Repeat buyers are one of the strongest measures of confidence in any apartment development.

At <a href="https://www.apartments.com.au/new-apartments/era-newcastle-west-124-126-bull-street-newcastle-west-nsw-2302">ERA</a> in Newcastle West, some purchasers are returning to <a href="https://www.apartments.com.au/developers/gwh">GWH</a> after living at the developer's One Apartments. Their decision to purchase again was driven by the quality of life they found after moving into their first GWH home.

Keith Wilton had spent years living in a house in East Maitland before deciding it was time for a change. Apartment living had always been on his radar, but he was selective about what he wanted.

<iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen="" frameborder="0" height="315" referrerpolicy="strict-origin-when-cross-origin" src="https://www.youtube.com/embed/FH_1EzB-1vs?si=XScVlP1ERsTDJoME" title="YouTube video player" width="560"></iframe>

"I had some boxes I wanted to tick," he says.

Keith points to the open-plan design, generous outdoor areas and considered inclusions as key reasons One Apartments worked for him.

“One of those things was a nice indoor open plan area, but also I wanted a nice outdoor open area that I could entertain on in summer or Christmases or birthdays,” he says.

He also found value in the smaller details, from integrated appliances to shared resident spaces including the pool, cinema and rooftop areas.

[smartcode_project:default project_id=135096 project_image_fid=356818]

After comparing several developments, he chose One Apartments because of GWH's longstanding local reputation and his own experience working with the developer on a commercial project more than a decade earlier.

"I knew that they were local, that the quality of the build was going to be up there. I'd looked at other apartment complexes around and close by, and I just knew that here was a better decision location wise."

Today, Keith says the move has completely changed how he experiences Newcastle.

"I enjoy living in this location because it's more of a lifestyle change. That Newcastle city living where you can walk to restaurants and bars and even beaches and parks and even shopping across the road."

[smartcode_project:default project_id=135096 project_image_fid=356828]

Beyond the location, he says it's the sense of community that has surprised him most.

"Everyone loves living here because they chose to live here, but everyone looks out for each other. It's a real great community feel here."

For Aimee and Lyle Goodman, the journey started almost by chance.

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The couple happened to be having coffee in Newcastle when they noticed the site where One Apartments was about to begin construction.

"We were aware GWH was planning a development," Aimee says. "We made one phone call and things moved pretty quickly after that."

As busy business owners, they initially thought apartment living would simply reduce the maintenance that came with larger homes. Instead, it fundamentally changed how they spent time together.

"We actually catch up more as a family now," Aimee says.

"We've had homes with big yards and lots of space, but everyone ended up in different rooms. Here we'll have dinner together, the kids can play, and we spend far more quality time together."

[smartcode_project:default project_id=135096 project_image_fid=356829]

Lyle says their confidence came from GWH's reputation within Newcastle's building industry.

"I know people who've worked across different apartment projects, and whenever GWH came up the feedback was always the same. They're rock solid. They're quality."

That confidence only grew throughout the buying process.

"One of the things that really impressed us with GWH was the whole process, was the communication," Lyle says. "It was consistent, it was regular, there was no problem if we had some weird questions, there was no problems in getting answers."

[smartcode_project:default project_id=135096 project_image_fid=351104]

Aimee says one moment stood out.

"The project actually finished on time. We realised we needed to hurry up and sell our house because everything was happening exactly when they said it would."

The positive experience at One Apartments ultimately gave all three buyers the confidence to purchase again with GWH, this time at ERA.

Their confidence reflects what many buyers are seeking in today's apartment market. Location remains important, but so too does certainty around delivery, quality and long-term liveability.

[smartcode_project:default project_id=135096 project_image_fid=356822]

ERA builds on those foundations with 280 one, two and three-bedroom apartments across two landmark towers in <a href="https://www.apartments.com.au/developments/newcastle-west-nsw-2302">Newcastle West</a>.&nbsp;

Designed by <a href="https://www.apartments.com.au/architects/fk-australia">Fender Katsalidis</a>, the project will include more than 2,000 square metres of resident amenities, including a resort-style pool, gym, sauna, private cinema and rooftop entertaining spaces overlooking the harbour and coastline.&nbsp;

The development is also within walking distance of the Newcastle Interchange, Honeysuckle, Darby Street, the harbour foreshore, restaurants, retail and the city’s beaches, continuing the walkable lifestyle that existing GWH buyers say has transformed how they live.

[smartcode_project:default project_id=135096 project_image_fid=356826]

For Keith, the appeal remains straightforward.

"You feel at home even before you've moved into your home."

For Aimee, the change is measured in time.

“I just felt like I had more time,” she says.

[smartcode_project:default project_id=135096 project_image_fid=351102]

Construction at ERA is now underway, with more than half of the residences already sold and limited two and three-bedroom apartments remaining in the East Tower release. Priced from $980,000 for two-bedroom residences and $1.46 million for three-bedroom residences, buyers can secure an apartment with a 10 per cent deposit, with premium homes offering ocean views from Level 8 and harbour views from Level 10.

ERA is also backed by Resilience Insurance's 10-year Latent Defects Insurance policy, providing protection against structural or waterproofing defects for 10 years after completion. The project is anticipated to be completed in early 2028.

[smartcode_project_cta:default project_id=135096]

Joel Robinson

From ONE to ERA: Why buyers are choosing GWH again in Newcastle West

Virgate Property Group is preparing to commence construction of Verdé, its new apartment development in Melbourne's Arts Precinct at Southbank, following a strong run of sales that has seen more than half of the project's 173 apartments secured.

Verdé has attracted a broad mix of first home buyers, owner-occupiers upgrading from nearby inner-city suburbs and investors, with younger owner-occupier couples aged between 28 and 45 accounting for the strongest enquiry. Many are already living in Southbank, South Melbourne, Albert Park, Port Melbourne, South Yarra and the CBD.

"Verdé is located in one of the most desirable pockets of southern Melbourne," Blair Property Group Director Darren Blair, who is managing sales at Verdé, said.

"It's within walking distance of the Arts Centre, Royal Botanic Gardens, Albert Park Lake, and Southbank's restaurants and retail. It's a great lifestyle location with strong amenity and liveability, which made it a very attractive choice for the project."

[smartcode_project:default project_id=4661 project_image_fid=372549]

Virgate was already familiar with the precinct, having previously delivered the successful Domain House development in neighbouring South Melbourne. That experience gave the developer confidence to acquire the Coventry Street site and continue expanding its presence in Melbourne's inner south.

"We had been keeping an eye on the site and the broader precinct for a few months before deciding to move forward with the acquisition," Virgate said.

The project was ultimately secured in 2020 following feasibility studies, planning assessments and due diligence, with the brief centred on delivering "a high-quality, considered design that feels both refined and fit for purpose."

[smartcode_project:default project_id=4661 project_image_fid=314259]

Designed by <a href="https://www.apartments.com.au/architects/bruce-henderson-architects">Bruce Henderson Architects</a>, Verdé comprises 173 one, two and three-bedroom apartments priced from $599,000. The architecture is distinguished by a faceted glass façade that responds to both the site's outlook and Melbourne's changing light conditions.

According to Bruce Henderson Architects, the coloured glazing gives the building a distinctive identity while also providing privacy and solar shading, with residences oriented to capture views across the bay, city skyline and surrounding parklands.

Inside, <a href="https://www.apartments.com.au/interior-designers/designoffice">DesignOffice</a> has created interiors focused on natural light, efficient planning and enduring materials. Apartments feature engineered oak flooring, natural stone benchtops, floor-to-ceiling glazing and SMEG appliances, while a restrained material palette aims to complement the expansive outlooks rather than compete with them.

[smartcode_project:default project_id=4661 project_image_fid=372550]

Resident amenity has also been designed around everyday functionality rather than occasional use. Facilities include a concierge-serviced lobby, residents' lounge with fireplace, library and co-working space, gym, terrace garden with barbecue facilities, ground-floor café, and package delivery management.

The project's location continues to be one of its strongest drawcards. Positioned on Coventry Street, Verdé sits within walking distance of the National Gallery of Victoria, Arts Centre Melbourne, Royal Botanic Gardens and Albert Park Lake, while Southbank's dining precinct, Sturt Street trams and the new ANZAC Station are all nearby. The surrounding education catchment also includes Melbourne Grammar, Melbourne Girls Grammar, Mac.Robertson Girls' High School and several major university campuses.

The sales team says buyers have responded particularly well to the combination of location, design quality and long-term liveability.

"They're responding really positively to the quality of the design, premium resident amenities and the uninterrupted views. Many also appreciate the location and how connected it is to everything they need."

The ability to secure stamp duty savings before completion has also been a key factor for purchasers, alongside the opportunity to personalise finishes ahead of settlement.

With construction set to commence soon and more than half the apartments already sold, Verdé enters its next phase as one of the Arts Precinct's more established apartment developments, offering remaining buyers an opportunity to secure a residence before construction advances further. Expected completion is scheduled for late 2027.

[smartcode_project_cta:default project_id=4661]

Virgate's Verdé Southbank moves toward construction as sales fly past halfway stage

Downsizer-focused apartment development Kooyongkoot in Hawthorn has been recognised at the 2026 Better Future Melbourne Design Awards, taking home Gold and Silver awards in two categories.

<a href="https://www.apartments.com.au/new-apartments/kooyongkoot-hawthorn-1-kooyongkoot-road-hawthorn-vic-3122">Kooyongkoot</a>, currently being delivered by developer PQD and designed by Cera Stribley, received Gold in the Interior Design – Proposed category and Silver in the Architecture – Proposed category.

The dual recognition reflects the design approach behind the boutique development on prestigious Kooyongkoot Road, where the focus has been on creating homes for downsizers seeking the space, quality and functionality of a detached house within a low-rise apartment building.

Rather than maximising apartment numbers, <a href="https://www.apartments.com.au/developers/pqd">PQD</a> and <a href="https://www.apartments.com.au/architects/cera-stribley-architects">Cera Stribley</a> limited the development to just 18 residences, allowing for larger floorplans, greater privacy, generous landscaping and expansive communal spaces.&nbsp;The majority of the apartments also benefit from corner aspects, allowing for dual sources of natural light.

Now around 70 per cent complete and on track for completion in November 2026, Kooyongkoot will comprise a mix of garden residences, ter​race apartments, sub-penthouses, and is crowned by two half-floor penthouses with direct lift access and private rooftop terraces.

[smartcode_project:default project_id=102717 project_image_fid=355297]

The Silver Award for Architecture recognised the way the building responds to its prominent corner position at the ent​rance to Hawthorn's Scotch Hill precinct, one of Melbourne's most established residential neighbourhoods.

Rather than competing with the grand homes that line Kooyongkoot Road, the architectural approach focused on restraint and longevity, using curved brickwork, generous landscaping and carefully considered proportions to integrate with the existing streetscape.

"The form feels fluid and timeless, as though shaped by the landscape itself – architecture that belongs, rather than competes," said Chris Stribley, Co-Founder and Managing Principal of Cera Stribley.

The judging submission also highlighted practical innovations throughout the building, including lift cores servicing only nine homes each, a central landscaped lightcourt designed to bring daylight and ventilation into the building, and fully enclosed private storage rooms with lighting, power and shelving to better accommodate residents transitioning from larger family homes.

[smartcode_project:default project_id=102717 project_image_fid=355293]

The Gold Award for Interior Design recognised the project's focus on long-term liveability rather than display-home aesthetics.

According to the awards submission, the interiors were designed from the inside out, prioritising how homes would function over decades of daily use through generous proportions, practical storage, durable natural materials and flexible layouts.

The specification includes natural stone throughout, upgraded acoustic glazing, V-ZUG appliances and fully enclosed storage rooms, alongside an amenity offering focused on wellness, entertainment and everyday convenience.&nbsp;

Residents will have access to a gym and yoga studio, a wellness centre featuring traditional and infrared saunas, a cold therapy shower and treatment room, as well as a residents' lounge and golf simulator/cinema room for entertainment.&nbsp;Kooyongkoot has also considered the everyday convenience of its residents by offering a private carwash and pet wash facilities on site as well as dedicated parcel lockers and oversized fully enclosed storage rooms.&nbsp;

[smartcode_project:default project_id=102717 project_image_fid=355303]

The project's attention to detail has already resonated with buyers. Earlier this year, Kooyongkoot recorded one of Boroondara's highest apartment sales when an $8 million penthouse was purchased by a Melbourne CEO downsizing from a nearby family home.

"Every detail feels deliberate, from the overall design down to the smallest touches," the purchaser said.

"The level of quality and refinement is exceptional, but what really sold it was how liveable it felt... It felt like a place where everything had been considered, not just a luxury building."

[smartcode_project:default project_id=102717 project_image_fid=355304]

Sustainability also formed a key part of both award submissions. Kooyongkoot is targeting a minimum 7.5-star NatHERS rating across all residences, supported by passive design principles, high-performance glazing, EV charging infrastructure, water reuse systems and a wellness model focused on lower-energy dry facilities rather than pools and large wet areas.

Located within walking distance of Scotch College, Methodist Ladies' College, Koo​yong Lawn Tennis Club, Aubur​n Village and Camberwell Junction, Kooyongkoot continues to target owner-occupiers looking to remain in Melbourne's inner east without compromising on space or quality. A limited selection of two, three and four-bedroom residences remains available, with prices starting from $1.9 million.

[smartcode_project_cta:default project_id=102717]

Kooyongkoot wins Gold and Silver at Better Future Melbourne Design Awards

New apartment supply has become increasingly constrained across <a href="https://www.apartments.com.au/developments/parramatta-nsw-2150">Parramatta</a> in recent years, with fewer projects progressing through to completion as development conditions have become more challenging.

It makes <a href="https://www.apartments.com.au/developers/novm">NOVM</a>'s 2021-completed <a href="https://www.apartments.com.au/buildings/the-lennox-parramatta-12-phillip-street-parramatta-nsw-2150">The Lennox</a> one of the most recently completed residential towers on the Parramatta River, and among the newest apartment developments in Sydney's second CBD.

With the project largely completed before the sharp escalation in construction costs and inflation following the pandemic, The Lennox is now offering pricing that would be difficult to replicate in a comparable new development in Parramatta today, or across much of Western Sydney.

The majority of the 413 apartments at The Lennox sold before and shortly after completion. A limited release of the remaining apartments has recently been brought to market by capital partner <a href="https://www.apartments.com.au/project-marketer/equitifund-group">Equitifund</a>, with entry-level pricing from $700,000 and two-bedroom apartments available from under $1 million.

Rising above the Parramatta River at 12 Phillip Street, The Lennox comprises one, two, three and four-bedroom apartments, appealing to first home buyers, young professionals, families, downsizers and interstate investors seeking a completed apartment in one of Australia's fastest-growing economic centres.

[smartcode_project:default project_id=5743 project_image_fid=372394]

Rather than positioning Parramatta as an alternative to Sydney's CBD, Equitifund believes the city has reached a point where it stands on its own merits.

"Parramatta is no longer simply an alternative to Sydney CBD, it's becoming a destination in its own right," Equitifund Executive Chairman Greg Huxley said.

"The Lennox captures that evolution with a level of quality and amenity that's difficult to match at its price point."

[smartcode_project:default project_id=5743 project_image_fid=953]

Designed by <a href="https://www.apartments.com.au/architects/marchese-partners">Marchese Partners</a>, the tower responds directly to its riverfront setting through expansive glazing and open-plan layouts that maximise views across the Parramatta River and city skyline. Interiors feature engineered timber flooring, stone benchtops, stainless steel appliances and floor-to-ceiling glazing, while generous balconies extend the living spaces outdoors.

Marchese Partners says the project was conceived to balance high-quality apartment living with practical, long-term functionality, pairing larger, efficient floorplans with amenities more commonly associated with five-star hotels.

That emphasis continues through the resident facilities, which include a 20-metre rooftop swimming pool, fully equipped gym and wellness spaces, full-time concierge, a residents' lounge, function room, private lifts, secure basement parking and rooftop communal areas overlooking the Parramatta River. Ground-floor boardwalk retail and dining further activate the riverfront and integrate the building into the surrounding public realm.

[smartcode_project:default project_id=5743 project_image_fid=925]

Australian housing and finance group Equitifund has secured the remaining apartments, believing there are few completed apartment opportunities in Parramatta that offer the same combination of location, amenity and pricing.

Equitifund National Sales Director Ben Hamblett says buyers are increasingly recognising that premium apartment living no longer needs to come with Sydney CBD pricing.

"The Lennox is where aspirational living becomes attainable," Hamblett said.

"Wake to river and mountain views, step into Sydney's Second CBD, and arrive home to resort-calibre amenities, all without the harbour price tag."

Hamblett says owner-occupiers are also attracted by the convenience of having Westfield Parramatta, Church Street's dining precinct, Parramatta Park, Riverside Theatres, Western Sydney University and major transport connections all within walking distance.

"At The Lennox, lifestyle is not an afterthought, it is the foundation."

[smartcode_project:default project_id=5743 project_image_fid=5374]

The Lennox places residents within walking distance of Parramatta Square, Westfield Parramatta, Church Street Eat Street, Parramatta Station, the ferry wharf, Light Rail, the future Sydney Metro West, Parramatta Park and CommBank Stadium, reinforcing Parramatta's position as one of Australia's most connected metropolitan centres outside Sydney's CBD.

Equitifund says buyers visiting the display suite consistently comment on the quality of the finishes, generous floorplans, river and skyline views, and the walkability of the location. The project has attracted a broad mix of local professionals, upsizers, downsizers, buyers relocating from Sydney's inner suburbs and interstate investors seeking long-term growth opportunities.

That demand aligns with Parramatta's continued evolution as an economic powerhouse. Equitifund Research and Market Insights specialist John Bekiaris says sustained population growth, infrastructure investment and expanding employment opportunities continue to support long-term housing demand across the city.

"Parramatta has evolved from a satellite city into one of Australia's most important economic centres. Population growth, infrastructure investment and employment are all supporting sustained long-term housing demand."

[smartcode_project_cta:default project_id=5743]

The apartment price gap drawing Sydney buyers west

A luxury beachfront apartment at Rainbow Bay has more than doubled in value since it sold off the plan six years ago, setting a new local apartment record in the process.

The three-bedroom apartment in the Flow development on Petrie Street, the first of four new projects locally by Paul Gedoun's S&amp;S Projects, has sold for $7.4 million, after originally selling for $3.27 million when the project launched in 2020.

The seventh-floor apartment, comprising 187 sqm of internal living space and a 54 sqm balcony overlooking Froggies Beach and Snapper Rocks, was purchased by a local family.

The transaction was negotiated by Pezet Matheson director Kerry Pezet and equates to more than $30,000 per sqm.

Pezet said the sale reflected the limited opportunities to buy into the boutique beachfront development.

"The sale highlights the rarity of opportunities within the boutique beachfront development, where residences seldom become available," Pezet said.

"Flow is one of the Gold Coast's most tightly held buildings. Buyers from our database move quickly when residences become available, and achieving an off-market sale at $7.4 million demonstrates the depth of demand for property of this calibre."

<img alt="Flow" data-entity-type="file" data-entity-uuid="c585b206-2130-4eee-a50c-3f27c51a7c70" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-06%20at%208.33.25%E2%80%AFPM.png?VersionId=m3pHRDV62Y3fvN.XQuQHq.52ilTWpRLf" />

Flow was the first of four luxury apartment developments delivered by Paul Gedoun's S&amp;S Projects at Rainbow Bay and was completed in 2023.

Positioned on the beachfront overlooking Snapper Rocks, the residence includes three bedrooms, three bathrooms, a powder room and views stretching north along the coastline towards Surfers Paradise.

Pezet Matheson Residential principal Mitchell Lambert said buyers continued to prioritise quality beachfront apartments in tightly held locations.

"Flow Residences offers a rare combination of elevated beachfront positioning, architectural excellence, comprehensive resident amenity and premium finishes, which is exactly what discerning purchasers are seeking," Lambert said.

"The transaction further reinforces Rainbow Bay's reputation as one of Australia's premier coastal lifestyle destinations, where limited supply and growing demand continue to support strong market performance."

Pezet Matheson originally marketed and sold out Flow off the plan, making the latest transaction a return to one of the project's original buyers.

Paul Gedoun is selling his third project, <a href="https://www.apartments.com.au/new-apartments/radia-rainbow-bay-271-boundary-street-coolangatta-qld-4225">Radia Rainbow Bay</a>, after recently completing, and selling out, <a href="https://www.apartments.com.au/buildings/esprit-217-227-boundary-street-coolangatta-qld-4225">Esprit</a>. He has plans for a <a href="https://www.apartments.com.au/news/qld/first-look-s-s-projects-proposes-88-apartment-wellness-tower-at-coolangattas-boundary-street">fourth building</a>, 88 apartments on <a href="https://www.apartments.com.au/new-apartments/209-213-boundary-street-coolangatta-qld-4225">Boundary Street</a>.

Rainbow Bay apartment doubles in price since off the plan sale during pandemic

Lending Practices

<html><body>
EXPERT OBSERVER
Today I will summarise the Bank's assessment of the various measures put in place to address the risks around housing lending. I will draw on Chapter 5 of the recent Financial Stability Review (FSR). I think it is important in terms of accountability that we provide our assessment of the effect the measures are having and continually review whether they are achieving the desired intent.
The motivation for implementing these various measures was to address the mounting risk to household balance sheets arising from the rapid growth of certain forms of lending, in particular lending to investors and interest-only (IO) lending. The strong growth in investor borrowing was increasing the risk that investor activity could be excessively boosting housing prices and construction and so increasing the probability of a subsequent sharp unwinding. This risk is greater for investor borrowing than owner-occupiers as investors can behave pro-cyclically, withdrawing from the market as it declines. The rise in the prevalence of interest-only borrowing for both investors and owner-occupiers increased the overall risk profile of household borrowing. No principal is repaid during the IO period, and the increase in required repayments can be large when the IO period expires.
I don't see the riskiness of the borrowing as being the source of the negative shock. My concern is for its potential to be an accelerator to a negative shock from another source. To put it another way, I don't regard it as likely that household borrowing will collapse under its own weight. Rather, if a negative shock were to hit the Australian economy, particularly one that caused a sizeable rise in unemployment, then the risk on the household balance sheet would magnify the adverse effect of that shock. This would have first order consequences for the economy and hence also for monetary policy.
To repeat the conclusion of the assessment in the FSR: the measures have helped to reduce the riskiness of new borrowing. In turn, this has stemmed the increase in household sector vulnerabilities and improved the resilience of the economy to future shocks. The measures have led to a slowing in credit growth but there is little evidence to suggest that the measures have excessively constrained aggregate credit supply. Housing credit growth has slowed, but it is still running at 5 per cent.
The various measures implemented to address the riskiness of housing lending fall into three categories:<a id="r1" href="https://www.rba.gov.au/speeches/2018/sp-dg-2018-11-15#fn1"> </a>
<ol>
<li>Lending standards or serviceability criteria. This includes tightening up the assessment and verification of borrower income and expenses, the discouragement of high loan-to-valuation ratio (LVR) loans and ensuring that minimum interest rate buffers were being applied, including on existing loans.</li>
<li>Investor lending growth benchmark. A 10 per cent cap on investor lending growth was introduced in December 2014.</li>
<li>A cap on the share of interest-only loans in new lending of no more than 30 per cent.</li>
</ol>
These measures were introduced progressively over a number of years. The scrutiny on serviceability by both APRA and ASIC has been underway for over four years now. For example, in September 2015, APRA noted that by then, serviceability practices had been tightened, such as the haircutting of various forms of income, including rental income. At the same time, APRA reported that minimum interest rate buffers and floors were also being more consistently applied.
This means that these tighter lending standards have been in place for a while now. They are not a recent phenomenon. But this also makes assessing the overall impact difficult in some cases, though the effect of some of the measures has been obvious. There clearly has also been an interaction between them.
What Has Been the Effect of These Various Measures?
1. Different interest rates are now charged across the various types of mortgages. Interest rates are higher on investor lending and interest-only lending than they are on owner-occupier lending (Graph 1). Previously there was little, if any, variation in the interest rate charged on different types of loans, beyond the size of the discount that varied with borrower income and the size of the loan.
<div>Graph 1</div>
<div> </div>
<img src="https://www.rba.gov.au/speeches/2018/images/sp-dg-2018-11-15-graph1.gif" alt="Graph 1: Variable Housing Interest Rates">
<div>Rather than use quantitative restrictions on the flow of new investor or interest-only lending to meet the requirements, banks chose to increase the interest rate on all loans of these types, both new <cite>and</cite> existing. Judging by what happened, it appears that the impact of the interest rate changes on borrower activity was difficult to calibrate. The banks seem to have increased rates by more than enough to achieve the requirements with most significantly undershooting the caps on both investor lending growth and the share of IO loans.</div>
<div> </div>
<div>2. Investor lending growth took a while to respond to the introduction of the growth benchmark, in part because banks didn't increase interest rates on investor loans until some time after its introduction (Graph 2). But there was a sharp and immediate slowing in response to the cap on IO lending. The share of IO loans in the flow of new lending declined sharply from 40 per cent in March 2017 to 17 per cent by September 2017 and has remained around 15 per cent since then. At the same time, the share of new lending with LVRs greater than 90 per cent has declined for both owner-occupiers and investors. In particular, there is now only a very small amount of loans to investors being written with LVRs over 90 per cent. Investor credit is now barely growing. Lending to owner-occupiers has slowed but is still growing at 6½ per cent.</div>
<div> </div>
<div>Graph 2</div>
<div> </div>
<div> </div>
<div><img src="https://www.rba.gov.au/speeches/2018/images/sp-dg-2018-11-15-graph2.gif" alt="Graph 2: Investor Housing Credit Growth"></div>
<div>3. As a result there has been a sizeable shift in the composition of the stock of housing lending. In addition, in response to both measures, a sizeable number of borrowers switched from an investor and/or IO loan to a principal and interest (P&amp;I) owner-occupier loan reflecting the now significant interest differential. As a result of switching and weaker growth of investor lending, we estimate the share of housing loans to investors has declined by 5 percentage points to around one-third. Interest-only loans currently comprise 27 per cent of the stock, having been as much as 40 per cent (Graph 3). These changes decrease the riskiness of the stock of housing lending.</div>
<div> </div>
<div>Graph 3</div>
<div> </div>
<div><img src="https://www.rba.gov.au/speeches/2018/images/sp-dg-2018-11-15-graph3.gif" alt="Graph 3: Interest-only Lending"></div>
<div>4. There has been a decrease in maximum loan sizes offered by banks to new borrowers in response to the tightening of the serviceability requirements. How big an effect might this have?<a id="r2" href="https://www.rba.gov.au/speeches/2018/sp-dg-2018-11-15#fn2">[2]</a> As any of you who have applied for a home loan may know, often the bank is willing to lend you much more than you want to borrow. Now they are willing to lend you less on average, by around 20 per cent. How much impact this actually has in aggregate depends on how many people are now constrained by this lower maximum loan size that weren't previously. Using data from the HILDA survey, we estimate that the share of borrowers who are near their maximum loan and so are affected by this change is small, though for those who are constrained the effect can be quite large. Our assessment is that the aggregate impact is less than it would appear on the face of it.</div>
<div> </div>
<div>5. As a consequence of the greater scrutiny of interest-only lending and the tightening of serviceability requirements, some borrowers are no longer able to roll over their IO loan at the expiry of the IO period. The shift to a P&amp;I loan can cause their required payments to increase by as much as 30–40 per cent.<a id="r3" href="https://www.rba.gov.au/speeches/2018/sp-dg-2018-11-15#fn3">[3]</a> Liaison with lenders suggests that some borrowers have encountered repayment difficulties after switching to P&amp;I repayments at the end of their IO terms, but that many have subsequently been able to adjust to higher payments within a year. Loan-level data from the Reserve Bank's Securitisation Dataset supports this. It is also worth remembering that this process has already being going for quite some time, but we have yet to see it have a material effect on arrears rates. It still has a couple more years to run before the stock of expiring IO loans will have all been written under the current tighter serviceability criteria. But based on the experience to date, I don't see this is a material risk, particularly given the current favourable macro environment.</div>
Competition
Turning now to look at the effect on these measures on competition. (This is covered in more detail in the FSR Chapter). The investor lending benchmark did have a competitive impact for a time in that it constrained the ability of smaller lenders to gain market share by increasing their lending faster than 10 per cent. That said, with investor lending growing at or below 5 per cent since early 2016, it has not been a significant constraint on most lenders increasing their market share for some time now. Indeed, recently we have seen smaller lenders again gaining market share. Currently the major banks' share of new lending is at its lowest in a decade. At the same time, there was no constraint on the ability of smaller lenders to gain market share in the owner-occupier market. The interest-only cap did not obviously have an effect on competition. Again, with nearly all lenders well below the 30 per cent threshold, it is not a binding constraint on lenders from increasing their market share.
The tighter lending standards have seen an increasing share of borrowers obtain finance from non-ADI lenders. These lenders are subject to regulatory oversight but less than that of ADI lenders. They are subject to ASIC's responsible lending standards but not to prudential supervision by APRA. Non-ADIs' housing lending has been growing rapidly, over twice the rate of growth of ADIs. As a result, the estimated non-ADI share of housing credit has also increased, although it remains less than 5 per cent of the total.
Effect on the Housing Market
The integral relationship between debt and housing prices means that these measures have clearly influenced conditions in the housing market. The FSR analyses in detail the impact on the housing market of the investor lending benchmark in 2014. It uses the fact that the share of investors varies across different parts of the housing market. Differentiating between ‘high’ investor regions and ‘low’ investor regions, the analysis shows that high investor regions had very similar price growth to low investor regions before the benchmark was implemented. In contrast, after the benchmark was introduced, house price growth has been notably slower in the higher investor regions.
Other factors may have also contributed to the divergent price growth between the high and low investor regions. For example, regions with a high share of investors may have also experienced larger increases in housing supply and so slower price growth in the period after the benchmark was introduced. The analysis attempts to control for these other factors and concludes that the policy effect accounts for around two-thirds of the 7 percentage point difference in average cumulative housing price growth between high and low investor regions from December 2014 to mid 2018 (Graph 4).
<div>
<div>Graph 4</div>
<img src="https://www.rba.gov.au/speeches/2018/images/sp-dg-2018-11-15-graph4.gif" alt="Graph 4: Housing Price Growth in High and Low Investor Regions">
</div>
Again it is worth reiterating that the measures are aimed at the resilience of household balance sheets, <cite>not</cite> house prices. The assessment of their effectiveness is around the riskiness of household balance sheets, not the outcomes in the housing market. But at the same time, they clearly are having a notable effect on the housing market.
Housing construction activity has been at a high level for some time now. Our forecast is for it to continue at this level for at least a year given the amount of work in the pipeline. Beyond that, we expect construction activity to decline from its peak. Off-the-plan apartment sales in the major east coast cities have declined since around mid 2017, with developers citing weaker demand from domestic investors, as well as from foreign buyers. One risk is that tighter lending standards could amplify the downturn in apartment markets if some buyers of off-the-plan apartments are unable to obtain finance. This could lead to an increase in settlement failures, further price falls and even tighter financing conditions for developers. However, to date, in our liaison with developers, few have reported much evidence of this.
While not directly related to the housing measures, there has been some tightening in credit for developers of residential property. This reflects lenders' reducing their desired exposure to dwelling construction, which is higher-risk lending, particularly given the longer planning and construction lags of higher density dwelling construction. That is, banks are less willing to lend given the fall in prices. To the extent that the housing policy measures have contributed to the decline in investor demand and prices, they have indirectly affected developers' access to finance. There is a risk that this process overshoots leading to a sharper or more protracted decline in activity than we currently expect.
The effect of a tightening in lending to developers seems to me to be a higher risk to the economic outlook than the direct effect of the tighter lending standards on households, which has ameliorated risk. Relatedly, there may also be a bigger impact on lending to small business given the extensive use of property as collateral for small business loans. This would be further exacerbated if the banks' risk appetite for small business lending declines for other reasons.
Housing prices have fallen by almost 5 per cent from their late 2017 peak while the pace of housing credit growth has slowed over the past couple of years. The fall in housing prices is a combination of a number of other factors, including the very large increase in the supply of houses and apartments both now and in prospect. It also reflects a reduction in foreign demand, which has been affected by a tightening in the ability to shift money out of China and an increase in stamp duty in some states.
Some have attributed the slowing in housing credit solely to a tightening in the supply by banks in response to regulatory actions. Others have suggested there has been a weakening in housing demand and so demand for credit, including because of the high level of and weaker outlook for housing prices. To me, reductions in both the demand and supply of credit have been at play and it is hard to separate their effects. For example, tighter lending conditions have reduced how much some people can borrow, and this contributed to weaker demand for properties and so softer prices. Price falls have themselves contributed to weaker demand by investors who are no longer confident of rising values. Assessing the relative importance of demand and supply is also complicated by the fact that banks have cut back most on their lending to less credit-worthy borrowers, but have more aggressively targeted safer borrowers with lower interest rates.
Conclusion
The regulatory measures have significantly reduced the riskiness of new housing lending. A smaller share of new loans are to investors, are interest-only, have high LVRs or are to borrowers more likely to have difficulty repaying the loan. But it takes time for the riskiness of the stock of outstanding loans to improve. When you implement a change in lending standards the existing loans are no different to how they were the day before. But over time a larger share of outstanding loans will have been written with more stringent lending standards, while the larger share of principal and interest loans will see more of the outstanding loans have a declining balance over time. Finally, in assessing the overall riskiness of the debt both before and after the various measures, it is worth remembering that arrears rates remain low.
To conclude, the available evidence suggests that the policies have meaningfully reduced vulnerabilities associated with riskier household lending and so increased the resilience of the economy to future shocks.
Guy Debelle is Deputy Governor of the Reserve Bank of Australia. He is Deputy Chair of the Reserve Bank Board and Chair of the Reserve Bank's Risk Management Committee.
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jrobinson-rf4aSBido9

Assessing the effects of housing lending policy measures: RBA's Guy Debelle

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A Royal Commission-induced credit slowdown could push the next interest rate rise back to 2020, according to Shane Oliver, head of investment strategy and economics and chief economist at AMP Capital.
"We are only two weeks into the Royal Commission, but it seems a real risk around the issues of lax lending standards is that banks move to a far more rigorous assessment of applications for loans," Shane Oliver noted.
"This is most unlikely to cause a full-on credit crunch, but the end result could be much tougher lending standards and a slowing in credit growth.
"Its early days yet but it’s worth keeping an eye on.
"It could serve to further delay any move to higher interest rates by the RBA, into say 2020," Oliver suggested.
Oliver anticipates more rigorous attention to lending in terms of each applicant’s income, expenses, assets and other debts.
<div>
Rowena Orr, QC, the senior counsel assisting the Hayne royal commission, has already revealed serious breaches committed by the banks and mortgage brokers.
There have been instances where banks had breached their statutory obligations under the National Consumer Credit Protection Act as well as under the Corporations Act to provide financial services "efficiently, honestly and fairly."
There appears to have been a failure to ensure that customers were not disadvantaged by conflicts of interest.
</div>
<div>Bankers had not adhered to National Credit Act in making loans without making reasonable inquiries about the customer's financial circumstances.</div>
<div> </div>
<div>Bank staff frequently receive incentive payments based on the volume of products sold, rather than on ensuring that the bank met responsible lending obligations. It already seems likely Commissioner Kenneth Hayne will recommend sweeping changes to the country's home loan industry. </div>
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j.ballantyne1990-6AQqhLzZaK

Royal Commission-induced credit slowdown could push interest rates rise back to 2020: Shane Oliver

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Mortgage brokers are adding 16 basis points to a borrower’s cost on every home loan they write, or an average $4,600 commission on a loan, says new research by investment bank UBS.
Nearly $2.5 billion was paid as commission to mortgage brokers by banks in 2015, which is about a quarter of the total cost of running their personal lending operations, UBS analysts John Mott and Rachel Bentvelzen said in the research cited by The Australian Financial Review.
The news comes at a time when banks have been levied with a $6.2 billion tax in the recent federal budget and regulators are reviewing potential conflicts of interest in the way mortgage brokers are remunerated for their services.
The share of new home loans originated by mortgage brokers had risen from below 40 per cent in 2012 to just under 50 per cent in 2016, according to Fitch banking analyst Tim Roche, the AFR reported.
As banks face rising cost pressures while the industry's remuneration structures are under review, these costs will inevitably fall, the analysts said in a note titled "Are mortgage brokers overpaid?"
The average commission was $4600 per mortgage, which the analysts said was "disproportionate for advice provided on a simple, commoditised, single product".
That was especially the case compared to fees charged by financial advisors for "simple advice" ranged from $200 to $700, UBS said.
Broker commissions summed to $2.4 billion in 2015, an 18 per cent per annum increase from $1.5 billion in 2013 and equated to nearly a quarter of the $10.6 billion cost of running the entire consumer and personal lending operations of a major bank, UBS said.
UBS said the cost of mortgage brokers was born by all borrowers and calculated that the sum of commissions added 16 basis points per annum to the $1.5 trillion of all outstanding mortgages.
"Although mortgage broker commissions are paid by the bank, not the customer, commissions are factored into the bank's cost of funding and have been a driving factor in mortgage repricing in recent years."
These payments, UBS said, "are an illustration of excesses built into the financial system following a 26-year economic boom," and they expect them to fall over time.
"We believe the current quantum of economic rent being extracted by the mortgage broking industry is unrealistic and is likely to fall dramatically in coming years.
"We expect these benefits to be passed on to the customer, which could help offset anticipated repricing for the Bank Levy."
The Australian Securities and Investments Commission review of the industry and the Sedgwick Review both found that loans originated by brokers were more likely to lower deposit and interest only, as brokers are paid on the size of the loan.
The ASIC review formed part of a coordinated effort by regulators to counter a rise in debt-fuelled speculation in the property market with broker incentives identified as a factor in encouraging riskier lending.
The credit rating agencies have also highlighted the rise of third-party originated home loans as flagging future risks in the housing market.
However, Finance Brokers Association of Australia’s executive director, Peter White, questioned the UBS report and said they were exaggerated.
White said the average broker commission on a mortgage was closer to $2500 to $3000 and that most brokers earned about $70,000 per annum of income.
"There seems to be grandeur on these numbers that don't make sense. This information is quite simply not correct practically and by examination of regulators' data."
UBS suggested that the robo-advice industry could easily replace brokers providing advice for a single commoditised product.
It said the rising trend of broker-originated loans was worth monitoring because loans not originated by the banks were more likely to be riskier or could contain irregularities in the application.
"We are not saying that all brokers will result in weaker underwriting but we think the compensation structure could encourage mortgage application fraud.
"We don't have hard evidence to suggest part of it is happening and suggests it could be a risk, but it does potentially increase the risk in mortgage portfolios."
While the mortgage broking industry has faced several reviews, they are still regarded as providing a useful service for borrowers keen to get the best terms from their banks, and can handle the administrative complexities.
UBS however "questioned the trade-off between the value received by the customer versus the cost of this service relative to other parts of the financial industry."
"While a mortgage is a large financial commitment, it is a simple, commoditised product."
There were only a few options available to borrowers while APRA's focus on sound lending practices "ensures there should be little difference in underwriting standards or size of loan offered across the banks."
 
 
 
 
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jonathanchancellor-7SQnKwU6yx

Mortgage brokers overpaid and adding 16 basis points to every loan: UBS report

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There will be no let up in the prudential regulator’s scrutiny of lending practices by banks as it wants to prevent a shock to their balance sheets and the economy in the event of a property market downturn. That is the clear message from Wayne Byres, the chairman of the Australian Prudential Regulation Authority.
In his remarks at CEDA’s 2017 NSW Property Market Outlook in Sydney, Byres said APRAs moves to put brakes on investor lending and other measures were meant to ensure that “standards for property lending are prudent, particularly in an environment of heightened risk”.   
He said sound lending standards are “vital for the stability and safety of the Australian banking system, given their high exposure to both the residential mortgage and commercial property markets. 
APRA’s intense scrutiny of lending practices would continue in the foreseeable future, he said.
Stressing that the ultimate goal was to protect bank depositors, because its their money that banks are lending, Byres said risk was an inherent part of lending.
He said while “the banking system is heavily exposed to the inevitable cycles in property markets… our goal is to seek to make sure the system can readily withstand those cycles without undue stress”.
Home loans account for about 60 per cent of banks' loans.
Byres said that the regulator’s moves to cap investor lending and other measures were “unusual”, but that they were driven by the view that “the higher-than-normal prescription was warranted in the environment of high house prices, high household debt, low interest rates, low income growth and strong competitive pressures”. 
“In such an environment, it is easy for borrowers to build up debt. Unfortunately, it is much harder to pay that debt back down when the environment changes,” he said.
APRA has set a 10 percent annual growth for banks on lending to investors and and also set interest rate buffers when looking at loan approvals (the higher of 7 per cent, or 2 per cent over the loan product rate).
It recently also announced a limit of 30 percent on interest-only loans and warned that lenders exceeding its benchmarks risked incurring higher capital requirements to compensate for their higher risk. 
He said those measures are having an impact now and have helped slow the growth in investor lending, and lift the quality of new lending. 
Byres also noted that lenders not regulated by APRA “will still provide competitive tension in that area and it is likely that some business, particularly in the higher risk categories, will flow to these providers”. 
And alluded to the warning to lenders that provide warehouse facilities to make sure that the business they are funding through these facilities was not growing at a materially faster rate than the lender’s own housing loan portfolio.
“We don’t want the risks we are seeking to dampen coming onto bank balance sheets through the back door.”
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prateek24-ezbwHMbNAk

No let up in APRAs scrutiny of banks' lending practices, says Wayne Byres

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Australia's home loans industry has improved its performance over the past year, adopting better 'responsible lending' practices, according to a review by ASIC however there is still room for improvement.
ASIC's 'Review of interest-only home loans: Mortgage brokers’ inquiries into consumers’ requirements and objectives' examined how the changes implemented by lenders in response to the findings from ASIC’s report into interest-only home loans from 12 months ago last yearhave flowed through to mortgage brokers.　
According to ASIC, since the release of Report 445 in August 2015,  　
<ul>
<li>the percentage of new home loans approved by lenders which are interest-only has decreased by 12 percent; and　</li>
<li>the amount that can be borrowed by an individual consumer through an interest-only home loan has decreased, as lenders have adjusted their assessment of consumers' ability to repay, in line with ASIC's recommendation in Report 445. 　</li>
</ul>
Information provided by the mortgage brokers showed that for the six months from July 2015 to December 2015,    　
<ul>
<li>the number of new interest-only home loans fell by 16.3 percent, with total value of these loans reducing by 15.6 percent; and　</li>
<li>the percentage of interest-only loans with a term greater than five years reduced by more than half, from 11.2 percent to 5.1 percent.　</li>
</ul>
ASIC said almost 80 percent of applications reviewed included a statement summarising how the interest-only feature specifically met the consumer's requirements and objectives. This compared favourably with another finding that more than 30 percent of applications reviewed showed no evidence the lender had considered whether the interest-only loan met the consumer's requirements.　
ASIC deputy chairman Peter Kell said it is vital that mortgage brokers understand consumers' requirements and objectives to ensure they are not placed in unsuitable credit contracts.
"ASIC is pleased that our concerns about interest-only loans and responsible lending are being acted on by the home lending industry, but there is still room for improvement," her said.
Key compliance risks identified included:  　
<ul>
<li>Policies and procedures—Mortgage broker policies and procedures provided only general information, rather than tailored information on specific products and loan features that may impose increased financial obligations or restrict repayment flexibility (such as interest-only home loans); 　</li>
<li>Recording of inquiries—Record keeping was inconsistent and in some cases records were fragmented and incomplete; 　</li>
<li>Explaining the loan choice—More than 20 percent of applications reviewed did not include a statement explaining how the interest-only feature of the loan specifically met the consumer’s underlying requirements and objectives. The level of detail in these statements varied considerably and in some cases, where an interest-only loan was specifically sought by a consumer (including where this option was recommended by a third party, such as an accountant), the reason for this was not clear; 　</li>
<li>Consumer understanding of risks and costs—In some cases, where the potential benefit of the interest-only loan depended on the consumer taking specific action (for example, allocating additional funds to higher interest debt), it was unclear whether the consumer understood the potential risks/additional costs if the specific action was not taken. 　</li>
</ul>
The report details steps that mortgage brokers should take to improve their current practices, including: 　
<ul>
<li>Ensuring they understand the consumer's underlying objectives for requesting specific loan products and features;　</li>
<li>Recording concise summaries of consumers' requirements and objectives and the reason why a particular product, features and lender was chosen;　</li>
<li>Providing a statement summarising the broker's understanding of the consumer's requirements and objectives, which could also include the reason a particular loan is suggested, for the consumer to confirm before obtaining a loan.　</li>
<li>Where the potential benefits of a loan feature might require the consumer to undertake specific behaviour, ensuring consumers were aware of the action they needed to take to obtain the potential benefit, as well as the potential costs should this action not be taken.</li>
</ul>
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