Perth’s new apartment market recorded its strongest quarter of sales since Q4 2021, with 412 apartments sold in Q1 2026 and a record quarterly sold value of $537 million, according to Urbis’ latest Apartment Essentials results.

Urbis said the March quarter result reflects strong, highly product‑specific demand across both ends of the market, from more attainable projects delivering at scale, through to premium stock being absorbed by equity‑rich downsizers.&nbsp;

David Cresp, Partner at Urbis, said the key story in Perth is not demand, it is the market’s ability to convert demand into delivered housing.&nbsp;

“This is the strongest sales quarter since Q4 2021, and it reinforces that demand in Perth is real and it’s local,” David Cresp said. “But the task now is delivery, turning that demand into projects that can actually be built and completed.”&nbsp;

[smartcode_project:default project_id=110291 project_image_fid=302785]

<h2>Affordable product leads, premium demand remains resilient</h2>

Sales in Q1 were led by more affordable projects, with The Boulevard (SKS Group) recording 115 sales in the quarter, the presentation noting this is only the second time a single project has surpassed 100 quarterly sales. The project was able to offer more affordable housing product right next to a train station.&nbsp;

Palmyra West (Finbar) also delivered strong results with 28 sales in Q1, following 84 sales in Q4, with an average price of under $800,000, underscoring depth of demand for well‑located, attainable new stock.&nbsp;

At the premium end, Urbis said downsizer demand is continuing, with the results highlighting Romeo (Applecross, Finbar) recording 75 sales and reaching almost 50% sold in one quarter.

Jual (Shenton Park, Celsius Property) also posted a strong quarter with 28 sales, reaching 39% sold in one quarter.

Urbis noted that Perth apartment demand is not speculative, not investor‑led, and not uniform, describing it as localised, often equity‑driven and highly product‑specific, a pattern reflected in the polarisation between strong “attainable” performers and premium downsizer product.&nbsp;

[smartcode_project:default project_id=148957 project_image_fid=364102]

<h2>Prices underpinned by costs, and the delivery risk is growing</h2>

Urbis said pricing pressure is cost not demand‑driven: construction costs and delivery risk are now a central constraint, with the results noting build costs remain elevated and volatile, and that energy, fuel and labour uncertainty weigh on feasibility.

David Cresp said a growing challenge for private Build‑to‑Sell developers is simply securing a builder in the current environment.

“Developers are really feeling the pressure from a building market that was operating at capacity and securing a builder is challenging,” David Cresp said, adding that even where a builder can be secured, “trying to get to the price that makes the development financially viable is incredibly challenging in the current market.”&nbsp;

Urbis’ broader WA commentary also notes that industry remains at or above capacity with lot and housing creation, and that many builders are limiting new sales to manage stretched workforces and fixed‑price contract pressures, conditions that flow directly into apartment feasibility and delivery timing.

[smartcode_project:default project_id=108869 project_image_fid=317905]

<h2>Supply: improving later, but still constrained, and Perth lags eastern benchmarks</h2>

While near‑term supply remains constrained, Urbis’ forecast shows completions lifting “Supply is forecast to be back above 1,500 apartments per annum for the first time since 2019”, with 1,775 completions forecast for 2026, and volumes remaining above that level over the following years.&nbsp;

Looking further ahead, completions are forecast to reach 2,500 in 2028, with the report noting 32% of that total is social/affordable, reflecting the role of government‑supported delivery in rebuilding the pipeline.&nbsp;

However, Urbis said Perth remains behind comparable markets on pipeline scale. In a national comparison of projects under construction, the report shows under construction Perth Build‑to‑Sell (BTS) at 3,446 apartments versus the Gold Coast at 7,922. Mr Cresp said “The challenge for Perth is how to we grow the delivery pipeline”.

Urbis’ conclusion is that Perth’s market is increasingly defined by product discipline and delivery certainty, with the research identifying “delivery certainty is key” and calling out builder risk and procurement models as core success factors, alongside “timing and staging”.&nbsp;

Joel Robinson

Perth apartment sales hit strongest pace since late 2021 as builder capacity tightens

<a href="https://www.apartments.com.au/developers/sammut-developments">Sammut Group</a> has secured development approval for its latest Brisbane apartment project, marking the Sydney developer’s next step in expanding its Queensland pipeline following the success of its debut Gold Coast development, Coast.

The approved project at <a href="https://www.apartments.com.au/new-apartments/44-glen-road-toowong-qld-4066">44 Glen Road, </a><a href="https://www.apartments.com.au/developments/toowong-qld-4066">Toowong</a> will deliver a 15-storey riverfront apartment building with 42 residences, significantly increasing the scale of the site’s previous approval for a smaller luxury scheme. Designed by Bureau^proberts, the development will comprise a mix of predominantly four-bedroom and two-bedroom apartments positioned to maximise Brisbane River and city views.

Sammut Director Julian Sammut said the group had been actively searching Brisbane for several years before identifying Toowong as the right fit.

“Brisbane was the right step for Sammut,” Sammut said.

“With the success of Coast we thought we should definitely look to do more in Queensland alone. We then pushed up to look at Brisbane. We've been looking for I'd say two to three years actually and it was hard to find the right location.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screenshot%202025-12-23%20at%203.27.14%E2%80%AFPM.png?VersionId=dYAVIL7qdcGA8ojvkslSrLjczXFejSSx" />

Sammut said suburbs including New Farm and Teneriffe were considered before the group ultimately focused on Toowong due to its strong downsizer demographic and limited supply of developable riverfront land.

The site was acquired off-market after what Sammut described as a lengthy negotiation and planning process, with the developer pursuing an uplift to the original approval.

“We are DA approved now which is very exciting,” Sammut said.

“We've had our change approval come through and we've obviously doubled the height, 15 storeys plus rooftop. We've got 42 amazing apartments that are going to be coming to market soon.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-23%20at%203.27.26%E2%80%AFPM.png?VersionId=ohkRkY0dIZlqdfME2EZePsCQavRiBadE" />

Bureau^proberts said the design responds to Toowong’s evolving urban character, balancing contemporary apartment living with the area’s established residential identity.

“A place where traditional Queensland living has taken place for centuries; Toowong is seeing a shift of contemporary influence, commercial and retail hubs mixed with well-considered residential offerings – all the while maintaining its character and charm,” the architect noted in planning documents submitted to Brisbane City Council.

The architecture practice said the project’s form was shaped by its riverfront setting, flood considerations, neighbouring building scales, and view corridors.

“They said the mix of four and two-bedroom apartments capture the ‘fundamental qualities of Queenslander living,’ translated into the context of a contemporary subtropical building.”

The development sits just off Coronation Drive within walking distance of Toowong’s retail precinct and the upgraded Regatta ferry terminal, while also benefiting from proximity to the incoming green bridge connection to West End. Sammut said the accessibility and amenity offering were central to the site’s appeal.

The approval adds to growing residential activity along the Toowong riverfront, joining nearby projects including Consolidated Properties’ Monarch Residences and Spyre Group’s ARC Residences.

Sammut secures approval for debut Brisbane apartment development in Toowong

Developer Lanevick is heading back into Sydney’s apartment market after focusing more heavily on the luxury townhouse and terrace sector in recent years.

Lanevick, founded and directed by Steve Maroun, is expecting to receive approval in the coming months for a new apartment development in Gladesville, with the aim to launch it to the market later this year.

The 51-apartment project, designed by Studio Johnston, will comprise a mix of one-, two-, and three-bedroom apartments positioned toward the Hunters Hill downsizer market.

“Traditionally it’s been difficult for people in that market to downsize because there just hasn’t been the right product available,” Maroun said.

“We’re targeting buyers who might have 30 to 40 per cent of their house value sitting in the bank after downsizing.

“They still want good spacious entertaining areas, they still want quality design, but they also want flexibility and the ability to enjoy life a bit more after working hard for a long time.”

The project sits near Boronia Park and within close proximity to the Parramatta River foreshore, an area Maroun says offers more of a Hunters Hill lifestyle than a traditional apartment precinct.

“From a lifestyle perspective, it’s really more Hunters Hill than Gladesville,” Maroun said. “You’re close to the foreshore, close to parklands, and still connected back into the village precinct.”

From level four and above, apartments will capture water views&nbsp;toward Sydney Harbour. Communal amenity will include rooftop entertaining areas, wellness spaces, and a gym tailored toward owner-occupier buyers.

“We’ve really designed these apartments around that buyer coming from the Hunters Hill LGA and what they’re actually looking for in their next chapter.”

The proposed development has also been designed to respond to the changing character of the broader Gladesville town centre, where a growing number of mixed-use and residential proposals are expected to emerge over the coming years.

“Gladesville presented a rare opportunity to deliver a genuinely design-led residential project within an evolving lifestyle precinct, just moments from the growing Gladesville town centre, and we’ve approached the project with a strong focus on architecture, liveability and long-term community value,” Maroun said.

Maroun said Lanevick saw a first-mover advantage within the precinct as planning controls continue to evolve to accommodate greater housing density.

“We think there’s a real opportunity there that hasn’t really been serviced properly yet,” he said.

“There’s going to be a broader evolution of the whole Gladesville village precinct over time, particularly with more activation and mixed-use outcomes.”

The Venus Street proposal will include a commercial and retail component at ground level designed to contribute to that evolving streetscape activation.

“A big part of the thinking was how do you activate that area properly and create more vibrancy and amenity, which is what Hunters Hill has been looking for,” Maroun said.

Lanevick’s focus since 2020 has largely been on smaller-scale luxury townhouse and terrace developments. The developer recently completed Royale Randwick, also designed by Studio Johnston, where prices reached $3.65 million. The project was featured in the UDIA NSW 2026 Professional Development Prospectus and was also named a finalist for Development of the Year.

&nbsp;

Lanevick to cater for Hunters Hill downsizers with new Gladesville apartment development

Property developer One Living, backed by former Macquarie banker turned investment manager Chris Green’s investment firm, has unveiled plans to bring more institutional capital into housing to help address the national supply crisis.

The New York-based investor has focused his firm, GreenPoint Partners, on addressing the supply shortage hitting middle market housing in Australia.

It is backing the new One Living business to develop more than 1000 units along the eastern seaboard. The new firm is starting with a development on Mona Vale Road, on the border of Mona Vale and Pymble, in Sydney’s Northern Beaches, with around 140 apartments planned. They are eyeing off more sites across the city.

With cost pressures rising in the industry, One Living’s model is to be a vertically integrated developer-builder, so it can respond directly to the housing gap by removing the cost inefficiencies embedded in traditional residential delivery.

“We are building a platform designed to operate at scale and starting in a market where there’s a clear need for quality, attainable housing,” One Living joint managing director Joseph Scuderi said.

“It’s that missing middle – it’s that attainable end of housing… that’s what most Australians invest into and what Australians can actually afford.”

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="798dfa93-4941-4db6-a696-31e9dc18e81c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.31.50%E2%80%AFPM.png?VersionId=mKBqi5C_DmeiXS.AtJkcR8LQIxqCqmFi" />

GreenPoint Partners brings years of experience assembling and scaling real estate operating businesses across major markets. And Green sees a big opportunity in Australia.

“For its size, sophistication and importance to the community, Australia’s living sector has remained largely under-institutionalised, which represents significant opportunity,” Green said. “GreenPoint identified that gap, assembled the right team, and is backing One Living to build a platform that is aligned to market needs.”

Green said being a builder-developer would give the company the capacity and flexibility it required to deliver reasonably-priced homes.

“We want it to be at that attainable level; not super high end luxury but at that attainable level,” he said.

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="74a5344a-4b26-4d4a-ada3-056b1220be77" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.32.15%E2%80%AFPM.png?VersionId=vY8hXHO4reBMdO8ZXMWCNtGZJofUPQ3j" />

&nbsp;

One Living will undertake a component of affordable housing in its schemes, which it will own and operate, and it could also run build-to-rent on some sites.

Green praised local policy settings.

“The NSW government is being very supportive, strategic and pragmatic in terms of how do we generate more supply of housing,” he said. “We think it’s actually positive for development and the bit that’s been lacking at that attainable level is that it’s lots of relatively small private developers, whereas we want to create an institutional platform.”

One Living is also&nbsp;looking at high-density projects and could take on more institutional funding in the future.

“The way we will be able to achieve economies of scale is through size,” Green added.

One Living enters Sydney's new apartment market with Northern Beaches site acquisition

It's been several years since there's been an opportunity to buy a brand new townhome in Melbourne's coastal suburb of Mordialloc. Even apartment developments in recent times have been few and far between in the area.

Local developer LDS Property identified the gap in new housing, securing a site on White Street, directly opposite&nbsp;Woodlands Golf Club Mordialloc. They've recently launched&nbsp;<a href="https://www.apartments.com.au/new-townhouses/wm-residences-mordialloc-102-white-street-mordialloc-vic-3195">WM Residences</a>, just 13 townhouses which they have already started building.

Projects by Buxton Director Heath Thompson, who is selling WM Residences, says the townhouses x that perfect middle ground be

"Mordialloc residents have had limited options to downsize within the suburb, often forcing them to look elsewhere despite long-standing ties to the area," Thompson says.

"With very little comparable new supply coming to market, projects like WM Residences are well placed, particularly as buyers look to capitalise on current conditions amid constrained supply."

[smartcode_project:default project_id=134646 project_image_fid=6109]

The development, designed by regarded architecture firm&nbsp;<a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a>,&nbsp;adopts a deliberately restrained architectural approach, focusing on simplicity, durability and liveability rather than overt design gestures.

The boutique scale is central to the offering. With only 13 three-bedroom residences, each home is configured to prioritise functional layouts and everyday use, supported by private terraces and secure two-car garages.

Ewert Leaf’s design response leans into a calm, neutral material palette. Interiors are defined by oak flooring, white walls and soft finishes, creating a consistent and understated backdrop. The approach avoids trend-driven detailing in favour of longevity, with an emphasis on natural light and spatial clarity.

[smartcode_project:default project_id=134646 project_image_fid=6110]

Beyond aesthetics, the homes are designed to meet contemporary performance expectations. Each residence targets a minimum 6-star energy rating, incorporating double glazing, comprehensive insulation and all-electric Bosch appliances.

The project’s location supports a walkable coastal lifestyle, sitting within close proximity to Mordialloc’s foreshore, Main Street retail strip and the train station. Local cafés and dining venues, including Suburbia Deli and Hendriks Café, are within a short walk, reinforcing the area’s established neighbourhood character.

[smartcode_project:default project_id=134646 project_image_fid=6116]

While <a href="https://www.apartments.com.au/developments/mordialloc-vic-3195">Mordialloc</a> is often defined by its beach and pier, the project taps into other areas of day to day living, offering easy access to local food, casual dining and transport, rather than positioning itself purely as a lifestyle retreat.

WM Residences reflects a continued trend across Melbourne’s coastal suburbs towards smaller-scale, design-led townhouse developments, particularly on infill sites where proximity to amenity is already established.

With construction commenced prior to its market entry, the project aligns with a growing preference among buyers for developments with visible progress and defined delivery timeframes.

[smartcode_project_cta:default project_id=134646]

WM Residences fills gap in Mordialloc townhouse market

Housing Market

<html><body>
Houses in Newcastle, the NSW Central Coast and Coffs Harbour are still at market peak according to the August Property Clock from Herron Todd White.
The locations were at peak of market for houses in July as well, according to HTW.
<a href="https://www.propertyobserver.com.au/images/2017/08/07/Screen%20Shot%202017-08-07%20at%209.38.46%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/08/07/Screen%20Shot%202017-08-07%20at%209.38.46%20AM.png" alt="" width="854" height="555">
 
<div class="page" title="Page 7">
<div class="section">
<div class="layoutArea">
<div class="column">
Herron Todd White said over 50 percent of residential sales in the Lower Hunter in the past financial year being to investors, this region is certainly a hot spot for property investment. 
"The number of investment home loans has dropped nationally over the past year and this trend is predicted to continue due to the regulatory clampdowns that have been imposed," HTW said.
"These regulations and the government’s efforts to cool the housing market especially in major cities would suggest that investment should slow down nationwide. 
</div>
<div class="column">
"This may not be the case in the Lower Hunter however; in fact it will probably buck the trend. 
"Newcastle is still an enticing prospect for investors due its close proximity to Sydney, its affordability compared to the capital cities and an excellent rental market with a current vacancy rate of just 2.3 percent. 
"With Newcastle being a university city there is a high investor involvement in good rental yield suburbs close to the university such as Jesmond and Wallsend. 
"However investors are also looking at inner city and coastal suburbs such as Cooks Hill, Wickham and Adamstown for higher capital gains. 
"Strong rental returns, larger blocks, competitive capital gains and the ability to find low maintenance 2- to 3-bedroom properties for under $500,000 means the region offers plenty of good investment opportunities for those who can’t afford the larger capital cities, especially Sydney."
</div>
</div>
</div>
</div>
</body></html>

j.ballantyne1990-6AQqhLzZaK

Houses in Newcastle, the NSW Central Coast and Coffs Harbour at market peak: HTW Property Clock

<html><body>
Australian dwelling prices rose by a moderate 0.8% m/m in seasonally adjusted terms in July, which was the strongest monthly result since February.
<a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2011.28.35%20am.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/08/01/Screen%20Shot%202017-08-01%20at%2011.28.35%20am.jpg" alt="">
The market remains healthy despite tighter regulation and higher borrowing costs, although auction results do point toward a further cooling in the market in coming months.
APRA’s macroprudential regulation and the subsequent increases in borrowing costs (primarily for investors) have been felt in the market, with annual dwelling price growth slowing to 10.4% y/y, down from the 13% peak earlier in the year.
Interestingly, Sydney prices have slowed markedly, but Melbourne prices have been more resilient and are still 16% higher than a year ago.
<a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2011.28.43%20am.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/08/01/Screen%20Shot%202017-08-01%20at%2011.28.43%20am.jpg" alt="">
As we noted in this morning’s Canadian housing insight, British Columbia’s experience suggests that regulation can indeed slow the housing market, but questions remain over the sustainability of such movements.
Subsequent tightening in Ontario has also had a negative impact on prices in recent months, and we will be watching closely to see if these moves become permanent.
<a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2011.28.51%20am.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/08/01/Screen%20Shot%202017-08-01%20at%2011.28.51%20am.jpg" alt="">
In Australia, weaker auction results in recent months suggest that price growth will continue to ease, especially in Sydney.
But there is no suggestion that prices will materially fall, as per Canada.
Yesterday’s private credit data showed that while investor credit growth has slowed in response to the regulatory changes, there has been an improvement in owner-occupier borrowing.
This suggests that overall sentiment in Australia’s property market remains positive.
<a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2011.29.01%20am.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/08/01/Screen%20Shot%202017-08-01%20at%2011.29.01%20am.jpg" alt="">
Daniel Gradwell is the senior economist for <a href="https://www.anz.com.au/" target="_blank">ANZ</a>.
</body></html>

Australian house prices still solid despite regulation: ANZ's Daniel Gradwell

<html><body>
The worst is behind the Perth property market after a 3-year cyclical downturn where supply outweighed demand amid record-high housing construction and slower population growth according to a new report by Momentum Wealth.
The report, Residential Property Spotlight: Perth found the number of properties for sale in Perth has hit a 2-year low at around 13,600 and building commencements have returned to normal levels after reaching a record high in 2015.
Damian Collins, Momentum Wealth managing director said supply and demand were starting to rebalance, which would help buoy property prices going forward.
“The research report concludes that the Perth market has bottomed and it’s now in a recovery stage,” he said..
“On the supply side, the report shows that the number of properties for sale has hit a 2-year low, meanwhile the amount of new properties being built has returned to average levels after dwelling starts hit a record high in 2015.
“After 3 years of an imbalance, this tightening of housing stock will allow demand to catch up to supply and subsequently will help underpin property price growth going forward.
“The research report explains that although Perth’s population growth has slowed following the end of the resources construction boom, it’s expected to rebound as the city’s labour market continues to strengthen.
"Perth’s unemployment rate had dropped to a 12-month low recently, and was in line with the national average. 
“Add to this the city’s encouraging housing affordability, which is the second-best in the nation only behind Hobart, and the report explains that more buyers will increasingly return to the market as job stability firms and the economy continues to gain momentum.
“As the jobs market continues to adjust in the aftermath of the resources construction boom, we can expect buyer confidence to return to normal levels and strengthen as the local economy diversifies into tourism, agriculture, technology and education."
 Fort more information from Momentum Wealth, <a href="https://www.momentumwealth.com.au" target="_blank">click here</a>.
</body></html>

jonathanchancellor-7SQnKwU6yx

Perth property market recovering

<html><body>
House prices rose in 27 out of the 45 world's housing markets to publish housing statistics for the first quarter of 2017, according to the Global Property Guide.
The Global Property Guide noted European house price rises continue unabated.
Six of the ten strongest housing markets in the global survey are in Europe.
House prices have risen in 17 of the 23 European housing markets for which figures were available during the year to Q1 2017.
Iceland remains the strongest housing market in Europe and second best performer in our global survey, amidst spectacular economic growth.
Nationwide house prices surged 16.01% y-o-y in Q1 2017, the highest increase since Q1 2006.
This surge is attributable to strong demand, coupled with limited housing supply, especially in the capital city of Reykjavik.
<a href="https://www.propertyobserver.com.au/images/2017/07/03/Q1%202017%20Inflation.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/07/03/Q1%202017%20Inflation.jpg" alt="">
Hong Kong was the world's strongest housing market during the year to Q1 2017, despite higher stamp duties for non-first time homebuyers.
China's housing market continues its upward march.
The Philippines also had strong price rises, continuing the pattern of the past six years, amidst continuing economic growth.
Japan, Vietnam, and Taiwan posted more modest house price rises.
Hong Kong's housing market is now accelerating, despite the higher stamp duties for non-first time homebuyers introduced in November 2016.
Residential property prices surged by 17.27% during the year to Q1 2017.
House prices rose 3.93% during the latest quarter.
China continues to experience double-digit house price rises.
In Shanghai the price index of second-hand houses rose by 13.16% during the year to Q1 2017, after y-o-y rises of 21.68% in Q4 2016, 24.86% in Q3 2016, 20.73% in Q2 2016, and 16.99% in Q1 2016.
However, house prices in Shanghai fell by 0.95% during the latest quarter.
Japan's housing market is slowing again, despite a weak economy.
In Tokyo, the average price of existing condominiums rose by 2.93% during the year to Q1 2017.
Quarter on quarter, residential property prices in Tokyo fell 0.81% during the latest quarter.
Vietnam's housing market remains sluggish, despite a booming economy and the recent introduction of the housing laws that allow foreigners and overseas Vietnamese to legally own, sell and transfer real properties.
House prices rose by just 1.13% y-o-y in Q1 2017.
Quarter-on-quarter, house prices fell 1.06% during the latest quarter.
Taiwan's nationwide house prices rose by 0.69% during the year to Q1 2017, in contrast with a y-o-y decline of 7.65% a year earlier.
Quarter-on-quarter, house prices increased 1.65% during the latest quarter.
Other Asian housing markets have lost steam.
House prices fell in four of the ten Asian markets for which figures were available during the year to Q1 2017.
Singapore's housing market is still weak.
House prices fell by 3.45% during the year to Q1 2017, after a 2.35% y-o-y decline during the same period last year. House prices fell by 0.56% q-o-q during the latest quarter.
Thailand's property market continues to lose steam.
Nationwide house prices fell 1.37% during the year to Q1 2017, the second consecutive quarter of y-o-y decline.
Quarter-on-quarter, house prices increased by 0.1% during the latest quarter.
In South Korea the nationwide housing purchase price index fell by 1.35% y-o-y in Q1 2017, in contrast to the rise of 1.81% a year earlier.
House prices fell by 1.1% q-o-q during the latest quarter.
In Indonesia, residential prices in the country's 14 largest cities fell by 0.98% during the year to Q1 2017, the ninth consecutive quarter of y-o-y declines.
House prices fell 0.33% q-o-q during the latest quarter.
The pace of price-rises in the U.S. housing market is slowing gradually, though homebuilder sentiment remains bullish.
Canada meanwhile is in the middle of a house price boom.
The S&amp;P/Case-Shiller seasonally-adjusted national home price index rose by 3.29% during the year to Q1 2017 (inflation-adjusted), the slowest pace since Q3 2014.
House prices increased by only 0.17% during the latest quarter.
The impression of a slowing pace of price rises was supported by Federal Housing Finance Agency's seasonally-adjusted purchase-only U.S. house price index, which rose by 3.37% y-o-y in Q1 2017 (inflation-adjusted), down from 4.87% a year earlier.
The index rose 0.6% q-o-q in Q1 2017.
Canada's house prices are rising strongly, despite repeated market-cooling measures.
House prices in the country's eleven major cities surged by 11.7% during the year to Q1 2017, sharply up from a y-o-y rise of 5.67% the previous year, and the biggest annual increase since Q3 2006.
<a href="https://www.propertyobserver.com.au/images/2017/07/03/Q1%202017%20Nominal.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/07/03/Q1%202017%20Nominal.jpg" alt="">
The average price of new apartments in Greater Santiago fell by 0.37% y-o-y in Q1 2017, in sharp contrast with the annual rise of 6.75% the same period last year.
However on a quarterly basis, house prices actually increased 4.72% in Q1 2017.
Mexico's nationwide house price index rose by a meagre 0.17% during the year to Q1 2017, a sharp slowdown from the y-o-y rise of 5.26% the previous year.
On a quarterly basis, house prices fell 2.24% in Q1 2017.
New Zealand's house price rises have sharply accelerated, amid post-earthquake rebuilding.
The nationwide median house prices rose by 7.26% during the year to Q1 2017, up from 3.63% the previous year.
House prices rose by 4.11% q-o-q during Q1 2017.
</body></html>

House price rises in majority of markets worldwide

<html><body>
Storm clouds are gathering over Australia’s housing market as NSW and Victoria's price growth boom was borrowed from the future and they will have to pay back some of it, according to a recent Del­oitte Access Economics’ report.
Home building will likely shrink further amid “increasing evidence that gravity may soon start to catch up with stupidity in housing markets,” noted Chris Richardson of Deloitte Access Economics in its quarterly outlook.
The report, while summarising the state of the world economy and its impact on Australia, said “the jump from a China boom to a housing price boom sent the nation’s money and momentum from its north and west towards its south and east”. 
The outlook from Deloitte is the latest in a series of warnings about the risks to Australia's economy from the housing market. Earlier, Citi had said property prices could fall by as much as 7 percent as the housing boom unwinds by 2018.
The report picked NSW and Victoria as having “clay feet”, saying a house price boom borrows growth from the future, and both states will have to pay back some of that in the years ahead “as today’s housing prices gradually reconnect with reality”.
It noted that NSW benefited from the shift to lower interest and exchange rates since 2012. 
“But storm clouds are building, as the housing price boom has artificially supported retail and home building. There’ll be an eventual butcher’s bill to pay as those supports reverse,” Richardson noted.
Victoria has benefited as key cyclical drivers – exchange and interest rates – moved in a ‘Victoria- friendly’ direction in recent years. And though Victoria is experiencing its strongest population gains for many a decade but its population and housing cycles may be near their peaks, it said.
In Queensland, Cyclone Debbie and slowing housing construction are current negatives, but Debbie’s impact will be temporary and gas exports are lifting, it said.
The report warned that the “gargantuan Chinese credit surge is finally easing back”, suggesting that “the global economy won’t be doing Australia quite as many favours from 2018 onwards”. 
Amid all the grim warnings of the risks from the housing market, the report said those were the only caveats  on an otherwise solid outlook. 
“Relative to the rest of the rich world, Australia’s economic outlook may not be quite as impressive as it once was, but we are still kicking goals,” it said.
</body></html>

Gravity catching up with stupidity in housing markets: Deloitte report

<html><body>
Over the last financial year (2016-2017), CoreLogic found that combined capital city dwelling values increased by 9.6% which was actually greater than the 8.3% rise over the 2015-16 financial year.
According to research analyst Cameron Kusher, combined capital city dwelling values have now increased over five successive financial years however, prior to these increases there were successive financial years in which values fell (-1.4% in 2010-11 and -3.6% in 2011-12).
He said, “Across the individual capital cities the growth story over recent financial years has been vastly different.”
In most capital cities, the rate of value growth over the past financial year was superior to that over the previous year. The exceptions were Brisbane and Darwin. A number of cities recorded their greatest increases in values in a number of years highlighting that the rate of growth has been accelerating.
<a href="https://www.propertyobserver.com.au/images/2017/07/14/Screen%20Shot%202017-07-14%20at%2010.15.18%20am.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/07/14/Screen%20Shot%202017-07-14%20at%2010.15.18%20am.jpg" alt="">
Mr Kusher said, “Two of the primary factors influencing the rebound in capital gains during the most recent financial year was the increase in investment activity after 2015/16 which saw investment activity slow on the back of changed prudential policies implemented by APRA, as well as successive rate cuts in May and August last year that added further incentive to property buyers.”
With a new round of macroprudential policies announced at the end of March this year, Mr Kusher said, “It’s likely there will be a similar, if not more pronounced slowdown in investment activity across the housing market.”
“Coupled with affordability constraints and higher mortgage rates, we expect the 2017/18 financial year will record a less substantial rate of capital gains that what was seen in 2016/17.”
How the capitals performed over the 2016-2017 financial year: 
Sydney – dwelling values increased by 12.2% over the past year and it was the fifth successive year in which values rose. Value growth was slightly higher than the 11.3% over the previous financial year.
Melbourne – values have now increased for five successive financial years with each of those years progressively seeing a faster rate of value growth. Over the past year, values increased by 13.7% which was their greatest increase over a financial year since 2009-10.
Brisbane – a 2.0% increase in values over the past financial year was down on the 5.3% the previous year. Brisbane values have increased over each of the past five years however, last year was the slowest rate of growth since 2012-13.
Adelaide – the 2.4% rise in values over the past year eclipsed the 2.1% increase the previous year and marked the fifth consecutive financial year in which values increased.
<a href="https://www.propertyobserver.com.au/images/2017/07/14/Screen%20Shot%202017-07-14%20at%2010.15.51%20am.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/07/14/Screen%20Shot%202017-07-14%20at%2010.15.51%20am.jpg" alt="">
Perth – dwelling values have fallen over each of the past three financial years however, the rate of decline has slowed from -4.7% in 2015-16 to -1.3% in 2016-17. At no other time over the past 20 years have values fallen over three successive financial years in Perth.
Hobart – the 6.8% increase in dwelling values over the past financial year was the greatest increase in values over a financial year since they rose by 8.5% in 2005-06.
Darwin – dwelling values have fallen for three successive financial years. The -7.0% fall in values over the year was the largest annual decline since values fell by -12.6% over the 2010-11 financial year.
Canberra – values rose by 9.6% over the last financial year which was the greatest rise in values over a financial year since 2009-10 when values increased by 13.3%.
<a href="https://www.propertyobserver.com.au/images/2017/07/14/Screen%20Shot%202017-07-14%20at%2010.16.02%20am.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/07/14/Screen%20Shot%202017-07-14%20at%2010.16.02%20am.jpg" alt="">
</body></html>

ckusher-ujnxiKuFQs

How did the capital city housing markets perform over the financial year? Cameron Kusher

<html><body>
The September ANZ-Property Council Survey has found sentiment in the housing market has declined noticeably with the the housing market expected to continue to cool through 2017 and 2018.
The survey noted the impact of APRA’s regulation is taking hold as firms report greater difficulty obtaining finance.
<a href="https://www.propertyobserver.com.au/images/2017/07/13/Screen%20Shot%202017-07-13%20at%209.45.14%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/13/Screen%20Shot%202017-07-13%20at%209.45.14%20AM.png" alt="">
David Plank, head of Australian economics, ANZ, said the September quarter ANZ-Property Council survey shows that sentiment is cooling in the property sector.
"This is perhaps not surprising for the housing sector, but somewhat at odds with the strength in non-residential building approvals," he said.
"Expectations of a cooling housing sector are in line with the regulation-induced slowdown evident in slower house price growth and weaker auction results in recent months.
"APRA’s crackdown on the investor segment has seen borrowing costs rise and the availability of finance tighten.
"As a result, firms are reporting a softer outlook for construction activity and prices over the next 12 months, which is in keeping with ANZ’s view.
"But it’s not all bad news.
"Despite a softer outlook for economic growth, firms continue to report solid demand for labour, suggesting that employment growth will remain positive.
"The survey also provides further evidence that the mining states have moved past the bottom of their mining boom adjustment.” 
<a href="https://www.propertyobserver.com.au/images/2017/07/13/Screen%20Shot%202017-07-13%20at%209.46.46%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/13/Screen%20Shot%202017-07-13%20at%209.46.46%20AM.png" alt="">
 
<div class="page" title="Page 2">
<div class="section">
<div class="layoutArea">
<div class="column">
The survey said the outlook for Australia’s property sector has eased recently, but remains at solid levels. 
"The quarterly decline was led by a softening outlook in New South Wales and Victoria," the survey said.
"The drop in sentiment in this survey does not ring alarm bells, given that sentiment across most regions remains higher than it was a year ago. 
"The mining states have been the key drivers of this improvement, with confidence in Western Australia bumping around the highest levels in three years, while Queensland’s recovery from the trough of 2016 continues. 
<a href="https://www.propertyobserver.com.au/images/2017/07/13/Screen%20Shot%202017-07-13%20at%209.56.07%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/13/Screen%20Shot%202017-07-13%20at%209.56.07%20AM.png" alt="">
<div class="page" title="Page 3">
<div class="section">
<div class="layoutArea">
<div class="column">
"Survey respondents suggest that the outlook for the housing market is softening, with a variety of indicators pointing toward a weaker market going forward.
"Construction activity, capital values and the forward-work schedule are all expected to ease over the coming 12 months. Staffing levels in the housing sector are also expected to ease, in contrast to the more positive outlook for the property sector overall.
<a href="https://www.propertyobserver.com.au/images/2017/07/13/Screen%20Shot%202017-07-13%20at%2010.01.44%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/13/Screen%20Shot%202017-07-13%20at%2010.01.44%20AM.png" alt="">
"The sector has started to cool in recent months, with Sydney house-price growth slowing to 12 percent y/y in May, from 20 percent y/y just two months earlier.
"Similarly, monthly building approvals have fallen around 15 percent from the peak a year ago. It is increasingly apparent that the tighter macroprudential regulation from APRA is having a negative impact on the industry.
"The additional regulation is resulting in a continual worsening of the availability of debt finance. While tighter funding conditions are being reported across all sectors of the property market, the impact has been most pronounced in the residential segment.
<a href="https://www.propertyobserver.com.au/images/2017/07/13/Screen%20Shot%202017-07-13%20at%2010.12.36%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/13/Screen%20Shot%202017-07-13%20at%2010.12.36%20AM.png" alt="">
"As a result, only 37 percent of respondents expect house prices to rise over the next 12 months, and 31 percent expect construction activity to rise, down from 49 percent and 38 percent respectively three months ago.
"Similar to the housing segment, all retail indicators softened in the September survey.
"Both capital value and construction activity expectations fell to the lowest levels on record, reflecting the fact that the industry faces a number of challenges. Only a net 10 percent of respondents expect retail property values will rise over the next 12 months, down significantly from 44 percent a year ago.
"Household spending remains subdued, in line with wages bumping around historically low growth rates.
<a href="https://www.propertyobserver.com.au/images/2017/07/13/Screen%20Shot%202017-07-13%20at%2010.15.01%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/13/Screen%20Shot%202017-07-13%20at%2010.15.01%20AM.png" alt="">
"In addition, the large list of global retailers that are either ramping up their presence in Australia or preparing to enter, is putting significant downward pressure on retailers’ margins. An additional headwind going forward is likely to be the expected slowdown in house price growth.
"Significant wealth increases over recent years have supported consumption through a period of low income growth, but slower house price growth will lessen this support. The retail sector has already lost 20k jobs nationwide over the past 12 months, and it is difficult to see a significant reversal of this trend. "
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</body></html>

Housing market outlook softening: ANZ, Property Council

<html><body>
CoreLogic's Tim Lawless gives the June national housing market update.
<iframe src="https://www.youtube.com/embed/56cEyNnhJOw" frameborder="0" width="450" height="253"></iframe>
</body></html>

jrobinson-rf4aSBido9

CoreLogic's Tim Lawless June 2017 national housing market update

<html><body><div class="page" title="Page 1">
<div class="layoutArea">
<div class="column">
GUEST OBSERVER
Australia’s housing cycle has been largely driven by the use of the RBA’s 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 mostly been a good story.
The housing construction boom has helped to fill the growth gap left by falling mining investment. It has also helped to reduce a housing undersupply that had accumulated. Not many houses were built during the mining boom.
<a href="https://www.propertyobserver.com.au/images/2017/07/06/Screen%20Shot%202017-07-06%20at%2010.46.59%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/06/Screen%20Shot%202017-07-06%20at%2010.46.59%20AM.png" alt="">
The housing price boom has also presented some challenges. National housing prices have risen 50% since mid-2012 and much of the rise has been driven by rising household debt. This has reduced housing affordability and also 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 6% in Perth, 11% in Adelaide, and 21% in Brisbane, where the mining retreat has had its biggest effects. In contrast, Melbourne and Sydney prices have risen 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.
These fundamental factors largely explain the price boom and, as a result, we do not judge it to be a bubble.
Nonetheless, we expect these markets to cool in 2018 as we forecast supply to gradually catch up to demand, continued tight prudential settings, a pullback in the foreign bid (partly due to new taxes), and the RBA to lift its cash rate from early 2018. We see national housing price growth slowing from 8-10% in 2017 to 3-6% in 2018. 
Price boom is largely in line with fundamentals
Australia has had strong housing price growth in recent years (Chart 1). This has raised questions among some observers about whether Australia has a housing bubble. However, in our view, the weight of evidence suggests that this ramp up is largely justified by fundamentals.
At a national level, demand has been supported by low interest rates, strong population growth, and foreign demand. At the same time, despite a significant ramp up in housing construction in recent years, our estimates still suggest aggregate housing undersupply (Chart 2). On the supply side, it is important to recall that during the mining boom very little housing was built and population growth was strong.
As a result, Australia accumulated a significant housing undersupply in the earlier period. Chart 2 updates our estimates to include the latest data from the 2016 census. It shows that the process of returning to balance in the housing market is happening at a slower pace than previously thought, due to faster population growth (for earlier estimates see Downunder Digest: Australia’s housing supply ramp up, 9 September 2015).
<a href="https://www.propertyobserver.com.au/images/2017/07/06/Screen%20Shot%202017-07-06%20at%2010.48.07%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/06/Screen%20Shot%202017-07-06%20at%2010.48.07%20AM.png" alt="">
At a national level, a key reason for rising housing prices has been housing undersupply. This also suggests that a significant fall in Australian housing prices, as occurred in the US and Spain during the Global Financial Crisis, is unlikely, given that, in contrast to those countries, in Australia there is little evidence of a national housing oversupply.
Where supply has caught up, prices have fallen
Another element that re-assures us that housing price developments broadly reflect fundamentals are the regional patterns. As we have pointed out previously, Australia has many housing markets and they are affected by different forces (see Downunder Digest: Australia’s many housing markets in 2017, 25 November 2016). What is clear from the numbers is that housing price growth has been high where strong demand has been met by insufficient supply and, likewise, price growth has been weak where the market shows signs of oversupply.
Although there has been a national undersupply of housing on our estimates, this masks differences across the regions. In New South Wales and Victoria, our estimates suggest that construction has barely kept up with population growth, let alone run down the accumulated undersupply (Chart 3).
While growth in dwellings has just overtaken population growth in New South Wales, there was a significant undersupply accumulated over previous years, which suggests a still significant undersupply. For Victoria, the 2016 census data, released in June 2017, saw an upward revision to population growth, suggesting that the overall housing market is tighter than previously thought. These two states are driving the national undersupply.
By contrast, strong rates of housing construction in Queensland and Western Australia have coincided with sharply slower population growth, as the mining sector has been in retreat (Chart 4). In Western Australia, the housing market looks oversupplied, while in Queensland, any shortfall created by strong population growth during the mid-2000s is rapidly being worked off. These supply and demand trends appear to have had significant implications for housing prices. In Sydney and Melbourne housing prices have continued to show double-digit price growth overall (Chart 5 and 6). Meanwhile, the Perth and Brisbane markets have been demonstrably weaker, with housing prices declining in many segments (Chart 7 and 8). 
<a href="https://www.propertyobserver.com.au/images/2017/07/06/Screen%20Shot%202017-07-06%20at%2010.49.08%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/06/Screen%20Shot%202017-07-06%20at%2010.49.08%20AM.png" alt="">
Even within the various regional markets, supply and demand fundamentals seem to have driven differences in price behaviour. Much of the increase in supply over recent years has been driven by strong rates of building of attached dwellings (mainly townhouses and apartments/units), particularly in Melbourne and Brisbane. As a result, unit prices have fallen in these markets, while detached house prices have continued to rise, as the boost to supply has been much weaker. This effect has been particularly stark in Melbourne, where the supply of city-centre apartments has grown strongly and seemingly kept a lid on price growth.
In Adelaide, housing price growth has been weak as the end of the mining boom weighed on South Australia (Chart 9). Canberra and Hobart have been buoyed by strong demand and weaker supply. In Hobart, much of the pick-up seems to reflect catch-up as the city is looking more affordable given strong price gains elsewhere.
<a href="https://www.propertyobserver.com.au/images/2017/07/06/Screen%20Shot%202017-07-06%20at%2010.50.03%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/06/Screen%20Shot%202017-07-06%20at%2010.50.03%20AM.png" alt="">
Tighter prudential settings are slowing lending
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. As we have shown in other work, our view is that the tightening of lending standards over the past couple of years makes it unlikely that any misallocation of credit has been widespread enough to be a systemic risk (Downunder Digest: How worrisome is Australia’s high household debt?, 16 May 2017). This work also shows that although housing prices are high relative to incomes, they are not exceptionally so and the high house price to income ratio can be largely explained by supply side fundamentals. In addition, while overall household debt has risen to high levels, the cost of servicing that debt is modest by historical standards due to low interest rates.
The tightening of prudential settings over recent years is also likely to be contributing to a pullback in activity in some parts of the housing market. A range of actions undertaken by the prudential regulator over recent years has already seen investor mortgages become more expensive and harder to come by, leading to a marked slowdown in investor credit growth (Chart 10).
These prudential tightening measures have included a requirement that banks grow their investor mortgage portfolios by less than 10% a year (introduced in 2015) and a recent limit on interest-only mortgages, which make up the majority of investor lending and are now not allowed to make up more than 30% of new lending. Alongside these overt measures, the regulator has also increased its micro-prudential scrutiny of banks’ mortgage lending.
The result of these various measures has been increased mortgage rates for investor lending, alongside other rationing measures such as banks no longer giving mortgages for properties in certain neighbourhoods where supply is growing strongly, or banks no longer lending to households only backed by overseas income (Chart 11).
<a href="https://www.propertyobserver.com.au/images/2017/07/06/Screen%20Shot%202017-07-06%20at%2010.50.58%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/06/Screen%20Shot%202017-07-06%20at%2010.50.58%20AM.png" alt="">
Both credit growth and mortgage approvals suggest that there was a sharp slowdown in investor lending in 2015, when the initial 10% limit was introduced (Chart 12). Then lending picked up over most of 2016, before slowing more recently as settings were tightened further. Up until now though, slower lending to investors has largely been offset by increased lending to owner-occupiers. Overall housing credit growth has been pretty steadily at 6.5-7.0% y-o-y since early 2016. That is only a slight slowdown from the 7.5% growth recorded over 2015.
Going some way to explaining the relatively modest impact of tighter prudential settings is the fact that interest rates have generally been falling; variable owner-occupier mortgage rates are currently around 35bp lower than they were at the end of 2015. However, this is likely to be the bottom of the interest rate cycle and we anticipate expectations of higher rates will build over the second half of 2017. This would also likely mark a turning point for the housing market.
Foreign demand has pulled back
Another factor that has supported housing price growth in Australia has been foreign demand. This has been particularly evident in demand for apartments in the major cities. Many observers have pointed to foreign demand as a key driver of housing price growth in recent years, although there is still considerable debate about how much impact foreign demand has had.
In Australia, non-resident buyers have to get approval for property purchases from the Foreign Investment Review Board and the number of these approvals surged from around 10,000 in 2012-13 to 40,000 in 2015-16 (Chart 13). However, although growth in these numbers has been quite strong, even at 40,000 dwellings this is still only around 10% of housing turnover over that period. Recent comments by the Australian Treasury Secretary, John Fraser, in a speech, also indicated that approvals have fallen back to around 15,000 this financial year (to date).
<a href="https://www.propertyobserver.com.au/images/2017/07/06/Screen%20Shot%202017-07-06%20at%2010.51.53%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/06/Screen%20Shot%202017-07-06%20at%2010.51.53%20AM.png" alt="">
Foreign demand appears to have pulled back and possibly quite significantly. This could be due to a number of factors, including tighter capital controls in China, reduced access to Australian mortgages, or increased stamp duty imposed on foreign buyers by various State governments. New South Wales, Victoria, and Queensland have introduced additional stamp duty levies on foreign housing purchases, which they have just increased to 8%, 7%, and 3% of the property sale price, respectively. Weaker foreign demand could also reflect the recent fall in the RMB, which has made Australian housing more expensive in Chinese currency terms (Chart 14).
However, despite the pullback in foreign investor approvals the Sydney and Melbourne housing markets have continued to experience strong price growth. The impact of lower overseas demand may, though, have contributed to weaker apartment price growth. The full impact may also only be felt further down the line, as many foreign purchasers buy off plan, meaning a significant delay between the purchase and settlement.
We are still forecasting a slowdown
For quite some time, we have been forecasting the housing market to cool (see Downunder Digest: Australia’s many housing markets in 2017, 25 November 2016). Although the Adelaide, Brisbane, and Perth markets and the Melbourne apartment market have largely cooled as expected, the Sydney market and the Melbourne detached market have shown more resilience. We attribute this mostly to stronger-than-expected demand, partly due to higher population growth than forecast and continued supply constraints in these markets.
Nonetheless, we still expect some cooling of these markets over the next 12-18 months. More apartment supply is expected in Sydney and Melbourne, which should help meet demand. We also expect foreign demand to continue to be somewhat curtailed by the increases in local taxes and the weaker RMB. Our central case also sees the RBA beginning to lift its cash rate from early 2018, which would be expected to help cool the housing market (see The RBA Observer: Not quite yet, but hikes are coming, 30 June 2017). We are forecasting national housing price growth to slow from 8% to 10% in 2017 to 3% to 6% in 2018 (Table 15). 
expect Perth housing prices to begin to stabilise as the mining sector gets a modest lift from higher commodity prices.
Housing affordability challenges
The housing price ramp up in Sydney and Melbourne in recent years has reduced affordability of housing in these markets and presents a policy challenge. Unlike previous housing market upswings, first home buyer activity has not lifted significantly this time around. Instead, much of the increased activity has been amongst housing investors. Home ownership amongst younger households is falling.
Given the demand and supply imbalance in recent years it makes sense that Sydney and Melbourne have housing affordability challenges. These are global cities that often rank in the Top 10 in surveys of ‘liveability’. For example, Melbourne has been ranked the world’s most liveable city for six years in a row (2011-16) in the Economist Intelligence Unit’s Global Liveability Ranking. Unlike Perth and Adelaide, which also rank highly in these surveys, the end of the mining boom has had limited negative impact on Sydney and Melbourne.
At the same time, housing supply has not kept pace with strong demand. Housing supply has been constrained by regulations on land release and urban infill. Approvals processes for dwellings also tend to be quite long and onerous, particularly in Sydney, where supply has been most constrained recently. Under investment in urban infrastructure has also meant long travel times into Sydney and Melbourne from outer suburbs, increasing demand for the inner suburbs and thus driving up housing prices in these areas.
<a href="https://www.propertyobserver.com.au/images/2017/07/06/Screen%20Shot%202017-07-06%20at%2010.52.49%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/06/Screen%20Shot%202017-07-06%20at%2010.52.49%20AM.png" alt="">
The Melbourne apartment building boom offers an example of how to improve housing affordability by building a large amount of affordable dwellings. While Melbourne detached house prices have risen 65% over the past five years, apartment prices have only increased 20% and have been broadly flat over the past year. Boosting supply is likely to be the best solution to improving housing affordability in Australia’s major cities.
Little negative wealth effect is expected
A concern among some observers is that a slowdown in housing price growth could prompt weaker growth in household consumption due to a negative wealth effect. We are more sanguine about this risk. As we have shown recently, there is little evidence of a positive wealth effect from the recent housing boom, so we expect that any negative wealth effect, from a slowdown in housing price growth, may be equally suppressed (see Downunder Digest: Australia’s shifting consumer, 27 June 2017).
Unlike during the early 2000s housing price and housing credit boom, households have been injecting equity into their dwellings, rather than withdrawing it to boost consumption. At the same time, the household saving rate has also stayed high in the states that have had the largest housing price gains, New South Wales and Victoria, which, again, suggests few signs of a positive wealth effect.
Paul Bloxham is the Chief Economist for HSBC and Daniel Smith is the Economist for HSBC. They can be contacted <a href="https://www.hsbc.com.au/" target="_blank">here</a>.
 
</div>
</div>
</div></body></html>

Australian housing more boom than bubble: HSBC

<html><body>
The latest housing finance and housing credit data confirm that the level of activity from investors in the housing market is slowing.
Australian mortgage lenders have been rationing credit to the investor segment and lifting mortgage rates and these changes are starting to bite with investor demand now slowing. It remains to be seen if this slowdown lasts or, if once these limits are eased the investor segment of the market comes back to residential property.
<a href="https://www.propertyobserver.com.au/images/2017/06/20/chart-1-4.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/06/20/chart-1-4.jpg" alt="">
Since August 2015, Australian mortgage lenders have been charging interest rate premiums for investors.  While standard variable mortgage rates for owner occupiers were recorded at 5.45% in August 2015, the same mortgage type for investors had a mortgage rate of 5.75% or a 30 basis point premium.  Since August 2015, the cash rate has fallen by 50 basis points however, mortgage rates have not shown the same decline. 
At the end of May 2017, standard variable mortgage rates were recorded at 5.3% for owner occupiers and 5.8% for investors.  Despite two 25 basis point interest rate cuts since August 2015, owner occupier mortgages rates are only 15 basis points lower while investor mortgage rates are 5 basis points higher and have a premium of 50 basis points compared to a typical owner occupier mortgage.
The mortgage rate premium for investors appears to finally be biting into the market with weakness in both total investor credit and investor housing finance commitments.  The April 2017 lending aggregates data from the Reserve Bank (RBA) showed that investor credit rose by 0.55% over the month, its lowest monthly increase since August 2016. 
At the same time, April 2017 housing finance data shows there was $12.6 billion in investor housing finance commitments over the month, the lowest value since September 2016.  Since August and September of last year, standard variable mortgage rates for investors have risen by 30 basis points compared to a 5 basis point increase for owner occupiers.
<a href="https://www.propertyobserver.com.au/images/2017/06/20/chart-2-4.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/06/20/chart-2-4.jpg" alt="">
There are individual states and territories in which a slowdown in mortgage demand by investors will have more of an impact, namely New South Wales and Victoria.
<a href="https://www.propertyobserver.com.au/images/2017/06/20/chart-3-3.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/06/20/chart-3-3.jpg" alt="">
Tasmania is the only state or territory where the value of lending to housing investors is currently rising however, in terms of the value of lending to investors, New South Wales and Victoria account for a substantial majority of overall lending. 
This is partly a function of higher housing costs in these two states, nevertheless, New South Wales accounted for 49.3% of all investor lending nationally in April 2017 with Victoria accounting for 27.4%. A pull-back in lending to investors is inherently likely to have more of an impact on the New South Wales (Sydney) and Victorian (Melbourne) housing markets.
<a href="https://www.propertyobserver.com.au/images/2017/06/20/chart-4-3.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/06/20/chart-4-3.jpg" alt="">
The potential impact on the New South Wales and Victorian housing markets of an investor slowdown is further highlighted in the final charts.  Excluding refinances (which are also trending lower) investors accounted for 55.3% of mortgage demand in New South Wales in April 2017 and 46.8% in Victoria.  In all other states and territories investors accounted for less than 40% of mortgage demand in April 2017, with the proportion trending lower over recent months in most regions.
It is anticipated that investor demand will continue to slow over the coming months.  Lenders are continuing to re-price mortgage rates for investors and we are yet to see the full impact of the policy changes designed to slow the level of interest-only lending.  With investor demand likely to continue to fade, it is expected that this will also contribute to a further slowing of the rate of value growth in the Sydney and Melbourne housing markets where investor demand has been significantly greater than it has been elsewhere.
A reduction in the pace of capital gains will add further disincentive to investors.  Considering that rental yields in Sydney and Melbourne are close to record lows, we can assume most investors are focused on the prospects for capital growth and relying on a negative gearing strategy to offset the cash flow losses.  If investors anticipate the prospects for capital gains have dissipated we may see investment demand deflect to those markets where the growth cycle is less mature than Sydney and Melbourne’s and where rental yields haven’t been depleted as substantially.
Cameron Kusher is head of research for CoreLogic. You can contact him <a href="https://blog.corelogic.com.au/about/">here</a>.
</body></html>

Housing Market

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News

Housing Market

Editor's Picks

Receive the latest news stories to your inbox

Have something to contribute?

Developments

New apartments

New townhouses

News