Sydney may hold the dubious honour of being the world’s second most expensive housing market, outpriced only by perennial leader Hong Kong, but its appetite for prestige property shows no sign of slowing. At the heart of it all sits Sydney Harbour, where waterfront apartments command eye-watering prices that show few signs of slowing.

According to Westpac’s August Prestige Market Overview, the city’s luxury sector continues to outperform expectations, with top-end values rising 6.2 per cent across 2024. Over the past decade, prices for Australia’s most exclusive apartments have surged more than 40 per cent, while available listings remain nearly 20 per cent below pre-pandemic levels, data from Cotality reveals.

Much of Sydney’s recent luxury boom has centred on Circular Quay and Barangaroo, two glittering precincts now home to some of the country’s most expensive real estate. Yet one of the city’s most iconic waterfronts has, until now, remained surprisingly underdeveloped: Darling Harbour.

Long known as a playground for tourists and locals, Darling Harbour has never truly offered the chance to live there, until now. Recognising the untapped potential of this prime harbourfront, development powerhouse Mirvac has taken the lead in reimagining the precinct. The company is at the centre of a wider $15 billion revitalisation that will elevate Darling Harbour’s prestige to rival its glamorous neighbours.

At the heart of the transformation is Harbourside Residences, a $2 billion glass tower rising from the redeveloped Harbourside Shopping Centre. The project brings together an international design collaboration between Norwegian architecture firm Snøhetta and Australian practice Hassell, with interiors by Bates Smart. The tower will house 260 residences, with the yet-to-be-released penthouse collection, six sub-penthouses and three full-floor penthouses, expected to rank among Australia’s most exclusive homes.

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Buyers have already responded in force. The project’s first apartment release late last year became the most successful launch in Mirvac’s 54-year history, recording more than $700 million in sales in just one weekend, with more than $800m total pre-sales to date. Prices ranged from $1.7 million to $25 million, with more than 40 per cent of purchasers being repeat Mirvac buyers, a testament to the developer’s reputation for quality and delivery.

Mirvac has now unveiled the tower’s most coveted homes: a collection of three- and four-bedroom residences positioned across the upper levels of the 48-storey building. From this vantage point on the western edge of Sydney Harbour, residents will enjoy a striking and rarely seen perspective of both the city skyline and the water.

[smartcode_project:default project_id=141327 project_image_fid=352369]

Inside, luxury extends far beyond the apartments themselves. Harbourside Residences will feature wellness amenities on par with a five-star resort, including a traditional sauna, steam room, ice bath, indoor lap pool, gymnasium, and yoga and pilates studio. Private leisure spaces cater to the growing desire for exclusive community living, with a residents’ lounge, private dining rooms with commercial and show kitchens, a cinema room, and even a golf simulator.

Outdoors, the experience is just as impressive. Landscaped garden terraces frame a lagoon-style pool that looks directly across the harbour, offering some of the most intimate city views anywhere in Sydney.

[smartcode_project:default project_id=141327 project_image_fid=352372]

Construction of Harbourside Residences is well underway. Mirvac, which designs, builds, and delivers its own projects, a model that reduces risk and ensures consistency, expects completion in late 2027. When finished, it will not only redefine Darling Harbour living but reshape Sydney’s skyline once again.

[smartcode_project_cta:default project_id=141327]

Joel Robinson

Sydney’s next great waterfront: Darling Harbour steps into the spotlight

Boutique development and construction firm <a href="https://www.apartments.com.au/developers/hsn-property-group">HSN Property Group</a> is the latest to seek a new apartment development through the NSW Government's&nbsp;Housing Delivery Authority.

They've filed a State Significant Development Application for a nine-storey building across nine consolidated lots on <a href="https://www.apartments.com.au/new-apartments/2-16-spencer-street-rose-bay-nsw-2029">Rose Bay's Spencer Street</a>, just 400m from the centre of the affluent suburb.

“The site’s location and context make it well suited to support a more diverse and sustainable residential offering in the area,” the developer stated in community consultation materials.

The plans are for 54 apartments, 14 of which will be dedicated to affordable housing. There will be a mix of two- and three-bedroom apartments.

The proposal aims to contribute to housing diversity in the Woollahra Local Government Area while taking advantage of recent Low and Mid-Rise Housing Reforms introduced under the NSW Housing SEPP, according to the Scoping Report prepared by Urbis.

The architecture, led by <a href="https://www.apartments.com.au/architects/mhn-design-union">MHNDU</a>, reflects a "contemporary design approach sensitive to the character of Rose Bay." Communal amenities will include a wellness area with a pool and sauna, a gym, a wine lounge, and landscaped spaces with barbecue facilities.&nbsp;

“The proposed development will offer a suite of premium communal amenities designed to enhance resident wellbeing, foster social connection, and promote a healthy lifestyle,” the project team notes in its public materials.

Three levels of basement parking are planned, and EV charging facilities will be included, aligning with sustainability and transport objectives. A comprehensive traffic study is underway to assess and manage local impacts.

With 54 apartments, the proposal by HSN will be one of the largest developments in Rose Bay for decades. It tops the 50 apartments soon to launch by Orosi on <a href="https://www.apartments.com.au/new-apartments/the-avenue-rose-bay-1-the-avenue-nsw-2029">The Avenue</a>, near the Royal Sydney Golf Club.&nbsp;

First look: HSN plans Spencer St, Rose Bay apartment project

Lendlease’s Barangaroo South precinct is officially complete, marking the culmination of a 15-year urban regeneration project that has revitalised Sydney’s harbourfront.&nbsp;

In 2009, the NSW Government’s Barangaroo Delivery Authority appointed <a href="https://www.apartments.com.au/developers/lendlease-development">Lendlease</a> as developer to transform what was once an inaccessible container port on the western edge &nbsp;of Sydney’s CBD into one of the city’s most thriving mixed-use destinations. Today, Barangaroo South is home to more than 1,800 residents, 23,000 workers, 95 retailers and welcomes 33,000 visitors each day. The precinct stands as an international benchmark for large-scale urban regeneration.&nbsp;

International Towers Sydney, the three flagship commercial buildings at the centre of &nbsp;Barangaroo South, together with engineered timber buildings Daramu House and &nbsp;International House, attracted major corporate tenants from the outset, including Westpac, &nbsp;PwC and KPMG, who are still there today. These workplaces remain some of the most &nbsp;sought after in Sydney’s CBD with over 95 per cent occupancy– a testament to the appeal of world-class, modern infrastructure alongside the precinct’s dining and entertainment that &nbsp;are a drawcard for businesses.&nbsp;

One Sydney Harbour, the three luxury residential towers designed by world-renowned architect Renzo Piano, has achieved more than $4 billion in sales since its launch in 2019, while setting new Australia property price records. This includes the three-level penthouse that crowns Residences One which sold for more than $141 million in 2019 – the most expensive individual residential property ever sold in Australia. &nbsp;

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Barangaroo South is also Australia’s first mixed-use carbon-neutral development, an accolade achieved through energy-efficient and innovative infrastructure, including a district cooling plant with a harbour water heat rejection system, a recycled water &nbsp;treatment plant, onsite solar and an embedded electricity network.

The precinct has maintained its Climate Active Carbon Neutral certification since 2019, affirming its &nbsp;reputation as the gold standard in large scale, sustainable urban renewal. Additionally, its &nbsp;world leadership status has been validated by the Green Building Council of Australia’s &nbsp;6 Star Green Star Communities recertification (Pilot v.2).

[smartcode_project:default project_id=139801 project_image_fid=349157]

First Nations cultural values were embedded throughout the planning and delivery of the project. The precinct honours Barangaroo, a prominent First Nations woman, through its &nbsp;name. Public art, street names, and design elements across the precinct reflect and &nbsp;celebrate First Nations cultures and connections to Country.&nbsp;

The project's completion positions Barangaroo South as a legacy urban transformation delivered through long-term partnerships and world-leading urban regeneration and placemaking capabilities. &nbsp;

[smartcode_project:default project_id=139801 project_image_fid=349154]

Tony Lombardo, Group CEO Lendlease, said&nbsp;Barangaroo South represents one of the most significant urban regeneration projects in Australia.

"[It] demonstrates what can be achieved through an ambitious vision, innovative placemaking, long-term commitment and strong partnerships. The precinct has changed the face of Sydney's waterfront, established new benchmarks &nbsp;for sustainable development, and provided a model for urban regeneration that continues &nbsp;to inform our approach to creating places that deliver long-lasting value.”&nbsp;

Tom Mackellar, CEO Development Lendlease, said&nbsp;Barangaroo South has reconnected the city to its harbour in a way that seemed unimaginable 15 years ago and turned it into a thriving precinct where people can live, work and gather on the harbour’s edge.&nbsp;

“This precinct is the result of countless contributions, led by the NSW Government who set the ambition, supported by investment partners who believed in Lendlease’s vision, imagined by architects and designers, shaped by consultants and artists, and brought to &nbsp;life by our dedicated construction teams. &nbsp;

“What we’ve created here is more than buildings – it’s the best of placemaking, sustainability, arts and culture and quality design. Barangaroo South has become an integral part of Sydney that will serve our city and economy for generations.”

Staff Writer

Barangaroo South’s 15-year transformation of  Sydney’s waterfront officially complete

CBE Asia Pacific has lodged plans for a prominent corner site in Fitzroy North, with a proposal that integrates state-significant affordable housing alongside heritage adaptation and new retail.

The application covers a consolidated 2,024 sqm parcel at 201–215 Queens Parade and 6–12 Dummett Crescent. The site includes the heritage-listed Former Clifton Motor Hill Garage, fronting Queens Parade, and vacant land to the rear abutting Dummett Crescent.

According to planning documents prepared by proUrban, the proposal seeks approval for a 12-storey residential building comprising 98 apartments, including a component of affordable housing, over a ground floor retail podium integrated within the heritage structure. Approximately 780 sqm of retail space will occupy the ground floor, while residents will have access to over 850 sqm of communal amenity.

The built form presents as two connected volumes: a 12-storey tower addressing Dummett Crescent and a five-storey volume fronting Queens Parade, the latter consistent with a separate Heritage Victoria permit granted in 2023. The tower reaches a maximum height of 38.26 metres, with upper-level setbacks of 14 metres from the western boundary to reduce visual bulk. A 1.5-metre footpath widening is proposed to Dummett Crescent Lane.

Parking is provided across four basement levels, accessed via Dummett Crescent, with a total of 142 car spaces and 143 bicycle spaces.

The architectural response by <a href="https://www.apartments.com.au/architects/cht-architects">CHT Architects</a> is framed by a need to reconcile new density with a sensitive heritage overlay. The Former Clifton Motor Hill Garage, identified as a place of State heritage significance, will retain its key façades, with demolition and reconstruction limited to approved elements.

As noted in the Heritage Impact Assessment, the proposal remains consistent with the Heritage Victoria permit, which allows "partial demolition, reconstruction and new works, involving the construction of a five-storey multi-use development and three basement levels".

Affordable housing has been embedded into the proposal under Clause 53.23, with specific apartment allocations aimed at enhancing housing diversity within the Queens Parade Activity Centre.

"The proposal is generally consistent with the relevant policy objectives and the intent of the Yarra Planning Scheme," proUrban states in its planning assessment, citing its alignment with strategic documents including Plan Melbourne and Victoria’s Housing Statement.

CHT Architects' plans emphasise a tiered design that acknowledges the site's varied interfaces—from the elevated Heidelberg Road ramp reserve to the recently built Clifton Views aged care facility to the north-east.

CBE Asia Pacific has not been previously active in this precinct, but the project joins a wave of higher-density residential proposals along the Queens Parade corridor, spurred by Melbourne’s broader push to increase affordable housing in well-connected inner-urban areas.

The site benefits from direct access to the Queens Parade tram corridor and proximity to Clifton Hill Station (approximately 200 metres), as well as green open spaces including Mayors Park and Raines Reserve. Clifton Hill Primary School and the Queens Parade retail village lie within walking distance.

First look: CBE Asia Pacific plans 100-apartment Jenkin House on Queens Parade, Fitzroy North

ALT Pasta, one of Melbourne’s most beloved inner-city pasta bars, has been confirmed as one of the first tenancies for the highly anticipated <a href="https://www.apartments.com.au/new-apartments/comme-prahran-182-194-commercial-road-prahran-vic-3181">Comme Prahran</a> development, marking an exciting next chapter for the cult favourite as it prepares to expand into the heart of <a href="https://www.apartments.com.au/developments/prahran-vic-3181">Prahran</a>.

Fresh off being named National Best Italian Restaurant at the 2025 Restaurant &amp; Catering Hostplus Awards for Excellence, ALT continues to solidify its reputation as a quietly confident leader in Melbourne’s dining scene. Lauded for its reinterpretation of Italian pasta through a Korean and Japanese lens, the restaurant has grown into a staple since opening three years ago, and its new Prahran outpost will only deepen its local impact.

“From the very beginning, ALT has been about respect - for tradition, for ingredients, and for the process,” shares Mino Han, ALT’s founder, a Korean-Australian chef whose vision is shaped by cultural duality and craftsmanship.&nbsp;

“We’re not trying to reinvent the wheel, just make something beautifully familiar, feel quietly special,” added Han.

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Positioned at the entrance to Comme Prahran and directly opposite the iconic Prahran Market, the new venue will celebrate the interplay between casual comfort and elevated detail. Designed in collaboration with Rooftop Architecture, the same team behind ALT’s flagship city location, the space will mirror the neighbourhood’s laid-back energy while staying true to the brand’s understated refinement.

Diners can expect a frequently changing menu that takes advantage of the market’s daily produce, along with set menu offerings exclusive to this location. A distinctive chef’s table and open kitchen format are also in the works, allowing guests to experience ALT’s signature intimacy and transparency in a new light.

ALT Prahran won’t replace the original venue; rather, it complements it.

“Our city site is like our heritage bottle; it’ll age gracefully. Prahran is where we’ll play, explore new ingredients, and bring something special to the community,” Mino notes.

[smartcode_project:default project_id=108413 project_image_fid=353584]

For Comme Prahran, a boutique development by Leeka that blends heritage with multi-dimensional wellness, ALT Pasta’s arrival signals a meaningful addition to its vision of cultural connection, food-first living, and local engagement.

“Being part of Comme is more than just opening a second venue. It’s about contributing to a neighbourhood with character, history, and a strong sense of community. That’s something we deeply relate to,” says Mino.

Sustainability and cultural identity are deeply embedded in the ethos of ALT. From ingredient sourcing to interior design, the new location will reflect both environmental mindfulness and a spirit of inclusion, embodying the values of Melbourne’s diverse, forward-thinking culinary scene.

Comme Prahran is scheduled for completion in late 2027, with ALT Pasta expected to be among the first tenancies to open its doors shortly after.

[smartcode_project_cta:default project_id=108413]

National best Italian restaurant ALT Pasta to open at Comme Prahran, bringing refined familiarity to Melbourne’s culinary heart

National BEST Italian restaurant ALT Pasta to open at Comme Prahran

Prices Bottomed

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The decline in property prices continued in the June quarter and will most likely mark the bottom of the cycle, according to the latest research from the Real Estate Institute of Australia. 
REIA president Adrian Kelly said REIA Real Estate Market Facts for the June 2019 quarter show weighted average median prices decreased by 1.0 per cent for houses and by 0.6 per cent for other dwellings.  
“This is a continuing decline since June 2018 for both houses and other dwellings, but the decline is slowing,” Kelly said.   “The weighted average median price for houses for the eight capital cities decreased to $720,041 over the quarter, with prices decreasing in all capital cities except for Canberra and Hobart.  “The weighted average median price for other dwellings decreased to $565,753 over the quarter, with prices decreasing in all capital cities except for Melbourne, Hobart and Darwin.”  Kelly said whilst the total number of new finance commitments for the quarter were down 15.1 per cent over last year, including first home buyers down 7.6 per cent it needs to be remembered that the Federal election was held in the middle of the quarter. “There was considerable uncertainty regarding the outcome and concern about changes to property taxation and its impact should there be a change in Government. 
“With the post election boost in confidence in the real estate market as evidenced by higher levels of enquiry, two cuts in interest rates and changes in APRA’s requirements, the June quarter will most likely mark the bottom of the cycle. “Lending figures for the month of June 2019 show, in seasonally adjusted terms, that the number of owner occupied finance commitments excluding refinancing increased by 0.4 per cent.
"The value of investment housing commitments, excluding refinancing, increased by 0.5 per cent in June with the rise driven by the first rise in New South Wales since April 2018.” 
 
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wdavis-8cCN98p7xp

Market hit the bottom in the June quarter: REIA

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EXPERT OBSERVER
The Sydney housing market has bottomed out. Many leading indicators now suggest the current September quarter will record about a 2% rise in Sydney dwelling prices and we are expecting a rise of another 4% for the December Quarter. That should take the full year to about a 1% gain compared to 2018.   But let it be known Sydney has bottomed out at an overvalued point. The data suggests the Sydney housing market remains 21% overvalued despite the two year correction. For reference, the average overvaluation (since 1986) in Sydney is 19% with a low point of 5.9% ‘undervalued’ in June 1987 and a high point of 55.5% overvalued in December 2003.  The most recent overvalued point was 51.6% in the June Quarter 2017. The most recent undervalued point was 1.6% undervalued in September 2012.   This is all based on our view that there is a relationship between nominal GDP and house prices. And when you read this chart we think the evidence is there. Logically there should be a relationship. Housing price rises cannot outpace income growth forever. And the more the gap between the two, the more housing prices have to be supported by cheaper and easier access to credit.   Historically, the Sydney housing market has rarely been undervalued. There has nearly always been some sort of premium attached.
To enlarge, <a href="https://gallery.mailchimp.com/9badbd870addb4af72206c2eb/images/4c539bd2-4f54-4a6b-8cad-28e2a88d92d8.png" target="_blank">click here</a>.   <img src="https://gallery.mailchimp.com/9badbd870addb4af72206c2eb/images/4c539bd2-4f54-4a6b-8cad-28e2a88d92d8.png" width="800" height="444">
Effectively the current point suggests, that, left unchecked, we could soon be heading towards yet another historic overvaluation point similar to levels recorded in 2003 and 2017.
The key word though in this is “unchecked”. How will the regulators respond when they read newspaper headlines of a new booming Sydney housing market recording annualised double digit percentage price growth?     Our initial thinking is they are unlikely to respond well and may introduce more lending restrictions once again. Then again, if the powers that be feel cornered due to perhaps rising unemployment pressure or the need to hit inflation targets, etc., they may well let the market run.   And then finally consider what happens if we have another rate cut?
Louis Christopher is the managing director of <a href="https://sqmresearch.com.au/" target="_blank">SQM Research</a>.
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jrobinson-rf4aSBido9

Sydney housing market has bottomed out: SQM's Louis Christopher

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The ANZ Bank has revised its forecast and now sees the bottoming of the housing market "in the coming months" following the policy turnaround. 
Economists Felicity Emmett and Adelaide Timbrell have forecasted prices will rise modestly through to the end of 2019.
They expect a three percent growth in 2020.
"After a period of significant weakness, house prices appear to be stabilising," their latest Australian Housing Update read.
"Sydney prices have fallen 15%, while Melbourne’s are down 11%," they advised.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/7/16/Monthly%20housing%20prices%20ANZ.jpg" alt="">
"Brisbane prices have fallen only modestly, while Adelaide prices have been broadly stable.
"Perth remains weak, but Hobart has been a standout.
They cite the election result, back the back RBA cash rate cuts and APRA loosening their lending serviceability have all contributed to the quickening of the end of the downturn.
"All of these factors have helped to shift sentiment from one of pervasive negativity to cautious optimism," Emmett and Timbrell said.
They warned however against a property boom that we saw from 2012 to 2017.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/7/16/Capital%20city%20prices%20v%20auction%20results%20ANZ.jpg" alt="">
"While the outlook definitely looks more positive, we do not expect a V-shaped recovery for prices," the report noted.
"Our view for some time has been that the tightening in credit has been the major driver of weakness, and while there has been some easing at the margin, changes to the use of Household Expenditure Measure (HEM) and the introduction of comprehensive credit reporting will offset some of the impact.
"Moreover, there is still a substantial amount of supply coming on stream, particularly in Sydney where the rental vacancy rate is at a 15-year high.
"This all suggests that the recovery is likely to be a fairly modest one.
 
 
 
 
 
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ANZ sees bottoming of the housing market in coming months

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EXPERT OBSERVER
The residential downturn is expected to reach bottom in most Australian markets by as early as the end of 2019 or early 2020 – much sooner than previously predicted.
In the February release of CBRE’s Real Estate Market Outlook 2019 report we identified the Banking Royal Commission and the federal election as the two ‘unknown’ factors influencing Australia’s residential market outlook.
Signs are now emerging that a controlled relaxation of credit constraints was being managed and forecast interest rates cuts would help stabilise property prices.
The strong likelihood of further rate cuts by the RBA over the remainder of 2019 is expected to boost the prospects of an earlier than anticipated market recovery.
The results of the Banking Royal Commission and federal election would provide some comfort across the remainder of the year, increasing the number of buyers looking to enter residential markets, providing stronger support for prices and bringing forward the cyclical market bottom into 2019.
The federal election’s unexpected result and the relaxation of certain credit market constraints have provided a catalyst for market change.
The Coalition victory means proposed taxation changes impacting investment property, including negative gearing and capital gains tax changes, are off the agenda, while first home buyers have received a modest additional assistance package. The residential markets in general are expected to continue working through their adjustment cycle, with credit availability remaining the key constraint at present.
The results of the Banking Royal Commission were creating a more sustainable credit environment underpinning residential markets, resulting in an arguable credit market overcorrection, with banks appearing to have adjusted their requirements to reflect ‘responsible lending’ practices.
CRAIG GODBER is the Head of Residential Research for CBRE
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j.ballantyne1990-6AQqhLzZaK

Slowing residential headwinds bring market bottom forward: CBRE's Craig Godber

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EXPERT OBSERVER
The negatives weighing on Australian residential property prices remain significant but the past few weeks have seen a number of developments that suggest that prices could bottom earlier and higher than we have been expecting.
The election outcome removed a key threat, but several other factors also help. 
The biggest home price fall in the last 40 years
According to CoreLogic data, capital city dwelling prices are down 9.7% from their September 2017 high, which is their worst decline in the last 40 years.
Of course, there is a huge range here with prices down from their top by 15% in Sydney, 11% in Melbourne, 28% in Darwin, 18% in Perth, 2% in Brisbane, less than 1% in Adelaide and at record highs in Canberra &amp; Hobart
Drags on house prices remain significant…
The decline in prices reflects a range of factors, most notably, a “correction” to the huge surge in prices into 2017 in Sydney and Melbourne that left prices very overvalued relative to income, rents and their long-term trend and affordability very poor and household debt very high. 
The end of the mining investment boom impacting prices in Perth and Darwin since their peak in 2014. 
 <img src="https://www.urban.com.au/images/2019/5/23/shallow%201.JPG" alt="">
A tightening in lending standards that initially cracked down on lending to investors but since 2017 moved on to interest only loans and then a more fundamental focus around credit quality which made it harder to get loans. 
A surge in the supply of units to record levels which has led to rising rental vacancy rates in Sydney. 
An 80% collapse in foreign demand. 
A big pool of interest only borrowers switching to principal and interest loans driving higher debt servicing costs. 
Price falls feeding on themselves – just as the boom in prices was accentuated by a fear of missing out (FOMO), falling prices are driving falling price expectations &amp; leading to reduced demand and FONGO (fear of not getting out). 
Investors started to factor in some probability that Labor would win the election which would have meant that negative gearing would be restricted and the capital gains tax discount halved – with estimates that this could have knocked another 5-10% from property prices.
The negatives weighing on the housing market remain significant. In particular, credit conditions are still tight with housing finance still falling with a brief bounce in February giving rise to further falls in March and the start-up of Comprehensive Credit Reporting which will see banks crack down on borrowers with multiple undeclared loans. And the pipeline of units to hit the Sydney and Melbourne markets is still huge as reflected in a still high crane count.
<img src="https://www.urban.com.au/images/2019/5/23/Shallow%202.JPG" alt="">
Meanwhile, auction clearance rates in Sydney and Melbourne have risen from their December lows but this looks largely seasonal with clearances still weak at pre-boom levels just above 50% as are sales volumes.
What’s more the number of capital cities seeing monthly price falls has gone from three out of eight a year ago to now seven out of eight. Given all these considerations we have been reluctant to read too much into the slowing in downwards momentum in monthly property price falls in recent months, particularly given that Perth and Darwin have seen several phases where price declines slowed then sped up again during their five-year slump. And Australian housing still remains expensive.
Real house prices have fallen from 27% above their long-term trend to 7% above now, but housing is still expensive compared to incomes and rents. Sydney home prices may have fallen 15% from their 2017 high but this was after a 75% gain since 2012 when wages rose just 14%. And household debt remains very high.
…but some positives are starting to creep in
However, while the drags remain significant several positives have become apparent over the last few weeks. First, financial support for first home buyers is now on the way with the Government’s First Home Loan Deposit (underwriting) Scheme.
On its own it’s not a game changer particularly given that it’s capped in terms of numbers, the borrowers will be taking on bigmortgages, which will come with a higher risk of negative equity, borrowers will still have to meet the tougher credit standards of recent times and it won’t kick in until next year.
That said, with the Federal budget looking even healthier and probably already in surplus thanks to the surging iron ore price, I suspect that the deposit scheme will morph into a far more attractive home buyer grant at some point. Second, APRA is looking to relax the 7% mortgage rate serviceability buffer.
This was inevitable given APRA’s move to focus on more fundamental credit standards and 7% is way out of whack with current interest rates. Again, on its own it’s not a game changer - it wasn’t the main driver of the property downturn and borrowers still have to meet tougher credit standards. And don’t forget that relaxation of the 10% cap on growth in investor loans and the 30% limit on interest only loans last year had little impact. But it may help at the margin.
Third, RBA Governor Lowe has all but confirmed that rate cuts are on the way with his comment that “at our meeting in two weeks’ time, we will consider the case for lower interest rates” after observing that it needs lower unemployment to get inflation back to target.
We expect 0.25% rate cuts in June and August and that the bulk of these will be passed on to borrowers given the recent reduction in bank funding costs. This would be a bit earlier than the August and November rate cuts we were assuming back in January when we last reviewed our house price forecasts.
House prices bottomed around three months after the first cuts in 2008 and 2011. It may take longer this time as debt is now much higher, rates are already very low and lending standards are tougher. But they will still help. Finally, the threat of changes to negative gearing and CGT is gone with Labor’s defeat.
So a big negative for property is gone. Given the difficulty in predicting the election our house price forecasts had allowed for a 50% probability (ie 50/50 Labor would win) of an 8% additional drag on prices in Sydney and Melbourne from this, ie 4%. In other cities it was a bit less. Now it’s zero and we need to remove this from our forecasts.
It’s also worth noting that we have not seen much evidence of panic selling or forced selling by the banks despite rising (but still low) levels of negative equity. Mortgage delinquency rates remain relatively low – even in Perth where prices have fallen 18% and unemployment has spiked.
<img src="https://www.urban.com.au/images/2019/5/23/shallow%203.JPG" alt="">
Meanwhile, strong population growth of around 1.6% pa is still driving strong underlying demand for housing at a time when supply is likely to start slowing again next year (given falling building approvals). And vacancy rates while very high in Darwin and above trend and rising in Sydney are actually benign to low in most capital cities and have collapsed in Perth.
So taking all these things together – some of which are minor but are still positive – it’s likely that we are going to see house prices bottom out a bit earlier and higher than we had expected.
What about the risk of higher unemployment?
The main risk is that Australia slides into a downwards spiral as the housing downturn - maybe in concert with a global slump - triggers a surge in unemployment which triggers rising defaults and a further plunge in house prices ultimately causing 30% plus falls in national property prices.
This is still a risk, but we remain of the view that it will be avoided. The housing cycle downturn will lead to the loss of around 60,000 jobs on our estimates. But there are a number of other things that will keep growth going – albeit at a slower pace than the RBA and Government are assuming – but which should be enough to stop unemployment surging beyond 6% and feeding back to become a bigger threat to house prices.
Infrastructure spending is strong, resources investment is close to the bottom, non-mining investment is looking healthier, tax cuts for low and middle income earners next quarter (whether paid upfront or backdated a few weeks later when passed by Parliament) will provide some help, fiscal stimulus is likely to be increased helped by the windfall from the surging iron ore price and rate cuts will provide some help fo households with a mortgage.
Yes, the trade war could spiral out of control – but this probably means more stimulus from China which provides an offset for global growth and explains why the iron ore price keeps rising. The other big risk is that investors decide to exit in the face of low net rental yields &amp; diminished capital growth expectations.
Revised house price forecasts
Our forecasts for national average prices have been for a price fall of 15% top to bottom (of which we have done 10% so far) and for Sydney and Melbourne it’s been for a price fall of 25% top to bottom (of which Sydney has already done 15% and Melbourne 11%) and for prices to bottom in 2020.
Reflecting the considerations discussed above – notably the removal of the threat of changes to negative gearing and capital gains tax, imminent rate cuts, assistance for first home buyers and APRA’s relaxation of the 7% serviceability test - we are revising the estimate for Sydney home prices to a 19% top to bottom fall, Melbourne to 15% top to bottom (partly because it has been holding up much better likely reflecting stronger population growth) and the national average to 12% top to bottom with prices likely to bottom by year end.
However, given still poor affordability, still very high debt debt levels, tighter lending standards and rising unemployment a quick return to boom time conditions is most unlikely.
More likely is a lengthy period of constrained range bound house prices after they bottom later this year (although I thought the same around 2011-12 – but things are different now!).
DR SHANE OLIVER Head of Investment Strategy and Chief Economist AMP Capital
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Australian house prices approaching the bottom, it looks shallow: Shane Oliver

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Darwin property owners seeking a sale in the first quarter of 2018 should recognise the city’s housing values have bottomed, according to leading real estate group, Raine &amp; Horne. 
“Investment firm AMP Capital l<a name="x__ednref1" href="x-webdoc://DC3B27C2-F28F-4666-9E47-11992185BC89#x__edn1" title=""></a>ast week indicated that the Darwin real estate market has bottomed, which means that local owners should feel less pressure to take the first offer from a buyer,” said Glenn Grantham, general manager at Raine &amp; Horne Darwin.
“The Darwin property market in fact reached the bottom of the price cycle a few months ago, yet there still seems to be many owners believing they must take the first offer that comes their way.”
The failure by owners to recognise that prices have bottomed can be as costly as paying too much at the top of the market cycle, advised Grantham.
“We have heard of instances where some owners at the end of 2017 were accepting auction bids that were considerably lower than the going market rate.
“With the Darwin property market now at the bottom of the cycle, it’s critical that owners work with real estate agents, such as Raine &amp; Horne, who will put their interests first, and secure them the best price possible.”
Markets such as apartments in central Darwin and houses in Palmerston are set to be major buying hotspots in 2018.
“If you recognise that Darwin has reached the bottom of the price cycle, then you need to look at the sub-markets where prices have been most affected,” said Mr Grantham.
“In this regard, it’s hard to go past apartments in the centre of Darwin and houses in Palmerston.”
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/1/17/darwin3.jpg" alt="">
The median 3-bedroom house price in Palmerston is $300,000 and mid-$400,00s for a four-bedroom house, according to Raine &amp; Horne Darwin.
“Inner city, two-bedroom apartments start from around $300,000, and this is the market where we’re seeing more investor activity,” said Mr Grantham.
The wet season which extends to April coincides with an influx of interstate workers moving to Darwin for government and defence work.
“Many of the transient workers buy a Darwin property to live in, before transitioning it to the rental market when they leave,” noted Mr Grantham
“Almost 90% of investors are from interstate who move to Darwin for short to medium periods and recognise its property market offers the prospect of immediate price affordability and long-term growth. 
“Workers from interstate often purchase Darwin properties with an understanding that when they leave, they’ll keep it as an investment asset that can produce growth and income yields significantly higher than the southern capitals.”
Raine &amp; Horne Darwin has 66 properties on their books.
Their priciest is an apartment in the <a href="https://www.realestate.com.au/property-apartment-nt-darwin+city-119146115" target="_blank">Evolution on Gardiner</a> building in the city which has views of the water (top and above).
Agents Glen Grantham and Dan Campbell are asking for $985,000 for the three bedroom, two bathroom apartment.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/1/17/darwin2.jpg" alt="">
Grantham and Campbell are also marketing an off the plan townhouse in the <a href="https://www.realestate.com.au/property-townhouse-nt-the+gardens-123840718" target="_blank">Terrace Gardens project</a> (above).
The three bedroom, two bathroom townhouse is priced at $825,000.
There has only been one Darwin sale by the Raine &amp; Horne Darwin team this year. That was an <a href="https://www.realestate.com.au/sold/property-apartment-nt-darwin+city-120654785" target="_blank">apartment in the Marrakai complex</a> (below) which sold for $350,000.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/1/17/marrakai.jpg" alt="">
The ninth level apartment with two bedrooms and two bathrooms last traded for $245,000 in 2000 and had been on the market for over two years.
It initially sought a price between $520,000 and $550,000.
A unit Raine &amp; Horne sold in Cullen Bay went back in price late last year when it sold for $485,000.
The two bedroom apartment overlooking Cullen Bay Marina last sold for $620,000 in 2008, and even $500,000 in 2007, still above its price today 10 years later.
 
 
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