Perth’s new apartment market recorded its strongest quarter of sales since Q4 2021, with 412 apartments sold in Q1 2026 and a record quarterly sold value of $537 million, according to Urbis’ latest Apartment Essentials results.

Urbis said the March quarter result reflects strong, highly product‑specific demand across both ends of the market, from more attainable projects delivering at scale, through to premium stock being absorbed by equity‑rich downsizers.&nbsp;

David Cresp, Partner at Urbis, said the key story in Perth is not demand, it is the market’s ability to convert demand into delivered housing.&nbsp;

“This is the strongest sales quarter since Q4 2021, and it reinforces that demand in Perth is real and it’s local,” David Cresp said. “But the task now is delivery, turning that demand into projects that can actually be built and completed.”&nbsp;

[smartcode_project:default project_id=110291 project_image_fid=302785]

<h2>Affordable product leads, premium demand remains resilient</h2>

Sales in Q1 were led by more affordable projects, with The Boulevard (SKS Group) recording 115 sales in the quarter, the presentation noting this is only the second time a single project has surpassed 100 quarterly sales. The project was able to offer more affordable housing product right next to a train station.&nbsp;

Palmyra West (Finbar) also delivered strong results with 28 sales in Q1, following 84 sales in Q4, with an average price of under $800,000, underscoring depth of demand for well‑located, attainable new stock.&nbsp;

At the premium end, Urbis said downsizer demand is continuing, with the results highlighting Romeo (Applecross, Finbar) recording 75 sales and reaching almost 50% sold in one quarter.

Jual (Shenton Park, Celsius Property) also posted a strong quarter with 28 sales, reaching 39% sold in one quarter.

Urbis noted that Perth apartment demand is not speculative, not investor‑led, and not uniform, describing it as localised, often equity‑driven and highly product‑specific, a pattern reflected in the polarisation between strong “attainable” performers and premium downsizer product.&nbsp;

[smartcode_project:default project_id=148957 project_image_fid=364102]

<h2>Prices underpinned by costs, and the delivery risk is growing</h2>

Urbis said pricing pressure is cost not demand‑driven: construction costs and delivery risk are now a central constraint, with the results noting build costs remain elevated and volatile, and that energy, fuel and labour uncertainty weigh on feasibility.

David Cresp said a growing challenge for private Build‑to‑Sell developers is simply securing a builder in the current environment.

“Developers are really feeling the pressure from a building market that was operating at capacity and securing a builder is challenging,” David Cresp said, adding that even where a builder can be secured, “trying to get to the price that makes the development financially viable is incredibly challenging in the current market.”&nbsp;

Urbis’ broader WA commentary also notes that industry remains at or above capacity with lot and housing creation, and that many builders are limiting new sales to manage stretched workforces and fixed‑price contract pressures, conditions that flow directly into apartment feasibility and delivery timing.

[smartcode_project:default project_id=108869 project_image_fid=317905]

<h2>Supply: improving later, but still constrained, and Perth lags eastern benchmarks</h2>

While near‑term supply remains constrained, Urbis’ forecast shows completions lifting “Supply is forecast to be back above 1,500 apartments per annum for the first time since 2019”, with 1,775 completions forecast for 2026, and volumes remaining above that level over the following years.&nbsp;

Looking further ahead, completions are forecast to reach 2,500 in 2028, with the report noting 32% of that total is social/affordable, reflecting the role of government‑supported delivery in rebuilding the pipeline.&nbsp;

However, Urbis said Perth remains behind comparable markets on pipeline scale. In a national comparison of projects under construction, the report shows under construction Perth Build‑to‑Sell (BTS) at 3,446 apartments versus the Gold Coast at 7,922. Mr Cresp said “The challenge for Perth is how to we grow the delivery pipeline”.

Urbis’ conclusion is that Perth’s market is increasingly defined by product discipline and delivery certainty, with the research identifying “delivery certainty is key” and calling out builder risk and procurement models as core success factors, alongside “timing and staging”.&nbsp;

Joel Robinson

Perth apartment sales hit strongest pace since late 2021 as builder capacity tightens

<a href="https://www.apartments.com.au/developers/sammut-developments">Sammut Group</a> has secured development approval for its latest Brisbane apartment project, marking the Sydney developer’s next step in expanding its Queensland pipeline following the success of its debut Gold Coast development, Coast.

The approved project at <a href="https://www.apartments.com.au/new-apartments/44-glen-road-toowong-qld-4066">44 Glen Road, </a><a href="https://www.apartments.com.au/developments/toowong-qld-4066">Toowong</a> will deliver a 15-storey riverfront apartment building with 42 residences, significantly increasing the scale of the site’s previous approval for a smaller luxury scheme. Designed by Bureau^proberts, the development will comprise a mix of predominantly four-bedroom and two-bedroom apartments positioned to maximise Brisbane River and city views.

Sammut Director Julian Sammut said the group had been actively searching Brisbane for several years before identifying Toowong as the right fit.

“Brisbane was the right step for Sammut,” Sammut said.

“With the success of Coast we thought we should definitely look to do more in Queensland alone. We then pushed up to look at Brisbane. We've been looking for I'd say two to three years actually and it was hard to find the right location.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screenshot%202025-12-23%20at%203.27.14%E2%80%AFPM.png?VersionId=dYAVIL7qdcGA8ojvkslSrLjczXFejSSx" />

Sammut said suburbs including New Farm and Teneriffe were considered before the group ultimately focused on Toowong due to its strong downsizer demographic and limited supply of developable riverfront land.

The site was acquired off-market after what Sammut described as a lengthy negotiation and planning process, with the developer pursuing an uplift to the original approval.

“We are DA approved now which is very exciting,” Sammut said.

“We've had our change approval come through and we've obviously doubled the height, 15 storeys plus rooftop. We've got 42 amazing apartments that are going to be coming to market soon.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-23%20at%203.27.26%E2%80%AFPM.png?VersionId=ohkRkY0dIZlqdfME2EZePsCQavRiBadE" />

Bureau^proberts said the design responds to Toowong’s evolving urban character, balancing contemporary apartment living with the area’s established residential identity.

“A place where traditional Queensland living has taken place for centuries; Toowong is seeing a shift of contemporary influence, commercial and retail hubs mixed with well-considered residential offerings – all the while maintaining its character and charm,” the architect noted in planning documents submitted to Brisbane City Council.

The architecture practice said the project’s form was shaped by its riverfront setting, flood considerations, neighbouring building scales, and view corridors.

“They said the mix of four and two-bedroom apartments capture the ‘fundamental qualities of Queenslander living,’ translated into the context of a contemporary subtropical building.”

The development sits just off Coronation Drive within walking distance of Toowong’s retail precinct and the upgraded Regatta ferry terminal, while also benefiting from proximity to the incoming green bridge connection to West End. Sammut said the accessibility and amenity offering were central to the site’s appeal.

The approval adds to growing residential activity along the Toowong riverfront, joining nearby projects including Consolidated Properties’ Monarch Residences and Spyre Group’s ARC Residences.

Sammut secures approval for debut Brisbane apartment development in Toowong

Developer Lanevick is heading back into Sydney’s apartment market after focusing more heavily on the luxury townhouse and terrace sector in recent years.

Lanevick, founded and directed by Steve Maroun, is expecting to receive approval in the coming months for a new apartment development in Gladesville, with the aim to launch it to the market later this year.

The 51-apartment project, designed by Studio Johnston, will comprise a mix of one-, two-, and three-bedroom apartments positioned toward the Hunters Hill downsizer market.

“Traditionally it’s been difficult for people in that market to downsize because there just hasn’t been the right product available,” Maroun said.

“We’re targeting buyers who might have 30 to 40 per cent of their house value sitting in the bank after downsizing.

“They still want good spacious entertaining areas, they still want quality design, but they also want flexibility and the ability to enjoy life a bit more after working hard for a long time.”

The project sits near Boronia Park and within close proximity to the Parramatta River foreshore, an area Maroun says offers more of a Hunters Hill lifestyle than a traditional apartment precinct.

“From a lifestyle perspective, it’s really more Hunters Hill than Gladesville,” Maroun said. “You’re close to the foreshore, close to parklands, and still connected back into the village precinct.”

From level four and above, apartments will capture water views&nbsp;toward Sydney Harbour. Communal amenity will include rooftop entertaining areas, wellness spaces, and a gym tailored toward owner-occupier buyers.

“We’ve really designed these apartments around that buyer coming from the Hunters Hill LGA and what they’re actually looking for in their next chapter.”

The proposed development has also been designed to respond to the changing character of the broader Gladesville town centre, where a growing number of mixed-use and residential proposals are expected to emerge over the coming years.

“Gladesville presented a rare opportunity to deliver a genuinely design-led residential project within an evolving lifestyle precinct, just moments from the growing Gladesville town centre, and we’ve approached the project with a strong focus on architecture, liveability and long-term community value,” Maroun said.

Maroun said Lanevick saw a first-mover advantage within the precinct as planning controls continue to evolve to accommodate greater housing density.

“We think there’s a real opportunity there that hasn’t really been serviced properly yet,” he said.

“There’s going to be a broader evolution of the whole Gladesville village precinct over time, particularly with more activation and mixed-use outcomes.”

The Venus Street proposal will include a commercial and retail component at ground level designed to contribute to that evolving streetscape activation.

“A big part of the thinking was how do you activate that area properly and create more vibrancy and amenity, which is what Hunters Hill has been looking for,” Maroun said.

Lanevick’s focus since 2020 has largely been on smaller-scale luxury townhouse and terrace developments. The developer recently completed Royale Randwick, also designed by Studio Johnston, where prices reached $3.65 million. The project was featured in the UDIA NSW 2026 Professional Development Prospectus and was also named a finalist for Development of the Year.

&nbsp;

Lanevick to cater for Hunters Hill downsizers with new Gladesville apartment development

Property developer One Living, backed by former Macquarie banker turned investment manager Chris Green’s investment firm, has unveiled plans to bring more institutional capital into housing to help address the national supply crisis.

The New York-based investor has focused his firm, GreenPoint Partners, on addressing the supply shortage hitting middle market housing in Australia.

It is backing the new One Living business to develop more than 1000 units along the eastern seaboard. The new firm is starting with a development on Mona Vale Road, on the border of Mona Vale and Pymble, in Sydney’s Northern Beaches, with around 140 apartments planned. They are eyeing off more sites across the city.

With cost pressures rising in the industry, One Living’s model is to be a vertically integrated developer-builder, so it can respond directly to the housing gap by removing the cost inefficiencies embedded in traditional residential delivery.

“We are building a platform designed to operate at scale and starting in a market where there’s a clear need for quality, attainable housing,” One Living joint managing director Joseph Scuderi said.

“It’s that missing middle – it’s that attainable end of housing… that’s what most Australians invest into and what Australians can actually afford.”

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="798dfa93-4941-4db6-a696-31e9dc18e81c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.31.50%E2%80%AFPM.png?VersionId=mKBqi5C_DmeiXS.AtJkcR8LQIxqCqmFi" />

GreenPoint Partners brings years of experience assembling and scaling real estate operating businesses across major markets. And Green sees a big opportunity in Australia.

“For its size, sophistication and importance to the community, Australia’s living sector has remained largely under-institutionalised, which represents significant opportunity,” Green said. “GreenPoint identified that gap, assembled the right team, and is backing One Living to build a platform that is aligned to market needs.”

Green said being a builder-developer would give the company the capacity and flexibility it required to deliver reasonably-priced homes.

“We want it to be at that attainable level; not super high end luxury but at that attainable level,” he said.

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="74a5344a-4b26-4d4a-ada3-056b1220be77" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.32.15%E2%80%AFPM.png?VersionId=vY8hXHO4reBMdO8ZXMWCNtGZJofUPQ3j" />

&nbsp;

One Living will undertake a component of affordable housing in its schemes, which it will own and operate, and it could also run build-to-rent on some sites.

Green praised local policy settings.

“The NSW government is being very supportive, strategic and pragmatic in terms of how do we generate more supply of housing,” he said. “We think it’s actually positive for development and the bit that’s been lacking at that attainable level is that it’s lots of relatively small private developers, whereas we want to create an institutional platform.”

One Living is also&nbsp;looking at high-density projects and could take on more institutional funding in the future.

“The way we will be able to achieve economies of scale is through size,” Green added.

One Living enters Sydney's new apartment market with Northern Beaches site acquisition

It's been several years since there's been an opportunity to buy a brand new townhome in Melbourne's coastal suburb of Mordialloc. Even apartment developments in recent times have been few and far between in the area.

Local developer LDS Property identified the gap in new housing, securing a site on White Street, directly opposite&nbsp;Woodlands Golf Club Mordialloc. They've recently launched&nbsp;<a href="https://www.apartments.com.au/new-townhouses/wm-residences-mordialloc-102-white-street-mordialloc-vic-3195">WM Residences</a>, just 13 townhouses which they have already started building.

Projects by Buxton Director Heath Thompson, who is selling WM Residences, says the townhouses x that perfect middle ground be

"Mordialloc residents have had limited options to downsize within the suburb, often forcing them to look elsewhere despite long-standing ties to the area," Thompson says.

"With very little comparable new supply coming to market, projects like WM Residences are well placed, particularly as buyers look to capitalise on current conditions amid constrained supply."

[smartcode_project:default project_id=134646 project_image_fid=6109]

The development, designed by regarded architecture firm&nbsp;<a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a>,&nbsp;adopts a deliberately restrained architectural approach, focusing on simplicity, durability and liveability rather than overt design gestures.

The boutique scale is central to the offering. With only 13 three-bedroom residences, each home is configured to prioritise functional layouts and everyday use, supported by private terraces and secure two-car garages.

Ewert Leaf’s design response leans into a calm, neutral material palette. Interiors are defined by oak flooring, white walls and soft finishes, creating a consistent and understated backdrop. The approach avoids trend-driven detailing in favour of longevity, with an emphasis on natural light and spatial clarity.

[smartcode_project:default project_id=134646 project_image_fid=6110]

Beyond aesthetics, the homes are designed to meet contemporary performance expectations. Each residence targets a minimum 6-star energy rating, incorporating double glazing, comprehensive insulation and all-electric Bosch appliances.

The project’s location supports a walkable coastal lifestyle, sitting within close proximity to Mordialloc’s foreshore, Main Street retail strip and the train station. Local cafés and dining venues, including Suburbia Deli and Hendriks Café, are within a short walk, reinforcing the area’s established neighbourhood character.

[smartcode_project:default project_id=134646 project_image_fid=6116]

While <a href="https://www.apartments.com.au/developments/mordialloc-vic-3195">Mordialloc</a> is often defined by its beach and pier, the project taps into other areas of day to day living, offering easy access to local food, casual dining and transport, rather than positioning itself purely as a lifestyle retreat.

WM Residences reflects a continued trend across Melbourne’s coastal suburbs towards smaller-scale, design-led townhouse developments, particularly on infill sites where proximity to amenity is already established.

With construction commenced prior to its market entry, the project aligns with a growing preference among buyers for developments with visible progress and defined delivery timeframes.

[smartcode_project_cta:default project_id=134646]

WM Residences fills gap in Mordialloc townhouse market

Interest Rates

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The Reserve Bank's interest rate cut of 0.25 basis points could have further impact on the residential property market according to the Australian Property Institute.
API chief executive Mike Zissler said the record low rate is a double jeopardy play by the Reserve Bank as it will also push housing out of reach of many low income families as housing affordability becomes an even greater percentage of people’s incomes.
“There is little doubt it will have a positive impact on the housing and associated sectors," he said.
"The latest cut will, however, upwardly impact upon property values.
"If the intention is to stimulate the economy it is essential that banks pass the cut on and do so quickly."
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po-LsXgBTHBmX

Reserve Bank plays double jeopardy with housing market: API

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GUEST OBSERVER
The Reserve Bank has cut the cash rate from 2.00 percent to a record low of 1.75 percent.
The Reserve Bank has now adopted a “neutral stance” – suggesting that interest rates are on hold until at least the next reading of inflation (the next three months).
What does it all mean?
When the Reserve Bank cut the cash rate to 2.00 per cent in May last year, banks cut variable housing rates from 5.65 per cent to 5.45 per cent. In the period since banks were forced to lift housing rates to partially fund the cost of higher bank capital ratios. The average bank variable rate was back at 5.65 per cent before today’s decision.
 
<a href="/images/2016/05/03/Screen%20Shot%202016-05-03%20at%203.50.50%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/05/03/Screen%20Shot%202016-05-03%20at%203.50.50%20PM.png" alt="">
At the same time, the Aussie dollar had fallen from US78 cents over the past year to US76-77 cents and the oil price has fallen from US$60 to US$45 a barrel. So monetary policy settings were only a little more accommodative before today’s rate decision.
It may sound like a broken record, but the Reserve Bank has to be forward-looking in setting interest rates. And in so doing, today it saw little risk in cutting rates further. It would have been a different situation if the global economy was going gangbusters and if there wasn’t a structural global trend to lower inflation. 
In short, consumers can buy goods wherever and whenever they want to and this is causing businesses across the world to keep prices low.
It is important to note that the Reserve Bank is cutting from a position of strength rather than weakness. The economy is growing at a 3 per cent annual rate, unemployment is at 5.7 per cent and underlying inflation is below 2 per cent. So there is firm growth and low inflation. The Reserve Bank believes that the economy can do even better. And that is something that should inspire confidence across the economy.
The Reserve Bank has made no secret of its desire for a lower Aussie dollar, saying it “may complicate” the adjustment process for the economy. Clearly, if the Aussie dollar was a lot lower it would be providing more stimulus to the economy and helping to do some of the “heavy lifting” done by monetary policy. The good news is that the Aussie fell from US77.2 cents to US75.55 cents after the rates decision.
Perspectives on interest rates
The Reserve Bank cut the cash rate by 25 basis points (quarter of a percent) to 1.75 per cent. The previous rate cut was in May 2015 (25 basis points), taking the cash rate to a record low of 2.00 per cent.
There have now been 11 rate cuts since November 2011.
The Reserve Bank had previously lifted rates seven times from October 2009 to November 2010 – a total of 1.75 percentage points, from 3.00 per cent to 4.75 per cent.
What are the implications of today’s decision?
The Reserve Bank will update forecasts for economic growth and inflation on Friday. The growth forecasts may be revised up a touch; inflation, revised down a touch. The Reserve Bank will now stay on the monetary policy sidelines until the next inflation data.
If inflation continues to undershoot the 2-3 per cent target band, the Reserve Bank will keep interest rate cuts on the table. If the RBA feels that low inflation is a global, structural issue rather than driven by short-term economics, then there are fewer risks in cutting interest rates.
The big question is whether the economy still responds in the same way to rate cuts – that is, with rates so low – at generational lows. That is the $64 question.
The following table shows current monthly repayments on a range of mortgages and projections if rates are cut by major lenders in response to the lower cash rate.
<a href="/images/2016/05/03/Screen%20Shot%202016-05-03%20at%203.49.02%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/05/03/Screen%20Shot%202016-05-03%20at%203.49.02%20PM.png" alt="">
 Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>.
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cjames-5S2v74qSNK

Reserve Bank goes for growth: CommSec's Craig James

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National Australia Bank has cut the interest rate on its standard variable home loan rate by 25 basis points.
It is the full amount of the RBA's cut.
This announcement means NAB’s Variable Rate for Home Loans (Standard Variable Rate) will reduce from 5.60 percent p.a. to 5.35 percent p.a.
NAB customers with a Standard Variable Rate home loan will save an average of $47-a-month on their monthly home loan principal and interest repayments based on a $300,000 loan over a 30-year term.
NAB Group Executive Personal Banking Gavin Slater said in making the decision to change interest rates, the bank considers a range of factors.
“The circumstances of each decision will always vary and we must take into account factors such as competition, regulatory capital requirements and funding costs,” Mr Slater said. 
“Today’s decision balances the needs of our home loan customers with our shareholders.” 
Today’s change applies to Owner Occupier and Residential Investment variable rate home loans.
·         For owner occupiers with NAB’s Variable Rate for Home Loans (Standard Variable Rate) the rate will reduce from 5.60 percent p.a. to 5.35 percent p.a.
·         For residential investors with NAB’s Variable Rate for Residential Investment Home Loans the rate will reduce from 5.75 percent p.a. to 5.50 percent p.a.
NAB will also reduce its rate on standard variable business rate lending products by 0.25 percent p.a. 
The new rates will be effective from Monday 16 May 2016.
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jchancellor-FAypfDUnLy

NAB passes on full May 2016 rate cut to home borrowers

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The Australian dollar fell on news the May RBA meeting cut the cash rate.
CoreLogic RP Data's head of research Tim Lawless said the RBA decision to cut the cash rate to a new historic low today of 1.75 percent was likely to have been hotly debated at the board meeting. 
He said on one hand we have economic growth tracking at 3% per annum, a housing market where the pace of capital gains was moderating in a controlled fashion and relatively strong labour market conditions. 
"Balance this with negative quarterly inflation and a high Australian dollar and it becomes clear that this decision probably could have gone either way," he said.
"The big question relevant to the housing market is how much of the lower cash rate will be passed on to mortgage rates. The spread between the cash rate and standard discounted mortgage rate has been widening since 2008 when there was 1.8 percentage points difference between the two rates. 
"By the April 2016 the spread has doubled to be 3.65 percentage points and is likely to widen further if the full rate cut isn’t passed on by lenders to mortgage rates.  With home values still showing some upwards momentum, lower mortgage rates are likely to provide some further stimulus to the housing market, which the Reserve Bank will be monitoring closely.
"The last thing they would like to see is a rebound in the rate of capital gain, particularly in Sydney and Melbourne where dwelling values have already risen 50 percent and 31 percent respectively since the rate cutting cycle began in November 2011.
The shadow treasurer Chris Bowen has blamed the cash rate cut on the government's "incredibly poor economic management".
In a statement on Tuesday Mr Bowen said the decision reflected a weaker economic outlook, with the RBA expecting growth to moderate this year.
"In addition, incomes are falling, living standards are stagnating and home ownership is out of reach for so many Australians – facts the Government will be hiding from tonight.
"While our resilient economy is a testament to the efforts of hard working Australians, these are worrying trends we can't ignore." 
According to finder.com.au's resident money expert Bessie Hassan borrowers are being warned to keep a close eye on rate cuts that are set to filter the market as a result of the Reserve Bank’s surprise decision to slash the cash rate to a new historical low of 1.75 percent.
She said the move follows days of speculation regarding a rate cut, fuelled by the release of inflation data last week, which revealed that Australia’s Consumer Price Index (CPI) has dramatically slowed.
"The outcome was in contrast to the forecast of 96% of the economists and experts in the finder.com.au RBA survey, who predicted no change, citing a strong labour market, recovering Australian dollar and a ‘wait and see’ approach to the Federal Budget," she said.
"Only one economist, Savanth Sebastian of CommSec, correctly predicted the rate cut, with low inflation a likely key factor influencing the decision, he said.
"The finder.com.au RBA Survey closed on 27 April 2016 – the same day the new inflation data was released. More than half (55 percent) of the 22 experts who weighed in to prospects of a rate movement correctly tipped a rate cut was in store in 2016. However today’s cut has come somewhat earlier than expected, with the majority of experts tipping August or November as the most likely month this would happen.
"Thirty-eight percent of experts surveyed on the rate cycle predicted a drop to 1.75 percent before a rise, while 13 percent are forecasting one further drop to 1.5 percent before the cash rate starts to rise.  Our new cash rate of 1.75 percent is remarkable – it is the lowest it’s ever been and a far cry from the pre-GFC days of circa 7 percent."
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RBA cuts cash rate at May 2016 meeting

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STATEMENT BY GLENN STEVENS, RBA GOVERNOR: MONETARY POLICY DECISION
<div>
<div class="rss-mr-content">
At its meeting today, the Board decided to lower the cash rate by 25 basis points to 1.75 per cent, effective 4 May 2016. This follows information showing inflationary pressures are lower than expected.
The global economy is continuing to grow, though at a slightly lower pace than earlier expected, with forecasts having been revised down a little further recently. While several advanced economies have recorded improved conditions over the past year, conditions have become more difficult for a number of emerging market economies. China's growth rate moderated further in the first part of the year, though recent actions by Chinese policymakers are supporting the near-term outlook.
Commodity prices have firmed noticeably from recent lows, but this follows very substantial declines over the past couple of years. Australia's terms of trade remain much lower than they had been in recent years.
Sentiment in financial markets has improved, after a period of heightened volatility early in the year. However, uncertainty about the global economic outlook and policy settings among the major jurisdictions continues. Funding costs for high-quality borrowers remain very low and, globally, monetary policy remains remarkably accommodative.
In Australia, the available information suggests that the economy is continuing to rebalance following the mining investment boom. GDP growth picked up over 2015, particularly in the second half of the year, and the labour market improved. Indications are that growth is continuing in 2016, though probably at a more moderate pace. Labour market indicators have been more mixed of late.
Inflation has been quite low for some time and recent data were unexpectedly low. While the quarterly data contain some temporary factors, these results, together with ongoing very subdued growth in labour costs and very low cost pressures elsewhere in the world, point to a lower outlook for inflation than previously forecast.
Monetary policy has been accommodative for quite some time. Low interest rates have been supporting demand and the lower exchange rate overall has helped the traded sector. Credit growth to households continues at a moderate pace, while that to businesses has picked up over the past year or so. These factors are all assisting the economy to make the necessary economic adjustments, though an appreciating exchange rate could complicate this.
In reaching today's decision, the Board took careful note of developments in the housing market, where indications are that the effects of supervisory measures are strengthening lending standards and that price pressures have tended to abate. At present, the potential risks of lower interest rates in this area are less than they were a year ago.
Taking all these considerations into account, the Board judged that prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy at this meeting.
</div>
</div>
<div class="box-enquiries"> </div>
 
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May meeting: RBA Governor statement on rate cut

<html><body><div class="entry-content">
Mozo has suggested borrowers can give themselves a rate cut by refinancing to a better deal.
Mozo's database shows that the average rate is currently 4.73 percent, whereas the lowest rate in our database is just 3.86 percent. 
Rebeccah Elley, Mozo’s money editor took a look to see just how much a homeowner with a $600,000 mortgage would save by giving themselves a rate cut:
<table><tbody>
<tr>
<td> </td>
<td>
Average mortgage rate – 4.73%
</td>
<td>Average mortgage rate after 25 basis point rate cut – 4.48%</td>
<td>
Lowest rate in our database – 3.86%
</td>
</tr>
<tr>
<td>Monthly repayments</td>
<td>$3,414</td>
<td>$3,328</td>
<td>$3,121</td>
</tr>
<tr>
<td>Interest paid over 25 years</td>
<td>$424,142</td>
<td>$398,456</td>
<td>$336,247</td>
</tr>
</tbody></table>
 
"Even if your provider gives you a rate cut, the savings made on an average home loan won’t be anywhere near what you could get by switching to one of the best deals in the market."
If you would like to see how much you could save by refinancing, punch in your details into the <a href="https://mozo.com.au/home-loans/switch-and-save" target="_blank">Switch &amp; Save Calculator</a>, which will pull some of the cheapest mortgage deals available for your situation.
 
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Get your own interest rate cut by refinancing: Mozo

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Official interest rates are poised to hit a new historic low of 1.75 percent when the Reserve Bank Board meet later today following last week's shock consumer price index results.
Property website RateCity.com.au have suggested that deflation has sparked the May rate cut prospect.
Their analysis of the national and international economic indicators shows that the disappointing inflation figures could be enough to disrupt the RBA's year-long holding pattern.
RateCity.com.au money editor Sally Tindall said the chances of a budget-day cut were over 50 percent.
“Australians should get set for a rate cut, if not this month then within the following two months,” she said.
“The RBA has held an easing bias since October. Last week’s inflation figures should be the final straw.
“Inflation is now at 1.3 per cent and core inflation at 1.55 per cent, which is undeniably well below the RBA’s own target rate – a fact they will find hard to ignore.
“Despite a last-minute plunge, the relatively high dollar will also add to the RBA’s woes,” she said.
“If the RBA does deliver a cut, the big question for mortgage holders on Tuesday won’t be around the budget, but rather whether their bank will pass this savings on.”
“But with the cash rate decision set to be announced hours before Scott Morrison delivers his first Federal Budget and employment figures still holding up, the RBA may opt to wait and see if there’s a post-budget bounce in confidence.” 
<a href="/images/2016/05/02/RATECITY.jpg" target="_blank">Click here to enlarge RateCity.com.au's Rateulator</a>
<a href="/images/2016/05/02/RATECITY.jpg" target="_blank"><img src="/images/2016/05/02/RATECITY.jpg" alt="" width="280" height="197"></a>
Fellow mortgage website finder.com.au however have suggested that the cash rate will complete 12 months without movement as 96 percent of leading economists and experts have widely tipped the rate will hold at 2 percent.
The rate last moved in May when the Reserve Bank cut by 0.25 percent.
27 of 28 experts who took part in the finder.com.au Reserve Bank Survey believed the pause will continue due to a robust labour market, recovering Australian dollar and imminent Federal Budget.
CommSec's Savanth Sebastian is the only economist who has predicted a cut, suggesting the low inflation results opens the door for the Reserve Bank to cut rates if they deem it's necessary. 
As for prospects of a rate movement beyond May, 55 percent of the 22 experts who opted in to this question predict a fall is on the cards in 2016, with the most popular months indicated for a cut being August (four predictions) and November (3). 
Conversely, three experts – Steven Pambris from Bank of Sydney, Mark Crosby from Melbourne Business School and Stephen Koukoulas from Market Economics – predict a rate rise, or multiple rises, this year.  Ten experts (45 percent) predict no movement until 2017. All of this group agreed that a rate rise was the next likely move.  Half of the 24 experts surveyed on the rate cycle thought that the cash rate has already hit rock bottom, and would not drop below 2.00 percent in this period. Nine experts (38 percent) predict a drop to 1.75 percent before a rise, while only three experts (13 percent) predict a drop to 1.5 percent. Twenty-two experts weighed into whether recently reported oversupply of units in capital cities would have an effect on property prices. Eighty-two percent predict this would lead to a drop in unit prices in capital cities, with 36% (8) forecasting growth will slow across the whole capital city property market. Only four economists (18 percent) predict no effect on property prices.  Bessie Hassan, Money Expert at finder.com.au, says these findings, coupled with recent news that three of the big four banks – Westpac, ANZ and Commonwealth Bank – have ceased lending to foreign investors, could pave the way for first home buyers to enter the property market.  “Foreign investors account for nearly nine percent of housing sales, so this crackdown could take the heat out of the property market. If you’re a first home buyer and have a deposit saved up, now may be the best time to nab a bargain, especially if you’re eyeing an apartment.  “First home buyers have had an even tougher time of late, so this will be welcome news. Figures from the Australian Bureau of Statistics show that the number of first home buyers has been dropping consistency since September 2012, when it peaked at 19 percent. The latest figures show first home buyers now account for just 13.4 percent of all home loans financed.  “However, with the cash rate looking likely to remain stable for the foreseeable future, signs are pointing to a long-awaited first home buyer ‘comeback’," says Ms Hassan. “Interestingly, should the cash rate hold on Tuesday as widely expected, RBA figures show this would be only the third time in a decade that the official cash rate has held at the same level for 12 months or more. “That said, the average standard variable home loan rate – currently 5.21 percent – is not expected to hold for much longer with the big four banks having not moved their variable rates in five months.  “This reiterates that shopping around for the best home loan deal has never been more important. Do your homework, compare lenders, read the fine print and always factor in a buffer of 2-3 percent in case of future rate rises so you’re not left with a nasty shock soon after becoming a homeowner."
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Deflation sparks May rate cut propsect: ratecity.com.au

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GUEST OBSERVER
Australian CPI numbers surprised significantly to the downside. The RBA’s preferred measures of underlying inflation both fell well short of market expectation and are tracking well below the RBA’s last set of forecasts. 
These core measures of inflation have also declined to be convincingly below the bottom edge of the RBA’s 2-3 percent target band. The average of these underlying measures was 1.55% y-o-y.
This puts the RBA in a tricky spot. Most of the demand indicators have held up recently, with the unemployment rate falling and business conditions improving.
Normally a lift in the activity generates a solid rate of inflation. However, although growth has been solid, it has not been strong enough to keep inflation on target.
Low inflation partly reflects that the end of the mining investment boom has brought an extended period of below-trend growth, which has weighed on wages and price pressures in the economy. Global inflation has also been very low. More recently, low global inflation and rates have seen the AUD climb, which is set to weigh further on the outlook for inflation and could also weigh on growth.
All of this adds up to suggesting that the RBA will need to cut its cash rate further. It now also seems likely that a 25bp cut may not be enough.
The RBA also faces a tricky timing issue. The government is due to hand down the federal budget on 3 May, which is the same day as the RBA meets next week and a federal election looks likely on 2 July. The RBA typically looks to stay out of the political process, so cutting rates around these events is less than ideal.
Weighing all of this up, there is no denying that inflation is too low, which means that the cash rate almost certainly needs to be cut. The usual rule of thumb is the sooner the better. We retain our view that the RBA is likely to cut by 25bp in Q2. We now expect that a cut in May is likely, despite the budget. We now also expect a follow-up 25bp cut in Q3 and for the cash rate to remain at 1.50% over the forecast horizon.
<a href="/images/2016/04/27/Screen%20Shot%202016-04-28%20at%208.22.30%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/27/Screen%20Shot%202016-04-28%20at%208.22.30%20AM.png" alt="">
Q1 CPI was very weak
Today’s CPI numbers showed that inflation was weak across the board. The headline CPI print showed a fall of -0.2% q-o-q, which was the first decline in seven years (Chart 1). The y-o-y rate of headline CPI inflation has now been below the RBA’s 2-3% target band for six quarters, which is the longest period of below-target headline inflation since 1999. The fall in the headline CPI rate reflected weakness in imported prices, but also, and more worryingly, a fall in domestic inflationary pressures (Chart 2).
Of course, the RBA focuses on its preferred underlying measures of inflation – the trimmed mean and weighted median – which strip out the volatile items. Here the news is even less promising. The average of the two preferred underlying measures fell to its lowest rate in the history of Australia’s inflation-targeting regime (since mid-1993) (Chart 3). The average of the two underlying measures was running at 0.15% q-o-q in Q1. In y-o-y terms, underlying inflation is well below the RBA’s 2-3% target band and also at its lowest level on record (Chart 4).
The challenge is that this has occurred at the same time that domestic demand indicators have been lifting. Surveyed business conditions also remained at high levels in Q1 and the unemployment rate has continued to edge lower. As we have pointed out recently though, the improvement in the labour market has not yet been enough to lift wages growth (see Downunder Digest: Looking for signs of rising wages, 15 April 2016). At the same time, the rising AUD is likely to weigh on growth and inflation (see Downunder Digest: Services exports and the AUD, 30 March 2016).
<a href="/images/2016/04/27/Screen%20Shot%202016-04-28%20at%208.23.49%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/27/Screen%20Shot%202016-04-28%20at%208.23.49%20AM.png" alt="">
 
The timing is tricky, given the budget and election
 
With the Prime Minister, Malcolm Turnbull, having pulled the budget forward by a week to 3 May in order to facilitate calling an early election on 2 July, the budget is now due to be handed down on the same day as the RBA board meeting. This is less than ideal for the RBA, if it is looking to cut rates on that day. Typically, the RBA would like to stay apolitical and the Governor, Glenn Stevens, has also spoken on a number of occasions about monetary policy reaching its limits and other arms of policy (fiscal policy) needing to be more supportive of growth. Ideally, we would be hoping this allows the government to announce its policies without a cash rate cut also being part of the message. The RBA may also be reluctant to cut in the lead-up to an election (likely on 2 July) as it typically seeks to remain apolitical.
 
However, if the RBA deems that rates will need to be lowered at some point, the typical rule of thumb is: the sooner the better. Governor Stevens also has a track record of setting policy independent of the political cycle, having lifted the cash rate only a few weeks before the 2007 election. With this in mind, if the RBA does consider that the CPI print warrants it cutting further, as we think is likely, getting it done in May seems a little easier than waiting until June, given that it can more easily point to the lower-than-expected CPI as the trigger.
<a href="/images/2016/04/27/Screen%20Shot%202016-04-28%20at%208.25.23%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/27/Screen%20Shot%202016-04-28%20at%208.25.23%20AM.png" alt="">
 
<a href="/images/2016/04/27/Screen%20Shot%202016-04-28%20at%208.26.08%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/27/Screen%20Shot%202016-04-28%20at%208.26.08%20AM.png" alt="" width="792" height="336">
 
<a href="https://www.about.hsbc.com.au/hsbc-in-australia/management-team" target="_blank">PAUL BLOXHAM</a> IS CHIEF ECONOMIST (AUSTRALIA AND NEW ZEALAND) FOR HSBC. 
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Tricky, but expect RBA rate cut next week: HSBC's Paul Bloxham

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The RBA leaving interest rates on hold and the Australian dollar's strength likely mean that commercial property and infrastructure assets will reap the benefits from the search by investors for yield, evident from the recent trends in NSW's Newcastle and Charlestown.
In Newcastle, an undersupply of commercial and industrial investment properties against high demand is pushing the yield expectations down to unprecedented levels, said Steve Dick, director of Raine &amp; Horne Commercial Newcastle.
Meanwhile, a recent Raine &amp; Horne auction at Charlestown generated 95 enquiries with 25 contracts issued and 15 bidders registered, achieving a 6.3 percent yield at $1,300,000.
“With only one buyer there are plenty of purchasers left over,” said Steve.
The rise in the Australian dollar could also translate to further rate cuts by the RBA.
“The clear implication is that the rise in Australian dollar has increased the chance that the RBA will act on its bias to ease interest rates again,” said Shane Oliver, head of Investment Strategy and chief economist, AMP Capital.
With growth set to slow due to sluggish mining and housing sectors, relative high unemployment at 6 percent, low inflation coupled with the determination of the banks to put up interest rates independently of the RBA and a strong Australian dollar threatening tourism and higher education, Oliver is confident the RBA will cut interest rates again.
“A soft March quarter inflation report due April 27 could drive this in May – but it may not occur until the June quarter,” he said.
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Low interest rates to drive commercial investment in 2016: Raine & Horne

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Yields down since last month and almost back to levels in April 2015.
As part of our continued series on interest rates, Secret Agent has been tracking movements in the bond yield curve since late last year. If you don’t know why bond yields are so important for property investors, download our yield curve report.
So far this month, short, medium and long term treasury bond yields are down by between 0.06 percent for 90 day bills and 0.16 percent for 10 year bonds. This is shown in Figure 1.
<a href="/images/2016/04/14/Screen%20Shot%202016-04-14%20at%202.16.27%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/14/Screen%20Shot%202016-04-14%20at%202.16.27%20PM.png" alt="">
Note that lower bond yields are not necessarily a bad thing for bond investors, as yields and prices of bonds move in opposite directions. In fact, over the Easter period in particular, many bonds saw a large increase in price. One major cause was the announcement by the big banks (ANZ in particular) that bad debt charges are higher than market consensus. This drove a lot of investors to seek out bonds as an alternative, in turn driving up bond prices.
The continued downward trend on bond yields means that yields across the board are nearly back to levels seen in April 2015 (Figure 2), which was just before the RBA last cut interest rates.
<a href="/images/2016/04/14/Screen%20Shot%202016-04-14%20at%202.18.11%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/14/Screen%20Shot%202016-04-14%20at%202.18.11%20PM.png" alt="">
This again indicates low investor confidence and a bleaker outlook for the economy. It also increases the likelihood of a RBA interest rate cut before the end of the year.
For more information, <a href="https://secretagent.com.au/" target="_blank">click here</a>.
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