A collection of just 25 large-format apartments and penthouses overlooking Goodwin Park is entering the Coolangatta market, with <a href="https://www.apartments.com.au/new-apartments/marea-residences-coolangatta-27-27a-dixon-street-coolangatta-qld-4225">Maréa Residences</a> combining a low-density, residential-only approach with uninterrupted park and Pacific Ocean outlooks.

Located at 27 Dixon Street, Maréa comprises three and four-bedroom residences alongside a limited number of dual-level penthouses, with the project positioned between Goodwin Park and <a href="https://www.apartments.com.au/developments/coolangatta-qld-4225">Coolangatta</a>’s coastal precinct.

Construction has commenced, with completion currently estimated for late 2027. Three-bedroom residences are priced from $1.8 million.

[smartcode_project:default project_id=150999 project_image_fid=374005]

The project has been designed around its northern outlook across the park, with the building’s architecture, landscaping and material palette intended to establish a connection with the neighbouring green space. The residences have been configured to maximise natural light and views across Goodwin Park towards the ocean.

Inside, the material palette incorporates timber, stone and brushed brass, complemented by curved detailing and ambient lighting. Kitchens and bathrooms carry the same natural material approach, while residences also include basement parking, storage and lift access.

Maréa’s penthouses are arranged over two levels and include private pools, adding another layer to the project’s focus on larger-format apartment living. Across the development, residences are configured with three or four bedrooms rather than the broader mix of smaller apartment types commonly found in larger projects.

[smartcode_project:default project_id=150999 project_image_fid=374010]

Resident amenity is concentrated at rooftop level, where landscaped entertaining terraces and pools take advantage of elevated views across Coolangatta and the Pacific Ocean.

The project has so far been particularly well received by local owner-occupiers and downsizers, according to Urban Activation Property Sales and Marketing Director Matt George, with the residential-only format, construction quality and northern park outlook among the features resonating with purchasers.

“The uninterrupted northern aspect overlooking Goodwin Park has been a key point of difference, with buyers attracted to the sense of serenity and open space the park provides, while still enjoying easy access to the ocean and being within walking distance of the lifestyle and amenities Coolangatta has to offer,” George said.

[smartcode_project:default project_id=150999 project_image_fid=374002]

“The combination of high-quality construction, a residential-only building, park outlook and proximity to the beach has resonated strongly with the local downsizer market.”

The Dixon Street address is within walking distance of Coolangatta Beach and the broader southern Gold Coast coastline, including the surf breaks at Snapper Rocks and Kirra. Coolangatta’s cafés, restaurants and retail are nearby, while Gold Coast Airport is also within close proximity.

[smartcode_project_cta:default project_id=150999]

Joel Robinson

Maréa Residences brings parkside apartments to Coolangatta

Melbourne developer PDG has secured Victorian Government approval for its $1.5 billion Southbank development <a href="https://www.apartments.com.au/new-apartments/the-one-1-queens-bridge-street-southbank-vic-3006">The One</a>, clearing the way for the long-dormant riverfront site opposite Crown to finally be developed.

The Minister for Planning has approved the project at 1-29 Queens Bridge Street, with the Department of Transport and Planning issuing the planning permit following its assessment.

The approval will allow PDG to develop the prominent 5,059 sqm site with a major mixed-use tower comprising premium apartments, including branded residences, a luxury hotel and boutique office space.

PDG acquired the site in late 2024, with its position directly opposite Crown's main entrance and near Melbourne's Arts Precinct making it one of Southbank's most significant remaining development opportunities.

<img alt="PDG" data-entity-type="file" data-entity-uuid="3933013e-6332-4386-b9be-089df05caf17" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-27%20at%209.29.22%E2%80%AFAM.png?VersionId=sITIgBqDL0N3VNSMwWEmF5UA.uvcsRyu" />

Designed by COX in collaboration with ODO and PDG, the tower's architecture draws on the movement of the Yarra River, with six vertical pleats running the height of the sculpted facade.

The project will also see the heritage-listed Queens Bridge Hotel restored and incorporated into the development&nbsp;with new hospitality and public uses, including a rooftop venue.

A significant component of The One will be its residential amenity.

More than 5,000 sqm of resident facilities will be delivered across a single level, making it one of the largest consolidated residential amenity offerings proposed in an Australian apartment development.

The planning approval also incorporates a major upgrade of Queensbridge Square, which PDG will deliver in partnership with the City of Melbourne.

<img alt="PDG" data-entity-type="file" data-entity-uuid="73167fcd-1031-4b6f-a408-a064cfe45ed1" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-27%20at%209.29.17%E2%80%AFAM.png?VersionId=Pf1AEWxw6SNmBqR0zQW5lyEze.MtxgFp" />

The existing square will be revitalised as a new civic and pedestrian space along the Yarra River, strengthening the connection between the project, Southbank and the riverfront.

PDG Founder and Managing Director Vince Giuliano said the approval represented a major milestone for a site which has remained largely underutilised for more than 15 years.

“This is the most significant Planning Permit approval Melbourne has seen in recent years,” Giuliano said.

“For more than 15 years, this site has remained underutilised. This approval enables us to deliver a project that will contribute meaningfully to the revitalisation of Southbank, restore and reactivate an important heritage building, and create a new civic and hospitality destination for Melbourne.”

The latest approval follows an earlier planning permit issued by the City of Melbourne covering demolition works across part of the site at 9-29 Queens Bridge Street. Those demolition and early works are already underway.

PDG has also started generating early interest in the residential component from owner-occupiers ahead of a planned public launch in early 2027.

PDG secures approval for $1.5bn Southbank apartment development, The One

Local developer Harridan is seeking to turn its Woolloongabba apartment project into the first stage of a broader transformation of Burke Street, using a new 16-storey mixed-use building to establish a greener pedestrian connection toward the rapidly evolving Boggo Road transport and knowledge precinct.

The South East Queensland developer has filed plans for 154 apartments on the <a href="https://www.apartments.com.au/new-apartments/4-burke-street-woolloongabba-qld-4102">southern side of Burke Street</a>, where its proposal has been designed alongside a wider vision by LatStudios for the street.

That vision positions the southern side of Burke Street for buildings of 15 storeys and above, while envisaging lower-rise development of up to five storeys on the northern side to transition into Woolloongabba's existing character housing. It also proposes wider pedestrian verges, deep planting, new street trees and upgrades to the pedestrian approach to Boggo Road Station.

The Harridan development itself has been designed by Brisbane-based Arqus Design and will comprise 154 apartments across 16 storeys. The mix is weighted heavily toward two-bedroom apartments, with 121 proposed alongside 10 one-bedroom and 23 three-bedroom residences. There will typically be around 14 units per floor.

A lower-ground car park and three podium levels will accommodate 156 resident parking spaces, along with visitor and commercial parking. There will also be 154 resident bicycle spaces and 40 visitor bicycle parks.

&nbsp;

Harridan is a family-owned developer and part of the Holmwood Highgate Group, with more than three decades of development activity across South East Queensland. Its portfolio spans residential, commercial and industrial property, with current residential projects including Riverbank on Byron in Bulimba, Esperance Residences in Carina and The Precinct at Kinross Road in Thornlands.

Wooloongabba has been popular for apartment developers, particularly since the announcement of the 2032 Summer Olympics games in Brisbane.

While there have been a lot of development applications, it has failed to materialize into real supply.&nbsp;

Sarazin has been the major player in the area. They are under construction at Murcia Residences, on the fringe of East Brisbane and Woolloongabba. They have just launched <a href="https://www.apartments.com.au/new-apartments/the-stanley-residences-woolloongabba-8-trafalgar-street-woolloongabba-qld-4102">The Stanley Residences</a>, in Woolloongabba on Trafalagar Street. They also have Nuage coming soon on the nearby <a href="https://www.apartments.com.au/new-apartments/nuage-woolloongabba-14-wellington-road-woolloongabba-qld-4102">Wellington Road</a>.

First look: Harridan plans Burke Street transformation beside Boggo Road transport hub

IN BRIEF

<ul>
	<li>
	Just three double-storey Sky Homes sit at the top of The Waterline, each with its own private marina berth and rooftop terrace.
	</li>
	<li>
	Construction on The Waterline is complete, with the first residents expected to move in from mid-October.
	</li>
	<li>
	Sky Homes range from 282 sqm to 367 sqm and are priced from $3.65 million.
	</li>
</ul>

<hr />
Lewis Land has opened the first completed sky home for inspection at Harbour Shores, giving buyers their first opportunity to step inside one of just three double-storey residences crowning The Waterline.

Each sky home comes with its own private marina berth, rooftop terrace and Broadwater views, combining the scale of a larger home with direct access to the boating lifestyle that underpins the wider <a href="https://www.apartments.com.au/new-apartments/harbour-shores-biggera-waters-564-oxley-drive-biggera-waters-qld-4216">Harbour Shores</a> masterplan.

[smartcode_project:default project_id=113271 project_image_fid=366708]

Lewis Land Head of Development Michael Long said the inclusion of a berth with every Sky Home had become increasingly valuable as marina access across the Gold Coast tightened.

“Marina berths are becoming increasingly difficult to secure across the Gold Coast, so including one with every Sky Home makes this a genuinely rare offering,” Long said.

“The private 70-berth marina will accommodate boats up to 12 metres in length and is positioned just 2.5 kilometres from the Broadwater, placing the open ocean only 15 minutes away.

“Being able to step out of your home onto your boat is a rare luxury, and it’s something residents here can look forward to when it opens later this year.”

[smartcode_project:default project_id=113271 project_image_fid=366709]

The display opening comes as construction completes on The Waterline, with the first residents expected to move in from mid-October.

The three Sky Homes range from 282 sqm to 367 sqm and each feature three bedrooms, three bathrooms, multiple living zones, expansive kitchens with butler's pantries and large balconies taking in the Broadwater outlook.

Each residence also has three secure basement car spaces and additional storage.

“This is the first opportunity the Gold Coast has had to step into Harbour Shores and see, touch and feel what we’re bringing to life here,” Long said.

“There are only three Sky Homes within The Waterline, ranging in size from 282sqm to 367sqm, with each residence featuring three large bedrooms, three bathrooms, multiple living zones, expansive custom-built kitchens with butler’s pantry, and large balconies capturing Broadwater views.”

<img alt="Harbour Shores" data-entity-type="file" data-entity-uuid="bab65e10-4fab-45e1-92d8-fc56e2ab98ff" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-25%20at%202.00.16%E2%80%AFPM.png?VersionId=XT8q76LsPkw3cYTsvN3JfFDaPLud90PN" />

Residents of The Waterline will have access to a private pool, along with Harbour Shores' wider collection of amenity including a lagoon pool, social clubhouse, tennis court, gym, yoga facilities and sauna.

Lewis Land partnered with Studio Collective to furnish the completed display, with the interiors designed to demonstrate how the residences could function as permanent homes rather than simply as show apartments.

Studio Collective Director Melissa Park said the surrounding waterways informed the interiors, but in a more restrained way than a traditional coastal scheme.

“We drew inspiration from the canals and coastal surrounds, but our approach was to interpret that subtly through layered materials and a grounded palette of earthy tones, rather than literal coastal references,” Park said.

“We introduced hero moments of green and teal to reference the surrounding waterways, while mirrored elements help reflect natural light.

“The result is a residence that feels elevated yet comfortable, somewhere buyers can genuinely imagine themselves living, entertaining and unwinding.”

Sky Homes are priced from $3.65 million.

Lewis Land is also offering private marina berths with The Residences, its limited collection of three and four-bedroom villas positioned directly along the Harbour Shores waterfront boardwalk.

Three-bedroom villas are priced from $2.99 million, while four-bedroom residences start from $3.19 million.

Harbour Shores is being marketed by Colliers International.

[smartcode_project_cta:default project_id=113271]

Lewis Land opens sky home display as The Waterline completes at Harbour Shores

St Vincent de Paul Society Housing Australia has filed plans for a major mixed-use housing precinct on the southern edge of the North Sydney CBD, adding another significant proposal to a pocket around North Sydn​ey Station that is quickly becoming one of the LGA's busiest development zones.

The State Significant Development Application covers a 5,990 sqm site at <a href="https://www.apartments.com.au/new-apartments/1-19-mackenzie-street-lavender-bay-nsw-2060">1-19 MacKenzie Street and 211 Blues Point Road in Lavender Bay</a>, immediately south of Nor​th Sydney Station and between the commercial core and the lower-rise Lavender Bay Heritage Conservation Area.

Designed by Wardle, the proposal would deliver a new residential tower comprising 88 build-to-sell apartments and 19 affordable apartments, alongside a separate co-living building with 57 rooms and a building manager's studio.

It would also see the significant restoration and upgrade of St Francis Xavier Catholic Church, the adaptive reuse of the former school building, new parish facilities, retail, a new public square and around 1,000 sqm of publicly accessible open space.

<img alt="Vinnies North Sydney" data-entity-type="file" data-entity-uuid="d5dd7f87-a617-463e-b577-17541e01f0e9" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-26%20at%209.10.13%E2%80%AFAM.png?VersionId=4R8TsFN3P_LrrXO2HswTOIrx2blil8lh" />

The project is seeking a concurrent rezoning of the site to R4 High Density Residential and an increase in the maximum building height to allow a tower reaching RL120, or up to 20 storeys. The proposal was progressed through the NSW Government's Housing Delivery Authority pathway.

The build-to-sell component will be weighted toward larger apartments, with just six one-bedroom apartments compared with 31 two-beds, 43 three-beds and eight four-bedroom residences.

The 19 affordable apartments will comprise two studios, 15 one-bedroom apartments and two two-bedroom apartments, taking the total apartment component to 107 residences before the 58 co-living rooms are included.

<img alt="Vnnies" data-entity-type="file" data-entity-uuid="7d568ca5-cb90-4e18-96c6-d9795dba0c56" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-26%20at%209.10.05%E2%80%AFAM.png?VersionId=GY2R5M9VtQh0EKy1vajaea19PSLOPuRD" />

Wardle's design for the Vinnies site has sought to negotiate that emerging high-rise context while retaining the lower-scale character of MacKenzie Street and the adjoining heritage conservation area.

The main building adopts a three-storey podium and tower arrangement, with the podium aligned to the ridgeline and front setback of St Francis Xavier Church.&nbsp;Wardle has designed the podium with colonnades, seating, recessed entries and active ground-floor frontages, with sandstone-toned precast concrete and face brick referencing the materiality of the existing church.

The tower then steps back eight metres to the south and six metres to the north before rising in a sculpted form comprising four interlocking quadrants. Wardle has also introduced rounded forms and chamfered corners to reduce the tower's perceived bulk and improve view sharing with neighbouring development sites.

Resident facilities and outdoor areas are planned at the separation between the podium and tower at Level 3, oriented toward Sydney Harbour and the CBD skyline.

The tower itself will feature a glass reinforced concrete facade, with recessed balconies and deep reveals used both to provide shading and privacy and frame views toward the harbour and city. The lower levels take a different architectural approach, using brick and sandstone-toned finishes intended to establish a stronger relationship with St Francis Xavier Church. The Church itself will be conserved and upgraded for its continued use, while the former school building will be adaptively reused as part of the co-living component.

<img alt="Lavendar Bay" data-entity-type="file" data-entity-uuid="2d4418ad-90aa-4d49-af93-c80b140aea80" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-26%20at%209.09.47%E2%80%AFAM.png?VersionId=Kv4gzbsACaGvZSRuaqcfGC54jEJRXIDJ" />

&nbsp;

The proposal adds to an increasingly concentrated pipeline of residential development around Blue Street, MacKenzie Street and Lavender Bay.

Just west of the site, Central Element lodged plans earlier this year for one of the most significant residential developments proposed in Lavender Bay in recent years.

Central Element's SJB-designed scheme at 64-66 Lavender Street and 3-7 Middlemiss Street would deliver 163 apartments across two towers rising 23 and 32 storeys, replacing five existing apartment buildings containing 32 homes. The project also forms part of the Housing Delivery Authority pathway.

<a href="https://www.apartments.com.au/news/nsw/first-look-central-element-reveals-lavender-bay-apartment-plans?utm_source=chatgpt.com" rel="noopener" target="_blank">First look: Central Element reveals Lavender Bay apartment plans</a>

Immediately around North Sy​dney Station, another two significant proposals have emerged at 5 and 15 Blue Street.

Zurich Australian Insurance Properties is seeking to adaptively reuse its longstanding commercial building at 5 Blue Street, directly above North Sydney Station, rather than demolishing the structure.

Its SSDA proposes converting the building into a 14-storey mixed-use development with 62 apartments and 86 co-living rooms, together with ground-floor retail and a major refurbishment of Blue Street Plaza. The application is currently at the Response to Submissions stage.

<a href="https://www.apartments.com.au/news/nsw/first-look-zurich-targets-north-sydney-office-conversion-with-148-unit-proposal-above-metro-station">First look: Zurich targets North Sydney office conversion with 148-unit proposal above Metro station</a>

&nbsp;

First look: Vinnies files for 20-storey Lavender Bay apartment tower as North Sydney housing pocket heats up

Gareth Aird

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GUEST OBSERVER
The RBA’s updated forecasts are consistent with policy on hold over the rest of 2017.
The Bank expects growth to lift over the next few years to an above-trend pace.
And while core inflation is forecast to be close to 2% in H2 2017 (a touch under on the Bank’s chart), the RBA sees headline inflation tracking in their 2-3% target band.
Optimism around the recent strength in employment growth is tempered by a “subdued” outlook for wages growth.
As such, we think that the Bank retains a neutral bias in today’s Statement on Monetary Policy (SMP).
<a href="https://www.propertyobserver.com.au/images/2017/08/07/Screen%20Shot%202017-08-07%20at%209.53.06%20am.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/2017/08/07/Screen%20Shot%202017-08-07%20at%209.53.06%20am.jpg" alt="">
The Bank has downwardly revised their near term GDP forecasts due to the softer than expected QI which was negatively impacted by weather.
Looking at the Bank’s through the year forecasts implies that the pace of growth picks up to 2% by year end and 23⁄4% by Q2 2018.
Positive contributions to come from LNG production, consumption, infrastructure spend and a lift in non-mining investment.
The RBA notes that the stronger AUD has had a “modest dampening” effect on the growth forecasts.
In summary, the Australian economy would be deemed to be in good shape if the RBA’s growth outcomes can be achieved.
The forecasts look reasonable to us but the risks are to the downside.
<a href="https://www.propertyobserver.com.au/images/2017/08/07/Screen%20Shot%202017-08-07%20at%209.53.16%20am.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/2017/08/07/Screen%20Shot%202017-08-07%20at%209.53.16%20am.jpg" alt="">
Core inflation forecasts haven’t budged, but the expected trajectory for headline inflation has inched higher due to the lift in utilities prices.
There is nothing in the inflation forecasts to suggest that policy will be tightened over the next year.
We think that at the very least the RBA would need to upgrade its core inflation forecast to even entertain the idea of a rate rise.
<a href="https://www.propertyobserver.com.au/images/2017/08/07/Screen%20Shot%202017-08-07%20at%209.53.24%20am.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/2017/08/07/Screen%20Shot%202017-08-07%20at%209.53.24%20am.jpg" alt="">
We note the change in language from the RBA on the labour market that signals the Bank is clearly happy with developments.
The RBA states that leading indicators of the labour market point to, “solid employment growth” over H2 2017.
Here the emphasis is on solid and suggests that the RBA considers the recent strength in the labour market as genuine and that it will continue over the year.
<a href="https://www.propertyobserver.com.au/images/2017/08/07/Screen%20Shot%202017-08-07%20at%209.53.33%20am.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/2017/08/07/Screen%20Shot%202017-08-07%20at%209.53.33%20am.jpg" alt="">
As a result, some mild downward pressure is expected to be applied to the unemployment rate.
On wages, the RBA devoted “Box C” to a discussion on the 2017/18 minimum wage decision.
The upshot is that it should contribute 0.2ppts to growth relative to its contribution in 2016/17.
We have a similar view to the RBA on the outlook for wages growth.
Namely that it has reached a bottom and should pick up gradually from here.
That said, the process will be slow because there is still plenty of slack in the labour market.
<a href="https://www.propertyobserver.com.au/images/2017/08/07/Screen%20Shot%202017-08-07%20at%209.52.51%20am.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/2017/08/07/Screen%20Shot%202017-08-07%20at%209.52.51%20am.jpg" alt="">
As a result, we think that the RBA’s outlook for wages growth is more plausible than the optimistic wages forecasts underpinning the 2017/18 Federal Budget.
In summary, it looks like more of the same from a monetary policy perspective over 2017.
Rates will stay on hold until wages growth and core inflation are on a sustained upward trend.
That is some way off and in our view that means that policy is likely to be on hold until late 2018.
Gareth Aird is a senior economist at Commonwealth Bank and can be contacted <a href="https://www.propertyobserver.com.au/https://au.linkedin.com/pub/gareth-aird/14/790/905">here</a>.
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jchancellor-FAypfDUnLy

RBA on hold over rest of 2017: Gareth Aird

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According to the ABS, consumer inflation in Australia has risen by 63% since 1998, according to Gareth Aird, an economist for CBA.
Over that same period, national dwelling prices have lifted by ~300% (chart 1).
<a href="https://www.propertyobserver.com.au/images/2017/04/20/Chart%201.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/2017/04/20/Chart%201.jpg" alt="">
Looking at the more recent past, dwelling prices have lifted by 44% since QI 2013 while headline inflation has only risen by 8% (chart 2).
<a href="https://www.propertyobserver.com.au/images/2017/04/20/Chart%202.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/2017/04/20/Chart%202.jpg" alt="">
For all intents and purposes, dwelling prices are excluded from the CPI.
In a technical sense, “new dwelling purchase by owner-occupiers” is included.
But this is simply the cost of new homes excluding land (i.e. it is basically a residential construction cost index).
In reality it’s not a representative measure of dwelling prices because it doesn’t take into account the primary driver of changes in the price of a dwelling – which is of course the price of land.
Growth in the new homes ex-land component of the CPI bears no resemblance to changes in dwelling prices (chart 3).
<a href="https://www.propertyobserver.com.au/images/2017/04/20/Chart%203.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/2017/04/20/Chart%203.jpg" alt="">
And yet this component of the CPI is worth a non-trivial 8.7% of the total basket.
According to the ABS, land prices are excluded from the CPI because they don’t fit the definition of a consumption good.
The ABS states that, “the CPI only includes goods and services that are purchased by households for consumption.
A consumption good or service is one from which households directly derive utility or satisfaction.
Any business–related purchases by households are excluded from the basket, as are those items that have a significant savings or investment component, such as land and capital goods.”
Here one could reasonably argue that purchasing a home to live in has aspects of both investment and consumption as utility and satisfaction are derived from home ownership.
We continue: the ABS also states that, “the principal purpose of the CPI has been to measure inflation faced by households to support the operation of macroeconomic policy decision making.”
Our emphasis is on “inflation faced by households” because clearly based on the exclusion of land prices in the CPI the ABS does not consider dwelling price rises to be “inflation faced by households”.
That is true for households who own a home.
But for aspiring home owners dwelling prices are part of the inflation that they face.
Their exclusion from the CPI therefore makes it an inaccurate measure of the type of living costs that they face.
The RBA supports the exclusion of land prices in the CPI and according to the central bank, “the purchase of existing housing represents a transfer within the household sector (which means that there is zero net expenditure by the household sector in these transactions)”.
Very true. But then rent is also effectively a transfer within the household sector from tenant to landlord and rent is included in the CPI.
Land is not the only component of the cost of home ownership that is excluded from the CPI.
Mortgage interest payments are also not in the consumer basket (they were included prior to 1998).
And there is no estimate of imputed rent (i.e. owner-occupiers are effectively renting properties from themselves).
This simply leaves “rent” as being the main component of the CPI that picks up changes in the cost of having a roof over one’s head, notwithstanding the ‘residential construction cost index’ component.
This would be fine if households were completely indifferent between renting and purchasing a home (i.e. if they were perfect substitutes).
But this is simply not the case.
Here we want to point out that we are not arguing for the inclusion of dwelling prices in the CPI.
Rather, we are questioning the basis for their exclusion given nothing in the CPI as it currently stands fairly picks up changes in the cost of purchasing a dwelling to live in.
For illustrative purposes, it’s very easy to construct a CPI that includes changes in dwelling prices.
Here we construct a modified CPI (called CPIH) whereby dwelling prices account for 10% of the basket – roughly equivalent in size to the “new dwelling purchase by owner-occupiers” component of the CPI.
We use the ABS residential price index as the measure of changes in dwelling prices to construct our new CPIH. The results are telling, but unsurprising.
The inclusion of dwelling prices in CPIH, even just accounting for 10% of the basket, pushes up the annual change significantly since 1998.
The annual change in CPIH is, on average, 55bps higher than the annual change in CPI (chart 4).
<a href="https://www.propertyobserver.com.au/images/2017/04/20/Chart%204.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/2017/04/20/Chart%204.jpg" alt="">
The point of this exercise is to highlight how the exclusion of dwelling prices from the CPI has masked the uplift in the cost of living for households who don’t own a dwelling but aspire to purchase one.
For them, the cost of living has risen by more than is implied by the CPI. This is, to an extent, very much a question of generational equity.
Real wages growth has generally been positive over the past five years despite falling nominal wages growth as CPI inflation has been trending down (chart 5).
<a href="https://www.propertyobserver.com.au/images/2017/04/20/Chart%205.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/2017/04/20/Chart%205.jpg" alt="">
But if we deflate nominal wages growth by a measure of inflation that includes dwelling prices (i.e. CPIH) the picture looks quite different (chart 6).
<a href="https://www.propertyobserver.com.au/images/2017/04/20/Chart%206.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/2017/04/20/Chart%206.jpg" alt="">
Deflating wages growth by CPIH more accurately captures real wage changes for those who aspire to own a home.
These individuals (or households) are generally below 35.
To put it another way, younger people, who are less likely to own a dwelling, have faced a greater deterioration in real wages than is implied by deflating nominal wages by the CPI.
This is because the single biggest purchase they are yet to make is not included in the CPI. And it has, of course, been rising much, much quicker than the CPI itself.
There is a monetary policy, inflation and dwelling price nexus.
The RBA’s mandate is to maintain price stability, full employment and the economic prosperity and welfare of the Australian people.
To achieve this, the Bank has an ‘inflation target’ and seeks to keep consumer price inflation in the economy, as measured by the CPI, in the 2–3% range on average, over the medium term.
Interest rates have needed to be on a long-run downward trend for the RBA to meet its inflation target as the neutral rate has fallen (charts 7 and 8).
<a href="https://www.propertyobserver.com.au/images/2017/04/20/Chart%207.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/2017/04/20/Chart%207.jpg" alt="">
<a href="https://www.propertyobserver.com.au/images/2017/04/20/Chart%208.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/2017/04/20/Chart%208.jpg" alt="">
Throughout that period, Australia’s stock of debt has risen as a share of income, mainly driven by the household sector (chart 9).
<a href="https://www.propertyobserver.com.au/images/2017/04/20/Chart%209.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/2017/04/20/Chart%209.jpg" alt="">
Most of that debt has been going into bricks and mortar and dwelling prices have therefore risen faster than income.
But as discussed above, none of this has been captured in the CPI.
Back in 1997, the RBA argued against the inclusion of land in the CPI in its submission to the 13th Series CPI review.
And they also argued against including a mortgage interest component in the CPI because, “the interest charges as measured tend to distort the signal offered by the CPI of inflationary trends, by incorporating the policy responses to those trends.”
In other words, if the RBA cut (increased) rates then interest charges would fall (rise) thereby having the opposite intended impact by pushing down (up) on CPI inflation.
But including dwelling prices in the CPI would assist the RBA in hitting its inflation target.
Lowering (raising) interest rates has an immediate positive (negative) impact on the price of the very thing not included in the CPI – dwelling prices.
The hangover in Australia from pushing interest rates lower over an extended period of time to hit an inflation target has been a huge accumulation of debt and very high dwelling prices.
A raft of other policy decisions have also played their part.
The interest rate lever has helped to smooth out the business cycle.
But as we sit close to the lower bound in rates, and with debt a share of income at a record high, it seems futile to chase inflation any lower via more monetary policy stimulus unless the housing market falters and the appetite for additional debt cools.
A suite of policy reforms could help here.
When Governor Lowe appeared before the House of Representatives Standing Committee on Economics in late February he stated that, “the main effect (of another rate cut) would be more borrowing for housing, pushing up housing prices.” Touché!
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Gareth Aird

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