Fresh off completing Pienza Neutral Bay, developer <a href="https://www.apartments.com.au/developers/central-element">Central Element</a> is preparing its next move in the coveted Lower North Shore suburb.&nbsp;

Central Element (CE) has lodged plans for an eight-storey apartment building at <a href="https://www.apartments.com.au/new-apartments/54-64-barry-street-neutral-bay-nsw-2089">54–64 Barry Street</a>, a 1,659 sqm site just south of Military Road and the Neutral Bay town centre.

The $52 million development will involve the demolition of four detached homes across four lots to deliver 45 apartments, including eight affordable housing units to be managed by Bridge Housing. The mix will comprise six one-bedroom apartments, 24 two-beds, and 15 three-beds. The apartments will sit above three basement levels with 62 car parking spaces and 50 bicycle spaces.

<a href="https://www.apartments.com.au/architects/mhn-design-union">MHN Design Union</a> (MHNDU) has returned as architect following its work on Pienza, again shaping a mid-rise form with a clear street presence. The design features a lower four-storey podium element that responds to surrounding context, with upper levels recessed to reduce perceived bulk. Communal open space is proposed both at ground level and on the rooftop, the latter including an outdoor kitchen and swimming pool.

“The building has been designed with a lower four-storey element and with building materials commensurate with the character of the area,” Beam Planning noted in its submission to the North Sydney Council.

<img alt="Barry Street, Neutral Bay Nsw 2089" data-entity-type="file" data-entity-uuid="3a28ab3a-b8ba-4476-81cd-e4a8bb84f3a7" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Barry-Street-Neutral-Bay-1327x742.png?VersionId=hlgvxszAWXIHgHtdR5HiwIKiSli2lLZV" />

Bridge Housing will manage the affordable units for a period of 15 years, as required under the Housing SEPP’s incentive provisions.

MHNDU’s design report further highlights the site's strategic location just 250 metres from key bus stops and 1.3 kilometres from North Sydney CBD, positioning it for transit-accessible housing supply. In their planning justification, the design team emphasised the site’s compatibility with emerging local character and scale.

Central Element has a solid apartment pipeline spread all over Sydney. They recently completed&nbsp;Pienza, 37 apartments just 500 metres away from the new project, and are currently building Ethos Chatswood, Ballamac House in Coogee, and Bianca on the harbour in Drummoyne.

They have plans for future projects in Mosman, Bondi Beach, Greenwich, Lavender Bay, along with a tower on the edge of Hyde Park.

Joel Robinson

First look: Central Element unveils second Neutral Bay apartment project

Real estate investment fund Wentworth Wentworth Equities is soon to launch a "Los Angeles-inspired" residential, leisure and lifestyle precinct in Brisbane’s Hamilton riverside ahead of the predicted Olympic-led population explosion for the city.

Drawing its style inspiration and name from Los Angeles’ renowned The Grove, <a href="https://www.apartments.com.au/new-apartments/hamilton-grove-19-hercules-street-hamilton-qld-4007">Hamilton Grove</a> will feature three residential towers and a vibrant street-level public precinct with curated luxury lifestyle, retail and dining offerings.

The first of the three towers, to launch in March 2026, will comprise 61 apartments, in the same building as a premium hotel.<img alt="Hamilton Grove" data-entity-type="file" data-entity-uuid="d227fe61-8392-45b7-b386-9133f29a249f" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-01-19%20at%209.10.56%E2%80%AFAM.png?VersionId=HTCV35HZ4h84jQCmHwhsdIPN0ctO5d7Z" />

Wentworth Equities Executive Chairman Sameh Ibrahim said the precinct will be unique in its appeal to both residents and the wider community.

“Hamilton is already one of Brisbane’s most sought-after riverside suburbs and for good reason,” Ibrahim said.

“Where else in the world can you walk out of your front door and have everything you could possibly need at your fingertips? The city is just around the corner, the airport is only ten minutes away, you have the river and green spaces right there and premium retail and dining on your doorstep."

Wentworth Equities acquired the 7637 sqm Hercules St site in 2014, when Ibrahim said he had a "very clear vision" for the precinct, but ultimately it wasn't the right time to develop. He said Hamilton was still very much an "emerging precinct."

“Since then, Hamilton and surrounding suburbs like Ascot and Albion have significantly grown and matured into a precinct that aligns with our vision for Hamilton Grove. Brisbane as a whole has so much to offer in the way of lifestyle appeal, but as it stands it is so widespread – you go to Howard Smith Wharves for fine dining, you go to James Street for shopping, you go to West End to walk along the river – but what if you could go to Hamilton Grove for everything?

“Our vision is a precinct that brings together the best of Brisbane into one central space abundant with culture, class and culinary experience – a place that a lucky few will get to call home, but the rest of Brisbane still get to explore and experience at their leisure.”

<img alt="Hamilton Grove" data-entity-type="file" data-entity-uuid="46550990-8aeb-44d4-bb47-150cdca96529" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-01-19%20at%209.10.50%E2%80%AFAM.png?VersionId=bmCkApPKY_Bj3z02Q8vI7Kyo_caJXOnv" />

Experienced civil engineering contractor Mainland Civil has been appointed to commence early works for the project, adding Hamilton Grove to their extensive portfolio where it will join other iconic Brisbane developments including Queens Wharf, 300 George Street, Infinity Tower and 1 William Street.

Construction on Tower One is scheduled to commence in early 2026 with completion expected in late 2028.

Fast Facts 
 
• Three residential towers and a vibrant street-level public precinct with curated luxury lifestyle, retail and dining offerings. 
• Construction on Tower One is expected to commence in Quarter One 2026, with completion expected in late 2028. 
• 7,637 square metre site at 19 Hercules St, Hamilton (part of Economic Development Queensland’s 304 hectare Northshore Hamilton Priority Development Area). 
• 61 waterfront residences and skyhomes in the first tower, ranging from two to five bedrooms. 
• Hamiton Grove will be officially launched in March 2026.

"LA-inspired" Hamilton Grove to launch on Brisbane riverside

There’s a quiet patch of <a href="https://www.apartments.com.au/developments/hawthorn-vic-3122">Hawthorn</a>, between the bustle of Glenferrie Road and the curve of the Yarra, that rarely sees change, and even more rarely, new apartments. But that’s exactly where <a href="https://www.apartments.com.au/developers/pomeroy-pacific-quattro-corp">PQD</a> is planting Kooyongkoot: a deliberate, 18-residence answer to the question of what downsizers actually want.

“This is something this pocket of Hawthorn has never seen before,” says Fil Gacesa, head of sales at PQD. “<a href="https://www.apartments.com.au/new-apartments/kooyongkoot-hawthorn-1-kooyongkoot-road-hawthorn-vic-3122">Kooyongkoot</a> will deliver just 18 large-scale apartments in the heart of Hawthorn. It is the true definition of resort-style living.”

<iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen="" frameborder="0" height="315" referrerpolicy="strict-origin-when-cross-origin" src="https://www.youtube.com/embed/59D7VxzltmM?si=1iCzRD7FRneKryfv" title="YouTube video player" width="560"></iframe>

That scale is central to the story. It’s what allows for two dedicated lift cores, short corridors, and a generous lightcourt that draws natural ventilation and sunlight into every residence. It’s also what makes room for the sort of amenity usually confined to high-density towers: a fully equipped wellness centre with infrared and traditional saunas, yoga and pilates studio, cold therapy shower, and treatment room. There’s a golf simulator, car and dog wash stations, and extensive storage too, not bolted on, but baked in from the start.

But more than the checklist, it’s the design intent that carries weight. “This project has been many years in the making,” says Mark Pomeroy, Director of PQD. “Not just in planning, but in listening, to what our buyers and the local community are looking for”.

[smartcode_project:default project_id=102717 project_image_fid=355289]

That listening shows up in the materials, oak floors, natural stone, V-ZUG appliances, and in how space is handled. Penthouses feature private rooftop terraces with pools. Terraces and garden residences embrace outdoor connection. Inside, the layouts skew large and open, geared for hosting, not just housing.

Architecturally, <a href="https://www.apartments.com.au/architects/cera-stribley-architects">Cera Stribley</a>’s approach is grounded. There’s no reaching for spectacle here. Instead, the building offers a sculptural calm, anchored by landscaping from Eckersley Garden Architecture.&nbsp;

“We wanted to create spaces that feel expansive, serene, and meaningfully connected to daily life,” said founding partner Chris Stribley elsewhere.

[smartcode_project:default project_id=102717 project_image_fid=355304]

That sentiment, calm, connection, echoes in the location itself. Kooyongkoot sits just a short stroll from Central Gardens, Fairview Park, and the Rivoli Cinema. Tram lines and schools are close, but the street is tucked, quiet, and leaf-lined.&nbsp;

“Residents of Kooyongkoot will be a short stroll from Fairview Park, Central Gardens, and the Glenferrie Road retail strip," Gacesa notes, "but you're also cocooned in this peaceful pocket behind extensive landscaping by Eckersley Garden Architecture.”

Kooyongkoot is set for completion in late 2026.

[smartcode_project_cta:default project_id=102717]

Staff Writer

The project that said no to compromise: Inside Kooyongkoot, Hawthorn

When long-time Ivanhoe locals Graeme and Catherine, decided it was time to downsize, they weren’t necessarily in a rush.&nbsp;

Like many in their stage of life, they had started thinking about apartment living, but anticipated making the shift in two to three years.

That timeline changed when they visited <a href="https://www.urban.com.au/new-apartments/candela-ivanhoe-40-upper-heidelberg-road-ivanhoe">Candela</a>, a new boutique development by <a href="https://www.urban.com.au/developers/salter-brothers">Salter Brothers</a>. The project ticked all the boxes they were looking for: location, quality design, and long-term lifestyle benefits, which prompted them to bring their decision forward.

“It was the right place at the right time,” they said. “We knew immediately it ticked all the boxes, and we didn’t want to wait.”

[smartcode_project:default project_id=342 project_image_fid=358855]

Their decision to downsize was driven by a combination of practical needs and lifestyle considerations. Their existing home, while much loved, had become increasingly difficult to maintain. It spanned multiple levels, included extensive front and back gardens, and was starting to show the wear that comes with age.&nbsp;

They were looking for a more manageable lifestyle, one with less upkeep and more freedom. A brand-new apartment with no maintenance requirements and the ability to simply “lock up and leave” gave them peace of mind and a greater sense of control over their future.

Financially, the purchase made sense as well. The available stamp duty savings, strong price-to-value offering, and timing of the settlement suited their plans, making the transition smoother and more cost-effective. The apartment's design and inclusions further supported their choice.

[smartcode_project:default project_id=342 project_image_fid=357493]

The layout was both functional and flexible: three bedrooms, a butler’s pantry, a separate laundry, and a large open-plan living area. It gave them the freedom to host a family, accommodate guests, or set up a home office. The expansive balcony and elevated views added to the appeal, providing a sense of openness and connection to the outdoors.

“It just had a really good flow,” Catherine noted, something they found lacking in many other apartments they’d considered, particularly in the established market.

Candela’s boutique scale was another deciding factor. With a smaller number of residences and a top-floor penthouse position, the couple felt the development offered the privacy and space they were looking for, without feeling isolated.

“We liked that it wasn’t a huge development. It felt well-balanced, modern but still with a sense of community, not overwhelming,” they said.

[smartcode_project:default project_id=342 project_image_fid=357508]

Equally important was the ability to remain in Ivanhoe, a suburb they know well and have deep roots in. After 46 years in the area, proximity to local parks, shops, and familiar faces mattered just as much as the apartment itself.

“We didn’t want to give up the community we’ve known for decades. Candela allowed us to upgrade our lifestyle while staying in the place we call home.”

With a Walk Score of 90, the village location supports a convenient, connected lifestyle. <a href="https://www.apartments.com.au/developments/ivanhoe-vic-3079">Ivanhoe</a> Station is just a eight-minute walk away, and the neighbourhood offers access to parks, cafes, restaurants, and schools along Upper Heidelberg Road, all within easy reach.

Beyond the apartment, the couple also saw value in the broader vision for Candela, one that integrates residential living with public spaces and local amenities.&nbsp;

The development introduces 58 new apartments as well as a mix of commercial and social spaces that integrate contemporary architecture with the suburb’s existing character.&nbsp;

At ground level, residents will find a charming café and a lifestyle wellness centre, perfect for unwinding and rejuvenating. Meanwhile, the rooftop garden offers a stunning vantage point for residents to enjoy breathtaking sunsets, host gatherings, or enjoy barbecues with family and friends. It's not just a place to live; it's a vibrant community where every moment is an opportunity to connect and create lasting memories.

[smartcode_project_cta:default project_id=342]

Why Ivanhoe locals are choosing to downsize to Candela

Mark and Roy Makari are expanding their presence in Sydney’s South West with a second major proposal for Leppington, this time envisioning a 900-dwelling mixed-use development just 850 metres from their previously lodged tower trio on Fifth Avenue.

Project management and construction management firm Creative Vision filed the plans for the&nbsp;multi-building project at <a href="https://www.apartments.com.au/new-apartments/230-rickard-road-leppington-nsw-2179">230 Rickard Road, Leppington</a>. The proposal seeks to establish a new focal point for the precinct through a high-density, transit-oriented development supported by diverse land uses.

According to the Scoping Report prepared for the Department of Planning, the scheme includes around 900 apartments across multiple towers, including 135 dwellings designated for affordable housing. A mix of market and subsidised apartments will be supported by ground-level activation through retail and office space, a childcare centre, and a hotel, forming a comprehensive urban precinct.

<img alt="Mixed Use Development 230 Rickard Rd Leppington" data-entity-type="file" data-entity-uuid="34797362-f3dc-4d84-8235-2657fc5f3bde" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Plan.png?VersionId=Uzckrz9tUpDQl5lX1_WMhjnv16bsr8wG" />

The Design Report by <a href="https://www.apartments.com.au/architects/studiosc-0">Studio SC</a> notes that the project “intends to deliver a high-quality, high-density built form that supports the vision for the Leppington Town Centre, integrating mixed-use outcomes and public domain upgrades.” The development is expected to be delivered in stages, although a precise timeline is yet to be confirmed.

The project will be assessed through a future State Significant Development Application, with the Scoping Report indicating the team will seek design excellence via a competitive process or through an expert design review panel. Early massing diagrams suggest a series of mid- to high-rise buildings framing a central landscaped spine, with emphasis on pedestrian permeability and public space.

The planning documentation flags a strong sustainability agenda, stating that the development will “respond to the urban heat island effect, incorporate water sensitive urban design, and prioritise active transport”.

<img alt="Mixed Use Development 230 Rickard Rd Leppington" data-entity-type="file" data-entity-uuid="369d7b54-1279-4cde-88ec-dcb215594414" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Podium_1.png?VersionId=QArL7B2kkLt63vl5xvL0FNV_ardAlez4" />

The proposal follows in the footsteps of the Makaris’ nearby Fifth Avenue site, where they’ve submitted plans for three towers comprising nearly 500 apartments, with 10 per cent dedicated to affordable housing. That project features commercial podiums, a childcare centre, and a new public park that would occupy more than a third of the site.

Both developments are situated within walking distance of Leppington Train Station and fall under strategic precinct plans promoting higher density housing. The town centre is undergoing substantial transformation, driven by state government planning reforms aimed at fast-tracking housing delivery.

Together, the two projects represent a combined ambition of nearly 1,400 new homes across just under two kilometres of central Leppington.

First look: 900-home mixed-use precinct planned for Leppington

Hsbc

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On the eve of a Reserve Bank cash rate announcement expected to reveal no change, HSBC has cut its 2-year fixed rate to match the lowest in the market.”
The lowest home loans in the market are now offered by the subsidiaries of two global giants, HSBC and ING.
Fixed rates have become the competitive instrument of choice by the banks as they jostle for their share of quality business. 2-year fixed rates were cut by an average of -0.39% in May.
Canstar’s finance expert, Steve Mickenbecker said, “through their sharp pricing, HSBC and ING are again confirming their appetite for home lending in the Australian market, having lifted share by 0.20% and 0.08% respectively over the past 12 months."
“We’ll see what Tuesday brings from the Reserve Bank, but one thing we can be sure of is the robust competition for home lending."
“The gap between the average variable rate of 3.47% and the lowest two year fixed rate of 2.09% has blown out to 1.38%, a compelling refinancing argument for Australian home borrowers.”
Summary of HSBC rate changes:
<img src="https://www.urban.com.au/images/2020/7/1/HSBC%20changes.JPG" alt="">
HSBC has cut 2 and 3-year fixed rates by between -0.06% and -0.16% for owner occupiers paying principal and interest.
The lender also cut its Premier Standard Variable Rate by -0.05%.
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j.ballantyne1990-6AQqhLzZaK

HSBC cuts fixed rates to match lowest on market

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The cooling of the property market was expected, but the price falls have been larger than previously forecast, according to HSBC's Paul Bloxham.
He suggests the cooling has been due to a reversal of factors that drove the boom in the first place. 
These included: housing undersupply during the mining boom (2004-2012), which has been worked down by a building boom; falling interest rates, that have since stabilised; strong foreign demand, which has weakened, due to constraints on foreign buyers; strong growth in lending to investors, which has been constrained by tighter prudential settings; and, expectations of capital gains, which drove investor activity, but have eased. 
Bloxham noted the cooling is not unlike developments elsewhere, such as in London, New York and Vancouver, suggesting some common global factors.
"So far, the cooling has been orderly, with very few forced sales. 
"This partly reflects that the key fundamentals that support housing demand remain in place − strong population and jobs growth and low interest rates. 
"In addition, although housing supply has been boosted, the market does not appear to be oversupplied. 
"Our central case is for a soft landing, supported by these fundamentals.
"A harder landing is a risk and could occur if economic growth were to slow sharply and the unemployment rate rose.
"High household debt also makes Australia’s economy more vulnerable. 
"A further credit tightening, perhaps as the result of policy changes resulting from the Royal Commission, is a risk.
"Possible changes to the tax treatment of investment properties present a risk, but we see the likely effect as small."
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While the housing market correction remains orderly and jobs growth remains solid, Bloxham expects it to have a limited impact on consumption growth/
"There was little evidence of a positive wealth effect during the boom, and consumer spending has held up well recently, despite the housing market cooling.
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National housing prices rose by 46% from the trough in mid-2012 to the peak in mid-2017, which delivered a compounded annual growth rate of 8% over that period (Chart 1). Since mid- 2017, nation-wide housing prices have fallen by 5% (peak-to-current level).
However, the nation-wide average hides considerable variation across the country (Chart 2). 
He noted much of the ramp-up was in the Sydney and Melbourne markets, where prices rose by 75% and 58%, trough-to-peak, respectively. Over the same period, housing prices rose by smaller amounts in Adelaide (20%), Brisbane (20%), Canberra (22%) and Hobart (40%). In Perth, where the end of the mining boom had its largest effect, housing prices rose in 2012 and 2013, but then fell, to now be lower than in 2012 (Perth prices are the same as they were in 2009).
National housing prices began to fall in mid-to-late 2017, and since their peaks, Sydney and Melbourne prices are down 8% and 5%, respectively. Prices have continued to rise in the other cities, except for Perth. So far the cooling has orderly, "with little evidence of forced selling."
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<img src="https://www.urban.com.au/images/2018/11/22/HSBC%20GRAPH%203.JPG" alt="">
For Sydney, the rise and fall in prices occurred to similar degrees for both houses and apartments and prices rose by similar amounts across the price distribution.
So far, the price declines have been more pronounced at the top end of the market, although prices at the bottom end are also falling.
<img src="https://www.urban.com.au/images/2018/11/22/HSBC%20GRAPH%204.JPG" alt="">
For Melbourne, the trends are similar, although apartment prices rose by far less than detached house prices, due to a strong boost to apartment supply in recent years.
The differential between house and apartment price trends in Melbourne provides evidence that the supply and demand of dwellings (not just availability of finance and interest rates) have been key drivers of the price trends.
A large boost to Melbourne apartment supply ensured that unit prices rose by less than detached house prices.
<img src="https://www.urban.com.au/images/2018/11/22/HSBC%20GRAPH%205.JPG" alt="">
During the housing price boom, Sydney and Melbourne were favoured over the other cities for a number of reasons.
They had much less exposure to the drag in incomes from the end of the mining boom and, as a result, had much stronger jobs and population growth
Both markets were more undersupplied, as housing construction had been weak during the mining boom; and, they are Australia's most global cities, so they attracted the most foreign investment and migrants.
Many of these forces are now acting as a drag on housing prices in Sydney and Melbourne.
<img src="https://www.urban.com.au/images/2018/11/22/HSBC%20GRAPH%206.JPG" alt="">
The rise in housing prices since 2012 has been much more gradual outside of Sydney and Melbourne.
In Brisbane, housing prices have risen by 20% since the trough in 2012, with a significant differential between detached house and apartment prices, reflecting the effect of an apartment building boom in the central business district in recent years.
In Perth, housing prices rose in 2013 and 2014, as the fall in interest rates supported activity, but the combination of a sharp slowing in population growth at the end of the mining boom, and a boost to housing supply, has seen prices falling since then.
For the other smaller cities, prices have generally risen, given less exposure to the end of the mining boom and support from lower interest rates, among other region-specific factors.
<img src="https://www.urban.com.au/images/2018/11/22/HSBC%20GRAPH%207.JPG" alt="">
Bloxham noted what has been unusual about the recent housing market cooling, compared with history, has been that it has occurred without the RBA lifting its cash rate, or a significant rise in mortgage rates.
"Instead, housing supply has increased to meet demand, and help clear the market, and a range of other factors (outside of the RBA’s cash rate setting) have helped to constrain demand, including constraints on foreign purchases and tightened prudential settings.
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"Because the housing market is cooling while economic growth is strong and the labour market is tightening, the cooling has, so far, been orderly. There are few signs of forced sales, aside from pockets of the ‘off-the-plan’ apartment market," he said.
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Soft landing coming as Australian housing market continues to cool: HSBC

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HSBC has cut its house price forecasts for Sydney and Melbourne.
Tighter prudential settings, the pullback in foreign demand and a boost in housing supply triggered the change in its Sydney outlook.
HSBC expect Sydney prices to a fall between 3 percent and 5 percent over 2018, compared with a gain of between 2 percent and 4 percent it last predicted in December.
Brisbane's forecast is down 2 percent and 0 percent instead of a 1 percent to 4 percent gain.
HSBC cut its Melbourne forecast to a gain of between 1 per cent and 3 per cent, down from the 7 percent to 9 percent range previously tipped.
"We continue to expect a soft landing for the Australian housing market," HSBC chief economist Paul Bloxham said. 
"In our view, housing prices are unlikely to fall sharply given continued low interest rates and strong employment growth."
"Although housing price growth has slowed in both cities, the auction clearance rates suggest a more buoyant market than implied by the housing price numbers," he said in the report Australian housing: Expect a soft landing.
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"Indeed, it is quite unusual for price growth to slow as much as it has in these markets and for auction clearance rates to hold at the levels maintained recently."
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"A lift in household income would help to support ongoing servicing of mortgages and help secure financial stability," Fairfax Media reported Bloxham saying.
"A lift in household income growth would also drive further housing purchases, supporting housing price growth."
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Sydney property prices to fall by 5 percent as HSBC cut 2018 capital city growth forecasts

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GUEST OBSERVER
At last, the official labour force survey is starting to line up with other labour market measures, such as job advertisements and business surveys.
For quite some time we have argued that the divergence had largely reflected measurement issues in the official survey.
Stronger official prints in recent months means that the indicators are now all showing a tightening labour market.
The positive momentum is also consistent with the view emanating from the business surveys.
The NAB survey showed business conditions and capacity utilisation around decade highs in May.
This is happening despite weak real GDP numbers for 1Q.
The GDP print, which was published in early June, showed growth of 0.3% q-o-q and 1.7% y-o-y.
However, as we noted last month, we think most of the weakness reflects the impact of Cyclone Debbie and unusually wet weather on the east Coast.
Despite weak real GDP, nominal GDP rose by a strong 7.7% y-o-y, which is its fastest rate in over five years.
Nominal growth has been boosted by the rise in commodity prices, although there are also some signs that the nominal lift has moved beyond just a mining story.
Corporate profits have also picked up in a broad range of non-mining sectors.
However, as yet, we have not seen a pick-up in wages growth.
Although there are signs that wages growth has stabilised, it is still running at multi-decade lows.
Nonetheless, we expect wages growth to pick-up in 2H17 supported by a number of factors.
First, corporate profits growth is strong and historically this leads to a rise in wages growth.
Second, the labour market is tightening, and even though the link between wages and jobs market conditions may be weaker than in the past we still expect some traction.
Third, the minimum wage was lifted by more this year than last year, which we expect could add 0.2-0.3ppts to wages growth.
The lift in wages growth should support a gradual rise in underlying inflation.
Once the RBA sees clear evidence of a lift in wages growth, we expect that a hike will not be too far away.
On fixed income strategy, expect front-end risk premium to rise as the RBA would like to remove accommodative policy if/when the data allows, similar to other central banks.
As we pointed out last month, ahead of the 1Q national accounts, Cyclone Debbie and wet weather on the east Coast were expected to hold back first quarter GDP growth and indeed they did (Chart 1).
<a href="https://www.propertyobserver.com.au/images/2017/06/30/Chart-1.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/2017/06/30/Chart-1.jpg" alt="">
Exports fell, partly due to a fall in coal exports out of Queensland, retail sales were held back and housing construction also declined in the first quarter.
Much of this disruption is likely to be temporary.
Coal exports and retail sales have already bounced back and there is still a considerable pipeline of work yet to be done on apartments in major cities.
We expect modest growth in 2Q, as the cyclone effect continued into April, and then a strong bounce back in 2H.
Although real GDP was weak in the first quarter, nominal GDP rose at its fastest pace in over five years, particularly supported by higher commodity prices (Chart 2).
<a href="https://www.propertyobserver.com.au/images/2017/06/30/Chart-2.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/2017/06/30/Chart-2.jpg" alt="">
Measures that are better at abstracting from the impact of weather, such as business surveys and the labour market numbers, are also showing that underlying economic conditions are improving, rather than deteriorating.
Indeed, the NAB survey shows that business conditions and capacity utilisation are around decade-highs (Chart 3 and 4).
<a href="https://www.propertyobserver.com.au/images/2017/06/30/Chart-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/2017/06/30/Chart-3.jpg" alt="">
<a href="https://www.propertyobserver.com.au/images/2017/06/30/Chart-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/2017/06/30/Chart-4.jpg" alt="">
The improvement in surveyed business conditions is consistent with a strong recent lift in profits.
Although part of this reflects the effect of higher commodity prices on the mining industry, with mining profits up 113% y-o-y, non-mining profits have also lifted by a strong 17% y-o-y.
The jobs numbers suggest the labour market is tightening rather than loosening.
Given measurement issues in the official survey we have, for some time, been putting more emphasis on other measures of the labour market, such as the job advertisements and business surveys.
To keep track, we constructed a labour market index, which has shown a trend improvement in the jobs market, unlike the official survey (Chart 5).
<a href="https://www.propertyobserver.com.au/images/2017/06/30/Chart-5.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/2017/06/30/Chart-5.jpg" alt="">
However, the official numbers are now starting to come back into line.
A strong lift in the official jobs growth numbers in the past three months drove the unemployment rate down to 5.5% in May, which is its lowest level since 2013 (Chart 6).
<a href="https://www.propertyobserver.com.au/images/2017/06/30/Chart-6.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/2017/06/30/Chart-6.jpg" alt="">
The official numbers also showed a sharp jump in hours worked in May, which has brought the trend growth in hours worked back into line with the employment numbers (Chart 7).
<a href="https://www.propertyobserver.com.au/images/2017/06/30/Chart-7.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/2017/06/30/Chart-7.jpg" alt="">
A key question for the RBA is: when will the tightening in the labour market start to translate into a pick-up in wages growth?
The main indicators are showing signs that wage growth has stabilised, but there are few signs of a pick-up at this stage.
Many other countries are also grappling with the fact that labour markets have tightened, but wages growth has not yet lifted.
Our central case is that local wages growth will gradually pick-up in the second half of 2017.
Our view has largely been formed around the idea that there is a strong historical positive correlation between the terms of trade (mostly driven by commodity prices) and unit labour costs in Australia.
Typically, when commodity prices rise and support a pick-up in nominal GDP, some part of this boost to incomes ends up in wages growth.
Although it could be argued that the lift in commodity prices will have less effect this time around, as there is unlikely to be another mining investment boom, it is also worth keeping in mind that profits are also rising in the non-mining industries (Chart 8).
<a href="https://www.propertyobserver.com.au/images/2017/06/30/Chart-8.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/2017/06/30/Chart-8.jpg" alt="">
As the chart shows, there is also a strong positive correlation between non-mining profits and wages growth.
The recent lift in the minimum wage also supports our view.
The Fair Work Commission announced a 3.3% rise in the minimum wage from 1 July 2017, which is larger than the 2.4% rise announced last year.
This decision directly affects around one-quarter of all workers and can also form the benchmark for other enterprise bargaining agreements.
We expect the decision to lift wages growth by 0.2-0.3ppts.
The improvement in the local labour market and business conditions as well as improving global economic conditions and a recent shift in rhetoric at other central banks will all act to re-affirm the RBA’s view that it will not need to cut the cash rate further.
Although the RBA’s commentary has suggested that the leverage-fuelled housing market boom had been the key reason that it is not considering further cuts, improvements in the local and global macro-economy over recent months would further bolster the central bank’s resolve.
The RBA will also be keenly aware that central banks have gradually been turning more hawkish in recent weeks.
The Federal Reserve has clearly suggested that it will begin to reduce its balance sheet soon and that it intends to continue to lift its policy rate.
The ECB has given stronger hints that it may reduce its quantitative easing program soon.
<a href="https://www.propertyobserver.com.au/images/2017/06/30/Chart-9.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/2017/06/30/Chart-9.jpg" alt="">
There is debate at the Bank of England, amongst the MPC members, about the possibility of a rate hike.
Officials from the Bank of Canada and Norges Bank have turned more hawkish in recent weeks.
We do not expect the RBA to introduce any explicit forward-guidance in its policy statement, although the tone of the commentary may very well be a little more upbeat than previously, particularly on the local labour market.
We expect the RBA to point to forthcoming CPI numbers as the next key release to watch.
In our view, once the RBA has clear signs that wages growth is past its trough it will not be long before it will seek to move towards a more normal cash rate setting.
Our central case is for a hike in 1Q18 (not quite yet, but sooner than the market is currently pricing).
A growing theme in developed market central bank communication has been a boldness in signalling the removal of accommodative monetary policy, with softening headline inflation and weak wage growth downplayed.
The Bank of Canada’s recent communication shift was particularly interesting given that Canada shares many similar macro attributes with Australia, meaning they tend to be cyclically synchronised.
That front-end pricing has moved to opposite extremes presents an attractive cross-market opportunity, in our view.
Even if the RBA is not the “next cab off the rank”, we believe the risk-reward favours positioning for higher AUD front-end risk premium.
Current OIS implies a broadly flat path for the cash rate over the next 12 months, while only Japan and Switzerland have a lower spread between 2Y IRS and the 3m fixing among the G10 countries.
Yet, the RBA has set a very high bar for cuts and we suspect the central bank has a strong desire to remove its accommodative policy if/when the data allows.
Recent tightening of the labour market (the unemployment rate fell to 5.5% in May – the lowest since 2013) should embolden the hawks.
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>.
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The hikes are coming, but not quite there yet: HSBC

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GUEST OBSERVER
The tailwind is here. Higher commodity prices are boosting national incomes and the numbers are large.
Export values rose by a strong 32% year-on-year in December which drove the largest trade surplus on record. This is driving a strong rise in mining profits and tax revenues. The debate is about whether the lift in mining profits and taxes will boost wages growth, household spending and domestic inflation, as it has done in the past.
Will households feel the tailwind too? Some observers argue that without another mining investment boom or the government delivering personal tax cuts, both of which, we agree, seem unlikely, a rise in domestic wages and inflation will not happen. In our view, scale is important here. Although we agree that the income effect on households is likely to be less potent than in the past, some of the effect should still get through. Plus, this boost is in addition to the services sector growth story which is still humming along. We think this will keep the RBA from cutting further and expect that these same forces could mean rate hikes in 2018.
As we have been pointing out for some time now, we see the recent lift in commodity prices as having changed the economic story for Australia. For the past five years, Australia has sought to pull off a 'great rebalancing act' and this year with think that the rebalancing act is almost done. This is largely because the significant headwind that Australia has faced over the past five years, as a result of falling commodity prices and mining investment, is now becoming a noticeable tailwind. The resources sector is set to become a contributor, rather than a drag, on growth.
The past couple of weeks have revealed more evidence that the boost to incomes from higher commodity prices has already arrived. Export values rose by a strong 32% year-on-year in December, supported by a 127% rise in the value of coal exports. This drove a significant swing in the trade balance, from a deficit in October to the largest trade surplus in the history of the available numbers (since 1971) in December. Although we do not yet have the Q4 GDP figures, as chart 1 below shows, there is a strong positive correlation between commodity prices and Australia's nominal GDP growth. As a result, the RBA has been confident enough to recently state that higher commodity prices 'are providing a boost to Australia's national income'.
<img src="https://www.urban.com.au/images/2017/02/09/blo%20one.gif" alt="">
As the income has already arrived, the question is not whether there will be a pick-up in incomes, but whether it will flow through to the household sector, to wages and domestic inflation, as it has done in the past? On this, some observers argue that without another mining investment boom or boost to household incomes from personal tax cuts, both of which seem unlikely, a rise in domestic wages and inflation is unlikely.
We agree with some of these arguments, but think it is mostly a question of scale.
First, we agree that the pick-up in commodity prices is unlikely to stoke a substantial upswing in mining investment anytime soon. But we are not as convinced that this means you will not see any flow through to households. Keep in mind that mining investment is already set to stop falling from around mid-2017, as the resources sector shifts from new construction to maintenance and repair, which is now a larger spend than it has been in the past. Mining employment has also already started to stabilise and the timely mining sector job vacancy indicators are lifting. Spending on mineral exploration has also levelled out recently, after years of decline. Given the considerable recent boost to mining profits it seems unlikely, in our view, that mining sector wages growth will continue to fall as much it has in recent years.
Second, we agree that the federal government is unlikely to deliver income tax cuts, as it did between 2003 and 2007 when the commodity price super-cycle was first in its upswing. However, the corporate tax take will be boosted, which should take some pressure off the Federal budget. Some of this is likely to show up in the public sector wage bill. State royalties will also be boosted in Western Australia and Queensland and we expect some of this to trickle into state spending and public sector wages.
<img src="https://www.urban.com.au/images/2017/02/09/blo%20two.gif" alt="">
Overall, our strongest argument is that the significant scale of the ramp up in commodity prices, exports and nominal incomes means that at least some of the pick-up is likely to get through to the household sector, wages growth and domestic inflation. Just a levelling out of mining sector activity and incomes, after five years of decline should be expected to help see wages and domestic inflation stabilise. What we have seen is much more than this, with national income significantly boosted (again, see chart 1). Add to this that the non-mining economy has already been growing solidly, supported by low interest rates, the lower AUD and rising demand for services from Asia's growing middle classes.
Finally, it is worth keeping in mind that recent history supports the view that a lift in commodity prices should drive a pick-up in wages growth and inflation. As chart 2 shows, there is strong positive historical correlation between the terms of trade (think commodity prices) and unit labour costs (think wages). Given the scale of the ramp up in the terms of trade it would be surprising if unit labour costs did not lift at all. In turn, rising unit labour costs should be enough to support a modest lift in domestic inflation. In our view, the RBA only needs to be convinced that underlying inflation is past its trough to keep them from cutting. With this, we expect the RBA to be on hold through 2017 and to lift its cash rate in 2018.
Paul Bloxham is chief economist, Australia, New Zealand of HSBC.
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Will households feel the tailwind of rising commodity prices?: Paul Bloxham

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The HSBC Bank building in the Sydney CBD has sold for the first time in over three decades.
Last traded for $1,018,000 in 1984, the building at <a href="https://www.colliers.com.au/23929/" target="_blank">724-728 George Street</a> is anchored by HSBC bank with a new five year lease.
It is the first time offered on market by the original Haymarket developer, CKC Holdings aka as Chew Kong Chian and Sons. 
HSBC Bank have been trading in the seven storey building for 30 years.
The seven levels comprise with ground and 1st floor retail, 2nd to 6th floor offices, and 7th floor penthouse and offers a building area of around 3,383 sqm.
The total rental income for the building is $1.6 million per annum, and currently 95 percent is leased.
Colliers International agents Steam Leung and Jordan Lee were the marketing agents when it was offered for June tender on realcommercial.com.au.
No price has yet been revealed, but a similar 822sq m office building nearby, which is used by Citibank and St George Bank, at 695-699 George Street sold for $41 million in 2014. 
Colliers expected the yield as low as 4 to 4.5 percent.
It came with plans (pictured) for its redevelopment.
Chew Kong Chian, through an associated company, developed the Royal Gardens in Pitt Street.
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Haymarket HSBC Bank building in Sydney CBD trades for first time

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This month brought more evidence that the rebalancing act is continuing. Q1 GDP confirmed that household consumption is growing solidly, dwelling investment is in a strong upswing and resource export volumes are ramping up, as new capacity comes on line. The lift in these areas has more than offset the drag from falling mining and public investment, leaving solid GDP growth in the first quarter (0.9% q-o-q), although it was still below trend over the year (2.3% y-o-y).
More timely indicators provided signs that the RBA's February and May rate cuts have been feeding through to a further lift in the housing market. Housing prices rose by 9.8% y-o-y in June and building approvals reached a new record high in May. Business surveys showed improving conditions and confidence in May, which could reflect the impact of this year's rate cuts as well as the government's more pro-growth budget. On a less positive side, retail sales were quite weak in April.
The clearest sign of improving conditions has been in the labour market, with jobs growth running at a three-and-a-half-year high of 2.0% y-o-y in May. At this rate, jobs growth has been sufficient to keep the unemployment rate steady at 6.0% to 6.2% in recent months. The services sectors are leading job creation as mining employment declines. At the same time, however, wages growth is at a multi-decade low. This weak wages growth reflects the build- up of spare capacity in the labour market, but may also explain why jobs growth is lifting, as lower wages encourage greater hiring.
The lift in activity and steadying of the unemployment rate are expected to keep the RBA on hold this month. If these improving trends continue, as is our central case, we expect that the RBA will not need to deliver further cuts in this easing phase. However, low wages growth means that inflation is likely to remain benign, which is likely to leave the RBA with an 'easing bias'. The central bank is expected to continue to express concern about strong housing price growth, particularly in Sydney, and the still high level of the AUD.
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<img src="/images/2015/07/03/Screen%20Shot%202015-07-03%20at%209.12.40%20AM.png" alt="" width="709" height="308">
Jobs growth lifting, but wage inflation is low
Most of the activity indicators published this month showed positive results. In particular, there are increasingly convincing signs that the labour market is improving. The monthly labour force survey showed that 234k jobs have been created over the past year, implying jobs growth of 2.0% y-o-y, which has been enough to get the unemployment rate to stabilise (Chart 1 and 2). The quarterly labour market survey confirmed that although mining jobs are being cut, this is being more than offset by job creation in the services sectors. Business surveys also showed an improvement in conditions and confidence, which is likely to reflect the more pro-growth Federal budget delivered in May as well as the impact of the RBA's 50bp of rate cuts in the first half (Chart 3). Although timely indicators suggest a lift in domestic demand and jobs growth, wages growth is at its lowest level in at least two decades (Chart 4). To some degree, this is just part of the needed adjustment to get a lift in jobs growth. However, lower wages growth should also be expected to put downward pressure on inflation, leaving the RBA with the option of cutting rates further, or at least keeping rates on hold for longer.
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In 'wait and watch' mode 
The combination of having already delivered 50bp of cuts in H1 and the more positive domestic numbers are expected to keep the RBA firmly on hold next week. We expect the RBA to be in 'wait and watch' mode, as it seeks more information about the full impact of the cuts it has already delivered this year. We expect the central bank to also express continued concern over the exuberance of the housing markets in Sydney and Melbourne, where price growth is still rapid (Chart 5). While the prudential regulator has been gradually tightening micro-prudential settings, the Sydney market and parts of Melbourne are still showing excessive exuberance. On the margin, this concern is likely to keep the RBA on hold.
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 Working in the other direction, the RBA is likely to remain concerned about the still high level of the AUD. On our assessment, the central bank would be more comfortable with the AUD at around 68-70 USD cents (it is currently trading at 76 USD cents), so it is still about 10% higher than it would like (Chart 6). As the RBA has recently pointed out, a sustained lower currency is seen as necessary to encourage a solid lift in non-mining business investment intentions, which is the next stage of the rebalancing act.
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 Although developments in Greece may get a passing reference in the post-meeting statement, they are unlikely to be of particular relevance to local policy. There may, however, be an increased focus on China, given recent policy moves and volatility in the stock market.
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<div class="column">Paul Bloxham is chief economist for HSBC in Australia and New Zealand.</div>
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The RBA's rebalancing act continues: HSBC's Paul Bloxham

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GUEST OBSERVER
The RBA continues to face a tricky balancing act. Low interest rates are needed to continue to support the rebalancing of growth, as mining investment continues to fall. But, interest rates have now been low for quite some time and they are starting to drive potential asset price bubbles in some parts of the economy.
The key problem relates to the fact that the RBA's cash rate is, and always has been, a blunt instrument. Low interest rates are having their strongest effect on housing prices, which is flowing through to a residential construction boom and a pick-up in durable goods sales. However, the transmission of this effect to business investment and hiring – which is what the central bank would really like to see – has, so far, been weak.
Housing prices are also rising unevenly across the country. Sydney prices are up 39% in the past three years, while prices are 22% higher in Melbourne and only 10% higher elsewhere. More even housing price growth would be preferred. Although the trends in Sydney and Melbourne are what should be expected, given that these cities have the least exposure to the mining sector, at the same time, this is how 'bubbles' can form. What looks like a strong growth story, based on fundamentals (think: the IT bubble of the early 2000s), sees rising investor interest and, at some point, prices rise ahead of fundamentals. The market gets exuberant, as investors begin to believe that prices can only go up. 
The Sydney housing market is showing some of these more worrisome traits and has been for some time now (see '<a href="https://www.research.hsbc.com/midas/Res/RDV?p=pdf&amp;key=kCWWcrdPsN&amp;n=446843.PDF" target="_blank">Downunder digest: Australia's housing boom may get bubbly</a>', 10 February 2015). Investors continue to dominate the Sydney market, prices are rising at 15% y-o-y and auction clearance rates are around record highs.
To try to deal with this issue, the authorities have been tightening prudential settings (to sharpen the instrument). Concerns about the housing market are also likely to have been a key reason why the RBA has been reluctant to have an explicit 'easing bias', despite below-trend growth and the central bank's desire to see the AUD fall further.
No national bubble, but Sydney's exuberance is worrisome 
A housing boom is a part of the plan to rebalance Australia's growth as mining investment falls. When the mining boom was at its height, back in 2011 and 2012, the housing market was being held back by high interest rates which helped to make way for the mining boom without excessive inflation. Then, to stimulate activity in the non-mining sectors, the RBA cut its cash rate from a peak of 4.75% in 2011 to its current record low of 2.00%. As a result, house prices have risen by 24% in the past three years (Chart 1).
At this pace, housing prices have significantly outpaced household disposable income growth. But, from a national perspective these gains do not appear excessive. Indeed, the housing-price to income ratio is only now just reaching its previous peak levels (Chart 2).
<a href="/images/2015/06/10/hsbc1.jpg" target="_blank">Click to enlarge</a>
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However, the national story hides some more worrisome regional trends. Sydney housing prices have risen by 39% over the past three years, much faster than the other cities (Chart 3). Housing prices are also still rising in Sydney at a 15% y-o-y rate. Although comprehensive state-level income statistics are not available on a time-series basis, it is likely that the Sydney housing price gains are outstripping income growth. Sydney housing price gains are running well ahead of national household disposable income growth (Chart 4).
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Local investors and foreign demand driving the market 
As is part of the plan, the main driver of Australia's housing price boom continues to be low interest rates. As a result of low interest rates, housing loan approvals have risen by 67% since their trough in mid-2011 and are currently rising at a 14% y-o-y rate (Chart 5). It is also clear that the main driver of the ramp up in housing prices continues to be investors, rather than first home buyers or repeat purchasers for owner- occupation (Chart 6). This is more unexpected. Investor loan approvals have risen by 112% since their trough in 2011, while loans to repeat buyers are up 47% and first home buyer loan approvals have only risen by 13%.
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Again, there are significant divergences in the trends across the states. The New South Wales (NSW) market, which is mostly Sydney, is being largely driven by investors (Chart 7). The investor share of new housing loan approvals in NSW has remained around record levels for the past six months or so. 
Although investors in Australia's housing market tend to be lower risk borrowers, increased investor interest can provide a tell-tale sign that the market is overly exuberant. In Australia, investors tend to have lower loan-to-valuation ratios than owner-occupiers, to be older households with equity in an owner-occupied dwelling and have higher incomes than first home buyers. This tends to make them a safer risk for lenders. However, investors are also typically involved in the housing market on the expectation of capital gains. A high level of investor involvement is therefore a signal of a growing speculative dynamic that may be worrisome. If this begins to feed on itself, with expectations of capital gains starting to drive further capital gains, a bubble could form.
The other driver of the Sydney and Melbourne housing markets has been significant foreign investor interest, particularly in the apartment markets. Again, estimates of foreign investment flows are imprecise. This largely reflects that it is difficult to define a 'foreigner' in Australia's context. Keep in mind that 28% of Australia's population was born in another country, that there are 200k new migrants each year and around 500k foreign students in the country at any point in time. 
Nonetheless, there are some data available from the Foreign Investment Review Board (FIRB), as genuine foreigners require FIRB approval for real estate purchases. The FIRB report that approvals for foreign investment in real estate rose from 12,025 in FY2012/13 to 23,428 in FY2013/14. Although this a significant rise (95%), it still only leaves measured foreign approvals comprising around 5% of all dwellings turned over in that year. It remains that case that interest rates and local buyers are the dominant drivers of the housing market. 
However, the recent fall in the AUD, could mean that foreign interest in the housing market continues to rise. There is some evidence that a potential driver of increased foreign interest in Australia's housing market has been the recent depreciation of the AUD, particularly against the RMB (Chart 8). Further falls in the currency could continue to support this growing foreign interest.
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Authorities are sharpening the prudential tool 
As the RBA's cash rate setting is a blunt instrument, further fine-tuning is largely being left to the prudential regulator. Indeed, the RBA appears to be increasingly focused on managing the real economy, leaving the role of managing the financial cycle to the prudential regulator (as we discussed in detail here: <a href="https://www.research.hsbc.com/midas/Res/RDV?p=pdf&amp;key=j8qW80utUE&amp;n=462148.PDF" target="_blank">Downunder Digest: Australia's evolving approach to macropru'</a>, 20 May 2015).
The Australian Prudential Regulatory Authority (APRA) already requires that all new mortgages pass a serviceability test at an interest rate of 7.00% and that lenders should not grow their investor housing lending at a faster rate than 10% a year, or they could face closer scrutiny if they do. In a recent speech, the Chairman of the APRA, Wayne Byrnes, made it clear that the prudential regulator had been turning up the dial further on its regulatory settings. As a result, most of the major banks have reduced discounts on lending rates to housing investors over the past month. 
It also seems likely that concerns about the housing market have been a key reason why the RBA has been reluctant to have an explicit 'easing bias', despite below-trend growth and the central bank's desire to see the AUD fall further. 
<a href="/images/2015/06/10/hsbc5.jpg" target="_blank"> Click to enlarge</a>
<img src="/images/2015/06/10/hsbc5.jpg" alt="" width="724" height="851">
<a href="https://www.about.hsbc.com.au/hsbc-in-australia/management-team" target="_blank">PAUL BLOXHAM</a> IS CHIEF ECONOMIST (AUSTRALIA AND NEW ZEALAND) FOR HSBC. 
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Sydney's housing boom or bubble? HSBC's Paul Bloxham's worrisome conclusion

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HSBC Bank cut its two year fixed rate home loan to 4.58% for all new borrowings over $50,000 last week.
The rate cut makes HSBC’s two year fixed rate home loan the lowest fixed rate mortgage offered by any retail bank in Australia, according to Canstar ratings as of 16 May.
HSBC Bank Australia’s head of mortgages Alice Del Vecchio says that a drop in the cost of funds has allowed HSBC to cut rates.
Customers will need to have loan applications in to HSBC before 18 July and settle by 19 September to take advantage of the 4.58% rate. After the two year period, the fixed rate will revert to HSBC’s standard variable rate. Customers will be able to make extra payments of up to $10,000 per annum.
“The ability to make additional payments is attractive as it offers the security of a fixed rate but also the flexibility for additional repayments if extra money becomes available. We also know our customers prefer a combined loan approach and so we are offering competitive variable rate pricing to complement the headline fixed rate,” said Del Vecchio.
The two year fixed rate loan has a comparison rate of 5.19% based on a secured loan of $150,000 over a 25 year term.
The bank also offers a range of one, three, four and five year fixed rate loans.
Two year fixed rate loans from the big four banks:
<ul>
<li>Commonwealth Bank: 4.84% per annum (5.73% comparison rate)</li>
<li>ANZ: 4.99% per annum (5.77% comparison rate)</li>
<li>NAB: 4.94% per annum (5.79% comparison rate)</li>
<li>Westpac: 5.04% per annum (5.93% comparison rate)</li>
</ul>
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HSBC lowers two year fixed rate home loan

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With inflation below market expectations, HSBC Bank Australia expects the Reserve Bank of Australia (RBA) to leave the cash rate at 2.50% for this month.
This year’s Quarter One Consumer Price Index (CPI) figures showed inflation running at 0.55% quarter on quarter and at 2.65% year on year.
According to HSBC, the inflation results suggest that the RBA is likely to keep the cash rate on hold for this month. But the bank expects that the next change to the cash rate will be an increase, given that inflation is in the upper half of the RBA’s 2-3% target band.
The overnight cash rate is currently at 2.50%, a record low. According to HSBC economist Paul Bloxham, it is unlikely that the RBA will make any further cuts to the cash rate, with strong indicators of economic growth and “the housing market booming.”
HSBC’s Bloxham expects the RBA’s next rate hike as soon as Q4.  According to the bank, lifting momentum in the domestic economy is offsetting current declines in mining investment.
In its latest RBA Observer report, HSBC also states that despites media rhetoric, the bank does not expect the May federal budget to be as tight as some anticipate. The report cites a commitment by the government to increase spending with the paid parental leave scheme and to reduce taxation by abolishing the carbon and mining tax. 
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