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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GUEST OBSERVER
Japanese and Chinese shares up but US shares down slightly and Australian shares having another bad week.
Bond yields continued to back up as prospects for a December Fed rate hike continue to firm and as stronger UK growth diminished prospects for a further Bank of England easing. Commodity prices were mixed but the $US continued its ascent and the $A fell slightly. 
Why the recent poor performance from Australian shares? 
While global shares have been range bound over the last few months (with Eurozone and Japanese shares benefitting from falls in their currencies and the US share market down a bit) Australian shares are down 5 percent from their August high. 
This relative underperformance reflects a combination of: concerns about the Fed and the US election that seem to be weighing on most share markets at present; a reversal of the huge bond rally that had helped the higher dividend paying Australian share market and sectors like real estate investment trusts up to mid-year; a soft patch in consumer spending weighing on retailers; and stock specific issues. Of these the turn up in bond yields is perhaps most significant taking a huge toll on defensive high yield sectors like REITs. 
With the Fed on track to hike again in December and the RBA likely to be on hold for now a further back up in bond yields is likely into December. However, while the bond bull market is likely over as global inflation bottoms the back up in yields generally is likely to be gradual as global growth is set to remain constrained, the Fed is likely to remain gradual in raising interest rates and other major central banks including the RBA are likely on hold or skewed to easing further. 
Meanwhile defensive yield sectors are getting very oversold and due for a bounce and cyclical sectors have more upside if as we expect that global and Australian economies continue to see moderate growth. Bottom line – it’s just another correction.  
Spain moving out of limbo with the focus shifting to Italy. 
The political impasse that has hung over Spain following inconclusive elections in December and June looks likely to be resolved with the Socialist party voting to a abstain from voting in a parliamentary confidence vote that will then see Mariano Rajoy confirmed as PM. However, political risk in Europe has shifted to Italy and Austria. 
Italy will see a referendum on reducing the power of its Senate on December 4 with PM Matteo Renzi seeking to reduce its power in order to proceed with economic reform (something maybe Australia should think about!) and threatening to resign if the referendum is not passed which would then provide a boost to the mostly anti-Euro Five Star Movement. 
On the same day Austria will see a re-run of its presidential election with the far right candidate being anti-Euro. So if these go the wrong way we could see another bout of Eurozone break up fears. Either way I remain of the view that the Eurozone will continue to hang together – mainland Europeans are far more attached to the EU and Eurozone than the UK ever was, much of the recent rise in populists in Europe is really a backlash against austerity than necessarily the Euro (which remains popular). What’s more European shares remain very undervalued.
Based on history the best outcome for US shares will be a Clinton victory but with the Republicans retaining control of at least the House of Representatives. Since 1927 US total share returns have been strongest at an average 16.7 percent pa when there has been a Democrat president and Republican control of the House, the Senate or both. By contrast the return has only averaged 8.9 percent pa when the Republicans controlled the presidency and Congress. 
<a href="/images/2016/10/28/Screen%20Shot%202016-10-28%20at%201.13.38%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/28/Screen%20Shot%202016-10-28%20at%201.13.38%20PM.png" alt="">
Source: Bloomberg, AMP Capital
A Trump victory would likely trigger an initial bout of “risk off” with shares down (both in the US and globally), bonds rallying and the $US up as investors fret about his economic policies particularly his protectionist trade policies triggering a global trade war. Australian shares and the $A would be particularly vulnerable to this given our high trade exposure. But a Clinton/Democrat clean sweep of the Presidency and Congress would likely also trigger a bout of nervousness in US shares as it would be easier for Clinton to implement less business friendly tax and regulatory policies that would weigh on US health, energy and financial stocks. 
This would likely be more focussed on US shares though with less of an impact on global/Australian shares. A lot could still happen been now and election day but at this stage while Clinton looks to be ahead with a 5.7 point lead across a range of polls and leading in most battleground states (so we are sticking with a 70 percent probability of a Clinton victory), there is no sign of a wave of support going towards the Democrats that will see them win the necessary 30 seats to take the House.
<a href="/images/2016/10/28/Screen%20Shot%202016-10-28%20at%201.15.13%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/28/Screen%20Shot%202016-10-28%20at%201.15.13%20PM.png" alt="">
Major global economic events and implication
US data was good. Manufacturing and services conditions PMIs are up solidly, home sales are strong and home prices continue to rise and unemployment claims remain low. Durable goods orders are trending sideways though and consumer confidence fell but this looks to be related to election uncertainty. All consistent with a December rate hike.
Despite a few high profile misses, the US September quarter profit reporting season is actually looking pretty good…the profit recession looks to have ended. Of the 275 S&amp;P 500 companies to report so far, 78 percent have beat on earnings and 59% have beat on sales. Profits are now expected to be up 4 percent on the June quarter and up 15 percent from their March quarter low. A 4 percent yoy gain in revenue is a key driver. 
Eurozone manufacturing and services conditions PMIs also rose strongly in October pointing to continued moderate growth.
Japanese data was also solid with strong manufacturing conditions, a rise in small business confidence, an improvement in household spending and solid labour market indicators. Deflation continued in September though with core inflation falling to zero.
Chinese industrial profits slowed in September to 7.7 percent yoy, but consumer confidence spiked higher in October.
Australian economic events and implications
Inflation remains very low, but maybe not low enough to trigger another RBA rate cut just yet. While September quarter CPI inflation at 0.7 percent quarter on quarter was a bit higher than expected this was mainly due to prices for fruit &amp; vegetables, electricity, tobacco and property rates while underlying inflation at 0.3 percent qoq was a bit lower than expected with ongoing evidence that deflationary pressures are still working through the economy. 
However, on balance it is probably not enough to trigger an immediate rate cut as inflation is in line with the RBA’s own expectations, economic growth looks to be reasonable and rising commodity prices are set to boost national income. The latter was reflected in the second rise in the goods terms of trade in row in the September quarter with a further rise likely in the December quarter as higher coal and iron ore prices feed through. Meanwhile new home sales rose again in September and remain strong and producer price inflation remains very low.
What to watch over the next week?
In the US, the Fed (Wednesday) is very unlikely to raise interest rates particularly with a “risky” election just six days later but the post meeting statement is likely to confirm that the Fed is on track to raise rates in mid-December (the market probability is just 17 percent for a November hike and 72% for a December hike).  
Meanwhile September quarter earnings reports will continue to flow with around 100 S&amp;P 500 companies due to report, the October ISM manufacturing conditions index (Tuesday) is likely to show a further improvement and jobs data (Friday) is expected to show continued solid jobs growth of around 170,000, a slight fall in the unemployment rate to 4.9 percent but continued modest wages growth. Meanwhile, core inflation according to the private consumption deflator (Monday) is likely to have remained unchanged at 1.7 percent yoy in September.
In the Eurozone, September quarter GDP data (Monday) is expected to show continued moderate GDP growth and expect a further rise in October CPI inflation (Monday) as the fall in oil prices from a year ago drops out but core inflation to remain around 0.8 percent yoy.  
Japanese industrial production for September (Monday) is expected to show continued growth and the Bank of Japan (Tuesday) is unlikely to make any changes to monetary policy after the further easing announced a month or so ago.
Chinese manufacturing conditions PMIs for October (Tuesday) are likely to pause or slow slightly but remain consistent with a stabilisation in growth.
In Australia, it’s a close call but the RBA is expected to leave interest rates on hold at its monthly Board meeting (Tuesday). September quarter inflation was low on an underlying basis but probably not low enough to trigger another cut just yet as it is in line with the RBA’s own expectations, economic growth in Australia looks reasonable with the worst of the mining investment slump behind us and a rise in commodity prices is starting to boost national income again. As such, the RBA can afford to be patient in waiting for inflation to head back to target and thereby avoid the risk of adding to financial instability (read a further acceleration in Sydney and Melbourne home price gains) with another rate cut for now. 
Overall, we think that the RBA will leave rates on hold at its Melbourne Cup Day meeting, but that with inflation remaining very low, the $A still uncomfortably high and jobs data softening lately its premature to close the door on another rate cut but that’s more likely to be a 2017 story. The Reserve Bank’s Statement on Monetary Policy (Friday) will likely see little change to the RBA’s growth and inflation forecasts.
On the data front, expect credit growth (Monday) to remain moderate, CoreLogic home price growth (Tuesday) to remain solid, building approvals (Wednesday) to fall 6 percent, the trade deficit (Thursday) to show a further decline as higher coal prices flow through and retail sales (Friday) to grow 0.2 percent in September but just 0.1 percent in the September quarter in real terms.
Outlook for markets
We remain cautious on shares in the short term as event risk is high for the months ahead including ongoing debate around the Fed and ECB, issues around Eurozone banks, the US election on November 8 and the Italian Senate referendum &amp; Austrian presidential election re-run (both on December 4). Bond yields could also see more upside in the short term. However, after any short term weakness, we anticipate shares to trend higher over the next 6-12 months helped by okay valuations, continuing easy global monetary conditions, moderate economic growth and the shift from falling to rising profits for both the US and Australian share markets. 
Still ultra-low bond yields point to a poor medium term return potential from them, but it’s hard to get too bearish on bonds in a world of fragile growth, spare capacity, low inflation and ongoing shocks.
Commercial property and infrastructure are likely to continue benefitting from the ongoing search for yield by investors. 
Dwelling price gains are expected to slow, as the heat comes out of Sydney and Melbourne thanks to poor affordability, tougher lending standards and as apartment supply ramps up which is expected to drive 15-20 percent price falls for units in oversupplied areas around 2018.
Cash and bank deposits offer poor returns. 
The outlook for the $A has become murky. A shift in the interest rate differential in favour of the US as the Fed remains on its path to hike rates should see the long term trend remain down and the $A normally overshoots on the downside after the bursting of commodity price booms and this remains our base case. But against this, the stabilisation and rising trend in some commodity prices and the continued gradual nature of Fed rate hikes suggest ongoing upside risks in the short term. 
The danger is that the latter will threaten the rebalancing of the economy and the best defence against this is for the RBA to revert to a clear easing bias even if it never acts on it.
<a href="https://www.propertyobserver.com.au/https://plus.google.com/110172465327488162875?rel=author" target="_blank">SHANE OLIVER</a> is head of investment strategy and economics and chief economist at <a href="https://www.ampcapital.com.au/home" target="_blank">AMP Capital</a> and is responsible for AMP Capital's diversified investment funds.
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jchancellor-FAypfDUnLy

A close call but the RBA to leave interest rates on hold: Shane Oliver

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<img src="https://counter.theconversation.edu.au/content/67711/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Readers will appreciate the strong link between inflation (the Consumer Price Index), Reserve Bank interest rate policy, and the Australian dollar.
Inflation has been stubbornly low. The RBA has a 2-3 percent target, but they have been missing that on the low side for an extended period. Wednesday’s release saw a 0.7 percent rise for the September quarter, still only an annual rate of 1.3-1.5 percent (depending on which volatile components get stripped out).
Nonetheless, that was roughly in line with expectations and certainly not as bad as it could have been. Markets reacted accordingly, sending the Aussie dollar roughly half a cent higher. That means a Melbourne Cup day rate cut by the RBA looks less likely.
But the interesting wrinkle is that a higher dollar puts downward pressure on deflation. Plus, the RBA has been quite explicit about being concerned about too high a dollar for export competitiveness. So it might actually suggest a cut early next year. Welcome to the weird world of modern macroeconomics.
Housing supply is also top of mind, with September new home sales to be released this week. 
Showing concern about affordability and supply, NSW Finance Minister Dominic Perrottet floated a plan to move away from stamp duty to a land-tax-based system. 
Stamp duties are an economic nightmare of a tax. They distort the balance between supply and demand – meaning people often don’t move when they otherwise would. Nothing ruins an economist’s day more than a misallocation of resource caused by a stupid policy. Land taxes, by contrast, are far more efficient: creating far less distortion for the same amount of revenue generated.
More needs to happen on the supply side to help solve the housing affordability crisis. My McKell Institute plan would gradually phase out negative gearing other than for new properties – and would make for a nice complement to stamp duty reform.
<h2>All eyes on the US… election</h2>
In the US, consumer confidence figures released this week with the Conference Board’s index dropping to 98.6 in October, down sharply from 103.5 in September.
The reason that this is so consequential is that consumer spending accounts for more than two-thirds of US demand. Weaker consumer confidence means the prospect of lower economic growth. That in turn could affect the Fed’s decision-making.
Right now there is some difference of opinion among members of the Federal Open Market Committee (FOMC) that sets monetary policy. That may be in part due to some people campaigning for jobs in a Clinton White House – but it also partly reflects the genuinely complicated set of circumstances faced by advanced economies around the world.
Of course, the biggest news of all will come from the US Presidential election on November 8. Hillary Clinton appears almost certain to win – bookies are already paying out bets. There is also a strong possibility of Democrats winning back control of the Senate (the Upshot folks at the New York Times have it at 64% at the time of this writing).
That would be hugely consequential for the appointment of the next Supreme Court Justice. I will write more about this another time, but in a recent academic paper with Michaele Keane (from UNSW and Oxford) and Matthew Lilley (from Harvard) we showed that the ideological position and voting direction of a justice affects those of other justices. To give you a rough idea, we estimate that replacing the late Justice Scalia with Judge Merrick Garland (President Obama’s nominee) would make each other justice 5.1% more likely to vote liberal on a given case.
The US Presidential race is very important, but the Senate outcome matters, too.
Richard Holden is professor of economics and PLuS Alliance Fellow, UNSW Australia and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">here</a>.
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Melbourne Cup day rate cut less likely

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Conditions in the housing market have been mixed across Australia this spring, though the new RBA Governor Philip Lowe has suggested some of the Sydney property market has seen "brisk" price increases.
"It is a complex picture," he noted given prices were still falling in some capitals.
"There remained considerable uncertainty about momentum in the labour and housing markets," the latest RBA minutes advised.
This mixed bag was being watched closely by the RBA board members as they figure out if there's another rate cut yet to come for the nation.
Lowe advised the board had assessed the rapid growth in housing prices and concluded the overall risks had receded over the past year.
But I'd suggest the shortage of stock this spring has actually put many of Sydney's suburban markets into risky top gear.
The regularly high clearance rates, the pre-auction sales and the speed of private treaty sales are showing no signs of slowing.
The eastern suburbs auction success rate sits above 90 percent, while across Sydney it sits around 80 percent.
The days on market for both Sydney houses and units is at near record lows of 27 days before their private treaty sale.
The pre-auction BresicWhitney sale of a Leichhardt warehouse conversion highlighted the trend of vendors pocketing more than they dreamed off.
With 11 registered bidders in June last year, after 40 contracts were issued, a $1.55 million sale was secured when it was still operating as a sign-writing business.
The property returned to the market last month with a mezzanine bedroom level and a splash of paint.
It was marketed with $1.8 million hopes and sold before last weekend's scheduled auction at $2.1 million.
That's $550,000 more - reflecting near 25 percent price annualised growth.
This month there was also a snappy pre-auction sale - after just four days on market - by the fashion designer Collette Dinnigan and her hotelier husband Bradley Cocks at Watsons Bay.
Last traded at $6.25 million 18 months ago, she secured well in excess of the $8 million being sought through Ben Collier at McGrath Estate Agent for the classic Beaux-Arts style home. Perhaps even $9 million.
He was out the front of Saturday's cancelled first open for inspection when I turned up for a look, advising intending inspectees of the overnight sale at an undisclosed price.
When it was last sold at $6.25 million in 2015 Matthew 'Ched' Csidei and his lawyer wife Lauren Roscoe, had sought $8 million too, but it took them over 200 days to secure their sale.
All this staggering price growth at a time when wages growth is low.
Infact research by the RBA and the Australian Bureau of Statistics shows a dramatic fall in the size and frequency of wage gains in recent years.
Six years ago, almost 40 per cent of the 18,000 individual job categories tracked by the ABS received a wage increase in excess of four per cent.
Over the last year, less than 10 per cent of jobs got this type of wage increase.
Around half had a wage increase of between two and three percent.
Recent Roy Morgan research showed that more than two-thirds of mortgages to owner-occupiers were held by households with two incomes.
This poses huge risks if one of the incomes disappears or is even reduced.
The loss of one of the incomes was calculated as having a bigger impact than a doubling in interest rates.
Let's just hope we can keep both these scenarios out of the economic equation.
This article was first published in the Saturday Daily Telegraph.
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Sydney's speed and price growth is sometimes staggering

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APRA has told banks they should make sure new borrowers can repay their debts with mortgage rates of at least 7 percent.
The foreshadowed guidelines have confirmed already widely followed practice across bank mortgage lending.
The Australian Prudential Regulation Authority updated its industry guidance to ensure banks are "prudent" in managing risks in the $1.5 trillion mortgage market.
APRA is now being more specific in demanding minimum interest rates banks must use when approving customers for home loans.
It continues the crackdown commenced in late 2014.
While the banks advertise home loan interest rates well below 4 percent for new customers, APRA said a "prudent" bank would have an internal assessment rate of at least 7 percent.
APRA is also seeking banks must "scale" their cost of living indexes according to a borrower's income.
For instance, it says that even if a borrower does not have housing costs because they live with their parents, banks should still make a "reasonable estimate" of what their housing costs would be if they had to pay for housing.
The policy also specifies the minimum "haircuts" banks should make to non-salary income.
It says banks should apply a haircut of at least 20 per cent to non-salary forms of income – including bonuses, overtime, or rent from investment properties – when they are assessing a loan application.
The Australian Prudential Regulation Authority released for consultation revisions to Prudential Practice Guide APG 223 Residential mortgage lending to incorporate measures either announced by APRA in December 2014 or communicated to authorised deposit-taking institutions (ADIs) since that time.
APRA has also released for consultation with ADIs proposed new reporting requirements for residential mortgage lending data.
APRA does not expect the revisions to APG 223 to result in material changes to existing lending practices for ADIs.
The revised APG 223 does include more detailed guidance on the following areas:
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<li>quantitative serviceability parameters including the application of interest rate buffers and floors,</li>
<li>haircuts for non-salary income such as rental income,</li>
<li>treatment of interest-only loans and estimation of living expenses; and</li>
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other qualitative measures including meeting responsible lending obligations, monitoring serviceability policy overrides, and treatment of self-managed superannuation fund loans and other specific loan types.
Released on 5 November 2014, APG 223 summarises APRA’s expectations for sound residential lending practices, including guidance on addressing housing loan credit risk within an ADI’s risk management framework and applying sound loan origination criteria, verification procedures and security valuation methods, among other things. 
On 9 December 2014 APRA announced further steps to reinforce sound residential mortgage lending practices — the revisions to APG 223 incorporate the serviceability requirements that were announced in December 2014 and reflect APRA’s supervisory experience in the subsequent period.
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APRA tightens home loan lending policy including cost of living calculations

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GUEST OBSERVER
The minutes of the monetary policy meeting of the Reserve Bank Board for October, which mark the first meeting of the new Governor Lowe, provide significant insight into the Board’s current deliberations.
The minutes are quite honest that there is a high degree of uncertainty in a number of areas. In particular the assessment of the labour market is quite mixed and conflicting evidence is presented around the housing market.
The minutes point out that even though the unemployment rate has fallen by half a percentage point over the past year the underemployment rate, which captures workers who would like to work more hours, has increased. That message is consistent with a number of other developed economies where the unemployment rate is not necessarily a clear indicator of spare capacity in the labour market. In a speech which the Governor delivered today he estimates that the current unemployment rate is around half a percent above ‘full employment’, pointing to ample spare capacity in the labour market. However, the minutes do note that job vacancies and advertisements have increased and are consistent with employment growth in the coming months. There is also a more confident assessment that the relentless downward pressure on earnings may be waning. Recent evidence from the national accounts shows that average earnings have picked up in the past two quarters because the switch from high paying mining-related jobs to lower paying service jobs has slowed. The increase in the terms of trade in the June quarter, and expected increase for the September quarter also point to a boost to wages and profits.
The assessment of the housing market is more uncertain than had been the case at the time of the August rate cut. In particular for the first time in this cycle the Board recognises high auction clearance rates in Sydney and Melbourne and strengthening house price growth. Uncertainty around the outlook for housing is most clearly emphasised when the minutes states: “developments  would need to be monitored closely”.
In the speech referred to earlier the Governor linked those two markets back to monetary policy’s key objective around inflation. He pointed out that the need to achieve the inflation target should be affected by the conditions in labour and housing markets. For example, if inflation was well below the target but moving it back to the target came at the cost of a weakening of balance sheets and an unsustainable build up in leverage, a longer period away from the target would be appropriate. On the other hand if the labour market was deteriorating then a much more rapid movement towards the target would be appropriate. Clearly the story is never as clear cut as that but we can see strands of that approach to policy coming out in the minutes where uncertainty around those two markets is a central theme., although the assessments of the Sydney and Melbourne housing markets counsel caution.
The minutes also surprised us by the explicit sentence in the final paragraph: “Members noted that data on CPI inflation for the September quarter and an update of the forecasts would be available at the next meeting”….. providing the opportunity to review conditions in the labour and housing markets. Explicitly recognising the upcoming inflation report is not a standard approach. Certainly,it was referred to explicitly in the July minutes when we were clearly conditioned to see the June quarter inflation report as critical to the August policy decision.
We have not been of the view that the next inflation report will have the same significance. Bear in mind a 0.3%qtr is dropping out of the annual number and so the report would have to indicate that core inflation printed 0.2%qtr or less to see a further fall in annual inflation. We think that is extremely unlikely given our own forecast of 0.4%qtr and therefore an actual increase in annual underlying inflation from 1.5%yr to 1.6%yr. It is reasonable to assume that the Bank has a similar number in mind and therefore eliminating any case for a  policy response. However, choosing to include this sentence in the minutes and noting that the Governor has used the same observation in his speech today points out that given the uncertainty around housing and labour markets there may be a sufficiently low number that would put policy back into play for November. That is not to say that there would be an automatic policy response to an extraordinarily low number given that further information will also be available on the housing and labour markets.
While the minutes do not consider inflation expectations the Governor’s speech today highlights their importance- in particular the significance of the current inflation read for impacting inflation expectations: “One of the key influences on inflation expectations is the actual outcomes for inflation” – this observation further emphasises his assessment of the importance of current inflation for the future path of inflation.
There were no other surprises in the minutes. The Board is slightly more positive about the global economy as a result of a better performance from China. The minutes point out the recent boost to commodity prices but recognise that supply effects have been critical to this adjustment. It is our view that with evidence that supply is already responding, particularly in China, prices will adjust back towards costs of production over the course of the next year.
While the minutes included a section on the Bank’s half yearly assessment of the financial system (Financial Stability Review) there was surprisingly little emphasis on the risks around the inner city apartment market. Consistent with the Bank’s uncertainty around the residential property market the minutes are surprisingly brief on this issue.  
Conclusion
The minutes and today’s speech have provided us with valuable insights into the core approach to policy that we can expect from the new Governor. Less emphasis on specific inflation targeting and direct consideration of the implications of policy for housing and labour markets is clearly spelled out. However, the minutes do remind us that inflation is still the central policy objective and the inflation reports which we receive on a quarterly basis will always be important to the policy response. Based on the Governor’s apparent uncertainty around housing and the labour market at the moment it is clear that he would not welcome a sharp negative surprise on current inflation. We do not think that such an outcome is at all likely and we also believe that his tolerance for a very low number will be high but not infinite.
We maintain our long held view that rates will remain on hold in November and developments in the real economy will be sufficiently supportive to keep rates on hold in 2017.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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Reserve Bank minutes highlight uncertainty about housing and labour markets: Westpac's Bill Evans

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Dwelling investment increasing more rapidly than housing credit: RBA

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<div class="column">Financial stability has become more important to the RBA, with an increased emphasis on financial stability in the updated policy agreement with the Treasurer.</div>
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<div class="column">In the Financial Stability Review, the RBA is more worried about the rapid growth in the already high level of debt in China, where our recent analysis highlights the downside risk this poses to Australia’s outlook. The RBA thinks local banks are in good shape, where household-related risks have “lessened a little” since April. The RBA thinks risks have increased for property development, particularly given the huge increase in the supply of apartments in Brisbane and Melbourne, and mining-related areas.
The main points from the Financial Stability Review were:
China’s high and rapidly rising debt is a key concern.</div>
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<div class="column">The “potential for a disruptive adjustment in China remains pronounced, given the ongoing increase in debt [is occurring] at a time when the pace of economic growth has [slowed]”. The financial system has become “increasingly large, opaque and interconnected” and easier policy aimed at stabilising the economy has fuelled the rapid growth in debt. China still has policy options to boost growth, but many of these would likely boost debt further, which “could increase the risks to longer-term reform and stability”.</div>
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 European and Japanese banks remain under pressure.</div>
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<div class="column">European banks are struggling given low profits, bad debts, and weak stock prices. Low/negative rates are pressuring net interest margins for banks in Japan and other advanced economies.</div>
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 Australian banks are performing well and remain “resilient to possible shocks”. Local banks have high capital and leverage ratios and have strengthened their liquidity positions. Banks have scaled back some international exposures and their exposure to the mining-related sector is small and falling (Asian bank balance sheets are the ones most exposed to mining and commercial property). Bad debts are up from low levels, mainly reflecting lending to households and companies in mining areas and the New Zealand dairy sector.</div>
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 Risks related to households have “lessened a little” since April given improved serviceability metrics, tighter lending standards, and slower growth in credit. Even so, the RBA notes that: 1) house prices are up “a little” in recent months in Sydney and Melbourne; 2) the ratio of debt to income is up; and 3) non-performing home loans have increased in mining areas, which are a small part of bank mortgage books. Local risks are centred on property development and mining areas.
The risks relate to: 1) the huge increase in the supply of apartments in Brisbane and Melbourne over the next couple of years; and 2) the search for yield boosting Sydney and Melbourne commercial property, and resource-related weakness in Perth and Brisbane.
For apartments, there are signs of longer settlement times and valuations falling below contract prices, while developers expect settlement failures will increase. Assessing the health of developers is hard because of the importance of unlisted and foreign developers.
Banks have tightened up on: 1) lending to borrowers who rely on foreign income, which may weigh on demand in the short term; and 2) property developers, which could help forestall future oversupply, although some developers are turning to non-banks. For commercial property, the RBA is worried that the current low level of yields may prove unsustainable if global interest rates rise and/or foreign demand declines.
The RBA also notes that APRA is reviewing bank commercial property lending practices, including for residential development, with the aim of improving lending standards. 
Kieran Davies is an economist for ANZ and can be contacted <a href="https://www.anz.com/personal/" target="_blank">here</a>.
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RBA sees Chinese and Australian apartments risks to financial stability: ANZ

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GUEST OBSERVER
Australian Treasurer Scott Morrison recently suggested the Reserve Bank of Australia (RBA) avoid cutting interest rates below the current 1.5 percent.
The Turnbull government’s “fiscal consolidation”, he said, was more important for stimulating the economy.
This is big talk, and to be anything close to credible it needs to be backed up by big policies.
Morrison is not alone among politicians wading into the current debate on interest rates. Republican presidential nominee Donald Trump has said US Federal Reserve Chair Janet Yellen “should feel ashamed” for keeping rates so low. US President Barack Obama and UK Prime Minister Theresa May have been more lucid, taking greater care to understand the tradeoffs that central banks face.
Debate is certainly warranted. Negative interest rates were widely considered “impossible” just a decade ago, yet today they are the norm for OECD countries. If they are here to stay then serious reforms will be necessary to keep capitalism working.
Australia, so far, remains an outlier. The RBA’s rate of 1.5 percent may be a record low on our shores, but it is enviably high compared to most of the OECD. 
But as Australia faces the end of the mining boom, the end of a housing boom, and the end of car manufacturing and gas-intensive manufacturing, downward pressure on growth and interest rates is building.
To counter this, Morrison must offer a credible way of avoiding further cuts in Australia.
<h2>Excess savings</h2>
Interest rates are low across the OECD due to excess savings. This is the same problem that caused prolonged unemployment during the Great Depression.
Imagine the world spontaneously decided to save 10% more of its income in 2017. As the year progressed, demand for goods and services would collapse. Businesses would find their warehouses packed with unsold goods and their staff under-utilised. They would be forced to lay off workers and halt production. Spooked investors would be unwilling to expand businesses, build housing, or invest in production. Asset prices would collapse, many debts would become unpayable, and the resulting financial crisis would further cut into employment.
In turn, high unemployment would feed back to further reduce demand. The negative feedback between employment and demand would send the economy into a downward spiral. During the Great Depression, US industrial output shrank by an astounding 50% and unemployment reached 25%.
What sends savings higher in the first place?
Both the Great Depression and Great Financial Crisis were triggered by asset bubbles. When the bubbles burst, savings increased rapidly while investment plummeted, due to negative expectations (which increase savings for the coming hard times), financial instability (which leads people and companies to hold on to their money rather than lend it to potentially insolvent others), and high levels of debt (which increase savings to pay down debt).
Interest rates are so important in this story because they affect the rate of savings and investment – they reward savers and cost investors.
Higher interest rates increase the incentive to save and reduce the incentive to invest. They will tend to cool the economy. Lower interest reduce the incentive to save and increase the incentive to invest, and tend to heat the economy up. 
The role of central banks is to set monetary policy to what is termed the “neutral” rate of interest. This is the rate that keeps the economy running at its full potential, by balancing intentions to save and intentions to invest – so that neither is in excess. 
For this reason, central banks do not reduce rates “on purpose”, but follow the underlying neutral rate by using (roughly) the following formula: 
<ul>
<li>If unemployment is high and inflation is below target (usually around 2-3%), then there is spare capacity in the economy. Interest rates are above the neutral rate and should be lowered to heat things up. </li>
<li>If unemployment is low and inflation is above target, then the economy is likely overheating. Interest rates are below the neutral rate and should be raised before inflation gets out of control. </li>
</ul>
Extremely low interest rates at OECD central banks are a symptom of current economic conditions, where too many people are saving and not enough people are consuming or investing. 
<h2>Why is the “neutral” interest rate so low today?</h2>
The global neutral interest rate has actually been trending steadily downward since the 1980s. This is unprecedented in the history of capitalism, and its importance cannot be overstated.
Bank of England researchers identify several reasons behind this trend, each of which either increases intentions to save or reduces intentions to invest: 
<ul>
<li>growing inequality, which increases savings because the rich save more of their income</li>
<li>an ageing population living longer, which increases lifecycle savings for retirement</li>
<li>the growth of emerging markets, predominantly China, which have very high levels of savings</li>
<li>the lower cost of capital goods, which reduces the capital outlay needed for the same investment</li>
<li>reduced population growth, slowed productivity growth, and reduced public investment, each of which cut demand for new investment.</li>
</ul>
Together these trends towards excess saving have reduced the neutral rate by around 4 percent since 1980. 
Importantly, we can be confident that most of these changes are here to stay. Low interest rates appear to be the new normal for advanced capitalist societies. 
<h2>Can our government policies credibly keep interest rates higher?</h2>
Treasurer Morrison acknowledges that rate cuts are a “matter for the RBA”, and that his comments will have little influence on its decision making. 
To actually influence the path of RBA interest rates, the Turnbull government must take actions that place substantially more of the load in boosting demand on fiscal policy (government spending). Given increasing government spending will further increase an already problematic budget deficit, such policies are only justifiable where their long-term benefits outweigh their immediate costs. 
The Turnbull government’s policy in this area rests heavily on the proposed company tax cut of A$48 billion over the next ten years. Ordinarily such a tax cut might increase investment. But investment in the OECD has been disappointingly unresponsive to the kind of small change in profitability that the company tax cut will bring. 
In the US, for example, investment remains low even while corporate profits are around record highs. Instead of investing, businesses are hoarding trillions of dollars in profits. This pattern is highly suggestive of monopoly-like rents being pervasive among larger corporations, in which case company tax cuts will only increase savings. 
The pro-investment signal businesses really need is greater consumer demand for goods and services. Yet to fund company tax cuts, the Turnbull government is cutting back on the most effective of demand-boosting fiscal policies: welfare programs. Poorer individuals live closer to subsistence, so tend to spend most of the additional income they receive. Taking money from welfare and sending it to corporations risks increasing corporate saving while reducing consumer demand – the exact opposite of what is needed. 
Given the cost to the ailing budget of A$48 billion, the proposed tax cuts are a waste of the Australian government’s minimal fiscal headroom. It is fortunate they will soon be blocked in the Senate.
Scott Morrison’s comments show some understanding of the challenges presented by the new low-rate era. The policies he promotes do not. 
While Australia faces its greatest economic challenges in a generation, it seems we are still waiting for the greatest economic reformers in a generation to arrive.
Reuben Finighan is senior research officer at The Melbourne Institute and Fellow of the ARC Life Course Centre of Excellence, University of Melbourne and auhtor for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/reuben-finighan-157147" target="_blank">here</a>.
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Can Australia stop interest rates from approaching zero? Only with a big shift in policy

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The ASIC corporate regulator Greg Medcraft says the big four banks should introduce residential mortgage loans that track the official cash rate.
He sees it as part of a series of measures to boost competition in banking.
Speaking ahead of his appearance before the parliamentary Standing Committee on Economics tomorrow, Mr Medcraft said mortgages priced at a fixed margin above the Reserve Bank's official cash rate would end the confusion and lack of transparency in the home loan market.
"These rate tracker mortgages are very popular overseas because the consumer knows there is a fixed margin earned by the bank over the life of the loan," Mr Medcraft said.
"The problem in Australia at the moment is there is a double jeopardy with standard variable rate loans," he said in an interview with The Australian Financial Review..
"I think the banks like the confusion in the market."
Mr Medcraft recently had his term as chairman of the Australian Securities and Investments Commission renewed.
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Banks like home loan interest rate confusion: Greg Medcraft

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GUET OBSERVER
The Westpac Melbourne Institute Index of Consumer Sentiment rose by 1.1 percent in October from 101.4 in September to 102.4 in October. 
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This result extends a remarkable run of stability in the Index. Over the last six months the Index has held within a relatively tight 4 percent range with five of the six readings hovering just above 100 indicating that optimists have remained slightly in the ascendancy. 
<a href="/images/2016/10/12/Screen%20Shot%202016-10-12%20at%2010.58.50%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/12/Screen%20Shot%202016-10-12%20at%2010.58.50%20AM.png" alt="">
This has been despite some significant local events including two rate cuts from the Reserve Bank; a very close election result and the aftermath of the May Budget. 
International events have hardly been without highlights including the vote by the British people to leave the European Union (‘Brexit’) and a particularly volatile US presidential election. On the other hand anxieties around China have definitely settled down and the prices of Australia’s major commodity exports have been particularly buoyant. 
This stability is signalling a sustained lift in Consumer Sentiment over the last year. The average level of the Index over this last stable six months is now 4.9 percent higher than the average of the same six months a year ago. However that boost is all in expectations. 
The “Current Conditions components of the Index have been steady while the Expectations components of the Index are up 8.1 percent on the previous year. This boost to expectations has been sustained. Certainly there was a 4.4 percent lift following the change of Prime Minister a year ago but the Expectations Index has lifted a further 5.2 percent since last October.
The only disappointing aspect of this story is that the component of the Index which measures how respondents feel about their own finances relative to a year ago has fallen by 2.9 percent (on a six month average basis) whereas the component that tracks their outlook for finances over the next 12 months has lifted by 2.2 percent. 
The largest average boost of the components has been the outlook for the economy over the next 12 months which has lifted by 13.1 percent on a year ago (on a six month average basis). 
Ongoing stability in the labour market has been one likely explanation for the overall boost to confidence. The Westpac Melbourne Institute Index of Unemployment Expectations dipped from 138.4 to 138.2. The average print for the Index over the last six months is 138.2 – emphasising the stability of the current assessment of the labour market. This average read is 8.0 percent below the average of the same six months a year ago indicating a definite improvement in respondents’ assessments of the conditions in the labour market.
There were generally minimal movements in the components of the Index over the month. The ‘family finances compared to a year ago’ sub-index fell by 0.4% while the ‘family finances over the next 12 months’ sub-index lifted by 0.9 percent. 
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The ‘economic conditions over the next 12 months’ sub-index lifted by 5.8% while the ‘five year’ outlook was unchanged. 
The ‘time to buy a major household item’ sub-index fell by 0.4 percent but is still up by 9.2 percent over the year. The average reading for this component over the last six months is up 3.3 percent on the average six months reading a year ago. 
Confidence in housing faded in October. The ‘time to buy a dwelling’ Index fell by 3.3 percent in October from 105.7 to 109.3. There was a particularly sharp fall in the NSW Index – down by 10.5 percent with the Sydney Index down from 101 to 82.2 (–18.6 percent). However if we consider the average of the ‘time to buy’ index over the last six months relative to the same period a year ago the Index is around 2 percent higher. In the case of the volatile Index in NSW we can see a 14.7 percent improvement while the Sydney index has improved over that period by 34 percent. 
Confidence in house prices continued to improve. The Westpac Melbourne Institute Index of House Price Expectations increased by 1.6 percent in October to be 12.1% above its level in October last year. House price expectations in NSW lifted by 2.6 percent in the month to be 20 percent above the level a year ago. 
There have been solid improvements in expectations across the major states over the year with Victoria up by 6 percent; Queensland by 9 percent and Western Australia by 15 percent. With vacancy rates rising and prices falling in Perth we had been surprised by the resilience in respondents’ expectations for prices in WA although this month we have seen a disturbing 16 percent fall in expectations in one month. 
The Reserve Bank Board next meets on November 1. 
A significant number of commentators have been predicting a rate cut in November and a few weeks ago markets had been giving around a 50 percent probability to a move. We were never convinced that the inflation report which is due to be released on October 26 would provide the case for a cut. In fact, with a 0.3 percent reading for the underlying inflation dropping out, it seems likely that the September quarter report will actually show that annual underlying inflation has lifted. 
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It has also become clear that the new Governor will give considerable weighting to ‘financial stability’ in his policy deliberations. With Sydney house prices having been reported to have lifted by 3.5 percent and Melbourne by 5 percent in the last three months the risks of further boosting housing with another rate cut will be a significant consideration for the Board. While the results of today’s report point to some short term deterioration in housing sentiment the longer term picture is clearly still positive.
Indeed while we give little probability to a further rate cut at the next meeting our assessment of the growth outlook, including the shape of the construction cycle, points to rates remaining on hold for the foreseeable future. 
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BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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New apartments

New townhouses

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