underutilisation rising to exceptionally high levels and hours worked declining sharply in April.
"The unemployment rate is expected to remain elevated for sometime, despite the rebound in growth.
"This reflects the time it will take to fully recover the level of GDP to pre-COVID levels following the large expected fall in Q2."
 
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Extended recovery forecast by NAB after "very large" Q2 fall 

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NAB have forecast the next RBA cut will come before we tick in to 2020.
In their report The Forward View, NAB Economics are predicting a December rate cut, a fourth cut this calendar year, which will bring the official cash rate down to a historic low 0.5 per cent.
Economists Gerard Burg, John Sharma and Phin Ziebell, co-authors of the report, suggest the NAB continue to expect growth to remain below trend, with just a small improvement expected.
They also expect the labour market to deteriorate slightly with the unemployment rate edging higher, with inflation to also remain weak.
"With these predictions largely a continuation of recent trends, it is likely that we will see a further reduction in interest rates by the RBA," the report notes.
"While the RBA has now lowered rates three times this year, taking the cash rate to a record low of 0.75%, we think that further stimulus will be required to support the economy, given the private sector remains weak and heightened global uncertainty poses significant risk.
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"We have pencilled in a further cut in the cash rate of 25bps in December taking rates to a new low of 0.5%."
NAB see potential for a further cut in the first half of 2020 should downside risk materialise and more significant fiscal stimulus fail to eventuate.
"The key dynamics behind our assessment of the economy continue to be headwinds from a weak consumer and a significant downturn in housing construction," NAB advise.
"That is being partly offset by strong public sector spending and growth in exports.
 
They suggest that the recent tax cuts appear to have failed to provide a significant boost to household spending given retail sales growth remains soft.
"We think the recent rate cuts will have an impact, but the effects will take longer and be more variable, which will make them less apparent.
 
NAB have positive forecasts for the national housing market.
"Conditions in the established housing market continue to brighten, with house prices continuing their recovery in Sydney and Melbourne.
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"It is likely that lower interest rates, low unemployment and still strong population growth, combined with a pull-back in construction, will support prices going forward, there are clearly a number of state specific factors at play."
Despite the turnaround in price conditions, the continuing building approval decline is likely to put some downward pressure on the market.
"The activity side of the market is likely to continue to weaken with building approvals continuing to trend down.
"Overall, we expect the downturn in the housing construction cycle to continue.
"We expect further falls in dwelling investment with approvals continuing to trend lower and the large pipeline of work outstanding to be rapidly depleted.
"The increase in prices to date is a positive, but will need to be sustained, with activity returning to more normal levels in the market before residential construction sees a recovery.
"We continue to expect a modest increase in process over the next year or so."
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NAB forecasts next rate cut in December

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EXPERT OBSERVER
The Reserve Bank’s May Statement on Monetary Policy (SMP) shows substantial reductions in the growth and inflation forecasts. GDP growth (to one decimal point) is now forecast at 2.6% for 2019 and 2.7% for 2020. That compares with 3.0% and 2.7% in the February Statement on Monetary Policy. The main explanations for the growth reductions for 2019 are consumption (2% down from 2.5%) and dwelling investment (–6.7% down from –4.5%).
As revealed in the Governor’s decision statement following the May Board meeting, the underlying inflation forecasts (trimmed mean) have been reduced from 2.0% for 2019 in the February SMP to 1.75% in May and the 2020 forecast reduced from 2.25% to 2.0%. 
The forecast for the unemployment rate has been slightly increased, with the 5% unemployment rate still expected to hold through 2019 but the fall to 4.75% pushed back from December 2020 to June 2021.
It is very important to note that these forecasts are based on market pricing for the profile for the RBA cash rate and the current spot AUD. In February, markets had one cut priced-in for February 2020, whereas in May, one full cut is priced-in for August 2019 and a second priced-in for May 2020. The AUD trade weighted index is 2% lower than in February.
Consequently, despite a significantly lower cash rate profile, the growth and inflation forecasts have been lowered. These current forecasts are what we should call absolute ‘bare-essentials’ – growth slightly below trend (trend at 2.75%) and inflation only holding at the bottom of the 2–3% target band out to the end of the forecast horizon. It seems clear therefore that the RBA now believes that it needs to cut rates to barely achieve an acceptable outcome.
The timing of market pricing is slightly more cautious than Westpac’s forecasts (announced on February 21) of cash rate cuts in August and November 2019.
The reasonable issue therefore arises as to whether these cuts should not occur immediately. In that regard, we need to point to the lingering theme which the RBA has promoted for most of 2019. That theme relates to the “tension” between the labour market data and economic growth as depicted through the national accounts and partial indicators particularly around retail sales and the housing market.
In the introduction to this SMP, the RBA notes “in contrast to the signal coming from the national accounts, a number of labour market indicators remain positive. Employment growth was strong in the March quarter… the vacancy rate remains high and there are ongoing reports of skilled shortages”. However, the RBA’s own forecasts do not envisage the unemployment rate falling further until 2021, even with the rate cuts embedded in the forecasts.
Consequently, there remains  a suspicion that their labour market forecasts might prove to be pessimistic and, if so, the favourable dynamics that would be associated with a much stronger labour market could be expected to develop. Those dynamics would be associated with faster wages growth, faster employment growth, faster growth in household incomes, faster consumption growth;  a narrowing in the output gap, and therefore a more favourable profile for inflation. Given that the Bank must realise that it is nearing the floor of the cash rate a time to assess this prospect is reasonable.
The issue therefore becomes one of what data around the labour market will be required for the RBA to delay its rate cuts. That theme is fully emphasised in the final sentence in the introduction to the May SMP, “the Board will be paying close attention to developments in the labour market at its upcoming meetings”.
It has been Westpac’s view for some time that the unemployment rate has already bottomed out at 4.9% and we expect that it will gradually drift up through the second half of 2019 to around 5.4%. We expect that trend to become clearly apparent by the June employment report (released in late July), making the first cut an obvious decision for the August meeting. There is always a risk that such a trend could emerge more quickly, but, given the volatility of the monthly employment reports, and the “strong employment growth in the March quarter”, we would be surprised if the RBA was prepared to abandon that hope at an earlier Board meeting.
We are not surprised that the RBA has now adopted our own view of the consumer with its big reduction in forecast consumer spending growth to 2% in 2019 now broadly in line with our own. The RBA is also moving towards our forecast for the contraction for dwelling investment in 2019 of 9%, having now forecast -6.7% from -4.5%, and an overall reduction in the GNE forecast from 2.6% to 1.9% (Westpac’s forecast is 1.6%).
Conclusion:
Today’s SMP emphasises that the RBA thinks it’s highly likely that it will need to follow market pricing with two rate cuts. Westpac concurs with the market’s August timing for the first cut but expects that the second cut will occur in November – well before the timing implied by market pricing of a full cut by May 2020.
The risk remains that the RBA may choose to move earlier than August, although given the strong first quarter for employment growth and the notorious volatility of the monthly employment reports, it seems likely that a prudent central bank would wait until August for its first move - when of course it will be able to fully explain the move and support it with its revised forecasts in the next Statement on Monetary Policy.
BILL EVANS is the Chief Economist for Westpac
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Suspicion RBA labour market forecasts might prove to be pessimistic: Westpac's Bill Evans

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EXPERT OBSERVER 
Douglas Driscoll, CEO of real estate group Starr Partners, has announced his anticipated top 10 Sydney suburbs to watch in the upcoming year. 
1.       Eveleigh. Billed to become Australia’s Silicon Valley, Eveleigh, next to Redfern, is a hip inner-city suburb to keep an eye on. If the house price growth in San Francisco’s tech epicentre is anything to go by, the new technology and innovation project, which will bring more jobs and start-ups to the area, will in turn raise Eveleigh’s prices. With lots of new apartment developments, the Carriageworks arts centre, cafes, good public transport, and only a short walk to the city, Surry Hills and Newtown, Eveleigh is the ideal suburb for young professionals, hipsters and young families.
2.       Waterloo. First Surry Hills, then Redfern, now Waterloo is next in line to become one of Sydney’s reborn residential hotspots. Close to parks, the airport, and Sydney CBD, Waterloo is undergoing a major skyline transformation with a wave of new apartments. Danks Street is buzzing with galleries, shops and a booming dining scene. A metro line is being discussed, but Green Square and a bus network provide public transport options.
3.       Maroubra. It once had a reputation as an edgy suburb, sensationalised through documentaries, but Maroubra is nowhere near as menacing as its fictitious reputation. It still offers relatively affordable prices compared with Sydney’s eastern beaches. As it continues to gentrify, Maroubra, like Bondi and Coogee, will continue to grow as a sought-after beachside suburb.
4.       Brookvale. Many Sydney-siders dream of living nearby the beach, and Brookvale provides an affordable option, with average house prices $150,000-$180,000 cheaper than neighbouring Dee Why and Allambie Heights. A masterplan to turn Brookvale into a vibrant precinct is on the cards, which will add bars, cafes and restaurants as well as residential opportunities to the area. Adding to the infrastructure is the B-line bus network connecting residents to the city, the recently opened Northern Beaches Hospital and the planned Beaches Link. The Northern Beaches has often been viewed as a fickle market, but for the here and now it is in demand – and becoming more popular.
5.       Baulkham Hills. Often seen as a poor relation to neighbouring Castle Hill or Bella Vista, family-centric Baulkham Hills is gentrifying and coming into its own. Only 20 per cent of the suburb is rented, which is good news for owner-occupiers, it also means the market is not oversaturated for investors. While we have already seen investor activity in the area, the multibillion-dollar Sydney Metro Northwest rail line, set to open early next year, will cause a ripple effect in Baulkham Hills. With the new train station, ample buses, and M2 Motorway off-ramp, transport links are not hard to come by.
6.       Auburn. As Sydney grows, its boundaries become blurred and redefined. Once considered in the western Sydney heartland, Auburn is now being absorbed into the inner west. It is a cultural melting pot that wears its multiculturalism like a badge of honour. The family-owned restaurants offering a range of cuisines is a foodie drawcard, and nature lovers can take a stroll through the Botanical Gardens. Better yet, properties are cheaper than those in neighbouring suburbs such as Lidcombe and Strathfield. 
7.       Millers Point. I see Millers Point really taking off. Following the completion of the controversial sell-off of public housing, I do believe a sense of community will continue to grow in this suburb. Equidistant between Barangaroo and the CBD, it is in a prime location but is still surprisingly quiet. This suburb is the next Surry Hills or Paddington; it has heritage terraces, lively pubs, and a strong community-feel. With change happening all along that part of the harbour foreshore, Millers Point it will continue to grow in popularity.
8.       Castle Cove. One of Sydney’s best kept secrets, Castle Cove is a charming suburb on the foreshore of middle harbour. Although properties are tightly held, most are detached, on decent plots and have elevated views – some of the most interesting in Sydney. Despite being only 10kms from the CBD, Castle Cove is leafy, green and well connected by bus. Its charm is that it does not have major supermarkets and shopping centres, but residents have an abundance of great eateries, cafes and grocery stores. With a public school and a golf course, Castle Cove is solitude without isolation.
9.       Breakfast Point. With beautiful harbourside walking tracks and hipster cafes, Breakfast Point is a trendy inner west suburb that is tantamount to a beach lifestyle. Once a gasworks, there are now a lot of well-designed masterplanned communities, which makes it attractive for young families and people downsizing. A direct bus line takes commuters to Sydney CBD, or they can catch a ferry from nearby Cabarita wharf.
10.   Riverstone. This nascent suburb has been on my radar for a while, but it has been a slow burner. Billions have been spent in the area on masterplanned developments and infrastructure projects, and the metamorphosis is set to continue. Blacktown City Council recently announced strategic plans for a new town centre, retail and commercial developments, and public spaces. 
Douglas Driscoll is the CEO of real estate group Starr Partners. 
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Sydney suburbs to watch in 2019: Doug Driscoll

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ANZ have revised their forecast for the housing markets and now see prices falling as much as 20 percent in Sydney and Melbourne.
They previously predicted 10 percent falls peak to trough on their <a href="/news/anz-revise-property-forecasts-and-see-10-percent-declines-in-sydney-and-melbourne">second forecast revision</a> back in June.
The ANZ said expect Sydney house prices to return to 2015 levels, with the current weakness <a href="/expert-insights/buying/prices-likely-to-remain-subdued-into-2020-anz-research">running through to 2020</a>.
They now forecast declines between 15 to 20 percent.
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<div class="cq-article-content-media section">Sydney and Melbourne had been proving more difficult to predict than the other capitals.</div>
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"Until recently, housing prices have been performing broadly as we expected," ANZ's economist Daniel Gradwell and Jo Masters said. 
"In fact, most capital cities are still tracking in line with our forecasts. 
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"Sydney and Melbourne, however, are not.
"We had expected by this stage to see some evidence that price declines in these cities were moderating, as the impact of credit tightening started to wind down.
"But price falls are continuing at a material pace and are broadening through most segments of these markets." 
The revisions for the Sydney and Melbourne outlook are now more in line with fellow economists.
CoreLogic-Moody Analytics however suggest Sydney house prices <a href="/news/sydney-house-values-to-grow-0-6-in-2019-corelogic-moody-s-analytics-australian-home-value-index-forecast">will grow 0.6 percent in 2019.</a>
 
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ANZ revise forecast upwards to 20 percent house price declines in Sydney and Melbourne

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EXPERT OBSERVER
The Reserve Bank Board meets next week on November 6.
The Bank will also release the November Statement on Monetary Policy on November 9.
Of course the Governor will announce that there has been no change in the cash rate.
Readers will be aware that Westpac adopted a “no change” call for both 2018 and 2019 back in September 2017. At that time markets were pricing in three hikes by end 2019.
Today, markets are pricing only the probability of around 50% of one hike by end 2019 and a full 25bps is not priced-in until end 2020.
Back in August this year, Westpac forecast that the cash rate would remain on hold in 2020.
So, while a year ago we were offering readers some forecasts that were significantly at odds with market pricing, our views today are now largely factored in by the market.
That does not mean that our views are universally supported. In the latest Bloomberg survey of economists’ forecasts, only 10 of the 24 forecasters expect the cash rate to be on hold (one is calling cuts) by end 2019. In addition, 9 of those 13 forecasters expecting rates to be rising expect multiple hikes. Note that the other three major Australian banks expect rate hikes next year.
So the case for rates on hold is certainly not a universally accepted one.
As usual we will scour the Governor’s statement next Tuesday for any hints towards a firmer tightening bias, but there is unlikely to be much to encourage these efforts.
The Statement’s themes will be the same: continuing global expansion; China slowing a little; international trade uncertainty; Australian growth to average a bit above 3% in 2018 and 2019; positive business conditions; household consumption a source of uncertainty; labour market outlook positive; wages growth low; but a gradual lift in wages growth expected; further gradual decline in the unemployment rate expected; inflation higher in 2019 and 2020; housing conditions in Sydney and Melbourne continue to ease; progress toward full employment and target inflation will be gradual.
The Statement on Monetary Policy will include an update of the Bank’s forecasts out to December 2020.
Forecasts for GDP growth are likely to be unchanged from the August Statement on Monetary Policy: 3.25% in 2018 and 2019; and 3% in 2020. These forecasts indicate above potential growth, which is generally accepted to be 2.75%.
Headline Inflation forecasts in August were 1.75% in 2018; 2.25% in 2019; and 2.25% in 2020.
With higher petrol prices than were expected in August, the RBA may raise its forecast for headline inflation in 2018 from 1.75% to 2%.
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Underlying forecasts for inflation were 1.75% in 2018; 2% in 2019; and 2.25% in 2020.
These forecasts are likely to be unchanged.
On October 31, we received the Inflation Report for the September quarter of 2018. The key underlying measures would have disappointed the RBA. The annual pace of the average of the core measures further slowed to 1.7% from the 2.0% pace in the March quarter. The six month annualised pace of the core measures is now 1.5% - the slowest pace since September 2016.
Recall that in May 2016, the then Governor Stevens was expecting 2.5% for core inflation through 2016 but revised that down to 1.5% following the release of the March quarter CPI. The Governor responded to that shock with a rate cut of 25 basis points in May and another in August.
At that time, the 6 month annualised pace of core inflation registered 1.4% through the March quarter and 1.2% through the June quarter. So momentum in inflation was indeed lower than current momentum but not by a significant margin. The longer the subdued 1.5% momentum continues, the harder it will be to justify the forecasts of 2% in 2019 and 2.25% in 2020.
One aspect of the detail within the September quarter 2018 CPI result that stood out was the sharp fall in the price pressures associated with house building. This component, which has the biggest weight in the CPI and consistently appears in the core measures, slowed from 0.8% in the June quarter to 0.1% in the September quarter.
We had a similar result for the March quarter in 2016 (0.2%) but the measure bounced back 0.9% in the June quarter as the housing market recovered through 2016 in response to the May and August rate cuts. Between March 2016 and December 2016 new lending to property investors lifted by 40% and house prices in Sydney (up 11%) and Melbourne (up 7%) both boomed in the last six months of 2016.
There will be no such recovery in 2018 or 2019. The RBA has made a clear commitment to holding the cash rate at the current level and bank lending policies continue to tighten and house prices in Sydney and Melbourne are likely to fall through 2019.
As a comparison with 2016, we note that new lending to investors has fallen by 27% over the last year and there is no sign of any relief.
It is entirely reasonable that builders in the process of constructing new residential developments in Sydney and Melbourne will find great difficulty in passing on cost increases as this particular component of the CPI has remained weak for many quarters. Supply is also likely to maintain downward pressure on rents which are another key component of the CPI.
We would not expect the RBA to incorporate such concerns in their forecasts. They will continue to forecast rising inflation out to 2020 despite the risks around housing as well as the ongoing threat to inflationary expectations as the headline rate stays well below the 2.5% target (on a calendar year basis headline inflation has been below 2% since 2014).
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The final forecast which appears in the SOMP will be for the unemployment rate.
The forecast in the August SOMP were for a gradual decline to 5.25% in December 2019 continuing to 5% in December 2020.
That was always a very awkward forecast for the RBA which is promoting the prospect of rising wage pressures particularly through 2019 and 2020.
For Australia, the “full employment” rate estimate is generally considered to be 5.0% but we have found that in other developed economies (particularly the US and UK) the full employment rate is lower in the current cycle than that historically. In the US, the unemployment rate has fallen to 3.7% (well below the previously accepted full employment rate of 4.75%) yet wage pressures are only just beginning to emerge, (the Employment Cost Index has lifted by 2.8% in the year to September).
It seems highly unlikely that in this current world of increasingly rapid technological change; globalisation; risk aversion of employees; low inflationary expectations and low trade union membership that Australia’s full employment rate is 5%.
With the current print (September) on the unemployment rate now at 5.0% (compared to 5.5% in the August SOMP) the RBA is expected to lower its 2020 unemployment forecast to 4.75%.
Note that the RBA use the three month average of the seasonally adjusted monthly unemployment rate estimate, which is currently 5.2%, as their latest read. That recognises the volatility in monthly estimates and the potential for the recent sharp fall in the unemployment rate to reverse somewhat over the next few months. Abstracting from the short-term particulars, the core profile of the forecast will be consistent with the key theme of a “gradual decline in the unemployment rate”.
In contrast, Westpac’s forecast reflects a likely slowdown in jobs growth in 2019 with the unemployment rate ticking up to 5.3% through 2019 before settling back at 5.0% by end year. In 2020 we would broadly concur with a 4.75% unemployment forecast by end 2020 although would not see that level as full employment.
Note that the August SOMP discussed the dynamic around the wealth effect as a risk but not a central theme driving the forecasts.
“Recent declines in national housing prices have been gradual and follow several years of very strong growth. Accordingly, there is no evidence that moderate housing price declines have weighed on household consumption to date. Nevertheless, housing assets account for around 55 per cent of total household assets, so lower housing prices could lead to lower consumption growth than is currently forecast. Although the earlier gains in national housing wealth may not have encouraged much additional consumption, it is possible that the consumption decisions of highly indebted and/or credit-constrained households could be more sensitive to declines in housing prices than to the previous increases.”
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We expect this issue to remain a risk in the November SOMP but not a factor incorporated into the forecasts.
We view that risk as being much more likely and a central component behind our growth forecasts.
Westpac expects growth in 2019 to slow from 3.3% in 2018 to 2.75% in 2019.
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BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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RBA will stick to positive forecasts but risks are mounting: Bill Evans

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Alexandra Heath, the RBA's head of economic analysis, was speaking at the Urban Development Institute of Australia, Wollongong
It is a great pleasure to be here today to talk to members of the UDIA in Wollongong. To start, I'm going to give an overview of how the Australian economy has been travelling and how the drivers of growth have been evolving. In particular, I'm going to highlight the growth in non-mining business investment and the fact that dwelling investment is no longer contributing, although it is likely to remain at a high level for some time. Then I am going to turn to the outlook for housing markets across states, focusing on differences in the drivers of demand and how they relate to demographic changes. Finally, I will take this process of disaggregation one step further to look at some of the factors that have been driving demand for housing in Wollongong and the Illawarra region. Clearly, the close proximity to Sydney, which is only likely to strengthen with improvements to transport infrastructure, is an important factor.
<h2 id="the-macroeconomic-outlook">The Macroeconomic Outlook</h2>
GDP growth in Australia has averaged around 2½ per cent over the past five years or so (Graph 1). This is a little bit below our estimates of trend growth, so you would say that growth has been decent, but not really enough to make significant inroads into the spare capacity in the economy. Low and stable wage pressures and consumer price inflation are also consistent with this general picture.
<div class="image-graph">
<div class="title">Graph 1</div>
<img src="http://www.rba.gov.au/speeches/2018/images/sp-so-2018-07-05-graph1.gif" alt="Graph 1: GDP Growth">
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GDP growth picked up over the year to the March quarter to around 3 per cent, and more recent data have been positive. Our central forecast is for growth to be at or above 3 per cent over 2018 and 2019. This should lead to a further gradual reduction in spare capacity and a gradual increase in wage and inflationary pressures.
To understand this central forecast, it is necessary to look at how the composition of growth has been changing (Graph 2). The drag on growth from falling mining investment has diminished. This has played out largely as expected and we anticipate that most of its effect will be done by early next year. The contribution to growth from the public sector has also increased. The other two points I want to highlight are that there has been a significant pick-up in the contribution of investment by non-mining firms, but that dwelling investment is no longer contributing to growth.
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<div class="title">Graph 2</div>
<img src="http://www.rba.gov.au/speeches/2018/images/sp-so-2018-07-05-graph2.gif" alt="Graph 2: GDP Growth, year ended">
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The pick-up in non-mining business investment matters because it is hard to imagine a sustainable pick-up in growth without investment being a part of the story. New investment is required to replace depreciated capital and it is one of the ways new technology gets embedded into the way goods and services are delivered. So, long periods of weak investment growth can create concerns that the foundations are being laid for weak productivity growth in the future.
It is fair to say that we are now more confident about a sustainable pick-up in non-mining business investment. In 2015, our discussion of the risks around our forecasts highlighted the weakness in non-mining business investment and noted that indicators of investment intentions provided very little evidence that a recovery was imminent. This was despite the fact that many of the preconditions for a recovery, such as reports of above-average business conditions, were in place. We spent a considerable amount of effort trying to understand why investment outside the mining sector was low.<a id="r1" href="http://www.rba.gov.au/speeches/2018/sp-so-2018-07-05#fn1">[1]</a>
Rolling forward, non-mining business investment grew by 10 per cent in year-ended terms in the most recent national accounts (Graph 3). A lot of the pick-up in non-mining business investment over recent years has been from the non-residential construction category, which includes a range of things like hotels and office blocks. The ‘other’ category, which includes investment in areas like computer software and research &amp; development, has also been adding noticeably to growth. Liaison suggests that many firms have been more willing to spend on IT, particularly software, to become more productive, reduce costs and improve their service quality.
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<div class="title">Graph 3</div>
<img src="http://www.rba.gov.au/speeches/2018/images/sp-so-2018-07-05-graph3.gif" alt="Graph 3: Private Non-Mining Business Investment">
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Machinery &amp; equipment investment has become increasingly important to the non-mining business investment growth story. The pick-up in public infrastructure work being done by the private sector is a part of this story (Graph 4). Our liaison contacts have reported that the recent increase in the flow of public infrastructure work, and expectations of further infrastructure spending based on both state and federal government commitments, have encouraged contractors in the construction industry to commit to investments in new construction equipment.
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<div class="title">Graph 4</div>
<img src="http://www.rba.gov.au/speeches/2018/images/sp-so-2018-07-05-graph4.gif" alt="Graph 4: Public Infrastructure">
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<h2 id="the-outlook-for-housing">The Outlook for Housing</h2>
As already noted, dwelling investment has gone from making a positive contribution to growth two years ago to being roughly flat over the year to March. In terms of our forecasts, dwelling investment is not expected to contribute much to growth over the next couple of years, but is expected to remain at a high level.
To understand the outlook, it is helpful to recognise that there isn't a single national housing market. At the state level, there have been some similarities in the evolution of dwelling investment, but there have also been distinct differences (Graph 5).
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<div class="title">Graph 5</div>
<img src="http://www.rba.gov.au/speeches/2018/images/sp-so-2018-07-05-graph5.gif" alt="Graph 5: Real Dwelling Investment">
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One point of similarity is that the construction of higher-density apartments has been much more important than in the past, especially in the east-coast capitals. We have used our liaison program quite extensively to understand how to adapt our forecasting processes to take into account that the time taken for a building approval to progress to construction and the period of construction is longer and more variable for high-density projects than for detached dwellings. The liaison program, which includes organisations such as the UDIA and its members, has also allowed us to gain deeper insights into specific local factors, such as differences in planning rules and the emergence of capacity constraints in the housing construction sector.
One point of difference across states has been the timing of dwelling investment cycles. For New South Wales and Victoria, the level of dwelling investment has been broadly stable at a high level since 2016. In contrast there has been a decline in higher-density construction in Queensland since early 2017. In Western Australia, residential construction peaked in mid 2015, which was well after the end of the mining boom. These differences highlight the fact that there are different demand and supply forces at work across the states. Given time constraints, I am going to focus my attention on the demand side of the market.
An important driver of housing demand over the long run is the rate at which new households are being formed. This depends on population growth and changes in the average number of people who are living in each household. Household size declined steadily in Australia between 1960 and 2000 before levelling out, alongside declines in marriage and fertility rates and population aging. The natural increase in the Australian population has also declined over time due to demographic factors. In particular, lower fertility rates have offset increased life expectancy (Graph 6). Having said that, the rate of natural increase in Australia's population remains higher than in most other advanced economies.
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<div class="title">Graph 6</div>
<img src="http://www.rba.gov.au/speeches/2018/images/sp-so-2018-07-05-graph6.gif" alt="Graph 6: Population Growth">
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Immigration has also been a feature of the population growth story and it has certainly been the dominant influence on the swings in population growth over the past decade. The largest single category of net overseas migration has been people on temporary student visas (Graph 7). Prior to the financial crisis, a large share of these students were coming to Australia for vocational training courses. Following changes to visa requirements, student visa numbers initially dropped, but have picked up again in recent years, mostly due to an increase in students attending university. To put this into perspective, education now accounts for around 10 per cent of Australia's total exports, which is in the same ball park as our rural exports. From the perspective of demand for housing, the important point is that most of these students have gone to Sydney and Melbourne.
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<div class="title">Graph 7</div>
<img src="http://www.rba.gov.au/speeches/2018/images/sp-so-2018-07-05-graph7.gif" alt="Graph 7: Net Overseas Migration">
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Another interesting category is skilled workers. The net inflow of people on skill visas increased in response to demand for workers during the mining boom. Most of these workers went to Western Australia and Queensland. At the same time, net migration to Western Australia and Queensland from other states and New Zealand also increased. As the mining sector transitioned from the construction to the production phase of the mining boom, the demand for labour fell. The number of people on skilled visas fell and the inflow of people from New Zealand and other Australian states turned to an outflow.
As a consequence, there have been quite large differences in population growth at the state level, which have had direct effects on the demand for housing (Graph 8). Population growth is expected to remain strong, particularly in Victoria and New South Wales, and the net overseas migration component of this is expected to be driven by people on student visas.
<div class="image-graph">
<div class="title">Graph 8</div>
<img src="http://www.rba.gov.au/speeches/2018/images/sp-so-2018-07-05-graph8.gif" alt="Graph 8: Population Increase and Dwelling Investment">
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On the supply side, the pipeline of residential construction that has been approved, but not completed remains high in New South Wales and Victoria (Graph 9). There is also a reasonable pipeline of work in Queensland, although it has already started to decline. Based on recent approvals data and expected demand conditions, this suggests that dwelling investment in New South Wales and Victoria will remain at a high level for a number of years. Liaison contacts have suggested to us that capacity constraints in the construction industry, particularly in New South Wales, will make it difficult for construction activity to increase.
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<div class="title">Graph 9</div>
<img src="http://www.rba.gov.au/speeches/2018/images/sp-so-2018-07-05-graph9.gif" alt="Graph 9: Residential Dwelling Pipeline">
</div>
Of course household formation and population growth are not the only drivers of housing demand. For example, interest rates and changes in lending standards can also influence how much households are willing and able to spend on housing. Another way to gauge the current balance of housing supply and demand is to look at housing price growth.
Over the past five years, housing price growth has been subdued in Brisbane and Perth (Graph 10). This is consistent with the fall in population growth coinciding with an increase in the supply of housing. In contrast, housing price growth has been strong until recently in Sydney and Melbourne, where population growth has been strong. Given that housing accounts for around 55 per cent of total household assets, we are paying close attention to these developments.
<div class="image-graph">
<div class="title">Graph 10</div>
<img src="http://www.rba.gov.au/speeches/2018/images/sp-so-2018-07-05-graph10.gif" alt="Graph 10: Housing Price Growth">
</div>
<h2 id="the-housing-market-in-the-illawarra-region">The Housing Market in the Illawarra Region</h2>
From a demand perspective, the Illawarra region has experienced a pick-up in population growth. Some of this has come from overseas students attending the University of Wollongong, and some has come from people migrating to the Illawarra region from Sydney. Although the Illawarra region is a little older, on average, than the rest of Australia and Sydney, it still has a large working-age population (Graph 11).
<div class="image-graph">
<div class="title">Graph 11</div>
<img src="http://www.rba.gov.au/speeches/2018/images/sp-so-2018-07-05-graph11.gif" alt="Graph 11: Age Distribution">
</div>
This is partly because its geographic proximity and transport infrastructure allow people living in Wollongong and the Illawarra region to commute to Sydney. Around 20 per cent of Wollongong workers commute at least 50 kilometres to work (Graph 12). This is one of the highest rates in the state. Unsurprisingly, five of the seven areas with higher shares of people commuting more than 50 kilometres are also within commuting distance of Sydney. Illawarra residents are also well placed to benefit from the fact that some of the fastest growing areas of Sydney are in south and south-west, including the proposed “aerotropolis” around the new airport at Badgery's Creek. Access to these growth areas will be enhanced if some of the recently announced transport infrastructure plans are realised.
<div class="image-graph">
<div class="title">Graph 12</div>
<img src="http://www.rba.gov.au/speeches/2018/images/sp-so-2018-07-05-graph12.gif" alt="Graph 12: Distance to Work 50+ km in NSW">
</div>
Although people from the Illawarra region can and do commute to Sydney, labour market conditions in the Illawarra region itself have also been strong recently (Graph 13). In combination, these factors mean that there has been strong employment growth for those living in the Illawarra region over the past five years and the unemployment rate is close to the average for New South Wales, which is, in turn, lower than the Australian unemployment rate.
<div class="image-graph">
<div class="title">Graph 13</div>
<img src="http://www.rba.gov.au/speeches/2018/images/sp-so-2018-07-05-graph13.gif" alt="Graph 13: Labour Market">
</div>
Strong population growth and the economic prosperity associated with strong labour market outcomes have led to higher housing prices in the Illawarra region (Graph 14). Just as in Sydney, developers have responded to the higher prices, and dwelling investment in the region has increased. Also similarly to Sydney, there has been a debate about whether the infrastructure has been growing fast enough to accommodate the needs of an expanding population and the increase in construction that goes with that.
<div class="image-graph">
<div class="title">Graph 14</div>
<img src="http://www.rba.gov.au/speeches/2018/images/sp-so-2018-07-05-graph14.gif" alt="Graph 14: Median House Prices">
</div>
<h2 id="conclusion">Conclusion</h2>
In summary, over the past couple of years, non-mining business investment has become a more important driver of growth in the Australian economy. This is a good thing because investment of this kind is necessary to ensure future productivity growth, which is ultimately what contributes to the economic prosperity and welfare of the Australian people. Infrastructure investment has been a part of this story.
At the same time, dwelling investment growth has eased off. Although dwelling investment is still expected to remain at a high level, particularly in New South Wales and Victoria, it is not likely to contribute much to growth over the next couple of years. Demand for housing remains strong because population growth is expected to stay strong. However, the housing story is different across states and across regions within states, partly because population trends differ. The effects of the mining investment cycle on population trends and housing markets in Western Australia is a clear-cut illustration of this point.
The data show that population trends and housing market developments in the Illawarra region are closely linked to those in Sydney, partly because the transport infrastructure allows people to live in the Illawarra region and commute to Sydney. Future transport infrastructure plans and the development associated with the Badgery's Creek airport are likely to strengthen these ties. As always, the key to effective urban development is high-quality, transparent cost-benefit analysis of potential infrastructure projects informed by local knowledge. The UDIA has an important role to play here. The UDIA and its members, in Wollongong and elsewhere, also have an important role to play in macroeconomic policy by informing the Bank's understanding of the factors at play in different housing markets through our liaison program.
<div class="footnotes"> </div>
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