<p>Malaysian developer <a href="https://www.apartments.com.au/developers/s-p-setia">SP Setia</a> is the latest to jump into St Leonards booming Transport Oriented Development precinct.</p>

<p>The developer, which has previously delivered Sapphire by the Gardens apartment development in Melbourne, identified the Atchison Street site in 2023. It filed a Scoping Report around 12 months ago, and now has revealed the designs for the new&nbsp;40-storey mixed-use tower.</p>

<p>The State Significant Development Application covers <a href="https://next-portal.urban.com.au/projects/14650/summary">20-22 Atchison Street</a>, a 1,374 sqm site positioned between St Leonards Station and the new Crows Nest Metro station.</p>

<p>Designed by <a href="https://www.apartments.com.au/architects/cox-architecture">COX Architecture</a>, the project would deliver 181 apartments, above a four-storey commercial podium, five basement levels, and new public domain works along Mitchell Street. The apartment mix comprises 35 one-bedroom apartments, 39 one-bedroom-plus-study apartments, 85 two-bedroom apartments, and 22 three-bedroom residences.</p>

<p>The proposal has been lodged as a shop-top housing development under the NSW Government’s TOD planning pathway, which allows increased density around key transport infrastructure. The site sits within the recently rezoned Crows Nest Accelerated TOD Precinct.</p>

<p><img alt="First look: SP Setia targets St Leonards skyline with 40-storey TOD tower" data-entity-type="file" data-entity-uuid="b799673d-48e2-46b0-801a-0e33a9330100" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/atchinson%20site.png?VersionId=dPh0UfwfaHpbFL1R7H1cbZNbIW0CHbCC" /></p>

<p>SP Setia acquired the Atchison Street site as part of its continued expansion into the Australian apartment market. In comments made to City &amp; Country (The Edge Malaysia) in 2023, SP Setia President and CEO Datuk Choong Kai Wai described the acquisition as “a strategic move” aligned with the group’s post-pandemic market recovery strategy.</p>

<p>“Our target for this exceptional development is local and overseas buyers, including first-home buyers, downsizers and investors,” Choong said.</p>

<p>The tower has been designed as a slender vertical form rising from a mixed-use podium, with COX Architecture positioning the development as a response to the evolving St Leonards and Crows Nest skyline.</p>

<p>“The purpose of the project is to facilitate the delivery of high-quality housing at a strategically located site and deliver a built tower outcome that is consistent with the desired future character of St Leonards and aligns with the TOD controls,” the design report stated.</p>

<p><img alt="First look: SP Setia targets St Leonards skyline with 40-storey TOD tower" data-entity-type="file" data-entity-uuid="b1a85eee-76f7-436c-a6da-73ba827b9b13" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/atchinson%20entry.png?VersionId=dA9jHGPMcm.dDbwk4QfxqWiY5bfh3UVt" /></p>

<p>The podium would incorporate retail uses fronting Atchison Street, commercial tenancies, landscaped communal areas, and pedestrian improvements along Mitchell Street. Vehicle access and loading would be consolidated via Atchison Lane.</p>

<p>Residents would have access to more than 665 sqm of communal indoor and outdoor spaces, while the development proposes 96 parking spaces across five basement levels.</p>

<p>The proposal also includes a commitment for 10 per cent of residential floor space to be allocated toward affordable housing through a monetary contribution.</p>

<p>COX said the tower form responds directly to the emerging high-density character of the precinct while seeking to maximise solar access, cross ventilation, and outlook from apartments.</p>

<p><img alt="First look: SP Setia targets St Leonards skyline with 40-storey TOD tower" data-entity-type="file" data-entity-uuid="2163f85c-f63b-4be3-aafa-f8763976cec5" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Article%20Feature%20Image%20%28Grid%29_5.png?VersionId=WiAmtIKJ6.ZQ41EtYEQ1fol7AeorKBlL" /></p>

<p>“The building is orientated towards north,” the Apartment Design Guide compliance report noted, adding that the tower’s slim form was driven by the constrained inner-urban site dimensions.</p>

<p>The design also incorporates landscaped setbacks and communal open space at podium level, intended to soften the interface with surrounding streets and improve pedestrian amenity.</p>

<p>The project adds to a growing wave of redevelopment proposals reshaping St Leonards and Crows Nest following the opening of the Sydney Metro City line and the NSW Government’s push for higher-density housing around major transport nodes.</p>

<p>Last week Stockland filed plans just down the road. They want to build a <a href="https://www.apartments.com.au/new-apartments/601-pacific-highway-st-leonards-nsw-2065">52-storey tower on Pacific Highway</a>.</p>

<p><em>Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/first-look-stockland-plans-52-storey-538-apartment-st-leonards-tower">First look: Stockland plans 52-storey, 538-apartment St Leonards tower&nbsp;</a></em></p>


Joel Robinson

First look: SP Setia targets St Leonards skyline with 40-storey TOD tower

<p><a href="https://www.apartments.com.au/developers/urban-property-group">Urban Property Group</a> has revealed plans for a new mixed-use tower at 10 Dangar Street, Wickham, advancing a proposal that would reshape the southern gateway to Newcastle’s city centre with one of the city’s tallest residential buildings.</p>

<p>The State Significant Development proposal, now on exhibition, seeks approval for a <a href="https://www.apartments.com.au/new-apartments/bowline-10-dangar-street-wickham-nsw-2293">43-storey tower</a> immediately adjacent to the Newcastle Interchange. The project would deliver around 200 apartments, including 42 affordable housing dwellings, alongside 99 co-living units, a 171-room hotel, retail space, and new public domain integrated through the site.</p>

<p>The scheme marks a significant escalation of plans previously approved for the site. Urban Property Group took over the prominent 2,904 sqm parcel, where excavation and demolition had already commenced under an earlier consent for a 14-storey mixed-use development.</p>

<p><img alt="First look: Urban Property Group unveils Newcastle’s next supertower at Wickham interchange" data-entity-type="file" data-entity-uuid="58a96dd9-407f-4d20-86b4-94e4bfeef74b" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/wickham%20podium.png?VersionId=LGlf08pdFGAZDzvx_CXC4XakHNZRuEE0" /></p>

<p>Designed by <a href="https://www.apartments.com.au/architects/sjb-architects">SJB</a>, the tower has been conceived as a landmark transit-oriented development anchored to the Newcastle Interchange precinct. The proposal includes 245 build-to-sell apartments across a mix of one, two, and three-bedroom residences, as well as two penthouses. Fifteen apartments and one operational unit are earmarked for NDIS housing. The co-living component would add a further 99 units, while the podium would accommodate retail uses and hotel facilities.</p>

<p>SJB said the site presents “a valuable opportunity to anchor the precinct by setting the standard for design, active ground planes and character at the key southern gateway.”</p>

<p>The architecture responds directly to the site’s position beside major transport infrastructure and within one of Newcastle’s fastest-evolving urban renewal precincts. The tower form sits above a sculpted podium designed to frame new public spaces, including a through-site pedestrian link connecting Station Street to Hannell Street, landscaped plazas, and activated retail edges.</p>

<p><img alt="First look: Urban Property Group unveils Newcastle’s next supertower at Wickham interchange" data-entity-type="file" data-entity-uuid="a7bd6ff0-f7db-4ce8-a6dc-ea56e72c6149" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/wickham%20lanne.png?VersionId=xzf39VADyhj7zBQY2I9fx9vI62u2tuSb" /></p>

<p>The design report describes the project as part of the broader transition of Wickham into “a vibrant, high-quality mixed-use urban precinct” that leverages proximity to the station, open space, and regional connectivity.</p>

<p>A detailed public art strategy has also been prepared for the development. The strategy positions the project as “a transit-oriented development of state significance at the gateway to Newcastle’s city centre” and outlines a series of integrated artworks responding to Newcastle’s industrial and transport heritage.</p>

<p>Creative Road’s curatorial framework for the project, titled Unveil, draws on “stratified surfaces, carved volumes, and light-filled apertures” while referencing Newcastle’s transformation from an industrial city into a contemporary education and technology hub.</p>

<p><img alt="First look: Urban Property Group unveils Newcastle’s next supertower at Wickham interchange" data-entity-type="file" data-entity-uuid="77a882bb-14b1-4d28-99ff-9438e39508c0" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/wickham%20site.png?VersionId=cevgo_vN0eKPK78P8YcEu3mKPLkpFqE7" /></p>

<p>The proposal is being advanced through the NSW Housing Delivery Authority pathway after being declared State Significant Development in June 2025. The accompanying scoping report states the development aims to “maximise the site’s proximity to the Newcastle Interchange by delivering transit-oriented development” while increasing housing supply and affordable housing provision within the Newcastle LGA.</p>

<p>Urban Property Group’s plans align with the long-term strategic vision established under the Wickham Master Plan, which identified the interchange precinct as suitable for substantial uplift in height and density. The current proposal would significantly intensify that vision, positioning the tower among the tallest developments proposed for Newcastle.</p>

<p>The site sits immediately north of the Newcastle Interchange, bounded by Dangar Street, Hannell Street, and Charles Street. It is surrounded by a rapidly growing cluster of residential towers and mixed-use projects that have emerged following the completion of the light rail and transport interchange.</p>


First look: Urban Property Group unveils Newcastle’s latest tower at Wickham interchange

<p>Bottega House has completed settlement of a landmark riverfront site in Macquarie Street, St Lucia, representing its first major Brisbane development.&nbsp;</p>

<p>Positioned on the banks of the Brisbane River, the <a href="https://www.apartments.com.au/new-apartments/180-macquarie-street-st-lucia-qld-4067">premium site at 180 Macquarie Street</a> features uninterrupted river frontage in one of Brisbane’s most tightly held residential precincts.&nbsp;</p>

<p>The proposed development, currently under assessment with Brisbane City Council, has been designed by <a href="https://www.apartments.com.au/architects/plus-studio">Plus Studio</a> with interiors by <a href="https://www.apartments.com.au/interior-designers/mim-design">Mim Design</a> and will deliver a boutique collection of premium residences positioned specifically for owner occupiers and downsizers.&nbsp;</p>

<p>The residences are set to redefine luxury apartment living in the area, with a focus on architectural quality, refined finishes, landscape integration and elevated amenities including curated wellness facilities, resort-style pools and recreation spaces rarely seen in the local market.&nbsp;</p>

<p>Exclusive sales for the project will be led by Keenan &amp; Byrne, ahead of an anticipated launch later this year.&nbsp;</p>

<p>Bottega House Managing Director Nick Malloch said the project reflects the group’s ambition to deliver a highly curated residential offering within one of Brisbane’s most tightly held precincts.&nbsp;</p>

<p>“This is an incredibly rare riverfront opportunity and one we have approached with a long-term perspective,” Malloch said.&nbsp;</p>

<p>“Our vision from the outset was to create a boutique collection of residences that feel more like private homes than traditional apartments, with generous proportions, refined finishes and exceptional amenity throughout."</p>

<p>Malloch says there is a&nbsp;lack of premium owner-occupier stock of this quality in the market, particularly for downsizers wanting space, privacy and a true lifestyle offering without compromise.&nbsp;</p>

<p>"Demand is expected to be strong given the scarcity of premium riverfront opportunities of this nature within Brisbane’s inner-west."&nbsp;</p>


Bottega House secures landmark riverfront site in St Lucia 

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<p data-end="157" data-start="0">The arrival of the first piling rig officially marks the commencement of construction at SIERA’s new beachside apartment development, Exhale, in Northcliffe.</p>

<p data-end="459" data-start="159"><a href="https://www.apartments.com.au/new-apartments/exhale-surfers-paradise-8-enderley-avenue-surfers-paradise-qld-4217">Exhale</a>, a glass-encased tower featuring 54 large-scale apartments at 8 Enderley Avenue, is SIERA’s third Gold Coast development. It follows the recently completed PIPIS Bilinga beachfront project, which achieved suburb-record prices, and the soon-to-be-completed Chevron Island development, Tapestry.</p>

<p data-end="459" data-start="159">[smartcode_project:default project_id=112661 project_image_fid=359603]</p>

<p data-end="651" data-start="461"><a href="https://www.apartments.com.au/developers/siera">SIERA</a> Founder and Managing Director Brent Thompson said the arrival of the piling rig represented a significant milestone for the development, which is scheduled for completion in late 2028.</p>

<p data-end="950" data-start="653">Over the next month, around 260 piles are expected to be installed as work progresses on the basement structure. The building is anticipated to rise above ground level early next year, before unveiling its sculptural glass curtain wall, developed in collaboration with specialist façade engineers.</p>

<p data-end="1081" data-start="952">“The façade was designed to maximise panoramic coastal views while creating a distinctive architectural identity,” Thompson said.</p>

<p data-end="1081" data-start="952">[smartcode_project:default project_id=112661 project_image_fid=355935]</p>

<p data-end="1307" data-start="1083">Designed by BDA Architecture, Exhale will comprise just 54 two- and three-bedroom residences across 26 levels, a level of low-density living rarely delivered in this beachside pocket between Surfers Paradise and Broadbeach.</p>

<p data-end="1522" data-start="1309">The project has been conceived as a resident-only building, with no short-stay accommodation permitted. SIERA says the model is intended to appeal to long-term owner-occupiers rather than transient holiday demand.</p>

<p data-end="1522" data-start="1309">[smartcode_project:default project_id=112661 project_image_fid=361052]</p>

<p data-end="1714" data-start="1524">Residences have been designed with large-format layouts and expansive glazing, with most apartments featuring more than 30 metres of glass frontage to maximise natural light and ocean views.</p>

<p data-end="1945" data-start="1716">The amenity offering spans two levels and centres on wellness and lifestyle, including a heated magnesium pool, sauna, yoga and Pilates studio, gymnasium, private dining facilities, cinema lounge, and dedicated surfcraft storage.</p>

<p data-end="1945" data-start="1716">[smartcode_project:default project_id=112661 project_image_fid=359607]</p>

<p data-end="2220" data-is-last-node="" data-is-only-node="" data-start="1947">More than half of the apartments have already sold. SIERA has also opened a sales gallery for Exhale at its Chevron Island commercial premises, near its Tapestry tower and the site of its second Chevron Island apartment development, which is slated to launch in early 2027.</p>
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<p>[smartcode_project_cta:default project_id=112661]</p>


SIERA kicks off construction at Northcliffe tower Exhale

<p data-end="320" data-start="79">Local Little Bay residents, along with buyers from premium postcodes across Sydney’s affluent Eastern Suburbs, have dominated purchases in developer-builder Urban Property Group’s first Eastern Suburbs apartment development, <a href="https://www.apartments.com.au/new-apartments/este-little-bay-jennifer-street-little-bay-nsw-2036">ESTE Little Bay</a>.</p>

<p data-end="638" data-start="322">The $250 million coastal project, one of the first new developments in the area in several years, has proven particularly popular with downsizers, especially those from Coogee and Bondi. One Double Bay downsizer paid $4.7 million for a four-bedroom penthouse, setting a new local apartment price record in the process.</p>

<p data-end="864" data-start="640">Buyers have been attracted to the combination of coastal tranquillity, premium design and amenity-rich neighbourhood living. The walkable village setting, along with proximity to three of Sydney’s leading golf courses, New South Wales Golf Club, St Michael’s Golf Club and The Coast Golf Club, has also been a key drawcard.</p>

<p>[smartcode_project:default project_id=112343 project_image_fid=352689]</p>

<p>Built across two low-rise buildings designed by <a href="https://www.apartments.com.au/architects/hill-thalis-architecture-urban-projects-pty-ltd">Hill Thalis</a> and set along a lush, landscaped green spine, designed by leading landscape architect <a href="https://www.apartments.com.au/landscape-architect/arcadia-landscape-architecture">Arcadia</a>, ESTE Little Bay offers a collection of one, two, three and four-bedroom residences with interiors by Richards Stanisich.</p>

<p><a href="https://www.apartments.com.au/developers/urban-property-group">Urban Property Group</a> Sales Director, Tom McIvor said the response to ESTE has been "nothing short of extraordinary."</p>

<p>“Buyers have been quick to recognise ESTE as a rare opportunity to invest in a coastal sanctuary that offers both seclusion and connectivity to the heart of Sydney,” McIvor said.</p>

<p>[smartcode_project:default project_id=112343 project_image_fid=352687]</p>

<p><a href="https://www.apartments.com.au/project-marketer/srm-residential">SRM Residential</a> Senior Director, <a href="https://www.apartments.com.au/project-marketer/srm-residential">Clayton Ross</a> said the local market has responded incredibly well, driven by ESTE’s exceptional location and the rarity it offers.</p>

<p>“We’ve seen strong interest from a variety of buyer groups, all of whom are drawn to the exclusivity and quality of the build and construction by the 4.5-star iCIRT-rated builder / developer, Urban Property Group. There’s truly nothing else like it along Sydney’s coastline.”</p>

<p>[smartcode_project:default project_id=112343 project_image_fid=352690]</p>

<p>The project also includes robust buyer protections, including Resilience Insurance’s Latent Defects Insurance, providing 10 years of structural cover, and an independent iCIRT-rating of the developer.</p>

<p>“The iCIRT-rating adds another layer of confidence,” Ross added. “Buyers see it as a safeguard for their investment and their lifestyle.” A highlight of ESTE’s offering is its exclusive wellness amenities, including a heated rooftop infinity pool and outdoor heated spa, a state-of-the-art Technogym fitness centre, and a sauna.</p>

<p><a href="https://www.apartments.com.au/new-apartments/este-little-bay-jennifer-street-little-bay-nsw-2036">ESTE Little Bay</a> is topped out and is on track to complete towards the end of 2026, with residents moving in before Christmas.</p>

<p>[smartcode_project_cta:default project_id=112343]</p>


Eastern Suburbs buyers snap up ESTE Little Bay apartments

Household Debt

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<p>GUEST OBSERVER </p>
<p>Expensive housing and high household debt leave Australian housing vulnerable. But without a recession or much higher interest rates a property crash is unlikely.</p>
<p>However, the surging supply of apartments and the continuing strength of the Sydney and Melbourne property markets pose an increasing risk. Average dwelling prices in these cities are likely to see another cyclical 5-10 percent price downswing around 2018, with unit prices in oversupplied areas likely to decline 15-20 percent.</p>
<p>The combination of high house prices, huge gains in Sydney and Melbourne, low rental yields and a coming surge in the supply of apartments mean property investors need to be careful. Best to focus on undersupplied, less loved parts of the property market. </p>
<p>Housing matters a lot in Australia. Having a house on a quarter acre block is part of the "Aussie dream". Housing is a popular investment destination. And the housing cycle is a key component of the economic cycle and closely connected to interest rate movements.</p>
<p>But in the last 15 years or so it has taken on a darker side as a surge in house prices that started in the late 1990s has led to poor affordability and gone hand in hand with surging household debt. Reflecting this, predictions of an imminent property crash bringing down the Australian economy have been repeated ad nauseam since 2003.</p>
<p>This note looks at the risks of a property crash, particularly given the rising supply of units, implications from the property cycle for economic growth and how investors should view it.</p>
<p>High house prices and high debt</p>
<p>The big picture view on Australian residential property is well known. First, Australian housing is expensive. According to the 2016 Demographia Housing Affordability Survey the median multiple of house prices in cities over 1 million people to household income is 6.4 times in Australia versus 3.7 in the US and 4.6 in the UK. In Sydney it’s 12.2 times and in Melbourne it’s 9.7 times.</p>
<p>The ratios of house price to incomes &amp; rents are at the high end of OECD countries and have been since 2003.</p>
<p>Second, the surge in home prices has gone hand in hand with a surge in household debt, which has taken Australia’s household debt to income ratio from the low end of OECD countries 25 years ago to now around the top. This can be seen in the next chart which shows the deviation in the house price to income ratio against its long term average for Australia against the ratio of household debt to income. The shift to overvaluation and high debt mostly occurred over the 1995-2005 period. </p>
<p><a href="/images/2016/10/13/Screen%20Shot%202016-10-13%20at%209.09.15%20AM.png" target="_blank">Click to enlarge</a></p>
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<p> <span><img src="/images/2016/10/13/Screen%20Shot%202016-10-13%20at%209.09.15%20AM.png" alt=""></span></p>
<p>How did it come to this?</p>
<p>While it’s common to look for scapegoats to blame for high home prices and debt the basic driver looks to be a combination of the shift from high to low interest rates over the last 20-30 years which has boosted borrowing and buying power and the inadequacy of a supply response (thanks to tight development controls, restrictive land release and lagging infrastructure) to suppress the resultant rise in the ratio of prices to incomes.</p>
<p>The following chart shows a cumulative shortfall of over 100,000 dwellings relative to underlying demand had built up by 2014. </p>
<p><a href="/images/2016/10/13/Screen%20Shot%202016-10-13%20at%209.11.08%20AM.png" target="_blank">Click to enlarge</a></p>
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<p>A home price crash remains unlikely</p>
<p>The surge in prices and debt has led many to conclude a crash is imminent. But we have heard that lots of times over the last 10-15 years. Several considerations suggest a crash is unlikely.</p>
<p>First, we have not seen a generalised oversupply and at the current rate we won’t go into oversupply until around 2017-18.</p>
<p>Second, despite talk of mortgage stress the reality is that debt interest payments relative to income are around 2004 levels.</p>
<p>Third, Australia has still not seen anything like the deterioration in lending standards seen in other countries prior to the GFC. In fact in recent years there has been a decline in low-doc loans and a reduction in loans with high loan to valuation ratios. </p>
<p><a href="/images/2016/10/13/Screen%20Shot%202016-10-13%20at%209.12.51%20AM.png" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2016/10/13/Screen%20Shot%202016-10-13%20at%209.12.51%20AM.png" alt=""></span></p>
<p>Finally, it is dangerous to generalise. While property prices have surged 60 percent and 40 percent over the last four years in Sydney and Melbourne, they have fallen in Perth to 2007 levels and have seen only moderate growth in the other capital cities.</p>
<p>But the risks on the unit supply front are a concern</p>
<p>To see a property crash - say a 20% plus average price fall - we probably need to see one or more of the following:</p>
<p>A recession – much higher unemployment could clearly cause debt servicing problems. This looks unlikely though.</p>
<p>A surge in interest rates – but rate hikes are unlikely until 2018 and the RBA knows households are more sensitive to higher rates so it’s very unlikely rates will reach past highs. </p>
<p>However, the risks on the supply front are clearly rising in relation to apartments where approvals to build more apartments are running at more than double normal levels. </p>
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<p><span>Due to the rising supply of units, vacancy rates are trending up </span><span>&amp; rents are stalling, making property investment less attractive.</span></p>
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<p><span>Outlook </span></p>
<p><span>Nationwide price falls are unlikely until the RBA starts to raise interest rates again and this is unlikely before 2018 at which point we are likely to see a 5% or so pullback in property prices as was seen in the 2009 &amp; 2011 down cycles. Anything worse would likely require much higher interest rates or recession both of which are unlikely. However, it’s dangerous to generalise: </span></p>
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<p><span>Sydney and Melbourne having seen the biggest gains are more at risk and so could fall 5-10% around 2018. </span></p>
<p><a href="/images/2016/10/13/Screen%20Shot%202016-10-13%20at%209.18.26%20AM.png" target="_blank"><span>Click to enlarge</span></a></p>
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<p><span>Price growth is likely to remain negative in Perth and Darwin as the mining boom continues to unwind but this should start to abate next year. </span></p>
<p><span></span><span>The other capitals are likely to see continued moderate growth and a less severe down cycle in or around 2018. </span></p>
<p><span></span><span>But units are at much greater risk given surging supply and this could see unit prices in parts of Sydney and Melbourne fall by 15-20% as investor interest fades as rents fall. </span></p>
<p><span>The property cycle and the economy </span></p>
<p><span>Slowing momentum in building approvals points to a slowdown in the dwelling construction cycle ahead. While this might be delayed into 2017 as the huge pipeline of work yet to be done is worked through, slowing dwelling investment combined with a slowing wealth affect from rising home prices mean that contribution to growth from the housing sector is likely to slow. However, as this is likely to coincide with a fading in the detraction from growth due to falling mining investment and c</span>ommodity prices it’s unlikely to drive a slowing in the economy. </p>
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<p><a href="/images/2016/10/13/Screen%20Shot%202016-10-13%20at%209.21.32%20AM.png" target="_blank"><span> Click to enlarge</span></a></p>
<p><span><img src="/images/2016/10/13/Screen%20Shot%202016-10-13%20at%209.21.32%20AM.png" alt=""></span></p>
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<p><span>However, a likely decline in rents (as the supply of units hits) will constraint inflation helping keep interest rates low for longer. </span></p>
<p><span>Implications for investors </span></p>
<p><span>There are several implications for investors:<br></span></p>
<p><span>Firstly, over the very long term residential property adjusted </span>for costs has provided a similar return to Australian shares.</p>
<p><span>Its low correlation with shares, lower volatility but lower </span>liquidity makes it a good portfolio diversifier with shares. So there is clearly a role for property in investors’ portfolios. </p>
<p><a href="/images/2016/10/13/Screen%20Shot%202016-10-13%20at%209.23.09%20AM.png" target="_blank">Click to enlarge</a></p>
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<p><span>Secondly, there remains a case to be cautious regarding housing as an investment destination for now. It is expensive on all metrics and offers very low income (rental) yields compared to other growth assets. This means a housing investor is more dependent on capital growth. </span></p>
<p><span></span><span>Thirdly, these comments relate to housing in aggregate and right now it’s dangerous to generalise. Apartments in parts of Sydney &amp; Melbourne are probably least attractive but for those who want to look around there are pockets of value. </span></p>
<p><span></span><span>Finally, investors need to allow for the fact that they likely already have a high exposure to Australian housing. As a share of household wealth its nearly 60%. Once allowance is made for exposure via Australian shares it’s even higher. </span></p>
<p><span><em><span><a href="https://www.propertyobserver.com.au/https://plus.google.com/110172465327488162875?rel=author" target="_blank">SHANE OLIVER</a></span> is head of investment strategy and economics and chief economist at <a href="https://www.ampcapital.com.au/home" target="_blank">AMP Capital</a> and is responsible for AMP Capital's diversified investment funds.</em></span></p>
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The Australian housing market - Shane Oliver on the surging unit supply, the economy and what it all means for investors

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<p>Sydney's higher house prices over the past four years has seen many households take on larger mortgages while remaining in their own home.</p>
<p>And it has been high-debt households that have increased their debt by more than low-debt households. </p>
<p>Research by the Australian Housing and Urban Research Institute (AHURI) has suggested the responsive of households to house price growth has been greatest among households with already higher levels of indebtedness.</p>
<p>"These households are the most vulnerable to income shocks, such as unemployment," the report warned.</p>
<p>They found that a $1,000 increase in house values prompted a $240 increase in household debt for home owners. A one percent increase in local house price growth was accompanied by a 0.3 percent decrease on household non-mortgage debt. </p>
<p>They warned the take-up of further mortgage debt exposed them to the risk of significant loss if house prices fall or if interest rates rise.</p>
<p>"This, in turn, may pose a systemic risk for the macroeconomy.</p>
<p>"An economic shock, emanating in either financial, labour or housing markets, may lead to widespread defaults that would cause the shock to spread across markets and threaten the performance of the economy," it said.</p>
<p>Their report noted a general belief in Australia that debt is held by those most able to service it, namely, higher-income and higher-wealth households. </p>
<p>Ofcourse the Organisation for Economic Cooperation and Development has long observed that Australia’s household debt ratios (debt divided by disposable income) are high by international standards.</p>
<p>In the mid-1990s, household debt was around 50 per cent of household disposable income.</p>
<p>This ratio rose to over 150 percent of income by 2007, with housing debt alone accounting for almost 90 percent of this, and has since remained constant.</p>
<p>In Australia we have not seen households reducing their debt burden as witnessed in other countries more severely affected by the GFC.</p>
<p>Instead when these households experienced increases in the value of their housing wealth, they have been quite likely to refinance from their relatively more expensive unsecured non-mortgage debt, by moving debt from credit card to home loan.</p>
<p>The debt escalation is possibly already adding to housing stress and resulting in less money being available for discretionary spending.</p>
<p>We know around 30 percent of home owners have no debt, but evidence on the relationship between house prices and debt is scarce.</p>
<p>There are always links between household debt and work life-cycle. </p>
<p>Any price movements in housing markets has the potential to either promote or dampen labour supply, according to the AHURI research paper, House prices, household debt and labour supply in Australia authored by Kadir Atalay, Garry Barrett and Rebecca Edwards. </p>
<p>Higher housing debt-to-income levels are associated with longer working hours especially for middle aged and older men along with for younger and older women.</p>
<p>But throw in the positive wealth effect of good house price growth and it leads to a reduction in labour supply for older women via early retirement and for young partnered men and women who move to carer activities.</p>
<p>Households typically smooth any fluctuations in current income by accumulating wealth. They achieve this by saving when income is relatively high and by drawing on that wealth when income is relatively low. Anticipated changes in wealth are built into consumption plans, but unemployment shocks aren't.</p>
<p>It was interesting to see more borrowers are falling behind on repayments, according to credit ratings agency Fitch this week.</p>
<p>Despite low interest rates, the appreciating housing market and falling unemployment, Fitch believes the worsening arrears may be due to the emerging trend of higher underemployment.</p>
<p><em>This article was first published in the Saturday Daily Telegraph.</em></p>
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Underemployment could be weak link in growing household debt

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<p><span>Australian households are saddled with more debt in relation to the size of the economy than any other country, according to a new report published by LF Economics.  </span></p>
<p><span>In a piece written for <em>The Guardian</em>, Philip Soos from LF Economics said Australia's household sector has accumulated massive unconsolidated debt compared with other countries and as of the third quarter of 2015 has become the world's most indebted household sector relative to GDP.</span></p>
<p><span>"Denmark long held this unholy accomplishment, but has been slowly deleveraging over the last several years as its housing bubble peaked and burst during the GFC," he said.</span></p>
<p><span>"The latest debt-financed boom in Sydney and Melbourne<a class=" u-underline" href="https://www.theguardian.com/australia-news/2015/jul/23/sydney-house-prices-jump-22-in-one-year-to-reach-1m-median-report-says" data-link-name="in body link" data-component="in-body-link"> </a>has resulted in Australia now overtaking Denmark, a comparison of official figures from Australia and Denmark has shown.</span></p>
<p><span>"Australia has around $2 trillion in unconsolidated household debt relative to $1.6 trillion in GDP. Australia’s ratio is 123.08%, while Denmark’s fell slightly to 122.99% in the third quarter of 2015, a marginal difference of 9 basis points. Although Denmark holds the record in terms of peak debt of 140.14% in the last quarter of 2009, as Australia continues to leverage and Denmark deleverages the current gap between the two will widen."</span></p>
<p><span>He said a</span><span style="line-height: 1.3em;">part from Switzerland, which with Denmark has a negative interest rate, no other country is close in terms of having such extreme household sector debts. </span><span style="line-height: 1.3em;">The UK ratio is 85.9% while in the US it is 79.1%.</span></p>
<p><a href="/images/2016/01/19/CYue0tBUsAADkVH.jpg-large.jpeg" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2016/01/19/CYue0tBUsAADkVH.jpg-large.jpeg" alt=""></span></p>
<p>Soos, <em>the co-author of Bubble Economics: Australian Land Speculation 1830-2013 and co-founder of <a class=" u-underline" href="https://www.lfeconomics.com/" data-link-name="in body link" data-component="in-body-link">LF Economics</a>, says o</em><span>ver the last two decades, Australia has been beset by rampant housing price inflation.</span></p>
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<span>"Since 1996, prices have outpaced fundamentals such as inflation, incomes, construction costs, rents and GDP, making it difficult for potential first home buyers to enter the market "</span><a class=" u-underline" href="https://www.theguardian.com/australia-news/2016/jan/14/melbourne-rent-hits-record-high-as-agents-report-high-demand" target="_blank" data-link-name="in body link" data-component="in-body-link">while lower income households and marginal groups struggle to afford decent shelter.</a>"</div>
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<p>He calculates between 1996 and 2015, housing prices (adjusted for inflation and quality) have boomed by 141%, "without a large and obvious downturn."</p>
<p>"Contrary to the analyses of the vested interests, the data clearly establishes Australia is in the midst of the largest housing bubble on record," he concludes.</p>
<p><span>"Only a couple of housing market metrics is needed to identify a bubble, and are now considered commonplace: nominal price to inflation, price to income and price to rent. </span></p>
<p><span>"On all three, Australia is both historically and internationally at or near the top."</span></p>
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po-LsXgBTHBmX

Soos in The Guardian: How Australian households became the most indebted in the world

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<div>The latest AMP.NATSEM Household Debt report showed that the average household debt in Australia has increased to a new high of $245,000, continuing a prolonged run-up which has seen the average debt per household increase by a factor four since 1988, up from $60,000.</div>
<div> </div>
<div>While the bulk of the rise in mortgage debt has been driven by 30 to 50 year olds, the over 65s cohort also accounts for a fair proportion of the increase in household debt, with more Australians than ever before taking liabilities into retirement.</div>
<div> </div>
<div>Despite this, the latest Australian National Accounts implied that interest serviceability has continued to become easier.</div>
<div> </div>
<div>There are a thousand possible ways to measure this, nine of which is satisfactory: the blue points on the chart below denote interest paid on dwellings as a percentage of total employee compensation minus income tax, while the red points show total interest paid inclusive of consumer debt (excluding unincorporated enterprises) as a percentage of gross household income.</div>
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<div><a href="/images/2015/12/14/Interest.jpg" target="_blank">Click to enlarge</a></div>
<div><img src="/images/2015/12/14/Interest.jpg" alt=""></div>
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<div>You could spend forever debating what should or should not be included in household income (imputed interest on dwellings, benefits receivable etc.) or backed out of gross household income (e.g. other taxes, transfers, insurance premiums etc.) but the results tend to be broadly similar. </div>
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<div>Of course the results generally appear to be "too low" due to the significant number of debt free households. The important thing to note is the trend, which shows that while the mining boom was in full swing the aggregate mortgage interest repayment burden was tending towards excruciating levels by September 2008 (when the official cash rate was still as high as 7 per cent). but since that time serviceability has become relatively speaking very easy.</div>
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<div><strong><span style="text-decoration: underline;">Buffers at record highs</span></strong></div>
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<div>The Reserve Bank of Australia (RBA) has noted in its Financial Stability Review that indicators of household financial stress are presently low, with households pushing ahead on repayments to the extent that aggregate mortgage buffers - as measured by balances in offset and redraw facilities - remain at around 16 per cent of outstanding loan balances, or the equivalent of well over two years of scheduled repayments at current interest rates. </div>
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<div><a href="/images/2015/12/14/Buffers.gif" target="_blank">Click to enlarge</a></div>
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<div>Loan arrears and mortage delinquencies data are also tracking at historically low levels, with favourable delinquency developments having cascaded lower since the 2008 book year. </div>
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<div>A crude comparison the aggregate interest paid to the total stock of outstanding housing credit implies that the average mortgage rate is well under 5 per cent, suggesting in turn that Australians have taken advantage of the very generous fixed rates available through 2015.</div>
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<strong><span style="text-decoration: underline;">The outlook</span></strong><br><br><div>The first chart above shows the sensitivity of household finances, and especially mortgage repayments, to the unpredictable changes in interest rates. Mortgage repayments are on average clearly very affordable now, but may not be so if interest rates rise sharply.</div>
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<div>The AMP.NATSEM report found that the highest typical debt repayment burdens are to be found in the outer suburbs of our capital cities.</div>
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<div>If interest rates were to rise by 2.5 percentage points - essentially the equivalent of ten interest rate hikes - then the most indebted households could see mortgage repayments rise from 42 per cent of household income to a stress-inducing 58 per cent, while perhaps unsurprisingly the most indebted low income households would be the hardest hit of all.</div>
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<div>An increase in interest rates of 2.5 percentage points would also see repayments for the typical first homebuyer rising from 21 per cent to 30 per cent of household income, or a shade over an extra $8,000 per year.</div>
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<div>There are few indications that the official cash rate is set to move materially higher any time soon, although shifts in capital requirements and funding costs may be another matter. </div>
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<div><strong><span style="text-decoration: underline;">Fragile markets</span></strong></div>
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<div>Unemployment rates have generally been trending down since January 2015, although unemployment rates in Western Australia and the Australian Capital Territory are in an uptrend, and the housing market in Darwin looks exceptionally fragile.</div>
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<div><a href="/images/2015/12/14/UERATE.jpg" target="_blank">Click to enlarge</a></div>
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<div>Although household financial stress is currently low, it seems likely that there will be some vulnerable housing markets in 2016, which may include;</div>
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<div>-resources regions and markets, with the terms of trade crunch likely to result in multiple mass lay-offs to add to the winding down of capital investment;</div>
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<div>-suburbs and sub-regions which are experiencing extensive over-building of apartments. particularly inner city high-rise stock, and those areas with already elevated and rising vacancy rates; </div>
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<div>-off-the-plan developments which will be adversely impacted by APRA's tougher deposit measures; and</div>
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<div>-outer suburban fringe locations in Sydney which saw a massive spike in investor activity and rapid price growth in 2015.</div>
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<div>I'd include a generic entry here for "mining towns", but many have been so utterly smashed already, leading to investor defaults and bankruptcies, since not only were prices unsustainable, so too were rents, and even tenancies. </div>
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<div><strong><span style="text-decoration: underline;">Auctions</span></strong></div>
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<div>Sydney's preliminary auction clearance rate rebounded a bit to 55.2 per cent this week, with outer suburban markets looking particularly dormant, The strongest auction market was a resurgent inner west, with a strong preliminary auction clearance rate of 74.6 per cent (<em>CoreLogic-RP Data</em>).</div>
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<div>This month's Labour Force data showed that New South Wales economy has generated a seasonally adjusted +176,000 jobs over the past year, for an outrageous employment growth rate of +4.9 per cent (trend +160,000 jobs, or +4.4 per cent). The Detailed Labour Force figures, which provide more colour by city, region and industry will be released on Thursday. So stay tuned for that and more this week. </div>
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<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
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