<p><a href="https://www.apartments.com.au/developments/broadbeach-qld-4218">Broadbeach</a> offers plenty of reasons to live vertically, but moving from a substantial family home into an apartment can expose the compromises of high-density living. Privacy, room for guests and usable living space tend to matter more when an apartment is intended as a permanent home rather than an occasional coastal base.</p>

<p>A typical residential floor at <a href="https://www.apartments.com.au/new-apartments/the-eveleigh-broadbeach-7-9-surf-parade-broadbeach-qld-4218">The Eveleigh</a>, on Surf Parade,&nbsp;contains just four apartments. The 94-residence development by <a href="https://www.apartments.com.au/developers/hirsch-faigen">Hirsch &amp; Faigen</a> is predominantly made up of expansive three-bedroom homes, with a limited collection of half-floor penthouses above.</p>

<p>Across the apartment floors, <a href="https://www.apartments.com.au/architects/rothelowman">Rothelowman</a> has used the relatively limited number of residences to give each home greater access to natural light and outlook. Living spaces extend towards full-height glazing, while a series of bay windows frame selected views across the Pacific Ocean, city and hinterland rather than treating the building edge as a continuous wall of glass.</p>

<p>&nbsp;</p>

<p>[smartcode_project:default project_id=149670 project_image_fid=360965]</p>

<p>“The apartment floors deliver a collection of homes that embrace controlled outlook via a series of bay windows deliberately framing moments of view,” Rothelowman Director Kim Lowman said.</p>

<p>From outside, those projecting forms contribute to the tower’s faceted profile. Strong horizontal and vertical elements establish its proportions, while the changing position of the sun alters the light, shadow and reflection across the façade throughout the day.</p>

<p>The same attention moves inside the apartments, where the material palette combines warm timber, natural stone, metallic detailing and softer curved forms. Kitchens sit within the main living zone, with stone island benches, integrated joinery and European appliances, before the living areas extend towards the glazing and the outlook.</p>

<p>&nbsp;</p>

<p>[smartcode_project:default project_id=149670 project_image_fid=360981]</p>

<p>Three genuine bedrooms provide room to accommodate family and guests, while two secure car spaces and storage address some of the practical considerations that can become more noticeable when moving from a larger home. Feedback from the display suite has centred on the warmth and restraint of the interiors, with buyers commenting that the residences feel like homes rather than conventional coastal apartments.</p>

<p>A limited collection of half-floor penthouses occupies the upper levels, increasing the scale of the living spaces and adding private balconies and elevated finishes. From this position, the outlook extends between the ocean and hinterland.</p>

<p>Outside the private residences, The Eveleigh separates its shared spaces between the podium and rooftop. The podium is centred on wellness, with subtropical landscaping surrounding a swimming pool and pool terrace, yoga garden, private gymnasium, sauna and hot and cold plunge facilities. Landscaped retreats and pavilions provide additional places to sit away from the main recreation areas.</p>

<p>&nbsp;</p>

<p>[smartcode_project:default project_id=149670 project_image_fid=360966]</p>

<p>Higher in the building, a rooftop pavilion and private dining suite sit alongside resident lounge, barbecue and outdoor dining areas, opening towards panoramic views across the ocean, city and hinterland.</p>

<p>“Buyers are no longer just looking for an apartment, but a lifestyle where they can relax, reset, and enjoy a balanced way of living,” Hirsch &amp; Faigen Director of Sales Matt George said.</p>

<p>Interest to date has come from established owner-occupiers and interstate lifestyle purchasers, including buyers planning a future move to the Gold Coast. Many are coming from larger homes and want to reduce ongoing maintenance without giving up space for family and guests, privacy, two car spaces or the ability to entertain at home.</p>

<p>&nbsp;</p>

<p>[smartcode_project:default project_id=149670 project_image_fid=360969]</p>

<p>Much of that daily life can also take place beyond the building without requiring a drive. Kurrawa Beach and Pratten Park are an easy walk from Surf Parade, while Pacific Fair, Oracle Boulevard, The Oasis, restaurants, cafés, entertainment and public transport are also within walking distance.</p>

<p data-end="8307" data-start="8063">The Eveleigh is Hirsch &amp; Faigen's fourth Gold Coast development since entering the market in 2021, following The Hemingway at Palm Beach, The Emerson at Kirra and Yves at Mermaid Beach. Each of the preceding projects sold out before completion.</p>

<p data-end="8543" data-start="8312">“Broadbeach had been on our radar throughout our time operating on the Gold Coast,” the developer said. “Following our projects in Palm Beach, Kirra and Mermaid Beach, Broadbeach represented the natural next step for the business.”</p>

<p data-end="8915" data-start="8548">The Surf Parade site brought together proximity to the beach, protected coastal outlooks and walkability to dining, shopping and recreation. Hirsch &amp; Faigen also identified the street as an emerging premium residential address, with enough separation from Broadbeach's busier destinations to retain a quieter environment at home.</p>

<p>The Eveleigh is now under construction by Maxcon, with completion forecast for mid-2028. Three-bedroom residences are currently available from $2.87 million.</p>

<p>[smartcode_project_cta:default project_id=149670]</p>


Joel Robinson

The Eveleigh brings house-like apartments to Broadbeach

<p>A long-stalled Campbelltown development site is back in play, with new plans for 139 apartments set to supersede a mixed-use scheme approved almost a decade ago but never built.</p>

<p>The new proposal for 28 Cordeaux Street would deliver 116 market and 23 affordable apartments in a part 14-storey building, bringing a substantial new project into a Campbelltown market where new apartment supply remains limited.</p>

<p>Plans have been filed over the 3,092 sqm corner site at Moore-Oxley Street, around 600 metres from Campbelltown Railway Station and the city-centre retail core.</p>

<p>The site already carries a mixed-use residential approval dating to 2016. Doroch Architects has now been engaged on a larger replacement scheme, which is progressing as a State Significant Development Application following a Housing Delivery Authority determination in August 2025.</p>

<p>The apartment mix comprises 39 one-bedroom, 72 two-bedroom and 28 three-bedroom residences. Two-bedroom apartments make up just over half of the project, while three-bedroom homes account for 20 per cent.</p>

<p><img alt="First look: New 139-apartment plans revive long-stalled Campbelltown city centre site" data-entity-type="file" data-entity-uuid="136dd5b9-3791-4da6-9e31-76f533f5b4de" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Campbelltown%20da2.png?VersionId=LgOSy9nwf5u.MGswBBwaGGxuX8QpHSl_" /></p>

<p>Of the 139 apartments, 23 will be delivered as affordable housing under the in-fill affordable housing provisions of the Housing SEPP. The affordable component represents 15 per cent of the residential gross floor area and will be managed by a registered Community Housing Provider.</p>

<p>Doroch has sought to break the scale of the building into two distinct elements, with a masonry podium of around four storeys establishing the street edge before the residential tower steps back above.</p>

<p>The corner position has shaped that approach. Cordeaux Street faces toward the commercial and civic centre, while Moore-Oxley Street leads into the lower-scale residential neighbourhood to the south, and the design verification report describes the site as "bridging the commercial core to the north and established residential areas to the south."</p>

<p>The podium will be expressed predominantly in face brick, while the upper levels shift to brushed and grooved concrete cladding with darker metal detailing. Recessed sections, deep balcony edges and landscaping break down the upper form, with an approximately 11.8-metre setback to the northern boundary addressing the adjoining St Peters Anglican School.</p>

<p><img alt="First look: New 139-apartment plans revive long-stalled Campbelltown city centre site" data-entity-type="file" data-entity-uuid="c8b3d2d3-c561-4bfc-a5d9-a68c0c10dac1" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Campbelltown%20da1.png?VersionId=AeAEyJU02Gk2k5noUj2StziCvdQ7fW4B" /></p>

<p>Campbelltown has been starved of new residential developments in the last decade.</p>

<p>The only other notable development set to come to market this year is ALAND's Queen Square, a mixed-use precinct on over two hectares that will comprise apartments above a vibrant ground-level retail and hospitality dining precinct.</p>


First look: New 139-apartment plans revive long-stalled Campbelltown city centre site

<p>
<style type="text/css">
</style>
</p>

<p>A 60-apartment building nine storeys tall would be a rarity almost anywhere along this stretch of Moreton Bay, but that's exactly what's been lodged for a modest Deception Bay street better known for its single-storey weatherboard homes.</p>

<p><a href="https://www.apartments.com.au/developers/sherlock-construction-homes">Sherlock Construction Homes</a> is seeking to push Deception Bay’s emerging medium-density housing profile higher, lodging plans for a nine-storey apartment building near the suburb’s shopping centre and foreshore.</p>

<p>Dubbed Grosvenor Apartments, the proposal at 14-20 Grosvenor Terrace would replace two detached homes with a new building designed by&nbsp;<a href="https://www.apartments.com.au/architects/mode">Mode Design</a>&nbsp;which would&nbsp;reach nearly 30 metres, well above the site’s mapped 21-metre building height.</p>

<p><img alt="First Look: Sherlock Construction pitches 9-storey tower for low-rise Deception Bay" data-entity-type="file" data-entity-uuid="86c21a25-5a97-4ca7-a361-80757137ea5b" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Deception%20da%20front.png?VersionId=aXIujfvEhH33sLHOEjHFv9Ii6qxSvAF4" /></p>

<p>The apartment mix is weighted toward larger homes, with 14 three-bedroom apartments, 31 two-bedroom apartments and 15 one-bedroom apartments. Six apartment types are spread across the floors, ranging from 66 sqm one-bedroom units through to three-bedroom apartments of 116 sqm, most with private balconies or terraces.</p>

<p>Levels one through seven follow a consistent layout of six to eight apartments per floor arranged around a central lift and stair core, with the top floor, level eight, trading one apartment for a landscaped community breakout space rather than repeating the standard layout below.</p>

<p>Ground floor is dedicated to arrival and services, with a lobby, mailroom and manager's office, alongside 91 car spaces.</p>

<p><img alt="First Look: Sherlock Construction pitches 9-storey tower for low-rise Deception Bay" data-entity-type="file" data-entity-uuid="b098bde0-5fe1-4e6c-9601-e5446612e5fc" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Deception%20podium.png?VersionId=A0hfENMNxSxkfh9Jl6D4WJ9XIraeOukA" /></p>

<p>Mode Design's brief describes a "serene coastal-inspired design blending soft curves, natural textures and light-filled spaces to reflect the relaxed Deception Bay lifestyle."&nbsp;</p>

<p>The material palette leans on white and grey render, timber-look aluminium screening and stacked-brick-look finishes, with hanging greenery and vine planting proposed across balcony edges and ground-level walls.&nbsp;</p>

<p>Balconies feature asymmetrical geometries intended to vary the building's rhythm rather than repeat a single module up the tower, while lush planting is concentrated over the entry and level one balconies to soften the building's base.</p>

<p><img alt="First Look: Sherlock Construction pitches 9-storey tower for low-rise Deception Bay" data-entity-type="file" data-entity-uuid="c05c5693-3e00-42d0-b075-55c36094f4db" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Deception%20da%201.png?VersionId=cMKJgBsBaaVCd2dA5O22SOT38OT_.BPA" /></p>

<p>The design evolved following an April 2025 prelodgement meeting with council. At that stage, the project was conceived as a seven-storey building containing 45 apartments. The subsequently lodged scheme increases the development to nine storeys and 60 apartments while introducing one-bedroom residences to the mix.</p>

<p>Zone Planning argues the additional scale reflects the site's position within an area earmarked for increased residential intensity. The planning report points to the North Lakes-Redcliffe-Moreton Bay Rail corridor strategy, which identifies Deception Bay as a district-level activity centre and supports greater housing choice within urban neighbourhoods.</p>

<p>Market Square Deception Bay, Deception Bay Sports Centre, Deception Bay State School, public transport, community facilities and the Moreton Bay foreshore are all identified within approximately one kilometre of the site, while the property falls within a 400-metre walking catchment of Market Square.</p>

First Look: Sherlock Construction pitches apartments for low-rise Deception Bay

<p data-end="587" data-start="368">Queensland builder-developer MAYD has revealed the first look at its major North Kirra beachfront development, lodging amended plans that reduce the number of apartments and increase the proportion of larger residences.</p>

<p data-end="778" data-start="589">The project is planned across a substantial 4,742 sqm amalgamated site spanning seven lots at <a href="https://www.apartments.com.au/new-apartments/2-6-pacific-parade-bilinga-qld-4225">2-6 Pacific Parade</a> and 27-33 Golden Four Drive in Bilin​ga, directly opposite Nor​th Kirra Beach.</p>

<p data-end="907" data-start="780"><a href="https://www.apartments.com.au/developers/mayd-group">MAYD</a> secured the site for $32.5 million in 2025, in what was one of the Gold Coast's largest property transactions of the year.</p>

<p data-end="1052" data-start="909">The development will be delivered across two stages, with the first stage carrying an estimated gross realisation value of around $360 million.</p>

<p data-end="1311" data-start="1054">The latest amendments seek to reduce the overall apartment count and shift the project further toward the owner-occupier market, with larger residences designed for buyers wanting considerably more space than traditionally offered in a beachfront apartment.</p>

<p data-end="1451" data-start="1313">The residential mix will include townhomes, oversized two-bedroom apartments, substantial three-bedroom residences and four-bedroom homes.</p>

<p data-end="1676" data-start="1453">MAYD has appointed Cera Stribley to lead the architecture and interiors, with the Melbourne-based design practice drawing on the beachfront setting through a series of ocean-facing terraces and heavily landscaped balconies.</p>

<p data-end="1908" data-start="1678">Strong horizontal forms and curved balconies will define the exterior, with subtropical landscaping integrated throughout the building to soften the built form and increase the connection between the residences and the beachfront.</p>

<p data-end="2142" data-start="1910">The project will also include an extensive collection of resident wellness and lifestyle facilities, continuing the broader shift across the Gold Coast's luxury apartment market toward larger homes supported by resort-style amenity.</p>

<p data-end="2142" data-start="1910"><img alt="MAYD" data-entity-type="file" data-entity-uuid="d1bcbb05-e659-4b47-8bd4-1e595315e2ad" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-27%20at%202.05.03%E2%80%AFPM.png?VersionId=jj0XEud1X1DuLt7_KyElhjMdZGOXmLHP" /></p>

<p data-end="2308" data-start="2144">MAYD Founder Todd Mould said North Kirra was increasingly appealing to buyers attracted to the more established, lower-density character of the southern Gold Coast.</p>

<p data-end="2648" data-start="2310">"North Kirra presents one of the most compelling luxury residential opportunities currently emerging in Australia, combining absolute beachfront with the character and authenticity that buyers are increasingly seeking, and the same sense of tight-knit community that defined Burleigh and Currumbin perhaps 10 or 15 years ago," Mould said.</p>

<p data-end="2797" data-start="2650">"With Gold Coast Airport on its doorstep, it also offers a level of accessibility that broadens its appeal across almost every market demographic."</p>

<p data-end="2938" data-start="2799">The project comes as the southern Gold Coast continues to attract an increasing share of high-end apartment development and buyer activity.</p>

<p data-end="3216" data-start="2940">Kirra in particular has emerged as one of the region's more tightly held beachfront markets, with its relatively low-density character, established surf and hospitality scene and proximity to Gold Coast Airport differentiating it from the higher-density markets further north.</p>

<p data-end="3325" data-start="3218">Mould said those characteristics had informed the approach MAYD and Cera Stribley had taken to the project.</p>

<p data-end="3442" data-start="3327">"We've worked closely with Cera Stribley to create a vision that is deeply connected to its surroundings," he said.</p>

<p data-end="3662" data-start="3444">"Inspired by the coastline itself, the architecture has been shaped around space, privacy and resort-style living, creating a collection of homes that reflects the next generation of luxury on the southern Gold Coast."</p>

<p data-end="3818" data-start="3664">MOTIV Managing Director Carly Cottam, who has been appointed to market the project, said buyer attention had continued to move south along the Gold Coast.</p>

<p data-end="4076" data-start="3820">"Purchasers who may once have defaulted to Broadbeach, Main Beach or Surfers Paradise are increasingly recognising the value of a genuine beachfront location that offers lower density, strong amenity and a more established sense of community," Cottam said.</p>

<p data-end="4375" data-start="4078">"Kirra has a powerful combination of growing demand and genuine scarcity. Beachfront supply is inherently constrained, the area remains relatively low density, and buyers are increasingly placing a premium on locations that feel established, uncrowded and authentic rather than heavily developed."</p>

<p data-end="4503" data-start="4377">Cottam said the proximity to Gold Coast Airport was also proving increasingly important for interstate and second-home buyers.</p>

<p data-end="4741" data-start="4505">"Being minutes from Gold Coast Airport makes it particularly compelling for interstate buyers, frequent travellers and second-home purchasers who can access an authentic coastal lifestyle almost immediately after stepping off a flight."</p>

<p data-end="4910" data-start="4743">The acquisition takes MAYD's active development portfolio to more than $500 million, with the North Kirra project representing one of its largest undertakings to date.</p>

<p data-end="4951" data-start="4912">MAYD is targeting an early 2027 launch.</p>


First look at MAYD's North Kirra mixed-use precinct

<main data-perf-region="main">
<p data-end="600" data-start="394">Castle Hill, the longtime hub of the Hills District, has been one of the major beneficiaries of Sydney's Metro expansion, with improved connectivity helping drive continued population growth, development and buyer demand across the Hills District.</p>

<p data-end="733" data-start="602">But despite that growth, the suburb has seen relatively few major new apartment projects brought to market over the past 18 months.</p>

<p data-end="970" data-start="735">Hills District developer Reve Group is looking to fill that gap with <a href="https://www.apartments.com.au/new-apartments/nova-r-ve-castle-hill-2-garthowen-crescent-castle-hill-nsw-2154">Nova Rêve</a>, a major new mixed-use precinct on the corner of Garthowen Crescent and Old Castle Hill Road, a short walk from Castle Hill Metro Station and Castle Towers.</p>

<p data-end="970" data-start="735">[smartcode_project:default project_id=152737 project_image_fid=377679]</p>

<p data-end="1159" data-start="972">The project will comprise three residential towers alongside a hotel, restaurants, cafes and a skybar, more than 1,600 sqm of ground-floor retail and almost an acre of landscaped gardens.</p>

<p data-end="1357" data-start="1161">It represents the largest project undertaken by Reve Group, the development arm of the Kassis family, which has been building across the Hills District for more than 30 years through Kassis Homes.</p>

<p data-end="3400" data-start="3216">[smartcode_project:default project_id=152737 project_image_fid=377675]</p>

<p data-end="3400" data-start="3216">Nova Rêve also represents a significant step up from the family's first apartment development, Grand Rêve, which was delivered nearby on Garthowen Crescent.</p>

<p data-end="1664" data-start="1517">Grand Rêve introduced larger, house-like apartment layouts and premium inclusions including Wolf and Sub-Zero appliances to the Castle Hill market.</p>

<p data-end="1826" data-start="1666">Nova Rêve takes that approach to a precinct scale, combining the residential component with hospitality, retail and substantial public and resident landscaping.</p>

<p data-end="1826" data-start="1666">[smartcode_project:default project_id=152737 project_image_fid=377685]</p>

<p data-end="2045" data-start="1828">Reve Group Managing Director Sam Kassis said the project reflected the family's three decades of building in the Hills, which has evolved from trophy homes on quarter-acre blocks to larger-scale apartment development.</p>

<p data-end="2269" data-start="2047">"Grand Rêve was our first apartment project here and it showed us what this pocket of Castle Hill could be. Nova Rêve is the refinement of that idea: not just apartments, but a place the whole suburb can use," Kassis said.</p>

<p data-end="2430" data-start="2271">A key part of that approach is the hotel, which has been designed to operate as an amenity for the wider Castle Hill community rather than solely hotel guests.</p>

<p data-end="2606" data-start="2432">It will include restaurants, cafes, skybars and all-day dining, alongside conference and event facilities catering to business functions, community groups and private events.</p>

<p data-end="2724" data-start="2608">At ground level, more than 1,600 sqm of shops and cafes will open onto the surrounding streets and landscaped areas.</p>

<p data-end="2892" data-start="2726">Almost an acre of gardens designed by Land and Form Studios will run through the precinct, incorporating pathways, seating, barbecue areas and children's play spaces.</p>

<p data-end="2892" data-start="2726">[smartcode_project:default project_id=152737 project_image_fid=377680]</p>

<p data-end="3004" data-start="2894">Reve Group's Romio Georges said creating an active ground plane had been central to the planning of Nova Rêve.</p>

<p data-end="3214" data-start="3006">"There are gardens with pathways, barbecues, seating and play areas, shops and cafes opening onto the street, and a hotel with restaurants and a skybar that anyone in Castle Hill can walk into," Georges said.</p>

<p data-end="3400" data-start="3216">The project's elevated position on one of Sydney's highest ridgelines will also provide apartments with outlooks toward the Sydney skyline, surrounding parkland and the Blue Mountains.</p>

<p data-end="3400" data-start="3216">More than 80 per cent of the apartments will occupy corner positions, with Turner responsible for both the architecture and interiors.</p>

<p data-end="3670" data-start="3538">&nbsp;</p>

<p data-end="3670" data-start="3538">[smartcode_project_cta:default project_id=152737]</p>

<h3 data-end="3697" data-section-id="q3n5ak" data-start="3672">&nbsp;</h3>
</main>


Nova Rêve arrives as Reve Group bets on Castle Hill's next growth phase

Interest Rates

<html><body>
<p><span>Some 17 more lenders have passed on the interest rate cut, according to finder.com.au.</span></p>
<p><span>This includes online banks who have cut interest rates from between 10 to 15 basis points.</span></p>
<p><a href="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%2010.32.31%20AM.png" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%2010.32.31%20AM.png" alt=""></span></p>
<p> </p>
<p><a href="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%2010.32.41%20AM.png" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%2010.32.41%20AM.png" alt=""> </span></p>
<p><a href="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%2010.32.47%20AM.png" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%2010.32.47%20AM.png" alt=""></span></p>
</body></html>

jonathanchancellor-7SQnKwU6yx

17 more lenders pass on cut following cash rate cut

<html><body><div class="page" title="Page 4">
<div class="layoutArea">
<div class="column">
<p>The ANZ Australian Housing Update for August said housing demand will begin to slow, most notably for property developers and foreign buyers due to tighter lending standards.</p>
<p>Rate cuts from the RBA in May and August, as well as expectation of more easing is driving pressure on mortgage rates.</p>
<p>The report said for owner-occupiers, the average discounted mortgage rate is now the same as before these macroprudential measures were implemented.</p>
<p><a href="/images/2016/08/15/Screen%20Shot%202016-08-15%20at%2011.38.56%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/08/15/Screen%20Shot%202016-08-15%20at%2011.38.56%20AM.png" alt=""></p>
<p>"We continue to expect that demand for housing will ease from here, driven by tighter lending standards, especially for property developers and foreign buyers," the report said.</p>
<p> </p>
<p>"A number of major lenders have either exited the foreign investor segment of the market or have made a variety of adjustments, including requiring foreign buyers to hold a larger deposit and reducing the amount of overseas income when calculating the ability to service a loan.</p>
<p>"Construction activity is also expected to moderate. Building approvals remain below last year’s peak, suggesting that the rapid growth in starts and work done is unlikely to be sustained. However, a tremendous backlog of work will continue to support construction around record levels.</p>
<p>"In fact, the large backlog of construction work presents a risk of oversupply emerging in some markets. Significant additions to the supply of apartments are forthcoming in Brisbane and Melbourne, raising fears of settlement risk and eventual price declines."</p>
</div>
</div>
</div></body></html>

Housing demand will begin to slow: ANZ 

<html><body><div class="page" title="Page 1">
<div class="section">
<div class="layoutArea">
<div class="column">
<div class="page" title="Page 1">
<div class="section">
<div class="layoutArea">
<div class="column">
<p><span>GUEST OBSERVER</span></p>
<p><span>“Record low interest rates”. This seems to be the headline of the year, having been used so many times it is hard to remember any other kind of interest rate. Each time we see this, expectations for another rate cut decrease momentarily, only to return to the same, pre-cut probability-levels after a few weeks. </span></p>
</div>
</div>
</div>
</div>
<p><span>Figure 1 paints a clear picture of a similar short-term outlook, </span>yet weakening long-term expectations.</p>
<p><a href="/images/2016/08/12/Screen%20Shot%202016-08-12%20at%209.45.34%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/08/12/Screen%20Shot%202016-08-12%20at%209.45.34%20AM.png" alt=""></p>
<p>While this graph does not include data since the rate cut (yields on 10 year treasuries have lifted a whopping 0.03 percent since the July levels shown in Figure 2), we can see almost identical movements at each maturity date from May to June and from June to July.</p>
<p><a href="/images/2016/08/12/Screen%20Shot%202016-08-12%20at%209.47.22%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/08/12/Screen%20Shot%202016-08-12%20at%209.47.22%20AM.png" alt=""></p>
</div>
</div>
<div class="layoutArea">
<div class="column">
<p><span>Yields on 3 year bonds are down 0.05 percent, 5 year bonds are down 0.1 percent and 10 year bonds are down 0.2 percent. </span></p>
<p><span>This is almost a textbook example of yield curve inversion. In fact, yields on 90 day treasury bills in June were identical to those on 10 year bonds at 1.93 percent. </span></p>
<p><span>Other than perhaps transaction costs, there is no reason for an investor to take on the extra risk of longer term securities without any increase in expected return. </span></p>
<p><span>The RBA had little choice but to cut rates again. </span></p>
<p><span>Figure 2 shows a similar picture, with greater inversion in the short and medium-term (up until about 2022) and lower yields on long- term maturities. </span></p>
<p><span>This is a dangerous combination. </span></p>
<p><span>An interest rate cut effectively lowers the short-term cash rate </span>(i.e. 90 day yield), which normalises (steepens) the yield curve.</p>
<p><span>In theory, this stimulates the economy by making borrowing cheaper and incentivising banks to borrow at the short-term rate and lend out at the higher long-term rate. If the curve continues to flatten out (as it did since the last rate cut in May) then this impact is almost entirely negated. Like a see-saw, rates will continue to decrease until long-term expectations increase or at least stabilise. </span></p>
<p><span><em>For more information, <a href="https://secretagent.com.au/" target="_blank">click here</a>.</em></span></p>
</div>
</div>
</div>
</div></body></html>

jchancellor-FAypfDUnLy

Rates will continue to decrease: Secret Agent 

Outgoing Reserve Bank Governor Glenn Stevens highlights limitations and constraints of a super-low interest rate environment

<html><body>
<p>Aussie Home Loans executive chairman John Symond says low interest rates would ensure the property market stay robust. </p>
<p>"I am expecting low rates for a decade.</p>
<p>" I'm not saying it won't go up, but we won't see 6 to 7 percent interest rates for a decade plus," he told Fairfax Media.</p>
<p>"Mortgages are in a good shape," he said. </p>
<p>"People are still making the same repayment when interest rates were 8 percent.</p>
<p>"The average mortgage holder is two years in front. I'm not saying WA, but the eastern seaboard ... particularly those who have bought property five years ago."</p>
<p>"We took a survey and the net asset value of all the areas where we have loans ...there was a 40 percent equity. In NSW, 50 percent," he said. </p>
<p>Aussie Home Loans has opened its 200th store in Sydney.</p>
<p>He says there is the potential for a 10 to 15 percent price growth in some capital city markets during the next three years as long as employment remained steady.</p>
</body></html>

Low interest rates for a decade: John Symonds' forecast

<html><body><div class="page" title="Page 1">
<div class="section">
<div class="layoutArea">
<div class="column">GUEST OBSERVER</div>
<div class="column"> </div>
<div class="column">In his final speech as Reserve Bank Governor, Glenn Stevens highlighted the limitations and constraints of a super-low interest rate environment.</div>
<div class="column"> </div>
<div class="column">“I have serious reservations about the extent of reliance on monetary policy around the world. It isn't that the central banks were wrong to do what they could, it is that what they could do was not enough, and never could be enough, fully to restore demand after a period of recession associated with a very substantial debt build-up”.</div>
<div class="column">
<br>Home loans: The number of loans (commitments) for budding home owners (owner-occupiers) rose by 1.2 percent in June. Excluding the refinancing of dwellings, the number of loans was up by 2.1 percent.</div>
<div class="column">
<br>Consumer confidence: The Westpac/Melbourne Institute survey of consumer sentiment rose by 2 percent in August to 101.0. The confidence index is up 1.6 percent on a year ago. The survey was conducted August 1st-4th.</div>
<div class="column">
<br>The housing finance data has implications for banks, building material suppliers and retailers. The consumer confidence figures have implications for finance providers, retailers, and companies dependent on consumer and business spending.</div>
<div class="column"> </div>
<div class="column"><a href="/images/2016/08/11/Screen%20Shot%202016-08-11%20at%208.31.59%20AM.png" target="_blank">Click to enlarge</a></div>
<div class="column"><img src="/images/2016/08/11/Screen%20Shot%202016-08-11%20at%208.31.59%20AM.png" alt=""></div>
<div class="column">
<br>What does it all mean?</div>
<div class="column">
<br>The Reserve Bank Governor has used his last public forum as a seminal speech to discuss a number of wide ranging issues from inflation targeting, the effect super low interest rates, a review of the past decade and also what “normal” growth may be in the current environment. The Governor did ask a lot of questions but as is the case with the Reserve Bank left it up to the public for interpretation.</div>
<div class="column">
<br>However the section of the speech that focussed on looking ahead, discussed the constraints of monetary policy. The Governor highlighted that monetary policy on its own is not enough to boost growth significantly. In fact a combination of public and private investment would be needed to support growth over the medium term. Interestingly the Governor did suggest that the current inflation target is still the right methodology to support longer-term growth outcomes.</div>
<div class="column">
<br>When it comes to the outlook for rates the Governor suggested that Australia is not in isolation and the negative and super low interest rates on a global front has also pushed the Reserve Bank in that direction.</div>
<div class="column"> </div>
<div class="column"><a href="/images/2016/08/11/Screen%20Shot%202016-08-11%20at%208.33.05%20AM.png" target="_blank">Click to enlarge</a></div>
<div class="column"><img src="/images/2016/08/11/Screen%20Shot%202016-08-11%20at%208.33.05%20AM.png" alt=""></div>
<div class="column"> </div>
<div class="column">“We in Australia have done fewer such things, but we are connected to the world, and the effects of policies adopted elsewhere condition the policy choices available to us”.</div>
<div class="column">
<br>The latest data on the housing sector could be classified as somewhat old news given that it predates the Reserve Bank interest rate cut last week. What it does do is provide a useful barometer for housing activity earlier this year. And in that context housing activity remains solid. The value of loans to build new homes stood at a just under $3 billion – easing modestly from the record high of $3.45 billion in March. There is a healthy pipeline of work, with owner occupiers likely to dominate home building and buying.</div>
<div class="column"> </div>
<div class="column">Interestingly the proportion of fixed rate loans fell sharply<br><ul>
<li>over the past two months to just 13.4 per cent – a six month</li>
<li>low. In addition the number of home loan refinancing transactions fell for the past two months, although it remains well above decade averages. It may be the expectation of further rates cuts seems to have resulted in home owners holding off from fixing rates. No doubt with the latest rate cut and intense competition by lenders it is likely that more home owners will re-evaluate their home loans in coming months. The anticipated lift in refinancing will eventually provide additional savings to household budgets – injecting fresh spending power into the economy.</li>
</ul>
The average loan size recorded a sizable 5.7 per cent in June. In fact the gain was the strongest percentage increase in nine months. The May rate cut may have been catalyst for the lift in home loan size, providing mortgages holders with the opportunity to comfortably service larger loans. It should be noted that the average home loan is also influenced by home prices, composition of borrowers and the geographic location of home purchases.<br><p>The monthly consumer confidence data is now merely useful as a check against the timelier weekly survey. The ANZ-Roy Morgan survey has the same number of survey respondents as the monthly series, has been running over the same number of years and covers the same questions but is conducted each week. And what is clear from both surveys is that confidence levels are a little higher than where they were a month ago. The consumer confidence reading on both fronts remains “ok”, with consumers modestly optimistic about life. </p>
<div class="page" title="Page 2">
<div class="layoutArea">
<div class="column">
<p>What do the figures show?</p>
<p>Housing finance - number</p>
<p>The number of loans (commitments) for budding home owners (owner-occupiers) rose by 1.2 per cent in June after falling by 0.8 per cent in June. Excluding the refinancing of dwellings, the number of loans was up by 2.1 per cent.</p>
The number of new home loans was up by 6.7 per cent on a year ago.<br>Loans by owner-occupiers for the construction of homes rose by 2.1 per cent in June.</div>
<div class="column">Loans to buy newly-erected dwellings rose by 2.7 per cent.</div>
<div class="column">Loans for the purchase of established dwellings (excluding refinancing) rose by 1 per cent.</div>
<div class="column">The number of refinancing transactions fell by 0.4 per cent. </div>
</div>
</div>
</div>
<div class="column">
<div class="page" title="Page 3">
<div class="layoutArea">
<div class="column">
<p><span>Housing finance - value</span></p>
<ul>
<li> The value of new housing commitments (owner occupier and investment) rose by 2.3 per cent in June after rising by 1.8 per cent in May.</li>
<li>Owner-occupier loans rose by 1.8 per cent while investment loans rose by 3.2 per cent.</li>
<li> The value of loans by owner-occupiers and investors to build new homes fell by 1.3 per cent in June after rising by 3.5 per cent in May.</li>
<li>The value of loans to build new homes eased further from the record highs of $3.45 billion in March to $2.99 billion in June.</li>
</ul>
Housing finance – other statistics<br><p><span></span><span>The proportion of first-time buyers </span><span>in the home loan market rose from a 12-year low of 14.2 percent in May to 14.3 percent in June. (However the figures take into account refinancing loans and as such the figures may misrepresent the true situation). </span></p>
<p><span>The proportion of fixed rate loans </span><span>fell from 14.7 percent to 13.4 percent in June. And the </span><span>average home loan </span><span>across Australia stood at $360,100 in June, up 3.5 percent on a year ago. </span></p>
<p><span>Westpac/Melbourne Institute consumer sentiment:</span></p>
<p>The Westpac/Melbourne Institute index of consumer confidence rose by 2 percent in August to 101.0. The confidence index is up 1.6 percent on a year ago.</p>
<p>The current conditions index rose by 1.3 percent while the expectations index rose by 2.4 percent.</p>
Four of the five components of the index rose in August:<br><p>The estimate of family finances compared with a year ago was up by 1 per cent;  The estimate of family finances over the next year was up by 4.3 per cent;</p>
<ul>
<li> Economic conditions over the next 12 months was up by 3.5 per cent;</li>
<li> Economic conditions over the next 5 years was down by 0.7 per cent;</li>
<li> The measure on whether it was a good time to buy a major household item was up by 1.6 per cent.</li>
</ul>
Gender &amp; demographics: Men (index reading of 104.1, up 1.5 per ent) were still more optimistic than Women 98.1, up 2.4 percent). The sentiment index for young people rose by 3.9 percent to 112.9 in August. Across the other demographics: 25-44 years (index 103.0, up by 1.1 percent); 45 years plus (index 96.9, up 2.1 per cent).<br><p>  Housing outlook: A good time to buy a dwelling? – Index up 10.1 per cent in the month and up 9.2 per cent on the year.</p>
<p>  Housing Finance data is produced monthly by the Bureau of Statistics and shows commitments by lenders, such as banks, to provide finance for housing purposes. The lending figures relate to those looking to buy or build homes to live in as well as those seeking to buy or build homes for investment purposes. Generally people get their finance organised first, so the figures are regarded as a leading indicator on the housing market.</p>
<p><a href="/images/2016/08/11/Screen%20Shot%202016-08-11%20at%208.34.05%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/08/11/Screen%20Shot%202016-08-11%20at%208.34.05%20AM.png" alt=""></p>
<p>  Westpac and the Melbourne Institute release the Index of Consumer Sentiment each month. According to Melbourne Institute: “The survey of consumer sentiment was first undertaken in 1973 and was conducted on a quarterly basis until 1976, a six-weekly basis from 1976 to 1986, and has been conducted monthly ever since.” Confident consumers may be more inclined to spend, especially on major items.</p>
<p>What are the implications for interest rates and investors?</p>
  The housing sector will continue to be a key driver of growth, given the amount of home building on the horizon. Home prices are lifting, but investors need to be more cautious about the outlook. Arguably we are near the point of maximum velocity. The plethora of cranes dotting skylines across the country indicate that plenty of sparkling new apartments will be coming onto the market over the next few years</div>
<div class="column"> </div>
<div class="column">CommSec expects a further interest rate cut in November. </div>
<div class="column"> </div>
<div class="column"><em>Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a></em></div>
</div>
</div>
</div>
</div>
</div>
</div></body></html>

RBA Governor questions benefit of lower rates: CommSec's Savanth Sebastian

<html><body>
<div id="post-body-3728627092930340920" class="post-body entry-content">
<div>Measures taken to slow the housing market in 2015 did their job effectively, largely by restricting the amount that people could borrow.</div>
<div> </div>
<div>Although there have been two interest rate cuts since May - a valedictory "double tap" from Governor Stevens, if you will - serviceability calculations continue to be assessed at a more stringent level.</div>
<div> </div>
<div>As a result borrowers can generally borrow little more than was the case before the most recent salvo of easing.</div>
<div> </div>
<div>This was to some extent reflected in the Housing Finance figures for June, released by the ABS today following a troublesome Census night website crash.</div>
<div> </div>
<div>Although the average loan size has been increasing steadily again from $352,200 to $360,100 since February, this figure remains below the peak of $382,300 seen in November last year. </div>
<div> </div>
<div>And it's a similar story for first homebuyer loan sizes. </div>
<br><a href="/images/2016/08/11/A2.jpg" target="_blank">Click to enlarge</a>
</div>
<div class="post-body entry-content">
<img src="/images/2016/08/11/A2.jpg" alt=""><br><br><div>At the state level, the first homebuyer loan sizes figures show the impact of tighter serviceability calculations.</div>
<br><div class="separator"><a href="/images/2016/08/11/A1.jpg" target="_blank">Click to enlarge</a></div>
<div class="separator"><img src="/images/2016/08/11/A1.jpg" alt=""></div>
<strong><span style="text-decoration: underline;"><br></span></strong><strong><span style="text-decoration: underline;">Total finance</span></strong><br><br><div>The net effect of this is that although trend total monthly housing finance has also now been rising again for the past few months - back up to well above $32 billion - the total value of commitments for now remains below the peak of $32.7 billion seen in June last year.</div>
<div> </div>
<div>Investor lending was the main target of the macroprudential crackdown, as you can see in the chart below. </div>
<div> </div>
<div>With the speed of investor credit growth now only about half of the arbitrary 10 per cent "speed limit", investor lending has now been trending up again for the past six months, albeit at a far less frantic pace than seen previously.</div>
<br><div class="separator"><a href="/images/2016/08/11/A3.jpg" target="_blank">Click to enlarge</a></div>
<div class="separator"><img src="/images/2016/08/11/A3.jpg" alt=""></div>
<br><strong><span style="text-decoration: underline;">Homebuyers return</span></strong><br><div> </div>
<div>The level of activity of homebuyers in the market has generally been relatively lower than we have seen in previous cycles, in part due to the sheer volume of investors in the Sydney and Melbourne markets since interest rates were dropped.</div>
<div> </div>
<div>However, following the effectively imposed caps on investor lending banks are now targeting the home loan market, and the trend number of monthly owner-occupier commitments has continued to rise to the highest level since June 2009. </div>
<br><div class="separator"><a href="/images/2016/08/11/A4.jpg" target="_blank">Click to enlarge</a></div>
<div class="separator"><img src="/images/2016/08/11/A4.jpg" alt=""></div>
<br><strong><span style="text-decoration: underline;">State versus state</span></strong><br><br><div>The number of owner-occupier commitments is trending solidly higher in Queensland, South Australia, Tasmania, and the ACT.</div>
<div> </div>
<div>Homebuyer activity remains high in Sydney and Melbourne, but these markets will also be impacted by serviceability constraints.</div>
<br><a href="/images/2016/08/11/A6.jpg" target="_blank">Click to enlarge</a>
</div>
<div class="post-body entry-content">
<img src="/images/2016/08/11/A6.jpg" alt=""><br><br><div>Indeed, this is reflected in the dampened trend monthly value of owner-occupier commitments in the two most populous states in the chart below.</div>
<div> </div>
<div>The homebuyer trend value of commitments appears to be strongest in Queensland, South Australia, Tasmania, and the ACT.</div>
<br><div class="separator"><a href="/images/2016/08/11/A5.jpg" target="_blank">Click to enlarge</a></div>
<div class="separator"><img src="/images/2016/08/11/A5.jpg" alt=""></div>
<div> </div>
<div class="separator">That said there has been a marked resurgence in investor lending in Sydney, sending preliminary auction clearance rates to their highest level of the year, at above 80 per cent.</div>
<div class="separator"><strong><span style="text-decoration: underline;"> </span></strong></div>
<div class="separator"><strong><span style="text-decoration: underline;">The wrap</span></strong></div>
<div class="separator"> </div>
<div class="separator">Overall, despite lots of alarmist reporting housing finance is tracking both at a historically high level, and is now accelerating again.</div>
<div class="separator"> </div>
<div class="separator">And remember that these figures for June pre-date an interest rate cut delivered in August.</div>
<div> </div>
<div>It's also worth remembering that the underlying demand for mortgages right now is enormous - the only reason lending slowed was because regulators were getting concerned about the sheer wight of demand for borrowing.</div>
<div> </div>
<div>The data seem to be following a remarkably similar trajectory to what we saw in the United Kingdom following its own macroprudential intervention (the so-termed Mortgage Market Review). </div>
<div> </div>
<div>That is the initial shock clonked the market on to the back foot, but as the dust settles lending is on the rise again - just more steadily than it was before.<br><br>Finally, the ABS reported a small increase in first homebuyer activity, but as disclosed by the ABS these data remain incomplete.<br><br>NAB's survey for Q2 2016 showed that first homebuyers accounted for 1 in 3 new home sales in the June quarter, and 29 per cent of established home sales.</div>
<div> </div>
</div>
<div class="post-footer"> 
<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
</div>
</body></html>

pwargent-M4siyDbqQY

Housing finance accelerating again: Pete Wargent

<html><body>
<p>Heritage Bank has lifted its profit in 2015/16, despite loan approvals being down slightly.</p>
<p>Its retail deposits grew strongly, up by $294 million (6.05 percent) to $5.16 billion.</p>
<p>Its chairman Mr Kerry Betros said the results reflected the key drivers of a renewed corporate strategy that is now being implemented. <br><br>“Our Roy Morgan customer satisfaction rating at 30 June 2016 was 94.3 percent, the highest of any financial institution in Queensland,” he said. <br><br>“Canstar Blue awarded Heritage the 2016 Most Satisfied Customers award in the Challenger Bank category across Australia <br><br>“We also took out the 2016 Mozo People's Choice Award for overall customer satisfaction, an award based on actual customer reviews completed throughout Australia during the year. <br><br>“In addition, independent analysis by research company CANSTAR, found that our customers were $50 million a year better off in 2015/16 through banking with Heritage rather than one of the big four banks. <br><br>“That’s a compelling demonstration of how banking with a customer-owned organisation provides tangible benefits for our customers.<br><br>“Our mutual ethos stretches back to our origins in Toowoomba 141 years ago."</p>
<p>Australia’s largest mutual bank, with a national presence, reported a capital adequacy ratio at 30 June 2016 was 13.95% and its liquidity ratio was 15.94%, well above regulatory requirements.</p>
<p>Heritage’s mortgage loan arrears greater than 30 days was 0.30 percent at 30 June 2016, well below the industry average. </p>
<p>Its CEO Peter Lock said today that Heritage's unaudited financial results for the 2015/16 year showed pre-tax profit of $51.11 million, up 6.46 percent on the $48.01 million achieved the previous year.  </p>
<p>The after tax profit was $36.14 million, up 7.53 percent on the $33.61 million achieved in 2014/15. <br><br>Loan approvals were down slightly (3.26 percent), reaching $1.78 billion in 2015/16 compared to $1.84 billion in the previous year. </p>
</body></html>

Heritage Bank lends less, but profits up

<html><body>
<div class="page" title="Page 1">
<div class="section">
<div class="layoutArea">
<div class="column">
<p>GUEST OBSERVER</p>
<p>As expected, the statement fell short of providing explicit forward guidance, but we interpret the larger number of risks to the outlook and the RBA’s forecast that average underlying inflation would be stuck at the bottom of the 2-3 percent target band by the end of 2018 as a strong easing bias.</p>
<p>Our base case is that rates remain on hold at 1.5 percent, but we see a clear risk of further cuts given the RBA expects persistently low inflation and with banks passing on only half of this week’s rate cut to home loan customers. The AUD is also important given the RBA thinks it still poses a “significant source of uncertainty” around the outlook.</p>
<p>In our view, today’s statement reinforces this risk. With the cash rate now close to the 1 percent floor for the cash rate, we think the RBA would be looking more closely at unconventional options if downside risks to the outlook materialise.</p>
<p>Persistently low inflation points to an easing bias. As expected, the RBA’s forecast profile for underlying inflation was unchanged, showing inflation at or below the bottom of the 2-3 percent target band for the entire forecast period.</p>
<p>Importantly, in our opinion, the RBA’s initial forecast for Q4 2018 showed average inflation remaining at the bottom of the target band rather than returning to the 2.5 percent midpoint. We think this is a dovish signal, given that the RBA cut rates this week and the forecasts are based on market pricing, which was for another rate cut.</p>
<p>Near-term growth was revised higher, but the RBA is more uncertain about the outlook. The RBA revised near-term growth higher given Q1 GDP was significantly higher than it had expected, but left the rest of its forecast profile for modest growth unchanged. Unemployment was expected to “move only a little lower”, with a degree of spare capacity in the labour market for some time. The statement highlighted the uncertainty about the outlook, citing China, the labour market, the housing market, and the exchange rate.</p>
</div>
</div>
</div>
</div>
<div class="page" title="Page 2">
<div class="layoutArea">
<div class="column">
<p><a href="/images/2016/08/08/Screen%20Shot%202016-08-08%20at%208.27.50%20AM.png" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2016/08/08/Screen%20Shot%202016-08-08%20at%208.27.50%20AM.png" alt=""></span></p>
</div>
</div>
<div class="layoutArea">
<div class="column">
<p>We think the RBA would be looking more closely at unconventional options if downside risks to the economy materialise. We think the RBA would have to look more closely at unconventional policies if, say, the economy takes a turn for the worse, the exchange rate unexpectedly strengthened, and/or low inflation expectations kept actual inflation below the target band. The RBA thought the likelihood of using such options was “very remote”, but we are much less sure given the cash rate is close to the RBA’s 1 percent floor.</p>
<p>Governor Stevens may talk about the limits to monetary policy next week.</p>
<p>The Governor is speaking on 10 August at what might be his last speaking engagement before his term finishes on 17 September. We think he may cover familiar ground, emphasising that central banks are having to shoulder too much of the burden of supporting growth and argue that there are limits to what can be achieved with monetary policy. He may also repeat his support for the RBA’s inflation targeting framework and argue that tougher regulations have put the banks in a better place. </p>
<p><span><em>Kieran Davies is an economist for ANZ and can be contacted <a href="https://www.anz.com/personal/" target="_blank">here</a>.</em></span></p>
</div>
</div>
</div>
</body></html>

Clear risk of further cuts from RBA: ANZ's Kieran Davies

<html><body>
<p><img src="https://counter.theconversation.edu.au/content/63512/count.gif" alt="The Conversation" width="1" height="1"></p>
<p>GUEST OBSERVER</p>
<p>The big, but completely unsurprising, news this week was the Reserve Bank of Australia cutting the cash rate to an historic low 1.50 percent.</p>
<p>As Vital Signs has been saying for some time, this month was a likely candidate for a cut, once second-quarter inflation was confirmed to be disturbingly low – as it was last week.</p>
<p><a href="/images/2016/08/05/Screen%20Shot%202016-08-05%20at%208.48.39%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/08/05/Screen%20Shot%202016-08-05%20at%208.48.39%20AM.png" alt=""></p>
<p>Australia is faced with extremely low inflation, low effective growth, a squishy labour market, and prudential regulation measures enacted last year partially reigning in the housing market. Given this, it was almost inevitable Glenn Stevens would engineer another cut.</p>
<p>But there were some other figures of note this week. Australian retail trade rose 0.1 percent in June, compared to market expectations of 0.3 percent – further underlining the weak domestic economy.</p>
<p>Adding to that story of gloom, private sector building approvals were down in June, both in absolute terms and relative to expectations. House approvals fell 2.3 percent implying a 5.9 percent drop compared to a year earlier. Apartment approvals fell 2.4 percent, implying a 4.8 percent drop year-on-year.</p>
<p>Chinese manufacturing data was mixed – or perhaps just confusing – with the official Purchasing Managers' Index (PMI) down to 49.9, from 50.0 the month before. Recall that 50 is the break even between expansion and contraction. Meanwhile, the private Caixin index came in at 50.6 in July, up from 48.6 in June. This was the first jump above 50 since February 2015.</p>
<p>Why the difference? The likely answer is that the official government PMI is more relevant for large, state-owned enterprises, while the Caixin index is a better gauge of smaller and medium-size companies.</p>
<p>In the US, payroll processing firm ADP’s latest data revealed a 179,000 increase in non-farm payrolls in July. This was essentially confirmation of the official Bureau of Labor Statistics figures (though on a slightly different scale) of strong job creation in the US. This is further evidence of the likelihood of a rise in official rates by the Fed in the next month or two.</p>
<p>Now, back to Australian interest rates. Lower rates only have a potential stimulatory effect if they are passed on to borrowers by (largely) the big 4 banks. About half of Tuesday’s cut was passed on – with the rest “kept” for bank shareholders.</p>
<p>On Thursday afternoon, Prime Minister Malcolm Turnbull and Treasurer Scott Morrison announced at a press conference that the big 4 banks would have to front the House Economics Committee annually to “explain” their interest rate decisions.</p>
<p>Populist nonsense? Interventionist joke? Meaningless charade? Those are all phrases that come to mind. Turnbull grinned like a Cheshire cat as he described it as a “great opportunity” for the banks. Ho, ho, ho.</p>
<p>I’m no apologist for the banks, but they do have a legitimate argument that their funding costs have been rising. The US money market funds are much harder to tap as they have become significantly more conservative after the Primary Reserve Fund “broke the buck<a href="https://www.investopedia.com/terms/b/broke-the-buck.asp">”</a> during the financial crisis. Deposits now make up about 60% of bank funding, compared to 40 percent in 2007-08 – and those rates have been rising.</p>
<p>Nonetheless, the banks do have a good deal of market power. It’s legitimate for them to use that, unless they are violating competition law. That’s a matter for the Australian Competition and Consumer Commission, not the House Economics Committee.</p>
<p>One final note. To all those people who keep saying “rates have been cut a lot and it hasn’t done any good”: please search my name and the word “counterfactual”.</p>
<p><em><span class="fn author-name">Richard Holden is p</span>rofessor of economics, UNSW Australia and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">here</a>.</em></p>
</body></html>

Interest Rates

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News

Interest Rates

Editor's Picks

Receive the latest news stories to your inbox

Have something to contribute?

Developments

New apartments

New townhouses

News