A landmark former orphanage site in Surrey Hills could be transformed into a new residential community under plans lodged by <a href="https://www.apartments.com.au/developers/antipodean-land-developments">Antipodean Land Developments</a> that would deliver 76 apartments and townhouses while restoring some of the suburb's most significant heritage buildings.

The burgeoninng Melbourne-based developer has submitted plans for the 9,158 sqm site at 1 Kent Road and 24 Durham Road, home to the former St Joseph's Home for Destitute Children, a historic institutional complex dating back to the late 19th century. The proposal seeks to adaptively reuse several heritage buildings while introducing two new four-storey residential buildings set within extensive landscaped grounds.

Designed by <a href="https://www.apartments.com.au/architects/woods-bagot">Woods Bagot</a> and Kerstin Thompson Architects, the project has been conceived as a contemporary residential village embedded within a restored heritage precinct. The development team describes the design approach as "The Village in the Garden," with new buildings positioned among mature landscaping by OCULUS and significant heritage structures.

<img alt="First look: Antipodean Land Developments plans heritage-led apartment community in Surrey Hills" data-entity-type="file" data-entity-uuid="44ec8c1b-c0b6-44ae-859e-5811b3e6a023" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Untitled%20design%20%281%29.png?VersionId=p.p1_KFh4iQoV4nisdnPfQBAsWNi7m79" />

The proposal would deliver 76 dwellings comprising a mix of apartments and duplex-style residences, significantly increasing housing supply on one of the largest privately held residential landholdings in Surrey Hills. The development includes 127 car spaces, 24 bicycle spaces and more than 1,000 sqm of communal amenity, with the existing chapel building earmarked for conversion into resident facilities.

According to the planning submission, the project centres on the restoration and adaptive reuse of the site's most significant heritage assets, including the original c.1889 St Joseph's building, the chapel designed by architect Augustus Andrew Fritsch, and the historic brick perimeter walls and entry gates. The proposal also incorporates the retention of other contributory buildings including the former infirmary and school building.

Tract Consultants, in the planning report accompanying the application, said the scheme had been shaped through extensive heritage analysis and design development.

"The shared vision for the Site by the project team has culminated in a scheme which successfully breathes life back into a historic site while delivering upon the objectives of Victoria's Housing Statement in a carefully curated and contextually responsive manner."

<img alt="First look: Antipodean Land Developments plans heritage-led apartment community in Surrey Hills" data-entity-type="file" data-entity-uuid="7263b7d8-95ea-400f-9531-6ca7d22c3c33" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Untitled%20design%20%282%29.png?VersionId=4cR1tiWOsDpgxEOwZi5vVFcyvvOsYkIE" />

The proposal is being assessed under Victoria's Significant Residential Development with Affordable Housing pathway. As part of the application, three per cent of the project's residential development cost would be contributed to the Social Housing Growth Fund. The development would also provide a diverse mix of one, two and three-bedroom residences targeting a broader range of buyers than typically found in Surrey Hills' detached housing market.

Sustainability initiatives include an anticipated 66 per cent BESS score, natural cross-ventilation to 80 per cent of apartments, 28 per cent deep soil landscaping and a canopy cover outcome exceeding local planning requirements. The proposal also sets aside more than 1,083 sqm for communal indoor and outdoor resident amenity spaces.

<img alt="First look: Antipodean Land Developments plans heritage-led apartment community in Surrey Hills" data-entity-type="file" data-entity-uuid="33fad46f-fe26-4d0a-acfd-6b776e1c6a3d" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Untitled%20design.png?VersionId=D9F6WVSyYCtGvSUmith35LRp6R7PQkw_" />

Planning documents describe the property as one of the largest underutilised residential sites in Surrey Hills, arguing it presents a rare opportunity to introduce "missing middle" housing in an established inner-eastern suburb while preserving and revitalising a significant heritage precinct.

Antipodean Land Developments has built a reputation for design-focused residential projects across Melbourne, particularly in the medium-density sector. Previous developments include Neighbourhood in Brunswick East, delivered with Breathe Architecture, and Balfe Park Lane, designed by Kerstin Thompson Architects.

They've been very active in site acquisition as they build out their future development pipeline. They recently launched Thornubury House, 45 apartments above a mix of commercial, retail, and food and beverage tenancies, and have plans for a boutique project in Fitzroy and another <a href="https://www.apartments.com.au/news/vic/antipodean-plan-apartments-for-deepdenes-missing-middle-on-whitehorse-road">"missing middle" project</a> on Deepdene's Whitehorse Road.

Joel Robinson

First look: Antipodean Land Developments plans heritage-led apartment community in Surrey Hills

Developer <a href="https://www.apartments.com.au/developers/auyin-property-development">Auyin</a> is the latest to turn to the Victorian Government's Development Facilitation Program in an effort to secure approval for its long-planned, mixed-use project in Elsternwick.

In 2018, Auyin lodged plans with Glen Eira City Council for a 14-storey building, however Council approved a reduced eight-storey scheme. A subsequent VCAT appeal in 2019 upheld the eight-storey height limit.

The project was later amended to nine storeys, but Auyin is now seeking to revive something closer to its original vision. The developer argues that the planning context has evolved significantly over the past decade, particularly within the Elsternwick Activity Centre, where higher-density development has increasingly been encouraged along Glen Huntly Road.

The proposal would transform the 1,239 sqm site at <a href="https://www.apartments.com.au/new-apartments/7-12-horne-street-elsternwick-vic-3185">7-15 Horne Street</a>, opposite Elsternwick Railway Station, into a 13-storey residential and retail development designed by CBG Architects, with 40 apartments

The site currently comprises three commercial properties.

<img alt="First look: 13-storey mixed-use tower planned for Elsternwick activity centre" data-entity-type="file" data-entity-uuid="5f465dd4-509b-4082-a669-0253b313914b" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/elsternwick%20podium.png?VersionId=72frWi0SmQ5AVJ3ARRhX5ILUYObhTm7x" />

The proposed apartment mix comprises 25 two-bedroom and 15 three-bedroom residences above 200 sqm of retail space at ground level. Residents would have access to a 90 sqm wellness facility, a 351 sqm communal indoor and outdoor terrace on the third level, and extensive landscaped areas throughout the development. A publicly accessible 135 sqm plaza would be created on the north-east corner of the site, providing seating, landscaping, and a new gathering space adjoining Horne Street.

The design adopts a four-storey podium that references the finer-grain character of the surrounding streetscape, with the upper tower recessed behind generous setbacks on all boundaries.

<img alt="First look: 13-storey mixed-use tower planned for Elsternwick activity centre" data-entity-type="file" data-entity-uuid="e637e763-2abc-4c34-a0aa-5c7ad36fae18" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/elsternwick%20open.png?VersionId=J1AoOpZgTyaF.KeeFSX6lMjEScX8KKRi" />

A key element of the proposal is the reconfiguration and widening of the surrounding laneways. Vehicle access would be retained from Lois Lane, with upgraded pedestrian connections linking Ross Street and Horne Street. The development would provide 58 residential car spaces, two retail car spaces, and 52 bicycle spaces across two basement levels and ground-floor facilities.

Architecturally, the building draws inspiration from the established character of Elsternwick Village. The façade combines dark charcoal brickwork, textured concrete, bronze-toned metal detailing, and extensive planting integrated into podium and tower levels. The design also incorporates a chamfered corner treatment and publicly accessible plaza intended to strengthen pedestrian activity around the station precinct.

Elsternwick's last new development completion was&nbsp;EVA Elsternwick by Pitard late last year. <a href="https://www.apartments.com.au/developers/milieu-property">Milieu</a> is working away on its nature-led neighbourhood, <a href="https://www.apartments.com.au/new-apartments/elsternwick-gardens-by-milieu-8-gordon-street-elsternwick-vic-3185">Elsternwick Gardens</a>, on Gordon Street, with its first stage expected to complete next year.

First look: Auyin seeks mixed-use apartment project in growing Elsternwick Activity Centre

<a href="https://www.apartments.com.au/new-apartments/otium-parkdale-123-125-como-parade-east-parkdale-vic-3195">Otium Parkdale</a>, the 13-residence boutique development by&nbsp;<a href="https://www.apartments.com.au/developers/huxtable-property">Huxtable Property</a>, has entered its final stages of delivery, with completion expected within the coming month and more than half of the residences sold.

The Como Parade East project is nearing the finish line at a time when opportunities to purchase new apartments in <a href="https://www.apartments.com.au/developments/parkdale-vic-3195">Parkdale</a> remain exceptionally limited. Fewer than 10 per cent of dwellings in the bayside suburb are apartments, making developments like Otium a relatively rare addition to a market traditionally dominated by detached housing.

[smartcode_project:default project_id=134974 project_image_fid=5427]

The three-level development comprises 13 residences, including ten two-bedroom apartments and three larger three-bedroom homes, all positioned above a secure basement car park.

Designed by <a href="https://www.apartments.com.au/architects/almeida-architects">Almeida Architects</a> with a strong connection to its coastal surroundings, Otium combines red brick, exposed concrete and dark metal detailing with integrated landscaping and greenery. Expansive glazing, generous balconies and terraces have been incorporated throughout the design to maximise natural light and reinforce indoor-outdoor living.

Inside, the residences feature engineered European oak flooring, natural and reconstituted stone benchtops, Bosch kitchen appliances, ducted heating and cooling, lift access and secure entry systems. The larger three-bedroom residences on the upper level have been designed with house-like proportions, while the two-bedroom apartments prioritise functionality, flexibility and low-maintenance living.

[smartcode_project:default project_id=134974 project_image_fid=5421]

The project is now in its final stages, with <a href="https://www.apartments.com.au/builders/labco">Labco</a> completing the remaining landscaping and external finishing works following the completion of the residences' interiors.

Otium's location within the heart of Parkdale continues to underpin its appeal. Residents will be just steps from local cafés, restaurants, shops and the newly elevated Parkdale Station, while the beach is less than a kilometre away.

With the project tracking ahead of schedule, buyers can currently secure a residence with a five per cent deposit and benefit from settlement terms of up to eight months. The advanced stage of construction also provides buyers with the opportunity to walk through the near-complete residences and experience the quality and finishes firsthand ahead of completion.

[smartcode_project_cta:default project_id=134974]

Otium Parkdale enters final month before completion as rare apartment opportunity nears sellout

A new boutique apartment development is entering the market in <a href="https://www.apartments.com.au/developments/chermside-qld-4032">Chermside</a>, with Brisbane-based developer <a href="https://www.apartments.com.au/developers/ausdev">Ausdev</a> bringing 33 residences to a well-connected pocket of Brisbane's north.

<a href="https://www.apartments.com.au/new-apartments/parkdrive-apartments-chermside-25-sammells-drive-chermside-qld-4032">Parkdrive Apartments</a>, at 25 Sammells Drive, will comprise a mix of one- and two-bedroom residences positioned within walking distance of Westfield Chermside, The Prince Charles Hospital, and Bradbury Park.

Established in 1989, Ausdev has a long-standing presence across both development and construction, with Parkdrive Apartments representing its latest residential project in Brisbane's northern suburbs.

[smartcode_project:default project_id=152125 project_image_fid=363778]

The development has been designed around open-plan living and natural light, with residences featuring stone benchtops, timber cabinetry, BOSCH appliances, and private balconies that extend the living areas outdoors.

Kitchens are positioned as the centrepiece of the homes, incorporating natural material palettes and integrated appliances, while bathrooms have been designed with a focus on functionality and understated finishes.

Residents will have access to a communal barbecue and entertaining area on Level 3, providing shared outdoor space within the development. Secure parking and lift access are also incorporated into the building.

The project will deliver a limited collection of 33 apartments, with one-bedroom residences priced from $749,000.

[smartcode_project:default project_id=152125 project_image_fid=363782]

Beyond the building itself, the location places residents within easy reach of several of Chermside's key amenities. Bradbury Park is around 350 metres away, while Westfield Chermside is approximately 1.3 kilometres from the site. The Prince Charles Hospital is located within 750 metres, and the Chermside Bus Interchange is around 1.5 kilometres away, providing connections across Brisbane.

Parkdrive Apartments adds to the growing residential pipeline in Chermside, a suburb that continues to evolve as a major retail, healthcare, and transport hub for Brisbane's north.

[smartcode_project_cta:default project_id=152125]

Ausdev introduces boutique Parkdrive Apartments to Chermside's growing centre

<a href="https://www.apartments.com.au/developers/skymark-group">Skymark</a>'s boutique Cronulla development Solis has secured a 10-year Latent Defects Insurance policy through Resilience Insurance, providing buyers of the 16-residence building on Ewos Parade with structural and waterproofing protection that extends a decade beyond the building's completion.

Currently under construction and due for completion in late 2027, <a href="https://www.apartments.com.au/new-apartments/solis-cronulla-8-ewos-parade-cronulla-nsw-2230">Solis</a> is one of a small number of new developments in the Sutherland Shire to carry Resilience LDI coverage, a distinction that carries increasing weight as buyer confidence in the off-the-plan sector continues to be shaped by how developers stand behind their product.

Latent Defects Insurance, which entered the Australian market in 2022 when Resilience Insurance was approved to offer the cover, protects buyers against major structural or waterproofing defects for ten years post-completion. Unlike traditional statutory warranties, it operates as a first-resort policy, if a covered defect arises, the insurer responds directly, without the buyer needing to pursue the builder or developer through a lengthy claims process.

Resilience Insurance CEO Corey Nugent has noted that the product addresses something fundamental to the new apartment market.

"The overarching feedback from prospective buyers in the new development space is that they want more confidence and assurances around the quality of the build," Nugent says.

"Resilience Insurance Latent Defects Insurance not only gives them complete peace of mind for 10 years, but it shows the developer they are buying from is standing by their product."

[smartcode_project:default project_id=150499 project_image_fid=370898]

For Solis, the Resilience LDI policy adds a meaningful layer of accountability to an already considered project. The development comprises nine two-bedroom and seven three-bedroom residences, including one dual-level three-bedroom apartment, across a five-storey building on Ewos Parade, positioned between Shelly Beach and South Cronulla.

Garden apartments connect directly to private landscaped courtyards, while upper-level homes capture beach views to the east from level four and above.&nbsp;

All 16 residences include at least one balcony or courtyard, and select apartments on the upper floors feature bar areas and secondary flexible living spaces.

Hiba Sander, Managing Director of Skymark, says Solis offers a rare balance, nestled between the quiet beauty of secluded beaches and the lively charm of South Cronulla's esplanade.

"It's a place to choose your pace and live gracefully, seaside'," Sander says.

[smartcode_project:default project_id=150499 project_image_fid=370900]

The architecture, designed by <a href="https://www.apartments.com.au/architects/ida-design-group">IDA Design Group</a>'s Michael Trinh, draws from the natural erosion patterns of <a href="https://www.apartments.com.au/developments/cronulla-nsw-2230">Cronulla</a>'s sandstone headlands, translating the organic forms of the coastline into soft curves, pavilion-style massing, and a material palette chosen for longevity in a salt-tinged environment.&nbsp;

Textured natural stone, soft renders, and timber-look battens reference the tones of the surrounding cliffs, while the building has been oriented to maximise natural light and passive ventilation, with primary living spaces facing north and east to capture morning sun and sea breezes.

"At Solis, our aim was to create architecture that feels quietly confident, grounded in natural materials like stone and timber, and elevated by light and landscape," Trinh says.&nbsp;

"The buildings are designed to sit gently within their coastal surrounds, with expansive glazing and abundant greenery creating a seamless dialogue between inside and out."

[smartcode_project:default project_id=150499 project_image_fid=370897]

Interiors by <a href="https://www.apartments.com.au/architects/hot-black">Hot Black</a> carry the same material language through to every room. Kitchens feature integrated Gaggenau appliances, sculpted stone benchtops, and Lo &amp; Co joinery, while bathrooms feature natural stone, timber, and brushed metal finishes.&nbsp;

Hot Black Founder and Design Director Sophie Safrin describes the intent as one of considered restraint: "At Solis, every detail has been thoughtfully considered to create a timeless coastal retreat, calm, refined, and effortlessly liveable. From natural finishes to seamless indoor-outdoor flow, Solis offers a quiet elegance that's deeply connected to its surroundings.

The landscape, designed by Julian Brady of <a href="https://www.apartments.com.au/landscape-architect/sitedesignstudios">Site Design Studios</a>, treats green space as an integral part of the resident experience rather than an afterthought.&nbsp;

"Gentle curves and layered native plantings mirror the ebb and flow of the ocean," Julian Brady says, "creating a serene connection between architecture and place."&nbsp;

Coco Republic has provided bespoke furniture packages tailored to the project's coastal palette.

[smartcode_project:default project_id=150499 project_image_fid=370899]

Skymark has an established track record in the Sutherland Shire, with a portfolio spanning Cronulla, Woolooware and Burraneer that includes Isla, Sylva, Bask, Shells, Sula and Mist. Securing LDI on Solis reflects a broader shift in how the developer is positioning its buildings to buyers, at a time when Resilience Insurance expects the policy to become mandatory in New South Wales by 2028.

Sales at Solis are launching soon through Ray White Projects, with an official event scheduled for 11 June. Enquire for more information.

[smartcode_project_cta:default project_id=150499]

Skymark takes out 10-year Resilience Insurance LDI at Solis Cronulla

Housing Bubble

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The UBS Global Real Estate Bubble Index, designed to track the risk of housing bubbles in global financial centres, places Sydney as fifth riskiest.
Toronto tops the index in 2017, but all sub-indicators "point unequivocally" to elevated risk in the Sydney housing market.
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Sydney’s housing market has been overheating since the city became a target for Chinese investors several years ago, the index again noted.
"Low interest rates, rising wealth and exuberant expectations also buoyed local demand. 
"So valuations soared and pushed the market into bubble risk zone," it concluded. 
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Since 1980 the average real annual price rise in Sydney has been 3.5 percent, the highest among all select cities. 
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"Real prices again shot up 12 percent in the last four quarters and are now 60 percent higher than in 2012.
"Incomes increased by a meagre 2 percent in infation-adjusted terms. Tax breaks and interest-only loans are whitewashing the worsening affordability for the time being." 
According to the UBS Global Real Estate Bubble Index, the bubble risk in select world cities has increased significantly over the last five years.
 Real house prices of those metropolises within the bubble-risk zone have climbed by almost 50% on average since 2011.
 In the other financial centres prices had only risen by roughly 15%. 
"This gap is grossly out of proportion to the differences in local economic growth and inflation rates," the report noted.
<a href="https://www.propertyobserver.com.au/images/2017/09/29/UBSchart.jpg" target="_blank">Click here to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/09/29/UBSchart.jpg" alt="">
Bubble risk seems greatest in Toronto. 
Stockholm, Munich, Vancouver, Sydney, London and Hong Kong all remain in risk territory, with Amsterdam joining this group after falling into 'overvalued' territory last year. 
Valuations are stretched in Paris, San Francisco, Los Angeles, Zurich, Frankfurt, Tokyo and Geneva as well. 
In contrast, property markets in Boston, Singapore, New York and Milan seem fairly valued, while Chicago remains undervalued, just as it was last year.
Sydney ranked fourth most riskiest in the 2016 report which also advised “Sydney’s housing market had been overheating since the city became a target for Chinese investors several years ago."
The latest report noted in Munich, Toronto, Amsterdam, Sydney and Hong Kong, prices rose more than 10% in the last year alone.
"Annual price-increase rates of 10 percent correspond to a doubling of house prices every seven years, which is not sustainable.
"Never-the-less, the fear of missing out on further appreciation predominates among home buyers.
"After all, the price increases appear rational, for three reasons," it suggested. First, financing conditions in many cities are now more attractive than ever before, it noted. Second, the global increase in wealthy households seemingly creates constant demand for the most attractive residential areas. Third, building activity cannot keep pace with this demand.
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"Expectations tend to be prone to exaggerations in boom phases," the annual report advised.
It suggested the optimistic projections of the trends "created ever-greater price fantasies."
However, should sentiment change or interest rates increase, a correction is practically inevitable. 
"In the past, rising interest rates almost always triggered a crash in housing markets. 
"In addition, the dependence of prices on international ows of capital represents an incalculable risk. 
"Plus, once demand fell, even the low growth in supply would no longer provide an anchor," it concluded.
Vastly overvalued housing markets have historically been associated with a significantly heightened probability of correction and greater downside than housing markets whose prices developed more in line with the local economy, UBS advised.
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jchancellor-FAypfDUnLy

Chinese buyers ensure Sydney remains a risky housing bubble: UBS global bubble index

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GUEST OBSERVER
Strong house price growth in Sydney and Melbourne in recent years largely reflects fundamentals.
Interest rates have been low, population growth and foreign demand have been strong and supply has been insufficient in these cities.
Tightened prudential settings and higher mortgage are expected to cool the Sydney and Melbourne housing markets in 2018.
Prices have risen most where housing supply is inadequate.
Australia has had a housing construction and price boom in recent years.
<a href="https://www.propertyobserver.com.au/images/2017/09/01/Screen%20Shot%202017-09-01%20at%2010.41.44%20AM.png">Click to enlarge</a>
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Much of the boom reflects the central bank's use of its cash rate setting to manage the mining boom.
A high cash rate in the earlier period (4.75% in 2011), held back housing to make way for the mining boom.
Subsequent cash rate cuts (to 1.50%) drove a housing construction and price boom.
This has been mostly a good story.
The housing construction boom has helped to fill the growth gap left by falling mining investment and has reduced an accumulated housing undersupply.
Not many houses were built during the mining boom.
<a href="https://www.propertyobserver.com.au/images/2017/09/01/Screen%20Shot%202017-09-01%20at%2010.42.38%20AM.png" target="_blank">Click to enlarge</a>
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The challenge has been that national housing prices have risen by 50% since mid-2012 and much of the rise has been driven by rising household debt.
This has reduced housing affordability and raised questions about whether Australia has a housing bubble. 
However, just because prices and housing debt have risen does not necessarily mean that there is a bubble.
The key question is whether the rise is in line with fundamentals? In our view, to a large degree, it has been.
Housing prices have risen very little in regions where housing demand has been weak, or supply has been boosted.
In contrast, where supply has not kept up with demand, house price growth has been strong.
For example, housing prices have only risen by 6% in Perth, 11% in Adelaide and 21% in Brisbane since 2012, where the mining retreat has had its biggest effects (Chars 25 &amp; 26). By contrast, Melbourne and Sydney prices have risen by 60% and 80%, respectively. In addition to low interest rates, demand for housing has been supported by migration (both international and domestic) and foreign investment: factors which have been strongest in Sydney and Melbourne.
Although supply has increased in the Sydney and Melbourne markets, it has still been insufficient to meet demand (Chart 27).
These fundamental factors largely explain the price boom and, as a result, we do not judge it to be a bubble.
It’s the distribution of debt that matters the most
Another element that could indicate a housing bubble would be misallocated lending.
If the lending that has driven the housing boom has been to households that may be unable to service it when interest rates rise, then this could cause a sharper fall in housing prices than otherwise, much as the sub-prime crisis did in the US last decade.
It is therefore the distribution of debt that matters most, rather than the aggregate level.
Although Australia has high household debt levels, in our view, they are high for fundamental reasons.
There is also strong evidence that the distribution of debt is fairly favourable and the institutional features of the mortgage market should help to ensure financial stability.
First, all of Australia's mortgages are full recourse loans. Second, Australia does not have sub- prime or low documentation loans.
Third, most of the household debt is held by higher income households (Chart 28). Fourth, although household debt is high when compared with other countries, this partly reflects differences in the tax system. In Australia, households are able to deduct the expenses related to investment properties from their broader income tax liabilities.
As a result, around one-quarter of household debt is investors that own rental properties. In many other countries, these rental properties are owned by the corporate sector.
Fifth, given the lack of tax deductibility of expenses on a first, owner-occupied, mortgage, households have an incentive to pay down their owner-occupied mortgages ahead of schedule.
As a result, the average mortgage in Australia is over 2.5 years pre-paid, which offers a significant buffer in the face of a negative income shock.
Finally, prudential settings have been tightened in Australia since late 2014, given concerns that authorities have had about the booming Sydney and Melbourne housing markets.
Tightened prudential settings make it unlikely that there has been a large enough mis-allocation of housing lending to be a systemic risk.
Overall, we expect housing price growth to slow in Sydney and Melbourne over the next couple of years, as new supply ramps up, the foreign bid pulls back (partly due to new state taxes on foreigners) and interest rates rise. 
<a href="https://www.about.hsbc.com.au/hsbc-in-australia/management-team" target="_blank">PAUL BLOXHAM</a> IS CHIEF ECONOMIST (AUSTRALIA AND NEW ZEALAND) FOR HSBC. 
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Housing boom not bubble: Paul Bloxham

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Australia needs to fix its “spectacular housing bubble” with tougher regulatory measures, according to Citigroup Inc’s chief economist Willem Buiter.
A shortage of housing and record-low interest rates has made Sydney the world’s second-most expensive property market. Home prices in Australia’s biggest city jumped 16 per cent in the 12 months through April, helping stoke record household debt which has also been cited as a concern by the central bank. 
“It had better be focused on immediately, to try and tether a soft housing landing,” Buiter was quoted by Bloomberg as saying. 
“Clearly if these things are not managed well they can be a trigger for a cyclical downturn.”
Michael Pascoe, the Fairfax Media columnist noted there had been "wildly disproportionate coverage" given to visiting Citi chief economist Willem Buiter. 
"Buiter has been forecasting a recession for a couple of years now," Pascoe said.
"If he keeps it up, odds are he will eventually be right.
"While waiting for that, it's bemusing that a visiting fireman who apparently is not very well informed about the Australian economy is taken so seriously and granted such wide coverage," Pascoe said.
Buiter's comments certainly add to the growing commentary over whether Australia has a property market bubble - where house prices are over-inflated compared to a benchmark - and when it might burst.
Property Observer has previously outlined four scenarios where this could happen, based on expert views.
In response to a tighter regulatory environment aimed at taking the heat of the east coast property market, the country’s biggest banks have made home loans for investors and interest-only mortgages more expensive relative to owner-occupier loans.
The Reserve Bank of Australia has cited the east-coast property markets and their impact on financial stability as a key concern. While it’s reluctant to cut the benchmark interest rate from the record low 1.5 per cent and stoke further price rises, lifting borrowing costs would place a greater burden on households saddled with debt already at 189 per cent of gross domestic product.
Buiter also warned that a downturn in China would hurt Australia more because of its dependence on commodity exports. He is forecasting a downturn in China, Bloomberg reported.
“The good news for Australia is of course that its performance is the best of any advanced economy,” he said. “You still have a little bit of monetary policy elbow room left and, as far as I can tell, a lot of fiscal elbow room left.”
Buiter urged the country to do more to boost its infrastructure pipeline, and ensure there was a long list of “shovel-ready” projects to cope with any downturn.
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jonathanchancellor-7SQnKwU6yx

Citi chief economist says immediate fix needed for 'property bubble'

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GUEST OBSERVER
The b-word is doing the rounds, barely a decade after the United States house price bubble burst spectacularly, setting in motion a global financial crisis. As Australian real estate prices continue to break records, many wonder whether this is sustainable. 
Economists disagree on how to define a bubble, or even whether bubbles exist. Intuitively, a bubble (and this applies to any asset, not just real estate) exists when the price of an asset is over-inflated relative to some benchmark. And here’s the rub: no one can agree on what that benchmark should be.
The benchmark could be an estimate of the asset’s value based on a collection of variables that plausibly affect its supply, demand and price, so-called fundamentals. For houses, these fundamentals include population growth, tax policy, household size, household income, and many others. 
But economists cannot agree on what fundamentals determine an asset price, or how important each fundamental is. As well, the value of these fundamentals can only be estimated, not observed. It’s subjective to the point that someone will always be able to concoct a story based on fundamentals to rationalise why house prices are at the level they are.
Some economists propose alternative benchmarks to measure a bubble, such as historical long-run averages or an estimate of the underlying value of a trend. If asset prices are greater than these averages or the trend, then we have a bubble. However, this definition is too simplistic because the economy is dynamic, ever evolving, and both long-run averages, as well as trends, do change.
Price hikes and bubbles
It’s only when asset prices reach outrageous heights that a majority of people, economists included, agree that it is overpriced and due for a major correction (a bubble burst). Even then some economists will deny the existence of a bubble. 
One of the earliest examples of an asset price bubble was the frenzy in the market for Dutch tulip bulbs in the seventeenth century — the so-called “Tulipmania”. Although the data is patchy and many historians have not exercised great care in retelling the story, there’s little else to explain how prices for Witte Croonen bulbs rose 26-fold in January 1637 and fell to one-twentieth of their peak value in the first week of February.
Yet, well-respected scholar Peter Garber argued that:
"The wonderful tales from the tulipmania are catnip irresistible to those with a taste for crying bubble, even when the stories are so obviously untrue. So perfect are they for didactic use that financial moralizers will always find a ready market for them in a world filled with investors ever fearful of financial Armageddon."
Assuming bubbles are a significant gap between the observed asset price and some appropriate benchmark value, the mere existence of this gap begs the question of how it came about. The answers mostly rely on psychology, which is why many economists (looking to represent the world in a mathematical model) struggle with the concept.
Bubble frenzy
Bubbles are ultimately a confidence game, in which the vendor sells the asset to a buyer at a profit, with the latter hoping to do the same in the future. This game relies on a powerful narrative that captures people’s imagination and persuades them their turn will be different. 
As George Soros, the famous US-Hungarian multi-billionaire hedge fund manager once remarked:
"Bubbles don’t grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception."
This misconception is the consequence of human behaviour and traits that depart from the fully rational paradigm so often assumed in formal economics. Instead, as behavioural economists argue, people exhibit a number of biases.
These include, for example, the desire to find information that agrees with their existing beliefs (called confirmation bias) or the tendency to form decisions based on the most readily available information (called availability bias). People experience and seek to resolve their discomfort when they have two or more contradictory beliefs, ideas, or values and they also employ simple abstractions in thinking about complex problems and events (framing).
People are poor intuitive statisticians and care more about avoiding losses than about experiencing gains (called loss aversion). The list of flaws in human behaviour goes on. Moreover, humans, social animals that we are, compete with and emulate our peers, herd like sheep and act on rumours. 
Occasionally, all these traits and biases re-enforce each other and send the prices of houses, or shares or whatever, into the stratosphere.
Who’s afraid of a bubble?
The bubble itself is rarely a major cause for concern, although young Australian households looking to purchase their first home will disagree. The problem, of course, is that every bubble eventually pops and this correction is typically violent and painful, for two reasons. 
First, asset prices often fall faster than they rise, so the downward correction can destroy value in a very short space of time. And second, most bubbles are fuelled by debt, because the only way a bubble can expand in the later stages is if the demand for the asset is bolstered by debt.
This combination – high debt and falling asset prices – generates a vicious cycle in which distressed debtors scramble to repair their balance sheets and sell their asset. This in turn pushes the price of that asset even lower, causing further distress to similar owners of the asset, and so on.
The pain associated with a bursting bubble varies considerably. Sometimes economies rebound rather quickly from a burst bubble, as was the case after the breath-taking collapse of the dotcom bubble. 
However, housing bubbles are in a league of their own. Historically, they have always led to severe recessions, and there is no reason to believe this should change. The next time is not different.
The answers on how to deal with a bubble range from “nothing” to “whatever it takes”. The problem is that no-one (policy makers included) can reliably identify a bubble. 
If there is such a thing as a bubble, we will only know for sure when the bubble is already popping. Acting early to prevent a bubble expanding further is risky and unpopular. It’s a brave central banker who raises interest rates in anticipation of an increase in asset prices when the rest of the economy is humming along just fine, or even showing signs of weakness.
So, is Australia in the midst of a housing bubble? I will go out on a limb and answer in the affirmative. There are plenty of arguments why current house prices are exactly where they should be, based on the fundamentals.
But in my opinion these explanations do not pass the smell test: double digit increases in house prices, combined with unprecedentedly high household debt (more than 120 percent of GDP, the third highest in the world) and household debt servicing ratios (also the third highest in the world), make for a precarious situation. All it takes is a modest change in investor sentiment, a few interest rate hikes, or a noticeable increase in unemployment, and the whole scheme unravels. I hope I’m wrong, but history is on my side.
Timo Henckel is research associate, Centre for Applied Macroeconomic Analysis, Australian National University and author for The Conversation.
He can be contacted <a href="https://theconversation.com/profiles/timo-henckel-990" target="_blank">here.</a>
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j.ballantyne1990-6AQqhLzZaK

Are record-breaking real estate prices sustainable?

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Westpac chief executive Brian Hartzer has rejected speculation that there was a “housing bubble” while admitting that the market was stretched in some areas.
The CEO of the country’s second-largest bank repeated the same view he expressed before a parliamentary committee in March in an interview with The Weekend Australian ahead of the bank’s 200th anniversary.
“I would draw the distinction between a speculative bubble in prices and prices beyond what fundamentals would justify," Hartzer told the parliamentary committee.
He described the property market as “certainly complex”, with wide variations across regions, he told the newspaper. “Western Australia and Queensland are obviously having real challenges and we have some very unusual dynamics going on in the Sydney and Melbourne real estate markets.”
Hartzer said the bank did not believe there was a property bubble “in terms of people speculating on the value of properties going up and using leverage to do it”.
But he said high housing prices was more because of supply constraints than ­excessive demand, noting that “some of the fundamentals around value are looking pretty stretched in some parts of the market”. 
Westpac expects that supply issues could be solved by working with developers and state and local governments, which would reduce the pressure on the housing market and also lower “risk” over time.
Westpac recently said it was not worried by the latest note from the Australian Prudential Regulation Authority to tighten requirements for investor and interest-only loans as the bank had already taken action in the interest-only lending area.
“We have been clear in our communications around wanting an interest rate differential for ­interest-only loans to encourage people to move to principal and interest loans,” he said.
The bank recently raised variable home loan rate for owner occupiers by 0.08 percent to 5.49 percent per annum for customers with interest only loans and for investors with interest-only loans, by 0.28 percent to 5.96 percent per annum. 
Hartzer said the bank was already well below APRA’s 10 percent cap on investor lending, with its lending for investor loans at 5.9 percent of its total mortgage book at the time of its full-year ­results at the end of September last year.
He said the bank was celebrating its 200th anniversary at a time when the political system was “finely balanced” with the banks having become a “pretty convenient target” for criticism, including an opposition promising to hold a royal commission into the banking industry.
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Westpac CEO Hartzer says ‘no bubble’ in housing, but market stretched

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GUEST OBSERVER
I didn’t think it was possible for there to be more focus on the Australian housing market than in 2016, but the last couple of weeks have proved me wrong.
ABS figures revealed that in the December quarter, across the eight major Australian cities, house prices rose 8.9 percent and apartment prices rose 4 percent. Those are stunning figures, particularly on the back of the huge rises of recent years.
This prompted renewed discussion about whether prices constituted a bubble. Many players weighed in, but former Liberal Party leader John Hewson put it most succinctly, saying on ABC’s Lateline:
“I think it’s a crisis, it is a bubble. I know people are hesitant in saying that, it is a bubble.”
In one sense it doesn’t really matter whether there is a housing bubble or not. Once buyers start believing there is and think it will burst, they have every incentive to wait to purchase. That dries up liquidity in the property market and sellers who need to sell are forced to take a steep discount. That justifies the buyers’ belief that prices are going to fall. And that, simply put, is how a bubble bursts.
Are we at that point yet? It’s hard to say, but given that a former Liberal Party leader, the ASIC chairperson, and the Secretary to the Treasury(among others) have said so recently, there is reason to think we might get there.
The most recent board minutes revealed the RBA was somewhat focused on housing as well. The minutes stated:
“Over recent months, conditions appeared to have strengthened in Sydney and had remained strong in Melbourne; these cities had continued to record brisk growth in housing prices, and auction clearance rates had remained high. Housing loan approvals and credit growth had picked up for investors, primarily in New South Wales and Victoria” and that this “continued to suggest that there had been a build-up of risks associated with the housing market.”
The minutes also noted a number of positive developments, from the terms of trade to the strength of our trading partners to business sentiment. The notable exception was the labour market which continued to confound understanding. The RBA noted that the key implication was that:
“Domestic wage pressures remained subdued and household income growth had been low, which, if it were to persist, would have implications for consumption growth and the risks posed by the level of household debt.”
It is difficult to assess the future path of the cash rate. The economy looks like it might be strengthening, and if business investment were finally to rebound, there would be a case for a rate rise. But with a weak labour market, a rise in rates would put the squeeze on those heavily indebted households. This could, in turn, detonate the property market. The nightmare scenario is that it has a big enough effect on bank balance sheets that they contract lending significantly, further hurting the property market.
This is the delicate tightrope the RBA is trying to walk.
The run-up in prices has put further focus on housing affordability. The Coalition have suggested they will announce a series of measures to address it in the budget. They are rumoured to be considering schemes like allowing first home buyers to access their superannuation – which is a very bad idea. It is another policy that fuels the demand side without addressing supply. I have said numerous times – including in my McKell Institute plan – that demand-side excesses such as negative gearing need to be curbed and the supply side needs to be encouraged.
The housing package might be the most interesting thing to look out for in the federal budget on May 9.
Richard Holden is professor of Economics and PLuS Alliance Fellow, UNSW and author for The Conversation.
He can be contacted <a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">here</a>.
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If it looks like a bubble and sounds like a bubble…

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Westpac Banking Corp chief executive Brian Hartzer says the RBA faces a difficult challenge.
They had to, on the one hand, support parts of the economy with low interest rates, while avoiding a housing price bubble, he told The Australian Financial Review's Chanticleer column.
Hartzer advised he does not believe Australia is in the midst of a housing asset bubble.
He says there is no evidence in Westpac's housing lending data that investors are buying houses for a "quick flip" to another buyer.
But he says Michele Bullock's recent comments highlight the need for action by local and state governments to ease the barriers to new housing development.
He thinks there needs to be co-ordinated policy action to fill the demand supply gap.
Hartzer indicated he was not a surprise to Hartzer on why Chinese nationals would want to live in Australia and take advantage of the high quality standard of living, including the education system.
He says foreign investment has been a feature of Australia for many years and continues to support the financing of new unit developments which, in turn, helps to resolve the lack of supply in the residential market.
Hartzer thinks the capital controls in China will eventually have an impact on the amount of money being invested in the Australian housing market.
Fresh data shows foreign buyers were responsible for purchasing about 11 percent of NSW homes, with Chinese buyers accounting for 32 percent of these buyers.
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There's no housing bubble: Westpac chief Brian Hartzer

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A senior industry executive has brushed aside speculations about the risk of an Australian housing bubble, saying it is based on overseas analysis and doesn’t apply to the country's unique market.
Ray Ellis, chief executive of First National Real Estate said the Organisation for Economic Cooperation &amp; Development’s recent assertion that Australian house prices may represent a threat to the economy is similar to much of the foreign commentary we’ve heard before.
"it fails to fully appreciate the nature of our economy, how Australians invest, and where they want to live," he said.
The OECD recently warned that a potential hard landing in the property market could morph into a recession fuelled by record high household debt and the control wielded by big banks.
Its latest report cautioned that “a fall in house prices and or demand could have significant macroeconomic implications. Specifically, the market may not ease gently but develop into a rout on prices and demand with significant macroeconomic implications”.
But Ellis was of a different view. 
“Australia is the only country in the world where nearly 40 per cent of its population wants to live in two capital cities that together comprise less than 0.3 per cent of the country’s landmass,” he said. 
“Historic low interest rates have combined with overall positive economic conditions, and a national preference for housing investment over shares, to drive up house prices in Sydney and Melbourne. However, this is not the case across regional Australia and in Perth where house prices are still falling.”
First National says that unless there is a sharp increase in interest rates or a sudden rise in unemployment, the chances of a housing prices crash is low.
“Both scenarios are unlikely,” he said.
The Reserve Bank of Australia’s (RBA) preference would in fact be for further cuts to official interest rates if that didn’t increase the risk of further inflating house prices. While rates will eventually have to rise, that’s clearly not the RBA’s choice while inflation remains below target and the country is not at full employment. And, with 1.1 per cent economic growth announced last week, a significant increase in unemployment is also unlikely, said the media release.
Ellis concluded that in reality, Australia has no oversupply of property, with data showing new construction approvals are trending downwards. Meanwhile, a tightening of lending standards by banks contrasts with the conditions that led to housing bubbles bursting in many countries following the Global Financial Crisis.
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OECD housing bubble warning unwarranted: First National CEO

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Commenator Alan Kohler has written that the demand for Sydney and Melbourne property is real, not speculative.
He says it was prompted by super-low interest rates, the global trend to urbanisation, the well-heeled baby-boomers downsizing to make up for inadequate superannuation and China’s capital outflow.
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The Australian columnist noted high prices in the east coast mainland cities "remain a problem because the boom turns out not to have been a bubble."
"Prices have inconveniently not fallen 30-40 per cent as predicted by the bubbleists.
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"If it were a bubble there wouldn’t be a problem because ­prices would collapse, and policymakers would be dealing with the economic fallout of that event — recession and unemployment — rather than unaffordable housing.
"But regrettably it seems that the demand for Sydney and Melbourne property is real, not speculative, prompted by super-low interest rates, the global trend to urbanisation, well-heeled baby-boomers downsizing to make up for inadequate superannuation and China’s capital outflow."
He noted in the absence of a curative crash, there has been a series of well-meaning attempts to propose a solution:
1. The Labor Party’s election plan last year was to stop negative gearing for established houses and only allow deductions for new ones, but the Coalition naturally said that was the worst idea ever conceived throughout all of history. Labor lost, the Coalition won, so that’s out.
2. The Weekend Australian’s Bernard Salt suggested that millennials stop eating smashed avocado for breakfast and save more, which didn’t go down well, the counterargument being that you’d have to eat cornflakes for breakfast, lunch and dinner for 1000 years to save a deposit for a place in Sydney.
3. Barnaby Joyce has now proposed moving to Tamworth, where he lives, or even Charleville (population 3728, about 800km west of Brisbane) which also didn’t go down well.
4. This week, Scott Morrison reported back from an all-expenses-paid fact-finding mission to London that the solution is, as the Treasurer’s always suspected, more supply.
"As someone tweeted — that was money well spent, wasn’t it?"
Looking at Australian housing approvals, he noted house starts have not changed for 35 years - and the rate of apartment approvals has quadrupled.
"Last year more than 200,000 dwellings were started.
"The idea that the problem is a shortage of supply is, as Trump would say, fake news."
Kohler did warn there seems to be a glut looming, not a shortage, and bankers are getting worried about settlement risk.
He concluded the real solution was already being implemented by families, especially in Sydney and Melbourne, helping the kids buy a house. 
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Alan Kohler says there is no property bubble, just real demand

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The Reserve Bank of Australia will need the Australian Prudential Regulation Authority to reign in home lending once again, or lift interest rates, or do both to avert a dangerous housing bubble, says housing expert Louis Christopher in his newly released Christopher’s Housing Boom and Bust Report 2017.
Under one scenario house prices in Sydney could rise up to 16 percent, the other scenario shows prices could rise as high as 18 percent.
Louis Christopher, the managing director of SQM Research calculated the housing market is currently at its second most overvalued point on record and now, given a combination of factors including loose monetary policy, strong population growth and booming local economies, prices in Sydney and Melbourne will be rising from this very lofty valuation point.
SQM Research forecasts an acceleration of dwelling price rises in Sydney and Melbourne with Sydney dwelling prices forecasted to rise 11 percent to 16 percent for the 2017 calendar year, while Melbourne is forecasted to rise by 10 percent to 15 percent.
The capital city average forecast is for dwelling prices to rise 6 percent to 10 percent. 
The forecasts assume a stable interest rate environment, a stable exchange rate and no further home lending restrictions by APRA.
If lending rates are cut again by the RBA, Sydney and Melbourne prices could rise by up to 18 percent for the year as forecasted by SQM’s “Scenario 2 outlook”.
The Scenario 2 outlook has three drivers such as a 0.25 percent cut in rates during mid-2017, APRA takes 'more action' after mid-2017 and the Aussie dollar ranges between US70-80 cents.
“The end of 2017 will see both Sydney and Melbourne markets dangerously overvalued and paving the way for a possible correction in 2018,” Christopher said.
“The authorities need to take action sooner rather than later. Failure to do so will result in double digit national housing price growth in 2017 driven by out-of-control Sydney and Melbourne housing markets.
“The problem this time round is tapping on APRA’s shoulders once again could be a little more complicated as it will need to involve restricting owner occupied credit growth – something which the banks will be more reluctant to do. And given the recent announcement of the 7% interest rate servicing test, APRA may well feel reluctant to take further action.”
<a href="/images/2016/11/01/Housing%20bubble.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/11/01/Housing%20bubble.jpg" alt="">
Elsewhere in the nation, the housing market is expected to be mixed, with Perth and Darwin prices expected to fall again.
However, it is likely 2017 will be the last year of price falls generated by the mining downturn for these cities.
Behind Sydney and Melbourne, Hobart is expected to be the next fastest growing city, with Hobart dwelling prices forecasted to rise 7 percent to 12 percent.
Brisbane is forecasted to rise 3 percent to 7 percent with the market been held back by an existing oversupply situation of dwellings which is covered in detail in the report.
Meanwhile, Canberra has now entered into a slow housing recovery with prices also expected to rise 3 percent to 7 percent.
Adelaide is expected to rise a modest 2 percent to 4 percent for next year.
Louis Christopher’s Housing Boom and Bust Report this year also has a full breakdown of every postcode in the country covering current market statistics and its inaugural postcode investor ratings.
The full report can be found on <a href="https://www.sqmresearch.com.au">www.sqmresearch.com.au</a>  for $59.95.
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