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


Joel Robinson

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

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


Sammut secures approval for debut Brisbane apartment development in Toowong

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


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

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


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

<p>It's been several years since there's been an opportunity to buy a brand new townhome in Melbourne's coastal suburb of Mordialloc. Even apartment developments in recent times have been few and far between in the area.</p>

<p>Local developer LDS Property identified the gap in new housing, securing a site on White Street, directly opposite&nbsp;Woodlands Golf Club Mordialloc. They've recently launched&nbsp;<a href="https://www.apartments.com.au/new-townhouses/wm-residences-mordialloc-102-white-street-mordialloc-vic-3195">WM Residences</a>, just 13 townhouses which they have already started building.</p>

<p>Projects by Buxton Director Heath Thompson, who is selling WM Residences, says the townhouses x that perfect middle ground be</p>

<p data-end="683" data-start="511">"Mordialloc residents have had limited options to downsize within the suburb, often forcing them to look elsewhere despite long-standing ties to the area," Thompson says.</p>

<p data-end="882" data-start="690">"With very little comparable new supply coming to market, projects like WM Residences are well placed, particularly as buyers look to capitalise on current conditions amid constrained supply."</p>

<p data-end="882" data-start="690">[smartcode_project:default project_id=134646 project_image_fid=6109]</p>

<p>The development, designed by regarded architecture firm&nbsp;<a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a>,&nbsp;adopts a deliberately restrained architectural approach, focusing on simplicity, durability and liveability rather than overt design gestures.</p>

<p>The boutique scale is central to the offering. With only 13 three-bedroom residences, each home is configured to prioritise functional layouts and everyday use, supported by private terraces and secure two-car garages.</p>

<p>Ewert Leaf’s design response leans into a calm, neutral material palette. Interiors are defined by oak flooring, white walls and soft finishes, creating a consistent and understated backdrop. The approach avoids trend-driven detailing in favour of longevity, with an emphasis on natural light and spatial clarity.</p>

<p>[smartcode_project:default project_id=134646 project_image_fid=6110]</p>

<p>Beyond aesthetics, the homes are designed to meet contemporary performance expectations. Each residence targets a minimum 6-star energy rating, incorporating double glazing, comprehensive insulation and all-electric Bosch appliances.</p>

<p>The project’s location supports a walkable coastal lifestyle, sitting within close proximity to Mordialloc’s foreshore, Main Street retail strip and the train station. Local cafés and dining venues, including Suburbia Deli and Hendriks Café, are within a short walk, reinforcing the area’s established neighbourhood character.</p>

<p>[smartcode_project:default project_id=134646 project_image_fid=6116]</p>

<p data-end="247" data-is-last-node="" data-is-only-node="" data-start="0">While <a href="https://www.apartments.com.au/developments/mordialloc-vic-3195">Mordialloc</a> is often defined by its beach and pier, the project taps into other areas of day to day living, offering easy access to local food, casual dining and transport, rather than positioning itself purely as a lifestyle retreat.</p>

<p>WM Residences reflects a continued trend across Melbourne’s coastal suburbs towards smaller-scale, design-led townhouse developments, particularly on infill sites where proximity to amenity is already established.</p>

<p>With construction commenced prior to its market entry, the project aligns with a growing preference among buyers for developments with visible progress and defined delivery timeframes.</p>

<p>[smartcode_project_cta:default project_id=134646]</p>


WM Residences fills gap in Mordialloc townhouse market

Pete Wargent

<html><body>
<p>EXPERT OBSERVATIONS</p>
<p>Building approvals held up well in April 2018, still tracking at 19,000 per month in trend terms.</p>
<p><a href="https://4.bp.blogspot.com/-sPFJh_iXaNg/Ww4PpeWWqHI/AAAAAAAAqRU/qNz215mLY2oj6wIWKRw0SWCSvAE_dxYnACLcBGAs/s1600/A1.jpg"><img src="https://4.bp.blogspot.com/-sPFJh_iXaNg/Ww4PpeWWqHI/AAAAAAAAqRU/qNz215mLY2oj6wIWKRw0SWCSvAE_dxYnACLcBGAs/s640/A1.jpg" width="640" height="378" data-original-height="795" data-original-width="1341"></a></p>
<p>It's still very much hammer time for Melbourne apartments, but Sydney unit approvals continued their decline to sit at the lowest level since August 2015.  <a href="https://3.bp.blogspot.com/-PWI4D2EE_r8/Ww4PpJabroI/AAAAAAAAqRM/M1fKllaWLEICWZtZt-RWUEF2Wjfvwkx_gCLcBGAs/s1600/A2.jpg"><img src="https://3.bp.blogspot.com/-PWI4D2EE_r8/Ww4PpJabroI/AAAAAAAAqRM/M1fKllaWLEICWZtZt-RWUEF2Wjfvwkx_gCLcBGAs/s640/A2.jpg" width="640" height="364" data-original-height="796" data-original-width="1392"></a></p>
<p> </p>
<p>I've been watching the budding Hobart supply response with mild interest, as well as noting some of the subdivisions and, shall we say, rather ambitious sticker prices for townhomes.</p>
<p>And like many things in Tassie, the supply response been rather slow.</p>
<p>That said, it is now happening, with annual approvals at an 82-month high in rising to the highest level since June 2011. </p>
<p> </p>
<p><a href="https://4.bp.blogspot.com/-NdVa1HaRMUw/Ww4PpRgMRFI/AAAAAAAAqRQ/LM-_WGG2GiIaDnf9W-4CuzZUdD_NLqHhQCLcBGAs/s1600/A3.jpg"><img src="https://4.bp.blogspot.com/-NdVa1HaRMUw/Ww4PpRgMRFI/AAAAAAAAqRQ/LM-_WGG2GiIaDnf9W-4CuzZUdD_NLqHhQCLcBGAs/s640/A3.jpg" width="640" height="388" data-original-height="801" data-original-width="1316"></a></p>
<p> </p>
<p>Overall, the headline numbers were pretty good, thanks to more houses and semis now being approved, notably following population flows into Melbourne and Greater Brisbane, while Perth finally recorded a bit of an uptick, having fallen so sharply since December 2014. </p>
<p> </p>
<p><a href="https://4.bp.blogspot.com/-qmIXwgoTuUs/Ww4PqcSZerI/AAAAAAAAqRY/WdAdH0N_eZUeulmz4CPyT8JiqtZVHZ7EgCLcBGAs/s1600/A4.jpg"><img src="https://4.bp.blogspot.com/-qmIXwgoTuUs/Ww4PqcSZerI/AAAAAAAAqRY/WdAdH0N_eZUeulmz4CPyT8JiqtZVHZ7EgCLcBGAs/s640/A4.jpg" width="640" height="364" data-original-height="785" data-original-width="1380"></a></p>
<p>Annual house approvals in Perth are 45 per cent below their 2014 peak, but the sentiment and the clouds appear to be lifting a little. </p>
<p>Summarily, pretty solid then.But - and this is a fairly big but - many apartment projects seem to be struggling with pre-sales and therefore with financing, and in turn the residential construction cycle appears set to fade.</p>
<p>There is already a record number of apartments <a href="http://petewargent.blogspot.com/2018/04/bust-looms-for-sydneys-apartment" target="_blank">approved and not yet commenced</a>, especially in Sydney, and approvals to non-resident approvals have been <a href="http://petewargent.blogspot.com/2018/05/foreign-investment-in-new-apartments" target="_blank">curbed dramatically</a>.</p>
<p>Queensland infrastructure lift-off.</p>
<p>The total value of building approved remained strong in the month at more than $10 billion, but arguably a fair chunk of that residential building work approved will never see the light of day, and non-residential approvals are now sliding too.</p>
<p><a href="https://4.bp.blogspot.com/-xFIb4e2oJBg/Ww4Pq_d-hpI/AAAAAAAAqRc/Yi7uYlyWUV8Hv52JeMm3JA9K5dz83BXqACLcBGAs/s1600/A5.jpg"><img src="https://4.bp.blogspot.com/-xFIb4e2oJBg/Ww4Pq_d-hpI/AAAAAAAAqRc/Yi7uYlyWUV8Hv52JeMm3JA9K5dz83BXqACLcBGAs/s640/A5.jpg" width="640" height="370" data-original-height="801" data-original-width="1381"></a></p>
<p>The one shining light is Queensland, where all the talk of commercial projects is now finally translating into action stations.</p>
<p><a href="https://1.bp.blogspot.com/-trvDoCqub6s/Ww4Prf_YpLI/AAAAAAAAqRg/TYg643XKVlMlDJaXaeEy_FNnBIvWvEg8wCLcBGAs/s1600/A6.jpg"><img src="https://1.bp.blogspot.com/-trvDoCqub6s/Ww4Prf_YpLI/AAAAAAAAqRg/TYg643XKVlMlDJaXaeEy_FNnBIvWvEg8wCLcBGAs/s640/A6.jpg" width="640" height="366" data-original-height="774" data-original-width="1349"></a></p>
<p>However, the sugar-hit for Melbourne and Sydney eventually looks set to wear off.</p>
<p>Overall, then, these figures appear consistent with the construction cycle rolling over this year.</p>
</body></html>

pwargent-M4siyDbqQY

Hammer time for Melbourne apartments, but Sydney unit approvals continue decline: Pete Wargent

<html><body>
<div><span>EXPERT OBSERVATION</span></div>
<div><span> </span></div>
<div><span>The Foreign Investment Review Board (FIRB) released its Annual Report for the 2017 financial year, and as expected it showed that investment in new apartments from mainland Chinese investors has been annihilated by a combination of fee charges and tighter capital controls.</span></div>
<div><span> </span></div>
<div>
<span>There's much more to the Annual Report than just the residential real estate investment aspect, of course, but this is a blog not an Encyclopaedia Britannica so let's crack straight into it.</span><span><br></span>
</div>
<div><span> </span></div>
<div><span>Although the impact on total foreign investment was played down in the report, the reality is that the number of residential approvals have been smoked, down by 67 per cent from the prior year. </span></div>
<p> </p>
<div class="separator"><a href="https://2.bp.blogspot.com/-UMTpeaTHMM4/WwyhL22FvEI/AAAAAAAAqP0/8gaf_QtZb183rLkVwdH45jQUDJNGnkdRQCLcBGAs/s1600/FIRB1.jpg"><img src="https://2.bp.blogspot.com/-UMTpeaTHMM4/WwyhL22FvEI/AAAAAAAAqP0/8gaf_QtZb183rLkVwdH45jQUDJNGnkdRQCLcBGAs/s640/FIRB1.jpg" width="640" height="372" data-original-height="780" data-original-width="1337"></a></div>
<div>Similarly the value of residential approvals crashed 65 per cent lower from $72.4 billion to $25.2 billion. </div>
<p> </p>
<div class="separator"><a href="https://2.bp.blogspot.com/-eeKkUWK9UlM/WwyhMNmDdLI/AAAAAAAAqP4/8tL55X2DYeMHxJaDttmNpm2Z3WPJ1uxcQCLcBGAs/s1600/FIRB2.jpg"><img src="https://2.bp.blogspot.com/-eeKkUWK9UlM/WwyhMNmDdLI/AAAAAAAAqP4/8tL55X2DYeMHxJaDttmNpm2Z3WPJ1uxcQCLcBGAs/s640/FIRB2.jpg" width="640" height="372" data-original-height="801" data-original-width="1376"></a></div>
<p> </p>
<div>The bulk of new approvals through this unprecedented cycle have been for new dwelling exemption certificates, mainly for Chinese investors.</div>
<div> </div>
<div>Looking at these numbers it's not hard to understand how Sydney now has more apartments approved but not yet commenced than at any time in its history, as <a href="http://petewargent.blogspot.com.au/2018/04/bust-looms-for-sydneys-apartment" target="_blank">detailed here previously</a>.</div>
<div> </div>
<div>The offshore buyers have dried up, demand from domestic investors has been stymied, and the demand from owner-occupiers is insufficient to get new development project finance across the line. </div>
<p> </p>
<div class="separator"><a href="https://2.bp.blogspot.com/-NB_Pr0ox8ag/WwyhMFmGT_I/AAAAAAAAqP8/QW3ddVDDvDsLNYRsM8ydj3RaFs_WdVtqQCLcBGAs/s1600/FIRB3.jpg"><img src="https://2.bp.blogspot.com/-NB_Pr0ox8ag/WwyhMFmGT_I/AAAAAAAAqP8/QW3ddVDDvDsLNYRsM8ydj3RaFs_WdVtqQCLcBGAs/s640/FIRB3.jpg" width="640" height="376" data-original-height="798" data-original-width="1354"></a></div>
<p> </p>
<div>Statistically it appears to be a certainty that Sydney will experience the greatest number of failed apartment projects as these trends flow through. </div>
<p> </p>
<div class="separator"><a href="https://4.bp.blogspot.com/-oB--8HHlBVI/WwyhNNBYK4I/AAAAAAAAqQA/jcgvA_iBayUyUp_smd7mvblQxlk_NFajQCLcBGAs/s1600/FIRB4.jpg"><img src="https://4.bp.blogspot.com/-oB--8HHlBVI/WwyhNNBYK4I/AAAAAAAAqQA/jcgvA_iBayUyUp_smd7mvblQxlk_NFajQCLcBGAs/s640/FIRB4.jpg" width="640" height="378" data-original-height="801" data-original-width="1355"></a></div>
<p> </p>
<div>I expect to see plenty of apartment projects stalling, and increasing signs of discounting on new Sydney apartments.<br><br>Perhaps this was an inevitable end-game for this cycle, where development has been too much skewed towards apartments for investors, and too little towards the types of medium-density dwellings that people want to reside in.</div>
<div> </div>
<div><strong><span style="text-decoration: underline;">The wrap</span></strong></div>
<div> </div>
<div>As noted, there is much more to foreign investment than just new apartment purchases, with total investment of $168 billion only 4 per cent below the level seen in the prior year. </div>
<div> </div>
<div>And indeed, investment in manufacturing, agriculture, ports, other commercial real estate, and resources has catapulted China to become by far and away the greatest investor in Australia at $38.9 billion in FY2017, miles ahead of the United States in second place at $26.5 billion.</div>
<div> </div>
<div>Nevertheless, these figures will have some significant impacts on the new apartment sector, construction trends, and the broader economy - and especially so in Sydney.</div>
<div> </div>
<div>
<span>PETE WARGENT is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and </span><a href="https://petewargent.blogspot.com/" target="_blank">blogger</a><span>.</span>
</div>
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Local demand insufficient to get projects across the line as offshore apartment buyers dry up: Pete Wargent

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<div><span>A solid headline result for employment growth in April 2018, beating expectations of 20,000, with total seasonally adjusted employment up by 22,600 to beyond 12<span>½</span> million for the first time, driven by a substantial 32,700 increase in full time jobs.</span></div>
<div><span> </span></div>
<div>There were, however, adverse revisions to take into account for the preceding month. </div>
<div> </div>
<div>Click here <a href="https://3.bp.blogspot.com/-cSFR5OFaXS8/Wv0rFcRhMQI/AAAAAAAAqFs/ni7qvpHrW1IG6pa-CJ-CqqHyNmyokZuYQCLcBGAs/s640/A1.jpg" target="_blank">to enlarge.</a>
</div>
<div> </div>
<div class="separator"><img src="https://3.bp.blogspot.com/-cSFR5OFaXS8/Wv0rFcRhMQI/AAAAAAAAqFs/ni7qvpHrW1IG6pa-CJ-CqqHyNmyokZuYQCLcBGAs/s640/A1.jpg" width="640" height="376" data-original-height="809" data-original-width="1372"></div>
<div> </div>
<div>Alas, the Coalition's favoured '1000 jobs per month' slogan is going to have to be canned forthwith, with annual employment growth down from a record high of 431,200 in January 2018 to 332,200 (or 2.73 per cent) by April. </div>
<p>Click here <a href="https://2.bp.blogspot.com/-_JFbqwgARDc/Wv0rFQ_Ib9I/AAAAAAAAqFw/Yy8kZrFzvI8ZiFYm7PFFKrAPo0ZGSzJAACLcBGAs/s640/A2.jpg" target="_blank">to enlarge.</a></p>
<div class="separator"><img src="https://2.bp.blogspot.com/-_JFbqwgARDc/Wv0rFQ_Ib9I/AAAAAAAAqFw/Yy8kZrFzvI8ZiFYm7PFFKrAPo0ZGSzJAACLcBGAs/s640/A2.jpg" width="640" height="386" data-original-height="815" data-original-width="1346"></div>
<p><br><strong><span style="text-decoration: underline;">State versus state (NSW superboom)</span></strong><br><br></p>
<div>Employment blazed another 27,600 higher in New South Wales to be up by 46,800 over the quarter, and a thunderous 156,000 year-on-year, casting further doubt on the endless gloomy house price predictions, with first homebuyers also now wading in. </div>
<div> </div>
<div>The New South Wales economy has added well over 300,000 extra jobs over the past three years, something achieved for the first time ever on a rolling 3-year basis in the past few months across more than 40 years of available figures. </div>
<p>Click here <a href="https://3.bp.blogspot.com/-hU-FibmfM9o/Wv0rFEzr5GI/AAAAAAAAqFo/YE68F8xEGcMtqe9nrQ6JYlK-D9crzfLkACLcBGAs/s640/A3.jpg" target="_blank">to enlarge.</a> </p>
<div class="separator"><img src="https://3.bp.blogspot.com/-hU-FibmfM9o/Wv0rFEzr5GI/AAAAAAAAqFo/YE68F8xEGcMtqe9nrQ6JYlK-D9crzfLkACLcBGAs/s640/A3.jpg" width="640" height="388" data-original-height="815" data-original-width="1342"></div>
<div class="separator"> </div>
<div>One of the extraordinary aspects of this cycle has been the sheer concentration of employment growth.<br><br>Of the suburbs where participation rates have been rising almost all of them are in the inner suburban heart the big capital cities, while more than half of jobs have been created within a tiny 2-kilometre radius of the Sydney and Melbourne CBDs.<br><br>Small wonder the competition for prime location land continues to intensify.<br><br>Queensland's jobs boom seems to have tapered back, with annual employment growth in trend terms now at 3.5 per cent, remaining comfortably in second place only to New South Wales at a supercharged 3.8 per cent. </div>
<div> </div>
<div>Interestingly the trend participation rate hit a record high 65.7 per cent in April driven by female and older workers entering the labour force, with the unemployment rate ticking up a notch to 5.6 per cent. </div>
<div> </div>
<div>Click here <a href="https://4.bp.blogspot.com/-_ANT7qWj-sE/Wv0rGiDqpLI/AAAAAAAAqGM/1wL4OeEc2_Qfu93prKaJ5OTpNvAt7K4WACEwYBhgL/s640/A5.jpg" target="_blank">to enlarge.</a>
</div>
<div> </div>
<div class="separator"><img src="https://4.bp.blogspot.com/-_ANT7qWj-sE/Wv0rGiDqpLI/AAAAAAAAqGM/1wL4OeEc2_Qfu93prKaJ5OTpNvAt7K4WACEwYBhgL/s640/A5.jpg" width="640" height="378" data-original-height="816" data-original-width="1377"></div>
<p>Despite searing annual population growth of 123,100 and 147,400 in the two most populous states respectively, New South Wales has a trend unemployment rate of just 4.9 per cent while Victoria has seen its trend unemployment rate crunched lower to 5.3 per cent, down from 6.1 per cent a year earlier. </p>
<p>Click here <a href="https://4.bp.blogspot.com/--TIYS4_qVXQ/Wv0rGSfiMwI/AAAAAAAAqF0/k_KZjy70WNEuwkE2jt4Cr5UIlwBpR9j8gCLcBGAs/s640/A4.jpg" target="_blank">to enlarge.</a></p>
<div class="separator"><img src="https://4.bp.blogspot.com/--TIYS4_qVXQ/Wv0rGSfiMwI/AAAAAAAAqF0/k_KZjy70WNEuwkE2jt4Cr5UIlwBpR9j8gCLcBGAs/s640/A4.jpg" width="640" height="372" data-original-height="801" data-original-width="1376"></div>
<div class="separator"> </div>
<div>Finally, and to finish on a positive note, the trend annual growth in monthly hours worked increased to 3.3 per cent, the highest level since all the way back in August 2010. </div>
<div> </div>
<div>Click here <a href="https://2.bp.blogspot.com/-IGsidl1U7dg/Wv0rHIOpcFI/AAAAAAAAqF8/uoGPI43dbcM5jHX6TIimeuaWZuE3aXDGwCLcBGAs/s640/A6.jpg" target="_blank">to enlarge.</a>
</div>
<div> </div>
<div class="separator"><img src="https://2.bp.blogspot.com/-IGsidl1U7dg/Wv0rHIOpcFI/AAAAAAAAqF8/uoGPI43dbcM5jHX6TIimeuaWZuE3aXDGwCLcBGAs/s640/A6.jpg" width="640" height="386" data-original-height="814" data-original-width="1348"></div>
<p> </p>
<div><strong><span style="text-decoration: underline;">The wrap</span></strong></div>
<div> </div>
<div>Overall, these figures would be construed as disappointing if you don't live in New South Wales, where the stamp duty/infrastructure boom is paying some serious dividends. </div>
<div> </div>
<div>Employment growth in recent times has been quite heavily focused in healthcare and construction, which might in part account for why wages growth has generally been tepid across most industries.<br><br>Underutilisation remains elevated, despite a modest improvement. </div>
<div> </div>
<div>Despite the uptick in the unemployment rate policymakers will most likely see enough positives here to stay on the sidelines for the foreseeable future. </div>
<div> </div>
<div>PETE WARGENT is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank">blogger</a>.</div>
<div> </div>
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New South Wales, where the stamp duty/infrastructure boom is paying serious dividends: Pete Wargent

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<p>EXPERT OBSERVATION</p>
<p>Brighter news for Brisbane landlords as the vacancy rate declined to 3% from 3.7% a year earlier, according to SQM Research figures. </p>
<p>Asking rents for Brisbane units increased by +0.4% in the month, too, mainly driven by the upper end of the market (renting good quality property in inner Brisbane still doesn't come cheap, despite the soft market overall). </p>
<p>Brisbane appears to have a turned a corner as population growth picks up and dwelling commencements now decline sharply. </p>
<p>The 6mMA figures attempt to capture the latest trends, but do incorporate the Christmas period, when vacancy rates tend to be high. </p>
<p><img src="https://2.bp.blogspot.com/-cfT-Ng3Fy1o/WvtKDkHSxbI/AAAAAAAAqCg/3OLsp0ja3s4mgBlgrF-opHfFLrivSJ7zQCLcBGAs/s640/SQM1.jpg" width="640" height="374" data-original-height="809" data-original-width="1379"></p>
<p>Hobart appears to be through the worst for renters with vacancy rates rising slightly to 0.7%.</p>
<p>Adelaide is building plenty of houses, but hasn't experienced the surge in investors seen in the larger cities, and accordingly vacancy rates keep tightening, now down to 1.3%.</p>
<p>Melbourne was also tighter again on strong population growth at 1.3%. </p>
<p>Sydney's vacancy rates was flat at 2.3% in the month, but plenty higher than a year earlier when it was 1.7%, while Perth continues to turn the corner. </p>
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Good news for Brisbane landlords as vacancy rate slips: Pete Wargent

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<p><span>Home loan arrears are just beginning to creep a bit higher on weak income growth.</span><br><br><span>So reports the Commonwealth Bank (ASX: CBA) in its trading update.</span><br><br></p>
<div class="separator"><a href="https://3.bp.blogspot.com/-Pmu1pNOxlig/WvI_Z6QG82I/AAAAAAAAp6k/BOUkDZcbQ1MFLXlP6aL2Pe5dtLBJFaXBwCLcBGAs/s1600/CBA.jpg"><img src="https://3.bp.blogspot.com/-Pmu1pNOxlig/WvI_Z6QG82I/AAAAAAAAp6k/BOUkDZcbQ1MFLXlP6aL2Pe5dtLBJFaXBwCLcBGAs/s640/CBA.jpg" width="640" height="374" data-original-height="505" data-original-width="863"></a></div>
<div> </div>
<div>
<em><span style="text-decoration: underline;">Source: ASX</span></em><br><em><span style="text-decoration: underline;"><br></span></em>
</div>
<div>
<div>The market was unhappy with the trimmed unaudited cash profit of $2.35 million.<br><br>The result is 2.1 per cent lower than the unaudited figure for the prior year's corresponding period. </div>
<div> </div>
<div>Share price latest: down -3.4 per cent to $71, having bounced off the intraday lows at $70.80.</div>
<div> </div>
<div>Our latest report for funds and institutional investors <a href="https://www.livewiremarkets.com/wires/3-immediate-implications-of-tighter-lending-standards" target="_blank">Chemical Change</a> discusses the downside risks eventuating from a combination of trimmed lending volumes, a potential loss of market share, compressed margins, and an uptick in home loan arrears. </div>
<div> </div>
<em>PETE WARGENT is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank">blogger</a>.</em>
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Weak income growth triggering higher arrears: Pete Wargent

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<p>EXPERT OBSERVATION</p>
<p>The yield trap refers to how stocks with high dividend yields can often be, erm, a trap, since the high yield is often reflective of weak share price performance or an unsustainable dividend.</p>
<p>It's tempting to gun for the apparent promise of a high dividend, but often misguided.</p>
<p>Yield is a spot figure calculated at any given point in time; but it's not the same thing as income over the life of an investment.</p>
<p><strong>Rental yield &amp; risk</strong></p>
<p>The same holds true for most asset classes, not least real estate.</p>
<p>Recall the 15-20% high-yielding mining town 'investments' of 2012 being spruiked by opportunists (Gladstone, Port Hedland, South Hedland, Moranbah etc). </p>
<p>The dividend or rental income wasn't sustainable as supply responded, and these markets utterly imploded. </p>
<p>In a similar vein, let's take a look at apparently everyone's favourite topic du jour, Sydney housing.</p>
<p>Rewind to the day I was allegedly born, and a three-bedroom cottage in Paddo would have set you back about $40,000.</p>
<p><img src="https://4.bp.blogspot.com/-J2hzZl_ACLs/WuUzyayRQ6I/AAAAAAAAps4/pGnAE3F2grcM1gkxhNkKxNckOxvutToaACLcBGAs/s640/VG%2B1977.jpg" width="640" height="482" data-original-height="661" data-original-width="876"></p>
<p>Higher-yielding investments were always available in the form of two-bedroom apartments, for a purchase price set about 20% lower. </p>
<p>The higher yield partly reflected that units were often more modern - as well as the cheaper purchase price - but also less scarcity value.</p>
<p><img src="https://1.bp.blogspot.com/-RDOjGlliDuE/WuUzyOqUuzI/AAAAAAAApsw/DHuVNNd8E2gcios92ISREitC723aY8sHACLcBGAs/s640/VG%2B1977%2BUnits.jpg" width="640" height="320" data-original-height="433" data-original-width="861"></p>
<p>It's no secret that land and house prices have always appreciated fastest in Sydney's inner ring, ahead of apartment prices and blocks on the outer - the Valuer General dutifully reported as such in typed font for years in its famed 'Blue Book' annual compendium.<br><br> AHURI and the Reserve Bank of Australia periodically note the same thing.</p>
<p><img src="https://4.bp.blogspot.com/-hZvdb6l7SI8/WuUzyAogqTI/AAAAAAAAps0/BkooOqmvggItSNsBpq34ORuePX3Y197KgCLcBGAs/s640/1981%2BValues.jpg" width="640" height="616" data-original-height="782" data-original-width="810"></p>
<p>Roll forward to today and with a bit of a refurb your three-bedroom cottage in Paddo rents for about $1750/week ($91,000 per annum) while the two-bed unit would be doing pretty well if it generated just 40% of that amount. </p>
<p>Meanwhile the cottage costs at least double what the apartment does, probably more, so house prices have continued to outperform too.</p>
<p><strong>Immutable laws of supply &amp; demand</strong></p>
<p>Conventional housing market economics suggests that as prices increase supply should respond, but in the case of inner Sydney land this obviously cannot be so, at least until some brainbox decides to build out on to the harbour. </p>
<p>In fact, the Census figures appeared to show that the number of houses in Sydney's inner ring is actually in decline as they make way for more and more, and more...and more apartments (in some areas more than others, 'tis true).</p>
<p><img src="https://2.bp.blogspot.com/-OEXHdEjPlXo/WuVA0ScpMJI/AAAAAAAAptY/B_3sZ8Ap7asnJhRMnHoVxQa26wuWoGWMgCLcBGAs/s640/units.jpg" width="640" height="388" data-original-height="817" data-original-width="1342"></p>
<p>Yield is important for serviceability, but it's by no means the same thing as income over the life of an investment. </p>
<p>Inner city apartments still generate a higher percentage yield in Sydney than houses. Maybe they always will. </p>
<p>And don't get me wrong, my portfolio has several apartments in inner ring Sydney.<br><br> But still I know what I'd rather own! </p>
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Don't get caught in the yield trap: Pete Wargent

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<p>Data released by the Australian Taxation Office (ATO) showed that just shy of 2.1 million Australians declared an interest in a rental property for the 2016 financial year. </p>
<p>The number declaring a net rental loss to the tax office has declined over the past four years of available figures, mainly due to lower mortgage rates. </p>
<p>Note that under Australian taxation law it is quite possible for an investor to declare a net rental loss to the tax office yet be in a positive cashflow position, in part due to depreciation and capital works deductions. </p>
<p><img src="https://1.bp.blogspot.com/-1whPH9ZxGns/WuK37Bk7pzI/AAAAAAAApqg/kwFHsUb5wqUHZttcqhF8Seasn-ZXSe23QCLcBGAs/s640/ATO3.jpg" width="640" height="384" data-original-height="827" data-original-width="1376"></p>
<p>Property investment in Australia is mainly the purview of the Mum and Dad investor, with more than 90% of investors owning just one or two rentals. </p>
<p>71.3% of landlords owned a solitary investment property. </p>
<p><img src="https://4.bp.blogspot.com/-DSi5FL-iptM/WuK36mh5MgI/AAAAAAAApqY/6N9EbSDo0VEgBhfuMJcPbgE3SlZ6BBBVACLcBGAs/s640/ATO1.jpg" width="640" height="396" style="font-size: 12.16px;" data-original-height="831" data-original-width="1343"></p>
<p>Who uses negative gearing? A broad range of people, including just over 796,000 with a taxable income of under $80,000, and about 495,200 with a taxable income of above $80,000. </p>
<p>As you might expect, wealthier negatively geared households tend to borrow more and incur greater net rental losses, at least initially. </p>
<p><img src="https://1.bp.blogspot.com/-QbU1vzGYIcg/WuLAkoI5_CI/AAAAAAAAprM/Gb4UH5XSoJgb8TXV7yfuNaVxSM2ObmOJwCLcBGAs/s640/Claimants.jpg" width="640" height="394" data-original-height="821" data-original-width="1327"></p>
<p>The beneficiaries of negative gearing are often in the younger cohorts, with the net rental profits tending to swell later in life. </p>
<p><img src="https://4.bp.blogspot.com/-40OBJshUFFM/WuK38E2gjtI/AAAAAAAApqk/fdPrn7RqWMQPi7I-9hF6TzNMD1h_ra4BwCLcBGAs/s640/ATO4.jpg" width="640" height="404" style="font-size: 12.16px;" data-original-height="825" data-original-width="1306"></p>
<p> </p>
<p>Similarly, the size of net rental profits typically increases for the older cohorts as they move into their retirement years. </p>
<p> </p>
<p><img src="https://1.bp.blogspot.com/-ig-jftBvOqc/WuK38ccmAcI/AAAAAAAApqo/Toa8cPMcv0AyyAkHjwroY89ZT4YNjC87QCLcBGAs/s640/ATO5.jpg" width="640" height="420" data-original-height="823" data-original-width="1249"></p>
<p><strong>Budget repair happening anyway</strong></p>
<p>In terms of Federal Budget repair, the ATO recorded only a very small change in net rental losses from the $3.6 billion notched in the preceding tax year.</p>
<p>Note that any potential Budget savings from negative gearing rule changes would relate to tax-effected rental losses (as opposed to net rental losses), negative gearing deductions being a timing difference in principle. </p>
<p>Moreover, Treasurer Morrison has already made sweeping changes to plant and equipment depreciation deductions under division 40, which will begin to take effect from the 2018 tax year, while landlord travel expenses will also be disallowed (to the likely dismay of errant politicians). </p>
<p><img src="https://4.bp.blogspot.com/-vSdIcM_bPBw/WuK37AR7alI/AAAAAAAApqc/x3gB3aikBskCYiZVYvgtFEY3EVbmVtmKgCLcBGAs/s640/ATO2.jpg" width="640" height="394" data-original-height="820" data-original-width="1328"></p>
<p>The supposed savings from changing negative gearing rules have always been questionable to my mind, especially after lower taxable bank profits, higher public housing costs, and a raft of other factors are taken into account. </p>
<p>Landlord-bashing has become a popular sport in recent years, yet at the same time the average superannuation balance suggests that millions of Australians are basing their financial futures upon drawing the Age Pension. </p>
<p>The Budget balance has improved significantly regardless of late, thanks to a record +431,000 surge in employment over the year to January 2018 combined with a timely boost in export prices.</p>
<p>Meanwhile at the national level the housing market has cooled and investor activity has been comfortably subdued by macroprudential measures. </p>
<p>With thanks to Cameron Kusher of CoreLogic for expertly dicing up some of the above data points by age cohort at lightning speed.</p>
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71% of landlords owned a solitary investment property: Pete Wargent

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<p>EXPERT OBSERVATION</p>
<p>Headline inflation increased by only +0.4% in the March quarter.</p>
<p>Tradables inflation was negative year-on-year for a third consecutive quarter.</p>
<p>There has been some consumer price inflation, mainly in areas influenced by government, as articulated by Shane Oliver of AMP: utilities, healthcare, education. </p>
<p>There's also been the obligatory excise on tobacco and booze. </p>
<p>But generally CPI in the private sector has been extraordinarily weak. </p>
<p><img src="https://3.bp.blogspot.com/-EMLo6TRQV-Y/Wt6vpkNhOFI/AAAAAAAApkA/vfRefQ0p_Yoe9s-SyoeO1sWrSC6Tb_W_ACEwYBhgL/s640/A3.jpg" width="640" height="394" data-original-height="831" data-original-width="1347"></p>
<p>Prices actually fell for clothing, household equipment, furnishings, and recreation. </p>
<p>Underlying inflation over the year did increase to +1.98%, though a stronger print will soon drop off the annual figure, and in any event this is still below the 2 to 3% target. </p>
<p><img src="https://4.bp.blogspot.com/-Fodx4jaDI8c/Wt6vrKVfYVI/AAAAAAAApkM/F6hgLqbWIp07Ofis_BQsWj9w6e59fFcNgCEwYBhgL/s640/B3.jpg" width="640" height="384" data-original-height="821" data-original-width="1365"></p>
<p>Ongoing weakness, it must be said, with the Australian economy appearing to be firmly entrenched in a low inflation environment. </p>
<p><strong>Rents off the mat</strong></p>
<p>Nationally rental price growth was off the mat, with rents up in Sydney (+2.4%) and Melbourne (+2.2%), but marginally down in Brisbane (-0.5%), and still negative year-on-year in Perth and Darwin, though the respective lows for these two resources capitals now appear to have passed.<br><br> Canberra's rental price growth has done a donut from significantly negative -2.5% to +2.7% over the past 11 quarters, and rents are accelerating fast.</p>
<p><img src="https://1.bp.blogspot.com/-chSZtq4Yk1k/Wt6vqOFeBNI/AAAAAAAApkI/55F714zQs6Uk4FJCTu4-K04ApY6LtV-SgCLcBGAs/s640/A1.jpg" width="640" height="376" data-original-height="823" data-original-width="1400"></p>
<p>Sydney rents continued to outpace all groups CPI by a significant margin, as they have tended to across the past 11 years.</p>
<p><img src="https://4.bp.blogspot.com/-GnXIXQ_L90E/Wt6vpxyt7VI/AAAAAAAApkE/Z7CZpTlFC6oLJ4wCHaZuDR6r83NU_YY-ACLcBGAs/s640/A2.jpg" width="640" height="356" data-original-height="831" data-original-width="1487"></p>
<p><strong>The wrap</strong> </p>
<p>Overall, seemingly no significant implications for interest rate moves in the near-term, with underlying inflation still below target (and missing expectations), as it has been for quarter after quarter after quarter.</p>
<p>Of course, +1.98% is getting pretty close to the target.</p>
<p>Wages growth may begin to pick up - following on from news of better earnings growth - but some of the key leading indicators such as broad money growth and building permits have weakened over the past year. </p>
<p>Hard to see any change in interest rates over the remainder of 2018 (and probably 2019) in my head, but nobody ever agrees with me on the world wide interweb.</p>
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National rental price growth rises off the mat: Pete Wargent

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<div>There are two very interesting data releases due out on Tuesday.</div>
<div> </div>
<div>Firstly the regional population growth figures, which shed more light on where people have been migrating from and to in Australia, which is always very informative. </div>
<div> </div>
<div>And then there is the big one: <strong><span style="text-decoration: underline;">inflation!</span></strong><br><strong><span style="text-decoration: underline;"><br></span></strong>I <a href="http://petewargent.blogspot.com.au/2018/01/rate-hikes-are-not-on-cards" target="_blank">looked here</a> at the last round of inflation numbers, released in January. </div>
<div> </div>
<div>This is clearly going to be a vital data series because it shows whether the Reserve Bank of Australia (RBA) is on target to get inflation back up to its mandated target. </div>
<div> </div>
<div>With housing market activity now easing, it will be very interesting to see whether inflation is still on course to rise towards the target over the next couple of years, or whether there will be further downward pressure on interest rates. </div>
<div> </div>
<div>The rhetoric from the RBA has been very clear: it doesn't want to cut rates further under any circumstances, unless it absolutely has to. </div>
<div> </div>
<div>Over the year to December, underlying inflation rose +1.87 per cent, which was yet again under the 2 to 3 per cent target range.<br><br>Very soft inflation has been a feature of the economy since the end of 2015.<br><br>There doesn't seem to be a whole lot of pressure on rents at the moment, which is one contributory factor.<br><br>Some of the sources of the inflation that has been in evidence have been in fuel costs, energy, education, and 'sin taxes' on alcohol and tobacco.<br><br><strong><span style="text-decoration: underline;">Market forecasts</span></strong><br><br>
</div>
<div>Bloomberg released its survey of 20 economists for the March 2018 quarter.</div>
<div> </div>
<div>It showed a market median consensus for a quarterly result of +0.5 per cent, which would put annual underlying inflation at about the same level at +1.85 per cent.</div>
<div> </div>
<div>However, some forecasts see a bit of downside risk, most notably AMP.</div>
<p> </p>
<div class="separator"><a href="https://2.bp.blogspot.com/-VdEOo5MB2xY/WtnSxc0xgmI/AAAAAAAApf0/evOQx1tXAzYuYi-6vdRTInHVX4jeP3uvgCLcBGAs/s1600/ABS%2BCPI.jpg"><img src="https://2.bp.blogspot.com/-VdEOo5MB2xY/WtnSxc0xgmI/AAAAAAAApf0/evOQx1tXAzYuYi-6vdRTInHVX4jeP3uvgCLcBGAs/s640/ABS%2BCPI.jpg" width="640" height="378" data-original-height="408" data-original-width="689"></a></div>
<div>Stay tuned for that, and more analysis here on this blog, from 11.30am on Tuesday.</div>
<div> </div>
<div>If you like investment property or continued low mortgage rates, say to yourself a silent prayer for a benign print!</div>
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Inflation data will shape future interest rate direction: Pete Wargent

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<p>EXPERT OBSERVATION</p>
<p>Both new residential building and renovation activity declined significantly in 2017, with total seasonally adjusted dwelling starts down to 52,600 by the final quarter of the year, well down from the peak of 62,300 in the first quarter of calendar year 2016.</p>
<p>The drop was driven by a 17% year-on-year decline in attached dwellings, with Brisbane's inner city apartment market the prime culprit. </p>
<p><a href="https://2.bp.blogspot.com/-Aqgce8eMVis/Ws3krKiHsuI/AAAAAAAApW4/hwxLmhWjgzMkCiXBwS61LwBb0e9cfsQXgCLcBGAs/s1600/3.jpg"><img src="https://2.bp.blogspot.com/-Aqgce8eMVis/Ws3krKiHsuI/AAAAAAAApW4/hwxLmhWjgzMkCiXBwS61LwBb0e9cfsQXgCLcBGAs/s640/3.jpg" width="640" height="386" data-original-height="816" data-original-width="1346"></a></p>
<p>Sundry indicators suggest that activity across Queensland should now trend moderately upwards, spurred on by a healthier spread of boutique developments, 'plexes, and townhomes.</p>
<p>But inner Brisbane's new build high-rise sector is absolutely cactus as the renters move in. </p>
<p>Interestingly, despite the extremely high level of apartment starts through this cycle, total dwelling completions continued to decline for another quarter, suggesting that all is not well in developer-land. </p>
<p><a href="https://2.bp.blogspot.com/-fxCJHA8tq6o/Ws3lYKrikcI/AAAAAAAApXY/P5ORNb1wvhQ0wojNqhZxHtnvOX-DwSl0gCLcBGAs/s1600/5.jpg"><img src="https://2.bp.blogspot.com/-fxCJHA8tq6o/Ws3lYKrikcI/AAAAAAAApXY/P5ORNb1wvhQ0wojNqhZxHtnvOX-DwSl0gCLcBGAs/s640/5.jpg" width="640" height="386" data-original-height="808" data-original-width="1338"></a></p>
<p><strong>Crunch looms for developers</strong></p>
<p>By the end of the year there were still some 150,000 attached dwellings under construction. for the seventh consecutive quarter.</p>
<p><a href="https://1.bp.blogspot.com/-6uuK9Vf8lJw/Ws3uwfvG1oI/AAAAAAAApXs/hd3mUvlFK6wWWot_rbIw_LtZco3QyHtwgCLcBGAs/s1600/1.jpg"><img src="https://1.bp.blogspot.com/-6uuK9Vf8lJw/Ws3uwfvG1oI/AAAAAAAApXs/hd3mUvlFK6wWWot_rbIw_LtZco3QyHtwgCLcBGAs/s640/1.jpg" width="640" height="382" data-original-height="825" data-original-width="1380"></a></p>
<p>Drilling down a level it's clear to see that while apartment activity was fading fast in Melbourne and Brisbane respectively, Sydney and the state New South Wales had more than 68,000 attached dwellings under construction.</p>
<p>To say that this is unprecedented would be an understatement; the numbers are off the charts!</p>
<p>Now it does take a long time to see apartment projects through from approval, but in Sydney the completions just haven't been hitting the market in the numbers expected.</p>
<p><a href="https://1.bp.blogspot.com/-Rq6BLQR7lGc/Ws3krLf7-rI/AAAAAAAApW0/FofyGN3Y-BEk1VE3yTRvzAk-EzbKXW1FQCLcBGAs/s1600/2.jpg"><img src="https://1.bp.blogspot.com/-Rq6BLQR7lGc/Ws3krLf7-rI/AAAAAAAApW0/FofyGN3Y-BEk1VE3yTRvzAk-EzbKXW1FQCLcBGAs/s640/2.jpg" width="640" height="386" data-original-height="816" data-original-width="1352"></a></p>
<p>Total dwelling completions in 2017 for New South Wales were 61,600, with just over half of that total accounted for by attached dwellings, which on a net completions basis is barely keeping pace with demand. </p>
<p>Officially, of course, everything is fine.</p>
<p>There are few reported defaults, and settlement valuations are holding up reasonably well despite the softening of the resale market and the total evaporation of the offshore Chinese bid.</p>
<p>With pre-sales flagging it's certainly hard to envisage as many new projects getting off the ground, as investors grapple for finance in the midst of a Royal Commission into banking misconduct.</p>
<p>It's become a vicious circle, with nervous banks requiring higher pre-sales which developers are unable to achieve, and finance for construction thus not forthcoming. </p>
<p>In any case, a raft of actioned and proposed budgetary and regulatory macroprudential measures have made property investment less appealing at the margin (and totally unappealing for foreign investors). </p>
<p>Another compelling indicator of troubled times ahead for developers is the sheer number of dwellings approved but not commenced at 46,400, mostly accounted for by apartments and by far the highest figure in Australia's history. </p>
<p><a href="https://1.bp.blogspot.com/-gUWVmdnHC2E/Ws3kr6g6XAI/AAAAAAAApW8/wcRYn02NKMIyys25qx5zJ4VRnBJ_JRaZQCLcBGAs/s1600/4.jpg"><img src="https://1.bp.blogspot.com/-gUWVmdnHC2E/Ws3kr6g6XAI/AAAAAAAApW8/wcRYn02NKMIyys25qx5zJ4VRnBJ_JRaZQCLcBGAs/s640/4.jpg" width="640" height="380" data-original-height="825" data-original-width="1385"></a></p>
<p><strong>What happens next?</strong></p>
<p>Now sure, the plural of anecdote is not data, but I believe that we'll see many of Sydney's apartment projects running into trouble. </p>
<p>The official line is that defaults are low, and everything is going swimmingly, but I'm not so sure. </p>
<p>By the way, don't rely on anything you read here either, this is just my opinion.</p>
<p>Take a drive around, speak to a few sales staff, observe how apartment projects are progressing. </p>
<p>In addition to the astonishing boom and collapse of Chinese investors, another potentially unique aspect of this cycle is that construction and materials costs could remain high in Sydney, even in the face of a sharp drop in apartment activity.</p>
<p>Forged on the back of a stamp and transfer duty bonanza from both residential housing and asset sales, the state has embarked upon an overdue thrust at tackling its infrastructure deficit, in turn propelling total construction employment to even greater heights. </p>
<p>As a result construction employment surged higher than it had ever been before both in absolute terms and as a share of the workforce, squeezing developer margins.</p>
<p>Incidentally, I personally believe that most of the apartments approved in Sydney will be converted into dwelling starts in the fullness of time, but quite possibly at a different price and rate. </p>
<p>Receivers and cashed up opportunists will stand by at the ready. </p>
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Pete Wargent

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