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

Joel Robinson

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

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

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

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

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

Parcel delivery is joining the apartment amenity checklist

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

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

Housing Bubble

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Sydney is at risk of a "housing bubble", according to a report from UBS Wealth Management.
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The UBS Global Real Estate Bubble Index report analysed residential property prices in 18 cities around the world. 
UBS says Sydney's housing market has been overheating since the city became a target for foreign investors several years ago.
It had been the least risky city in Asia Pacific in 2012. 
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"When combined with rigid supply and sustained demand from China, this has produced an ideal setting for excesses in house prices," the report said.
Sydney housing prices peaked in the second half of 2015 after an increase of 45% since mid-2012.
"Since then, prices have corrected by a low single-digit," it noted on Sydney.
"The Australian residential market is influenced by a rapidly growing foreign demand (in particular, Chinese), which has tripled in value over the last three years.
"Increasing supply and further tax measures to reduce foreign housing investments may end the price boom rather abruptly." 
The report noted the situation is fragile for the most overvalued housing markets.
A sharp increase in supply, higher interest rates or shifts in the international flow of capital could trigger a major price correction at any time, the report warned.
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Vancouver tops the index in 2016.
"Bubble risk also seems eminent in London, Stockholm, Sydney, Munich and Hong Kong.
"Deviations from the long-term norm point to overvalued housing markets in San Francisco and Amsterdam.
"Valuations are also stretched, but to a lesser degree, in Zurich, Paris, Geneva, Tokyo and Frankfurt."
In contrast, Singapore, Boston, New York and Milan are fairly valued, while Chicago’s housing market remains undervalued relative to its own history.
While property overvaluations have become more pronounced in many major cities since 2011, according to the report, Vancouver faces the greatest risk of a housing bubble, while London is the riskiest city among the major financial centres. 
In contrast, New York, Hong Kong and Singapore prices have stagnated or decreased over the last year, according to the index.
The report noted 'bubble risk zones" where prices within that zone have increased by 50 per cent on average since 2011. 
"What these cities have in common are excessively low interest rates, which are not consistent with the robust performance of the real economy," the report stated.
"In a world in which more than a third of all government bonds offer negative yields, investing in tangible assets remains popular.
"So it is hardly any wonder that housing markets are again overheating, just a few years after the last major wave of global correction.
"We see a significant overvaluation of housing markets in some key financial centers.
"What these cities have in common are excessively low interest rates, which are not consistent with the robust performance of the real economy.
"This is illustrated by the Eurozone, where monetary policy cannot accommodate the macroeconomic differences between the countries.
"Yet other countries such as Australia, Canada and the UK are also keeping their interest rates artificially low.
"When combined with rigid supply as well as sustained demand from China, this has produced an ideal setting for excesses in house prices.
"Even in the cities with the clearest signs of a real estate bubble, it is not possible to predict exactly the timing and duration of a correction.
"The situation is nevertheless fragile for housing markets.
"A sharp increase in supply, higher interest rates or shifts in the international flow of capital could trigger a major price correction at any time."
It says the publication UBS Global Real Estate Bubble Index reveals the financial centers where the imbalances are most apparent, and the cities where house prices still have fair valuations overall. 
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UBS sees overheated Sydney's housing bubble risk

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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.
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.
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.
"Domestically, the unwinding of housing market tensions to date may presage dramatic and destabilising developments, rather than herald a soft landing," it said.
The warning is accompanied by graphs showing dwelling approvals retreating from a peak and house prices levelling out. 
Australia’s entire economy was vulnerable to the continued commodity price plunge too, the OECD warned.
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.
“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.
“The unwinding of tensions in the housing market to date may presage dramatic and destabilising developments, rather than herald a soft landing,” it advised.
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.
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OECD warns of dramatic end to housing boom

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Talk of a housing bubble is "simply hot air," says the Property Council’s chief of policy and housing, Glenn Byres.
Official data from the Australian Bureau of Statistics released last week signals a warning, he suggests, with the 5.1 per cent fall in building commencements and 2.3 per cent drop in completions for the December quarter suggesting the construction boom has passed its peak.
"While the number of commencements and completions over the past 12 months remain at record highs – reaching 220,887 throughout 2015 – there is now a real risk that housing starts could head south," Byres says.
“We only risk a housing bubble if we are creating demand that won’t be met.
"There will be pockets and cycles in individual markets, but overall the reality is the opposite – we have a shortage of supply.
“The fundamentals that support housing markets are very sound. The economy is growing, jobs are growing and our population is growing.
“At the same time, we have challenges on the supply side. When you piece these things together, there’s nothing to suggest the market is operating at anything other than normal speed.”
While the increase in housing supply has been much lauded over the last two years, Byres is more circumspect.
“This is the first time we’ve seen a balance between supply and demand in more than 10 years. We are only just now hitting the levels of supply we need. In capital cities, particularly Sydney, we are still playing catch up on the big deficit that accumulated over the last decade.”
He advised Australia was currently adding an extra million people to its population every three to four years, and numbers in our four largest cities – Sydney, Melbourne, Brisbane and Perth – are expected to double within the next 15 years.
"Sydney will need an estimated 664,000 houses over the next 15 years just to keep up with this growth.
“We know most of our nation’s growth is going to happen in the ‘big four’ capital cities – and that’s where our challenge is most acute. We have fallen a long way behind in supporting this growth with the infrastructure and housing we need. Until we get ahead of the curve, we risk landing on the wrong side of the affordability equation.”
While New South Wales saw the largest increase in commencements in 2015, up 19.1 per cent for the year, Byres says the 14.0 per cent fall in the December quarter is a marker for concern.
“It is a reminder that NSW needs to get cracking and fix up its planning system, which is still the most dysfunctional in the nation.”
“We need policy solutions in place that reduce the time, cost and red tape on projects and make it easier to deliver a sustained period of strong supply and improve affordability over the long-term.”
Byres says the choices are simple: smart growth or dumb growth.
“Growth is coming – but dumb growth involves turning off housing supply, tying up markets in red tape and pushing up prices beyond the point at which the average person can enter the market.”
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No housing bubble, but risk of housing starts heading south: Glenn Byres

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Charter Keck Cramer executive chairman Scott Keck says the housing market is "fully priced" but property values are likely to drift sideways over the next few years rather than crash.
Keck told clients that while the housing market was "certainly inflated [though] perhaps not fully inflated to the extreme" domestic conditions were subsiding with the market having just recently drifted off its peak.
"We think that it is unlikely that there will be a significant increase in commercial interest rates or unemployment and thus these internal factors are not a danger. Left alone there seems to be no internal or domestic pending or immediate threat that would cause a major correction." he said.
But, he did acknowledge that at inflated levels, property along with other asset classes would be vulnerable to a major international event like an economic meltdown in China or another GFC.
"So, in summary, does Charter think that there is a bubble which infers an event that is about to collapse? Our answer is NO," he wrote.
Speaking to The Australian Financial Review, Mr Keck said housing values were supported by strong population growth and immigration, major demographic changes and a "huge depth of demand" from those looking to buy at lower rungs of the property ladder.
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Scott Keck says there's no housing bubble

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GUEST OBSERVER
It’s reporting season, and over the past few weeks some of Australia’s biggest companies have been releasing information on how they’re travelling. 
These reports reflect key themes of how things are going in key sectors of the economy. 
Today we look at the banking sector.
The Australian banking industry is a classic economic ‘oligopoly’ with the so-called ‘Four Pillars’ or ‘Big Four’ (National Australia Bank (NAB), Commonwealth Bank of Australia (CBA), ANZ and Westpac) dominating not only the banking sector but the whole financial sector and arguably the economy.
The big four banks account for over 25 percent of the market capitalisation of the ASX 200, and are valued at over $360 billion. In total, the four banks reported assets in 2015 of some $3.5 trillion or about 10 times the size of BHP and RIO combined, and profits for their latest financial year of over $30 billion between them.
<a href="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/114178/width668/image-20160308-15110-odx4a3.png" target="_blank"> Click to enlarge</a>
<img src="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/114178/width668/image-20160308-15110-odx4a3.png" alt=""><a class="license" href="https://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a>
 
 
<h2>The risks in Australia’s banking system</h2>
In an oligopoly, the dominant players operate a very similar business model. This is true of the Big Four, which operate within a structure known as ‘universal banking’. Not only do each of these behemoths run a traditional retail and business bank, they also have wealth management (mainly retail superannuation fund management) and insurance subsidiaries. To complete the picture, each of the four runs a wholly owned bank in New Zealand, again dominating the banking system in that country. The banks operate throughout Australasia, often with competing branches (and valuable jobs) in each small town - Australia is ‘over banked’.
The risks of having one of the most concentrated banking systems in the world were outlined in 2012 by the International Monetary Fund (IMF), it warned that Australia’s banks had: “broadly similar business models and reliance on offshore funding leave them exposed to common shocks and disruptions to funding markets. Against a still worrying global environment, these risks will need to be closely monitored, particularly if the domestic economy slows sharply.”
Among the four banks, there is constant jockeying for prominence and any one time one bank climbs to the top of the pile. At the moment, the clear winner is CBA, largest by capitalisation, latest annual profits and staff employed with the lowest Cost to Income Ratio (CIR). Another winner is Westpac, the smallest by assets and employees but with an enviable CIR and Net Interest Margin (NIM) leading to excellent profit results. Meanwhile, NAB trails the others by profitability and with a low NIM and high CIR, will be likely do so for some time. Nonetheless, NAB is by any standards a very profitable company, if a bit overshadowed by the other banks this year.
It should be noted that not all banks report their financial results at the same time in a completely consistent fashion. However each quarter the banks are required to report their risk numbers to the Australian Prudential Regulation Authority (APRA), the banking regulator. These so-called APS 330 reports give a picture (albeit slightly murky) of where banks are taking risks and the size of those risks.
These numbers show that the banks hold roughly similar amounts of assets, so-called Risk Weighted Assets (RWA) and associated capital. Although Westpac, being slightly smaller, has about 10 percent less of each. This data shows Big Four banks are still predominantly lending institutions with about 86 percent of their Risk Weighted Assets (RWAs) related to credit.
While ANZ has a higher proportion of corporate and business lending than the others, about 23 percent of its credit (RWAs) relates to retail, mainly residential mortgage, lending. With a few notable exceptions, such as CBAs exposure to interest rate risks and NAB’s operational risks, the risk numbers are similar across the banks.
From an analysis of prior APS 330 reports (not shown), it appears that, although the RWAs for residential mortgages have increased slightly for all banks (mainly because lending has increased), the banking sector has not factored in much additional capital to cover the potential for the busting of a housing bubble.
The large Australian banks will in the next year face headwinds from a number of directions. First, any busting or even deflation of Australia’s real or imagined housing bubble will undoubtedly give the banks serious headaches.
Likewise, the end of the mining boom is already beginning to take its toll on mining companies, even the largest. If the gloom spreads, loans to the sector might be under pressure. Last, but far from least, banking scandals will definitely come to the fore this year especially market manipulation and product misselling.
<h2>Disruption from technology</h2>
Following the retreats of both NAB and ANZ from their respective overseas forays, it looks like the four banks are going to resemble each other even more as they are all embarking on strategies that target the same Australasian retail, mortgage and business markets. But there is at least one significant point of difference between the banks that might give a clue to potential shifts in future.
In banking, as in other industries, technology is critical. After an outsourcing deal that went sour, in 2008 the CBA board was forced (some say was brave enough) to embark on a complete refresh of its ageing IT systems, often called a Core Systems Replacement (CSR).
After some significant project blowouts, CBA eventually got the CSR to work and their annual profit numbers are beginning to reflect that success. Meanwhile, NAB is in the middle of its almost decade long CSR project (called Nextgen) and is constantly changing its management, which does not bode well for its completion in the near future. On the other hand, the new Chief Information Officer (CIO) of Westpac has denied that the firm needs a CSR, and has embarked on a much needed face-lift to the bank’s ageing systems.
After a number of attempts to change its core systems, the new management of ANZ have just announced that they are hiring an ex-Google executive to become its head of ‘digital banking’ - but to do what is still not certain.
Given the oft repeated fact that some 70 percent of IT projects fail, it looks like one or more of the banks are in for some big headaches over the next decade.
For this snapshot, the information is collected from the latest annual reports (2014-2015), except for CBA which reported its semi-annual numbers in February 2016. The risk figures are taken from the 2016 December quarter APS 330 reports of the banks to APRA, which are available at the banks’ websites.
Pat McConnell is honorary fellow, Macquarie University Applied Finance Centre, Macquarie University and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/pat-mcconnell-13137" target="_blank">here</a>.
 
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Property 101: The housing bubble risk to the big four banks

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The national Australian housing market is severely overpriced relative to all the fundamental measures of value: rental incomes, inflation, construction costs, household incomes and GDP.
That is the conclusion of LF Economics duo Lindsay David and Philip Soos who conclude debt-financed speculation as the major cause of the what they describe as "Australia’s largest housing bubble in the nation’s economic history."
"The media and industry has warned housing price growth will begin to moderate and fall, but the latest results from the debt accelerator, Speculative Index and Kavanagh-Putland Index, however, indicates annualised real price growth of 8.9% could remain steady over the course of the next couple of quarters, inflating the bubble further.
They noted nationwide real housing prices surged by 4.3% in 2015Q2, the single largest quarterly increase since 2009Q4.
<a href="/images/2015/10/21/Screen%20Shot%202015-10-21%20at%2012.35.41%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2015/10/21/Screen%20Shot%202015-10-21%20at%2012.35.41%20PM.png" alt="">
The duo calculate the price to income ratio has reached record highs in 2015Q2: houses (8.3x) and units (6.4x).
"Both historically and internationally, Australian dwelling prices are extremely expensive and unaffordable relative to household incomes," according to the LF Economics report titled Ahead of the Housing Curve,  written by Lindsay David and Philip Soos.
"Australia is catastrophically overleveraged in terms of private sector debt, particularly the household sector.
"Since 1996, housing prices have outpaced economic fundamentals such as inflation, household incomes, rents, construction costs and GDP, demonstrating the housing market is in the thrall of an asset bubble.
"Australia’s economic history indicates real estate bubbles developed during the 1830s, 1880s, 1920s, mid-1970s and late 1980s.
"Contrary to the analyses of the vested interests, the data overwhelmingly demonstrates Australia is in the midst of the largest housing bubble on record, both in terms of prices to rents and household incomes.
"The government, central bank (RBA), prudential regulator (APRA), FIRE sector (finance, insurance and real estate industries) and their economists predictably deny the existence of a housing bubble, believing a severe downturn in the housing market simply cannot occur.
"The usual arguments put forward are the same as those made everywhere else a housing bubble has occurred: prudent lending practices, deregulation of finance, recourse mortgages, dwelling shortages, restrictions on land supply, low nominal interest rates and inflation, population growth, demographic change and so on.
"Today, after centuries of asset bubbles, mainstream economists have yet to determine and define what they are, so debate on the matter is kept necessarily vague.
"Housing bubbles are poorly understood, if at all, on the basis of ‘irrational exuberance’ or ‘chasing capital gain’.
"No rational explanation can be made as to why housing prices have so radically departed from fundamental factors, most notably rental prices.
"The data strongly suggests the boom in real housing prices are not caused by any commensurate movement in economic fundamentals, but rather, debt-financed speculation as evidenced by the exponentially growing stock of mortgage debt.
<a href="/images/2015/10/21/Screen%20Shot%202015-10-21%20at%2012.37.53%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2015/10/21/Screen%20Shot%202015-10-21%20at%2012.37.53%20PM.png" alt="">
The report concludes there is greater awareness among policymakers and public of the housing bubble and its potential for wealth destruction.
"While there is more to say about Australia’s fascinating and quite dangerous economic experiment with financialisation and real estate speculation, the data and commentary in this report illustrates the long-term trends in the housing and debt markets, providing the necessary proof that a housing bubble does indeed exist and therefore represents a clear and present danger to the economy and banking system," the LF Economics report concluded.
For the full report from LF Economics, <a href="https://www.lfeconomics.com/news" target="_blank">click here</a>.
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Catastrophically overleveraged as Australia’s largest housing bubble in history continues: LF Economics

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Sydney home owners can feel confident that their property values will hold up amid the gradual wind-down of the price boom.
There are two reasons. One is that economists are predicting values will fall. Given their track record of getting it wrong on real estate, we can be fairly sure values won’t decline.
The other reason is the historic precedent. Sydney has had big price booms before and when the bull run ended, there was no decline in values. Prices simply stopped growing.
I fully agree with the growing list of pundits calling the end to Sydney’s boom. I’ve been writing about it for the past 5-6 months.
On 21 May I wrote in this column: “It was inevitable that Sydney would run out of puff eventually and the most likely time for it to happen was in the third year of price growth – which means some time this year. It’s rare for major markets to sustain a boom for any longer than that. 
“I’ve just finished the research for the latest edition of The Price Predictor Index, examining market activity in suburbs and towns across the nation, and it indicates Sydney has begun a gradual fade.”
That view was subsequently confirmed by sales figures for the June Quarter, which continued the pattern seen in the March Quarter figures. It’s clear now that, in terms of sales activity, Sydney peaked in the December Quarter last year and has been on a gradual fade ever since.
But does this mean prices will collapse? Not if 2004 is any guide.
The preceding 2-3 years represent the last time Australia had a genuine national property boom. In 2002, six of the eight capital cities recorded double-digit growth in median house prices, including three (Sydney, Brisbane and Adelaide) where prices grew more than 20%. The national average rise was 18%, double the average rise in the past 12 months.
The following year was even more prolific. In 2003, all eight capital cities recorded growth of at least 13%. Five of capital cities grew more than 20% and the city average that year was a 19% rise.
The past 12 months, in comparison to those stellar years, have been rather tame, with only Sydney recording double-digit growth (although some research sources have Melbourne nudging above 10%). Media hysteria suggesting we have been in the midst of an unprecedented national boom lately is quite ludicrous when we consider the 2002-2003 scenario.
 The bottom line, however, is this: by 2004 the boom had run out of steam. Economists, journalists and other pontificators were routinely predicting a collapse in prices. But it didn’t happen. The growth subsided but there was no price decline.
Earlier this year I conducted a research exercise for a client, examining media coverage of real estate since the beginning of the 21st Century and comparing it to actual outcomes.
This revealed that reports of bubbles, unsustainably high property values and inevitable price collapse have occurred constantly in Australian media over the past 15 years.
Every economist complaining that property prices should fall because they don’t comply with their theory about where prices should be has been given airplay.
Every overseas spruiker seeking to drum up attention for a book launch or a seminar tour has gained massive publicity by forecasting that our property values were about to decline 40%, 50% or 60%. One was silly enough to predict a 90% drop in land values and media was silly enough to publish it.
None of them was right. Despite that relentless production line of doomsday headlines stretching across 15 years, there has been no Armageddon in Australian real estate.
So, now the chattering economists are at it again. No matter how many times they get it wrong on real estate, they will continue to step up for another bout of false profiteering. 
The boffins at Macquarie Bank have rolled out some very specific forecasts about something they call “Australian property prices”. They’re going to start falling in March next year. And the decline won’t be 5% or 6% or somewhere in the band from 5-10%, it will be exactly and precisely 7.5%.
Will they be proven accurate? Not a chance.
Terry Ryder is the founder of <a href="https://www.hotspotting.com.au/" target="_blank">hotspotting.com.au</a>. You can <a href="https://mailto:ryder@hotspotting.com.au" target="_blank">email him</a> or follow him on <a href="https://twitter.com/hotspotting" target="_blank">Twitter.</a>
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