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 (RBA) February minutes noted activity and prices in the housing market continued to be bolstered by the low level of lending rates and strong population growth.
"A range of indicators, including residential building approvals, suggested further growth of dwelling investment in the near term," the minutes read.
"Housing price inflation had moderated from the rapid rates seen in late 2013, but remained high and in Sydney and Melbourne had been well above the growth rate of household income.
"Growth of owner-occupier housing credit had remained around 6% in year-ended terms, while investor credit had continued to grow at a noticeably faster rate."
The minutes noted given the large increases in housing prices in some cities and ongoing strength in lending to investors in housing assets, that developments in the housing market would "bear careful monitoring."
 They noted that it would be important to assess the effects of the measures designed to reinforce sound residential mortgage lending practices announced by APRA in December.
Members noted that the data released since the December meeting suggested that the domestic economy had continued to grow at a below-trend pace over the second half of 2014.
"Members noted that there was considerable uncertainty around the timing and extent of the expected increase in household consumption growth and non-mining business investment. 
"Although fundamental factors such as low interest rates and strong population growth remained in place, they had not been sufficient to see a significant pick-up in the growth of these variables or a decline in the degree of spare capacity in the labour market. 
"In addition, recent data suggested that the expected improvement in economic conditions would occur later than had been previously expected. 
"Members commented that a strengthening in non-mining investment was a necessary element for growth to pick up to an above-trend pace, and noted the importance of confidence in underpinning such an outcome. 
"Indeed, an improvement in the appetite for businesses to take on risk had the potential, should it occur, to lead to much stronger growth in non-mining business investment than currently forecast," the minutes advised.
Those attending were Glenn Stevens (Governor and Chair), Philip Lowe (Deputy Governor), John Akehurst, Roger Corbett AO, John Edwards, Kathryn Fagg, John Fraser (Secretary to the Treasury), Heather Ridout AO and Catherine Tanna. The others present were Guy Debelle (Assistant Governor, Financial Markets), Malcolm Edey (Assistant Governor, Financial System), Christopher Kent (Assistant Governor, Economic), Alexandra Heath (Head, Economic Analysis Department), Anthony Dickman (Secretary), and Peter Stebbing (Deputy Secretary).
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jchancellor-FAypfDUnLy

RBA says Sydney and Melbourne house price inflation remains high

<html><body>
GUEST OBSERVATION
The RBA’s decision is good news for home owners as they can pay off their mortgage quicker than expected.
It’s also a positive move for those looking to enter the market.
But these buyers need to keep in mind that shrinking rates will drive more competition, which may cause property prices to rise.
Particularly in Melbourne’s inner north where supply is limited, suburbs such as Carlton, Princess Hill, Brunswick East and North Melbourne have experienced growth of 18.97%, 14.87%, 12.9% and 17.3% for houses respectively over the past 12 months without interest rate cuts.
It will be interesting to see how upper pressure on asset prices and more competition will impact these already bustling, low supply areas.
Rob Elsom is director of <a href="https://www.hockingstuart.com.au/" target="_blank">hockingstuart </a>Brunswick, Carlton, North Melbourne and Northcote.
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po-LsXgBTHBmX

Rate cuts will benefit Melbourne's inner north market: Rob Elsom

<html><body>
GUEST OBSERVATION
Following the recent cut in interest rates, we can see that there will be a pickup in residential construction particularly in Melbourne, Sydney and to a lesser extent in Brisbane, that will feed the appetite of the property investor who makes up more than 50% of the purchase of these apartments.
We think that self-managed super funds, as well as mum and dad investors, will be heightened with the fall in interest rates. Affordable housing, lower interest rates and higher job confidence will tempt first home buyers.
The concern is that outside of Sydney the economic indicators are not as strong, which permeates into confidence.
We are of the opinion that although interest rates have been lowered, it will not push another increase in property prices above circa 4% on the back of home purchasers being mindful of the price.
From the rental point of view we expect to see vacancy rates in the major capital cities to tick up as more of the investor stock comes on the market, which means a good opportunity for tenants.
As far as the government looking to regulate property investment, we don’t think this will take place as the major economic driver is the construction boom, which the government will not wish to disrupt.
We will see a multi-tiered market with Sydney continuing to grow with strong economic conditions coupled with job security to a lesser extent in Brisbane and in Melbourne.
Concern lies with Perth where there is a declining state economy due to job losses in the mining industry and the housing marketing beginning wane.
Malcolm Gunning is the president of the <a href="https://www.reinsw.com.au/imis15_Prod/web" target="_blank">REINSW </a>and the principal of <a href="https://gunningcommercial.com.au/" target="_blank">Gunning Commercial</a>.
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Outside of Sydney the economic indicators are not as strong: Malcolm Gunning

<html><body>
John Symond, the founder of Aussie Home Loans, forecasts another two rate cuts, in part because of the political shenanigans and ensuing lack of confidence.
"I think the Reserve Bank realised what is going on in Canberra is going to cause further problems with confidence and I think it was probably one of the reasons to get them to drop interest rates," he told Ross Greenwood's Money News on 2GB.
"When you you talk to businessmen, taxi drivers and shop keepers, everyone is so sick of it."
He says the low rates, for those people who have jobs and can afford it, would assist to spur things along, "but not in a crazy sense".
"Why wouldn't you go and buy a property and rent it out rather than put your money in the bank and get 2.5% less tax," Symond said.
The turbulence on the political sphere for the next several months will hurt confidence even more, he bemoaned.
"That's why I'm now thinking the Reserve Bank will continue to drop rates.
"I think there's probably a couple more there."
{mijopolls 90}
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John Symond sees another two rate cuts

<html><body>
GUEST OBSERVATION
The Reserve Bank’s recent decision to introduce an interest rate reduction is a strong indication that there are changes brewing for Australia’s property market.
To fully understand how this rate cut will affect our housing markets, I think it’s essential to firstly understand how they have performed over the last 12 months. My research shows that there has definitely been some ‘winners and losers’ in the state comparisons.
The clear winner of the housing market battle is Sydney, which has documented a 16.78% annual growth rate from the period of December 2013 to December 2014. Performing equally as well in the unit market with an annual growth of 12.90%. By all accounts, what we have just witnessed is one of the largest boom periods in Sydney’s housing market history.
Taking this into consideration - along with its strong annual economic growth throughout 2014 that saw its state final demand increase by 3.5% - it is clear to see why people who are looking to enter the housing market would choose New South Wales. This compares to Western Australia, for example, whose economy is arguable in recession with its state final demand falling in the last three reported quarters.
This aside, when we take a deeper look at the Sydney market we uncover some unfavourable facts, including:
<ol start="1">
<li>The ABS’ latest reported commencements in new housing currently sits at 4,082 dwellings above the median commencement rate of the last five years. 
</li>
<li>New housing approvals, as last reported by the ABS, are running at 2,591 dwellings above the five year median. 
</li>
<li>Population growth, as last reported by the ABS, is slowing and currently running at 1,728 people below the five year median. 
</li>
<li>Residex estimates that there are currently some 7,000 dwellings surplus to need. 
</li>
<li>Unemployment is increasing, and is likely to increase a little more than was anticipated, given the lower crude oil prices and a consequential likely reduction in employment in the LNG development and exploration area.</li>
</ol>
These observations suggest that the Sydney market is heading into considerably oversupplied territory, which could lead to some significant corrections. In fact, analysis right across Australia indicates that there is a national stock overhang, and in many states it is significant.
So what does this all mean in a situation where interest rates have decreased?
We can anticipate that the interest rate decrease is likely to stimulate the markets, so house prices will probably move forward from here, with the lending control of the major banks hopefully keeping the markets from overheating.
But is this a good outcome for the property market? My simple answer is… no!
While it may be good in the short-term for existing house owners, throughout my three decades of monitoring house price growth, I can confirm that each period of growth always ends with a number of people who bought close to the top of the market getting burned due to their excessive leverage. 
I issue a warning to all, and that is that we have passed the top of a normal growth period, and we are now about to have the market further stimulated. This will take the growth into unchartered waters where affordability will be worse than we have previously seen.
If you are an investor wanting to get into the market, take care and make sure you don’t pay a premium for any purchase you make, especially if you are buying new units.
John Edwards is a consulting analyst for <a href="https://www.onthehouse.com.au/" target="_blank">Onthehouse.com.au</a>.
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jedwards-8kHM8GNY6d

The interest rate cut was a bad outcome for the property market: John Edwards

<html><body>
guest observation
Interest rate cuts will undeniably have a positive impact on consumer sentiment, especially for lower segments of the market such as first home buyers and investors who typically purchase properties under $500,000.
Suggestions of more cuts on the horizon will keep the market positive for 2015.
Competition for properties is always strong at the start of the year given limited supply over the summer, but competition should pick up even more with most banks passing on the rates.
The impact should trickle into the marketplace within the next couple of weeks, and it will be interesting to see the results at the end of February - when there are over 1,000 auctions scheduled in the Melbourne market.
Investors should keep in mind though that if first home buyers make the jump, the rental market may be impacted.
This makes it imperative for investors to do their research and investigate areas and property types in locations where rental yields are high and vacancy rates are low.
FRANK VALENTIC is managing director of award-winning buyers' agency <a href="https://www.advantageproperty.com.au/" target="_blank" rel="nofollow">Advantage Property Consulting.</a>
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fvalentic-kJt4iZ5jDx

With more rate cuts a possibility, the market will stay positive: Frank Valentic

<html><body>
GUEST OBSERVATION
The Reserve Bank's (RBA) interest rate cut last week will have far reaching implications across the board for both home owners and investors.
Here are the six main changes that will be put in to motion with a cut from the RBA last week.
<ol>
<li>
Investor boom to continue As money becomes cheaper, it becomes more appealing for investors to buy in to property and using the depreciation benefits off owning a property to their advantage. Expect to see further investors snapping up blue-chip properties that most commonly are reserved for first home buyers as they will be happy to bank on the capital appreciation and can afford the off-set from the loss. 
</li>
<li>
First Home Buyers to start buying their parents presents Unfortunately, a cut to interest rates, which will fuel further interest from the investor market, makes it highly unlikely that first home buyers will be able to compete in blue chip locations for traditional first homes. Two bedroom homes in prime locations will become tougher to buy and anything that is a corner block with redevelopment potential is almost certain to be purchased by an investor, making it even harder for first home buyers to get in. Things are likely to get tougher for first home buyers.  
</li>
<li>
It will put Australia back in to the 1970s Not since the 1970s have Australian's been able to access money so cheaply. The last time a home loan was below 5% (which is where it will fall to with a cash rate of 2.25%) was over 30 years ago. 
</li>
<li>
It will (attempt) to build consumer confidence  An underlying reason the government wants to cut rates is to have consumers start spending again, and if money is cheaper than ever before it may encourage people to take further risks and start putting money in to the economy, however, so far this hasn't worked, and it seems the RBA may push this as low as it can go to encourage spending, which so far is minimal. It will attempt to encourage consumer spending on goods and services.  
</li>
<li>
It should keep unemployment stable, or lower it  Most likely an interest rate cut in its bravest attempt will encourage consumer spending, and if consumer spending picks up, it's easy to see more jobs becoming available and the economy picking up. This will be heavily dependant on a surge in consumer spending rather than further saving.  
</li>
<li>
It will start talk of a bubble Expect a heap of people to say that now money is so cheap, and people are able to buy so easily, property prices are going to sky rocket to an unsustainable level, causing a bubble. This will be a serious concern for the RBA, but they obviously feel that there is still room to move in the pricing of the housing market, and it is not overpriced currently. </li>
</ol>
TODD SCHULBERG is marketing engagement and digital strategy executive at <a href="https://www.homely.com.au/" target="_blank">Homely</a>.
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ToddSchulberg-ooPiJQCUaR

Six ways the interest rate cut will impact the housing market: Todd Schulberg

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Investors have been told rent inflation was slowing, consistent with the increase in vacancy rates over recent years, according to the February Reserve Bank of Australia (RBA) meeting monetary statement.
The pace of national housing price growth slowed too noticeably in early 2014 but, looking through the volatility, appeared to have changed little since then, the RBA board meeting was told on Tuesday.
"Notwithstanding this, growth of housing prices remained strong over recent months, particularly in Melbourne and Sydney," the minutes said.
"At around 8%, housing price growth remains well above the growth rate of household incomes.
"Survey measures of housing price expectations declined in the December quarter and remain below the levels reached in late 2013.
"Most non-price indicators of housing market activity remain consistent with strong conditions in the established market, which should provide further support to consumption in the near term."
It noted the nationwide rental vacancy rate "has been gradually drifting up since the mid 2000s".
"Accordingly, rental price inflation has slowed, which, combined with strong housing price growth, has resulted in rental yields continuing to fall," the statement read.
HSBC Noted today's official statement from the RBA saw them revise down their GDP growth forecasts to 1.75-2.75% for 2015, from 2-3% previously. Growth is still expected to pick-up in 2016, to 2.75-3.75% (previously 2.50-4%). Underlying inflation is expected to remain around 2.25% in H1 2015, and they continue to expect it to be 2-3% beyond that, in line with their target objective. The statement was generally more down-beat about the pace of the ongoing rebalancing of growth, which appears to have been the reason for this week's rate cut.
The monetary statement noted consistent with the strong growth in housing prices, low interest rates and above-average population growth, there has been considerable growth in dwelling investment, which increased by 7% over the year to the September quarter.
It noted timely leading indicators point to further growth in dwelling investment in the December and March quarters.
"Dwelling approvals, particularly those for higher density homes, have stayed at a high level recently.
"Loan approvals for new dwellings increased by 5% over the year to November and the number of first home owner grants paid for new dwellings has continued to trend higher, increasing by 22% over the past year.
"Inflation in the housing-related components of the CPI remained moderate overall in the December quarter.
"Inflation in the price of new dwellings remained above the average of recent years, consistent with strong residential building activity.
"The RBA's liaison suggests that the upswing in residential construction activity has allowed some builders to increase margins over the past year or so.
"Combined with an increase in the cost of building materials, this has contributed to higher inflation in the prices for new dwellings.
"In contrast, rents inflation remained slow in the quarter, consistent with the increase in vacancy rates over recent years. Utility prices increased slightly, after falling in the September quarter due to the repeal of the carbon price."
The statement offered forecasts for consumption assuming that wealth effects continue to operate as they have done in the past and that there will be a further gradual decline in the household saving ratio.
"Consumption growth could be stronger than anticipated if conditions in housing markets strengthen, particularly in parts of the country that have seen less growth in house prices of late.
"If this is associated with a significant increase in leverage or a decline in lending standards, it could pose some risk to macroeconomic stability.
"However, another possibility is that ongoing buoyant conditions in housing markets will have less of an effect on consumption than previously.
"In particular, in recent years fewer households appear to have been utilising the increase in the value of their dwelling to increase their leverage or trade up.
"This possibility would imply that the saving ratio will be higher and consumption growth a little lower than expected based on historical experience.
"In addition, there is significant uncertainty around the size of the effect that the large changes in commodity prices, particularly oil prices, will have on household saving and consumption behaviour."
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Investors warned national rental vacancy was drifting: RBA February statement

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GUEST OBSERVATION
Ever since commodity prices and the mining investment boom peaked three or four years ago there has been a constant chorus of doom regarding the Australian economy: the reversal of the mining boom will knock the economy into recession, house prices will crash and banks will tumble.
This view was particularly prevalent amongst foreign commentators who seemed to think that resource extraction was the only thing Australians do.
While this tale of doom has not happened, the economy has been a bit lacklustre: growth has been sub-par, wages growth has fallen to record lows, unemployment has drifted up and confidence readings have remained poor.
Against this background, the RBA has rightly cut interest rates again.
Interest rates and the economy
There are good reasons for the RBA to be cutting rates further:
<ul class="link-list">
<li>Growth is too low, running at around 2.75% through last year, which is well below potential (of around 3-3.25%) and the level needed to prevent a rise in unemployment. 
</li>
<li>Confidence is subdued, having well and truly given up the post 2013 Federal election boost.</li>
</ul>
<img src="https://www.ampcapital.com/AMPCapitalGlobal/media/contents/Blog/olivers-insights/2015/February/4/chart-1.PNG" alt="Confidence remains subdued">
Source: Bloomberg, AMP Capital
Partly reflecting this, consumers have started to become more focused on paying down debt again, which is a sign of increasing caution and will threaten spending if sustained.
<img src="https://www.ampcapital.com/AMPCapitalGlobal/media/contents/Blog/olivers-insights/2015/February/4/chart-2.PNG" alt="Australia's becoming a bit more cautious again">
Source: Westpac/Melbourne Institute, AMP Capital
<ul class="link-list">
<li>Prices for iron ore and energy have collapsed resulting in a bigger hit to national income than expected a year ago.</li>
</ul>
 
<img src="https://www.ampcapital.com/AMPCapitalGlobal/media/contents/Blog/olivers-insights/2015/February/4/chart-3.PNG" alt="Iron ore and the terms of trade has fallen more than expected">
Source: Bloomberg, AMP Capital
<ul class="link-list">
<li>Outside the US the predominant trend globally is still towards monetary easing and this is putting pressure on the RBA. Massive quantitative easing programs in Europe and Japan are forcing smaller countries to ease unless they want to see their currencies go higher. This should really be characterised as “easing wars” as opposed to “currency wars”. To the extent it is forcing monetary easing around the world, it adds to confidence that sustained deflation can be avoided. Australia is not immune. As the RBA wanted to see a continued broad based decline in the value of the $A it had to re-join the easing party lest the Australian dollar rebounded. Our interest rates are still high globally. 
</li>
<li>Finally, benign inflation provides flexibility for the RBA.</li>
</ul>
The main risk in cutting rates again is that it further inflates the residential property market. However, strong property price gains are largely concentrated in Sydney and the RBA sees this as more of an issue for the prudential regulator, APRA.
Overall, we see the RBA’s cut as justified and, given that there is rarely just one move, we expect another 0.25% cut taking the cash rate to 2% in the months ahead.
Reasons for optimism
However, it’s not that I am bearish on the economy. Rather it makes sense for the RBA to be taking out some insurance to make sure growth holds up and improves. There are several reasons for optimism that growth will improve:
<ul class="link-list">
<li>Borrowing rates are at generational lows. This is bad for bank depositors but the latest rate cut will save someone with a $300,000 mortgage roughly an additional $15 a week. In total Australian households have $850 billion in bank deposits but owe $2,050 billion in debt so the household sector is a net beneficiary of lower interest rates.</li>
</ul>
<img src="https://www.ampcapital.com/AMPCapitalGlobal/media/contents/Blog/olivers-insights/2015/February/4/chart-4.PNG" alt="Record or near record low interest rates">
Source: RBA, Bloomberg, AMP Capital
<ul class="link-list">
<li>The fall in the Australian dollar is removing a major drag on growth. It needs to go down some more but this is very positive for sectors such as manufacturing, tourism, higher education, services, farming and mining. 
</li>
<li>The collapse in oil prices has delivered huge savings to businesses and households. If petrol prices hold around current levels it means the average household will save around $19 a week from mid last year on their petrol bill.</li>
</ul>
 
<img src="https://www.ampcapital.com/AMPCapitalGlobal/media/contents/Blog/olivers-insights/2015/February/4/chart-5.PNG" alt="Weekly petrol bill for a typical Australian household">
Source: AMP Capital
<ul class="link-list">
<li>Stronger export volumes from completed resource projects will provide a partial offset to lower commodity prices.</li>
</ul>
Overall, we see growth picking up gradually as the year progresses to a 3-3.5% pace through next year, but the RBA’s latest rate cut and one more to come provide confidence that this will occur.
Article continues on the next page. Please click below. 
<hr class="system-pagebreak">
Implications for investors
There are several implications for investors. First bank term deposit rates are becoming even less attractive and will remain low at least into next year. As a result, there is an ongoing need to consider alternative sources of yield and return.
<img src="https://www.ampcapital.com/AMPCapitalGlobal/media/contents/Blog/olivers-insights/2015/February/4/chart-6.PNG" alt="Not a lot of value in Australian term deposit rates">
Source: RBA, AMP Capital
Second, remain cautious on the Australian dollar. While the Australian dollar is nearly back to the US$0.75 level that marks fair value on the basis of relative prices, past experience tells us it can overshoot and it hasn’t fallen nearly as much against the Euro and Yen putting more pressure on for further weakness against the US dollar.
The RBA has indicated “a lower exchange rate is likely to be needed”, and it is likely to ease further till it gets this. The Australian dollar is oversold short-term and so could have a short-term bounce, but expect a fall to US$0.70 by year end. So continue to favour unhedged over hedged global shares.
<img src="https://www.ampcapital.com/AMPCapitalGlobal/media/contents/Blog/olivers-insights/2015/February/4/chart-7.PNG" alt="The A$ back to around fair value on relative prices">
Source: RBA, ABS, AMP Capital
Third, overweight Australian versus global bonds. While Australian bond yields are low they are high by global standards and likely to provide better returns than global bonds as the global search for yield results in ongoing convergence of Australian bond yields with the lower rates seen globally and as further RBA easing pulls down local bond yields. This should also benefit Australian corporate debt relative to global.
Finally, with low interest rates growth assets providing decent yields will remain attractive. This includes commercial property and infrastructure but also Australian shares which continue to offer much higher income yields relative to bank term deposits.
<img src="https://www.ampcapital.com/AMPCapitalGlobal/media/contents/Blog/olivers-insights/2015/February/4/chart-8.PNG" alt="Australian shares offering a great yield v bank deposits">
Source: RBA, Bloomberg, AMP Capital
<a href="https://www.propertyobserver.com.au/https://plus.google.com/110172465327488162875?rel=author" target="_blank">Shane Oliver</a> is head of investment strategy and economics and chief economist at <a href="https://www.ampcapital.com.au/home" target="_blank">AMP Capital</a> and is responsible for AMP Capital's diversified investment funds.
He also provides economic forecasts and analysis of key variables and issues affecting, or likely to affect, all asset markets.
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The RBA was right to cut rates and should do so again: Shane Oliver

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GUEST OBSERVATION
Today, the Reserve Bank Board decided to lower the cash rate by 25bps to 2.25%.
This has been Westpac’s forecast since 4 December when it became clear that demand conditions in the Australian economy had deteriorated more sharply than we expect the Bank had anticipated.
The Governor’s statement confirms this assessment when he refers to growth as being below trend but more importantly “domestic demand growth overall quite weak”.
The Bank has also clearly revised down its growth forecasts and the exact extent of these revisions will be known in the Statement on Monetary Policy to be released on 6 February (we expect that forecast growth in 2015 will be reduced from 3% to 2.5%). It refers to “output growth will probably remain a little below trend for somewhat longer and the rate of unemployment peak a little higher than earlier expected” (the Bank does not provide specific unemployment forecasts).
It is also likely that the Bank will lower its inflation forecast. Recall that in November when the oil price was US$86/bbl, underlying inflation for 2015 was forecast at 2.75% (midpoint of the range). The Governor now refers to underlying inflation currently running at 2.25% and it is reasonable to conclude that he is implying that that low read will continue for some time.
The most popular argument against cutting rates continues to be around overstimulating housing. In that regard, the Governor points out that dwelling prices continue to rise strongly in Sydney whilst recognising that other cities have had more variable performance. As we anticipated the new macroprudential policy around containing growth in loans to investors to 10%pa is deemed by the Bank as an effective insurance policy to contain any housing bubbles. In that regard the statement specifically refers to the Bank’s work with regulators.
Another argument against the rate cut was that the Australian dollar had fallen sufficiently. However the Bank points out that even though the Australian dollar has declined noticeably against the US dollar its performance against other currencies has been more robust. Once again it is stated that the Australian dollar “remains above most estimates of its fundamental value” and the statement calls out for a lower currency.
In the all-important final paragraph it is concluded that based upon assessments of the economy and in particular the updated forecasts, which will be released in the Statement on Monetary Policy, a cut in the cash rate was appropriate. The language in the final sentence which might have referred to “a period of stability” or “scope to cut further” takes a more neutral stance making the obvious point that “this action adds some further support to demand”. This gives the Bank full flexibility to determine its next policy move without making any commitment to the market.
Westpac’s forecast which was released on 4 December, 2014 included not only a 25bp cut in February 2015 but a follow up move of 25bps in March. Our reasoning is that the Bank would not have disturbed such a long period of interest rate stability for just one move. The case to move rates after such a long period would need to be convincing.
We believe that the forecasts that will be released in the Statement on Monetary Policy will depict an economy expected to grow markedly below trend in 2015, barely back at trend by 2016 and with core inflation holding near the bottom of the 2-3% band in 2015. Under those circumstances we think it is justifiable to expect another move with March being the best timing.
Our forecast last December was for rates to then remain on hold for the rest of the year and we are comfortable with that view.
Bill Evans is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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