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

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GUEST OBSERVER
The latest available China housing data reports that the pick up in house price momentum in August was sustained in September, across both new and existing markets.
For new housing, 63 cities reported price gains in the month, broadly in line with August’s 64 and the recent peak of 65 in April 2016. Emphasising the breadth of the improvement in 2016, a year ago only 37 cities reported price gains.
The secondary market improved further in September with 60 cities reporting price gains in the month. That contrasts to 57 in August 2016; 54 in March 2016; and 40 a year ago. Only 7 cities are currently experiencing price declines – the best result for this metric since end-2013.
<a href="/images/2016/10/24/Screen%20Shot%202016-10-24%20at%2012.24.07%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/24/Screen%20Shot%202016-10-24%20at%2012.24.07%20PM.png" alt="">
Investigating annual price growth by tier, 2016’s key themes endured in September. Price growth of near 30 percent/yr continues to be seen on average in tier- 1 cities, across both new (29.4 percent/yr) and existing (33.0 percent/yr) markets.
Also, the tier-2 averages gained further momentum, from 9.1 percent/yr to 11.1 percent/yr for new and 7.6 percent/yr to 9.0 percent/yr for existing. Meanwhile, tier-3 price growth remains fickle, new and existing house prices up 6.6 percent/yr and 4.4 percent/yr respectively.
<a href="/images/2016/10/24/Screen%20Shot%202016-10-24%20at%2012.17.44%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/24/Screen%20Shot%202016-10-24%20at%2012.17.44%20PM.png" alt="">
As we have previously highlighted, the most interesting aspect of the price data is not the tier averages, but rather the city-by-city detail.
Herein we continue to see strong evidence of speculative demand, with a wide spectrum of price activity by city.
In tier-1, against the 29 percent/yr average result for new housing: Shenzhen price growth has slowed from near 63%yr in April to 34 percent/yr currently; over the same period, price growth has accelerated from around 17 percent/yr to 27 percent/yr and 23 percent/yr respectively in Beijing and Guangzhou. Shanghai has been stable near 30 percent/yr.
In tier-2, against the 11 percent/yr average: Hefei and Nanjing are currently seeing price growth of 46 percent/yr and 40 percent/yr, while many other cities such as Dalian are broadly flat year on year.
Similarly in tier-3, against its 6.6 percent/yr average for new housing, annual price growth varies between 47 percent/yr in Xiamen to –4.5 percent/yr in Jinzhou.
Clearly, cities with close ties to tier-1 and/or new industry are attracting investors (and owner occupiers); but elsewhere, demand is lacking.
<a href="/images/2016/10/24/Screen%20Shot%202016-10-24%20at%2012.19.11%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/24/Screen%20Shot%202016-10-24%20at%2012.19.11%20PM.png" alt="">
Given the disparate conditions across the nation, the divergence between sales and starts is likely to persist as significant inventory of unsold new homes lingers in many jurisdictions.
Indeed, even in areas where price growth has been strong, developers have cause to manage new supply carefully so as to see prices sustained at high levels. This is particularly true if authorities impose further restrictions in ‘overheated’ markets.
<a href="/images/2016/10/24/Screen%20Shot%202016-10-24%20at%2012.20.27%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/24/Screen%20Shot%202016-10-24%20at%2012.20.27%20PM.png" alt="">
As a consequence, while it has improved through 2016, growth in real estate investment is likely to remain soft relative to history, providing only modest support to manufacturing and commodity prices.
<a href="/images/2016/10/24/Screen%20Shot%202016-10-24%20at%2012.21.44%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/24/Screen%20Shot%202016-10-24%20at%2012.21.44%20PM.png" alt="">
As a final point, note that the strong price gains witnessed over the past year pose a risk to services activity into 2017. Chinese households remain willing to invest in property despite the higher cost, but doing so could crimp their ability and willingness to spend elsewhere. This is particularly true if job creation in the construction sector and related areas disappoints. 
<a href="/images/2016/10/24/Screen%20Shot%202016-10-24%20at%2012.22.47%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/24/Screen%20Shot%202016-10-24%20at%2012.22.47%20PM.png" alt="">
 
Elliot Clarke is senior economist, Westpac and can be contacted <a href="https://www.westpac.com.au/" target="_blank">here</a>.
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jchancellor-FAypfDUnLy

Pick up in China housing data sustained: Westpac's Elliot Clarke

You don’t address housing affordability by crashing the housing market: Scott Morrison

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<img src="https://counter.theconversation.edu.au/content/67536/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Treasurer Scott Morrison has outlined his vision for increasing home ownership at a speech to the Urban Development Institute of Australia.
The Treasurer acknowledged it’s hard for first home buyers to get into the Australian housing market and suggested a number of barriers to increasing housing supply. We asked an expert panel to analyse these and suggest what other ideas they might have for easing the problem.
What the states need to do
Nicole Gurran, Professor of Urban and Regional Planning, University of Sydney
The Treasurer’s comments about the planning system are out of date. A decade of state reforms to alleviate supply constraints have enabled the inner city apartment boom, and generated a steady supply of outer suburban land to build on. 
With housing construction at record numbers, state planning systems are clearly able to respond to rising market demand. Putting aside questions about the location and quality of new housing, increased construction hasn’t delivered cheaper homes, nor does the Treasurer seem to want that. In fact, he spends much of his speech cautioning about risks to the housing market from the removal of negative gearing or from an over-supply of apartments.
With our housing system so dependent on the private sector, the real question is how to keep construction running when the market cools. If Treasurer Morrison is truly concerned about affordability he should also be asking how to secure affordable homes as part of new development, without lowering values across the established market.
Providing incentives for developers to provide affordable homes is an obvious solution and one that the property industry itself has been lobbying for. This entails government support to drive investment towards affordable rental housing and to enable a new range of housing products such as shared equity and low cost home ownership.
At present, only around 2 percent of new homes are delivered by affordable and non profit housing providers. A larger affordable housing sector, assisted by government to draw on innovative sources of institutional finance, would be able to sustain new housing construction, irrespective of the market cycle.
The commonwealth should negotiate with states so that infrastructure investment and land release is closely linked to mandatory targets for including affordable housing. This way opportunities for affordable homes can be secured before land values rise. This will help stabilise housing production while boosting the supply of well-located and affordable homes. 
Cutting the cost of infrastructure to go with housing
Robin Goodman, Deputy Dean of Sustainability at the School of Global, Urban and Social Studies and Joe Hurley, Senior Lecturer, Sustainability and Urban Planning, RMIT
The planning, cost and provision of adequate infrastructure may add to the cost of housing. But the real cost of housing must include the ongoing costs of living. These will be greatly increased if there is little or no public transport, schools, services and jobs in anywhere near close proximity. 
The growing difference between expensive and unaffordable locations and prices on the urban fringe, shows people buying houses value infrastructure and services and the access to opportunities these provide. Morrison’s view of the costs of infrastructure as impeding housing supply, suggests we should spend less on infrastructure. Were we to do this we would be significantly adding to this growing inequality which will have implications for both liveability and prosperity. 
The way infrastructure is funded at the moment is partially through contributions from property developers and some of this will be passed on to the home buyer, increasing purchase costs. Governments fund some infrastructure directly however the current federal government has been more prepared to do this with freeways and roads, but less so with public transport and facilities. Housing affordability is a broader problem which involves the costs of both buying and renting and the ongoing costs of living within a house and a city. 
Rather than reducing the funding of infrastructure, or absolving developers of making some contribution towards it, the real issue is accurately targeting investment to where it most needed. The most urgent need for new outer urban areas is for adequate public transport to begin to give all residents more equal access to jobs and opportunities. 
Releasing more land and relaxing regulations
Steven Rowley, Associate Professor of Economics and Property, Curtin University Business School
The core driver of new housing supply is profit and that profit is a result of demand (the revenue from sales) and cost (the physical construction, land, finance, taxes). There are many barriers to this profit and hence new housing supply. A solution often put forward, and we heard again from the treasurer, is removing land use planning regulations that unnecessarily impede housing supply. 
Sounds sensible, but it’s no good just randomly releasing land and expecting development to occur. Policy makers must understand that more land does not necessarily lead to more development. For example, why would developers flood a local market with new product of a similar type; it will just reduce prices and hence profitability.
Infill development, where development occurs within existing built up areas, was barely mentioned in the speech. States are grappling with the challenges of increasing proportions of new dwellings on infill sites in an attempt to tackle urban sprawl. Large scale, coordinated infill projects can deliver open space and amenity, adding quality to our existing urban areas. This scale will be difficult to achieve without public sector intervention.
Challenges abound in the infill space and include community opposition, upgrades to existing infrastructure and allowing for housing diversity (attached houses and low rise apartments, not just high density towers). If the government wants to make a difference to the supply of dwellings, in places where many people want to live, they need to facilitate development at scale and deliver significant affordable housing contributions on government-owned land. This will not be popular with local communities and local council members, but is essential in delivering the diverse housing essential in our cities. 
Planning where to put more houses
John Daley, CEO of The Grattan Institute
Treasurer Morrison is right, planning is the biggest lever to make housing more affordable. Current rules make it reasonably easy to build apartments in the CBD – so that is what we’re getting. But it also makes it very difficult to subdivide and create extra residences in the middle rings of our capital cities, up to 20km out of the CBD.
It’s important that new supply is focused on the inner and middle rings (2-20km out of the CBD) of our large capital cities. New developments on the edge tend to be a long way from where additional jobs are being created. Over half of the net growth in jobs in Melbourne, Sydney and Brisbane in the last five years was within 10km of the CBD. 
<a href="/images/2016/10/25/image-20161024-26504-uo2gpc.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/25/image-20161024-26504-uo2gpc.png" alt="">
<h4>Grattan Institute, Author provided</h4>
Apartments in the CBD are never going to be enough to fill the demand for accessible housing – supply is limited by a very small area of land. There isn’t much governments can do about where employers decide to create jobs. But governments can set planning rules so that housing is built appropriately.
But unfortunately while Treasurer Morrison was spruiking the benefits of making it easier to subdivide and release land, he glossed over the impact on the prices of existing homes. And simultaneously he went out of his way to argue that reforms to negative gearing would both do nothing for housing affordability and lead to a crash in house prices.
Not all of these things can be true. By definition, if housing is more affordable, then prices are lower than otherwise. It would be more honest to recognise that changes to negative gearing will have less impact on home prices – and affordability – than to planning. On the other hand, changes to negative gearing will also reduce distortion in investment decisions, discourage excessive private sector leverage, and contribute to budget repair – outcomes which should all warm the cockles of a treasurer’s heart.
<div class="hover tooltip bottom">John Daley is chief executive officer, Grattan Institute and can be contacted <a href="https://theconversation.com/profiles/john-daley-1870" target="_blank">here</a>. Joe Hurley is senior lecturer, Sustainability and Urban Planning, RMIT University and can be contacted <a href="https://theconversation.com/profiles/joe-hurley-157161" target="_blank">here</a>.; Nicole Gurran is professor - Urban and Regional Planning, University of Sydney and can be contacted <a href="https://theconversation.com/profiles/nicole-gurran-759" target="_blank">here</a>. Robin Goodman is professor of Urban Planning, Deputy Dean, Sustainability and Urban Planning, RMIT University and can be contacted <a href="https://theconversation.com/profiles/robin-goodman-213975" target="_blank">here</a>. Steven Rowley, is director, Australian Housing and Urban Research Institute, Curtin Research Centre, Curtin University and can be contacted <a href="https://theconversation.com/profiles/steven-rowley-201914" target="_blank">here</a>.</div>
<div class="hover tooltip bottom"> </div>
<div class="hover tooltip bottom">All are authors for The Conversation.</div>
 
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Solutions beyond supply to the housing affordability problem

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GUEST OBSERVER
Despite a relatively healthy supply-side picture for the general housing market, the expected trickle down of housing opportunities to low-income households in Australia has failed to materialise.
The UK Department for Communities and Local Government boasted this year of a seven-year high in construction starting on new houses; in the 12 months to December 2015, there were a little over 143,500 housing starts. With a population of 54.3 million, the English housing sector is adding one new dwelling for every 380 persons. 
Over the same period there were 231,411 housing approvals in Australia. With a population of 23.5 million in 2014, the Australian housing sector is adding one new dwelling for every 102 persons.
The supply of new housing has matched Australian population growth in recent times. The figure below profiles growth of the housing stock between 2006 and 2014, and compares it to population growth over the same period Australia-wide, as well as across the state capitals, Canberra and Darwin. 
Growth in the national housing stock has kept pace with population growth for almost a decade.
However, the picture differs across state and territory capitals. In Perth and Sydney, increases in the housing stock are insufficient to match the increase in these state capitals’ populations. But there are different patterns underlying this common outcome.
In Perth, population growth was exceptionally strong. It was faster than any other city: its population soared (by 2014) to more than 28% above 2006 levels. Such rapid growth would stretch the capacity of most housing construction sectors, even in the absence of any supply-side impediments. 
Sydney’s population growth (at 14%) is below the average across all cities (17%). Despite this relatively low increase in its population, housing supply failed to produce a matching increase in the housing stock. 
<h2>A housing system under pressure</h2>
The balance between growth in population and expansion in housing stock through new housing supply is thought to be relevant to an understanding of housing affordability pressures. New housing construction that matches population growth should ease price and rent pressures, where all else is equal. 
Although most new housing is built and sold in the higher price ranges and therefore purchased by higher-income groups, the housing they vacate will fall in price. It therefore becomes accessible to middle-income groups. And, as they shift upmarket, the housing they move out of falls in price and becomes accessible to lower-income households. 
Eventually, this filtering process opens up new opportunities for the homeless.
Housing affordability is generally thought to be worsening, especially for low-income households. Homelessness numbers remain stubbornly high. And official figures for June 2015 reveal there were 154,000 households on state housing authority waiting lists for public housing.
It is likely that the length of these waiting lists underestimates the need for public housing. We have modelled the income rules determining eligibility for public housing, and estimate that there are nearly 900,000 households satisfying these income eligibility criteria. 
More than two-thirds of these households (650,000) contain one or more persons who:
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are aged 65 and over; 
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have a long-term health condition or disability; or
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have children aged under 15.
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These are people who value the security of tenure that has typically been offered by public housing, but who are unlikely to be able to buy their own homes. There are nearly 1 million individuals in these households – a group that is currently ill-served by Australia’s housing system. 
<h2>Housing solutions through private-public partnerships</h2>
The need for new housing solutions for these low-income groups is clearly a pressing requirement. However, raising the capital funding to expand public or social housing to meet their housing needs seems improbable. 
Secure leasing is a private-public partnership option that offers a rent premium to those private landlords willing to offer long-term leases to those satisfying the income tests for public housing. They would also be either of pension age, disabled or caring for children. 
In the unregulated Australian rental housing market, leases are almost always short term. This gives landlords the option to realise investments in the near term. Hence, a long-term lease proposal requires Australian governments to offer landlords a rent premium to compensate them for the money sacrificed when they enter into a long-term arrangement.
Consider a reform scenario in which landlords are given an incentive to offer five-year secure leases to households eligible for public housing who are now living in the private rental sector, with rent increases capped at increases in the consumer price index over the secure lease period.
We estimate that, over five years, the budgetary cost to the government to house these 650,000 households in secure lease arrangements is A$13.4 billion.
The uneven distribution of these households across states and territories means the program’s cost varies across the five most-populous states. Our estimates are $4.7 billion in New South Wales, $3 billion in Victoria, $2.5 billion in Queensland, $1 billion in South Australia, and $1.8 billion in Western Australia – with the remainder borne by Tasmania and the territories. 
This cost is much more affordable than the capital funding required to expand the social housing stock through the construction of new social housing dwellings.
The Australian tax system currently provides indirect support for the supply of private rental housing through tax concessions such as negative gearing and capital gains tax discounts. Is it now time to harness some of the private investment stimulated by these concessions to help improve the supply of affordable and secure housing opportunities for low-income households.
Gavin Wood is professor of housing, RMIT University and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/gavin-wood-113723" target="_blank">here</a>.
Rachel Ong is deputy director, Bankwest Curtin Economics Centre, Curtin University and author for The Conversation. She can be contacted <a href="https://theconversation.com/profiles/rachel-ong-113482" target="_blank">here</a>.
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Can the private rental sector provide a secure, affordable housing solution?

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GUEST OBSERVER
The six month annualised growth rate in the Westpac- Melbourne Institute Leading Index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, rose from +0.15 percent in August to +0.58 percent in September. 
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The September reading is the second consecutive above trend result and follows fifteen months of persistent below trend reads. It is the strongest growth rate recorded since December 2013 and a clear positive signal for the near term economic outlook. That signal is broadly consistent with Westpac’s forecast for growth to hold around a 3 percent pace over the course of both this year and next. 
The Leading Index growth rate has lifted sharply over the last six months from a 1.18 percent below trend reading in April to the current 0.58 percent above trend result. While all components have contributed to the improvement the main lift continues to come from ‘offshore developments’. Nearly two thirds of the gain has come from the combination of: a rally in commodity prices (+0.51ppts); a modest recovery in US industrial production (+0.40ppts) and globally-driven improvements in financial conditions reflected in the sharemarket (+0.20ppts) and the yield spread (+10ppts) components.
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That said, we continue to see some improvement in in local components as well with a notable positive from stabilising labour market conditions (aggregate hours worked contributing +0.40pts) and modest support from consumer sentiment and dwelling approvals (contributing +0.15ppts on a combined basis). 
The Reserve Bank Board next meets on November 1. A significant number of commentators have been predicting a rate cut in November and a few weeks ago markets had been giving around a 50 percent probability to a move. We were never convinced that the inflation report which is due to be released on October 26 would provide the case for a cut. In fact, with a 0.3 percent/qtr reading for underlying inflation dropping out, it seems likely that the September quarter report will actually show that annual underlying inflation has lifted. 
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It has also become clear that ‘financial stability’ concerns will be given considerable weighting in policy deliberations. In his maiden speech this week Governor Lowe clearly stated these had already factored in recent policy decisions and would continue to be given prominence. With Sydney house prices having been reported to have lifted by 3.5 percent and Melbourne by 5 percent in the last three months the risks of further boosting housing with another rate cut will be a significant consideration for the Board. 
Indeed while we give little probability to a further rate cut at the next meeting our assessment of the growth outlook, including the shape of the construction cycle, points to rates remaining on hold for the foreseeable future.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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Risk of boosting housing with another rate cut a significant consideration for RBA: Westpac's Bill Evans

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GUEST OBSERVER
The property market fundamentals of Australia’s biggest city council are as bent as a banana.
While rates of population growth continue to ease, the high volumes of new housing supply are absurd, and the situation with Brisbane jobs is not as rosy as the state government are trying to portray.
Whilst Brisbane City Council (BCC) has the highest population out of all of Australia’s 550 local government authorities, its population growth rate has come down a long way from the dizzy heights which it consistently produced throughout the noughties decade. Its 2015 growth rate of 1.4 per cent is now back in line with the national average.
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In spite of the distinct easing in population growth (housing demand) the rates of new housing supply have gone in the other direction, scaling record levels.
During the four years ending June 2010, BCC’s population increased by 85,313, thereby creating demand for an additional 32,809 dwellings (BCC has 2.6 people per household according to 2011 Census); 28,409 new dwellings were approved.
Contrast this to the most recent three years, additional housing demand was 17,285 (based on population growth of 51,804) yet a staggering 47,977 new dwellings were approved. As shown in Chart 2, things are completely out of whack.
84 per cent of approvals over the last three years were for attached dwellings. Obscene!
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<img src="/images/2016/10/18/Screen%20Shot%202016-10-18%20at%208.17.48%20AM.png" alt=""> 
In 2014 and 2015, most property pundits repeatedly predicted that Brisbane’s property market would follow in the footsteps of Sydney and Melbourne; often referring to a ‘knock-on effect’ and Brisbane’s more affordable housing as their so-called ‘research’. Conversely, Propertyology downgraded its outlook for Brisbane in early 2014, instead forecasting that Brisbane was likely to see only modest price growth unless something significant occurred to help turnaround Queensland’s disappointing economic performance.
Median property values subsequently increased in Brisbane by 4 percent (2014) and 4.3 percent (2015), well below Sydney (15.1 percent and 15.1 percent) and Melbourne (9.1 percent and 12.7 percent).
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<img src="/images/2016/10/18/Screen%20Shot%202016-10-18%20at%208.18.47%20AM.png" alt=""> 
On the surface, Greater-Brisbane’s unemployment rate of 4.9 percent [June 2016] looks very favourable compared to national and state averages of 5.8 percent and 6.3 percent, respectively. But, here’s the thing: a decline in Brisbane’s unemployment rate from 7.4 percent in February 2014 to the current 4.9 percent is totally at odds with the lack of confidence demonstrated by Brisbane business owners.
Where are all of these jobs that the Queensland state government continues to refer to in press release after press release since coming in to office in January 2014?
A close examination of the detail behind the employment data clearly illustrates that the economic reality is different to the broad-brush unemployment rate. According to official ABS data, the 46,921 extra jobs created in Queensland during the period February 2014 to May 2016 represents 9.1 per cent of jobs of the 517,333 jobs created nationally. Given that Queensland represents 20.3 per cent of Australia’s total population I’d say that banana-benders have been batting well below their weight!
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Further analysis of individual industry sectors suggests that Queensland’s economic engine has actually seized up. Of the 46,921 extra jobs created, public administration, health and education have collectively increased by 51,622 over the period. One can’t help but scratch their head and question why, with a significantly smaller population than New South Wales and Victoria, that Queensland added more jobs in the Public Administration sector (8,838 additional taxpayer-funded government jobs) than any other state.
Sixteen out of nineteen industry sectors collectively LOST 4,701 jobs.  
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The 25,300 jobs lost in Queensland’s mining industry will include plenty of white collar jobs in Brisbane’s CBD where, according to Property Council of Australia, commercial office vacancy rates rose to 16.9 per cent in August 2016.
The most compelling statistic is the 22,167 jobs lost in Queensland’s retail sector; cash register activity is one of the most reliable measurements of a community’s economic pulse. Job numbers in the Retail Trade sector have increased in every Australian state except Queensland.
New South Wales and Victoria’s impressive volume of jobs growth in retail trade reflects the confidence shown at auctions and open homes. On the other hand, property sales volumes in Brisbane City Council declined from an already modest level over the last twelve months (2.8 per cent fewer house sales and 17.2 percent fewer apartments).
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If Brisbane can get its act together, its property market does have potential. But, jobs and confidence are the key. Unlike New South Wales where an infrastructure boom is unfolding, the Queensland public voted against an asset sale proposal to fund new infrastructure projects. The Legacy Way tunnel and Moreton Bay Rail Link projects have recently been completed and there are very few new infrastructure projects in the pipeline.
Queensland’s third biggest employment sector, the 223,000 people construction industry, lost 8,095 jobs between February 2014 and May 2016 and, with an over-supply of housing already brewing, further construction industry job losses would have to be on the cards without several new infrastructure projects.
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<img src="/images/2016/10/18/Screen%20Shot%202016-10-18%20at%208.24.06%20AM.png" alt=""> 
Yes, property is much more affordable in Brisbane than in Sydney and Melbourne. But, Queensland’s interstate migration trend is (again) falling and few people will relocate without being exceptionally confident of their employment prospects. The under-performing economy is why Brisbane’s property market hasn’t found its way out of first gear.
And, the ridiculous volume of new housing supply may soon see that gear changed to neutral. Propertyology will continue to invest in locations across Australia where cash registers are ringing louder than Brisbane.
Simon Pressley is Managing Director of Propertyology, a REIA Hall Of Fame Inductee, property market analyst, accredited property investment adviser, and Buyer’s Agent. <a href="https://www.propertyology.com.au/more-than-a-buyers-agent/" target="_blank">Propertyology works exclusively with property investors</a> to purchase properties in strategically chosen locations all over Australia.
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Answers to Brisbane property market found in cash register:  Simon Pressley

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Tighter lending to investors is tipped to soften the Australian residential property market during the next three years, improving affordability and creating opportunities for owner occupiers, according to QBE’s Housing Outlook 2016-19.
The QBE commissioned BIS Shrapnel report, now in its 15th year, is an annual overview of the Australian housing market and forecast movements.
Brisbane is forecast to experience the highest house price growth of the three largest capital cities to June 2019, while Brisbane unit prices are expected to fall by a cumulative 8.2 percent in the same period.
Sydney house prices are tipped to remain flat in the period to June 2019, while unit prices are forecast to fall 6.8 percent cumulatively during the next three years.
Melbourne house and unit prices are forecast to decline, with units expected to decline by a total of 9 percent to June 2019, according to the report.
Nationally, slowing rental and price growth is likely to contain investor appetite for residential property, and recent tightening in bank lending policy towards overseas investors will also slow overall investor demand, the QBE Housing Outlook finds.
QBE Lenders’ mortgage insurance chief executive officer Phil White said it was a fascinating time to be looking at the Australian residential property and mortgage market. 
“Prices are forecast to soften through the three years to 2019, which is likely to be positive for housing affordability.”
Fewer investors are now entering the market due to banks tightening lending criteria. In 2015/16 investors accounted for 44 percent of all residential loans, compared to 51 percent in 2014/15, according to the report.
“It’s expected owner occupiers, including first home buyers, will be stepping in to pick up some of this opportunity in the market.”
Phil White said meeting the long-term demand for housing with the limited availability of land in most of our capital cities, will remain a significant challenge for State and Territory governments and underpin long-term property prices.
Sydney
Sydney's median house price reached $1.048m at June 2016 and is forecast to rise by 1.7 percent to $1.065m by mid-2017 before decreasing to $1.055m by June 2018 and $1.050m by June 2019, resulting in median house price growth being effectively flat by the end of the forecast period.
Price growth in the Sydney unit market has been below that of the house market. Sydney’s median unit price rose by an estimated 41 percent in the four years to June 2016. However, price growth has already started to flatten with the median unit price growing by just 3 percent in 2015/16.
Sydney’s median unit price growth is forecast to fall 1.8 percent in 2016/17 and cumulatively by 6.8 percent during the three years to June 2019 to a median unit price of $680,000.
Melbourne
The underlying demand and continued growth of the Melbourne house market has been underpinned by a strong population increase, with Victoria recording a net boost of 11,000 people in the year to June 2016. This population growth has continued to maintain a deficiency of dwellings in the Melbourne market despite continued growth in new dwelling supply.
Melbourne will see dwelling completions peak in 2016/17. Short term population growth is expected to ease and a 0.6 percent price decline in the median house price is forecast for the period ending 2018/19.
Record levels of unit completions and a strong project pipeline are expected to affect Melbourne’s median unit price, which is forecast to decline by a total of 9 percent to June 2019.
Brisbane
Moderate house price growth in Brisbane during the past four years is in line with Queensland’s challenging economic conditions. Without strong employment drivers, Queensland is not expected to be able to capitalise on Brisbane’s affordability advantage over Sydney and Melbourne.
Nevertheless, an overall dwelling deficiency should help to support Brisbane’s median house price that is forecast to rise by 6.5 percent to June 2019, the highest price growth during this period of the three largest capitals.
Perth
After peaking in December 2014, Perth’s median house price declined by 5.6 percent in the eighteen months to June 2016. Mining investment is now greatly reduced and economic conditions have weakened. Perth’s median house price is forecast to decline by 3 percent to June 2018 while the forecast median house price at June 2019 is expected to be 10% below its 2014 peak.
Overall, the Perth market is expected to weaken across both housing and unit markets. The median unit price was down by 6.5 percent to June 2016 with further declines totalling 6 percent forecast in 2016/17 and 2017/18 before prices decrease further to June 2019.
Adelaide
The median house price in Adelaide is forecast for limited growth of around 0.9 percent in 2017/18 and an overall decline of 1.3 percent is forecast by June 2019. Adelaide’s unit and apartment market is expected to remain relatively flat during the next three years declining a total of 0.6 percent to June 2019, moving in line with the forecast for house prices.
Hobart
Hobart’s median house price is forecast to rise around 4% per annum or at a cumulative rate of 12.5 percent by June 2019. With investor activity declining, the softness in the unit market is expected to continue to dampen demand, limiting median unit price growth to between 1 percent and 2 percent per annum through to 2018/19.
Darwin
Darwin’s median house price is forecast to decline by 6.3 percent by June 2019. Median unit prices are expected to decline by 4 percent in 2016/17 followed by further declines of 4 percent and 2 percent in subsequent years to take the median unit price 10% lower by June 2019.
Canberra
Canberra’s median house price is forecast to rise by 3.5 percent in 2016/17 with a further growth of 2.4 percent and 2.3 percent in the two years to June 2019. In contrast, the median unit price fell 2.6 percent in 2016 and a further downside of 4 percent is forecast in 2016/17 and 2018/19 by which time the dwelling supply is expected to peak and be absorbed by June 2019.
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j.ballantyne1990-6AQqhLzZaK

Brisbane houses top QBE price growth forecast, but units tipped to fall: QBE Housing Outlook 2016-19

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

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Houses in Dubbo, the NSW Central Coast and Newcastle remain at the top of the latest property clock from analyst firm Herron Todd White.
All three locations were at the peak of the market cycle in September and remain so in October.
Sydney, Melbourne and Adelaide houses are in a rising market.
Gold Coast houses are approaching the peak of the market.
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According to Herron Todd White the price point which most favoured within the Newcastle patch for the 30 to 40 age group of second home buyers and upsizers is between $500k - $700k.
"This demographic of families is purchasing their next home within the price point of approximately $500,000 to $700,000 which will purchase the extra bedroom and second bathroom within the desirable 20 minutes of the Newcastle CBD," HTW said.
"Specifically it is the well performing suburbs of Hamilton, Mayfield, Lambton, Adamstown and Charlestown where capital growth for 2016 is between 5.3 percent and 10.5 percent. 
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"There is a combination of factors as to why this price point and demographic is the most active, which also goes hand in hand with why the Newcastle property market is at peak levels.
"Investors are continuing to experience difficulty entering the market due to lending restrictions, even though there is con dence in property growth. First home buyers are having very little success securing a property as the lower end of the market is also in high demand from the same 30 to 40 years age group of buyers who have the skills and experience to extend and renovate."
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Dubbo, Newcastle and NSW Central Coast houses at market peak: HTW

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Finance commentator and Channel 7's Sunrise breakfast host, David Koch has offered six signs which show the housing market could be about to change.
"The recent Reserve Board minutes showed it was quite comfortable with the state of the property market," he told the Telegraph.
"Some international commentators however are predicting an imminent crash in values."
He said that rather than speculate, the more important thing is to understand the major signals which could points to a change in the property market.
1. Rising interest rates
"Borrowing money has never been cheaper," David says.
Record low interest rates have meant property buyers have been borrowing more for less.
But this period of easy money can lead to a financially deadly "debt trap" for those who overdo it.
A rise in interest rates on a four percent home loan doesn't sound much until you realise it would mean a 50 percent jump in repayments.
2. Rising unemployment 
With 25 consecutive years of positive economic growth, the job market has been pretty solid and unemployment has been relatively low.
That has been good news for the property market because stable employment gives buyers the confidence to get into the market or trade up.
If the economy slows, the job market deteriorates, unemployment rises, incomes become uncertain, confidence falls and property prices suffer.
3. Falling auction clearance rates
Auction clearance rates are a regular, consistent barometer of a property market health.
It's an indicator on the balance between buyers and sellers, which is the fundamental supply and demand foundation of all property markets.
The higher the clearance rate, the healthier the market as it indicates there are plenty of buyers competing for stock on the market. 
4. Rising vacancy rates
Investors buy property for both capital growth and income from rents.
The key to making an investment property stack up financially is they must have tenants paying rent.
Rising property vacancy rates means there aren't enough tenants to go around so investors will either have to slash their rents to attract tenants or sell the property.
5. Falling rental yields
Linked to increasing rental vacancy rates.
A property is valued on the rental income it can produce and its capital growth prospects from rising values.
If vacancy rates rise, landlords will have to lower their rents to attract tenants or the property will be vacant and earn no income.
6. Above-average construction numbers
 Property is about demand and supply.
If construction outstrips demand then values will fall as sellers compete to attract buyers.
That's the current concern about the Melbourne, Sydney and Brisbane inner-city home unit market.
A huge amount of construction is under way and there are fears that when these developments are finished, there will be an oversupply and values will fall.
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