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

Interest Rates

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The country’s largest lender, Commonwealth Bank, has raised rates for interest-only home loans while reducing owner-occupier principal and interest variable rates.
Variable interest only home loan rates for owner-occupiers and investors will increase by 30 basis points. 
The bank said in a media release that the move to raise interest-only loan rates was “to meet our regulatory requirements”.
CBA followed its rivals by lifting rates for customers who opt for interest-only repayments while offering a small reward to home owners paying down their debt.
For owner-occupiers standard variable rate for those repaying principal and interest there will be a reduction of three basis points to 5.22 percent p.a.
The rates are effective from July 7.
Around 80 per cent of owner-occupier customers are repaying principal and interest, and these changes can help these borrowers own their home sooner, said the bank. A customer with an average mortgage of $350,000 will save $78 a year.
Owner-occupiers paying interest-only will pay an extra $88 a month or $1,056 a year, while investors paying interest-only, will pay CBA an extra $87 a month, or $1,044 a year.
Comparison website RateCity.com.au CEO Paul Marshall said there is now nowhere left to hide for Big 4 mortgage holders paying interest-only.
“The big banks have unanimously decided to hike rates for both new and existing customers despite the fact APRA’s most recent cap on interest-only was for new lending.”
“We are supportive of the banking regulator’s moves to manage the level of growth and resiliency in the housing market,” said a CBA release.
RBA had noted in its latest Financial Stability Review that interest-only loans account for a sizeable and growing share of total housing credit in Australia and such lending could increase households’ vulnerability in part due to the higher average level of indebtedness over the life of an IO loan compared with a regular principal-and-interest loan.
“If you’re an investor who wants to keep paying interest-only, your only reprieve from relatively high rates will be switching to a smaller lender,” said RateCity’s Marshall.
“Right now there are still a couple of investor rates offering interest-only terms under 4 per cent, but they’re earmarked as dying breed.”
Meanwhile, Matt Comyn, group executive of Retail Banking Services at CBA, added that the changes also “help us keep the right balance in our home loan portfolio, in line with what our regulators require”.  
All the major banks have been nudging customers with interest-only payments to switch to principal and interest repayments. 
These interest only changes are not in response to the bank levy that was announced as part of the Federal Budget in May, CBA said.
However, Marshall said that while owner-occupiers paying down their principal would welcome the reduction, the cuts weren’t exactly stacking up with the hikes.
“We would challenge the big banks to pass on more of the savings to mortgage holders who are doing the ‘right’ thing by paying off their loan,” he said, adding borrowers could try to shift to a smaller lender with more competitive rates.
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jonathanchancellor-7SQnKwU6yx

Commonwealth Bank raises rates for interest-only loans

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National Australia Bank has followed Westpac and ANZ by increasing rates for mortgage holders making interest-only repayments and reducing rates for owner-occupier customers paying off their loan, according to RateCity.
RateCity said investors and owner occupiers who pay interest-only will have to pay an extra $102 a month, or $1,224 a year, based on the average loan size of $350,000 over 30 years while owner-occupiers paying principal and interest have been given a small reprieve with $17 a month off their repayments, a savings of $204 a year.
Sally Tindall, RateCity Money Editor said today's changes were once again attributed to APRA’s new regulatory requirements.
"An astounding 41 percent of loans on the Big4 banks' books are interest-only," she said.
"That's a huge proportion of Australians who aren't paying off a single cent of debt.
"It's no wonder APRA is coming down hard. They want Australian mortgage holders to go on a debt-diet.
“Paying interest-only, particularly when you are an owner-occupier, is an expensive business.
“The average owner-occupier who elects to pay interest-only for the first five years of their loan will pay $67,810 extra to NAB over the life of their loan.
“When you look at the big picture, a couple of hundred dollars in savings each month pales in comparison to the long-term benefits of paying down debt."
<a href="https://www.propertyobserver.com.au/images/2017/06/23/Screen%20Shot%202017-06-23%20at%2011.24.58%20AM.png" target="_blank"> Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/23/Screen%20Shot%202017-06-23%20at%2011.24.58%20AM.png" alt="">
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NAB follows suit in hiking interest-only rates

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The recent interest rate increases by major and non-major banks have contributed to a rise in national mortgage arrears, according to ratings agency Standard &amp; Poor’s.
The number of home loan delinquencies underlying Australian prime residential mortgage backed securities (RMBS) rose to 1.21 percent in April from 1.16 percent in March, according to a recent S&amp;P report, RMBS Arrears Statistics: Australia.
New South Wales, Victoria and Queensland – which account for about 80 percent of total loan balances – all recorded increases in arrears between March and April, according to S&amp;P.
“Part of the increase reflects a decline in outstanding loan balances, but we believe interest-rate rises announced by different lenders during the past few months affected the Standard &amp; Poor's Performance Index (SPIN) for Australian prime mortgages, given that most of the loans are variable-rate mortgages,” S&amp;P analyst Erin Kitson was cited as saying by the Australian Broker. 
The SPIN looks at the weighted average of arrears more than 30 days past due on residential mortgages in publicly and privately rated Australian RMBS transactions and is calculated on a monthly basis.
Arrears increased in all states and territories except the ACT, NT and Tasmania. 
The largest surges in delinquencies in this time period were as follows:
• Queensland (1.58% to 1.66%)
• New South Wales (0.85% to 0.91%)
• Western Australia (2.27% to 2.32%)
However, the number of delinquencies in NSW and Victoria remain below the weighted average SPIN for prime mortgages.
Regional banks recorded the most increase in rise in arrears with mortgage payments more than 30 days late up from 2.02 percent in March to 2.27 percent in April. This was around 1.8 times higher than the prime SPIN, Kitson said.
“We attribute this in part to a decline in outstanding loan balances and the regional banks' greater exposure to Queensland; around half of all regional banks' outstanding loan balances are domiciled in the state.”
In comparison, for non-regional banks arrears increased from 1.10 percent to 1.14 percent between the two months, while non-banks rose from 0.87 percent to 0.95 percent in the same time period. These figures remained below the SPIN.
For non-conforming loans, arrears fell from 6.17 percent to 5.03 percent between April and March, due to a backdrop of increasing loan balances.
“Interestingly, mortgage repayments more than 90 days past due made up around 41% of the total nonconforming arrears in April compared with 60% for prime arrears. The proportion has been broadly consistent in the non-conforming sector for the past 10 years, but has increased more markedly in the prime sector during the period,” the report said.
On the bright side, Kitson said improvements in the seasonally adjusted unemployment rate in May are a credit positive for mortgage arrears.
“Relatively stable employment conditions in Australia have underpinned the low levels of arrears and losses in Australian RMBS transactions; loss of income is a key cause of mortgage default. Declining unemployment and positive jobs growth are fundamental to the ongoing stable collateral performance of Australian RMBS.”
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Interest rate rises by banks driving up mortgage arrears: S&P

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Westpac has increased interest only rates for variable home loans for owner occupiers and investors.
Owner occupied interest only rate will increase by 34 basis points to 5.83 percent p.a.
Investor interest only rate will increase by 34 basis points to 6.30 percent p.a.
Westpac have also announced an eight basis points reduction in variable interest rates for customers paying principal and interest on their owner occupier home loans.
It takes the standard variable rate for these owner occupiers to 5.24 percent p.a.
These rate changes are all effective from 30 June 2017.
George Frazis, chief executive of Westpac Consumer Bank, said owner occupier customers who make principal and interest repayments as they will benefit from lower interest rates allowing them to pay off their loans faster.
“We hope the rate reduction will encourage owner occupier customers with interest only home loans to switch to principal and interest repayments, helping them to pay down their home loan in this low interest rate environment. There will be no switching fee. 
“We understand the significance of interest rate changes to our home loan customers, so we try to balance the needs of both owner occupiers and investors in making these decisions.
“APRA’s limit on new interest only lending is 30% of new residential mortgage lending, so we have to continue to make changes to our interest only rates and lending policies to meet this benchmark,” said Mr Frazis.
“Today’s decision is not in response to the Federal Government’s recently announced bank levy,” Mr Frazis told Broker News.
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j.ballantyne1990-6AQqhLzZaK

Westpac encourages the switch as its lifts interest only home loan rates

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GUEST OBSERVER
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The minutes to the RBA’s June monetary policy meeting mainly reiterated the key points from the Governor’s decision statement and the additional ‘message’ from previous minutes – that the Bank’s main focus was on developments in labour and housing markets.
That said, there were some notable details: an intriguing new paragraph on financial stability in the ‘Considerations for Monetary Policy’ section; a slightly more bullish/hawkish discussion of international conditions; and several useful snippets from the detailed discussion including those gleaned from the Bank’s liaison programme.
As per the Governor’s decision statement, the slower growth picture for the March quarter was acknowledged but attributed to “quarter to quarter variation” with the Bank’s positive medium term outlook for growth to rise to a little above 3 percent reaffirmed.
The labour market commentary in the minutes was perhaps a little more positive than in the Governor’s statement which explicitly described indicators as “mixed”. The minutes do not use this particular term although the rest of the discussion is the same. Note that the RBA meeting took place well before the surprisingly strong May labour force report released last Thursday.
The more constructive view around business investment that appeared in the decision statement was largely repeated, the detailed discussion downplaying the disappointing forward view from the Capex survey, citing its limited coverage and more positive tone from approvals, liaison feedback and business surveys.
On housing, the decision statement repeated the Governor’s statement comment that price pressures were starting to ease in markets that had seen brisk price rises. The minutes also note that housing credit growth had been steady with some slowing in growth in investor housing credit. However, “APRA’s recent prudential supervision measures … were yet to have their full effect”.
As in both April and May, the minutes concluded with the line that: “the Board continued to judge that developments in the labour and housing markets warranted careful monitoring”. Note that this line does not appear in the Governor’s decision statement, perhaps to avoid the appearance of giving some sort of policy guidance, e.g. these areas warrant monitoring but are not in a situation where they would draw an immediate policy response.
Turning to the ‘notable details’, the new paragraph on financial stability added to the ‘considerations’ section notes this aspect of the RBA’s role sits within its wider medium term inflation targeting framework, the effect of monetary policy decisions within this framework and the role of prudential supervision. It stresses the importance of cooperation and coordination across agencies facilitated by the Council of Financial Regulators.
While there are no ‘overt’ messages in the discussion, its inclusion is intriguing. Is it, for example, implying that a coordinated approach may also apply if the RBA were to consider additional rate cuts? Alternatively, is it simply restating the clear message the Bank has already given about the importance of financial stability concerns for policy and a broad endorsement of the current status quo?
The June meeting minutes sounded less wary on international conditions and more alert to a potential lift in inflation. Whereas previous minutes regularly noted risks to China around residential property markets and rising leverage in the Chinese economy, this line did not feature in June which ran with simpler observations including that the “recovery in residential construction had continued despite the Chinese authorities having again tightened policy measures aimed at reducing speculative activity”. 
More pointedly, the minutes also note that “globally, headline inflation had picked up” and that while this largely reflects higher oil prices with core inflation still low, “unemployment rates in many major advanced economies had been around or below levels that could be associated with a build-up in wage pressures”, with some signs that both wages growth (increasing in the US and Japan) and growth in unit labour costs (above average in the US, Japan and Germany) may be starting to respond.
The general theme is not new – last month’s minutes included the line that “core inflation was expected to rise gradually in the major advanced economies as spare capacity in labour markets declined further” – but the tone seems more hawkish.
Other useful snippets in the detailed discussion mainly come via the Bank’s liaison programme which included: “retail trading conditions had remained challenging”; “isolated reports of localised and skills-specific labour shortages feeding into higher wages”; and “identified a range of commercial property projects that are under consideration for the year ahead” that have yet to appear in the approvals data.
Conclusion
Monetary policy clearly remains firmly on hold as the Board assesses developments in housing and labour markets. The strong May labour force report released the week after the Bank’s June meeting would have eased some of its concerns on this front, although weak wages growth is likely still a factor (indeed this is one aspect of current conditions that could have received more discussion in the minutes which simply noted the link to consumer incomes and spending). It may also be becoming more comfortable around housing market risks as well although the situation here is clearly still evolving.
Overall there appears to be little shifting the Bank away from its positive medium term view on growth. Westpac’s more downbeat forecast for 2018 – based on a more significant drag from housing construction and falling commodity prices – will take time to become apparent and, in our view, will not be sufficient to draw an RBA interest rate response, particularly given its concerns about potential financial stability risks. As such we remain comfortable with our view that rates will remain on hold for the remainder of 2017 and 2018.
Matthew Hassan is senior economist with <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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Interesting detail in June RBA minutes: Matthew Hassan

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GUEST OBSERVER
Higher home prices: The Bureau of Statistics reports that Australian home prices rose by 2.2 per cent in the March quarter to stand 10.2 per cent higher over the year.
More homes: At the end of March there were 39,800 more homes than at the end of December. But the number of NSW homes rose by just 7,600 – the smallest quarterly gain in three years.
Reserve Bank Board minutes: The minutes from the June 6 Board meeting shows the Reserve Bank weighing up a raft of factors including the Federal Budget, signs of improvement in retail spending and reports of localised labour shortages feeding into higher wages.
Consumer confidence eases: The weekly ANZ/Roy Morgan consumer confidence rating eased from an 8- week high of 112.9 to 112.4 in the week to June 18.
The Reserve Bank Board minutes provides guidance on interest rate settings. Consumer confidence data is important for retailers. The residential property price data is important for housing-dependent businesses.
<a href="https://www.propertyobserver.com.au/images/2017/06/20/Screen%20Shot%202017-06-21%20at%208.18.33%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/20/Screen%20Shot%202017-06-21%20at%208.18.33%20AM.png" alt="">
What does it all mean?
It is taking some time for homes to be built to meet the demands of the population. That is particularly the case in NSW where the number of homes lifted by just 7,600 in the March quarter – the smallest gain in three years. Based on recent trends, the NSW population may have lifted by around 30,000 people in the March quarter. As the Reserve Bank has observed, the preference for apartment building is creating delays for home supply to bridge the gap with demand.
The wealth held in Aussie homes has passed $6,600 billion, up almost 11 per cent over the past year. While many bemoan poor housing affordability, wealth levels continue to soar for the two-thirds of Aussies that own homes or are paying them off.
The Reserve Bank Board has given no hints that rates will change any time soon. Board members considered all manner of factors at the June meeting although it is clear that the housing are job markets are being watched carefully. Since the meeting, data shows stronger job markets but softer home prices, further entrenching the Reserve Bank on the interest rate sidelines.
Consumer confidence remains just OK. Aussie consumers still believe that it is a good time to buy a major household item like a fridge or TV, but they are fretting over bills like council and utility rates and insurance premiums. And then there is the on-going adjustment to the new reality that annual wage growth will be closer to 2 per cent rather than 3- 4 per cent as in the past. 
What do the figures show?
Reserve Bank Board minutes:
Last paragraph: “The Board continued to judge that developments in the labour and housing markets warranted careful monitoring. Taking into account all the available information, including that year-ended growth in output was expected to have slowed in the March quarter, the Board judged that holding the accommodative stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.”
“ wage growth and inflation were expected to increase gradually as the economy strengthened.”
“ economic growth was still expected to increase gradually over the next couple of years to a little above 3 per cent per annum.”
“Over recent times, with interest rates at low levels, the Board has set monetary policy to support the economy in its transition following the mining investment boom, while also paying close attention to trends in household borrowing and related financial stability considerations. Members discussed the effect of monetary policy decisions on financial stability and on future inflation, employment and output. They also discussed the role that prudential supervision can play in promoting financial stability. In view of this, members acknowledged the importance of a strong relationship between the Bank and other regulators, particularly APRA.”
“According to liaison and survey data, retail trading conditions had remained challenging, although they had appeared to have improved a little since the start of the year, and this assessment had been supported by the large rise in retail sales in April.”
“Liaison suggested that, while wage growth is likely to remain subdued for some time yet, there had been isolated reports of localised and skills-specific labour shortages feeding into higher wages.”
“The Australian Government Budget had reported little change to the expected cash deficits over the next few years and, as a result, had had little effect on the Bank's near-term outlook for the Australian economy. Some new large infrastructure projects had been announced as a part of the Budget, but most of that spending would occur after 2019.”
Residential property prices
The Bureau of Statistics (ABS) has released its Residential Property Price indexes.
“The price index for residential properties for the weighted average of the eight capital cities rose 2.2 per cent in the March quarter 2017. The index rose 10.2 per cent through the year to the March quarter 2017.
The capital city residential property price indexes rose in Sydney (+3.0 per cent), Melbourne (+3.1 per cent), Adelaide (+1.5 per cent), Canberra (+2.8 per cent) and Hobart (+3.4 per cent) and fell in Perth (-1.0 per cent) and Darwin (-0.9 per cent). Brisbane was flat (0.0 per cent).
Annually, residential property prices rose in Sydney (+14.4 per cent), Melbourne (+13.4 per cent), Hobart (+11.3 per cent), Canberra (+8.9 per cent), Adelaide (+5.0 per cent) and Brisbane (+3.5 per cent) and fell in Darwin (-5.9 per cent) and Perth (-3.5 per cent).
The ABS notes that as at March 2017 there were 9.858 million homes in Australia. In the March quarter the number of homes rose by 39,800 with an extra 11,200 homes in Victoria, 9,600 homes in Queensland and 7,600 homes in NSW.
<a href="https://www.propertyobserver.com.au/images/2017/06/20/Screen%20Shot%202017-06-21%20at%208.19.43%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/20/Screen%20Shot%202017-06-21%20at%208.19.43%20AM.png" alt="">
“The total value of residential dwellings in Australia was $6,602,132.3 million at the end of the March quarter 2017, rising $163,122.9m over the quarter.
The mean price of residential dwellings rose $13,900 to $669,700 and the number of residential dwellings rose by 39,800 to 9,858,400 in the March quarter 2017
Consumer sentiment
The weekly ANZ/Roy Morgan consumer confidence rating eased from 112.9 to 112.4 in the week to June 18.
But confidence is down 3.3 per cent over the year and below the average of 113.2 since 2014. 
Three of the five components of the index rose in the latest week:
<ul>
<li> The estimate of family finances compared with a year ago was down from +9 to zero;</li>
<li> The estimate of family finances over the next year was unchanged at +23;</li>
<li> Economic conditions over the next 12 months was up from -7 to -6;</li>
<li> Economic conditions over the next 5 years was up from +1 to +4;</li>
<li>The measure of whether it was a good time to buy a major household item was up from +38 to +41:</li>
</ul>
What is the importance of the economic data?
The Reserve Bank releases minutes of its monthly Board meeting a fortnight after the event. The minutes give a guide to Reserve Bank thinking on interest rate settings.
The Australian Bureau of Statistics (ABS) provides quarterly data on residential prices. The figures provide further perspectives on the state of the housing purchase sector.
The ANZ/Roy Morgan weekly survey of consumer confidence closely tracks the monthly Westpac/Melbourne Institute consumer sentiment index but the former measure is a timelier assessment of consumer attitudes and is now closely tracked by the Reserve Bank.
What are the implications for interest rates and investors?
CommSec expects the Reserve Bank to remain on the interest rate sidelines for an extended period.
It takes time to build apartments – especially in light of the more common high-rise developments that dot the Sydney landscape. The homes are coming but the gap between demand and supply is closing only slowly. The longer it takes for the homes to be built, the greater the upward pressure on prices. The risk is that housing supply will come on with a rush, leading to a messy correction of home prices.
According to the Bureau of Statistics, sales of combined houses and apartments in Sydney in the March quarter were the lowest in 14 years. That is remarkable in a city where population is growing faster than the average rate over the past decade.
The Reserve Bank Board has highlighted the importance of the ‘third wheel’ – that is, regulatory policy to complement monetary and fiscal policy. But no arm of policy is precise in its impact on the economy so regulators must stand ready to change policy when required. 
Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>.
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Not enough homes, rates firmly on hold: Craig James

Minutes of June 2017 Monetary Policy Meeting of the Reserve Bank Board

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AMP has announced changes to investor lending saying it was to manage its portfolio responsibly and align with regulatory requirements.
Its variable interest rates for new and existing investment property loans will increase by 35 basis points.
For all new investor property loans, the maximum loan-to-value ratio (LVR) is reducing to 50 percent.
This change applies to all new loans with an investment property as security and includes loans to SMSFs.
The changes to interest rates are effective 23 June 2017 for new customers and from 26 June 2017 for existing customers.
The LVR change is from 21 June for new investment property loans and 1 July for SMSF investor loans. Sally Bruce, Group Executive AMP Bank, said the measures are needed to operate within its regulatory obligations.
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AMP raises rates for property investors

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GUEST OBSERVER
This week the US Federal Reserve, as expected, raised its benchmark interest rate by 25 basis points, to a range of 1-1.25 percent.
This was the third such hike in the last six months.
Fed Chair Janet Yellen said:
Our decision reflects the progress the economy has made and is expected to make.
Yet not everyone was so jazzed about the decision. In a terrific piece former US Treasury Secretary Larry Summers articulated <a href="https://www.washingtonpost.com/news/wonk/wp/2017/06/14/larry-summers-5-reasons-why-the-fed-may-be-making-a-mistake/?utm_term=.3fd9d567662c">“</a>5 reasons why the Fed may be making a mistake”.
And whether the Fed view or the Summers view is the better one has tremendously important implications for what the Reserve Bank should do here in Australia.
The nub of Summers’s concern revolves around the implicit model of the economy that the Fed is using – and whether it still works in the economic world in which we find ourselves.
The general worry with keeping rates too low, for too long, is that inflation will take off. In the past, policymakers have worried – with good reason – that waiting to raise rates until inflation starts rising much is dangerous because it can get out of control.
If one is not going to wait to see what happens to inflation, then one needs a way to predict the path of it. The traditional approach that policymakers have taken is to look at the relationship between unemployment and inflation – the so-called Phillips Curve – and predict future inflation based on unemployment.
Summers prefers what he calls the “shoot only when you see the whites of the eyes of inflation” paradigm. This – as the imagery suggests – involves waiting until the last possible point before raising rates. In other words, be really sure that the inflation is happening.
This makes sense if the old model is broken, and Summers makes a persuasive case that it is.
First, he points out that the Phillips Curve (the allegedly stable relationship) may not even exist. And even if it did, scholars have pointed out that it would be very hard to estimate statistically the Goldilocks point where unemployment is such that the rate of inflation is stable (the so-called Non-Accelerating Inflation Rate of Unemployment or NAIRU).
Second, Summers offers a different model of the world – at least in part. That model is one where advanced economies – like the US and Australia – are suffering from “secular stagnation”.
According to Summers, the implication for monetary policy of this are as follows:
there is good reason to believe that a given level of rates is much less expansionary than it used to be given the structural forces operating to raise saving propensities and reduce investment propensities.
I am not sure that a 2 percent funds rate is especially expansionary in the current environment.
Moreover, he sees asymmetric risk with getting it wrong, going on to say:
And I am confident that if the Fed errs and tips the economy into recession the consequences will be very serious given that the zero lower bound on interest rates or perhaps a slightly negative rate will not allow the normal countercyclical response.
Maybe the combination of a fire hose of global savings chasing too few productive investment opportunities has changed what level of interest rate can provide a serious boost to economic activity.
Which bring us to Australia. We, too, have relatively low unemployment by historical standards (the ABS just announced a drop in May to 5.5%), yet wage growth is remarkably low. Those two things happening together suggests that our old understanding of the labour market is off the mark. That low wage growth is a major driver of the low inflation we are also experiencing.
If Summers is right, and there isn’t some big point of difference between Australia and the US in this regard, then the unmistakable implication is that the RBA should probably cut rates – perhaps twice – later this year.
But there is that whole housing price thing in Australia. A rate cut could fuel further price rises which, as bad as that is for affordability, is also deeply problematic for financial stability.
Yet, if the Australian economy really does need a rate cut, and governor Philip Lowe holds steady because of housing price fears, then that could trigger a further slowing of GDP growth, put wages under even more pressure, and trigger a recession itself. And that would be bad news for financial stability, too.
Let’s see how the RBA handles that Gordian Knot.
<a href="https://theconversation.com/profiles/richard-holden-118107">Richard Holden</a> is a Professor of Economics and PLuS Alliance Fellow at UNSW and author for <a href="https://theconversation.com/au">The Conversation</a>.
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Australia is facing an interest rates dilemma

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ANZ has announced a five basis point reduction in variable interest rates for customers paying principal and interest on home loans, effective 16 June. 
The bank’s standard variable rate for owner-occupiers is at 5.20 percent/pa.
Customers with an investor loan paying principal and interest will receive a five basis point reduction on their standard variable rates.
Variable interest-only home loan rates for investors and owner-occupiers will increase 30 basis points, which the bank says is in response to regulatory and market condition.
Fred Ohlsson, ANZ Group Executive Australia said many Australians are finding it difficult to manage household budgets at present and ANZ is pleased to be able to reduce rates for the majority of our customers who are working hard to pay off their homes.
“While we know those only paying interest on their loans will be disappointed, we need to manage our regulatory obligations and we are now required to hold additional capital against our home loans. We also need to better balance our portfolio towards those paying off their homes," he said.
“There are clear benefits for our customers to be paying off their loans and we have made this as easy as possible by removing fees associated with moving across from interest-only loans.
“Today’s decision is not in response to the recently announced bank levy and we are still to determine the final impact of the tax.
“We do however recognise the work regulators are doing to manage the growth of both investor and interest-only loans and we will continue to be transparent on the impact this will have on how we structure and price our home loan products,” he said.
<a href="https://www.propertyobserver.com.au/images/2017/06/09/Screen%20Shot%202017-06-09%20at%2011.49.29%20AM.png" target="_blank">Click to enlarge</a>
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