One of North Sydney's best-known commercial buildings could become hundreds of new homes, with insurance giant Zurich Australia lodging a State Significant Development Application (SSDA) to transform 5 Blue Street into a mixed-use residential development above North Sydney Station.

Rather than demolishing the existing building and starting again, Zurich is proposing an adaptive reuse project that would convert the landmark office building into a 15-level residential development delivering 62 apartments, 86 affordable co-living dwellings, activated retail and significant upgrades to the Blue Street Plaza.

The proposal reflects a growing trend of commercial property owners repositioning ageing office assets into residential housing as Sydney grapples with housing supply shortages and changing workplace demand.

<img alt="Zurich" data-entity-type="file" data-entity-uuid="0bba7d12-06dc-4375-aad7-238c94b21ac5" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-22%20at%2010.42.05%E2%80%AFAM.png?VersionId=NJl5oLAEBDGuPmY3RnyliKODjMc8lvRh" />

Located directly above North Sydney Metro and train station, the 3,051 sqm site occupies one of the most strategically positioned parcels of land on Sydney's Lower North Shore.

Designed by fjcstudio, the proposal seeks to retain and adapt much of the existing structure while creating a contemporary residential address that better connects with the public domain surrounding North Sydney Station.

The application proposes two basement levels, ground floor retail, affordable co-living accommodation across the podium levels, and apartments above, while preserving and enhancing the publicly accessible Blue Street Plaza.

Rather than pursuing maximum apartment numbers, Zurich has opted for a housing mix heavily weighted towards larger owner-occupier residences.

The proposal includes 62 build-to-sell apartments comprising 12 one-bedroom, 19 two-bedroom, 29 three-bedroom apartments and two premium penthouses. It also incorporates 86 affordable co-living dwellings, which would be managed in perpetuity by a Community Housing Provider.

That balance between traditional apartments and affordable housing reflects the NSW Government's push to increase housing diversity around major transport infrastructure.

The proposal has been lodged concurrently with a rezoning application, with Zurich arguing the site is ideally positioned to support additional housing given its immediate proximity to public transport, employment and services.

"The proposal aims to respond to the housing challenges facing Sydney through the delivery of diverse housing types in a highly accessible location," the design report by fjcstudio states. It also seeks to improve pedestrian amenity through upgrades to Blue Street Plaza while creating a high-performing residential building that responds to the surrounding context.

<img alt="Zurich" data-entity-type="file" data-entity-uuid="36082e15-c636-4481-bb68-5a5f6443fe39" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-22%20at%2010.41.36%E2%80%AFAM.png?VersionId=5P6VD.fvmqjQfIG3TWWMRXxQWiQBjeFB" />

Rather than replacing the commercial building, fjcstudio has developed a design that works with the existing structural framework above the rail corridor, an approach that significantly reduces demolition while allowing the site to be repositioned as a mixed-use residential precinct.

The existing structural constraints have informed much of the building's design, including its relationship with Blue Street and surrounding public spaces.

The building has been designed as a slender tower rising above a clearly defined podium, with vertically expressed façades intended to reduce the perceived bulk while reinforcing North Sydney's emerging skyline.

According to fjcstudio, the architectural language responds directly to the surrounding commercial towers while maintaining a finer grain expression more closely aligned with the neighbouring Lavender Bay streetscape.

The tower incorporates articulated façade elements, landscaped podium edges and recessed upper levels to soften its appearance and improve pedestrian amenity below.

A significant component of the proposal is the revitalisation of Blue Street Plaza.

The existing public space has long served as one of the primary pedestrian connections between North Sydney Station, Greenwood Plaza and Blue Street, yet its role is expected to become even more important following the opening of Sydney Metro.

Zurich's proposal seeks to strengthen that role by improving landscaping, introducing new retail frontages, enhancing pedestrian permeability and creating more active edges throughout the day and evening.

Ground floor retail would wrap the plaza, while separate residential and co-living entries have been designed to improve wayfinding without reducing street activation.

Landscape design has been integrated throughout the podium and public realm, softening what is currently one of the most heavily urbanised parts of North Sydney.

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fjcstudio has carefully oriented apartments towards Sydney Harbour and the CBD while using privacy blades and articulated façades to minimise overlooking between neighbouring buildings.

Large framed openings along the western elevation maximise harbour outlooks, while the eastern apartments have been angled towards the south-east to improve privacy from neighbouring development.

The project forms part of the continuing transformation of North Sydney from a predominantly commercial CBD into a genuine mixed-use city centre.

Since the completion of Victoria Cross Metro Station, developers have increasingly shifted their attention towards residential projects capable of leveraging the area's unparalleled transport connectivity.

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FiveX recently lodged plans for a 61-storey, 490-apartment tower that would become one of the tallest residential buildings in North Sydney if approved.

Aqualand continues to expand its Lower North Shore presence following the completion of AURA on Walker Street and its recent St Leonards and Roseville proposals.

Developers are also progressing projects throughout Walker Street, Miller Street and the Victoria Cross precinct as demand for well-located owner-occupier apartments continues to strengthen.

Joel Robinson

First look: Zurich targets North Sydney office conversion with 148-unit proposal above Metro station

Busy developer Aqualand Prestige has formally taken the next step in its expansion across Sydney's Lower North Shore, lodging a State Significant Development Application (SSDA) for its long-held Archer Street site in Chatswood.

The application covers <a href="https://www.apartments.com.au/new-apartments/51-55-archer-street-chatswood-nsw-2067">51-55 Archer Street</a>, a 1,767 sqm amalgamated site on the eastern edge of the Chatswood CBD, where the developer is seeking approval for a 45-level mixed-use tower delivering 114 apartments, including a significant affordable housing component, alongside retail, commercial space and six basement levels of parking.

The SSDA marks the latest milestone for a project Aqualand has been quietly progressing over the past two years. The developer first secured the site for its Aqualand Prestige platform before undertaking an alternative design excellence process with PTW Architects, ultimately avoiding a formal design competition through the Housing Delivery Authority pathway.

The proposal has evolved considerably from Aqualand's original concept. The revised scheme has been designed around larger owner-occupier product, with an unusually high proportion of three and four-bedroom apartments, targeting the more affluent buyer profile, and downsizer, emerging across the North Shore.

<img alt="Archer St" data-entity-type="file" data-entity-uuid="0171204c-5811-41b5-9b09-2335d1b7c3d0" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-22%20at%208.52.48%E2%80%AFAM.png?VersionId=6YTuxfq.puZo7k2wbfgemcO5K3QfXYGQ" />

The 114-apartment mix comprises six studios, 27 one-bedroom apartments, 18 two-bedroom apartments, 50 three-bedroom residences and 13 four-bedroom homes. A quarter of the building will be dedicated to affordable housing, well above the mandated 15 per cent&nbsp;

PTW has structured the building vertically, with affordable housing across levels one to six, premium apartments through levels seven to 31, duplex skyhomes on klevels 32 to 43, a penthouse on level 44, and a rooftop plant level above. Six basement levels will provide resident parking and servicing.

The tower is proposed to reach approximately 154 metres, placing it among a growing collection of residential high-rises transforming Chatswood's skyline.

Rather than competing purely on height, PTW says the design has been driven by creating a slimmer tower capable of delivering significantly larger apartments.

"The primary objective of this project was to create a distinctive building that stands out from the recently approved or built structures in the Chatswood area," the design report states, noting the structural efficiency allows greater investment into apartment quality and resident amenity.

Residents would have access to more than 450 sqm of communal open space including landscaped gardens, swimming pool, rooftop entertaining areas, fitness spaces, community gardens, children's play areas and barbecue facilities.

A major focus of the design has been the public domain.

The ground plane has been opened up through landscaped terraces inspired by Willoughby's sandstone ridges, with native planting, public seating, artwork, retail activation and a series of gathering spaces intended to soften what has traditionally been a hard commercial streetscape.

The landscape strategy references Blue Gum forests once common throughout the area, while incorporating Indigenous storytelling, public art and lighting installations to strengthen the connection to Country.

Chatswood has been one of Sydney's busiest apartment markets over the past 12 months, with a steady pipeline of both new project launches and fresh development applications.

Hyecorp recently launched Celine, a 122-apartment development just along Archer Street, while Changfa and Huirong Group are progressing The Anderson, an 84-apartment project on Anderson Street.

Develotek recently secured approval for a 101-apartment tower on Pacific Highway, while Tian An LFD received the green light for Hammond Greens, its apartment development on the edge of the Chatswood Bowling Club.

Commercial property developer FiveX is also making its move into the residential market. Last month it lodged plans for a 61-storey tower with 490 apartments, which, if approved, would become one of the tallest residential buildings in Chatswood.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/first-look-fivex-targets-chatswood-skyline-with-61-storey-tower-after-north-sydney-plans">First look: FiveX targets Chatswood skyline with 61-storey tower after North Sydney plans</a>

Aqualand is also expanding its development pipeline following the launch of its luxury residential brand, Aqualand Prestige. The developer has delivered a string of high-end apartment projects across Sydney's affluent suburbs over the past decade, most recently AURA by Aqualand on Walker Street in North Sydney.

[smartcode_project:default project_id=30959 project_image_fid=292863]

It has since quietly assembled its next wave of projects.

Earlier this year Aqualand launched Boronia in Roseville, a boutique 111-apartment development on Larkin Street. The project is one of the first significant apartment developments to launch in the suburb ahead of what is expected to become one of Sydney's most active new housing precincts under the NSW Government's Low and Mid-Rise Housing reforms, which allow greater density around train stations.

[smartcode_project:default project_id=152095 project_image_fid=373685]

The developer has also lodged plans for a two-tower, 413-apartment development on Herbert Street in nearby St Leonards, further strengthening its presence across the Lower North Shore.

Beyond that, Aqualand remains behind the final stage of Barangaroo, where plans will deliver a five-hectare mixed-use precinct comprising new homes, retail, hospitality and community facilities, alongside a new Metro entrance and more than two hectares of public open space, completing the Barangaroo precinct.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/central-barangaroo-development-takes-big-step-with-concept-proposal-approval">Central Barangaroo development takes big step with concept proposal approval</a>

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/first-look-aqualand-joins-st-leonards-apartment-party">First look: Aqualand joins St Leonards apartment party</a> 
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First look: Aqualand pushes ahead with Chatswood apartment tower as SSDA lodged for Archer Street

Mass timber is becoming an increasingly popular construction material in apartment developments, but Adelaide developer <a href="https://www.apartments.com.au/developers/otello">Otello</a> is taking the approach a step further.

At its new <a href="https://www.apartments.com.au/new-apartments/flowe-bowden-18-gibson-street-bowden-sa-5007">Flowe Bowden</a> development, the exposed cross-laminated timber (CLT) structure isn't just about reducing the building's environmental footprint. It also forms the foundation of a broader wellness strategy, influencing everything from indoor air quality and natural materials to the way residents move through and experience the building.

The 115-apartment mixed-use development, designed by Melbourne-based architecture practice Fieldwork, will occupy a prominent island site opposite Bowden Village Reserve, combining one, two and three-bedroom apartments with retail and a dedicated wellness destination.

[smartcode_project:default project_id=152022 project_image_fid=375528]

Wellness isn't confined to a gym or shared resident facility at Flowe. Instead, Fieldwork embedded the concept into the building itself.

The development has been split into two residential wings connected by a naturally ventilated central breezeway, replacing traditional enclosed corridors with open-air walkways that improve natural light, encourage cross ventilation and create more opportunities for neighbourly interaction.

"Rather than treating wellness as something that only happens on the ground floor, our response integrates it throughout the building, which led us to ask what it really means to design a healthy building," Fieldwork Director Quino Holland said.

[smartcode_project:default project_id=152022 project_image_fid=375531]

The building's architecture also reflects Bowden's industrial heritage. The lower podium references the area's historic brick and sandstone buildings, while the upper levels transition to exposed CLT, allowing the timber structure to become a defining feature throughout the apartments and shared spaces.

The use of mass timber sits alongside a range of sustainability initiatives, including a fully electric, gas-free design, rooftop solar and a targeted 5 Star Green Star rating.

[smartcode_project:default project_id=152022 project_image_fid=375524]

Inside the residences, the focus remains on natural, durable materials. Blackbutt engineered timber flooring, exposed CLT ceilings, porcelain surfaces and warm timber joinery create a calming interior palette, while low-VOC finishes and responsibly sourced materials have been selected to improve indoor air quality.

Kitchens have been designed as the centrepiece of each apartment, featuring porcelain island benchtops, timber-look cabinetry and brushed steel tapware, with layouts that maximise natural light and ventilation.

[smartcode_project:default project_id=152022 project_image_fid=375530]

The more traditional interpretation of wellness comes in the form of Level Eleven, a two-storey wellness club spanning the ground floor, mezzanine and first floor.

The facility will include a gym, yoga and reformer Pilates studios, Finnish and infrared saunas, magnesium hot and cold plunge pools, and dedicated recovery spaces. Unlike many residential wellness facilities, Level Eleven will also operate commercially, allowing the broader Bowden community to access the venue while giving residents exclusive membership benefits.

The ground floor has also been designed around everyday living. A café overlooking Bowden Village Reserve will activate the street frontage, while a bike workshop with tool storage, co-working space and dog wash has been incorporated to support daily routines and encourage interaction between residents.

"Flowe brings together my two biggest passions, creating places and creating healthier lives," Otello founder Daniel Harris said.

"We wanted to create something Adelaide hasn't seen before, a genuinely healthy building, where the way you live is lifted without even trying."

Flowe is positioned directly opposite Bowden Village Reserve and within walking distance of Bowden Railway Station and the Adelaide Entertainment Centre, placing future residents just minutes from the Adelaide CBD while remaining connected to one of the city's most established urban renewal precincts.

[smartcode_project_cta:default project_id=152022]

Otello launches wellness-focused Flowe Bowden with Adelaide-first mass timber apartment design

Not all apartment amenities are immediately visible.

Swimming pools, gyms, rooftop terraces and residents' lounges have long featured on buyers' wishlists, but as the way Australians live has changed, so too have the features that make apartment living more convenient.

Increasingly, buyers are placing value on the practical aspects of day-to-day life. Fast internet, EV charging, secure bike storage, flexible workspaces and parcel management are becoming just as relevant as lifestyle amenities, reflecting changing habits and expectations.

Online shopping has been one of the biggest drivers of that shift.

Australians spent a record $82.6 billion shopping online in 2025, with almost one in every four retail dollars now spent digitally, making parcel deliveries a routine part of everyday life rather than an occasional convenience.

For apartment residents, however, receiving those deliveries isn't always straightforward.

Without someone home to accept a parcel, deliveries can be redirected to a nearby Post Office, left in building foyers or common areas, or require building management to temporarily store packages. As apartment living continues to grow across Australia's cities, parcel management has become an increasingly important consideration for both residents and developers.

Australia Post's Parcel Locker network is one response to that shift.

<iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen="" frameborder="0" height="315" referrerpolicy="strict-origin-when-cross-origin" src="https://www.youtube.com/embed/KPZ9j5FRdsQ?si=Qztc1dNP3ZvEIUhb" title="YouTube video player" width="560"></iframe>

Rather than relying on home delivery, eligible parcels can be directed to a nominated Parcel Locker, where they're securely stored until collected. Once a parcel arrives, residents receive a notification through the AusPost app or SMS and can retrieve it using a one-time code or QR code at a time that suits them.

The network has expanded to more than 1,500 locations nationwide, with Parcel Lockers positioned at Post Offices, shopping centres, supermarkets, transport hubs and, increasingly, within or alongside residential developments.

That growing presence reflects a broader change in how apartment buildings are being planned.

Developers are increasingly considering the operational side of apartment living alongside traditional lifestyle amenities. Just as secure mailrooms, bicycle storage and EV charging have become more common inclusions, parcel management is emerging as another feature that supports everyday convenience.

It also helps preserve the arrival experience within a building. Carefully designed lobbies and communal spaces can quickly become cluttered when deliveries accumulate, while secure parcel solutions reduce the likelihood of missed deliveries or parcels being left unattended.

For buyers comparing apartments, these everyday details are becoming part of the decision-making process.

Location, floorplans and finishes remain fundamental, but the features that simplify daily life are carrying greater weight than they once did. As online shopping continues to shape consumer behaviour, secure parcel delivery is increasingly becoming another amenity worth looking for.

Parcel delivery is joining the apartment amenity checklist

Inca Property Group has lodged a State Significant Development Application (SSDA) for Dawn, a 53-apartment oceanfront development overlooking Mona Vale Beach.

The proposal, at 35-39 Darley Street East, would replace an existing 18-apartment strata building with a new owner-occupier-focused development comprising 53 two and three-bedroom apartments, including nine affordable built-to-rent residences delivered under the State's infill affordable housing scheme.

Positioned on a 2,679 sqm elevated site around 280 metres from Mona Vale Beach, the development has been designed to maximise panoramic ocean views while responding to the site's sloping topography.

<a href="https://www.apartments.com.au/developers/inca-property-group">Inca Property Group</a> Managing Director Josh Thompson said the State Significant pathway provided greater certainty for projects of this scale.

"This State Significant pathway gives the team real certainty to progress <a href="https://www.apartments.com.au/new-apartments/dawn-35-39-darley-street-east-mona-vale-nsw-2103">Dawn</a> through to completion," Thompson said.

"It allows us to acquire a one-off site, design it carefully and deliver the right offering for the suburb, assessed by the NSW Government's planning department."

The project is one of the first developments in the area to be assessed under the NSW Government's Low and Mid-Rise Housing policy, with the site sitting on the edge of the policy's designated inner area.

The proposal includes three basement levels providing 124 car spaces, alongside a range of resident amenities including a swimming pool, gym, sauna, wellness facilities and private plunge pools for selected ground-floor and penthouse apartments.

<img alt="Dawn" data-entity-type="file" data-entity-uuid="fc1a1daf-0ce4-4f12-9076-b1fa553c7a91" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-21%20at%208.42.11%E2%80%AFAM.png?VersionId=4GZ9h.gpNkTljbxyAET8Jfhv51XUamDm" />

Thompson said Dawn had been designed specifically for owner-occupiers and downsizers, a buyer profile that has driven demand across Inca's recent Upper North Shore developments.

"The majority of buyers in our recent North Shore projects have been downsizers, and we are learning exactly what this market is looking for. Beyond the location itself, we have included resort-style amenities to deliver a genuine lifestyle offering," Thompson said.

Located within walking distance of Mona Vale Beach, the town centre, Mona Vale Golf Club and the Royal Motor Yacht Club, Dawn represents Inca's first Northern Beaches project following the sell-out of Tara on Park in Waitara and Ellis Residences, currently under construction in St Ives.

Construction will be undertaken by Inca's in-house construction arm, GOP Constructions.

Dawn is the latest major apartment proposal for Mona Vale, with the suburb emerging as one of the key beneficiaries of the NSW Government's new Low and Mid-Rise Housing policy.

New developer One Living, led by industry veteran Joseph Scuderi, recently secured a site on Mona Vale Road, on the border of Mona Vale and Pymble, where it is planning around 140 apartments.

IPM is also planning its third project in Mona Vale, significantly increasing the scale of its previous developments with an 82-apartment proposal at <a href="https://www.apartments.com.au/new-apartments/159-167-darley-street-west-mona-vale-nsw-2103">159-167 Darley Street West</a>, opposite Bayview Golf Course and less than 800 metres from Mona Vale town centre.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/one-living-enters-sydneys-new-apartment-market-with-northern-beaches-site-acquisition">One Living enters Sydney's new apartment market with Northern Beaches site acquisition</a>

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/first-look-ipm-plans-third-mona-vale-project">First look: IPM plans third Mona Vale project</a>

First look: Inca eyes Mona Vale with State Significant DA for Dawn apartments

Household Debt

jchancellor-FAypfDUnLy

Household debt high, rising faster than the unusually slow growth in incomes: RBA's Philip Lowe

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Record high household debt is expected to be on top of the Reserve Bank’s board meeting’s agenda on Tuesday as the central bank worries about risks to the economy from a shock in the property market.
Though most experts concur that the first rate hikes won’t come soon, but the RBA will be faced with question on Tuesday on whether or not to follow other central banks in lifting the official cash rate.
Australian household debt in the March quarter was at 190 per cent of their yearly disposable income, an all-time high, RBA data showed. The record debt level is even higher than the US just before the financial crisis.
High household debt is know to frequently be a trigger for financial crises.
RBA Governor Philip Lowe had earlier noted that a combination of high household debt and slow wages growth was a sobering combination. (put PO link)
A combination of low interest rates, slow wages growth and surge in home prices fuelled by overseas investor demand and strong population growth have been cited as reasons.
Data from the RBA confirmed that Australia’s record household debt mountain is largely due to soaring property prices.
In the March quarter, Australian housing debt reached 135 per cent of annual disposable income, according to the RBA, breaking another record.
RBA minutes in March noted that there was a build-up of risks associated with the housing market.
However, Treasurer Scott Morrison said recently that regulatory tightening is working to cool the overheated property market without a hard landing.
"The data shows to date that we are moving towards a safe landing when it comes to housing markets in Sydney and the pendulum swinging back in the favour of home owners and first home buyers, which is good news," Morrison said in Sydney on Monday, according to The Australian Financial Review.
In March, the Australian Prudential Regulation Authority announced restrictions on interest-only loans in response to record high household debt levels and the measure was has been "fully supported by the government”, he said.
Interest-only loans must be restricted to 30 per cent of new residential mortgage loans, APRA said.
 
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jonathanchancellor-7SQnKwU6yx

Record high household debt worries RBA ahead of board meeting

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The Reserve Bank of Australia could raise interest rates eight times in the next two years, given the central bank’s inflation target, according to former board member John Edwards.
The RBA is possibly already considering a schedule of rate increases given its forecasts for inflation returning to target and economic growth rising to 3 percent against a stronger global backdrop, Bloomberg reported, referring to a column Edwards wrote on the website of the Lowy Institute for International Policy, where he is a non-resident fellow.
The central bank has held rates at a record low of 1.5 percent since last August.
At its June meeting, its Board decided to leave the cash rate unchanged at 1.5 percent, with Governor Philip Lowe saying that conditions in the housing market vary considerably around the country.
The long-term cash rate was about 3.5 percent -- below the 5.2 percent average over the past two decades -- and the RBA wants to start tightening in 2018 and reach its goal within two years, which would require four quarter-point increases each year, he said. 
“It seems to me that something like eight quarter percentage point tightenings over 2018 and 2019 are distinctly possible, if the RBA’s economic forecasts prove correct,” said Edwards, who was on the bank’s board until July 2016, Bloomberg reported.
“It’s possible the tightening could start earlier, or if not the tightening itself, at least the signaling which should precede it. We may be seeing a little of that now.”
Separately on the Money News show by Ross Greenwood on 2GB, Edwards, a former chief economist of HSBC, said the policy rate would not go higher than 3.5 percent because of the household debt.
When asked by Greenwood that some economies, like Canada and New Zealand, were pushed into recession by rate rises… and if a similar situation could arise in Australia, Edwards said that the RBA would proceed very cautiously. 
The first rate rises are likely not to come before February-March next year, opined Edwards and then increases every quarter.
Traditionally, the RBA changes rates in small increments and typically doesn’t commit itself to subsequent moves, making the market wary of predicting where the bank will be in a few years, Edwards said. 
In the current circumstances, he said we can reasonably assume:
<ul>
<li>the RBA considers its current rate to be exceptionally low </li>
<li>if the economy improves as it predicts, the next move will be up </li>
<li>if the economy was operating, as the RBA predicts, at 3 percent output growth and 2.5 percent inflation, it would think of a sustainable or natural policy rate of at least 3.5 percent </li>
<li>most importantly, it will want the policy rate increase to match the forecast improvement in Australia’s economic performance, so rising to at least 3.5 percent by the end of 2019</li>
</ul>
 He noted the risks of rate increases amid record high household debt, a fact even noted by RBA Governor Philip Lowe.
“The bigger the household debt, the more impact a quarter percentage point increase in the policy rate will have on household spending,” he said. 
“In the Australian case, it is certainly possible that high household home mortgage debt will crimp consumer spending if the policy rate returned to what was once considered a relatively low long-term rate.”
Still, Edwards noted that interest paid on Australian mortgages is much less than it was six years ago: while debt has increased, interest rates have fallen a lot. 
Payments are now 7 percent of disposable income compared with 9.5 percent in 2011, and 11 percent at the peak of the RBA tightening cycle before the 2008 financial crisis, he said.
He said tightening steps would be dictated by how the economy performs.
“If household spending weakness, if the long expected firming of non-mining business investment is further delayed, if the Australian dollar strengthens, if employment growth is persistently weak, then the trajectory of rate rises will be less steep and the pace less rapid.”
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Starting next March RBA could lift interest rates eight times over two years: Ex-board member John Edwards

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Household debt and an increase in income-to-debt ratios add to macro-economic risks, suggests new research.
The study by researchers from the University of Sydney for the Australian Housing and Urban Research Institute reveals how the housing market is one contributing factor to these macro-economic risks. 
Titled ‘Housing prices, household debt and consumer spending’, the study examined the effects of house prices and house-price-induced increases in debt on general consumption spending in Australia, focusing specifically on how such links were affected by the GFC.
The study suggests that policymakers should consider the potential risks that high levels of household debt and rising household income-to-debt ratios bring to the economy.
It points to the dangers, saying a number of countries have regulations that “limit the growth of household indebtedness, while the need to ensure robust prudential regulation remains an important policy priority”.
The study identified the consumption patterns for homeowners and home owning investors at different ages and who had greater or smaller amounts of debt or equity in their properties. 
Before the GFC, a rise in housing prices were associated with increases in consumption (i.e. spending or borrowing) for homeowners, particularly because they borrowed a larger fraction of the property price (i.e. had a higher ‘Loan to Value’ (LTV) ratio). 
However, after the GFC households with high LTVs turned more conservative and were no longer increasing their debt to increase consumption as a response to increases in house prices, the research noted.
“Our findings are relevant for macro-economic stability in Australia,” says associate professor Stephen Whelan, from the University of Sydney," it said.
“In particular, the finding that households with higher levels of debt are most responsive to increases in house prices highlights a potential systemic risk. Financing higher consumption through taking debt among highly leveraged households exposes those households to the risk of significant loss if house prices fall or if interest rates rise. This is in contrast to a general belief in Australia that debt is held by those most able to service it, namely, higher income and higher wealth households.
"Before the GFC, for every $100,000 increase in house values old-aged households increased their consumption by $1,000 per year and middle-aged households increased consumption by $1,700. After the GFC, consumption by old- and middle-aged households dropped to $600 and $1,600 per year respectively.
"The significance of this is seen if we consider there are 1.69 million households aged 65 and over who are homeowners (90% of these households do not own another property), then just $400 less being consumed each year by each household means a loss to the economy of approximately $608 million when compared to pre-GFC household consumption."
The report also finds differences in the consumption responses of home owning investors with and without debt.
Following the GFC, home owning investors with no debt became more conservative, reducing their consumption response from around $3,000 to approximately $2,600 per annum for every $100,000 increase in house prices. Whereas investors with mortgage debt became more responsive as their consumption response rose from $1,700 per annum to almost $2,900 per annum for a $100,000 increase in house prices.
The conclusion of this finding was that these investors with mortgage debt are not as risk-adverse when compared to other homeowners.
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Soaring household debt poses risks to economy: AHURI

Household debt, housing prices and resilience: Philip Lowe

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GUEST OBSERVER
Australia’s household debt has been rising and is high by international standards.
The household debt-to-income ratio has risen from 167 percent in 2011 to 190 percent in Q4 2016. Assessing how much to worry about this is not straightforward.
On the one hand, high levels of debt make the economy more vulnerable to a negative economic shock. On the other hand, appropriately allocated debt is an engine of economic growth, as it better allocates resources between savers and investors.
Our long held view is that high household debt is not, in itself, a problem, as long as it is held by households that can continue to service it. The problem faced by many economies during the global financial crisis, such as the US and Spain, was that household debt was misallocated to households that could not service it. In Australia, the latest available statistics suggest that the distribution is fairly favourable.
As at 2014, most of the debt was held by high income earners and there were few low income households with large debt servicing burdens. In addition, Australia does not have sub-prime borrowers and all of the mortgages are full recourse.
<a href="https://www.propertyobserver.com.au/images/2017/05/16/Screen%20Shot%202017-05-17%20at%208.14.17%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/05/16/Screen%20Shot%202017-05-17%20at%208.14.17%20AM.png" alt="">
However, household debt has risen since 2014 and there has been an investor-led house price boom in Sydney and Melbourne. As a result, it is hard to be certain about how much risk has built up recently. The longer it goes on, the more difficult it is to judge. It is for this reason that prudential settings have been tightened and that RBA Governor, Mr. Phil Lowe, has repeated that it would not be in the ‘public interest’ to cut interest rates further if it provided another boost to housing prices and debt.
In its recent financial stability review, the RBA deemed that, given lending standards have been tightening, the key risk from rising household debt is to the macroeconomic cycle rather than financial stability.
The central bank’s own granular assessment is that any build-up of risks that could see rising defaults in a downturn is not large enough to be a financial-system-wide risk. Rather, they suggest the key risk is that the higher household leverage could amplify the economic cycle. We expect that concerns about high and rising household debt will be a key factor that keeps the RBA from cutting its cash rate further. We expect prudential settings to remain tight. 
Household debt is high, but mostly for fundamental reasons
Australia has high household debt and it has been climbing further in recent years. Indeed, across the range of economies regularly tracked by the Bank of International Settlements, Australia has the second highest level of household debt, relative to nominal GDP (Chart 1). In contrast, corporate debt is about average and public debt is low by international standards.
At the outset, a key question is: why is household debt high? In Australia, high household debt reflects that: firstly, the bulk of the housing stock, including the rental properties, is owned directly by the household sector using leverage, which is not the case across many nations; and, secondly, that housing prices are fairly high when compared with household incomes.
On the first point, this is because the owner-occupation rate is high, at around 68%, and because the bulk of the rental properties are also owned by the household sector directly. In Australia, investment properties, which are then rented, are a tax-favoured investment. So, unlike most other economies, including the US, for example, the stock of rental properties involves debt on the household balance sheet, rather than the corporate balance sheet. As a result, around one-quarter of Australia’s household debt is held by investors, which is a key reason that household debt levels are higher in Australia than elsewhere (Chart 2).
On the second point, Australia’s housing prices are fairly high relative to household incomes, although they are not exceptionally so (Chart 3). Australia’s housing-price to income ratio is around 5 times, which is a similar level to the UK, Ireland, Denmark, Spain, and the Netherlands. 
<a href="https://www.propertyobserver.com.au/images/2017/05/16/Screen%20Shot%202017-05-17%20at%208.17.13%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/05/16/Screen%20Shot%202017-05-17%20at%208.17.13%20AM.png" alt="">
For Australia, housing prices are high for a range of reasons, including relative economic success in the form of continued growth, low interest rates, strong population growth, and high foreign demand, in the face of limited supply.
<a href="https://www.propertyobserver.com.au/images/2017/05/16/Screen%20Shot%202017-05-17%20at%208.18.25%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/05/16/Screen%20Shot%202017-05-17%20at%208.18.25%20AM.png" alt="">
Some of these factor are cyclical, such as low interest rates, while others are structural. A key structural factor is limited housing supply. The supply of well-located housing has been limited by planning regulations and poor urban infrastructure. As a result, Australia has very low rates of urban density despite being a largely empty continent (Chart 4). Although there has been a ramp up in residential construction in recent years, in the largest city, Sydney, there is still not enough being built to meet demand (see Downunder Digest: Apartment building boom is nearing its end, 10 January 2017).
It’s the distribution of debt that matters the most
If the overall high level of household debt is driven by fundamentals, then what’s the worry? Part of the concern is that debt has been climbing recently, and that the rise has been driven by investors, rather than owner-occupiers (Chart 5). Again, even this is not worrisome, as long as the new borrowers are expected to be able to continue to service the debt. Thus it is the distribution of debt that matters the most, a point we have made before (see Downunder Digest: Australia’s rising household debt: should we worry?, 22 April 2016). The challenge is that there is considerable uncertainty about the distribution of debt and that this uncertainty rises when growth in debt is driven by new borrowers.
In Australia’s case, the key cross-sectional survey from 2014 shows quite favourable trends. 
<a href="https://www.propertyobserver.com.au/images/2017/05/16/Screen%20Shot%202017-05-17%20at%208.19.28%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/05/16/Screen%20Shot%202017-05-17%20at%208.19.28%20AM.png" alt="">
The survey shows that the bulk of the household debt is held by high-income earners, with 74% of the debt held by the top 40% of income earners. The survey also shows that most of Australia’s highly-indebted households (those with debt-to-income ratios in the top 10th percentile of debt holders) are also high-income earners (Chart 6).
Australia’s financial regulatory environment is also strong. All mortgages are full recourse and there is no sub-prime lending. Australians also have an incentive to pay down their mortgages ahead of schedule, as they cannot deduct the expenses associated with their owner-occupied housing, such as mortgage interest, against their other taxable income. As a result, the average mortgage holder is around 21⁄2 years ahead on their mortgage payments (when offset accounts and redraw facilities are included). This means that the average borrower has a significant buffer on which to draw in the event of job loss or some other negative income shock.
So what is the concern? First, the information on the distribution of debt is from 2014 and we know that household debt has risen since then. We do not know much about the distribution of the new debt, although we do know that the bulk of it has been for property investors. On the positive side, historically, investors have been less likely to default on mortgages than first home buyers as investors tend to have equity in an owner-occupied property, and tend to be older and higher-income households with a loan repayment history. On the negative side, we do not know much about the new investors in recent years, although we know that the prudential regulator has been tightening its settings since late 2014 to prevent an excessive build-up of risk.
Second, although the average mortgage holder has a significant buffer, it is not the average borrower that typically defaults. At the riskier end of the spectrum of borrowers there is evidence of mortgage holders with only slim buffers against a negative income shock. For example, in a recent speech (4 May 2017), the RBA Governor, Mr. Phil Lowe, referred to data on securitised loans which showed that about one-third of borrowers only have a one-month buffer.
However, in that same speech Governor Lowe relayed that the RBA’s own assessment, with full access to all of the granular lending numbers, was that the risk of rising household debt levels was not to financial stability but to the macroeconomic cycle. Given that lending standards have been tightened and that risky loans are still only a small share of financial system liabilities, a large enough rise in loan defaults to shake the overall financial system is unlikely.
What happens when housing price growth slows?
<a href="https://www.propertyobserver.com.au/images/2017/05/16/Screen%20Shot%202017-05-17%20at%208.20.23%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/05/16/Screen%20Shot%202017-05-17%20at%208.20.23%20AM.png" alt="">
The RBA’s concern is that, when housing price and household credit growth slow down, this could exacerbate the economic cycle. Sydney and Melbourne have had significant housing prices booms in recent years, although it has been quite concentrated to these cities (Chart 8). 
<a href="https://www.propertyobserver.com.au/images/2017/05/16/Screen%20Shot%202017-05-17%20at%208.21.27%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/05/16/Screen%20Shot%202017-05-17%20at%208.21.27%20AM.png" alt="">
Sydney and Melbourne housing prices have risen 77 percent and 58 percent over the past five years, while housing prices are only 14 percent higher in the rest of the nation.
The RBA’s argument is that the eventual slowdown, or fall, in housing prices and easing in the pace of household credit growth could weaken overall economic growth, particularly growth in household consumption.
While a slowdown in housing activity would, no doubt, have some effect, it may not be as large as in the past. Indeed, there is clear evidence that the recent ramp up in housing prices and household debt has had little impact on households’ willingness to borrow to consume goods and services. Unlike the early 2000s housing boom, households have not been withdrawing equity from their properties, but rather have been injecting it in recent years (Chart 9). If there has not been a significant positive wealth effect from rising housing prices and household debt, any slowdown in these factors may also have a more muted effect than in the past.
A key counter-argument is that the household saving rate has been falling in recent years, which provides some evidence of a positive wealth effect (Chart 10). That is, households may have been more willing to lower their saving out of income because their wealth has been rising.
However, the state-level numbers suggest that this story is a bit more nuanced. The biggest fall in the saving rate has occurred in Western Australia, following a sharp rise earlier. This reflects the impact of the mining boom, which boosted incomes significantly in that state prior to 2011/12 and where incomes have fallen since. Western Australian households saved when income growth was strong and have been saving less recently, in line with what a permanent income model might suggest.
However, the saving rate has not moved much in New South Wales and Victoria, where the housing markets have been booming recently. This suggests that the wealth effect has, in fact, been quite small in these states, consistent with the housing equity withdrawal numbers.
In our view, when the housing markets in Sydney and Melbourne cool, which we expect to be the case this year and next, we do not expect a large negative wealth effect.
For the RBA, the idea of the overall economic cycle being exacerbated by the housing cycle is clearly a concern. In our view this concern would suggest an earlier tightening, rather than a later one, though. If the concern is not allowing the housing boom to continue too long, because the end of the boom could cause problems, the risk-averse approach is likely to be higher rates, not lower ones. 
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<a href="https://www.about.hsbc.com.au/hsbc-in-australia/management-team" target="_blank">PAUL BLOXHAM</a> IS CHIEF ECONOMIST (AUSTRALIA AND NEW ZEALAND) FOR HSBC. 
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How worrisome is Australia’s high household debt? Paul Bloxham

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While the financial position of households has been fairly resilient, vulnerabilities persist for some highly indebted households, especially those located in the resource-rich states, the recent RBA's Financial Stability Review has noted.
Household indebtedness (as measured by the ratio of debt to disposable income) has increased further, primarily due to rising levels of housing debt, although weak income growth is also contributing.
Rising indebtedness can make households more vulnerable to potential income declines and higher interest rates.
This is of most concern for households that have very high levels of debt.
Low interest rates are helping to offset the cost of servicing larger amounts of debt and hence total mortgage servicing costs remain around their recent lows (Graph 2.5).
<a href="https://www.propertyobserver.com.au/images/2017/04/13/Graph%202.5.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/2017/04/13/Graph%202.5.jpg" alt="">
In this regard, lenders have tightened mortgage serviceability assessments in recent years to include larger interest rate buffers, which should provide some protection against the potential effects of higher interest rates.
Prepayments on mortgages increase the resilience of household balance sheets.
Aggregate mortgage buffers – balances in offset accounts and redraw facilities – are high, at around 17 per cent of outstanding loan balances or around 21⁄2 years of scheduled repayments at current interest rates.
However, these aggregate figures mask significant variation across borrowers, with available data suggesting that around one-third of borrowers have either no accrued buffer or a buffer of less than one month’s repayments.
Those with minimal buffers tend to have newer mortgages, or to be lower-income or lower-wealth households.
Weak economic conditions, and declining housing prices, continue to present challenges to the financial health of households in regions with large exposures to the mining sector.
For example, the rate of personal administrations in Western Australia increased further over the second half of 2016.
While commodity prices have increased, this seems unlikely to translate into significantly improved labour market outcomes in these regions in the near term.
If housing prices continue to decline in these locations, then banks may face additional losses on their mortgage portfolios.
Find the RBA's latest Financial Stability Review 2017 <a href="https://www.rba.gov.au" target="_blank">here</a>.
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j.ballantyne1990-6AQqhLzZaK

Households continue to have high levels of debt: RBA warns

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

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One third of mortgage owners have less than a month's buffer against financial instability, the Reserve Bank has warned.
The RBA's half-yearly financial stability review, released today, suggested a decline in investor credit could reduce consumption sharply, then trigger a downturn in the market. 
"The concern is that investors are likely to contribute to the amplification of the cycles in borrowing and housing prices, generating additional risks to the future health of the economy," the RBA said.
"Periods of rapidly rising prices can create the expectation of further price rises, drawing more households into the market, increasing the willingness to pay more for a given property, and leading to an overall increase in household indebtedness."
The central bank warned elevated mortgage debt, especially among investors, would see pain felt across the broader economy if high debt, falling house prices, and rising unemployment combined.
It added the banks are well braced for a downturn should it come.
“The risks associated with strong investor credit growth and increased household indebtedness are primarily macroeconomic in nature,” the RBA said.
The RBA was confident that the banks are well capitalised and would ride out an economic downturn.
“Australian banks have continued to reduce exposures to low-return assets and are building more resilient liquidity structures,” it said.
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Home borrowers with less than a month in reserve, so Reserve Bank steps up property warnings

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Housing markets in Australia and Canada have many similarities such as large increases in home prices in cities, high household debt levels and strong investor interest in property, says RBA Governor Philip Lowe. 
He put his views across at the recent Australia-Canada Leadership Forum, saying, “We are both attractive places for non-residents to invest their savings. We both have growing populations. And we both have had to deal with very large increases in housing prices in some of our cities. With all this in common, it is not surprising that we find much to talk about and experiences to share.” 
The 13th Annual Demographia International Housing Affordability Survey ranked Sydney as the second least affordable housing market behind Hong Kong. Canada’s Vancouver was ranked third.  
Sydney’s “median multiple”, or the median house price divided by the median household income is 12.2 while Vancouver had a score of 11.8.
Other major Australian cities such as Melbourne, Adelaide and Canada’s Toronto too are not too far behind in unaffordability.
<img src="https://www.urban.com.au/images/2017/02/23/RBAHousePriceGrowth.png" alt="">
He also drew similarities on high household debt to income ratio, saying, “The increase in overall housing prices in both our countries has gone hand in hand with a further pick-up in household indebtedness (Graph 7). 
<img src="https://www.urban.com.au/images/2017/02/23/RBADebttoIncome.png" alt="">
“In both countries the ratio of household debt to income is at a record high, although the low level of interest rates means that the debt-servicing burdens are not that high at the moment.”
Another commonality was addressing the supply side of the housing market equation, with low investment in infrastructure contributing to high prices. 
“Another characteristic that we have in common is that at a time of strong demand from both residents and non-residents, there are challenges on the supply side,” Lowe said.
“I understand that zoning is an issue in Canada, just as in Australia. In some parts of Australia, there has also been underinvestment in transport infrastructure, which has limited the supply of well-located land at a time when demand for such land has been growing quickly. The result is higher prices.”
He said both countries had large differences across the various sub-markets.  
“The strength in housing markets in our major cities contrasts with marked weakness in the mining regions following the end of the mining investment boom (Graph 6).”
 <img src="https://www.urban.com.au/images/2017/02/23/RBAHousePriceCity.png" alt="" style="font-size: 12.16px;">
 
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