One of North Sydney's best-known commercial buildings could become hundreds of new homes, with insurance giant Zurich Australia lodging a State Significant Development Application (SSDA) to transform 5 Blue Street into a mixed-use residential development above North Sydney Station.

Rather than demolishing the existing building and starting again, Zurich is proposing an adaptive reuse project that would convert the landmark office building into a 15-level residential development delivering 62 apartments, 86 affordable co-living dwellings, activated retail and significant upgrades to the Blue Street Plaza.

The proposal reflects a growing trend of commercial property owners repositioning ageing office assets into residential housing as Sydney grapples with housing supply shortages and changing workplace demand.

<img alt="Zurich" data-entity-type="file" data-entity-uuid="0bba7d12-06dc-4375-aad7-238c94b21ac5" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-22%20at%2010.42.05%E2%80%AFAM.png?VersionId=NJl5oLAEBDGuPmY3RnyliKODjMc8lvRh" />

Located directly above North Sydney Metro and train station, the 3,051 sqm site occupies one of the most strategically positioned parcels of land on Sydney's Lower North Shore.

Designed by fjcstudio, the proposal seeks to retain and adapt much of the existing structure while creating a contemporary residential address that better connects with the public domain surrounding North Sydney Station.

The application proposes two basement levels, ground floor retail, affordable co-living accommodation across the podium levels, and apartments above, while preserving and enhancing the publicly accessible Blue Street Plaza.

Rather than pursuing maximum apartment numbers, Zurich has opted for a housing mix heavily weighted towards larger owner-occupier residences.

The proposal includes 62 build-to-sell apartments comprising 12 one-bedroom, 19 two-bedroom, 29 three-bedroom apartments and two premium penthouses. It also incorporates 86 affordable co-living dwellings, which would be managed in perpetuity by a Community Housing Provider.

That balance between traditional apartments and affordable housing reflects the NSW Government's push to increase housing diversity around major transport infrastructure.

The proposal has been lodged concurrently with a rezoning application, with Zurich arguing the site is ideally positioned to support additional housing given its immediate proximity to public transport, employment and services.

"The proposal aims to respond to the housing challenges facing Sydney through the delivery of diverse housing types in a highly accessible location," the design report by fjcstudio states. It also seeks to improve pedestrian amenity through upgrades to Blue Street Plaza while creating a high-performing residential building that responds to the surrounding context.

<img alt="Zurich" data-entity-type="file" data-entity-uuid="36082e15-c636-4481-bb68-5a5f6443fe39" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-22%20at%2010.41.36%E2%80%AFAM.png?VersionId=5P6VD.fvmqjQfIG3TWWMRXxQWiQBjeFB" />

Rather than replacing the commercial building, fjcstudio has developed a design that works with the existing structural framework above the rail corridor, an approach that significantly reduces demolition while allowing the site to be repositioned as a mixed-use residential precinct.

The existing structural constraints have informed much of the building's design, including its relationship with Blue Street and surrounding public spaces.

The building has been designed as a slender tower rising above a clearly defined podium, with vertically expressed façades intended to reduce the perceived bulk while reinforcing North Sydney's emerging skyline.

According to fjcstudio, the architectural language responds directly to the surrounding commercial towers while maintaining a finer grain expression more closely aligned with the neighbouring Lavender Bay streetscape.

The tower incorporates articulated façade elements, landscaped podium edges and recessed upper levels to soften its appearance and improve pedestrian amenity below.

A significant component of the proposal is the revitalisation of Blue Street Plaza.

The existing public space has long served as one of the primary pedestrian connections between North Sydney Station, Greenwood Plaza and Blue Street, yet its role is expected to become even more important following the opening of Sydney Metro.

Zurich's proposal seeks to strengthen that role by improving landscaping, introducing new retail frontages, enhancing pedestrian permeability and creating more active edges throughout the day and evening.

Ground floor retail would wrap the plaza, while separate residential and co-living entries have been designed to improve wayfinding without reducing street activation.

Landscape design has been integrated throughout the podium and public realm, softening what is currently one of the most heavily urbanised parts of North Sydney.

&nbsp;

&nbsp;

fjcstudio has carefully oriented apartments towards Sydney Harbour and the CBD while using privacy blades and articulated façades to minimise overlooking between neighbouring buildings.

Large framed openings along the western elevation maximise harbour outlooks, while the eastern apartments have been angled towards the south-east to improve privacy from neighbouring development.

The project forms part of the continuing transformation of North Sydney from a predominantly commercial CBD into a genuine mixed-use city centre.

Since the completion of Victoria Cross Metro Station, developers have increasingly shifted their attention towards residential projects capable of leveraging the area's unparalleled transport connectivity.

&nbsp;

FiveX recently lodged plans for a 61-storey, 490-apartment tower that would become one of the tallest residential buildings in North Sydney if approved.

Aqualand continues to expand its Lower North Shore presence following the completion of AURA on Walker Street and its recent St Leonards and Roseville proposals.

Developers are also progressing projects throughout Walker Street, Miller Street and the Victoria Cross precinct as demand for well-located owner-occupier apartments continues to strengthen.

Joel Robinson

First look: Zurich targets North Sydney office conversion with 148-unit proposal above Metro station

Busy developer Aqualand Prestige has formally taken the next step in its expansion across Sydney's Lower North Shore, lodging a State Significant Development Application (SSDA) for its long-held Archer Street site in Chatswood.

The application covers <a href="https://www.apartments.com.au/new-apartments/51-55-archer-street-chatswood-nsw-2067">51-55 Archer Street</a>, a 1,767 sqm amalgamated site on the eastern edge of the Chatswood CBD, where the developer is seeking approval for a 45-level mixed-use tower delivering 114 apartments, including a significant affordable housing component, alongside retail, commercial space and six basement levels of parking.

The SSDA marks the latest milestone for a project Aqualand has been quietly progressing over the past two years. The developer first secured the site for its Aqualand Prestige platform before undertaking an alternative design excellence process with PTW Architects, ultimately avoiding a formal design competition through the Housing Delivery Authority pathway.

The proposal has evolved considerably from Aqualand's original concept. The revised scheme has been designed around larger owner-occupier product, with an unusually high proportion of three and four-bedroom apartments, targeting the more affluent buyer profile, and downsizer, emerging across the North Shore.

<img alt="Archer St" data-entity-type="file" data-entity-uuid="0171204c-5811-41b5-9b09-2335d1b7c3d0" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-22%20at%208.52.48%E2%80%AFAM.png?VersionId=6YTuxfq.puZo7k2wbfgemcO5K3QfXYGQ" />

The 114-apartment mix comprises six studios, 27 one-bedroom apartments, 18 two-bedroom apartments, 50 three-bedroom residences and 13 four-bedroom homes. A quarter of the building will be dedicated to affordable housing, well above the mandated 15 per cent&nbsp;

PTW has structured the building vertically, with affordable housing across levels one to six, premium apartments through levels seven to 31, duplex skyhomes on klevels 32 to 43, a penthouse on level 44, and a rooftop plant level above. Six basement levels will provide resident parking and servicing.

The tower is proposed to reach approximately 154 metres, placing it among a growing collection of residential high-rises transforming Chatswood's skyline.

Rather than competing purely on height, PTW says the design has been driven by creating a slimmer tower capable of delivering significantly larger apartments.

"The primary objective of this project was to create a distinctive building that stands out from the recently approved or built structures in the Chatswood area," the design report states, noting the structural efficiency allows greater investment into apartment quality and resident amenity.

Residents would have access to more than 450 sqm of communal open space including landscaped gardens, swimming pool, rooftop entertaining areas, fitness spaces, community gardens, children's play areas and barbecue facilities.

A major focus of the design has been the public domain.

The ground plane has been opened up through landscaped terraces inspired by Willoughby's sandstone ridges, with native planting, public seating, artwork, retail activation and a series of gathering spaces intended to soften what has traditionally been a hard commercial streetscape.

The landscape strategy references Blue Gum forests once common throughout the area, while incorporating Indigenous storytelling, public art and lighting installations to strengthen the connection to Country.

Chatswood has been one of Sydney's busiest apartment markets over the past 12 months, with a steady pipeline of both new project launches and fresh development applications.

Hyecorp recently launched Celine, a 122-apartment development just along Archer Street, while Changfa and Huirong Group are progressing The Anderson, an 84-apartment project on Anderson Street.

Develotek recently secured approval for a 101-apartment tower on Pacific Highway, while Tian An LFD received the green light for Hammond Greens, its apartment development on the edge of the Chatswood Bowling Club.

Commercial property developer FiveX is also making its move into the residential market. Last month it lodged plans for a 61-storey tower with 490 apartments, which, if approved, would become one of the tallest residential buildings in Chatswood.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/first-look-fivex-targets-chatswood-skyline-with-61-storey-tower-after-north-sydney-plans">First look: FiveX targets Chatswood skyline with 61-storey tower after North Sydney plans</a>

Aqualand is also expanding its development pipeline following the launch of its luxury residential brand, Aqualand Prestige. The developer has delivered a string of high-end apartment projects across Sydney's affluent suburbs over the past decade, most recently AURA by Aqualand on Walker Street in North Sydney.

[smartcode_project:default project_id=30959 project_image_fid=292863]

It has since quietly assembled its next wave of projects.

Earlier this year Aqualand launched Boronia in Roseville, a boutique 111-apartment development on Larkin Street. The project is one of the first significant apartment developments to launch in the suburb ahead of what is expected to become one of Sydney's most active new housing precincts under the NSW Government's Low and Mid-Rise Housing reforms, which allow greater density around train stations.

[smartcode_project:default project_id=152095 project_image_fid=373685]

The developer has also lodged plans for a two-tower, 413-apartment development on Herbert Street in nearby St Leonards, further strengthening its presence across the Lower North Shore.

Beyond that, Aqualand remains behind the final stage of Barangaroo, where plans will deliver a five-hectare mixed-use precinct comprising new homes, retail, hospitality and community facilities, alongside a new Metro entrance and more than two hectares of public open space, completing the Barangaroo precinct.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/central-barangaroo-development-takes-big-step-with-concept-proposal-approval">Central Barangaroo development takes big step with concept proposal approval</a>

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/first-look-aqualand-joins-st-leonards-apartment-party">First look: Aqualand joins St Leonards apartment party</a> 
&nbsp;

&nbsp;

&nbsp;

&nbsp;

&nbsp;

First look: Aqualand pushes ahead with Chatswood apartment tower as SSDA lodged for Archer Street

Mass timber is becoming an increasingly popular construction material in apartment developments, but Adelaide developer <a href="https://www.apartments.com.au/developers/otello">Otello</a> is taking the approach a step further.

At its new <a href="https://www.apartments.com.au/new-apartments/flowe-bowden-18-gibson-street-bowden-sa-5007">Flowe Bowden</a> development, the exposed cross-laminated timber (CLT) structure isn't just about reducing the building's environmental footprint. It also forms the foundation of a broader wellness strategy, influencing everything from indoor air quality and natural materials to the way residents move through and experience the building.

The 115-apartment mixed-use development, designed by Melbourne-based architecture practice Fieldwork, will occupy a prominent island site opposite Bowden Village Reserve, combining one, two and three-bedroom apartments with retail and a dedicated wellness destination.

[smartcode_project:default project_id=152022 project_image_fid=375528]

Wellness isn't confined to a gym or shared resident facility at Flowe. Instead, Fieldwork embedded the concept into the building itself.

The development has been split into two residential wings connected by a naturally ventilated central breezeway, replacing traditional enclosed corridors with open-air walkways that improve natural light, encourage cross ventilation and create more opportunities for neighbourly interaction.

"Rather than treating wellness as something that only happens on the ground floor, our response integrates it throughout the building, which led us to ask what it really means to design a healthy building," Fieldwork Director Quino Holland said.

[smartcode_project:default project_id=152022 project_image_fid=375531]

The building's architecture also reflects Bowden's industrial heritage. The lower podium references the area's historic brick and sandstone buildings, while the upper levels transition to exposed CLT, allowing the timber structure to become a defining feature throughout the apartments and shared spaces.

The use of mass timber sits alongside a range of sustainability initiatives, including a fully electric, gas-free design, rooftop solar and a targeted 5 Star Green Star rating.

[smartcode_project:default project_id=152022 project_image_fid=375524]

Inside the residences, the focus remains on natural, durable materials. Blackbutt engineered timber flooring, exposed CLT ceilings, porcelain surfaces and warm timber joinery create a calming interior palette, while low-VOC finishes and responsibly sourced materials have been selected to improve indoor air quality.

Kitchens have been designed as the centrepiece of each apartment, featuring porcelain island benchtops, timber-look cabinetry and brushed steel tapware, with layouts that maximise natural light and ventilation.

[smartcode_project:default project_id=152022 project_image_fid=375530]

The more traditional interpretation of wellness comes in the form of Level Eleven, a two-storey wellness club spanning the ground floor, mezzanine and first floor.

The facility will include a gym, yoga and reformer Pilates studios, Finnish and infrared saunas, magnesium hot and cold plunge pools, and dedicated recovery spaces. Unlike many residential wellness facilities, Level Eleven will also operate commercially, allowing the broader Bowden community to access the venue while giving residents exclusive membership benefits.

The ground floor has also been designed around everyday living. A café overlooking Bowden Village Reserve will activate the street frontage, while a bike workshop with tool storage, co-working space and dog wash has been incorporated to support daily routines and encourage interaction between residents.

"Flowe brings together my two biggest passions, creating places and creating healthier lives," Otello founder Daniel Harris said.

"We wanted to create something Adelaide hasn't seen before, a genuinely healthy building, where the way you live is lifted without even trying."

Flowe is positioned directly opposite Bowden Village Reserve and within walking distance of Bowden Railway Station and the Adelaide Entertainment Centre, placing future residents just minutes from the Adelaide CBD while remaining connected to one of the city's most established urban renewal precincts.

[smartcode_project_cta:default project_id=152022]

Otello launches wellness-focused Flowe Bowden with Adelaide-first mass timber apartment design

Not all apartment amenities are immediately visible.

Swimming pools, gyms, rooftop terraces and residents' lounges have long featured on buyers' wishlists, but as the way Australians live has changed, so too have the features that make apartment living more convenient.

Increasingly, buyers are placing value on the practical aspects of day-to-day life. Fast internet, EV charging, secure bike storage, flexible workspaces and parcel management are becoming just as relevant as lifestyle amenities, reflecting changing habits and expectations.

Online shopping has been one of the biggest drivers of that shift.

Australians spent a record $82.6 billion shopping online in 2025, with almost one in every four retail dollars now spent digitally, making parcel deliveries a routine part of everyday life rather than an occasional convenience.

For apartment residents, however, receiving those deliveries isn't always straightforward.

Without someone home to accept a parcel, deliveries can be redirected to a nearby Post Office, left in building foyers or common areas, or require building management to temporarily store packages. As apartment living continues to grow across Australia's cities, parcel management has become an increasingly important consideration for both residents and developers.

Australia Post's Parcel Locker network is one response to that shift.

<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/KPZ9j5FRdsQ?si=Qztc1dNP3ZvEIUhb" title="YouTube video player" width="560"></iframe>

Rather than relying on home delivery, eligible parcels can be directed to a nominated Parcel Locker, where they're securely stored until collected. Once a parcel arrives, residents receive a notification through the AusPost app or SMS and can retrieve it using a one-time code or QR code at a time that suits them.

The network has expanded to more than 1,500 locations nationwide, with Parcel Lockers positioned at Post Offices, shopping centres, supermarkets, transport hubs and, increasingly, within or alongside residential developments.

That growing presence reflects a broader change in how apartment buildings are being planned.

Developers are increasingly considering the operational side of apartment living alongside traditional lifestyle amenities. Just as secure mailrooms, bicycle storage and EV charging have become more common inclusions, parcel management is emerging as another feature that supports everyday convenience.

It also helps preserve the arrival experience within a building. Carefully designed lobbies and communal spaces can quickly become cluttered when deliveries accumulate, while secure parcel solutions reduce the likelihood of missed deliveries or parcels being left unattended.

For buyers comparing apartments, these everyday details are becoming part of the decision-making process.

Location, floorplans and finishes remain fundamental, but the features that simplify daily life are carrying greater weight than they once did. As online shopping continues to shape consumer behaviour, secure parcel delivery is increasingly becoming another amenity worth looking for.

Parcel delivery is joining the apartment amenity checklist

Inca Property Group has lodged a State Significant Development Application (SSDA) for Dawn, a 53-apartment oceanfront development overlooking Mona Vale Beach.

The proposal, at 35-39 Darley Street East, would replace an existing 18-apartment strata building with a new owner-occupier-focused development comprising 53 two and three-bedroom apartments, including nine affordable built-to-rent residences delivered under the State's infill affordable housing scheme.

Positioned on a 2,679 sqm elevated site around 280 metres from Mona Vale Beach, the development has been designed to maximise panoramic ocean views while responding to the site's sloping topography.

<a href="https://www.apartments.com.au/developers/inca-property-group">Inca Property Group</a> Managing Director Josh Thompson said the State Significant pathway provided greater certainty for projects of this scale.

"This State Significant pathway gives the team real certainty to progress <a href="https://www.apartments.com.au/new-apartments/dawn-35-39-darley-street-east-mona-vale-nsw-2103">Dawn</a> through to completion," Thompson said.

"It allows us to acquire a one-off site, design it carefully and deliver the right offering for the suburb, assessed by the NSW Government's planning department."

The project is one of the first developments in the area to be assessed under the NSW Government's Low and Mid-Rise Housing policy, with the site sitting on the edge of the policy's designated inner area.

The proposal includes three basement levels providing 124 car spaces, alongside a range of resident amenities including a swimming pool, gym, sauna, wellness facilities and private plunge pools for selected ground-floor and penthouse apartments.

<img alt="Dawn" data-entity-type="file" data-entity-uuid="fc1a1daf-0ce4-4f12-9076-b1fa553c7a91" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-21%20at%208.42.11%E2%80%AFAM.png?VersionId=4GZ9h.gpNkTljbxyAET8Jfhv51XUamDm" />

Thompson said Dawn had been designed specifically for owner-occupiers and downsizers, a buyer profile that has driven demand across Inca's recent Upper North Shore developments.

"The majority of buyers in our recent North Shore projects have been downsizers, and we are learning exactly what this market is looking for. Beyond the location itself, we have included resort-style amenities to deliver a genuine lifestyle offering," Thompson said.

Located within walking distance of Mona Vale Beach, the town centre, Mona Vale Golf Club and the Royal Motor Yacht Club, Dawn represents Inca's first Northern Beaches project following the sell-out of Tara on Park in Waitara and Ellis Residences, currently under construction in St Ives.

Construction will be undertaken by Inca's in-house construction arm, GOP Constructions.

Dawn is the latest major apartment proposal for Mona Vale, with the suburb emerging as one of the key beneficiaries of the NSW Government's new Low and Mid-Rise Housing policy.

New developer One Living, led by industry veteran Joseph Scuderi, recently secured a site on Mona Vale Road, on the border of Mona Vale and Pymble, where it is planning around 140 apartments.

IPM is also planning its third project in Mona Vale, significantly increasing the scale of its previous developments with an 82-apartment proposal at <a href="https://www.apartments.com.au/new-apartments/159-167-darley-street-west-mona-vale-nsw-2103">159-167 Darley Street West</a>, opposite Bayview Golf Course and less than 800 metres from Mona Vale town centre.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/one-living-enters-sydneys-new-apartment-market-with-northern-beaches-site-acquisition">One Living enters Sydney's new apartment market with Northern Beaches site acquisition</a>

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/first-look-ipm-plans-third-mona-vale-project">First look: IPM plans third Mona Vale project</a>

First look: Inca eyes Mona Vale with State Significant DA for Dawn apartments

Oversupply

<html><body>
GUEST OBSERVER
As mining investment falls, Australia’s growth has needed to rebalance to other sectors of the economy. A key driver of this rebalancing act has been a pick-up in housing construction, motivated by low interest rates and rising housing prices. Dwelling approvals have been at record levels in recent months.
This has been a positive story, as Australia did not build many houses when the mining boom was at its height and had an accumulated housing undersupply. But for how long will it be a positive story? When will we have built enough houses, or potentially too many? These questions have become more pertinent recently, given both the ramp-up in housing construction and a slowdown in population growth.
Answering these questions is tricky. There are good measures of the number of new houses being built (supply), but estimates of housing oversupply or undersupply also rely on growth in the number of households (demand). This is affected by population growth and the number of people in each dwelling, which is poorly measured and a swing factor when there are housing shortages or affordability changes. For example, when housing prices rise, more people live together. In short, the numbers are quite ‘rubbery’.
However, despite the uncertainties, it is clear that the recent ramp-up in housing supply means the cumulative housing deficit is diminishing. Our estimates see the national housing market in balance by 2017. Across the states, Victoria has the highest risk of oversupply, while NSW and Queensland will have undersupplies for some time yet.
The bottom line is: Australia does not currently have an oversupply of housing, but a further jump in approvals could increase the risk of building too many houses. This could affect the house price outlook. It may also make the RBA more cautious about cutting rates further from here, as the costs of cutting further could start to outweigh the benefits.  
<div class="page" title="Page 1">
<div class="section">
<div class="layoutArea">
<div class="column">
<a href="/images/2015/09/09/Screen%20Shot%202015-09-09%20at%209.04.07%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2015/09/09/Screen%20Shot%202015-09-09%20at%209.04.07%20AM.png" alt="" width="713" height="326">
 
<div class="page" title="Page 2">
<div class="layoutArea">
<div class="column">
Housing supply is ramping up, while population growth slows 
Housing supply has been ramping up in the past couple of years in Australia (Chart 1). Indeed, a pick-up in housing investment directly contributed 0.4ppts to GDP growth over the year to June 2015, which has been helping to rebalance growth as mining investment falls. 
Leading indicators of construction activity have recently risen to record levels with over 200,000 dwellings approved in the past year. The number of new dwellings approved in H1 2015 was 40% higher than in H1 2013. As building approvals typically lead dwelling completions by around 1-3 quarters, the current high level of approvals implies that some further ramp-up in construction is likely in coming quarters. We expect housing construction to continue to be a support for GDP growth in 2016. 
However, the ramp-up in housing investment has come at a time when population growth is slowing. The latest estimates show that population growth slowed to 1.4% in 2014, down from a recent peak of 1.7% in 2012 (Chart 2). The slowdown reflects slower growth in inward migration, with the largest driver of this trend being an increase in the net flow of Kiwis back to New Zealand. 
At first glance, these contrasting trends may seem worrisome. If housing supply is ramping up at the same time that demand is weakening, surely there could be excess supply in the market at some point? However, the story is more complex than this. Much of the recent ramp-up has been needed to work off an accumulated implicit undersupply of dwellings that occurred over the past decade. 
Australia has an accumulated housing undersupply 
Measuring the extent of undersupply in the housing market is, however, also quite tricky. This is partly because there is no literal housing shortage. Instead, the number of people per household adjusts to keep demand in line with supply. For example, when there is insufficient supply of housing at a reasonable price, young people may choose to live in their family home for longer. 
This pattern has been apparent in recent years with population growth exceeding the rate of growth in new households between the 2006 and 2011 censuses (Chart 3). Over that period, the average number of people per household levelled out, rather than falling in line with the historical trend. Importantly, small variations in the number of people per household can make a big difference to estimates of growth in the number of households (which drives housing demand). Measuring housing demand is further complicated by the fact that data on the number of people per household are only available on a five-year basis. 
<a href="/images/2015/09/09/Screen%20Shot%202015-09-09%20at%209.05.55%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2015/09/09/Screen%20Shot%202015-09-09%20at%209.05.55%20AM.png" alt="" width="896" height="418">
 
<div class="page" title="Page 3">
<div class="layoutArea">
<div class="column">
‘Underlying’ demand, therefore, has to be estimated, usually based on historical trends. To do this, we have used different scenarios for the number of people per household (Chart 4). In all cases, however, growth in the number of households has exceeded growth in the number of dwellings on average over the past 15 years (particularly between 2007 and 2010). So, on average, we have an accumulated implicit housing undersupply because in previous years we had built too few houses to meet new housing demand at a constant household size. 
When will the housing undersupply be worked off? 
Although there is significant uncertainty in these estimates, it is likely that we are now working off some of the undersupply that had previously built up. This is because dwelling construction is quite clearly growing faster than population growth. Our central estimates show that the housing undersupply probably peaked in 2012 at around 200,000 dwellings and has been falling since then (Chart 5). 
<a href="/images/2015/09/09/Screen%20Shot%202015-09-09%20at%209.10.52%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2015/09/09/Screen%20Shot%202015-09-09%20at%209.10.52%20AM.png" alt="" width="831" height="381">
 
<a href="/images/2015/09/09/Screen%20Shot%202015-09-09%20at%209.12.09%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2015/09/09/Screen%20Shot%202015-09-09%20at%209.12.09%20AM.png" alt="" width="835" height="388">
<div class="page" title="Page 4">
<div class="layoutArea">
<div class="column">
Just how quickly we will work off the housing undersupply will depend on a number of factors, including how many dwellings are built from here, how much population growth slows and, of course, how many people there are per household. 
In Chart 5, we set out three scenarios based on varying rates of growth in the number of households and all assuming that dwelling construction continues at its current level, with completions running at around 220,000 dwellings (net of 15% for demolitions and un-occupied dwellings). In the central case, with household growth of 1.4% a year this sees the undersupply of housing worked off by 2017. 
Supply imbalances differ across the states 
Although there has been a lift in residential construction in most states recently, there have been stark differences in housing supply and demand dynamics over the past decade (Charts 6 and 7). 
Victoria and New South Wales (NSW) have experienced similar levels of population growth since around 2007; however, in Victoria, construction has kept pace with the increase in the population, while in NSW it has not (Charts 8 and 9). Since the beginning of 2007, the population of NSW has grown by an estimated 813,000 people. In Victoria, the increase was almost identical at 815,000 people. However, over that time, NSW has added 214,000 dwellings, while Victoria added 307,000.
<div class="page" title="Page 5">
<div class="layoutArea">
<div class="column">
These disparities across the states mean the national story of a housing shortfall does not apply evenly. Our estimates show significant shortfalls seem likely in NSW and Queensland. In contrast, Victoria, South Australia and Western Australia appear to be much closer to balance. These trends in housing demand and supply are no doubt contributing to the strong growth in housing prices in Sydney and weaker housing price growth elsewhere (Chart 10). 
Looking forward, housing construction has been lifting in all states and recent building approvals suggest further growth to come. In Queensland and Western Australia, there has also been a sharp slowdown in population growth. These factors combined point to a rapid improvement in the level of the housing stock relative to demand. In NSW, a significant upswing in housing construction is underway, and population growth appears to be slowing modestly. However, the accumulated housing deficit appears to have been largest in NSW, so adjustment may take some time yet. In Victoria, as discussed above, housing construction appears to have kept pace with population over recent years. Slower population growth and even stronger construction poses the risk that certain parts of the market may become oversupplied. 
<a href="/images/2015/09/09/Screen%20Shot%202015-09-09%20at%209.14.28%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2015/09/09/Screen%20Shot%202015-09-09%20at%209.14.28%20AM.png" alt="" width="851" height="388">
<a href="https://www.about.hsbc.com.au/hsbc-in-australia/management-team" target="_blank">P</a>aul Bloxham is chief economist (ANZ) for HSBC . Daniel Smith is economist. They can be contacted <a href="https://www.about.hsbc.com.au/hsbc-in-australia/management-team" target="_blank">here</a>.
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</body></html>

jchancellor-FAypfDUnLy

Australia’s housing supply ramp-up: HSBC's Paul Bloxham

<html><body>
The supply of apartments in Melbourne's CBD and the inner suburbs is plentiful over the next few years with a mounting concern for potential over supply, according to Herron Todd White.
HTW's Month in Review for September estimates 160,000 established apartments will be in the market by 2018 - a 43% increase compared to 112,000 apartments in 2015 and said the recent resale of new apartments, even being sold in brand new condition, are struggling to achieve their original off the plan purchase price.
"It was recorded that 1,518 new apartments settled in the CBD over the past 12 months to May 2015 (City Scope, 2015)," the report noted.
"Demand will need to remain strong in order to match the large influx of new apartments over the short to medium term. Inner city apartments that are established or are not being sold off the plan, can generally be purchased at a lower price than a new apartment. 
"Off the plan sales in the CBD are strongly underpinned by foreign purchasers. 95% of 941 apartments within the proposed 92-storey skyscraper known as Aurora located in the heart of the city were sold in a fortnight. Approximately 75% of the buyers are from South-East Asia and China. EQ Tower, another 63-storey skyscraper on A’Beckett Street, was sold out within eight months. The development will comprise 633 apartments on completion in June 2017."
</body></html>

mick.cee-iDmgDDAmu8

Growing concern of oversupply in Melbourne's inner unit market: HTW

<html><body>
GUEST OBSERVATION
If I were an Australian central banker, politician, bank economist, or even a negatively geared property investor, I’d be telling you Australia has a chronic housing shortage, which is responsible for our sky-high housing prices. But as an independent macro researcher, the data tells me otherwise.
The best method to determine whether a surplus or deficit of housing exists is to compare the flow of new net dwellings to new net households. This has given rise to the LF Economics Dwelling Supply Index, which tracks the supply and demand trends since June 1996.
Using the most conservative estimates to err on the side of caution by biasing downward the number of dwellings while biasing upward the number of new households, the data tells us the following:
<ul>
<li> In September 2014, Australia had a net cumulative excess supply of at least 165,000 dwellings.</li>
<li> This surplus is equivalent to more than one year’s supply at current population growth rates nationwide, and about three years for the most oversupplied state, Victoria.</li>
<li> Australia’s dwelling oversupply peaked in June 2006 at 349,000 dwellings.</li>
</ul>
Western Australia, Queensland and Northern Territory are the only states undersupplied, given the rapid influx of population to service the mining sector. This is reflected in both the continuing net deficit of dwellings relative to households and strong rental price growth. These metrics are now reversing as the mining boom unwinds.
This illustrates the classic case of supply and demand: when the index shows a persistent surplus, rental prices remained subdued. During the global financial crisis, however, rental prices surged as a genuine shortage occurred because of a moderation in construction and heightened population growth via net overseas migration. Unlike capital prices, rents cannot be leveraged, so they demonstrate the true supply and demand situation.
If there were such a dire shortage of housing as the housing cheerleaders suggest, property investors en masse would not be negatively geared in a record low interest rate environment. This tells us leveraged speculation has generated “artificial” demand that has absorbed a wealth of the supply.
Sydney and Melbourne are today’s prime examples. Unfortunately, it is only when the tide rolls out that the masses realise no such housing shortage exists. Miami and Dublin are excellent examples.
The numerous global housing price booms of the 2000s were written off by government, industry and the economics profession as a failure of inadequate housing supply and a rapidly growing population. The facts later demonstrated these booms were actually gigantic asset bubbles, spectacularly crashing and revealing mass overbuilding.
A tiny fraction of the 15,000 professional economists in the United States managed to correctly identify that their housing price boom represented a bubble and was not the result of a dwelling shortage. Relative to scale, Ireland was no different. And it appears Australia’s economists are following suit by falling into the same trap of illogic.
It is easy to see why Australia’s housing lobby places the blame for high prices on government regulations and dwelling shortages: it’s an easy and a much safer explanation than admitting the real cause to be debt-financed speculation – a bubble. Indeed, as of September 2014, Australia has the world’s third-most indebted household sector relative to GDP, edging closer to Denmark (1st) and Switzerland (2nd).
Unfortunately, the faulty narrative is maintained by government and industry, whose experts have numerous unresolved conflicts of interest.
Lindsay David is the author of <a href="https://blog.australiaboomtobust.com/2015/02/lindsay-davids-new-book-print-central-bankers-bubble-now-available/">Australia: Boom to Bust and Print: The Central Bankers Bubble.</a> David holds an MBA from IMD Business School and recently founded <a href="https://www.lfeconomics.com/about">LF Economics</a>.
This article first appeared on <a href="https://www.prosper.org.au/" target="_blank">Prosper Australia</a>.
</body></html>

LindsayDavid-WEhfyLvNJJ

Melbourne and Sydney are in housing oversupply: Lindsay David

<html><body>
A few weeks agowe highlighted that the number of dwellings approved for construction reached an all-time high over the year to November 2014 with almost 200,000 approvals registered nationally. 
<a href="https://blog.corelogic.com.au/2015/01/record-high-number-dwelling-approvals-november-2014/" target="_blank"> Over the year house approvals were up 3.6%</a> compared with an 18% increase in the number of multi-unit dwellings approved.
<a href="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Chart-1.jpg" rel="wp-prettyPhoto[g4190]"><img class="aligncenter size-full wp-image-4147" src="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Chart-1.jpg" alt="Chart 1" width="500" height="181"></a>
The record level of housing supply in the pipeline comes at a time when population growth (ie housing demand) is winding down and some of the heat is coming out of the housing market.
A deep dive on the Australian Bureau of Statistics approvals data pinpoints exactly where the bulk of the development pipeline from the past year is geographically concentrated. 
At a broad level we can see the majority of new dwelling approvals are located in Melbourne where 44,633 new dwellings have been approved for construction over the 12 months ending November 2014.  Melbourne dwelling approvals accounted for 23% of all approvals nationally and 31% of all approvals across the combined capital city metro areas.
Sydney was close behind, recording just over 39,000 new dwelling approvals over the year.  67% of all approvals across the Sydney market were for multi-unit dwellings (the highest proportion of apartments approved of any capital city).
<a href="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Table-national-approvals-across-cap-city-and-ros-regions.jpg" rel="wp-prettyPhoto[g4190]"><img class="aligncenter size-large wp-image-4199" src="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Table-national-approvals-across-cap-city-and-ros-regions-580x399.jpg" alt="Table - national approvals across cap city and ros regions" width="580" height="399"></a>
While new housing supply should generally be viewed as  positive and a necessary factor in the Australian housing market and economy, areas where the approved supply pipeline are out of alignment with demand can offer up an element of risk. 
We recommend that prospective buyers factor supply levels into their housing market analysis and undertake additional research where they fear an area may be in oversupply or at least moving in this direction. 
The number of multi-unit dwellings, particularly in Melbourne and Brisbane are hovering around record highs.  Of course demand for this type of product is increasing but there are risks associated with too much new development of this product type, particularly given values are rising and population growth is slowing.
Eight of the top 20 SA3 regions, based on the number of dwelling approvals over the year to November 2014, are located in Melbourne; five are located in Perth, four in Sydney, two in Brisbane and one in Canberra.
<a href="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Table-National-top-20.jpg" rel="wp-prettyPhoto[g4190]"><img class="aligncenter size-large wp-image-4208" src="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Table-National-top-20-580x400.jpg" alt="Table National top 20" width="580" height="400"></a>
 
A state by state rundown on new housing supply begins on the next page. Please click below.
<hr class="system-pagebreak">
The tables and maps below highlight exactly where the largest amount of new housing supply is in the pipeline.
<a href="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Sydney2.jpg" rel="wp-prettyPhoto[g4190]"><img class="aligncenter size-large wp-image-4198" src="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Sydney2-580x351.jpg" alt="Sydney2" width="580" height="351"></a>
<a href="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Table-NSW.jpg" rel="wp-prettyPhoto[g4190]"><img class="aligncenter size-large wp-image-4201" src="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Table-NSW-580x276.jpg" alt="Table NSW" width="580" height="276"></a>
Seven of the top ten SA3 regions showing the most dwelling approvals across Sydney have a strong bias towards multi-unit dwellings, with the Inner Sydney region topping the list at 2,631 new apartments approved over the twelve months to November 2014. 
Within the inner city region it is the Waterloo-Beaconsfield area that is attracting the most developer interest.  These suburbs account for 1,047 (or 41%) of the apartments being developed across the Inner Sydney SA3 region.  Several areas around Sydney’s inner ring are attracting very little in the way of densification over the past year. 
The Manly region has only recorded 48 new dwelling approvals over the past year and similarly, Leichardt has recorded only 65 new dwelling approvals.  Towards the outskirts of the city, the regions attracting the largest supply pipeline are Parramatta (1,558 new unit approvals over the past year and 119 house approvals) as well as the Bringelly-Green Valley region which is seeing an influx of new detached housing approvals (1,449).
 
<hr>
<a href="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Melbourne2.jpg" rel="wp-prettyPhoto[g4190]"><img class="aligncenter size-large wp-image-4196" src="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Melbourne2-580x351.jpg" alt="Melbourne2" width="580" height="351"></a>
<a href="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Table-Vic.jpg" rel="wp-prettyPhoto[g4190]"><img class="aligncenter size-large wp-image-4206" src="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Table-Vic-580x281.jpg" alt="Table Vic" width="580" height="281"></a>
Melbourne’s inner city tops the nation with the majority of new dwelling approvals, recording just over 5,000 new apartment approvals over the past year. 
The high approval reading comes after 3,725 apartments were approved in the same region over the previous year as well as 5,419 the year before that.  More than half of last year’s approvals across the Melbourne Inner City were located in the Melbourne CBD (2,418) followed by North Melbourne (682) and Docklands (657). 
Outside of the inner city, the majority of new dwelling approvals across the Melbourne metro area have been located in the outer fringes and are primarily detached dwellings.  The Whittlesea-Wallan region has recorded the second highest number of Greater Melbourne dwelling approvals over the twelve month period at 2,956 of which 83% were detached dwellings. 
The data shows that the densification taking place in the Melbourne housing market is very much focussed within the inner city core.
 
<hr>
<a href="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Brisbane2.jpg" rel="wp-prettyPhoto[g4190]"><img class="aligncenter size-large wp-image-4192" src="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Brisbane2-580x351.jpg" alt="Brisbane2" width="580" height="351"></a>
<a href="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Table-Qld.jpg" rel="wp-prettyPhoto[g4190]"><img class="aligncenter size-large wp-image-4203" src="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Table-Qld-580x286.jpg" alt="Table Qld" width="580" height="286"></a>
The Brisbane Inner North SA3 region has recorded the third highest number of new dwelling approvals of all SA3 regions nationally over the 12 months to November 2014.  2,981 new apartment approvals were recorded over the year and 117 house approvals. 
The suburbs of Bowen Hills and Newstead comprise the majority of these approvals with 1,535 new apartments approved for construction over the twelve month period. 
The Inner City region also recorded a high number of multi-unit dwelling approvals, with 1,881 new apartments approved for construction over the year. 
Outside of the state capital, the regional city of Townsville recorded the third highest number of dwelling approvals across the state over the twelve month period, with 1,228 houses and 410 apartments. 
Interestingly, the resource-intensive regions of Mackay and Gladstone-Biloela, where market conditions have softened substantially, have also made it into the top ten for the state for new dwelling approvals over the year.
 
<hr>
<a href="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Adelaide2.jpg" rel="wp-prettyPhoto[g4190]"><img class="aligncenter size-large wp-image-4191" src="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Adelaide2-580x351.jpg" alt="Adelaide2" width="580" height="351"></a><a href="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Perth2.jpg" rel="wp-prettyPhoto[g4190]"> </a><a href="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Table-SA.jpg" rel="wp-prettyPhoto[g4190]"><img class="aligncenter size-large wp-image-4204" src="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Table-SA-580x285.jpg" alt="Table SA" width="580" height="285"></a>
Slightly less than one third (31.3%) of all new dwelling approvals across Adelaide were for multi-unit dwellings over the twelve months ending November 2014, with the city having a clear preference for detached dwellings. 
The largest supply pipeline, based on approvals over the twelve month period, can be found in Onkaparinga where 1,103 new dwelling approvals were issued over the year.  Most of the approvals were at Seaford (418), Aldinga (164) and Christies Beach (132). 
The Charles Sturt region was the only other SA3 in South Australia to record more than 1,000 approvals over the year.
Article continues on the next page. Please click below.
 
<hr class="system-pagebreak">
<a href="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Perth2.jpg" rel="wp-prettyPhoto[g4190]"><img class="aligncenter size-large wp-image-4197" src="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Perth2-580x351.jpg" alt="Perth2" width="580" height="351"></a>
<a href="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Table-WA.jpg" rel="wp-prettyPhoto[g4190]"><img class="aligncenter size-large wp-image-4207" src="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Table-WA-580x284.jpg" alt="Table WA" width="580" height="284"></a>
At a time when the Perth housing market is slowing down, new dwelling approvals have moved to historic highs. 
The SA3 region of Wanneroo ranks as number two nationally for dwelling approvals, with 3,406 new homes approved for construction over the twelve months to November 2014.  
The Swan region ranked second highest across Western Australia and 8th nationally with 2,557 new dwelling approvals.  The urban form of Perth housing continues to be mostly focussed on detached housing, with only 23% of new dwelling approvals being for multi-unit dwellings (only Hobart shows a lower proportion at 11%). 
With home value growth slowing and both sales volumes and rents falling, buyers of new homes, particularly if they are buying for investment purposes, should be cautious.
 
<hr>
<a href="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Hobart2.jpg" rel="wp-prettyPhoto[g4190]"><img class="aligncenter size-large wp-image-4195" src="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Hobart2-580x365.jpg" alt="Hobart2" width="580" height="365"></a>
<a href="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Table-Tas.jpg" rel="wp-prettyPhoto[g4190]"><img class="aligncenter size-large wp-image-4205" src="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Table-Tas-580x277.jpg" alt="Table Tas" width="580" height="277"></a>
Despite recording the lowest number of dwelling approvals of any state or territory over the twelve months ending November 2014, dwelling approvals across Tasmania have been trending higher to reach their highest point since early 2012. 
The most significant level of approval activity over the twelve months to November last year was located in the north of the state at Launceston where 329 dwellings were approved for construction.
 
<hr>
<a href="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Darwin2.jpg" rel="wp-prettyPhoto[g4190]"><img class="aligncenter size-large wp-image-4194" src="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Darwin2-580x351.jpg" alt="Darwin2" width="580" height="351"></a>
<a href="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Table-NT.jpg" rel="wp-prettyPhoto[g4190]"><img class="aligncenter size-large wp-image-4202" src="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Table-NT-580x261.jpg" alt="Table NT" width="580" height="261"></a>
58% of Darwin dwelling approvals over the twelve months to November 2014 were for multi-unit dwellings, the highest proportion of apartment approvals outside of Sydney. 
The largest development pipeline, based on dwelling approvals over the twelve month period, was at Palmerston with 818 new dwelling approvals a majority of which were units.
 
<hr>
<a href="https://blog.corelogic.com.au/wp-content/uploads/2015/01/canberra2.jpg" rel="wp-prettyPhoto[g4190]"><img class="aligncenter size-large wp-image-4193" src="https://blog.corelogic.com.au/wp-content/uploads/2015/01/canberra2-580x366.jpg" alt="canberra2" width="580" height="366"></a>
<a href="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Table-ACT.jpg" rel="wp-prettyPhoto[g4190]"><img class="aligncenter size-large wp-image-4200" src="https://blog.corelogic.com.au/wp-content/uploads/2015/01/Table-ACT-580x269.jpg" alt="Table ACT" width="580" height="269"></a>
The annual number of dwelling approvals has been trending lower across the Australian Capital Territory since early 2014 as housing market conditions broadly soften across the national capital. 
The Gungahlin region remains the most popular location for dwelling approvals across the Territory, with 2,160 new dwelling approvals over the twelve month period ending November last year. 
That figure is almost three times higher than the next most popular SA3 location, Cotter-Namadji, where 762 dwellings were approved for construction.
Buyers and developers of new stock should be cautious given that values, sales volumes and rental rates are currently falling in Canberra.
</body></html>

tlawless-5VLUrbAk9s

Where are the housing supply pipelines? A state by state rundown

<html><body>
GUEST OBSERVATION
Melbourne has defied the critics with better than expected post-GFC property price growth. The city boasts a wonderful cultural lifestyle, Australia's best town transport network, and year-round tourism.
But, is that enough to justify plonking money in to a market where the cost of accommodation is already significantly higher than two thirds of Australia?
A significant portion of Victorian government revenues over the last five to six years has been in the form of property-related taxes from an <a href="https://www.propertyology.com.au/wp-content/uploads/2014/04/2013.02.16_Propertyology_FieldOfDreams.pdf">over stimulated construction industry</a>.
<img src="/images/2015/01/30/pressley%20jan%2030%20one.jpg" alt="">
We have been increasingly concerned about an oversupply implication on Melbourne property markets. The data in our building approvals graphic shows that property supply has been significantly higher over the last five years than previous trends.
To date, the higher supply has been counter-punched by higher demand in the form of a swing in population growth. Population growth rates have come from two main sources: <a href="https://www.propertyology.com.au/wp-content/uploads/2014/04/InterstateMigration_2014-06.jpg" target="_blank">net interstate migration</a> and the international student market.
We believe that Melbourne’s property market is very delicately poised. We question the sustainability of Victoria’s ‘we’ll keep building and they’ll keep coming’ strategy. The market has been over supplied for some time. Rental yields are already the lowest in the country and vacancy rates will rise above where they are now.
In our opinion, Victoria has some significant economic challenges on the horizon. The state has a high exposure to manufacturing and the closure of Ford, Holden and Toyota during 2016-17 will inflict a lot of pain. According to a study conducted by University of Adelaide, 98,000 Victorian jobs will be lost. The city councils with the biggest exposure are Melbourne City (15,000), Hume (9,000), Dandenong (7,000), Hobsons Bay (6,000) and Geelong (5,000).
A new state government was elected in to office in November 2014 which resulted in the scrapping of one of the state’s very few major infrastructure projects – the $18 billion East West Link transport project.
With a waning manufacturing industry, fewer state-owned assets than the likes of New South Wales and Queensland, and a small infrastructure pipeline it remains to be seen how the jobs will be created to support a growing population.
Will the new government play the ‘just expand the public sector’ card?
<img src="/images/2015/01/30/pressley%20jan%2030%20three.jpg" alt="">
Even with the higher population growth rates, the rates of property supply are enough to be concerned about. Things could become quite ‘ugly’ if intervention doesn’t create the extra jobs needed to support population growth. We might see interstate migration trends do an about face over the next couple of years.
Simon Pressley is managing director of Propertyology, a property market analyst, accredited property investment adviser, and buyer’s agent. 
<a href="https://www.propertyology.com.au/more-than-a-buyers-agent/" target="_blank">Propertyology </a>works exclusively with property investors to purchase properties in strategically chosen locations all over Australia.
<h2>How to purchase high-performing investment properties: a free Propertyology eBook</h2>
 
</body></html>

spressley-sBoeMhannA

Melbourne oversupply is an increasing concern: Simon Pressley

<html><body>
Rumours of the imminent demise of the residential construction boom were somewhat exaggerated, it seems. Only yesterday morning I mused in the Twittersphere that we would need to see a proverbial "king wave" of building approvals for the month of November to reinstate the data series to a record high...
<img src="https://2.bp.blogspot.com/-eRHnncJlYUw/VK6c4jalVHI/AAAAAAAASW4/Rc1gJIDLC_g/s1600/pete.jpg">
...and, in the event, that's exactly what we got. Buoyed by a sizeable increase in attached dwellings over the past year, a further total of 18,245 <a href="https://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/8731.0Nov%202014?OpenDocument" target="_blank">building approvals</a> in November took total approvals to the highest annual level on record at 199,173. Over the past year there have been approvals for 113,734 houses (+4%) and 85,439 units and apartments (+18%) representing an excellent supply response to low interest rates and the ensuing increase in dwelling prices. The 18,245 approvals seasonally adjusted in the month of November also smashed the previous two decade old monthly record of 17,745 set way back in August 1994, by more than 3%.
The below chart thus indicates an impressive volume of approvals in the pipeline. With population growth sliding in most states outside New South Wales this generally points towards cooling dwelling price growth in many market sectors as supply steadily comes online. 
<img src="https://2.bp.blogspot.com/-MhBxXFt4g18/VK5xJqYxgII/AAAAAAAASVw/qMPFy9uGRSg/s1600/BA1.jpg">
Let's take a run through the key facts and figures in three short parts, commencing with...
Part one - Australian economy
November 2014 was a monster month for the value of residential building jobs at a seasonally adjusted $5,465 million - this is by a huge margin the greatest monthly figure on record, thereby taking the total value of building jobs to new record heights on an annualised basis.
<img src="https://3.bp.blogspot.com/-dIEWm7ZsazM/VK5xLJsWHFI/AAAAAAAASV8/X9K1KZdNKYc/s1600/BA6.jpg"> 
Victoria has been the kingpin of residential construction for some years now. Yet while this provides some short-term juice for the local economy, an oversupply of apartment stock is nurturing a systemic risk in that market as detailed in part three below.
As <a href="https://petewargent.blogspot.co.uk/2014/11/construction-work-done-sounds-alarm-on" target="_blank">analysed here previously</a> residential construction alone doesn't stand a snowball's chance of successfully offseting the forthcoming declines in mining construction, particularly as "alterations and additions" (major renovations activity) has contributed so little to GDP over the past year, though commercial and infrastructure construction will assist.
The other state which has really embraced a building boom has been New South Wales - but contrary to popular belief the surge in the number of cranes on the Sydney skyline is not leading to an oversupply of residential property.
<img src="https://4.bp.blogspot.com/-tdP6OgG_zPI/VK5xLkYK-kI/AAAAAAAASWI/IszyJS7S8Zk/s1600/BA7.jpg"> 
In fact the enormous boom in building jobs values and construction has to a significant extent been driven by infrastructure and commercial projects.
These include some of those initiated by LendLease (ASX: LLC) such as the gargantuan $6 billion Barangaroo project, of which the enormous office towers "T1, T2 and T3" have been progressing apace since the middle of 2014 (see some of my <a href="https://petewargent.blogspot.co.uk/2014/06/hanging-gardens-of-barangaroo" target="_blank">site photos here</a> among various places on this blog for an idea of the scale).
<img src="https://4.bp.blogspot.com/-f-3HPevuKmU/VK5xMzGRPjI/AAAAAAAASWY/GbYiABmaz2s/s1600/BA8.jpg"> 
Article continues on the next page. Please click below. 
<hr class="system-pagebreak">
Part two- Capital cities
Rather than imbue readers with a chronic case of "chart fatigue" we will omit the state level data today other than to note that Victoria is approving huge volumes of supply, but approvals in New South Wales are now sliding.
Let's skip directly to what is happening at the more interesting capital city level where Greater Melbourne is being joined by Greater Perth in approving the largest number of houses.
 <img src="https://1.bp.blogspot.com/-fMSl5a7IuzE/VK5xNiypVfI/AAAAAAAASWg/uZXBFmckqK4/s1600/ba2.jpg"> 
However it is the supply of inner city apartment stock that holds most intrigue for us in this data series. 
The trend data for Sydney apartment approvals peaked way back in September 2013 and continues to slide on a rolling annual basis - now down to a level at around 24,000 which can be easily absorbed by the growing market demand (population growth in the city could tip in at up to around 90,000 this year). 
Notably some commentators have called an oversupply of residential building in Greater Sydney. I can see why you would think that given the construction that is visibly taking place. 
But much of this is commerical in natue and the numbers tell another story - with the exception of a few small pockets in inner south and inner city suburbs, the market remains tight.
In reality much of desirable inner suburban Sydney has precisely the opposite problem with planning permissions generally difficult to come by and vacancy rates contracting to their <a href="https://petewargent.blogspot.co.uk/2014/12/perfect-storm-for-sydney" target="_blank">lowest level in more than 22 months</a> - since February 2013 - at just 1.5%.
Not only is the new construction not causing an oversupply, in most locations it has barely even begun to address the inherent undersupply.
 <img src="https://1.bp.blogspot.com/-nWgP2Dzi2AY/VK5xN-zJObI/AAAAAAAASWk/pfebfudDE-Y/s1600/ba3.jpg"> 
Greater Brisbane continues to approve a higher number of units and apartments than has been historically typical.
Therefore although we feel that Brisbane is likely to be Australia's best performing property market over the next few years, we would suggest avoiding those inner suburbs where there is a raft of new projects coming online as detailed here previously.
The problem child is Greater Melbourne. The month of November saw an extraordinary pre-election surge of 3,931 attached dwelling approvals (to add to more than 22,000 detached house approvals in the last 12 months).
Despite there already being a glut of apartment stock on the market and elevated vacancy rates, this takes rolling annual attached dwelling approvals to an unprecedented level for Melbourne at more than 25,000, and trending rapidly towards a figure with a "3 handle".
Article continues on the next page. Please click below.
<hr class="system-pagebreak">
Part three - Melbourne going highrise bonkers
The value of approvals in Victoria as charted below - while promising an attractive short-term sugar hit to the local construction economy - also hints at an underlying muddle.
 <img src="https://2.bp.blogspot.com/-nqwGVFyEW6I/VK5xJwi7UaI/AAAAAAAASWE/PpY6yV-ab18/s1600/BA5.jpg">
The number of high rise units continues to break new record levels, largely thanks to the prevailing trend towards constructing towering apartment structures to be exported to offshore investors. 
In localities such as Docklands a high percentage of units are thought to stand vacant as well highlighted at the suburb level in a recent Prosper report entitled Speculative Vacancies in Melbourne 2014.
Drilling into the number of apartments approved by number of storeys below highlights the crux of the issue. More than 3,000 units of four or more storeys were approved in November alone (!) taking the rolling annual total close to 15,000. This is well over double the figures being notched as recently as 2009.
 <img src="https://1.bp.blogspot.com/-DhYEmGMmWq0/VK5xJxa6XRI/AAAAAAAASV0/JPMIZKQo-jQ/s1600/BA4.jpg"> 
Put another way, across the last five years Victoria has approved an extraordinary 62,837 "high rise" (four plus storey) units - well over triple the 18,705 approvals in the preceding five years (New South Wales has been doing something similar in recent years but Sydney is playing catch-up after six years of woeful undersupply).
In short there is clear oversupply of highrise apartments set to land squarely in the city of Melbourne. 
Of course, over the long-term this will easily be absorbed as the city population grows and the largest Australian cities adopt a more Asian city feel and style of high-density living.
Over the short-term, however, this presents a systemic risk and may result in a painful correction in that sector of the market. 
The wrap
From a macroeconomic perspective this was a big result in November both in terms of the number and value of building approvals, which bodes well for this residential construction cycle pushing through until 2017.
At the capital city level apartment approvals have continued to ease back in Greater Sydney meaning that those waiting to see a harbour city oversupply are likely to be disappointed. 
Melbourne, on the other hand, is continuing to wave through high rise approvals at a maniacal rate. This may mask malignant adverse consequences.
Pete Wargent is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.
His new book '<a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>' is out now.
</body></html>

pwargent-M4siyDbqQY

Building approvals hit record high: We need to talk about Melbourne

<html><body>
With cranes dotting the horizon and a new apartment complex seemingly launched every week, many are wondering whether Melbourne will soon have more homes than it knows what to do with.
The Housing Institute of Australia forecasts a total of 51,007 dwelling starts for 2014. The figure puts Victoria's housing output above that of any other state, as it has been for every year since 2005. Dwelling starts in Victoria are predicted to reach 8.7% above those recorded last year.
According to <a href="/news">Victorian government predictions</a>, the number of households in Victoria is set to grow by an average of 1.9% between 2011 and 2021 to a total of 2,600,000 households.
The population projections have some arguing that Victoria is equipping itself for a migration boom. Others, however, believe we are building excess stock that will eventually result in a housing downturn. Meanwhile, the latest Speculative Vacancies Report from Prosper estimates a total of 64,386 properties are likely currently vacant in Melbourne.
<div id="stcpDiv" style="position: absolute; top: -1999px; left: -1988px;">64,386</div>
Property Observer took the question to the experts: Is Melbourne facing an oversupply problem?
Catherine Cashmore: independent analyst and author of Prosper's 2014 Speculative Vacancies Report<img src="/images/authors/fullbody/Catherine-Cashmore.png" alt="" style="float: right;">
If you're looking at it over the state as a whole, compared with the increase in population, it appears that there is ample property for the population.
If you narrow it down it down and look at it at a micro level, some areas definitely have an oversupply. Areas like Cardinia: there are about another 21,000 homes or that are to be built over the next five years or so. But almost 15% of the existing stock is sitting there vacant or unused.
When you say oversupply, in raw terms, sure. But the fact that it's not available to be accessed is important.
This is why it's really important for the government to understand how much latent supply is out there. If we do have a downturn in economic activity – which we will have, property cycles are quite predictable – investors try to offload their stock. That's what happened in 2008. A whole load of tiny apartments came onto the market because investors needed to access funds. Vacant properties go on the rental market. People sell off holiday homes.
In a downturn, people are hit in the pocket and the latent supply becomes active.
I wouldn't touch an inner city apartment. I'm talking about the Docklands, Carlton, West Footscray – all of these areas have seen an enormous uplift in apartment stock.
In Abbotsford, I'd advise any investor to keep glued to SQM's vacancy rates. In Abbotsford, SQM's <a href="https://www.sqmresearch.com.au/terms_vacancy.php" target="_blank">vacancy rate</a> came to 14% at one point. If you add that to our [Prosper's] <a href="https://www.prosper.org.au/2014/11/05/speculative-vacancies-7/" target="_blank">speculative vacancy rate</a>, of properties that have been vacant for 12 months or more – that figure rises considerably.
That is a red flag. The risks are just too great. The supply is not going to go away. You're not going to get capital gains from it, and you're not going to get a tenant.
The government can't keep talking about having a housing supply crisis. [Victorian Planning Minister] Matthew Guy says he doesn't want to see Melbourne suffering from a shortage of supply. They're fine concentrating on pushing the city's boundaries outwards and building more highrises, rather than concentrating on the supply that is vacant.
Robert Larocca: Victoria housing market specialist, RP Data<img src="/images/authors/fullbody/Robert-Larocca.png" alt="" style="float: right;">
The question of supply levels is a vexed one, after all a high level of supply can be great for buyers as it can dampen price growth, but as most buyers are sellers too it is not that simple.
The question is also hard to comprehensively answer, as there are a wide range of data sets and stages in the development cycle to compare.
At a citywide level the volume of homes on the market at any given time is a good measure.  In the month ending on 9 November there were 4.5% more homes newly listed for sale and 6.6% fewer overall homes for sale in Melbourne. Given values have been rising that suggests that there is not oversupply of homes for sale, buyers are buying the new homes and the older stock is also reducing.
But what of the unit market? A casual glance at the Melbourne skyline shows a lot of new high rise residential towers being constructed. Our data shows that those units are finding buyers. The number of units listed for sale is marginally, 2.4% lower than a year ago, and the overall number of units on the market is 3.3% higher.
That suggests that the supply is exceeding demand to a greater extent than is the case in the houses market. That is not necessarily a bad thing. Over the past decade the state government’s policies to address housing affordability concerns have been centred on increased supply in the inner city unit market and outer suburbs. The data shows that it is working.
This article continues on the next page. Please click below.
<hr class="system-pagebreak">
Andrew Wilson: Chief economist, Domain Group's Australian Property Monitors<img src="/images/authors/fullbody/Andrew-Wilson.png" alt="" style="float: right;">
I think it's almost becoming common knowledge that in the CBD highrise market, it clearly looks like supply has moved ahead of underlying demand.
We have record levels of approvals for highrises over the last two years.
It's a market that's under development in the sense that demand isn't pushing supply, but supply is trying to lead demand. The difficulty is that a lot of the development is funded by overseas development. The question is whether that investment model reflects the investment model we have here. That is, ensuring there are a lot of pre-sales before construction commences to ensure demand meets supply.
The prospect of empty towers is raised, and it also presents a conundrum for those developers who are looking for a critical mass of pre-sales before construction commences. With the market seemingly flooded, it means there's a lot of competition for a small pool of buyers. I don't know if there's an underlying culture of CBD living in Melbourne, particularly a culture that would satisfy the number of apartments that would be built. I'm not sure if there's the infrastructure to support it. I'm not sure Melbourne has the natural attributes that would support inner city living like in Sydney and Brisbane.
We probably have a lack of high rise in some of the inner suburban areas. South Yarra has undertaken a change in its profile, as has Prahran. I think demand and supply are matching each other in Prahran and South Yarra.
In Boroondora and Bayside and Stonnington, there are constraints from the local community to high rise development but there is the demand there. It's not all about high rise - it's a question of median density as well. The key question is whether there will be a medium density homes available for downsizers. If we do have these restrictions, there is a shortage.
We seem to be moving away from balance. We're building more high rises in the inner city and fewer medium density suburbs.
Developers such as Little Projects seem to be meeting the market, as are many other developers. In the city of Yarra, there seems to be a reasonable balance there.
Terry Ryder: Founder, hotspotting.com.au<img src="/images/authors/fullbody/Terry-Ryder.png" style="float: right;">
I'm surprised this is even up for debate. The oversupply in Melbourne's inner city apartment is starkly obvious. Also readily apparent is that it will get worse. A lot worse. It has the potential to cause a market crash.
Current vacancy rates include 5% in Docklands, 6% in the CBD and 7% in Southbank. That's about 1,200 apartments sitting vacant and seeking tenants, without considering the thousands of apartments under construction or being marketed off the plan prior to construction.
The true level of vacancies may be higher, given a recent report which found that 17% of Docklands apartments consumed no water last year, which presumably means they were permanently vacant.
New highrise projects are being approved by Planning Minister Matthew Guy at a frantic rate. Since coming to office four years ago, Guy has approved close to 100 buildings in Melbourne's inner city areas.
A recent study by RMIT, looking at additions to the supply of inner-city units from 2011 to 2021, found 85,000 apartments either built, under construction or in the pipeline.
Guy has shown that he will approve anything and everything that comes across his desk. A report six weeks ago suggested there were applications for 42 more apartment buildings on his desk – and the record suggests they will all be approved. You have to wonder about his motivations.
It's overbuilding on a grand and reckless scale. And it's all being done, not to provide homes for Melbourne buyers, but for sale to Asian investors.
There is clearly no local demand to support the scale of new supply that's being created. We will soon have vacancies above 10% throughout the inner city suburbs, with rents falling and property values being dragged down with it.
Inner city Melbourne has experienced oversupply in the past. It helps to explain why the market performance of inner city units has been so poor in Melbourne.
There has been no growth in the median unit price for the CBD over the past three years, while the median prices for Southbank and Docklands have fallen in that time.
Over the past five years, the median price for Docklands has averaged growth of just 1.7% per year, while Southbank and the CBD has managed little better, at around 3% per year.
Given the poor historic performance of inner city apartments, the current high vacancies and the impending glut of new properties, I would strongly urge investors – and home buyers – to steer well clear of this market.
This article continues on the next page. Please click below.
<hr class="system-pagebreak">
Miriam Sandkuhler: Founder, <a href="https://www.propertymavens.com.au" target="_blank">Property Mavens<img src="/images/authors/fullbody/sandkuhler-profile.png" alt="" style="float: right;"></a>
Having lived in and around the inner Bayside suburbs over the last 20 plus years, the ongoing addition of highrise development, especially in and around Port Melbourne, has had an enormous impact on the area.
While Port Melbourne has an attractive location on the bay with some great amenity, I would say that oversupply of apartments is an issue, not just for investors but for local residents alike.
When attempting to shop at Coles or anywhere in Bay Street, it is often a struggle to find a car park. In securing one, the one hour time limit frequently isn't adequate and the grey ghosts are hot to trot in this densely populated part of the suburb. Bay Street also carries a high volume of traffic during peak hour into and from the CBD and surrounding suburbs.
The local primary school is full to overflowing and the new Albert Park high school is also at capacity (it services Albert Park residents ahead of Port Melbourne residents). There is strong demand for a high school and child care to be built in Port Melbourne.
As we know, high demand and low supply drives capital growth. As demand in Port Melbourne is average, I wouldn't recommend investing in Port Melbourne. Investors can do better in other inner city suburbs with less high and midrise development, lower supply and greater demand.
This is evidenced by there being over 1,000 apartments available for rent and over 1,150 apartments for sale as at today, not including houses for rent or sale. Demand for housing to buy is average, based on data from listings over the last 12 months on realestate.com.au.
If owner occupiers particularly wanted to reside in Port Melbourne, I would recommend that they only buy a period style house to maximise capital growth and keep to the older and more established parts of Port Melbourne - on the north side of Graham Street and towards the city.
In other words, steer clear of all of the apartments.
Todd Hunter: Director and location researcher, <a href="https://www.wheregroup.com.au/" target="_blank">wHere Group</a><img src="/images/authors/fullbody/hunter-profile-2.png" alt="" style="float: right;">
Note: Last year, <a href="/news/vic/melbournes-potential-oversupply-the-experts-have-their-say">when asked the same question</a>, Todd Hunter said Melbourne was "absolutely" facing oversupply. 
So I went back and had a re-look at the available properties for sale and for lease, and I'm sorry, but the numbers tell a similar story:
Docklands and surrounding suburbs: 1,904 units for lease, 2,205 for sale, 4.5% yield
Melton: 840 houses for sale, 170 for lease, 4.7% yield
Whittlesea: 1,912 for sale, 414 for lease, 4.7% yield
Pakenham: 765 for sale, 414 for lease, 4.9% yield
Point Cook: 1,685 for sale, 518 for lease, 4.3% yield
Roxburgh Park: 902 for sale, 178 for lease, 5.1% yield
Werribee: 1,680 for sale, 504 for lease, 4.6% yield
In the above numbers, I have not used any price point and ticked the surrounding areas on realestate.com.au and the suburbs next door also add relevance to the huge over supply in these locations. All locations except for Docklands are houses.
It is also relevant to note that the above numbers account for each advert on the website. Now on many of the adverts where new House and Land is being offered or Blocks of Land, there are many properties on the one advert, so the numbers are even more scary than above – and the yields are very reflective of an over supplied market place.
</body></html>

jrichardson-uRX5hFdKfN

Exclusive: Does Melbourne have an oversupply problem?

<html><body>
A media release this week was positively gushing in its eulogy of the Brisbane inner city apartment market. Sales are surging, it said, and the level of new construction in the pipeline was a cause for celebration. The market, apparently, “continues to shine”.
From where I’m sitting, sales are not surging and the new construction – 14 new projects with 1,400 apartments were launched in the June quarter alone - will make worse an existing oversupply.
The thing is, the people building, promoting and selling apartments are concerned only about finding buyers. They’re not interested in the broader consequences of the projects that are earning them money.
If the apartments in the current project sell, they pocket the profits and commissions, and move on to the next one.
Others have to deal with the carnage created by their projects. And there will be repercussions from the overbuilding of apartments in Brisbane.
The situation in the Brisbane inner city market is not (yet) as serious as that in Melbourne, where the existing oversupply is serious and the future oversupply will border on catastrophic.
But Brisbane is heading down the same slippery slope to surplus as Melbourne.
In Brisbane, as in Melbourne, Sydney, the Gold Coast and other major unit markets, the inspiration for the high level of new building is the Chinese investment market. Everyone is targeting Chinese investors.
Developers and their marketing stooges don’t care about the vacancy rate figures. That’s someone else’s problem. If they can flog their apartments to Asian buyers, nothing else needs to be considered.
The people who will feel the most pain in the future will be the investor buyers. High vacancies will push down rents and the returns they will earn from their investment. That in turn will undermine values.
Others will suffer. Owners of existing properties in or near the inner city will also find it hard to tenant their properties and will have to cut rents. Their values will fall also. Home owners in those areas will be equally affected by falling values.
Overbuilding is a constant and recurrent problem in inner city apartment markets. It’s the reason capital growth rates have been so poor in Brisbane.
The average annual rise in the median unit price in the Brisbane CBD has been around 3% per year over the past five years and also the past 10 years. In real terms, capital growth has been negligible at best.
Suburbs just outside the CBD, including Kangaroo Point, Fortitude Valley and South Brisbane, have similar track records.
This week’s media release claims sales are now “surging” in the Brisbane inner city apartment market. Not according to the sales data I’m seeing. Sales levels did rise last year, with every quarter producing an increase in sales volumes. But the market peaked in the December 2013 quarter and sales activity has declined in 2014.
That probably explains why there has been little price growth in evidence recently. According to Australian Property Monitors data, there was no change to median prices in the CBD and Woolloongabba in the most recent quarter, a rise of about 1% in Fortitude Valley and South Brisbane, and a 4% decrease in Kangaroo Point.
The real issue is that the Brisbane inner city areas already have too many apartments. The CBD and the near city suburbs all have vacancy rates in the 3.5% to 4.5% range. Those vacancy levels would not cause undue concern, except that massive levels of new supply are in the pipeline.
The writer of this week’s media release was clearly excited about the new projects coming up. It scoffed as the “predictable murmurings” about oversupply. But the concerns are real and well-placed. Dozens of new highrise apartment buildings are under construction or in planning, bringing thousands of new units to an oversupplied market.
There’s been a lot of media about the potential for prices to fall because of a “bubble”. There is no bubble in Australian property prices but there is a real threat of value decline in many major markets caused by developer overbuilding.
We’ve seen many times in the recent past how much damage oversupply can do and how much angst it can cause to property owners, including both investors and home owners, when values fall.
The Gold Coast has just emerged from years of falling property values - many people own properties worth less than they paid four or five years ago. The median unit price in Surfers Paradise is still lower than it was in 2009.
Owners of property in Gladstone have suffered double-digit value losses, not because of a decline in demand but because of absurd levels of overbuilding by developers. What were they thinking?
Where overbuilding has coincided with a sharp drop in demand because of a pause in the resources sector, values have dropped as much as 40% from their peak levels, including in Karratha in Western Australia and Moranbah in Queensland.
Inner city apartment markets, including those in Brisbane, face the same risk.
I’m not sure what the solution is, with councils and state governments eager to approve anything that’s proposed and trumpet the outcomes as a construction boom benefiting everyone. Until Chinese investors realise they’re being sold over-priced apartments for which there is little or no tenancy demand, developers will continue throwing up high-rise in inner Brisbane and elsewhere.
The outcome, in some places at least, will be a market crash that will be ugly to behold.
I’m urging investors and owner-occupiers to stay well away from these markets.
You can contact Terry via <a href="https://mailto:ryder@hotspotting.com.au" target="_blank">email</a> or <a href="https://twitter.com/hotspotting" target="_blank">Twitter</a>. 
</body></html>

terryryder-YECXbqmri2

Brisbane on the slippery slope to oversupply

<html><body>
Currently Australia has a population of some 23,640,000 and we are rapidly heading towards the 24 million mark.
In the most recent population update issued by the Australian Bureau of Statistics (ABS) for the March quarter 2014 there are some interesting facts and some shifting fortunes for various Australian states. Some of the changes directly reflect the shifting strengths of the associated local real estate market, but there are many other influences the population is having on demand for housing.
Our march towards a population of 24 million is being fuelled by some key facts; our birth-rate is healthy while our death-rate is much lower. According to the ABS a new birth takes place every one minute and 43 seconds, while a death occurs every three minutes and 31 seconds. So births are well ahead. There is one new international migration into Australia every two minutes and five seconds, and we have the net result adding one new person to the local population every one minute and 17 seconds.  Our population growth rate is at around 1.8% which is very high by international standards; therefore we lead the OECD ranks.
It’s little wonder that we see so many new baby wear shops in our local shopping centres, and also continued strong demand for housing.
International Migration
While our natural rate of population growth is impressive, it only accounts for 40% of overall growth, with 60% coming from international migration to Australia. The impact is also apparent in NSW and Victoria, the two states currently leading in population gains.
The March Quarter ABS figures show that in NSW the population increased by 114,500 with 67% of that coming from net overseas migration. In Victoria the population grew by 108,800 with migration making a 57% contribution and we know that these two states also have the most demand for housing and the most robust prices. Clearly the arrival of one new international migrant almost every two minutes is having a major impact on growth and creates more immediate demand for housing than the numbers of new born babies.
Interstate Migration Shows Major Shifts
While WA still leads in the rate of growth at 2.5%, that is well down from the rate of 3.5% just 12 months ago, as momentum is shifting towards the big states like NSW and with its current population at 7,500,600 it’s easy to see how important that state and Victoria and their local economies are as we move out of the mining boom. The ABS figures go further and show how population trends have changed over the last five years.
In 2009 some 12,300 residents left NSW to move to Queensland, in 2014 that figure had fallen to 4,800.  That’s a very big shift. More people are arriving and staying in NSW where housing supply is at its most critical. At the same time growth has slowed in Queensland and WA. In fact NSW has recorded its lowest interstate migration of population in 30 years and Victoria has had its highest gains on interstate migration to that state on record. Queensland has seen its lowest rate of gain, dropping 65% in five years.
We are seeing some changes that are reversing decade-long trends and the different population pressures in each state are reflected in local demand for housing. New migrants and expanded families need homes and both are having a major impact on our local real estate markets and possibly compounding the problems of undersupply.
</body></html>

pchittenden-eLqUUC8TWW

Population growth compounding our undersupply problems

<html><body>
It makes absolute sense that a parliamentary committee would propose hitting foreign investors with extra fees.
If politicians are silly enough to bring on a lengthy, costly, pointless inquiry into a mythical problem (housing affordability), it follows that they would come up with “solutions” that are equally ineffectual.
The idea which reportedly is being considered by the parliamentary committee investigating housing affordability is to charge foreign buyers of Australian property extra stamp duty or other additional fees.
The “logic” goes like this: there is an affordability crisis; foreign investors are causing it and therefore if we hit foreign buyers with lots of extra costs they’ll all go away and there won’t be a problem any more.
Housing will be affordable once again and young Australians will all live happily every after.
Here’s the problem with the solution: we don’t have an affordability crisis, foreign investors are not pricing young Australians out of the market and charging them additional stamp duty will not have the slightest impact on the cost of dwellings for first home buyers.
The Reserve Bank and many commentators from the property research sector have said they believe the impact of foreign buyers is being overstated. I think they’re right.
None of that should prevent the committee from proceeding with the idea of punishing foreign investors. This whole exercise, remember, is being run according to the 'Boys Own Manual of Bureaucratic Smokescreens' written by Sir Humphrey Appleby.
Foreigners account for a small percentage of residential property sales. Their numbers are dwarfed by local investors and in particular by the most powerful force in Australian real estate, home buyers other than first home buyers.
Foreigners are not out-bidding Australians at Sydney and Melbourne auctions because foreigners are restricted in what they are allowed to buy (although there are claims they are sidestepping the rules in the some cases). The “debate” has got to the point where anyone Asian-looking who buys at auction is deemed to be a foreign investor.
Most foreign buyers are purchasing off the plan apartments in locations such as inner city Melbourne and the Gold Coast. These places are not first homebuyer territory so they are not competing with young Aussie wannabes.
My interpretation is that the impact of foreign investors on Australian house prices is close to zero.
Here’s the great irony in all this: if you really wanted to bring down the price of city real estate, you should be providing incentives for foreigners to buy off the plan apartments, not disincentives.
The only way to reduce property values is to create a massive oversupply. Simply increasing supply a little won’t do it. You need a serious glut, with vacancies at 10% or 15%.
The only markets around Australia where values have dropped a lot (such as mining towns and resources regional centres) are locations with major vacancies caused by oversupply.
Several of the inner city markets in our biggest cities already have high vacancies but developers are bringing on more and more new towers. Why? Because they think they can flog them to foreign investors. At least half of the apartments being built around Australia are being developed by Asian companies.
These apartment towers are not being built for Aussie first home buyers or Aussie buyers of any genre. They’re being built for gullible Chinese investors. Some of our cities, headed by Melbourne, will end up with scary oversupplies, big enough to crash rentals and prices – and not just in the inner city areas.
If politicians scare off foreign investors by hitting them with onerous charges, many highrise developments will be scrapped. No oversupply, no collapsing property values, no cheap dwellings for first home buyers – and, incidentally, no construction boom and none of the jobs it would generate.
On that basis, I think deterring foreign investors is a good idea – not because it will help housing affordability but because it will prevent a disastrous oversupply of apartments in Melbourne, Brisbane, Perth, the Gold Coast and, eventually, Sydney.
You can contact Terry via <a href="https://mailto:ryder@hotspotting.com.au" target="_blank">email</a> or on <a href="https://www.twitter.com/hotspotting" target="_blank">Twitter</a>. 
</body></html>

Oversupply

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News

Oversupply

Editor's Picks

Receive the latest news stories to your inbox

Have something to contribute?

Developments

New apartments

New townhouses

News