Iwan Sunito's vision for a landmark mixed-use precinct in Sydney's Inner West has taken a major step forward, with approval granted for the $1.9 billion Five Dock development first unveiled earlier this year.

The approved scheme by <a href="https://www.apartments.com.au/developers/one-global-capital">One Global Capital</a> will deliver an 80,500 sqm mixed-use precinct comprising 840 apartments, integrated hotel accommodation, commercial and retail space, alongside publicly accessible open space designed to create a new destination for the growing suburb.

"This is a significant milestone for One Global Capital and for the future of housing delivery in Sydney," Sunito said.

"The Housing Delivery Authority was established to identify major housing projects capable of delivering meaningful supply more efficiently, and we are delighted that Spencer Street has been recognised as one of those projects.”

He said the declaration reflected the rapid progress achieved since acquiring control of the site.

"In less than seven months we have progressed from taking control of the site to securing entry into one of the NSW Government's most important planning pathways. It reflects the experience of our team, the strength of our consultant group led by Urbis, and our long-term commitment to delivering transformational projects that contribute to Sydney's future."

When the project was revealed earlier this year, Sunito described the opportunity as one of the strongest development sites he had worked on.

"I probably hadn't appreciated the uniqueness of the site until more recently when putting together the concept plans," Sunito said.

"The proximity to the water, and the golf course opposite, is unlike any other part of Parramatta Road. We have a unique position and view corridors over the water that makes this one of the best sites I've worked on."

The development has evolved since its initial announcement, with the approved plans increasing the residential component from the originally proposed 750 apartments to 840 homes while retaining the project's focus on creating an integrated neighbourhood rather than a standalone residential development.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/a-city-within-a-city-iwan-sunito-flags-1-5-billion-mixed-use-precinct-in-five-dock">"A city within a city": Iwan Sunito flags $1.5 billion mixed-use precinct in Five Dock</a>

The precinct will combine apartments with hotel accommodation, commercial workplaces, retail offerings and public spaces, creating a mixed-use environment intended to serve both residents and the broader Five Dock community. The proposal also continues the collaboration between One Global Capital and internationally recognised architect <a href="https://www.apartments.com.au/architects/koichi-takada-architects">Koichi Takada</a>, whose previous work with Sunito includes Infinity, Arc and Skye North Sydney.

Takada previously said the design was driven by a philosophy of integrating nature into the built environment.

"The concept for this development is born from our design approach to naturalising architecture," Takada said.

"The public realm benefits from biophilic design that integrates generous landscaping, and the development is optimised for natural daylight, airflow and water views to foster wellbeing, sustainability and spaces that foster community interaction."

Sunito has consistently described the project as a "city within a city", with a strong emphasis on creating a destination that extends beyond housing.

"We want to create a development that's not only to be seen, but to be experienced by the whole local community," he said.

The approval comes as Five Dock continues its transformation ahead of the opening of the Sydney Metro West line, with the new Five Dock station set to significantly improve connections between the Inner West, Parramatta and the Sydney CBD.&nbsp;

The precinct will also benefit from its proximity to the Parramatta Road corridor, nearby waterfront parklands and established retail and dining offerings that have made Five Dock one of Sydney's most tightly held Inner West suburbs.

Joel Robinson

Iwan Sunito secures approval for $1.9 billion Five Dock mixed-use precinct

The new <a href="https://www.apartments.com.au/new-apartments/yarraville-green-42-stephen-street-yarraville-vic-3013">Yarraville Green</a> development in Melbourne's inner west is showing that landscaping can be just as influential as architecture, with buyers responding strongly to the garden-first approach adopted from the outset by developer Excelon Projects and the project's design team.

Excelon appointed Six Degrees Architects and landscape architects SBLA to work collaboratively on the development, with a brief to create "a sustainable, design-led building with a focus on community."

That approach has resonated with buyers. According to Next Chapter Director Tom Hirini, who is leading the sales campaign, the landscaped communal garden has become one of the project's defining features, alongside its boutique scale and European-inspired cluster housing concept.

Local downsizers, right-sizers and established families already living in Yarraville and surrounding suburbs have accounted for the majority of purchasers.

[smartcode_project:default project_id=144913 project_image_fid=297740]

Yarraville Green will comprise 53 homes, including apartments and townhomes, arranged around the shared central garden to maximise connections to the landscaped open space. Parking has been moved underground, allowing the ground plane to be dedicated to greenery, pedestrian movement and communal spaces.

The landscape extends well beyond passive planting. Productive garden beds, a pergola, communal gathering spaces, garden sheds and a pet wash have all been integrated into the masterplan, creating spaces designed to encourage everyday interaction between residents.

[smartcode_project:default project_id=144913 project_image_fid=297741]

The interiors continue Excelon's focus on craftsmanship, incorporating bespoke elements by Melbourne artisans including leadlight detailing by Adadaz, hand-turned timber hardware by Auburn Woodturning and blown-glass lighting by Ruth Allen.

Sustainability has also been embedded throughout the project, with Yarraville Green targeting an average 7-star NatHERS energy rating through passive design principles, rooftop solar servicing common areas and rainwater harvesting for landscape irrigation.

[smartcode_project:default project_id=144913 project_image_fid=297735]

Construction continues to progress at Yarraville Green, with structural works well underway and framing works approaching completion under builder Balmain &amp; Co. The project remains on track for completion in mid-2027.

Apartments at Yarraville Green are currently priced from $625,000, while townhomes start from $1.4 million.

[smartcode_project_cta:default project_id=144913]

Garden-led design drives buyer demand at Yarraville Green

National diversified developer Fortis has officially launched Crest &amp; Walker, its latest Brisbane apartment development, with construction now underway on the 20-storey Newstead project.

Award-winning builder BINAH has commenced construction on the Bureau^Proberts-designed building, which will deliver a limited collection of 65 two and three-bedroom apartments on Kyabra Street.

[smartcode_project:default project_id=145922 project_image_fid=373556]

The project marks Fortis' fourth active residential development in Brisbane, following River House, which is nearing completion, alongside projects in New Farm and Hamilton as the national developer continues to expand its South East Queensland pipeline.

Fortis General Manager – Development Queensland Dan Boman said Crest &amp; Walker reflects the developer's long-term commitment to delivering design-led residential projects in Brisbane's established inner-city suburbs.

"We're proud to be strengthening our presence in Brisbane with Crest &amp; Walker, particularly in such a sought-after lifestyle destination as Newstead," Boman said.

"Every Fortis project is shaped by its context, and we approach each one with the respect and care it deserves.

"Our focus is always on creating places that feel connected to their neighbourhood and elevate the everyday experience for residents. Newstead continues to evolve as one of Brisbane's most sought-after urban communities, and Crest &amp; Walker reflects our ambition to contribute meaningfully to that story."

[smartcode_project:default project_id=145922 project_image_fid=373559]

Positioned between Gasworks Plaza and James Street, <a href="https://www.apartments.com.au/new-apartments/crest-walker-newstead-12-kyabra-street-newstead-qld-4006">Crest &amp; Walker</a> has been designed as a boutique residential address offering privacy and generous living spaces within one of Brisbane's most established lifestyle precincts.

The building features a contemporary brick podium softened by integrated landscaping, while the upper levels are characterised by restrained architecture and enduring materiality. Interiors have been designed to maximise natural light, acoustic performance and long-term liveability.

[smartcode_project:default project_id=145922 project_image_fid=373583]

Residences comprise spacious two and three-bedroom floorplans, with two-bedroom apartments priced from $1.55 million and three-bedroom, half-floor residences from $3.95 million.

Residents will have access to a wellness-focused rooftop featuring a swimming pool, sauna, steam room, landscaped dining spaces and outdoor lounge areas overlooking Newstead and the Brisbane CBD.

[smartcode_project:default project_id=145922 project_image_fid=373571]

Sales are being managed by Slaite Projects, with Fortis expecting strong demand from owner-occupiers seeking a high-quality, design-focused apartment in one of Brisbane's most tightly held inner-city suburbs.

Completion of Crest &amp; Walker is slated for late 2028.

[smartcode_project_cta:default project_id=145922]

Fortis expands Brisbane pipeline with launch of Crest & Walker in Newstead

The enormity of delivering a true skyscraper in Australia's new development market is often overlooked.

It has taken the best part of a decade since plans for Chevron One were first unveiled, but the 41-storey tower is now complete, with residents collecting their keys and moving into what has become one of the Gold Coast's most recognisable new landmarks.

Rising 127 metres above Chevron Island, Chevron One stands almost twice as high as any other building on the island. Its scale places it alongside the trio of towers at Jewel, arguably the last truly significant addition to the central Gold Coast skyline when they were completed around six years ago.

While there are several developments underway around a similar height to Chevron One, they are more concentrated within clusters of the highest towers in the city. The fact Chevron One sits within a developing precinct, looking back at the other high-rise developments in Surfers Paradise and Broadbeach, makes it a different proposition altogether. It will certainly become a reference point on the Gold Coast skyline.

[smartcode_project:default project_id=6515 project_image_fid=68833]

Developer Bensons Property Group is behind the 41-storey tower, which has 229 apartments, along with an exhaustive list of resident amenity spread across what is the largest development site ever assembled on Chevron Island.

The tower has been the talk of the town for years, says Ray White Projects Gold Coast agent Caitlin Rosenboom, who is selling the remaining apartments.

"People have been watching Chevron One go up for years," Rosenboom says, adding that many prospective buyers have been surprised by the scale of the views once they step inside.

"It's only when they walk through a completed apartment that they truly understand the position of the building," Rosenboom says.

"The views are jaw-dropping. Whether you're looking east over the ocean, across Surfers Paradise, along the river systems or out to the hinterland, every level offers something different but equally impressive."

[smartcode_project:default project_id=6515 project_image_fid=360215]

One of Chevron One's defining advantages is its location on the eastern side of Chevron Island on Stanhill Drive, a position which protects the views forever.

"There's only one row of houses between Chevron One and the water, and the height restrictions along the river means views from Chevron One can never be built out,"&nbsp;Rosenboom says.

While new apartment developments continue to emerge across the Gold Coast, Rosenboom says opportunities to secure a completed apartment with this level of outlook are becoming increasingly rare.

"The size of the site is something that would be incredibly difficult to replicate today," she says.

"That's allowed Chevron One to deliver the sort of amenity, open space and resident facilities that very few projects can offer. There are not many completed apartment buildings on the Gold Coast right now that can compete with the combination of scale, quality and amenity."

[smartcode_project:default project_id=6515 project_image_fid=68839]

There's around 2,000 sqm of amenity solely for the use of residents of Chevron One. Club One features a uniquely shaped swimming pool that mirrors the footprint of the building itself, set within a extensively landscaped gardens. There's also an indoor pool and spa, a fully equipped gym with a Pilates room, a yoga garden, a bookable private dining area and lounge that can host up to 30 people, and a 24-hour concierge service.

As for the buyers, Rosenboom is fielding enquiry from everywhere: Sydneysiders and Melburnians looking at the new and off-the-plan market following the changes in the Federal Budget, as well as those looking to relocate, through to South East Queenslanders seeking either a permanent home or a weekender bolthole.

"The Gold Coast lifestyle continues to resonate with people relocating from the southern states, and when they see the views and the quality of what's been delivered at Chevron One, it becomes very easy for them to understand the appeal," Rosenboom says.

A diverse mix of one, two and three-bedroom apartments remain available, with each offering "something a little different", be it the orientation and views, configuration, or level, to suit a wide variety of buyers.

The remaining apartments are ready to inspect in person, by appointment.

[smartcode_project_cta:default project_id=6515]

A decade in the making: Residents to move into Chevron One as construction wraps up

A general rule of thumb in new apartment developments is that the penthouses get the rooftop.

It's a formula that's become commonplace across Australia's apartment market. Residents might have access to a pool, gym or barbecue facilities on a dedicated lower level, but the most desirable outdoor spaces are typically reserved for the highest-priced homes at the top of the building.

<a href="https://www.apartments.com.au/developers/sherpa-property-group">Sherpa Property Group</a> has taken the opposite approach.

Rather than dedicating the rooftop to a handful of buyers, the Gold Coast developer has made it the centrepiece of its Flourish collection, creating expansive shared spaces from the best vantage point in the building.

The philosophy has reached its most ambitious expression at <a href="https://www.apartments.com.au/new-apartments/flourish-soleira-palm-beach-1150-1160-gold-coast-highway-palm-beach-qld-4221">Flourish Soleira</a> in Palm Beach, where two rooftop precincts connected by a skybridge will deliver one of the most extensive lifestyle offerings seen in a residential apartment project on the Gold Coast.

[smartcode_project:default project_id=150017 project_image_fid=374053]

"We're seeing a clear move toward developments that offer more than just an apartment," Sherpa Group founder Christie Leet said.

"People want spaces that support how they actually live, whether that's working from home, staying active, or spending time with family and friends.

"That's where amenity becomes critical. It's not just about what's included, but how those spaces are designed to be used every day."

[smartcode_project:default project_id=150017 project_image_fid=374052]

The breadth of amenity has already attracted buyers across multiple demographics. Younger first home buyers have been drawn to Soleira's one-bedroom apartments, a product rarely delivered in Palm Beach, while families have responded to practical inclusions such as the shallow children's pool adjoining the main lap pool and the extensive communal recreation areas.

Instead of a single rooftop, Soleira delivers two distinct lifestyle zones.

[smartcode_project:default project_id=150017 project_image_fid=372547]

The southern rooftop has been dedicated to wellness, featuring a gym, yoga and Pilates studio, work-from-home facilities, a wellness centre, spa, and hot and cold plunge pools.

The northern rooftop focuses on recreation and entertaining, incorporating a heated resort-style pool, private dining rooms, pizza ovens, barbecues, a golf simulator, children's recreation areas, and what is expected to be the Gold Coast's first rooftop basketball court, which will also double as a squash court.

[smartcode_project:default project_id=150017 project_image_fid=374054]

Beyond the rooftops, Soleira will introduce 1,500 sqm of curated retail beneath the towers, creating one of Palm Beach's first genuinely mixed-use lifestyle precincts where cafés, restaurants and convenience retail become part of residents' everyday lives.

Sherpa has also retained management rights across the development, allowing it to oversee the long-term operation of the building through a 24-hour concierge model. The developer is also exploring additional revenue streams within the precinct aimed at helping offset ongoing body corporate costs for residents.

[smartcode_project:default project_id=150017 project_image_fid=370962]

While Soleira is the largest project Sherpa has delivered, the rooftop-first philosophy has been evolving for several years.

It began with <a href="https://www.apartments.com.au/new-apartments/amargo-6-12-sixth-avenue-palm-beach-qld-4221">Flourish Amargo</a>, the first project released under the Flourish brand. Rather than competing at the ultra-luxury end of the market with oversized half-floor and full-floor residences, Sherpa focused on creating lifestyle-driven apartments supported by resort-style shared spaces.

Amargo introduced more than 800 sqm of rooftop amenity, combining wellness facilities, heated pools, entertaining areas, cabanas, pizza ovens and private dining spaces into what was designed as an extension of residents' homes rather than a facility used only occasionally.

[smartcode_project:default project_id=146527 project_image_fid=366550]

That approach continued with Flourish Oasis, where the same amenity-led philosophy was refined into a more boutique development. Strong demand from Sherpa's growing VIP database saw much of the project sold before it reached the broader market, reinforcing buyer appetite for apartment communities centred around shared lifestyle experiences.

Flourish Amargo is slated for completion mid-way-through next year, with Oasis to be delivered by late 2027. Flourish Soleira is expected to complete in 2030.

[smartcode_project_cta:default project_id=150017]

Sherpa takes amenity to the sky as Flourish Soleira captures booming Palm Beach demand

Investment Risk

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Gold Coast City has been unchallenged for some time as the No.1 municipality in Australia for growth real estate markets, but that’s no longer the case.
The Sunshine Coast has overtaken Gold Coast City as the area with the most upwardly mobile markets.
The Gold Coast housing market remains strong, but the latest Hotspotting research for The Price Predictor Index finds that the number of suburbs with growing sales activity has decreased, while the Sunshine Coast precinct is rising.
The Sunshine Coast now ranks as the leading municipality in the nation in terms of the number of suburbs with growing sales activity (previous market leaders in the major cities, such as the Whitehorse LGA in Melbourne, have faded markedly in 2016).
The region has achieved national prominence on the back of major spending on infrastructure and urban renewal ventures – projects under way or in planning total well above $20 billion.
They’re headed by the $2.3 billion Sunshine Coast University Hospital, which is the centrepiece of a $5 billion health precinct that’s evolving rapidly in the Kawana area.
And there’s a lot more happening. Over $1 billion is being spent on the Bruce Highway, around $400 million on the airport and several billion over time on the new Maroochydore CBD, where preliminary works are now under way. The Sunshine Coast University continues to expand.
A $2 billion light rail project is proposed but is unlikely to be delivered any time soon.
Real estate development includes several master-planned communities and apartment developments, as well as a $400 million expansion of the region’s biggest shopping centre, Sunshine Plaza. Youi Insurance is building its national headquarters on the Sunshine Coast. 
Nambour, one of the inland towns of the Sunshine Coast Region, is typical of the growth markets - with sales up from around 65 per quarter 18 months ago to above 100 per quarter in 2016.
The Sunshine Coast hasn’t always been a hotspot contender – in the past it has been included in my No Go Zones report because of a weak economy (over-reliant on tourism) and bouts of over-supply, leading to price decline. But the broadening the local economy through infrastructure spending and evolution of the medical precinct has been the critical game-changer.
The Gold Coast has been the hottest market among the municipalities of Australia for the past 18 months, but the trend suggests it’s winding down – it surged throughout 2015 and the early part of 2016, but the number of growth suburbs has dropped from 25 six months ago to 20 three months ago to 14 now.
Nevertheless, six of our National Top 30 Growth Star suburbs are in Gold Coast City and the bulk of them are inland housing markets – including Ashmore, Carrara, Nerang and Upper Coomera.
The Gold Coast may surge again, given the high level of spending on infrastructure, some of it associated with the 2018 Commonwealth Games.
I continue to urge caution about the Gold Coast high-rise apartment markets because of the alarming history of boom-bust scenarios, poor capital growth record and looming prospect of oversupply.
Anyone thinking of getting into the Surfers Paradise high-rise market should keep in mind that the median apartment price today is lower than it was a decade ago, such is the ongoing impact of regular doses of over-building.
Other Gold Coast high-rise suburbs have similar track records.
Terry Ryder is the founder of <a href="https://www.hotspotting.com.au/" target="_blank">hotspotting.com.au</a>. You can <a href="https://mailto:ryder@hotspotting.com.au" target="_blank">email him</a> or follow him on <a href="https://twitter.com/hotspotting" target="_blank">Twitter.</a>
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terryryder-YECXbqmri2

Caution for Gold Coast high rise property investment: Terry Ryder

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EXPERT OBSERVATION
Lenders are reluctant to lend and buyers don’t want to buy when it comes to high-rise developments.
That’s according to RiskWise Property Research’s latest analysis of the construction industry which has been hit hard over recent months following the high-profile cases of the Mascot and Opal towers in NSW.
With cracks in both the Sydney towers, fears more will become apparent in other buildings and the need to replace combustible cladding in thousands of buildings throughout Australia, demand for units had dropped dramatically.
Lenders are proceeding much more cautiously too, and this includes non-bank lenders whose business model is to provide alternative solutions from the ADIs, and generally have a less conservative assessment of risk.
Add to that the issue of oversupply in many Danger Zone areas and there is very real risk for developers.
We have a situation now where lenders aren’t eager to lend and buyers don’t want to buy but we still have developers who are considering developing high rise.
Units in the pipeline for the next 24 months Australia-wide equate to 7.6 per cent of current stock. In Sydney there are 58,094 units in the pipeline or (9.5%) of current stock and in Melbourne there are 59,634 units in the pipeline or (8.1%) of current stock.
However, in the last three months to June 2019, only 8 per cent of stock sold in Sydney and in Melbourne, 12 per cent.
The high-profile issues around cladding and defects had created enormous ‘reputational damage’ across the entire industry and because of this, investors had lost interest in high-rise unit developments and were turning to “safer” house-and-land packages suitable for families.
And Sydney’s Mascot and Opal towers are not the only ones that have been hit with negative media coverage with a cladding fire taking hold in the 43-storey Melbourne building, Neo200, in February. In July, a development in Sydney’s Zetland was also forced to shut its doors on residents for eight months after reports of water damage and faulty fire prevention.
According to Knight Frank's Australian Residential Development Review, in Greater Sydney the value of sales of development sites suitable for high-density projects halved in the 2019 financial year, while average site values in both Sydney and Melbourne fell dramatically.
If you combine the recent quality issues with financial losses from investment in high-rise units, this could amount to a permanent structural change in demand.
In some cases developers, instead of assessing the true needs of the market, have developed large numbers of units and have needed to find ways to shift stock by using instrastate or overseas markets with high commissions that are often factored into the property price. A prime example of this type of poor risk management is the oversupply in the Brisbane unit market, as detailed in our case study of 2018, which resulted in lower valuations, rising defaults on settlements, heavy discounting and incredible incentives such as new cars.
We already have significantly reduced levels of demand due to restrictions on foreign investors, credit restrictions, banks refusing to loan to self-managed super funds and local investors looking elsewhere.
Add to that the high level of unit oversupply and it’s possible to see how structural changes could occur in a sense that the overall demand for off-the-plan dwellings shifts from units to house-and-land packages. Medium-density dwellings, such as townhouses, particularly in popular areas also enjoy higher demand.
Some developers were already struggling to meet pre-sales and / or sales targets in areas where there were high levels of stock and many had not proceeded to commencement. In other instances, according to recent media reports, development defaults were on the increase and many developers, such as the high-profile Ralan Group, had collapsed or were on the brink of failure.
 Without demand from investors, and other buyers, you don't have pre-sales or sales and the entire development is at risk. Obviously, an event of default is never planned by the developer. However, developers need to carefully assess the risk that they are taking the risk, and they need to be in a strong financial position to deal with the potential consequences and not be forced to do a fire sale.
Developers needed to do greater risk management and assess whether there was genuine demand for their product.
Demand for existing and off-the-plan properties, mainly units, began to lower with the introduction of APRA’s lending restrictions in 2017 followed by greater scrutiny of home loan applications.
However, with the addition of construction defects and cladding issues, greater government legislation within the industry and oversupply, demand had dropped even further and was now “extremely low” putting developers at higher risk of default if they did not do their due diligence.
DORON PELEG is the CEO of RiskWise
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j.ballantyne1990-6AQqhLzZaK

High-rise units are a massive risk for developers: RiskWise's Doron Peleg

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The non-bank finance group Chifley Securities has created a list of suburbs in Sydney and Melbourne that it rates as “high risk” and no-go zones for lending for residential developments.
In Sydney they won't lend for greenfield development sites in Schofields, in the Blacktown area, as well as regions in Box Hill.
The likes of Leppington, Badgerys Creek and Kemps Creek, Kurrajong Heights, Katoomba and Orchard Hills also make the list.
In Melbourne Chifley Securities highlight Plumpton and suburbs in the Bacchus March corridor as no-go areas.
Truganina to the west, Officer to the east and Cranbourne to the south are also now off-limits for Chifley.
Chifley has lent $2 billion to developers over the 2018/19 financial year.
Chifley Securities principal Dominic Lambrinos says no-go zones have been created on the basis that many outer-lying suburbs of Sydney and Melbourne pose serious risks for both developers and buyers due to an explosion of development activity.
“These areas are seeing explosive growth in the number of residential dwellings, yet are not yet supported by the necessary infrastructure required to support vibrant communities.
“While there might be a new railway station, road and supermarket in a suburb, this infrastructure does not fill the requirement for a sustainable and healthy and profitable development for both developers and residents”, he added.
Lambrinos said the list would be amended once the market and amenities in the suburbs “caught up” with the greenfields developments now saturating the suburbs.  
While the residential market has been flattened by over-supply and a range of quality issues related to a range of buildings, the commercial and industrial property sectors continued to perform well, he said.
“Meanwhile we continue to see more residential developers coming to Chifley and our competitors as their pre-sales dry up, amid the realisation that many have paid comparatively high prices for their land”, he added.
Lambrinos said further cuts to interest rates were expected to be made over the next few months in an attempt to remedy the growth slump in the economy and property markets.
“While credit guidelines have been loosened by the Australian Prudential Regulation Authority (APRA), financing by the major lenders continues to be tight and non-bank lenders are taking up the slack”, Lambrinos said.
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jrobinson-rf4aSBido9

Chifley Securities no-go zones for investors

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The investment management firm Auscap Asset Management has said that Australia's  reliance on past growth trends may be blinding us to certain risks that may adversely affect the property market in the future.
“Risks exist for every investment whether we acknowledge the risks or not. Risks that have not appeared for a long time can be ignored by investors or even assumed not to exist,” Tim Carleton and Matthew Parker, principals at Auscap, said.
The assumption that property inherently carries a low risk could be traced back to the fact that real estate has not experienced a broad decline since 1991, they said.
Risks exist for every investment whether we acknowledge the risks or not, their latest report noted.
"Risks that have not appeared for a long time can be ignored by investors or even assumed not to exist.
"To some extent we believe that the current thinking around the residential property market is illustrative.
"In Australia, residential property is considered the safest of all assets. Residential property prices have not experienced a broad decline since 1991.
"Because property has not fallen for such a long time, the risks involved in investing in property are often assumed to be low."
According to Carleton and Parker, risks most likely to impact the residential property market include:
<ul>
<li>Significant effects from interest rate rises over the medium-term given the current low interest rate environment</li>
<li>Unemployment rates which may increase from the current levels</li>
<li>Natural headwinds for domestic economic growth that overcome any tailwinds</li>
<li>High debt levels compared to historical household leverage ratios such that any deleveraging may negatively impact prices</li>
</ul>
In their opinion, the lack of a meaningful correction in property prices over such a significant length of time is more likely to imply that the risk might be quite high, because excesses in the system have been allowed to build for such a long period.
Similarly the fact that growth rates in house prices have exceeded growth in household income indicates to us that prospective residential housing returns will be significantly lower going forward. But many draw the opposite conclusion, that the historical growth rates are evidence that house prices should continue to grow at those rates in the future.
The inference is that past returns tell us something about future returns, they advised.
Their report said his extrapolation bias carries considerable risk.
National property price growth appears to have two main drivers, national household income growth and leverage.
Over the very long run we might assume that leverage levels oscillate within a range, dependent on the availability of credit and sharing an inverse relationship with the level of interest rates.
If that is true, then in the very long run property price growth should reflect growth in incomes, the report noted.
Adding but this has not been the case in the domestic residential market. Property prices have outstripped household income growth by a considerable margin for some time.
The probability that residential property prices are currently elevated appears to us to be quite high, based on a number of very favourable drivers that are present, including:
- Very low interest rates and therefore borrowing costs
- High debt levels (closely correlated with declining interest rates);
- Solid employment levels (the current unemployment rate is 5.7 percent)
- Strong long term historic growth (currently 1.8 percent and 25 years without a recession).
 
What the Auscap Report said:
 
The preconditions for high property prices are in place. Prices have risen to reflect the favourable macroeconomic factors. But like a stock that is pricing in the continuance of favourable conditions, this most likely means that the downside risks associated with investing in property are elevated.
Risks to the current residential property climate include:
- With global interest rates close to the zero bound, it is hard to envisage significantly better borrowing conditions than currently exist and the risk that interest rates rise over the medium term could be significant;
- Unemployment could rise from current levels
- Domestic economic growth probably has more natural headwinds than tailwinds over the medium term, especially when compared with recent history 
- Debt levels are high in the context of historical household leverage ratios and may fall over time, meaning that any deleveraging would most likely have a negative impact on prices.
We analysed the property market against the two factors we assumed would be the predominant factors affecting property prices, household incomes and debt levels. Below is a chart comparing property price growth against a composite index of the two factors.
<a href="https://www.propertyobserver.com.au/images/2017/01/23/Chart%201.jpg" target="_blank">Click here to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/01/23/Chart%201.jpg" alt="" width="467" height="269">
It appears that over the last 20 years the correlation between property prices and the composite index is very high, implying what would appear to be logical, that property prices are primarily a function of household income growth and growth in leverage. The short term moves in the composite index also mirror the short term growth rates in house prices, as shown below.
<a href="https://www.propertyobserver.com.au/images/2017/01/23/Chart%202.jpg" target="_blank">Click here to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/01/23/Chart%202.jpg" alt="" width="445" height="264">
 
The charts demonstrate visually what we know to be true, that property prices have grown by 7.4 percent per annum, a growth rate many take comfort from in making assumptions around future growth.
But the charts also imply that this has been a function of both growth in household income (which has been circa 3.7 percent pa) and the growth in household debt (which has been circa 3.3 percent pa).
Analysing this situation as though residential property prices were a stock, we would try to form sensible expectations around household income growth and growth in leverage in the future.
Household income growth is to a large extent tied to GDP growth, which we expect to be modest over the medium term. Recent growth rates have been lower than historical growth because of headwinds facing the economy that we expect will continue.
<a href="https://www.propertyobserver.com.au/images/2017/01/23/Chart%203.jpg" target="_blank">Click here to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/01/23/Chart%203.jpg" alt="" width="447" height="233">
On the other hand, leverage levels have risen as interest rates have fallen. We doubt that household borrowing costs can fall substantially from here, implying that growth in household debt levels may be limited.
<a href="https://www.propertyobserver.com.au/images/2017/01/23/Chart%204.jpg" target="_blank">Click here to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/01/23/Chart%204.jpg" alt="" width="411" height="208">
If this is the case, the best house price growth we might expect is for property prices to grow in line with historical household income growth. But there are a many downside scenarios that are also possible.
Household income might grow more slowly should Australia face periods of slower or even negative growth. The fact that there has not been a nationwide decline in GDP in 25 years implies the risk of such a scenario is elevated, not reduced.
It may not occur, but we can confidently propose that this scenario is not being considered or assessed by the majority of households in the same way it was in 1992, immediately after the last broad decline in Australian residential property prices.
Household leverage may need to decline should interest rates rise. If this were the case, falling leverage may drag on house price growth, rather than add to it as it has for the last 20+ years. If the decline in leverage is greater than growth in incomes, property prices may actually fall.
Certainly our conclusion would be that a continuation of the 7.4 percent per annum growth in household prices witnessed over the last 20 years seems extremely unlikely in the absence of borrowing costs continuing to fall, which we see as limited given where interest rates are currently, the report concluded.
 
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The risks in property in 2017 for Australia are getting higher

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Reserve Bank governor Glenn Stevens has conceded that he has "some discomfort' about rising Sydney house prices, but argued that these concerns need to be weighed up against the need to stimulate economic activity across the nation. 
He said the Reserve Bank remained confident there was little evidence of a widespread bubble in house prices.
Australia had a new "two speed" economy, with strong growth in states such as NSW, while resource-rich states, such as Western Australia and Queensland, had seen growth rates slump as the mining boom had ended.
Hie final interview with The Australian Financial Review, mentioned some mixed evidence as to the strength of the housing market. 
"Prices are probably rising smartly in some areas, but in other areas they're not, and in some cities in the country, they're falling," he said.
"So I think it's a mixed picture. It's not without risk, and it certainly gives me some discomfort, but then we're balancing that against the other obligations we have to pursue."
He said the RBA was tasked "to balance all these things and make a decision that neither completely ignores the financial stability and housing concerns, nor let them completely dictate the decision.
"That's the balance that we've tried to strike".
"Most of the domestic effects of cheap money comes through the household sector. Higher house prices than otherwise, more borrowing than otherwise, wealth effects, lower saving rate, etc."
But he added, "the thing that I've tried to grapple with is – that's where we get the effects, but do we actually want households to engage in a major levering-up from here?
"It's not that what they did before was disastrous – that clearly hasn't been. But from here, how much more do you want?"
"As the facts at the moment are, the credit growth of households is running about 6 percent. Fractionally less if you take account of a build-up in mortgage offsets and so on".
He added, "I don't think you can say this is a terrible risk. If it was 10 percent or 15 percent – that would be a different story".
He noted two speed housing price movements.
"It's probably not that surprising that parts of Sydney are leading the charge, because this economy is leading the country at the present time."
This, he added, is something "which, actually, we needed if we're to manage the transition after the mining boom".
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Housing markets not without risk as Sydney leads the charge: RBA's Glenn Stevens

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Moody's Investors Service says that signs of a re-acceleration in Australian house prices are credit negative for Australian banks and pose a risk to the economy.
The 2016 spurt had raised the banks' sensitivity to downside risk in the housing market.
"The likelihood of an outright downward correction in prices is rising,” the agency advised.
Moody’s Investors Service viewed loans taken out over 2014-15 as “bearing the most risk, given that they were originated after significant house price appreciation had already occurred”.
While noting strong employment conditions and low interest rates continue to support the quality of the banks' housing portfolios, the household debt/income ratios continue to rise.
Moody's conclusions are contained in its report, "House Price Growth is Increasing Tail Risks for Australian Banks".  
Annual house price growth has risen over the past two months, increasing by 10 percent for the 12 months to May 2016.   Moody's says that there is evidence the banks' appetite for investor lending is returning, after a period of tighter underwriting to comply with the Australian Prudential Regulation Authority's 10 percent annual limit for growth in such loans.  
Moody's points out that over the past month, a number of lenders have lifted their maximum loan to value ratios for investor lending, and there are indications that the banks are becoming more competitive in their pricing for investor loans.  Moody's notes, however, that some of the newer lending activity can be explained by investors bringing their purchase plans forward, ahead of the federal election.  
"These trends are unfolding against a backdrop of already high levels of household indebtedness, and elevated overall leverage in the economy," says Daniel Yu, a Moody's Vice President and Senior Analyst.
"The current trends are therefore credit negative for Australian banks, particularly in the context of the banks' high ratings, because these trends raise the banks' sensitivity to any potential deterioration in the housing market," Yu suggested.
According to Moody's senior vice president Ilya Serov, the housing market in Australia appeared to have accelerated over the past couple of months partly on the back of the cut in interest rates in May.
Mr Serov told he ABC's The World Today investors were exposed if the RBA moves or banks hike rates independently.
"The economy now I think from a household sector is more sensitive to increases in interest rates should they occur," Mr Sherov said.
"We are already in an economy which is characterised by fairly high levels of debt particularly in the household sector and the debt to income ratio which had been stable is now creeping up again."
 
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