Queensland builder-developer MAYD has revealed the first look at its major North Kirra beachfront development, lodging amended plans that reduce the number of apartments and increase the proportion of larger residences.

The project is planned across a substantial 4,742 sqm amalgamated site spanning seven lots at <a href="https://www.apartments.com.au/new-apartments/2-6-pacific-parade-bilinga-qld-4225">2-6 Pacific Parade</a> and 27-33 Golden Four Drive in Bilin​ga, directly opposite Nor​th Kirra Beach.

<a href="https://www.apartments.com.au/developers/mayd-group">MAYD</a> secured the site for $32.5 million in 2025, in what was one of the Gold Coast's largest property transactions of the year.

The development will be delivered across two stages, with the first stage carrying an estimated gross realisation value of around $360 million.

The latest amendments seek to reduce the overall apartment count and shift the project further toward the owner-occupier market, with larger residences designed for buyers wanting considerably more space than traditionally offered in a beachfront apartment.

The residential mix will include townhomes, oversized two-bedroom apartments, substantial three-bedroom residences and four-bedroom homes.

MAYD has appointed Cera Stribley to lead the architecture and interiors, with the Melbourne-based design practice drawing on the beachfront setting through a series of ocean-facing terraces and heavily landscaped balconies.

Strong horizontal forms and curved balconies will define the exterior, with subtropical landscaping integrated throughout the building to soften the built form and increase the connection between the residences and the beachfront.

The project will also include an extensive collection of resident wellness and lifestyle facilities, continuing the broader shift across the Gold Coast's luxury apartment market toward larger homes supported by resort-style amenity.

<img alt="MAYD" data-entity-type="file" data-entity-uuid="d1bcbb05-e659-4b47-8bd4-1e595315e2ad" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-27%20at%202.05.03%E2%80%AFPM.png?VersionId=jj0XEud1X1DuLt7_KyElhjMdZGOXmLHP" />

MAYD Founder Todd Mould said North Kirra was increasingly appealing to buyers attracted to the more established, lower-density character of the southern Gold Coast.

"North Kirra presents one of the most compelling luxury residential opportunities currently emerging in Australia, combining absolute beachfront with the character and authenticity that buyers are increasingly seeking, and the same sense of tight-knit community that defined Burleigh and Currumbin perhaps 10 or 15 years ago," Mould said.

"With Gold Coast Airport on its doorstep, it also offers a level of accessibility that broadens its appeal across almost every market demographic."

The project comes as the southern Gold Coast continues to attract an increasing share of high-end apartment development and buyer activity.

Kirra in particular has emerged as one of the region's more tightly held beachfront markets, with its relatively low-density character, established surf and hospitality scene and proximity to Gold Coast Airport differentiating it from the higher-density markets further north.

Mould said those characteristics had informed the approach MAYD and Cera Stribley had taken to the project.

"We've worked closely with Cera Stribley to create a vision that is deeply connected to its surroundings," he said.

"Inspired by the coastline itself, the architecture has been shaped around space, privacy and resort-style living, creating a collection of homes that reflects the next generation of luxury on the southern Gold Coast."

MOTIV Managing Director Carly Cottam, who has been appointed to market the project, said buyer attention had continued to move south along the Gold Coast.

"Purchasers who may once have defaulted to Broadbeach, Main Beach or Surfers Paradise are increasingly recognising the value of a genuine beachfront location that offers lower density, strong amenity and a more established sense of community," Cottam said.

"Kirra has a powerful combination of growing demand and genuine scarcity. Beachfront supply is inherently constrained, the area remains relatively low density, and buyers are increasingly placing a premium on locations that feel established, uncrowded and authentic rather than heavily developed."

Cottam said the proximity to Gold Coast Airport was also proving increasingly important for interstate and second-home buyers.

"Being minutes from Gold Coast Airport makes it particularly compelling for interstate buyers, frequent travellers and second-home purchasers who can access an authentic coastal lifestyle almost immediately after stepping off a flight."

The acquisition takes MAYD's active development portfolio to more than $500 million, with the North Kirra project representing one of its largest undertakings to date.

MAYD is targeting an early 2027 launch.

Joel Robinson

First look at MAYD's North Kirra mixed-use precinct

<main data-perf-region="main">
Castle Hill, the longtime hub of the Hills District, has been one of the major beneficiaries of Sydney's Metro expansion, with improved connectivity helping drive continued population growth, development and buyer demand across the Hills District.

But despite that growth, the suburb has seen relatively few major new apartment projects brought to market over the past 18 months.

Hills District developer Reve Group is looking to fill that gap with <a href="https://www.apartments.com.au/new-apartments/nova-r-ve-castle-hill-2-garthowen-crescent-castle-hill-nsw-2154">Nova Rêve</a>, a major new mixed-use precinct on the corner of Garthowen Crescent and Old Castle Hill Road, a short walk from Castle Hill Metro Station and Castle Towers.

[smartcode_project:default project_id=152737 project_image_fid=377679]

The project will comprise three residential towers alongside a hotel, restaurants, cafes and a skybar, more than 1,600 sqm of ground-floor retail and almost an acre of landscaped gardens.

It represents the largest project undertaken by Reve Group, the development arm of the Kassis family, which has been building across the Hills District for more than 30 years through Kassis Homes.

[smartcode_project:default project_id=152737 project_image_fid=377675]

Nova Rêve also represents a significant step up from the family's first apartment development, Grand Rêve, which was delivered nearby on Garthowen Crescent.

Grand Rêve introduced larger, house-like apartment layouts and premium inclusions including Wolf and Sub-Zero appliances to the Castle Hill market.

Nova Rêve takes that approach to a precinct scale, combining the residential component with hospitality, retail and substantial public and resident landscaping.

[smartcode_project:default project_id=152737 project_image_fid=377685]

Reve Group Managing Director Sam Kassis said the project reflected the family's three decades of building in the Hills, which has evolved from trophy homes on quarter-acre blocks to larger-scale apartment development.

"Grand Rêve was our first apartment project here and it showed us what this pocket of Castle Hill could be. Nova Rêve is the refinement of that idea: not just apartments, but a place the whole suburb can use," Kassis said.

A key part of that approach is the hotel, which has been designed to operate as an amenity for the wider Castle Hill community rather than solely hotel guests.

It will include restaurants, cafes, skybars and all-day dining, alongside conference and event facilities catering to business functions, community groups and private events.

At ground level, more than 1,600 sqm of shops and cafes will open onto the surrounding streets and landscaped areas.

Almost an acre of gardens designed by Land and Form Studios will run through the precinct, incorporating pathways, seating, barbecue areas and children's play spaces.

[smartcode_project:default project_id=152737 project_image_fid=377680]

Reve Group's Romio Georges said creating an active ground plane had been central to the planning of Nova Rêve.

"There are gardens with pathways, barbecues, seating and play areas, shops and cafes opening onto the street, and a hotel with restaurants and a skybar that anyone in Castle Hill can walk into," Georges said.

The project's elevated position on one of Sydney's highest ridgelines will also provide apartments with outlooks toward the Sydney skyline, surrounding parkland and the Blue Mountains.

More than 80 per cent of the apartments will occupy corner positions, with Turner responsible for both the architecture and interiors.

&nbsp;

[smartcode_project_cta:default project_id=152737]

<h3 data-end="3697" data-section-id="q3n5ak" data-start="3672">&nbsp;</h3>
</main>

Nova Rêve arrives as Reve Group bets on Castle Hill's next growth phase

A collection of just 25 large-format apartments and penthouses overlooking Goodwin Park is entering the Coolangatta market, with <a href="https://www.apartments.com.au/new-apartments/marea-residences-coolangatta-27-27a-dixon-street-coolangatta-qld-4225">Maréa Residences</a> combining a low-density, residential-only approach with uninterrupted park and Pacific Ocean outlooks.

Located at 27 Dixon Street, Maréa comprises three and four-bedroom residences alongside a limited number of dual-level penthouses, with the project positioned between Goodwin Park and <a href="https://www.apartments.com.au/developments/coolangatta-qld-4225">Coolangatta</a>’s coastal precinct.

Construction has commenced, with completion currently estimated for late 2027. Three-bedroom residences are priced from $1.8 million.

[smartcode_project:default project_id=150999 project_image_fid=374005]

The project has been designed around its northern outlook across the park, with the building’s architecture, landscaping and material palette intended to establish a connection with the neighbouring green space. The residences have been configured to maximise natural light and views across Goodwin Park towards the ocean.

Inside, the material palette incorporates timber, stone and brushed brass, complemented by curved detailing and ambient lighting. Kitchens and bathrooms carry the same natural material approach, while residences also include basement parking, storage and lift access.

Maréa’s penthouses are arranged over two levels and include private pools, adding another layer to the project’s focus on larger-format apartment living. Across the development, residences are configured with three or four bedrooms rather than the broader mix of smaller apartment types commonly found in larger projects.

[smartcode_project:default project_id=150999 project_image_fid=374010]

Resident amenity is concentrated at rooftop level, where landscaped entertaining terraces and pools take advantage of elevated views across Coolangatta and the Pacific Ocean.

The project has so far been particularly well received by local owner-occupiers and downsizers, according to Urban Activation Property Sales and Marketing Director Matt George, with the residential-only format, construction quality and northern park outlook among the features resonating with purchasers.

“The uninterrupted northern aspect overlooking Goodwin Park has been a key point of difference, with buyers attracted to the sense of serenity and open space the park provides, while still enjoying easy access to the ocean and being within walking distance of the lifestyle and amenities Coolangatta has to offer,” George said.

[smartcode_project:default project_id=150999 project_image_fid=374002]

“The combination of high-quality construction, a residential-only building, park outlook and proximity to the beach has resonated strongly with the local downsizer market.”

The Dixon Street address is within walking distance of Coolangatta Beach and the broader southern Gold Coast coastline, including the surf breaks at Snapper Rocks and Kirra. Coolangatta’s cafés, restaurants and retail are nearby, while Gold Coast Airport is also within close proximity.

[smartcode_project_cta:default project_id=150999]

Maréa Residences brings parkside apartments to Coolangatta

Melbourne developer PDG has secured Victorian Government approval for its $1.5 billion Southbank development <a href="https://www.apartments.com.au/new-apartments/the-one-1-queens-bridge-street-southbank-vic-3006">The One</a>, clearing the way for the long-dormant riverfront site opposite Crown to finally be developed.

The Minister for Planning has approved the project at 1-29 Queens Bridge Street, with the Department of Transport and Planning issuing the planning permit following its assessment.

The approval will allow PDG to develop the prominent 5,059 sqm site with a major mixed-use tower comprising premium apartments, including branded residences, a luxury hotel and boutique office space.

PDG acquired the site in late 2024, with its position directly opposite Crown's main entrance and near Melbourne's Arts Precinct making it one of Southbank's most significant remaining development opportunities.

<img alt="PDG" data-entity-type="file" data-entity-uuid="3933013e-6332-4386-b9be-089df05caf17" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-27%20at%209.29.22%E2%80%AFAM.png?VersionId=sITIgBqDL0N3VNSMwWEmF5UA.uvcsRyu" />

Designed by COX in collaboration with ODO and PDG, the tower's architecture draws on the movement of the Yarra River, with six vertical pleats running the height of the sculpted facade.

The project will also see the heritage-listed Queens Bridge Hotel restored and incorporated into the development&nbsp;with new hospitality and public uses, including a rooftop venue.

A significant component of The One will be its residential amenity.

More than 5,000 sqm of resident facilities will be delivered across a single level, making it one of the largest consolidated residential amenity offerings proposed in an Australian apartment development.

The planning approval also incorporates a major upgrade of Queensbridge Square, which PDG will deliver in partnership with the City of Melbourne.

<img alt="PDG" data-entity-type="file" data-entity-uuid="73167fcd-1031-4b6f-a408-a064cfe45ed1" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-27%20at%209.29.17%E2%80%AFAM.png?VersionId=Pf1AEWxw6SNmBqR0zQW5lyEze.MtxgFp" />

The existing square will be revitalised as a new civic and pedestrian space along the Yarra River, strengthening the connection between the project, Southbank and the riverfront.

PDG Founder and Managing Director Vince Giuliano said the approval represented a major milestone for a site which has remained largely underutilised for more than 15 years.

“This is the most significant Planning Permit approval Melbourne has seen in recent years,” Giuliano said.

“For more than 15 years, this site has remained underutilised. This approval enables us to deliver a project that will contribute meaningfully to the revitalisation of Southbank, restore and reactivate an important heritage building, and create a new civic and hospitality destination for Melbourne.”

The latest approval follows an earlier planning permit issued by the City of Melbourne covering demolition works across part of the site at 9-29 Queens Bridge Street. Those demolition and early works are already underway.

PDG has also started generating early interest in the residential component from owner-occupiers ahead of a planned public launch in early 2027.

PDG secures approval for $1.5bn Southbank apartment development, The One

Local developer Harridan is seeking to turn its Woolloongabba apartment project into the first stage of a broader transformation of Burke Street, using a new 16-storey mixed-use building to establish a greener pedestrian connection toward the rapidly evolving Boggo Road transport and knowledge precinct.

The South East Queensland developer has filed plans for 154 apartments on the <a href="https://www.apartments.com.au/new-apartments/4-burke-street-woolloongabba-qld-4102">southern side of Burke Street</a>, where its proposal has been designed alongside a wider vision by LatStudios for the street.

That vision positions the southern side of Burke Street for buildings of 15 storeys and above, while envisaging lower-rise development of up to five storeys on the northern side to transition into Woolloongabba's existing character housing. It also proposes wider pedestrian verges, deep planting, new street trees and upgrades to the pedestrian approach to Boggo Road Station.

The Harridan development itself has been designed by Brisbane-based Arqus Design and will comprise 154 apartments across 16 storeys. The mix is weighted heavily toward two-bedroom apartments, with 121 proposed alongside 10 one-bedroom and 23 three-bedroom residences. There will typically be around 14 units per floor.

A lower-ground car park and three podium levels will accommodate 156 resident parking spaces, along with visitor and commercial parking. There will also be 154 resident bicycle spaces and 40 visitor bicycle parks.

&nbsp;

Harridan is a family-owned developer and part of the Holmwood Highgate Group, with more than three decades of development activity across South East Queensland. Its portfolio spans residential, commercial and industrial property, with current residential projects including Riverbank on Byron in Bulimba, Esperance Residences in Carina and The Precinct at Kinross Road in Thornlands.

Wooloongabba has been popular for apartment developers, particularly since the announcement of the 2032 Summer Olympics games in Brisbane.

While there have been a lot of development applications, it has failed to materialize into real supply.&nbsp;

Sarazin has been the major player in the area. They are under construction at Murcia Residences, on the fringe of East Brisbane and Woolloongabba. They have just launched <a href="https://www.apartments.com.au/new-apartments/the-stanley-residences-woolloongabba-8-trafalgar-street-woolloongabba-qld-4102">The Stanley Residences</a>, in Woolloongabba on Trafalagar Street. They also have Nuage coming soon on the nearby <a href="https://www.apartments.com.au/new-apartments/nuage-woolloongabba-14-wellington-road-woolloongabba-qld-4102">Wellington Road</a>.

First look: Harridan plans Burke Street transformation beside Boggo Road transport hub

Pete Wargent

<html><body>
A recent poll of 6,000 folk in WA said they could experience mortgage stress if interest rates are ratcheted back up, with housing stress defined as spending more than one third of disposable income on a mortgage.
Usually one might treat such surveys with caution, but a look at data for WA over recent years does seem to back the point up to a certain extent.
Retail turnover, for example, went on a blazing run for half a decade from early 2008, but perhaps consumers are now 'tapped out', with WA retail sales growth having tapered off since late 2012 on a seasonally adjusted basis:
<img src="https://1.bp.blogspot.com/-WPy4jftppA0/U6lXKZYJyTI/AAAAAAAAODI/U_y1qb-Na1Y/s1600/WA.jpg">
Perth's property markets have been on a very strong  run over the past dozen years, and after a prolonged lull which broadly ran from 2009 to 2012, dwelling prices in many areas saw another 10% price uplift in 2013:
<img src="https://4.bp.blogspot.com/-leRz10fqeBU/U6lkfevZ3XI/AAAAAAAAOEQ/DPoVp8eOeSk/s1600/11+year+prices.jpg">
Western Australia is now in transition mode as the mining construction boom passes its peak and the less labour intensive production phase of the mining boom kicks in.
It's important to note that in the short term this is likely to result in an uptick in unemployment and a slowing of the economy, which is one of the reasons why our 2014 forecasts were only for a far more moderate 0% to 3% growth, which essentially looks to be about on track at this juncture:
<img src="https://4.bp.blogspot.com/-Yx1uPLpOLEo/U6lXRLmlWXI/AAAAAAAAODQ/mlPbLaVk2zo/s1600/Perth.jpg">
It's worth noting that some of the data reported to date needs putting in perspective.
While the state population growth of +71,300 in 2013 represented a significant slowdown from an romping annualised pace of 3.7% to 2.9% in Q4, this is still by far and away the strongest population growth rate of any state, even though the larger states recorded higher absolute population growth numbers:
<img src="https://2.bp.blogspot.com/-vABYA1a-56M/U6laOIp5jJI/AAAAAAAAODk/L-M9YAl-LYU/s1600/Population.jpg">
Similarly, while the unemployment rate has ticked up from its pre-crisis lows, the unemployment rate is still only 5%, which is comfortably the lowest rate of any state, and a world apart from the southern states of Tasmania and South Australia where unemployment rates are flirting with a 7% level or higher:
<img src="https://4.bp.blogspot.com/-qakZ_6v1Occ/U6lkD8xMonI/AAAAAAAAOEA/8baFNVl-0iY/s1600/UEby+state.jpg">
Jobs growth in WA has tapered off too of late, but the past decade has been an undeniably strong one in WA:
<img src="https://3.bp.blogspot.com/-yEuaK3IhBnc/U6lkEGbqLoI/AAAAAAAAOEE/I5Xq5W7RvJg/s1600/WAjobs.jpg">
Mining boom over or changing?
When commentators saw that the "mining boom is over", what they are really referring to is that the mining construction boom of the past decade has now passed its peak and will start to decline, representing a drag on economic growth.
Refer to the national figures for engineering construction below:
<img src="https://3.bp.blogspot.com/-ZQDm9Ohq790/U6n_cBNmdhI/AAAAAAAAOEw/hPGAhgm3XRo/s1600/CWD.jpg">
Mining boom over or changing?
When commentators saw that the "mining boom is over", what they are really referring to is that the mining construction boom of the past decade has now passed its peak and will start to decline, representing a drag on economic growth.
Refer to the natClearly, however, the whole point of constructing resources projects is to bring reserves to production, and in this sense, the mining commodity exports boom is only in its infancy, with exports to China in particular accelerating by the month.onal figures for engineering construction below:
<img src="https://www.rba.gov.au/chart-pack/images/16-17-balance-payments/16tr-bcomx-small.gif?accessed=2014-06-24-20-45-07" alt="Bulk Commodity Exports graph">
Take a look at what's happening in WA's Pilbara region for example.
Iron ore cargo shipped out by the Port Hedland Port Authority (PHPA) in the month of May totaled an extraordinary 36.05 Mt (million tonnes), a whopping 30% increase in volumes on the May 2013 figure, with some 85% of that cargo bound for China or Taiwan, and Korea and Japan mopping up the rest:
<img src="https://4.bp.blogspot.com/-IngIN3j-joE/U6lhHYbvm1I/AAAAAAAAOD0/EXb798ksuYk/s1600/PHPA.jpg">
It was announced recently that on Saturday 7 June 2014 the PHPA shipped out an extraordinary 1,270,271 tonnes of iron ore on only a single tide, crunching the previous record set in April by a whopping 160,000 tonnes.
The last time I checked there are two tides in day, you can see how this could potentially comfortably equate to new monthly and annual throughput records in June when the data are reported in a week's time.
Summary
Western Australia will continue to be Australia's exporting powerhouse in the decade to come.
Clearly, however, there will be a very strong level of interest in how the Chinese economy continues to fare, since it is China's demand for iron ore in particular which is driving the boom (although Port Hedland, for example, also exports salt, copper concentrate and manganese ore to China and Taiwan).
The key data to watch for WA will be the presently low unemployment rate and where that peaks, and the all-important Labour Force figures which are released monthly by the Australian Bureau of Statistics.
</body></html>

pwargent-M4siyDbqQY

Western Australia: A state in transition

<html><body>
An interesting release from Australia's largest mortgage aggregator Australian Finance Group, showing some notable trends in the Aussie property market.
The index is highly seasonal, of course, as we are now into the cold winter months - and most certainly in Sydney we are!
Stripping out seasonality, mortgage demand sits some 23% higher than it was a year ago.
Even allowing for any possible shifts in AFG's market share, this implies a huge annualised uplift in mortgages sold:
 <img src="https://1.bp.blogspot.com/-Y6RNrL1ZFBc/U7SvsRlQbvI/AAAAAAAAOOs/cVdY8ya1T7o/s1600/AFg6.jpg">
The average mortgage size by state shows that how it has been New South Wales and specifically Sydney which has driven the property boom over the past 18 months.
Queensland has also been a strong performer over the 12 months from July 2013.
Elsewhere, markets have been solid enough, but relatively much more subdued:
 <img src="https://2.bp.blogspot.com/-KTJ0y5gnZqs/U7Svs_LC0gI/AAAAAAAAOOc/rF4Cf7JvuvE/s1600/Afg1.jpg">
One trend we are watching is the role of investors by state, and in particular whether investors will spread their wings to look at the Sunshine State of Queensland next up in seeking yield and value.
There has been an uplift in the share of investors in the Queensland market, but Sydney remains the speculator's paradise with more than 45% of the mortgage market being sen up by investment purchases:
 <img src="https://3.bp.blogspot.com/-sHzCLOouTno/U7SwGxPWEVI/AAAAAAAAOO0/0YWRcv0ET_g/s1600/AFG7.jpg">
In terms of mortgages sold for the state, New South Wales demand has ripped upwards by +33% year on year, despite the low number of reported first home buyers.
It will be interesting to see if NSW mortgage demand resumes its upwards trajectory from July through to December as it did in 2013:
 <img src="https://1.bp.blogspot.com/-ceaR2JP-uZ8/U7Svro9UdXI/AAAAAAAAOOQ/B8kauromDCo/s1600/AFg4.jpg">
Overall, a strong release, and stripping out seasonality mortgage demand appears to remain in a secular uptrend which has been in place since 2011.
Article continues on next page. Please click below. 
<hr class="system-pagebreak">
Housing construction boom still on track?
I put forward the view some time ago that residential building approvals would likely hit all-time record highs, driven on by rising dwelling prices over the past couple of years.
Although is is argued by some that supply is effectively strangled by planning restrictions and NIMBY-ism (to some extent, this obviously does play a part, particularly in established inner- and middle-ring suburbs), there has been another factor at play.
And that is, with high labour and construction costs in Australia combined with government charges, dwelling prices were simply not high enough to encourage developers to build.
The numbers are clear - if Sydney's apartment prices were to dip much below $550,000, construction will quickly dry up, even with today's lower financing costs.
In short, projects would not be sufficiently profitable for developers to build and there would be no adequate return on investment.
<img src="https://www.rba.gov.au/speeches/2013/images/sp-so-230413-graph8-small.gif" alt="Graph 8: Construction Costs">
It's that simple. Ask anyone who works for a major developer in a residential division and they will tell you the same thing.
Dwelling values were previously too low and price action not strong enough for developers to be interested, until recently.
Indeed, RBA Governor Glenn Stevens confirmed as much in a speech this morning.
However, with prices moving up, there is clearly no shortage of approvals being waved through now in Sydney, thus underscoring the point.
In some areas, every second block appears to be under construction, especially in a number of inner south suburbs where thousands upon thousand of apartments are due to come online.
After three months of softer data, most commentators had already called the end of the approvals boom.
Admittedly, things were looking a tad shaky, but at the end of the day monthly approvals data is always necessarily going to be all over the shop.
In the event, after three weak readings building approvals in May jumped by 9.9% month on month to be up 14.3% year on year:
 <img src="https://3.bp.blogspot.com/-OmJ3i3uomTc/U7UFvwEANpI/AAAAAAAAOPk/YFCx_BAwDfQ/s1600/a+approvals.jpg">
This data is always easier to read when smoothed out on a rolling monthly basis.
As you can see, rolling 12 monthly approvals are approaching the highest level ever recorded in Australia, now tracking at well over 190,000.
The previous annualised record was recorded in 1994 after the cash rate had been slashed from the nosebleed level of 17.5% to just 4.75%, resulting in higher prices and and a construction boom:
 <img src="https://3.bp.blogspot.com/-OmJ3i3uomTc/U7UFvwEANpI/AAAAAAAAOPk/YFCx_BAwDfQ/s1600/a+approvals.jpg">
The major driver in this cycle has been a big ~20% year on year uplift in apartment approvals, casting a lot of doubt over the sticky supply response theory.
In fact, apartment approvals are booming to new record highs:
 <img src="https://4.bp.blogspot.com/-WdLE8tX-6IU/U7UH3Da_DEI/AAAAAAAAOQI/JhEwwZ3HirU/s1600/3+units.jpg">
New South Wales, a state with both a dwelling and an infrastructure deficit, has been leading the way with gusto in recent years:
 <img src="https://4.bp.blogspot.com/-9oOHSiKj9R8/U7UFveRjdOI/AAAAAAAAOPc/CbrADiFPzO0/s1600/4+NSW.jpg">
In NSW's case too, it's also been largely an apartment story, with nearly seven in every 10 approvals over the past year relating to unit and apartment stock in Sydney and the state-wide level of apartment approvals soaring:
 <img src="https://2.bp.blogspot.com/-DiMTITiI9rE/U7UFvl0XoWI/AAAAAAAAOPg/68ayXXSzr38/s1600/5+NSW+apartments.jpg">
That said, it's notable that what started as a New South Wales and Western Australia boom is now becoming more broad-based.
Only in the Australian Capital Territory jurisdiction, where new supply is essentially not really needed, are building approvals not materially higher than a year ago.
In terms of the capital cities, approvals are generally very strong as detailed by RP Data's Cameron Kusher here:
 <img src="https://1.bp.blogspot.com/-d-JzbvPy290/U7UJMz1CTPI/AAAAAAAAOQc/lbcukkrH_hA/s1600/7RPD.jpg">
Source: RP Data, ABS.
"As you can see from the above chart, across each of the major capital cities there has been an upswing in dwelling approvals.
"The most significant upswing has occurred in Sydney and Brisbane however, the number of approvals remains much higher in Sydney and Melbourne than in all other cities.
"The number of dwellings approved for construction is at an all-time high currently in Perth, is very close to its record high in Sydney and at its highest level since the 12 months to June 2004 in Brisbane," wrote Kusher.
No signs of any constipated supply response there, rather the market just seems to be doing exactly what it should do, and the dwelling construction boom remains - albeit tentatively - still on track.
Acquirers of property, particularly buyers of units and apartments, must be wary of pockets of oversupply.
Great wall of foreign capital hits Sydney &amp; Melbourne
Some years ago when I wrote my first book, I noted that one day in the not too distant future, the Aussie dollar would depreciate again and certain parts of our property markets would likely be hit by a great wall of foreign capital.
It's all part of a global shift towards storing wealth in real estate which I discussed in more detail here, and which we have seen playing out in London over the past two decades with ever-widening eyes.
However, as I noted in my book, foreign buyers generally aren't interested in smaller cities and regional centres.
Instead, they will be predominantly interested in buying medium-density properties in the areas they are generally most familiar with - that is to say, inner Sydney and inner Melbourne.
Credit growth in Australia is only just rebounding from 40 year lows and yet prices are surging, with Sydney prices up by 15.4% in the last 12 months alone.
Well, that unprecedented great wall of foreign capital is now here.There has been a lot of debate about foreign buyers purchasing illegally, but even approved annualised spending is up by a whopping 93% to an annualised equivalent of more than $33 billion.
The always-excellent Chris Joye <a href="https://www.afr.com/f/free/blogs/christopher_joye/foreign_buyers_purchase_homes_to_VCVDT4m60HAlgpYbdGrCSL" target="_blank">highlighted in the AFR</a> how foreign buyers are buying up to 40% of newly constructed homes in Sydney and Melbourne (while simultaneously completely disregarding the southern states):
"Foreign investors are likely key drivers of the Sydney and Melbourne housing booms, according to new UBS data, potentially buying up to 40% of all newly constructed homes, and accounting for up to one in eight Australian sales overall.
"Unprecedented levels of foreign buyer activity, combined with the ability of the $559 billion self-managed super fund sector to leverage its cash five times when making property purchases, could be two reasons why this Australian housing cycle is different to anything we’ve seen before."
<img src="https://www.afr.com/r/AFR/Blogs/christopher_joye/201406/Images/housing414x727.png" width="227" height="400">
Article continues on next page. Please click below. 
<hr class="system-pagebreak">
Lucky 888 Visas take-off
An interest sub-plot which has not received much airtime in the mainstream media is that the controversial "Significant Investor Visas" are being issued overwhelmingly in New South Wales and Victoria too - 85% of them.
The investor "Golden Ticket" or "Lucky 888" visas (doubtless that subclass was chosen as they will be mainly issued to Chinese immigrants) require a minimum $5 million of investment in qualifying assets in exchange for a visa, and the rules allow them to be processed very rapidly.
Another 81 visas were issued in April and May taking the tally to date up to 255, but the big story is that another 928 applications for Golden Ticket visas have been lodged.
Tally all of that up and that's another $5 billion of investment coming overwhelmingly into the two major states, not to mention the additional wealth that the new visa holders will bring with them.
And this is doubtless only the beginning.
Canada recently shut down its equivalent visa scheme with there still being a staggering 59,000 shut out in the waiting lists, most of them wealthy Chinese.
Throw in all of that together with another new advent - SMSF lending for property investment - mixed in with record low interest rates, and I continue to see little prospect of dwindling prices in inner Sydney any time soon.
Yesterday's <a href="https://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/3401.0Main+Features1May%202014?OpenDocument" target="_blank">Overseas Arrivals and Departures</a> data revealed some very interesting trends.
The number of short-term visitors to Australian shores reached a new record high of 583,600 in May on a seasonally adjusted basis.
The first key point of note today, which has actually been quite evident to me, both in the capital city and up and down the coast, has been the very substantial increase in the number of Chinese visitors to Australian shores. 
It's long been argued by commentators that Australia will become a playground for wealthy Asians.
Not to say that all Chinese visitors are wealthy, of course! 
But what has certainly been the case that there has been a strong and increasing interest in Sydney and Melbourne for $5 million Significant Investor or "Golden Ticket" Visas, with nearly 1,000 applications reportedly now in the queue to be processed in addition to those already dished out (85% of which were issued in Victoria and New South Wales). 
The number of Chinese tourists in May alone hit 66,700 (+5.9% y/y) - which was 11.4% of the total visitors for the month - helping to pump the short-term visitor levels to new heights:
 <img src="https://3.bp.blogspot.com/--gsHtO-E4vQ/U7oxWXGUQFI/AAAAAAAAOWE/fwePpA6uUPc/s1600/Arrivals1.jpg">
The number of long-term arrivals tailed back marginally to a shade under 760,000 on a rolling annual basis, from a peak level of close to 800,000:
 <img src="https://1.bp.blogspot.com/-9D_5bScSZ-0/U7oxX-0yt2I/AAAAAAAAOWY/GWTByl0-Ykg/s1600/arrivals2.jpg">
After accounting for long-term and permanent departures, rolling annual net long term migration came in at just a little over 376,000 in May, which is also down from its most recent peak of approximately 408,000 a year ago:
<img src="https://4.bp.blogspot.com/-HsHrOAudybA/U7oxWUUc7_I/AAAAAAAAOV8/PALex_CKoOo/s1600/Arrivals3.jpg">
Australia's population growth is now accounted for by approximately 60% net long term migration and 40% natural increase. These figures appear to be commensurate with annual population growth tailing back from searing highs of well above 400,000 to slightly more moderate (although still undeniably strong) levels, perhaps somewhere in the 300,000s range in 2014.
 
Article continues on next page. Please click below. 
<hr class="system-pagebreak">
Asian century
The Permanent Movements - Settlers data series showed that significant numbers of today's migrants hail from countries such as the Phillipines, Vietnam, Sri Lanka and Malaysia. From the Middle East, Iraq was another surprisingly strong contributor, at least, to me. 
An interesting point of note is how the number of settlers from New Zealand, and in particular, the United Kingdom, have dropped off dramatically since peaking in January 2009 and February 2008 respectively on a rolling annual basis.
In Britain's case, I'm fairly certain from my own experience that this is in part due to dramatic shifts in the exchange rate caused by the respective fortunes of those economies, and therefore the relative cost of living for Poms in Australia, as I discussed in <a href="https://petewargent.blogspot.com.au/2014/07/currency" target="_blank">this timely post</a>.
For my money, the biggest news of today's data set is explained by the graph below:
<img src="https://4.bp.blogspot.com/-6pk7fLfq3Ok/U7oxWgrwrjI/AAAAAAAAOWA/EfOZeuorEq4/s1600/Arrivals4.jpg">
Note how permanent settlers from both China and India are now tracking at or close to record highs.
Incredibly, approximately one in every eight permanent settlers in Australia hails from China (12.3%), and nearly one in every seven from India (13.7%).
Unevenly spread
The above charts show how clearly Australia has increasingly embraced a "populate or perish" mentality in recent years, and this decade and the next are likely to be noteworthy for the dramatic impact of immigration from Asia.
It's worth noting here though how the population growth differs greatly by state and by region:
<img src="https://4.bp.blogspot.com/-KcPgnQY8UAk/U7oxXf3UhGI/AAAAAAAAOWc/-qaoiH6hynI/s1600/Arrivals5.jpg">
The <a href="https://www.propertyobserver.com.au/https://www.abs.gov.au/ausstats/abs@.nsf/mf/3101.0" target="_blank">Australian Demographic Statistics</a> for the year to December 2013 showed how the New South Wales population increased by a thumping +110,300 in the 2013 calendar year, with the overwhelming majority of that taking place in Greater Sydney.
Many of the highest growth rates are being seen in the inner and middle-ring suburbs if the harbour city, placing a colossal strain on existing infrastructure and housing markets.
This population and labour market growth has occurred, and is occurring, at the expense of nearly every New South Wales regional centre where population growth rates below the national averages have been seen.
On the other hand, net absolute population growth in Tasmania, the Northern Territory, the Australian Capital Territory and South Australia remained fairly minimal in 2013:
<img src="https://3.bp.blogspot.com/-6EzgEBHbvTg/U7oxXrENM-I/AAAAAAAAOWU/_o0bgEAQNdE/s1600/Arrivals6.jpg">
Summary
Population growth in 2014 looks set to be driven more by China and India than ever before, as well as a number of other south-east Asian and far-east Asian countries. 
However, the absolute Australian population growth figure looks to have peaked for this cycle and perhaps may be closer to 300,000 than 400,000 in this calendar year. 
On the face of it this ongoing strong population growth is all great news for property investors.
However, some alarm bells are starting to ring in a number of areas as higher prices and lower interest rates are driving a glut of new supply in some regions.
In particular, certain parts of Melbourne and regional Victoria appear to have worryingly high vacancy rates, as do some parts of regional New South Wales and Queensland.
Moreover, there has been plenty of questinable advice over the last couple of years about investing for high yields in overpriced mining towns.
Yet in some mining locations we now we have the prospect of a potentially devastating trifecta of declining commodity prices, a crunching drop-off in mining construction and a jumping in unemployment in the resources sector.
Each to their own, but personally I'd be giving the one-trick mining towns a very wide berth.
You can visit <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) or Pete's <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blog</a>.
His latest book is '<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>' .
</body></html>

Lucky 888 Visas take-off and is the housing construction boom still on track?

<html><body>
It's the end of financial year, and here's how RP Data's much loved Daily Home Value Index finished up very strongly for the month of June, after 'falling' in May.
The best performing major capital city market over FY14 was, unsurprisingly, Sydney (+15.5%), actually tracking just a shade ahead of our forecasts for the calendar year to date. 
The weakest performing capital city market of those covered by the index was Adelaide (+2.9%), where prices were recorded as being down over Q2, despite interest rates near record lows. 
And the rest of the cities, erm, well, somewhere in between:
<div class="separator"><a href="https://2.bp.blogspot.com/-pAd_TLLatJs/U7FGyWJzPMI/AAAAAAAAOKo/mhszokKu7F4/s1600/RPDJune2014.jpg"><img src="https://2.bp.blogspot.com/-pAd_TLLatJs/U7FGyWJzPMI/AAAAAAAAOKo/mhszokKu7F4/s1600/RPDJune2014.jpg"></a></div>
<div>RP's index is a useful enough indicator over time, but not a reporting tool to take too literally on a day-to-day, or even month-to-month basis.</div>
Over the past quarter, the index has shown moderate gains for Sydney (+1.14%), Brisbane (+0.83%) and Perth (+0.62%), and declines in Melbourne and Adelaide.
The most likely outcome for H2 appears to be continued moderate price increases in all of the major capital cities, with ongoing headwinds in Canberra, and perhaps Hobart.
It's been a great year for creating wealth, largely thanks to ongoing low interest rates which continue to drive capital away from fixed interest products and into shares and property. I wrote yesterday whether shares of property has been a better bet over the past 10 to 20 years.
This past year, as usual, some people would have lost money on the share markets through chasing fast returns.
But had you simply held the XJO (ASX 200) index you'd be on track for a very smart +14% annual return even before dividend payments are thrown in. 
Adding in the dividend component, annual returns would be approaching +19%.
As it transpired, all of the share market uplift was in the first half of the financial year.
<div><img src="https://hfgapps.hubb.com/asxtools/imageChart.axd?s=xjo&amp;pi=Index&amp;ct=3&amp;tf=D12&amp;ovs=&amp;si=Code%20not%20supplied&amp;tima1=0&amp;tima2=0&amp;bi=2&amp;bima=0&amp;comt=index&amp;ds=xjo&amp;dovs=0&amp;ex=ASX&amp;ex2=ASX&amp;val=1&amp;stmp=2014062716185457" width="400" height="275"></div>
All of which, by the way, all comes off the back of a romping +20% gain in the 2013 financial year.
These are the best back to back gains that have been seen since the heady pre-financial crisis days.
Meanwhile, Australian property prices are up by around +10% in the past year too, with Sydney comfortably leading the way.
<a href="https://www.news.com.au/finance/real-estate/sydney-unit-market-set-to-rise/story-fnd91nhy-1226944060822" target="_blank">BIS Shrapnel</a> recently came out with a paper which stated that the Sydney apartment market boom has plenty of gas left in the tank, predicting another +15% of capital gains in the next two years.
We tend to agree that certain parts of the Sydney market will likely keep rising in price until interest rates do. 
We won't be right all the time, of course, and since property markets are illiquid, the timings of market movements are much harder to predict than they may appear.
But we'll never be wrong through lack of research.
Our extensive chart packs which track hundreds of metrics and are updated daily (and not only for Australia, but also for the US, UK, Europe and China) would not allow it.
For example, we could never have predicted an Adelaide property boom over the last five or six years as many experts have, because every metric - population growth, jobs growth, the unemployment rate, household formation, interstate migration, GSP, State Final Demand, private new capex, real wages growth, building approvals, housing finance, investor loan finance...everything - told a different story.
And that still continues. 
When RP Data releases its June 2014 figures later this week, it will record dwelling price declines of around -0.5% for Adelaide in Q2.
On the flip side, I was comfortable calling out Sydney as the standout capital city market <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Get-a-Financial-Grip/968/productview.aspx" target="_blank" style="line-height: 1.3em;">in my book</a>, even after Keen had predicted a 40% crash, because the data suggested that the market fundamentals were strong.
If market consensus is right, the ABS series will confirm that Sydney dwelling prices are up by around +47% over the past five years:
<div><a href="https://2.bp.blogspot.com/-nnQBABXlP3o/U7Covlw1XbI/AAAAAAAAOJg/COjU3wcqNd4/s1600/ABSSydney.jpg"><img src="https://2.bp.blogspot.com/-nnQBABXlP3o/U7Covlw1XbI/AAAAAAAAOJg/COjU3wcqNd4/s1600/ABSSydney.jpg"></a></div>
<a href="https://2.bp.blogspot.com/-nnQBABXlP3o/U7Covlw1XbI/AAAAAAAAOJg/COjU3wcqNd4/s1600/ABSSydney.jpg"></a>Past of the problem with a lot of (most) Aussie property market commentary is that it comes from the point of vested interest i.e. "I own a property here, so it must always be referred to as a great location to invest."
We've seen a lot of this with regards to some very ordinary regional centres and even some capital cities over the past half decade, and it appears likely that there will be more of it to come with regards to several mining towns as the resources construction boom turns to bust.
The awesome thing about comprehensive chart packs which are updated daily is that, whether you like it or not, they force you to change your opinions as the outlook shifts. You can't easily ignore reversing trends when the daily data sets give it to you straight between the eyes. 
New home sales plateau
<a href="/expert-insights/buying/current-cycle-peak-concerns-as-new-home-sales-down-for-first-time-in-2014-hia">New home sales slipped in May</a> for the first time in 2014, down by 4% on the month, suggesting that investment in new housing may be set to plateau.
Sales of detached new houses were still up by a very healthy +5.7 quarter on quarter, but this was offset by falls in multi-unit sales in the month, which declined quite sharply to be down by -5.2% quarter on quarter.
Notably, and concerningly, the HIA cited a "shortage of titled land in Sydney and Perth", which will continue to put upwards pressure on those two housing markets, especially since they both have very heavy population growth numbers:
<div class="separator"><a href="https://3.bp.blogspot.com/-w3crXLyyWFo/U7DMoU73VmI/AAAAAAAAOKY/CkX8DXEvnog/s1600/HIA.jpg"><img src="https://3.bp.blogspot.com/-w3crXLyyWFo/U7DMoU73VmI/AAAAAAAAOKY/CkX8DXEvnog/s1600/HIA.jpg"></a></div>
Source: HIA
New dwelling sales fell again by another 6% this month in South Australia, down to just 490 in the month of May.
A weak market, where city dwelling prices declined in Q2.Yesterday's release from the Housing Industry Association (HIA) appears to be consistent other recent data sets - including softening building approvals, and construction finance for owner occupiers which seemingly hit a peak back in March 2014:
<img src="https://4.bp.blogspot.com/-buq9F4meLFE/U7DJ_Fo13FI/AAAAAAAAOKE/F9MxlL3ngbI/s1600/CFOO.jpg" style="line-height: 1.3em;">
Housing finance for construction investment actually peaked in February 2014:
<div class="post-footer">
<a href="https://2.bp.blogspot.com/-EbBZ9p2_ovA/U7DKWqCmjdI/AAAAAAAAOKM/8MNG3H5Ggxc/s1600/CFI.jpg"><img src="https://2.bp.blogspot.com/-EbBZ9p2_ovA/U7DKWqCmjdI/AAAAAAAAOKM/8MNG3H5Ggxc/s1600/CFI.jpg"></a>
Established stock under pressure from investors
However, a closer look at the more timely <a href="https://www.rba.gov.au/statistics/frequency/fin-agg/2014/fin-agg-0514" target="_blank">Financial Aggregates data</a> from the Reserve Bank, tells a slightly different story:
<a href="https://2.bp.blogspot.com/-NMbQV-4COEw/U7DIYvsLcvI/AAAAAAAAOJ4/bGRleRzJ_WU/s1600/RBAFA.jpg"><img src="https://2.bp.blogspot.com/-NMbQV-4COEw/U7DIYvsLcvI/AAAAAAAAOJ4/bGRleRzJ_WU/s1600/RBAFA.jpg"></a>
Housing credit growth is tracking at +6.2% year-on-year, having increased by +0.5% m/m in May.
More notably, drilling into the data shows that investor credit for housing jumped by another +0.8% m/m in May to be up a scorching +8.3% y/y.
Why? 
Because domestic investors are focusing on established dwellings which offer far superior bang for the buck.
A large percentage of new housing stock is presently being sold offshore, perhaps as much as 40% of it in Sydney and Melbourne according to a UBS report today.
The new housing market may be hitting a plateau, but the established market certainly has not done so.
Housing credit for investment as recorded by the RBA's Financial Aggregates has now increased for an incredible <a href="https://marketscuttlebutt.com/2014/06/30/net-australian-housing-investment-lending-8-3-yy-to-459-6b-66th-consecutive-monthly-increase/" target="_blank">66 consecutive months</a>, and with interest rates stuck down at record lows the trend look set to continue.
Inflation to soften
On a related note, the TD-MI inflation gauge was stuck dead flat at 0.0% m/m in June to be +3.0% y/y.
While the 3.0% reading sits at the top of the Reserve Bank's 2-3% target range, the inflation seen previously was largely <a href="https://marketscuttlebutt.com/2014/06/30/td-mi-inflation-gauge-back-at-rba-ceiling-likely-to-fall-in-the-second-half-of-2014/" target="_blank">a result of the falling Aussie dollar</a> as opposed to labour market pressures or wages growth, and thus is likely to soften again in the 2nd half of 2014. 
In fact, this month's 0.0% month on month reading may just be the start of that very softening.
Interest rates on hold for ages yet; established dwelling prices to keep rising.
You can visit <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) or Pete's <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blog</a>.
His latest book is '<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>' .
</div>
</body></html>

The financial year in review: Home values up, interest rates on hold for a while yet

<html><body>
An interesting article last week comparedthe returns from property and shares over 10 and 20 year periods respectively to December 2013. 
<div>Of course, <a href="https://www.smh.com.au/business/the-economy/property-vs-shares-which-did-better-20140619-3afda" target="_blank">the conclusions </a>usually depend on the preconceptions and prejudices of those making them, but let's take a quick squiz anyway...</div>
Equities
First and foremost, what the research shows is that a diversified, dividend-rich portfolio of shares continues to be a wonderful investment for those with a considered and long-term outlook.
Gross returns of 8.7% over the last 20 years imply that an unlevered $100,000 portfolio of shares in 1993 could have been worth a little more than $500,000 by December 2013, a fabulous performance by anyone's measure which easily outperformed the rate of inflation or returns from fixed income products.
Over the last 10 years, despite the global share markets crash during the financial crisis, gross returns inclusive of dividends from Australian shares recorded an even stronger 9.2% per annum, implying that you could have turned $100,000 into somewhere just shy of $250,000 over the decade to December 2013, with dividends having been reinvested.
The returns continue to be forever volatile, of course, but over a long time horizon a diversified portfolio of productive, profitable, industrial companies should deliver outstanding dividend income and capital appreciation.
Property
The returns on residential investment property were recorded as having "lagged" at only 6.1% per annum over the past 10 years.
As noted above, I don't usually bother too much with reading the conclusions of the commentators, because they invariably reflect the prejudices of those making them, on both sides of the property versus shares fence.
It's certainly the case that that residential property prices are likely to experience lower capital returns in the future than they have in times past, since we have already experienced the structural shift to lower inflation and equivalently lower interest rates, as well as having undergone a demographic shift towards a greater preponderance of dual income households.
My chart below shows that dwelling prices have acted in markedly different fashion by capital city over the last decade:
<div class="separator"><img src="https://4.bp.blogspot.com/-2F-1QRuV_iU/U6TfwmsjmHI/AAAAAAAAN9A/oa6buJoTOrk/s1600/ABS+long+term+prices.jpg"></div>
Stretch the figures back 20 years, and Australian residential property has returned an astounding 9.9% return per annum, a huge compounding annual return and the sorts of figures, one supposes, which allow people like me to be pontificating on matters of the world via the blogosphere rather than doing anything more productive with my time.
Over 20 years, property has been the strongest performing asset class by a sizeable margin, and a huge margin when leverage is taken into account.
Comparisons?
To a certain extent, there must be limited value in comparing returns on the two asset classes since they serve very different purposes and are as quintessentially different as chalk and cheese.
The main advantages of investment property may seem to be (a) the greater leverage used by average investors, and (b) that average punters appear more inclined to hold investments through downturns due to the lack of daily quoted dwelling prices.
Note, however, how these perceived benefits can also be disadvantages in disguise for the unwary.
In other words, those who 'get it wrong' can be burned savagely by these twin characteristics of real estate by (a) borrowing too much, and (b) holding on to a heavily leveraged asset which experiences a long, slow deflation in price or market value.
This article continues on the next page. Please click below. 
<hr class="system-pagebreak">
Example?
I'm not sure how much value there is in including a stylised example here, since property investors tend to be more focused than diversified and thus returns are heavily dependent on correct asset selection.
For example, I'm extremely grateful to be a property owner in <a href="https://www.dailymail.co.uk/news/article-2660654/The-house-gained-800-000-three-years-Huge-increase-price-home-South-West-London-latest-example-capitals-booming-property-market" target="_blank">south-west London, where prices are continuing to appreciate in a near-parabolic fashion</a>, but one suspects you'd have found few young owners of a sunny disposition in regional UK real estate over the past eight years.
In any event, where a capital growth rate of 6% per annum on a property is experienced over a 10 year period - which well-located capital cities properties have often achieved during the last couple of decades - this would have broadly turned a $500,000 house into a $900,000 house over that 10 year time horizon.
Assuming an initial investment comprising a 10% deposit of $50,000 plus, say, $25,000 of closing costs including stamp duty, transfer and legal fees, a compounding annual 6% capital growth created equity of an outlandish $450,000.
That is to say, mortgage debt remaining at $450,000, a property valued at $900,000 and correspondingly, equity of $450,000:
<div class="separator"><img src="https://3.bp.blogspot.com/-dVUboAO9RQc/U6TwO0diP5I/AAAAAAAAN9Q/Zq68S48NFfc/s1600/Resi.jpg"></div>
In other words, ignoring for the sake of simplicity any holding costs (due to low gross yields well located residential property may generate negative a cash flow in its early years before generating a positive income later in the life of the investment), you may have recouped your initial investment of $75,000 some six times over in a decade, a level of return on investment of closer to 20% per annum on the initial cash outlay.
That is to say, a rate of return that has simply not been achievable in another asset class with an equivalent level of risk for the average investor.
How has this ever been so? 
The main reason is that residential property mortgages have a unique triumvirate of conditions attached, as I discussed in greater detail in my piece <a href="https://petewargent.blogspot.com.au/2013/05/the-basic-characteristics-of-property" target="_blank">"The basic characteristics of property as an investment" here</a>:
<ol>
<li>Loan terms of up to 30 years...or even longer;</li>
<li>Low borrowing rates;</li>
<li>Low required deposits.</li>
</ol>
Will there be a property downturn in the next decade? 
There will. In this era of lower inflation, dwelling prices will actually fall in value in nominal terms far more often than than they have done in decades gone by.
Indeed, we have already seen this happen in the past decade, with prices falling in nominal terms in several calendar years.
Due to the high level of transaction costs, investment property should ideally therefore be held over a period of more than two decades, in my opinion. 
I only can wish that I had a dollar for every time someone asked me about their property's lack of 'performance' over its first year or two...
Summary
In summary, two very different asset classes that are nigh on impossibly difficult to compare in any meaningful manner.
It is possible to use significant leverage in the share market too, but unfortunately very few investors manage to achieve this with the requisite level of skill.
In the last decade, in theory you could have made a motza by leveraging heavily into the share market, but in reality, most - at the risk of committing the cardinal sin of verbing my nouns  - would have been margin-called out during the 2008 crash.
<div><img src="https://hfgapps.hubb.com/asxtools/imageChart.axd?s=xjo&amp;pi=Index&amp;ct=3&amp;tf=M10&amp;ovs=&amp;si=Code%20not%20supplied&amp;tima1=0&amp;tima2=0&amp;bi=2&amp;bima=0&amp;comt=index&amp;ds=xjo&amp;dovs=0&amp;ex=ASX&amp;ex2=ASX&amp;val=1&amp;stmp=20140621115343362" width="400" height="275"></div>
Smart equities investors who kept their powder dry borrowed against the homes at low mortgage rates in 2009 to pick up parcels of shares in wonderful companies such as Wesfarmers (WES) and Commonwealth Bank (CBA) when they were trading at incredibly cheap Price/Earnings (PE) ratios and the market was "on sale".
In this way, share market returns can also begin to escalate massively, but for various reasons it seems to be the case that only a select few manage to pull this strategy off with any real panache.
The truth is that equities are a wonderful asset class for those who learn to treat shares as an income asset and derive their benefit from the ever-increasing tax-advantaged dividends with franking credits. 
Instead, most seem to ask: "Which shares are going to go up soon?" focusing exclusively on price action and indulge themselves in the endless and fruitless conjecture of market commentary, which is somehow miraculously to divine which direction the market will move in next.
You can visit <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) or Pete's <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blog</a>.
His latest book is '<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>' .
</body></html>

Property or shares - which is a better investment?

<html><body>
Forecasters often back off from their previous predictions, but there's not really too much point in that. 
The very concept of accurately forecasting dwelling prices is flawed, since it is not possible to anticipate future event which impact the economy.
In the absence of much interesting local news, I'll take a look at how Aussie property prices are tracking against our 2014 forecasts, by benchmarking against <a href="https://www.rpdata.com/" target="_blank">RP Data's Daily Home Value Index</a> for the year-to-date. 
Below is what we came up with for 2014. It may also be <a href="https://petewargent.blogspot.com.au/2013/11/property-market-predictions-for-2014" target="_blank">worth reading here</a> the rationale behind our predictions, in particular why we came in lower than most, if not all, other forecasters.
<div>
2014 forecasts
Hobart -1% to 2%
Canberra -1% to -4%
Perth 0% to 3%
Adelaide 0% to 3%
Brisbane 2% to 5%
Melbourne 2% to 5%
Sydney 6% to 9%
</div>
The year to date...
The RP Data Daily Home Value Index does not cover daily figures for Hobart or Canberra, but we note that according to Residex prices have been flat or falling moderately, in line with expectations.
Sydney
Our strongest 2014 forecast was for 6% to 9% capital growth in Sydney.
The home value index has historically recorded seasonal dips in May, the reasons for which have been well documented elsewhere.
We should now be through that seasonal dip and the outlook for Sydney suggests further price growth in 2014, 2015 and 2016 according to BIS Shrapnel.
I tend to agree that we'll likely ongoing growth for Sydney but at a slower pace than has been seen in the last 12 months.
<div class="separator"><img src="https://2.bp.blogspot.com/-kwDn1WFGSTk/U6i6SL5A-uI/AAAAAAAAOBw/Y1oLALOLqUQ/s1600/Sydney.jpg"></div>
Melbourne 
Melbourne is a tricky one, the data always seems to imply higher vacancy rates and plenty of stock, and yet dwelling prices have often defied the data in this regard, presumably due to much of the new stock being less sought after.
We opted for 2% to 5% capital growth om the grounds that the market has already been heated for some years now. Our prediction was lower than what others expected. 
The daily home index has been a wild ride for Melbourne, first "booming" and then "busting" in 2014.
The net position is that the market is tracking at around a 2% annualised pace in 2014, which is consistent with the bottom end of our forecast range. 
Some talk of the Melbourne market having peaked around in media circles. Watch this space.
<div class="separator"><img src="https://1.bp.blogspot.com/-8hxQVkPfiDM/U6i6Y4rdyiI/AAAAAAAAOB4/4sD_0BMO3RU/s1600/Melbourne.jpg"></div>
Brisbane
The market with the strongest three year prospects according to BIS Shrapnel who forecasts 17% capital growth over that time.
For similar reasons we plumped for 2% to 5% growth in 2014 for Brisbane and Gold Coast.
Tracking quite nicely.
<div class="separator"><img src="https://3.bp.blogspot.com/-vJJ7tAe7-jk/U6i64xgXGMI/AAAAAAAAOCA/fkHgu5wNt88/s1600/brisbane.jpg"></div>
Adelaide
It's been a recurring theme in Australia that every year the experts predict a "boom" in Adelaide but it never comes to pass.
To be blunt, I'm not a fan myself due to the weak and faltering local economy, a <a href="https://petewargent.blogspot.com.au/2014/06/blue-day" target="_blank">brain drain to other states</a>, weak state population growth and rising unemployment, as documented here many times.
In fact, I will always be wary of experts recommending that you invest into an economy where unemployment is rising towards 7%, particularly if they are vested interests in that market.
If net jobs growth returns then fair enough, but until that time...pass.
For these reasons, our forecast was only for 0% to 3% capital growth, which may have been unpopular, but with the local press reporting an <a href="https://www.adelaidenow.com.au/news/south-australia/south-australians-have-homes-repossessed-over-mortgage-default/story-fni6uo1m-1226962430827" target="_blank">increasing number of foreclosures</a>, I doubt we'll be too far off track with that prediction.
<div class="separator"><a href="https://1.bp.blogspot.com/-9DsqQo99hzc/U6i7I9mxupI/AAAAAAAAOCI/KRLxDpPfKV8/s1600/Adelaide.jpg"><img src="https://1.bp.blogspot.com/-9DsqQo99hzc/U6i7I9mxupI/AAAAAAAAOCI/KRLxDpPfKV8/s1600/Adelaide.jpg"></a></div>
Perth
2013 was a great year for Perth, driven by the strongest rate of population growth in Australian capital cities. 
<div>We see 2014 as being a flatter year as the mining boom reinvents itself as an export boom from a construction boom.</div>
<div> </div>
<div>Over the longer term there will be opportunities in Perth, particularly for houses located near transport hubs as the city population swells.</div>
<div> </div>
<div class="separator"><img src="https://2.bp.blogspot.com/-YrRgEDLAdVE/U6i7bsr22AI/AAAAAAAAOCQ/GxhbpjHLKoo/s1600/Perth.jpg"></div>
You can visit <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) or Pete's <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blog</a>.
His latest 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>

How my Aussie property price predictions for 2014 are tracking

Sydney supply problems, investor finance through the roof and "ferry good" Neutral Bay

<html><body>
There has been <a href="/expert-insights/buying/the-property-boom-is-over-a-good-headline-but-no-evidence-to-back-it-up">a lot of media chat</a> about house prices "falling" in May, which is basically a result of the famed Daily House Price Index recording a decline in that month (as it has done every May, due to seasonality).
Meanwhile, back in the real world, the housing markets continue to look strong, with the <a href="https://www.propertyobserver.com.au/https://www.abs.gov.au/ausstats/abs@.nsf/mf/5609.0" target="_blank">ABS Housing Finance data</a> recording further increases in April.
<a href="https://4.bp.blogspot.com/-AXUV3ocvw0c/U5Z10in1aeI/AAAAAAAANxM/iG9g2ZabZ5g/s1600/ABS+housing+finance.jpg" style="line-height: 1.3em;"><img src="https://4.bp.blogspot.com/-AXUV3ocvw0c/U5Z10in1aeI/AAAAAAAANxM/iG9g2ZabZ5g/s1600/ABS+housing+finance.jpg"></a>
This comes as no surprise, because, as I posted <a href="https://petewargent.blogspot.com.au/2014/06/record-high-mortgage-demand-in-may" target="_blank">here</a>, other mortgage market data has suggested the same thing, with Australian Finance Group (AF) recording the its highest mortgage demand ever in May.
In particular, AFG's data suggested to me that the markets are being driven by property investors more than ever before, a direct effect of the lowest interest rates we have seen in a generation.
At long, long last it also seems that the penny is beginning to drop that first home buyers are not (and never were, in fact) "on strike" - they're still around but often in a different guise than in previous cycles.
Some are buying but a little later in life than before, others are buying yet aren't being recorded as first-timers, others still are buying as investors and as such slip through the net in that manner.
Shifting trends, yes... but not a "strike".
Construction?
Remember that through this property cycle in Australia what we really want to see is heavy investment in new dwellings in order to generate dwelling construction and economic activity to offset the coterminous decline in mining investment.
On the face of it, construction finance for owner occupiers still looks strong for owner-occupiers on a moving annual basis.
However, what this chart doesn't quite show so clearly is that the data for the last few months is beginning to look decidedly sketchy.
Hopefully I'm wrong, but the peak may soon be in for this segment of the market:
<div class="separator"><a href="https://3.bp.blogspot.com/-lkJg4iJcsB8/U5Z2kCkPncI/AAAAAAAANxU/NRRSmk98TjE/s1600/CFOO.jpg"><img src="https://3.bp.blogspot.com/-lkJg4iJcsB8/U5Z2kCkPncI/AAAAAAAANxU/NRRSmk98TjE/s1600/CFOO.jpg"></a></div>
On the other hand construction finance for investors is very strong and looks to be heading for a record heights on a moving annual basis:
<div class="separator"><a href="https://2.bp.blogspot.com/-AdMP-Wzd3wM/U5Z2kD0p9UI/AAAAAAAANxc/8dSzdgyCZ_I/s1600/CFI.jpg"><img src="https://2.bp.blogspot.com/-AdMP-Wzd3wM/U5Z2kD0p9UI/AAAAAAAANxc/8dSzdgyCZ_I/s1600/CFI.jpg"></a></div>
In aggregate, finance for new dwellings remains strong which bodes well for the construction index, particularly for apartments.
Investor loans shatter all-time records
As for total property investment loans in April, the monthly figure printed at an astonishing $10,978,872,000.
That is comfortably the highest aggregate of monthly property investment loans ever recorded in Australia, roundly plonking a very large question mark against the suggestion that property prices have been receding.
<div class="separator"><a href="https://2.bp.blogspot.com/-ibINLNmRdS4/U5Z2kGnDYfI/AAAAAAAANxY/u95-PjW85ts/s1600/Invloans.jpg"><img src="https://2.bp.blogspot.com/-ibINLNmRdS4/U5Z2kGnDYfI/AAAAAAAANxY/u95-PjW85ts/s1600/Invloans.jpg"></a></div>
That's certainly the on the ground experience in Sydney: the idea that one might pick up under market value bargains based upon the supposedly falling prices is absurd. For decent properties, you'd be outbid very time.
The <a href="https://www.propertyobserver.com.au/https://www.abs.gov.au/ausstats/abs@.nsf/mf/5671.0" target="_blank">Lending Finance data</a> for April to be released on Friday will provide more detail by state, and I have little doubt that rolling 12 monthly property investment loans in New South Wales will be at or close to record highs.
There are simply far too many investors in the market for it to be otherwise.
Article continues on next page. Please click below. 
<hr class="system-pagebreak">
Strike or shift?
There's been a long-running debate about the so-called "first home buyer strike" in Australia.
It never really made any sense, since first home buyer numbers have remained very solid in states which have grants for first-times such as Western Australia, where <a href="https://www.afgonline.com.au/wp-content/uploads/2014/06/WA-June-14.pdf" target="_blank">20-25% of loans written</a> continue to be for first-timers.
Yet mysteriously FHBs had apparently disappeared in states such as New South Wales, crowded out by greedy Baby Boomer investors.
I summed up the basic issue incomplete records issue at the beginning of the year <a href="/expert-insights/buying">here</a>.
Further, as noted <a href="https://petewargent.blogspot.com.au/2014/04/investment-mortgages-crunch-all-time" target="_blank">here</a> as mortgage data broke new record heights, it's important to listen to what the data is actually telling you, which has not been commensurate with an entire sector of the market casually sitting on the sidelines.
There has been a shift, certainly.
First home buyers are getting older, often buying in couples rather than alone.
Many are choosing to buy an investment property as their first step, especially in Sydney.
But they are not "on strike", as has been claimed.
RBA reporting
The Reserve Bank released its chart pack to the end of May last week <a href="https://www.rba.gov.au/chart-pack/index" target="_blank">here</a>, and it seems that the central bank has at long last reached the same conclusion, completely stripping the first home buyer data out of its chart pack.
<div><img src="https://www.rba.gov.au/chart-pack/images/5-6-household-sector/6br-hla-small.gif?accessed=2014-06-10-08-22-50" alt="Housing Loan Approvals graph" width="400" height="320"></div>
Previously, the split had been shown between owner-occupiers, investors and first-timers, but since the FHB data was both incomplete and non-sensical, a decision has clearly finally been reached to have it pulled.
Other RBA charts show building approvals to be approaching something of a crossroads, although remaining close to record highs:
<div><img src="https://www.rba.gov.au/chart-pack/images/5-6-household-sector/5bl-privbapp-small.gif?accessed=2014-06-10-08-41-45" alt="Private Residential Building Approvals graph" width="400" height="316"></div>
And dwelling prices remain in an uptrend.
<div><img src="https://www.rba.gov.au/chart-pack/images/5-6-household-sector/6bl-dwelpri-small.gif?accessed=2014-06-10-08-41-45" alt="Housing Prices graph" width="400" height="330"></div>
The rest of the chart pack, which you can see <a href="https://www.rba.gov.au/chart-pack/index" target="_blank">here</a> makes for interesting reading as always.
In particular, note the near-exponential rate of growth in bulk commodity export volumes which are now overwhelmingly driving Australia's economic growth.
<div><img src="https://www.rba.gov.au/chart-pack/images/16-17-balance-payments/16tr-bcomx-small.gif?accessed=2014-06-10-08-43-32" alt="Bulk Commodity Exports graph" width="400" height="332"></div>
With a third of Australia's annual exports by value destined for China, it's a highly leveraged play.
You can visit <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) or Pete's <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blog</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>

Investor loans shatter all-time record highs, RBA changes stance on first home buyers

<html><body>
While it's an interesting exercise to draw property market charts back to the middle decades of the 1800s, it doesn't really help us to draw any logical conclusions about the future.
There is little comparison to be drawn from the slums in The Rocks of the 1900s where an outbreak of the <a href="https://makinghistoryatmacquarie.wordpress.com/2012/11/20/the-bubonic-plague-outbreak-in-sydney-1900-disease-as-a-political-tool/" target="_blank">bubonic plague</a> was killing residents and the modern housing of today.
That would be like comparing Ken Rosewall to Rafa Nadal and concluding that Rosewall was rubbish. He wasn't, of course, but the rules have changed.
Perhaps a more useful starting point for housing market data would be 1986, which is when lending markets in Australia were <a href="https://petewargent.blogspot.com.au/2014/05/interest-rates-more-important-than-they" target="_blank">deregulated</a> in a sweeping move which won't be reversed.
A few other things have changed since then too. 
I was reading a book on commercial property yesterday written in 2003, which anticipated that Australia's population could "swell" to 25 million by 2051. 
Well, we're <a href="https://www.abs.gov.au/ausstats/abs@.nsf/0/1647509ef7e25faaca2568a900154b63?OpenDocument" target="_blank">well past 23.5 million</a> already in 2014 and heading towards a projected 40 million or so by the middle of the century.
That's one major shift.
Another has been the huge change in borrowing rates. Today it's possible to borrow for housing a rate close to 4.50%, which is unfathomably low as compared to 25 years ago.
<div class="separator"><a href="https://3.bp.blogspot.com/-sIBAhQMwIM4/U4MkXg5x1JI/AAAAAAAANcM/d_Qc5mHo8ko/s1600/IRHAustralia.jpg"><img src="https://3.bp.blogspot.com/-sIBAhQMwIM4/U4MkXg5x1JI/AAAAAAAANcM/d_Qc5mHo8ko/s1600/IRHAustralia.jpg"></a></div>
Anyway, we've looked at the <a href="https://petewargent.blogspot.com.au/2014/05/interest-rates-more-important-than-they" target="_blank">role of lending deregulation</a> before.
Today let's consider...
Gender
Another major demographic shift in the last few decades has been the increasing role of females in the workforce.
<div>
The stats show that with total employment in the Australian workforce increasing to above 11.5 million, the percentage share of females has increased from around a third towards almost half at 46%.
</div>
<a href="https://2.bp.blogspot.com/-74IIj28MzKU/U4LxV0f8A8I/AAAAAAAANbs/6DyOHZk9FEQ/s1600/1Gender.jpg" style="line-height: 1.3em;"><img src="https://2.bp.blogspot.com/-74IIj28MzKU/U4LxV0f8A8I/AAAAAAAANbs/6DyOHZk9FEQ/s1600/1Gender.jpg"></a>
This impacts property markets because there has been a dramatic increase in the number of dual income households which boosts purchasing power and loads the dice in favour of the couple with two incomes and over the single income household. 
This is where it's important to consider some specifics if you are looking at buying a property. 
Phrases like "many young people want to live near the city" and "many young people look at apartments" may indeed be true, but they are so generic that they don't really tell you a lot.
Similarly, saying that "there are many more dual income households" may also be correct, but it doesn't really tell you much about the impact on property markets unless you drill down to a localised level.
Demographics by suburb
Let's say I'm looking at buying an investment property in a prestige leafy harbourside suburb in Sydney such as Neutral Bay, which is one of the locations I bought in last year. That's around 10 minutesto the Opera House and Circular Quay on the ferry.
First, I'd take a look at the demographics of the suburb. The data below is from RP Data, but you can use other sources if you prefer.
<div><a href="https://3.bp.blogspot.com/-XMzmD5RJm6A/U4ZplsNa7KI/AAAAAAAANeo/BELXw6FACrw/s1600/1NBaaa.jpg" style="line-height: 1.3em;"><img src="https://3.bp.blogspot.com/-XMzmD5RJm6A/U4ZplsNa7KI/AAAAAAAANeo/BELXw6FACrw/s1600/1NBaaa.jpg"></a></div>
<div>Source: RP Data.</div>
This gives me a good idea of my target tenant.
Intuition already tells me that it would most likely be a professional couple in a similar age bracket to myself, and the data says...yep, pretty much, 25-34 year olds are probably the go.
<div class="separator"><a href="https://3.bp.blogspot.com/-M7sjqjd5ATk/U4ZpxwvY51I/AAAAAAAANew/8IswNY32cbs/s1600/1NB.jpg"><img src="https://3.bp.blogspot.com/-M7sjqjd5ATk/U4ZpxwvY51I/AAAAAAAANew/8IswNY32cbs/s1600/1NB.jpg"></a></div>
<div class="separator"> </div>
Source: RP Data 
Note the impact of the dual income household in <a href="/news">Neutral Bay</a>, where the most households are in the $130,000-$180,000 household income bracket.
If you live in central Sydney, a lot of this is stuff is partly intuitive. In the type of inner suburb apartment blocks I've lived in over the years, the overwhelming majority are let to young two-income couples who work in or near the city. 
What the demographics of the suburb also tell me is that the target entry price for an apartment would likely be $650,000 to $750,000. 
That way, even couples with heavily geared 80% loans should still be able to service their mortgages in the unlikely event that standard variable borrowing rates return to 10% any time soon.
In that price bracket you'd likely be looking at a quality two bedroom apartment on a quiet street with parking, and ideally harbour or district views. 
Prolonged high levels of unemployment is a different issue for housing markets. 
The longer term data tells me that the population of Neutral Bay has not increased at all between Censuses  (it actually fell a little last time around) because the supply of new dwellings has been almost totally capped. 
The demand for housing in a glistening, prestige harbourside suburb will easily outstrip the available supply over the long term simply because there is very little new supply.
Median apartment prices have not done anything particularly spectacular, moreover they have simply tracked the growth in housheold incomes over the past decade, appreciating at around 4% per annum on average.
<div class="separator"><a href="https://2.bp.blogspot.com/-UUW2mcSxKxM/U4ZriF3o9hI/AAAAAAAANe8/ep_x1EQ6zaQ/s1600/1NB2.jpg"><img src="https://2.bp.blogspot.com/-UUW2mcSxKxM/U4ZriF3o9hI/AAAAAAAANe8/ep_x1EQ6zaQ/s1600/1NB2.jpg" width="400" height="258"></a></div>
<div class="separator"> </div>
There will certainly be downturns in a suburb like Neutral Bay as there are anywhere, but they are unlikely to be severe in the price range identified above. The replacement cost of apartments is high, and a downturn in prices would likely quickly be met by new demand.
Naturally, you could alternatively look at a house in the suburb but the entry point would likely be very high at $1.5 million plus. The long-term capital growth outcome would likely be great, but the ride would be more volatile and the holding costs more painful.
Clearly, we're looking at a prestige Sydney harbourside suburb scenario here. If you were looking at investing in a distant location somewhere west of <a href="/news">Narromine</a> rather than Neutral Bay, you would be looking at different demographics and income profiles, and therefore a necessarily lower entry price.
You can visit <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) or Pete's <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blog</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>

The demographics of dual income couples

<html><body>
Affordability
While on the face of it the level of housing affordability is what causes our housing markets to ebb and flow, it's as likely to be the unemployment rate and the availability or otherwise of credit in Australia which drives property market movements.
The unemployment rate currently sits at a historically low level at under 6%, but has been rising moderately through 2013.
<img src="https://1.bp.blogspot.com/-5KyrRjfn_4U/U3_NKChJnmI/AAAAAAAANYE/O2N0OR0t0Tk/s1600/1ue.jpg">
The issue of affordability is an ongoing one, and being an emotive issue, sometimes the dynamics of how housing markets actually work in practice are overlooked.
The great paradox of today's rising asset prices is that the prevailing low interest rate environment has improved affordability considerably for existing home owners, but made life correspondingly worse for first time buyers as entry prices to the market rise.
Older clients often come to me expressing surprise at the level of their surplus income, the driver of which has clearly been the structural shift to low inflation and lower interest rates over the past 25 years.
<img src="https://4.bp.blogspot.com/-a74WkKkfsuw/U3_LQuBMZFI/AAAAAAAANX4/gPOx71PU4u0/s1600/OCR.jpg">
Multiples of income
The way in which housing markets from different countries are compared to each other is most often by taking the median price of a house and dividing it by an average measure of household incomes to produce a multiple.
Looking at how long it would take to pay off an average house with an average income is a handy shortcut measure of housing affordability and a very easy means of comparison, but this isn't how housing markets work in reality since it flatly ignores the role of interest rates and the differing financial situations and stages of life that buyers of property are in.
This widely favoured methodology fails to consider mortgage repayments - a housing market where prices are a low multiple of incomes yet has mortgage rates approaching 20% may still not necessarily be an affordable market.In other words, the multiple of incomes method works on the presumption that everyone is a first home buyer with a 80-100% loan.
In the real world, our housing markets work very differently.
There are essentially four different types of buyer, and issues of affordability affect each of them differently.
<ol>
<li>
No finance The percentages fluctuate each year and by state, but between a quarter and a third of properties tend to be bought with no financing. How so? Well, there are some lucky so-and-sos whose parents buy their homes for them, but most often this happens due to the sale of an existing home. Empty-nesters and down-sizers form part of this phenomenon. Other older buyers who are mortgage free opt to move to a similarly-sized home and thus require no debt financing. By the end of 2013, the total of all Australian household debt reached a record $1.84 trillion as the population expands. Yet even the sum total of all forms of household debt is comfortably dwarfed by the value of housing assets as estimated by the Australian Bureau of Statistics (click chart): <img src="https://2.bp.blogspot.com/-on_IH1jsph4/U3_HkgaAYNI/AAAAAAAANXs/D-CJ95PWWuQ/s1600/1HD.jpg"><a href="https://2.bp.blogspot.com/-on_IH1jsph4/U3_HkgaAYNI/AAAAAAAANXs/D-CJ95PWWuQ/s1600/1HD.jpg"> </a>Cash buyers are affected little by rising interest rates and often they remain unaffected by the base value of housing, since the asset which they are selling may rise in tandem with the asset they opt to buy. 
</li>
<li>
Investors As our capital city housing markets mature and the population expands largely by immigration, it is expected that the number of properties owned by investors will also increase. In cities such as Sydney around half of loans presently written are investment loans, but Australia-wide one of the gauges over time of how much property is bought by investors is the rate of home ownership, which also seems likely to slide in the decades ahead. Since some investors choose to own multiple properties, investors tend to comprise around a quarter of buyers. Affordability is not really an issue for most investors in the low interest rate environment, since rental income pays the bulk (if not all) of the mortgage and there are tax deductions available for on-paper losses. Investors instead elect to buy at times when rental yields are acceptable as compared to other available investments and in regions where they expect to see capital growth. Most property investors are looking for locations where the population is expected to grow over time and therefore they are very heavily focused on capital cities and larger regional cities. 
</li>
<li>
Existing mortgagors Again, the percentages fluctuate each year and by state, but around a third of the market of property buyers are existing mortgagors who have equity in their home. So the issue for these buyers of affordability is largely governed by interest rates and the price gap between the property they own and the one which they want to own. Note therefore, that housing affordability for these buyers is correspondingly unrelated to the base value of their existing property, and is instead much driven by their own aspirations. 
</li>
<li>
First home buyers The remaining 10% or so of property buyers are first homebuyers, which is the one sector of the market for whom repayments versus household income is a genuinely worthwhile measure. For this sector of the market the challenges to be overcome include the deposit gap and whether mortgage repayments can be well covered in the event of future interest rate hikes. The first homebuyer demographic which has access to a deposit and mortgage finance is driven by another equation: the cost of renting versus the expected mortgage repayments if a home is purchased.
</li>
</ol>
This article continues on the next page. Please click below. 
<hr class="system-pagebreak">
Granularity
The above dynamics help to explain why US forecasters who predicted an Australian property crash have not to date seen their expected outcome.
A multiple of income measure is one measure of housing affordability, but in itself doesn't guarantee a price correction where a strongly rising demand is exceeding supply
This is particularly so where most of the population remains employed.
The above dynamics show that perhaps around 90% of buyers are not impacted by affordability in the manner which commentators frequently imply.
This is where the point on granularity comes in.
House prices in London have been able to run up to outrageous levels and by another 20% or so in the past year alone since there is a woefully low level of ongoing dwelling construction but demand is rising.
Yet in the north-east of England, more than 50% of first homebuyers who bought homes in 2007 remain in negative equity even seven years on.
The difference in outcomes is due to the respective supply/demand imbalances.
While it's certainly useful to compare price to income multiples to a point, it would be unwise to expect all markets to behave in the same manner in this regard.
In the case of parts of New South Wales, there exists a genuine challenge for the rising demand of the coming decades to met by quality supply.
Here is how things stand in Sydney's inner suburbs at the moment, which is to say, verging on crisis levels.
<a href="https://3.bp.blogspot.com/-DtNKs4qIo7M/U3_Qo-ArpKI/AAAAAAAANYQ/3IHTCOw7Ivk/s1600/1REINSW.jpg" style="line-height: 1.3em;"><img src="https://3.bp.blogspot.com/-DtNKs4qIo7M/U3_Qo-ArpKI/AAAAAAAANYQ/3IHTCOw7Ivk/s1600/1REINSW.jpg"></a>
Clearly certain regional markets do not face anything like the same issues, especially as population growth in New South Wales is tracking below the national average in almost every regional town as I considered <a href="https://petewargent.blogspot.com.au/2014/04/the-sea-change-is-well-and-truly-buried" target="_blank">here</a>.
Since we don't face the same demographic challenges in Australia as some other European countries where dependency rates have increased alarmingly, far more important will be how our economy progresses and the extent to which credit markets remain liquid and mortgage financing remains so widely available.
Further, while most of the value in housing market is equity rather than debt, and while a third of property is owned debt free (and a growing percentage by investors) those who are hurt financially by softer periods in the housing markets are likely to be those who are forced sellers such as the longer-term unemployed, those who have to relocate for employment, divorcees and deceased estates.
Other potential vendors have the luxury to 'wait out' softer periods in the market and as such are less likely to experience an adverse outcome.
Warning - the popular media is late to the party and <a href="https://news.domain.com.au/domain/neighbourhoods/erskineville-becomes-a-hot-property-20140519-zrhqa" target="_blank">tipping Erskineville</a> as a hot suburb, which means that you've long missed the time to buy.
As we said here previously, the time to buy in Erskineville was 2007/8 when it was still seen to be a less attractive proposition - and as we anticipated, apartment prices in the suburb have risen by 56% in the last five years.
It's time to look elsewhere.
Sources: I've leaned heavily here on the ideas of John Lindemann and his work in the Mastering the Australian Housing Market (Wrightbooks, Queensland, 2011).
You can visit <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) or Pete's <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blog</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>

The property market dynamics influencing affordability

<html><body>
On Saturday arvo, in a small but significant landmark for Australia, with the population increasing by one person approximately every 77 seconds, the <a href="https://www.abs.gov.au/ausstats/abs@.nsf/0/1647509ef7e25faaca2568a900154b63?OpenDocument" target="_blank">Aussie population clock</a> will quietly tick past 23,500,000.
Property investors tend to keep an eye on this kind of stuff because population growth and demographic shifts are vitally important to how we are developing as a nation.
While there may be no direct link between the growth in a population and property prices per se, over the long run it is crucial to understand how demographics are shifting.
And, more than that, whether the population is growing or not makes all the difference to city housing markets. 
Where populations are static or falling, this comes with an inherent risk of protracted declines in price, such <a href="https://petewargent.blogspot.com.au/2014/03/population" target="_blank">as experienced in certain other parts</a> of the world. 
Australia is growing its population at a very sharp pace, so these little landmarks tend to sneak up on us, and it is important that the building of infrastructure and jobs growth keep pace with the net migration and natural population increase:
<div class="separator"><a href="https://3.bp.blogspot.com/-lBnSx4QYUMI/U30u9-I_pEI/AAAAAAAANT0/5gHQkRldrBw/s1600/1AUSPOP.jpg"><img src="https://3.bp.blogspot.com/-lBnSx4QYUMI/U30u9-I_pEI/AAAAAAAANT0/5gHQkRldrBw/s1600/1AUSPOP.jpg"></a></div>
Steady states?
As I tend to look at periodically, the population growth in Australia is a combination of natural increase and net migration, and, as you might expect, it does not occur evenly across the country.
Over the long run, in particular, four states have been growing their populations at quite a bounding pace.
<blockquote>
While there may be no direct link between the growth in a population and property prices per se, over the long run it is crucial to understand how demographics are shifting.
</blockquote>
Since 1981 for example, New South Wales has increased its population from 5.2 million to above 7.4 million - a colossal increase - while Victoria is not far behind, having raced from below 4 million to above 5.75 million.
Queensland and Western Australia have also shown very strong population growth as you can see in the chart below, which details the make-up of Australia's population by state over the long haul.
On the other hand, even over the very long term South Australia has added relatively few persons to its population, increasing from a bit above 1.3 million to less than 1.7 million, a total increase of only around 350,000.
The other states are minnows by comparison, although artificial and geographical supply constraints in Canberra and Darwin have seen dwelling prices rise sharply in some cases:
<div class="separator"><a href="https://1.bp.blogspot.com/-yXscaSymvI8/U30ynG7_5LI/AAAAAAAANUI/yDxe_Q8QA9Y/s1600/1ad.jpg"><img src="https://1.bp.blogspot.com/-yXscaSymvI8/U30ynG7_5LI/AAAAAAAANUI/yDxe_Q8QA9Y/s1600/1ad.jpg"></a></div>
It was interesting to read <a href="https://www.propertyinvesting.com/migrant-housing-boom/?inf_contact_key=75f31db15d3c07ca9061d559a6def26c35b22d8413be84f391a07f6ad4f2159f" target="_blank">in an article this week</a>, Steve McKnight offering the following advice:
"The generic growth gives investors a blueprint of where to target, namely Melbourne, Sydney, Perth and Brisbane in that order, and where not to, namely: Tasmania, NT, ACT and SA (in that order)." 
The total population growth figures released by the ABS tend to reveal similar trends each quarter:
<div class="separator"><a href="https://3.bp.blogspot.com/-jsqw07wUCLQ/U30u90eFUiI/AAAAAAAANTw/CLVk6o8GUic/s1600/1PGBS.jpg"><img src="https://3.bp.blogspot.com/-jsqw07wUCLQ/U30u90eFUiI/AAAAAAAANTw/CLVk6o8GUic/s1600/1PGBS.jpg"></a></div>
McKnight believes that because the state of Victoria has the highest total population growth Melbourne is the best city to invest in.
Property price movements are not only about demand of course, you have to consider supply too.
Personally, I prefer Sydney because of its geographical constraints; the city can't readily spread due to the respective surrounding mountains, national parks and the ocean.
As an obvious aside, while it's good to see a city with very strong population growth, we don't look for suburbs with the highest density of population.
Not at all in fact - we look for prime location suburbs where the population is all but fixed due to a necessary lack of new supply, where there are height restrictions on new building.
In Sydney, for example, we've recently been buying in some of the lower north shore suburbs where the population growth within the individual suburbs from Census to Census has been all but negligible. Fully built out and height restrictions on new development. 
There are other factors to consider too, of course, including relative affordability.
Trees surely don't grow to the sky, so at various points in the cycle investors will consider Brisbane and Perth too.
The other states have feeble population growth, and generally speaking, therefore might be considered riskier propositions.
You can visit <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) or Pete's <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blog</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>

Pete Wargent

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News

Pete Wargent

Editor's Picks

Receive the latest news stories to your inbox

Have something to contribute?

Developments

New apartments

New townhouses

News