<p>Roseville is poised for a wave of new apartment development following the NSW Government's rezoning of land around Roseville Station under its Transport Oriented Development program.</p>

<p>The new planning controls have unlocked significant development potential within walking distance of the station, with a number of sites expected to be amalgamated and redeveloped in the coming years as developers seek to take advantage of the increased density allowances.</p>

<p>One of the more restrained developments in the precinct, and set among the first to be delivered having commenced well before the recent changes, is Hyecorp's Juliet. The boutique apartment project is already well under construction and remains on track to welcome residents by the end of the year, offering a markedly different proposition to many of the larger-scale developments now likely to emerge across the suburb.</p>

<p>[smartcode_project:default project_id=7395 project_image_fid=278194]</p>

<p><a href="https://www.apartments.com.au/new-apartments/juliet-roseville-64-pacific-highway-roseville-nsw-2069">Juliet</a> will comprise just&nbsp;34 one-, two-, and three-bedroom apartments opposite Roseville Station. For Hyecorp, which has delivered projects across Sydney's Lower North Shore for more than three decades, Roseville presented a rare opportunity to address a growing gap in the market.</p>

<p>"<a href="https://www.apartments.com.au/developments/roseville-nsw-2069">Roseville</a> has long been one of the North Shore's most tightly held and desirable suburbs, offering a unique combination of village charm, established greenery, excellent transport connections, and proximity to some of Sydney's best schools and lifestyle amenities," Hyecorp said.</p>

<p>"We recognised a growing demand from local homeowners seeking to downsize without leaving the community they have built their lives around. The location presented a rare opportunity to create homes that cater specifically to that buyer profile."</p>

<p>[smartcode_project:default project_id=7395 project_image_fid=278196]</p>

<p>The six-level development has been designed by <a href="https://www.apartments.com.au/architects/pbd-architects">PBD Architects</a> as a collection of residences that feel more like homes than apartments. The brief centred generous floorplans, abundant natural light, quality finishes, and strong connections to outdoor space.</p>

<p>PBD Architects drew inspiration from Roseville's established garden suburb character, creating a building that sits comfortably within its surroundings rather than dominating them. The architecture incorporates natural materials, soft forms, layered landscaping, expansive balconies, and generous setbacks to strengthen the connection between residents and the suburb's leafy environment.</p>

<p>"The focus was on designing spacious, house-like residences for discerning owner-occupiers and downsizers who wanted to remain on the North Shore without compromising on comfort, privacy, or design," PBD said.&nbsp;</p>

<p>"Every apartment was to feel considered, timeless, and highly functional."</p>

<p>[smartcode_project:default project_id=7395 project_image_fid=278195]</p>

<p>Inside, residences feature engineered timber flooring, stone kitchen benchtops and splashbacks, integrated Fisher &amp; Paykel appliances, ducted air conditioning, and large outdoor entertaining areas designed to take advantage of district and treetop views.</p>

<p>Residents will also have access to a rooftop barbecue and lounge area, alongside practical amenities including parcel lockers, EV charging capability, bicycle storage, a dog wash bay, and a basement car wash facility.</p>

<p>The majority of purchasers so far have been local owner-occupiers from Roseville, Lindfield, Chatswood, Killara, and the broader Upper North Shore, many of whom are transitioning from larger family homes.</p>

<p>"Buyers are looking for spacious, house-like apartments that allow them to downsize without feeling like they are sacrificing comfort or functionality," Hyecorp noted.</p>

<p>"They value large kitchens, generous living areas, ample storage, quality finishes, secure parking, lift access, and low-maintenance living."</p>

<p>[smartcode_project:default project_id=7395 project_image_fid=278204]</p>

<p>Juliet sits directly opposite Roseville Train Station and within walking distance of Roseville Village, while Chatswood's retail and dining precinct is only minutes away. The development is also surrounded by some of Sydney's most established schools, including Roseville College, Ravenswood, Pymble Ladies' College, and Knox Grammar, as well as nearby parklands and golf courses.</p>

<p>Juliet is currently more than 75 per cent sold ahead of its anticipated completion in late 2026.</p>

<p>[smartcode_project_cta:default project_id=7395]</p>


Joel Robinson

Juliet to sit quietly amid Roseville apartment boom

<p>Sherpa Property Group has unveiled the third instalment of its Flourish series, securing full approval for the two-tower, $500 million Flourish Soleira development in Palm Beach.</p>

<p><a href="https://www.apartments.com.au/new-apartments/flourish-soleira-1150-1154-gold-coast-highway-palm-beach-qld-4221">Flourish Soleira</a> will rise from a prominent site in the commercial heart of Palm Beach, the long-time home of Cash Converters and a range of local retailers.</p>

<p>The project will introduce a new retail and dining precinct at ground level, beneath 286 apartments.</p>

<p>[smartcode_project:default project_id=150017 project_image_fid=370959]</p>

<p>“We’re very committed to not only providing affordable residential offerings that are much needed in Palm Beach, but also delivering a vibrant new commercial heart that complements the extraordinary growth of the southern Gold Coast,” Sherpa Property Group founder Christie Leet said.</p>

<p>The development will sit under Sherpa's Flourish brand, which is aimed at providing a pathway into the beachside suburb for locals, first-home buyers and downsizers. In a move designed to assist first-home buyers entering the market, Sherpa has reserved all one and two-bedroom, one-bathroom apartments exclusively for eligible first-home buyers.</p>

<p>[smartcode_project:default project_id=150017 project_image_fid=370964]</p>

<p>“Our vision through Flourish is to create a vibrant retail and lifestyle focal point within the Palm Beach centre zone, delivering thriving communities underpinned by lifestyle-rich locations,” Leet said.</p>

<p>“So far, Flourish has been an incredible success, and we hope to carry this momentum as we progress the next two Flourish projects in Palm Beach.”</p>

<p>[smartcode_project:default project_id=150017 project_image_fid=371430]</p>

<p>Located across 1150-1164 Gold Coast Highway and 3 Sixth Avenue, the development will comprise two towers. The northern tower will deliver 154 apartments, while the southern tower will add a further 132 residences, helping address ongoing demand for new apartments in the tightly held coastal suburb.</p>

<p>Flourish Soleira will also feature the most extensive rooftop amenity offering ever delivered in Palm Beach.</p>

<p>The two towers will be connected by a skybridge, with residents gaining access to a rooftop recreation deck featuring a full-width swimming pool, hot and cold plunge pools, wellness spaces, a gymnasium, private dining facilities, massage treatment rooms, barbecue areas, a basketball court, golf simulator, indoor and outdoor dining spaces, sun lounges and extensive landscaping.</p>

<p>LPS Group is expected to start construction later this year.</p>

<p>Sherpa is already well advanced on construction of its debut Flourish project, Flourish Amargo, located just around the corner from Soleira. Meanwhile, Flourish Oasis, positioned opposite Amargo, recently commenced construction and has nearly sold out its collection of 47 apartments.</p>

<p>[smartcode_project_cta:default project_id=150017]</p>


Sherpa unveils $500m mixed-use Palm Beach precinct, Flourish Soleira

<p>Are mortgage holders set to get a reprieve from the RBA in 2026?</p>

<p>Big Four bank NAB believes so. They are now expecting the next move from the RBA to be a cut, rather than a hike, which they had pencilled in for August. They are unsure of the timing of the cut however, they note in their latest&nbsp;NAB Economics RBA Watch.</p>

<p>NAB Chief Economist, Dr Sally Auld, said recent data suggests the economy has lost momentum and the outlook for rates has shifted, noting that the broader economic backdrop has changed since earlier in the year.</p>

<p>“The next move in the cash rate is likely to be down, but the timing is uncertain," Dr Auld said.</p>

<p>"In February, growth was above trend, the economy was operating above capacity and there was uncertainty over the restrictiveness of rates. None of these conditions exist today,” she outlined.</p>

<p>Dr Auld said recent data pointed to softer momentum across the economy while acknowledging that at the same time, uncertainty remains a key feature of the outlook.</p>

<p>“Both Q1 GDP data and the NAB business survey suggest momentum in the economy has slowed, meaning that growth has likely peaked for the cycle. That said, we are cognisant there is still considerable uncertainty around the outlook, both with respect to activity and inflation.”</p>

<p>Dr Auld said inflation risks and labour market outcomes would be important to watch.</p>

<p>“On the prices side, we are still forecasting above target core inflation through to mid-2027. Margins will compress and weaker labour market outcomes are a risk.”</p>

<p>She said tighter financial conditions are expected to weigh on housing and activity.</p>

<p>“Tighter financial conditions will be reflected in a slowing in house price growth and housing credit growth. In summary, we have greater conviction that the next move in rates is down, but less conviction on the timing.”</p>


Mortgage relief? NAB forecasts RBA rate cut, not hike, after softer economic conditions

<p>A local downsizer has splashed $6.5 million on a penthouse in Perifa's Alex &amp; Willow development in Crows Nest.<br />
&nbsp;<br />
The purchaser sold their long-held family home in the area before embarking on a six-month search for the right apartment. After inspecting a range of options across the Lower North Shore, the buyer returned to <a href="https://www.apartments.com.au/new-apartments/alex-willow-crows-nest-82-90-alexander-street-crows-nest-nsw-2065">Alex &amp; Willow</a>.<br />
&nbsp;<br />
The buyer profile reflects the project’s broader purchaser mix. <a>Alex &amp; Willow</a> has attracted predominantly local downsizers looking to transition from larger homes without compromising on space or quality, alongside a smaller cohort of upsizers and investors drawn to the project’s location and design credentials.<br />
&nbsp;<br />
The milestone sale comes as the project, developed by&nbsp;<a href="https://www.apartments.com.au/developers/perifa">Perifa</a>&nbsp;and delivered by <a href="https://www.apartments.com.au/builders/versatile-made-construction">Versatile Construction</a>, both part of Versatile Group, reaches 60 per cent sold.</p>

<p>[smartcode_project:default project_id=6680 project_image_fid=371325]<br />
&nbsp;<br />
Eddie Mansour, Managing Partner of <a href="https://www.apartments.com.au/project-marketer/ray-white-projects">Ray White Projects</a>, said the result demonstrates not only a headline price but also depth of demand.<br />
&nbsp;<br />
“This is an exceptional outcome and a clear reflection of sustained buyer demand for premium, well-located downsizer product,” Mansour said.</p>

<p>“We’re seeing a consistent pattern of local homeowners selling family residences and reinvesting into high-quality apartments that allow them to remain within their community. Alex &amp; Willow has resonated strongly with this group because it offers genuine scale, thoughtful design and immediate proximity to the village.”<br />
&nbsp;<br />
The sale reflects a broader and consistent trend of local downsizers actively seeking high-quality, low-maintenance residences close to established village centres. Agents report that demand for this product type has remained resilient, particularly where developments offer a rare combination of scale, design quality and walkable amenity.<br />
&nbsp;&nbsp;<br />
Fabrizio Perilli, Managing Director of Perifa and Versatile Group, said the sale marks a defining moment for the project.<br />
&nbsp;<br />
“The penthouse sale is a strong endorsement of the quality we have delivered, alongside our partners, and the clear demand from local downsizers for premium, boutique residences in this location,” Perilli said.&nbsp;<br />
&nbsp;<br />
“Most importantly, we’re proud to see the Alex &amp; Willow community beginning to take shape. As we move closer to completion, we’re looking forward to welcoming residents and seeing the project come to life.”&nbsp;</p>

<p>[smartcode_project:default project_id=6680 project_image_fid=338516]<br />
&nbsp;<br />
Designed by <a href="https://www.apartments.com.au/architects/nettletontribe">Nettleton Tribe</a> with interiors by <a href="https://www.apartments.com.au/interior-designers/richards-stanisich">Richards Stanisich</a>, Alex &amp; Willow is a boutique collection of generously sized two- and three-bedroom residences in the heart of Crows Nest village.&nbsp;</p>

<p>Completion is slated for early 2027.</p>

<p>[smartcode_project_cta:default project_id=6680]</p>


Alex & Willow, Crows Nest penthouse sells off the plan for $6.5 million

<p>Fresh from launching the first stage of its Wollongong precinct, <a href="https://www.apartments.com.au/new-apartments/keira-place-wollongong-120-122-smith-street-wollongong-nsw-2500">Keira Place</a>, builder-developer Urban Property Group has unveiled plans for the next phase of the masterplanned community.</p>

<p>Now on public exhibition through the NSW Government's Housing Delivery Authority pathway is a State Significant Development Application for a further 657 homes on the prominent gateway site opposite Beaton Park.</p>

<p>The proposal comprises three buildings, including two build-to-sell towers rising 25 and 30 storeys, delivering 391 apartments, alongside a 12-storey co-living building with 266 residences, making it one of the largest co-living proposals currently planned in regional New South Wales.</p>

<p>Of the apartments proposed in the build-to-sell towers, the majority, 310, are two-bedroom dwellings. The balance comprises 44 one-bedroom apartments and 37 three-bedroom residences. Apartment sizes range from around 50 sqm for one-bedroom homes to approximately 90 sqm for three-bedroom apartments.</p>

<p><img alt="Smith St" data-entity-type="file" data-entity-uuid="19347059-1612-41a0-9c74-b86a657237f8" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-06-10%20at%2010.02.18%E2%80%AFAM.png?VersionId=sWXnaCcA.cIC6N8YT1dg5pJ2e1V3Z6z7" /></p>

<p>The submission says the proposal has evolved significantly from its original Housing Delivery Authority application following extensive consultation with the State Design Review Panel and Wollongong City Council.</p>

<p>The final scheme has been designed to align with the emerging vision for the Flinders Street Precinct, an area identified by Council as a future high-density mixed-use neighbourhood capable of accommodating substantial housing growth close to transport, employment and community infrastructure.</p>

<p>According to the design report prepared by COX Architecture, the development aims to "deliver a built outcome consistent with the future character of the Wollongong CBD while responding to the site's unique constraints and opportunities."</p>

<p>"Our vision for the next phase of the site evolution in Wollongong is grounded in three design pillars that guide the design response: place, natural environment and celebration," COX said.</p>

<p>"Inspired by its surroundings and grounded in the stories of place on Wodi Wodi Country, the design proposal acknowledges the established character of its setting while creating a unique and timeless identity that sits harmoniously within it.</p>

<p>"The design proposal responds to its specific site conditions, acknowledging the vegetation, climate, wind conditions and solar access of the site."</p>

<p>The architecture responds directly to the site's position between Wollongong's urban core and its natural landscape setting.</p>

<p>COX identified views towards Mount Keira and the Illawarra Escarpment as defining features of the site, while the upper levels of the towers will also capture expansive views across the city and out to the Pacific Ocean.</p>

<p>The design team has positioned the tallest buildings closer to the rail corridor, where overshadowing impacts can be better managed while establishing a landmark built form on the northern approach into the city.</p>

<p><img alt="Smith St" data-entity-type="file" data-entity-uuid="79580d5b-500c-4ebf-9629-797146a4a694" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-06-10%20at%209.51.59%E2%80%AFAM.png?VersionId=WbTB1EKSG.KDfsfz0F3wp1QVa2oCMGR5" /></p>

<p>Urban Property Group secured the 11,000 sqm Smith Street site in 2022 and has since progressed plans for the broader Keira Place precinct.</p>

<p>Construction recently commenced on the first stage of Keira Place, which will deliver 150 apartments across two residential buildings, including 27 affordable housing apartments and 18 specialist disability accommodation dwellings, alongside activated ground-floor retail and commercial space.</p>

<p>Urban Co-CEO Patrick Elias said the commencement of construction marked a significant milestone for Wollongong and reflected the developer's long-term commitment to regional cities.</p>

<p>"Today's groundbreaking is about turning approvals into homes and moving quickly to deliver much-needed housing in Wollongong's city centre," Elias said.</p>

<p>"Keira Place will provide a diverse mix of homes close to jobs, transport and services, while setting a high benchmark for quality, durability and consumer protection."</p>

<p><em>Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/groundbreaking-marks-start-of-construction-at-keira-place-in-wollongong-cbd">Groundbreaking marks start of construction at Keira Place in Wollongong CBD</a></em></p>

<p>&nbsp;</p>

<p>&nbsp;</p>

<p>&nbsp;</p>


Urban Property Group unveils trio of towers for next stage of new Wollongong precinct, Keira Place

Housing Boom

<html><body>
<p>Citi says its sees property prices falling by as much as 7 percent as the housing boom unwinds by 2018.</p>
<p>Lending curbs will hit and household debt will be lowered, according to Citi, with the hardest hit potentially being apartments in inner-city Brisbane and Melbourne.</p>
<p>The forecast from Citi came in a 47-page analysis addressing tighter lending standards, higher lending rates, reduced foreign investment and increased supply relative to demand.</p>
<p>Sentiment towards real estate compared with lowering debt had "soured" even before the latest efforts by the Australian Prudential Regulation Authority to rein in lending to investors, according to the Citi analysts.</p>
<p>"APRA's tightening measures probably contributed to the April prices result, but Easter and school holidays may also have contributed to the slowdown," the Citi analysts wrote.</p>
<p>"Given the stretched house price valuations in Sydney and Melbourne some correction would seem likely as supply continues to catch up to demand.</p>
<p>"The largest price falls would be higher rise, inner city apartments in Brisbane and Melbourne given their greater potential for oversupply.</p>
<p>"Either way, we aren't expecting large enough price falls to trigger a downturn in the economy, but the downside risks have risen as house prices and household debt have continued to increase briskly."</p>
<p>The Citi modelling advised if APRA succeeds "ultimately we see some mild deleveraging, there could be a partial correction in house prices during the course of the next two years.</p>
<p>"This would be the case even if population growth remained strong."</p>
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j.ballantyne1990-6AQqhLzZaK

Inner Melbourne and Brisbane to be hardest hit as Citi sees property prices falling 7 percent

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<p class="p1">GUEST OBSERVER</p>
<p class="p1">The continuing housing boom in Sydney and Melbourne has driven business confidence to a two year high in the latest <span class="s2"><em>National Survey of Building and Construction</em></span> for the March quarter 2017.</p>
<p class="p4"><span class="s1">But the most dominant picture emerging is of the growing disparity in activity and confidence between these markets and the rest of Australia. </span></p>
<p class="p4"><span class="s1">Western Australia's builders are doing it particularly tough with some Perth building businesses reporting that confidence is at its lowest in 30 years.</span></p>
<p class="p4">As we approach the May Federal Budget, this should reinforce to policy makers why 'sledgehammer' one-size-fits-all responses to housing affordability are extremely ill-advised. </p>
<p class="p4"><span class="s1">Overall, the residential building sector's record run has some way to go with the March quarter survey supporting an expectation of a high level of building activity to extend until the end of the year.   </span></p>
<p class="p4"><span class="s1">The survey also shows tentative signs of improvement for builders in the non-residential sector for the remainder of 2017 in line with expectations that the sector has reached the bottom of the cycle.</span></p>
<p class="p4"><span class="s1">Despite the non-residential activity index dipping below 50 and the national pipeline of non-residential work remaining unchanged, better approvals data supports a more positive outlook.</span></p>
<p class="p4"><span class="s1">Consistent with previous quarters, demand for labour continues to be dominated by the Sydney and Melbourne markets with pressures around availability of some trades reflecting conditions typical in a peaking cycle.</span></p>
<p class="p4"><span class="s1">But a new bright spot to emerge in the March quarter was the indication that the majority of South Australian builders intend to hire more staff in the next six months.</span></p>
<p class="p4"><span class="s1">It's a good sign for SA's builders and highlights the vital role the industry plays in building a stronger economy and stronger communitie</span></p>
<p class="p4"><em><span class="s1">Matthew Pollock, is national manager, housing, Master Builders Australia and can be contacted <a href="https://www.mbansw.asn.au" target="_blank">here</a>.</span></em></p>
<p><span class="s1"> </span></p>
<p class="p4"><span class="s1"> </span></p>
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jchancellor-FAypfDUnLy

Disparity in two speed housing market widens: Matthew Pollock

<html><body>
<div>
<p>The current housing boom won't come unstuck until 2018, according to SQM Research founder Louis Christopher.</p>
<p>He was described by the Australian Financial Review as "arguably the country's most accurate forecaster."</p>
<p>"It is now very likely it will be a strong start to the new year for Sydney and Melbourne, given the way 2016 ended," Mr Christopher said.</p>
<p>He listed four reasons for the likely coninued growth as the continued low interest rate environment, strong Sydney and Melbourne economies, continued strong population growth and the supply side of the housing market.</p>
<p>The SQM forecaster expects capital city house prices to rise between six and 10 per cent this year, led by double-digit price growth in Sydney, Melbourne and possibly Hobart.</p>
<p>There will be single-digit growth in the other capital cities, apart from Perth and Darwin where he anticipates continued further falls.</p>
<p>Christopher believes both Sydney and Melbourne's housing markets will be "dangerously overheated and overvalued" by 2018.</p>
<p>"The market will sustain its current momentum and rise again in 2017 – 2018 may be well another matter."</p>
</div>
<div>Over the past two years, his predictions on capital city house price growth have been roughly in line with the Australian Bureau of Statistics's Residential Property Price Index.</div>
<div>
<p>Mr Christopher believes a number of key macro factors will continue to push up prices this year.</p>
<p>These, he said, include the current low interest rate environment, continued strong population growth especially in Sydney and Melbourne and – until very recently – a weak response to the supply side of the housing market.</p>
</div>
<div>
<p>"We're getting around 90,000 new people coming to both Sydney and Melbourne every year.</p>
<p>"The Sydney and Melbourne economies have kept the country out of recession and there's a strong correlation between a city's economy and their housing market," Mr Christopher said.</p>
<p>His forecasts for 2017 are under a base case scenario of a steady economy, no changes to the cash rate, the Australian dollar hovering between 70¢ and 80¢ and no meddling in bank lending by the Australian Prudential Authority in the first six months of the year.</p>
</div>
<div>
<p>Christopher says if the Reserve Bank cuts the cash rate this year, then house price growth could be even greater. </p>
<p>SQM Research's Housing Boom and Bust Report, released in October 2015, forecast Australian dwelling prices to rise at between 3 and 8 per cent in 2016.</p>
<p>SQM forecast Sydney dwelling prices to rise by 4 to 9 per cent during 2016.</p>
<p>In Melbourne SQM's prediction of price growth was of 8 to 13 per cent.</p>
<p>Christopher acknowledges it was overly bullish on Brisbane, predicting growth of 5 to 8 per cent and was a bit too bearish on Canberra (2 to 4 per cent) but was quite accurate on its outlooks for Hobart (4 to 7 per cent) and Adelaide (2 to 5 per cent)</p>
<p>"It seems we did get most cities right and made the right call that Melbourne would be the out performer," Mr Christopher told the Australian Financial Review. "We copped a fair bit of stick over that one, particularly from the Macrobusiness guys who thought Melbourne would fall."</p>
</div>
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jonathanchancellor-7SQnKwU6yx

The four reasons why housing will boom again in 2017 in Melbourne and Sydney: SQM

<html><body>
<p>Australia was potentially on the cusp of a "dramatic and destabilising" end to the housing boom because of the apartments building boom, the Organisation for Economic Co-operation and Development has suggested.</p>
<p>In its latest assessment of the threats to the economy, the Paris-based think tank went into few details, but added jitters over the federal election policy are adding to risks.</p>
<p>Analysis of the OECD's latest report by the Australian Financial Review commented that the OECD had paradoxically simultaneously noted that risks of a property boom appeared to be receding which provided leeway for even more official interest rate cuts.</p>
<p>"Domestically, the unwinding of housing market tensions to date may presage dramatic and destabilising developments, rather than herald a soft landing," it said.</p>
<p>The warning is accompanied by graphs showing dwelling approvals retreating from a peak and house prices levelling out. </p>
<p>Australia’s entire economy was vulnerable to the continued commodity price plunge too, the OECD warned.</p>
<p>Suggesting that the strong economic growth of the first three months of the year will not be maintained, the OECD forecast growth for Australia of 2.6 per cent this year, down from the 3.1 per cent over the year to March.</p>
<p>“Australia’s exposure to commodity-market developments, par­ticularly those linked to the Chinese economy, remains an important source of uncertainty and risk,” the OECD says in its latest economic outlook.</p>
<p>“The unwinding of tensions in the housing market to date may presage dramatic and destabilising developments, rather than herald a soft landing,” it advised.</p>
<p>The OECD's two-page analysis calls for “close vigilance” of the heavily leveraged housing market and suggests Labor’s negative gearing proposal had created uncertainty.</p>
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OECD warns of dramatic end to housing boom

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<div class="section">
<div class="layoutArea">
<div class="column">
<p><span>GUEST OBSERVER</span></p>
<p><span>Australia's rebalancing act is well underway. Following the end of the mining boom, low interest rates and the lower AUD have supported a housing boom and, more recently, a strong pick-up in exports of tourism and education services. But challenges remain. </span></p>
<p><span>The housing boom is now cooling. Housing prices have levelled out over the past six months and building approvals have fallen over the past year. The end of the housing boom is set to weigh on growth, while the lift in housing debt, due to the boom, may increase the risks to financial stability, particularly as there has been a significant boost to housing supply. </span></p>
<p><span>We remain cautiously optimistic that the housing market will see a soft landing and that the lift in services exports will continue to create jobs, but there are risks around this central scenario. </span></p>
<p><span>Australia's mining investment boom peaked in 2012 and, since then, growth has needed to rebalance to being driven by something else. As regular readers will know, we have long been optimistic that this would occur. </span></p>
<p><span>The first stage of this process has been a housing price and construction boom. This has mostly been a positive story. By building more housing we have been working off an accumulated under supply of housing (Australia did not build many houses during the mining boom, which helped to keep wages and inflation contained during that episode). </span></p>
<p><span>But, as with all housing booms, they cannot continue indefinitely. If housing prices and construction continued to rise rapidly, there would eventually be a housing oversupply or a price bubble. There are now clear signs that Australia's housing market is cooling. Housing prices have tracked sideways since about October 2015, following previous double-digit growth. Sydney and Melbourne, where the housing boom has been centred, have seen flat housing prices in the past six months, following annual averages of 10 percent and 6 percent in the previous four years. The cooling has been driven by a collection of factors, including tighter prudential settings and the ramp up in new housing supply (which is meeting demand). </span></p>
<p><span>Our central case is for a soft landing. We see housing prices rising by 3-4 percent in 2016, following growth of 9 percent in 2015 (see </span><span>'Downunder Digest: Australia's housing market cools', 11 December 2015</span><span>). Housing construction is also expected to slow. Following a 0.5ppt contribution to GDP growth in 2015, housing construction is set to contribute about 0.2ppts to GDP growth in 2016 and to be a small drag on growth by 2017. </span></p>
<p><span>However, for the overall economy we expect this drag from housing construction to be offset by two key factors. First, services exports have been ramping up and we expect these to continue to contribute around 0.5ppts to GDP growth (see </span><span>'Downunder Digest: Services exports and the AUD', 30 March 2016</span><span>). Second, mining investment is set to be less of a drag on GDP growth in 2017, as the mining downturn matures. All up, we see the end of the housing boom as manageable, as the next stage of the rebalancing act sees growth transitioning to being led by the services sectors. </span></p>
<div class="page" title="Page 2">
<div class="layoutArea">
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<p><span>But this is the central case and there are clearly some risks to the 'housing soft landing' central scenario. Here we focus on three. First, stoking a housing boom has driven housing prices higher and led to an increase in the household debt to income ratio from 167 percent to 186 percent over the past four years. Higher debts may have increased the risks to financial stability. </span></p>
<p><span>Second, there has also been a substantial ramp up in housing construction, particularly on apartments in the major cities, and there is a risk of over-supply in some of these markets. Third, and importantly, our central case assumes continued household income growth, supported by job creation in the services sectors, which helps to make the higher debts sustainable. A negative shock to income growth, most likely emanating from overseas, is a risk to the central scenario. </span></p>
<p><span>For each of the risks, there are also a number of mitigating factors. On the first risk, of higher housing prices and debts, our view remains that it is the allocation of debt that matters, not the absolute levels (see </span><span>'Downunder Digest: Australia's household debt: why we are not worried', 21 November 2013</span><span>). As long as the households that have taken on the debt can continue to service it, the debt is sustainable. In Australia's case, we believe the debt is fairly well allocated. In Australia there are no sub-prime loans, all loans are full-recourse, lending standards have been tightening recently, the bulk of the debt is held by higher income households and the average mortgage is over two years pre-paid, leaving many households with significant equity to withdraw if required. </span></p>
<p><span>On the second risk, of housing oversupply, our estimates show that this is not the national story, even though there are some clear pockets of over-building (see </span><span>'Downunder Digest: Australia's housing supply ramp up', 9 September 2015</span><span>). </span></p>
<p><span>In Sydney, where housing prices have risen by the most, our estimates suggest that there is still undersupply, which is likely to keep prices from falling.</span></p>
<p><span> In Melbourne, the apartment market appears oversupplied, but the detached housing market does not. For apartments, some have also been bought by foreign buyers with the likely intention to hold for a long period, as a store of value, rather than for speculation. In Perth and Brisbane there are some signs of oversupply of apartments, but not of detached dwellings. Neither of these markets has seen much housing price appreciation in recent years, potentially limiting the downside. </span></p>
<p><span>The third risk, of a fall in household incomes, is the hardest to guard against. Here, Australia fares comparatively well, but is not in as good shape as it was when the global financial crisis struck in 2008. The RBA still has a cash rate at 2.00 percent, which gives it room to cut further and government net debt is low, at 18 percent of GDP, giving the fiscal authorities more room to move than other countries. However, by comparison, the cash rate was 7.25 percent in mid-2008 and the government had a net asset position of 4 percent of GDP. </span></p>
<p><span>Finally, it is worth considering the appropriate policy response to these risks. In terms of financial stability, the prudential regulator is continuing to tighten standards to making the banking system 'unquestionably strong'. This has included raising bank capital requirements. This should help to further protect Australia's financial system. </span></p>
<p><span>In terms of protecting against weaker demand, the central bank could still cut its cash rate further (our central case is for a cut in Q2, partly to ensure the AUD remain competitive). A lower AUD (rather than one that is rising, as it has been recently), would also be helpful, as it would help to improve competitiveness and support jobs growth in the export industries. </span></p>
<p><span>Fiscal authorities could also help to support growth by further reform to support productivity growth and well-planned infrastructure investment, which would support demand and also improve productivity. We remain optimistic about Australia's growth outlook, but, as always, there remain risks to the central view. </span></p>
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<p><span><em><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. </em></span></p>
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Navigating the end of the housing boom: HSBC's Paul Bloxham

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<div>Given the weak state of other sectors of the economy, the Retail Trade figures for the month and the June quarter took on an added significance.</div>
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<div>In this context, especially given soft wages and slowing population growth, the June data was happily very good.</div>
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<div>In seasonally adjusted terms retail turnover was up by 0.7 per cent for the month leading to a strong annual result to June 2015 as charted below.</div>
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<div><a href="https://2.bp.blogspot.com/-rivhiKoFaUo/VcHqnRk1RpI/AAAAAAAAXXg/LMg9AYRe9MU/s1600/RT1.jpg" target="_blank">Click to enlarge</a></div>
<br><div class="separator"><a href="https://2.bp.blogspot.com/-rivhiKoFaUo/VcHqnRk1RpI/AAAAAAAAXXg/LMg9AYRe9MU/s1600/RT1.jpg"><img src="https://2.bp.blogspot.com/-rivhiKoFaUo/VcHqnRk1RpI/AAAAAAAAXXg/LMg9AYRe9MU/s640/RT1.jpg" width="640" height="272"></a></div>
<br><strong><span style="text-decoration: underline;">State versus state</span></strong><br><br><div>At the state level the impact of Sydney's housing boom and to a lesser extent that of Melbourne is evident with retail turnover rising very strongly in New South Wales and Victoria.</div>
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<div><a href="https://4.bp.blogspot.com/-shpWGnWcZqo/VcHqoDxbUTI/AAAAAAAAXXw/BQGk6eE1D-Q/s1600/rt2.jpg" target="_blank">Click to enlarge</a></div>
<br><div class="separator"><a href="https://4.bp.blogspot.com/-shpWGnWcZqo/VcHqoDxbUTI/AAAAAAAAXXw/BQGk6eE1D-Q/s1600/rt2.jpg"><img src="https://4.bp.blogspot.com/-shpWGnWcZqo/VcHqoDxbUTI/AAAAAAAAXXw/BQGk6eE1D-Q/s640/rt2.jpg" width="640" height="270"></a></div>
<br><div>Perhaps more surprisingly, in turnover terms retail appears to have fired up a little elsewhere too, particularly in South Australia. </div>
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<div><a href="https://2.bp.blogspot.com/-KN4Bjh9HqmY/VcHqoHUFBvI/AAAAAAAAXXs/GoRQd1PsoJk/s1600/rt3.jpg" target="_blank">Click to enlarge</a></div>
<br><div class="separator"><a href="https://2.bp.blogspot.com/-KN4Bjh9HqmY/VcHqoHUFBvI/AAAAAAAAXXs/GoRQd1PsoJk/s1600/rt3.jpg"><img src="https://2.bp.blogspot.com/-KN4Bjh9HqmY/VcHqoHUFBvI/AAAAAAAAXXs/GoRQd1PsoJk/s640/rt3.jpg" width="640" height="272"></a></div>
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<strong><span style="text-decoration: underline;">Industry groups</span></strong><br><div class="separator"> </div>
<div class="separator">It has been a relatively poor time for department stores retailing, perhaps reflective of increasing demand in the online shopping space.</div>
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<div class="separator">The big winner over the past year has been household goods with retail turnover pumped up by the housing prices and construction boom.</div>
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<div class="separator"><a href="https://3.bp.blogspot.com/-GEggBGfpMgY/VcHqnWJRVaI/AAAAAAAAXXc/wTRwGxQsAHg/s1600/Rt5.jpg" target="_blank">Click to enlarge</a></div>
<br><div class="separator"><a href="https://3.bp.blogspot.com/-GEggBGfpMgY/VcHqnWJRVaI/AAAAAAAAXXc/wTRwGxQsAHg/s1600/Rt5.jpg"><img src="https://3.bp.blogspot.com/-GEggBGfpMgY/VcHqnWJRVaI/AAAAAAAAXXc/wTRwGxQsAHg/s640/Rt5.jpg" width="640" height="270"></a></div>
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<span><span>Cafés</span>, restaurants </span>and takeaway expenditure has also continued to rise relentlessly over the past year, a trend which has been ongoing over the past decade, another shift which feeds off increased apartment dwelling.</div>
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<div class="post-body entry-content"><a href="https://2.bp.blogspot.com/-YJLrK-Q2toQ/VcHqnU2X9ZI/AAAAAAAAXXk/X8z5SQvVElQ/s1600/Rt6.jpg" target="_blank">Click to enlarge</a></div>
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<br><div class="separator"><a href="https://2.bp.blogspot.com/-YJLrK-Q2toQ/VcHqnU2X9ZI/AAAAAAAAXXk/X8z5SQvVElQ/s1600/Rt6.jpg"><img src="https://2.bp.blogspot.com/-YJLrK-Q2toQ/VcHqnU2X9ZI/AAAAAAAAXXk/X8z5SQvVElQ/s640/Rt6.jpg" width="640" height="280"></a></div>
<br><strong><span style="text-decoration: underline;">National accounts for Q2</span></strong><br><br><div>With June being the last month of the second quarter we also got the turnover figures reported in volume terms, which threw out an excellent result.</div>
<br><div>Retail volumes doubled market expectations to be up by 0.8 per cent for the quarter and 3.6 per cent for the year. </div>
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<div><a href="https://1.bp.blogspot.com/-1ZDz1D5_n4Q/VcHqoYIc3SI/AAAAAAAAXX0/4srRCHtdALo/s1600/rt4.jpg" target="_blank">Click to enlarge</a></div>
<br><a href="https://1.bp.blogspot.com/-1ZDz1D5_n4Q/VcHqoYIc3SI/AAAAAAAAXX0/4srRCHtdALo/s1600/rt4.jpg"><img src="https://1.bp.blogspot.com/-1ZDz1D5_n4Q/VcHqoYIc3SI/AAAAAAAAXX0/4srRCHtdALo/s640/rt4.jpg" width="640" height="286"></a><br><br><div>I used to do a chart here on quarterly volumes at the state level, but to be frank it's a Sunday morning and believe it or not I actually have better things to do!</div>
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<div>Suffice to say that New South Wales (+4.6 per cent) and Victoria (+4.4 per cent) have been the retail trade linchpins over the year to June 2015.</div>
<br>This is a very notable result given that net exports (which have contributed significantly to GDP over the past year) will evidently not been doing so in the second quarter.<br><br>I looked at how Australia racked up a record trade deficit for the second quarter in a little more detail here.<br><br><strong><span style="text-decoration: underline;">The wrap</span></strong><br><div> </div>
<div>Overall this was a really good result for retail trade in the second quarter.</div>
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<div>And although the retail trade data is not necessarily representative of all household consumption this suggests that GDP for the second quarter will be held up by the strong capital city economies.</div>
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<div>Lately various surveys have hinted at gradually improving business conditions and confidence - and jobs growth has been strong over the past year at +233,600, particularly so in Sydney.</div>
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<div>On the other hand capital expenditure surveys have pointed towards very weak business investment.</div>
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<br>In that context, it is important that household consumption continues to produce sound results.</div>
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<div>The other contributor to a surprisingly upbeat GDP print in the first quarter (ex-inventories) was that of new housing, with the dwelling construction boom expected to continue over the next couple of years.</div>
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<div><a href="https://3.bp.blogspot.com/-y0n0iSGst2w/VW7aRC8nfwI/AAAAAAAAV1A/jrn7C21AbNY/s640/gdp6.jpg" target="_blank">Click to enlarge</a></div>
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<div><img src="https://3.bp.blogspot.com/-y0n0iSGst2w/VW7aRC8nfwI/AAAAAAAAV1A/jrn7C21AbNY/s640/gdp6.jpg" width="640" height="275"></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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