<p>For most new apartment buildings, the Owners Corporation starts life with little more than a bank account and the first quarterly strata levies.</p>

<p>At <a href="https://www.apartments.com.au/buildings/9-gay-street-castle-hill-9-gay-street-castle-hill-nsw-2154">9 Gay Street</a> in <a href="https://www.apartments.com.au/developments/castle-hill-nsw-2154">Castle Hill</a>, it starts with around $7 million in reserve.</p>

<p>It's an unusual legacy of what was once one of Sydney's highest-profile apartment remediation projects. When the development, originally known as Skyview and built by disgraced developer Top Place, came under scrutiny by then NSW Building Commissioner David Chandler, an $11 million remediation bond was negotiated to ensure any building defects could be fully rectified.</p>

<p>The building underwent an 18-month remediation program, during which around $4 million of that bond was spent bringing the building up to the standard it should have been in from the outset.</p>

<p>After extensive inspections, all active rectification orders have been lifted. What's more, around $7.2 million remains secured for the Owners Corporation for the next 15 years.</p>

<p>In a twist few would have predicted, what began as a significant concern for purchasers has left the building with something almost unheard of in the apartment market: a multi-million-dollar financial reserve from day one.</p>

<p>[smartcode_project:default project_id=147685 project_image_fid=359136]</p>

<p><a href="https://www.apartments.com.au/project-marketer/equitifund-group">Equitifund</a> Executive Chairman Greg Huxley said the structure offers buyers a level of certainty that is difficult to replicate.</p>

<p>"The $11 million bond established for the Skyview Castle Hill development represents exceptional value, providing genuine financial security for purchasers," Huxley said.</p>

<p>"Unlike a standard insurance policy, this bond consists of real funds held in trust for the Owners Corporation, offering a tangible layer of protection and added peace of mind."</p>

<p>The apartments themselves have been designed with a focus on practical, contemporary living. Interiors feature Smeg appliances, stone benchtops, tiled living areas, carpeted bedrooms, 2.7-metre ceilings, floor-to-ceiling glazing, and ducted heating and cooling throughout.</p>

<p>Residents also have access to a range of shared amenities, including two rooftop barbecue areas, a swimming pool, children's playgrounds, secure building access, storage cages, and visitor parking.</p>

<p>The location continues to be one of the project's strongest drawcards. Castle Hill Metro Station sits virtually on the doorstep, providing direct connections across Sydney's expanding Metro network, while Castle Towers offers extensive retail, dining, entertainment, and service amenities within walking distance.</p>

<p>[smartcode_project:default project_id=147685 project_image_fid=359127]</p>

<p>The building, now named after its location at 9 Gay Street, comprises a diverse mix of one-, two-, and three-bedroom apartments starting from just under $600,000.</p>

<p>Equitifund National Sales Director Ben Hamblett said demand in the Hills District continues to be driven by buyers seeking convenience and connectivity.</p>

<p>"Interest from both owner-occupiers and investors in Castle Hill remains exceptionally strong, with buyers consistently prioritising developments in close proximity to the Metro station and Castle Towers Shopping Centre," Hamblett said.</p>

<p>"There is a clear trend in the market, with purchasers seeking convenient access to transport and lifestyle amenities that support a seamless, low-maintenance way of living."</p>

<p>On top of the long-term protection afforded by the remaining $7.2 million bond, Equitifund is offering a limited-time stamp duty rebate on selected apartments.</p>

<p>Eligible purchasers can also secure finance options, including a 3.99 per cent two-year variable rate, loan-to-value ratios of up to 90 per cent, and interest-only lending options through EquitiCredit.</p>

<p>[smartcode_project_cta:default project_id=147685]</p>


Joel Robinson

Why this Castle Hill apartment building starts with a $7 million advantage

<p>For much of the past few years, conversations about Australia's property market have centred on the rapid growth seen in Sydney, Brisbane, Gold Coast, and Perth. <a href="https://www.apartments.com.au/developments/melbourne-vic-3004">Melbourne</a> has followed a different trajectory.</p>

<p>That relative underperformance is now encouraging some buyers to reassess the city, particularly those willing to look beyond short-term market movements and focus on quality property in established locations, along with the long-term growth prospects of a city expected to overtake Sydney as Australia’s most populous.</p>

<p>John Bekiaris, Research &amp; Market Insights at <a href="https://www.apartments.com.au/project-marketer/equitifund-group">Projects by Equitifund</a>, said Melbourne's current position is attracting increasingly sophisticated purchasers.</p>

<p>"Melbourne continues to present one of Australia's strongest long-term investment stories," Bekiaris says.</p>

<p>"While other capital cities have experienced stronger recent growth, that relative underperformance is exactly what's attracting sophisticated counter-cyclical investors."</p>

<p>[smartcode_project:default project_id=1979 project_image_fid=363268]</p>

<p>Equitifund isn't just commenting on Melbourne's property market, it's investing in it.</p>

<p>The Sydney-headquartered capital partner has taken over the remaining apartments at <a href="https://www.apartments.com.au/buildings/victoriana-melbourne-20-queens-road-melbourne-vic-3004">Victoriana</a>, the recently completed glass-encased development opposite Albert Park Lake in Melbourne's tightly held St Kilda Road precinct.</p>

<p>Designed by <a href="https://www.apartments.com.au/architects/rothelowman">Rothelowman</a> and built by <a href="https://www.apartments.com.au/builders/hickory">Hickory</a>, Victoriana places residents between one of Melbourne's most recognised parklands and the CBD, offering oversized two and three-bedroom apartments aimed at owner-occupiers seeking a genuine alternative to a traditional family home.</p>

<p>The development comprises 232 completed residences alongside a suite of resident amenities, including a 25-metre indoor swimming pool, gymnasium, landscaped entertaining areas, resident lounges, EV charging, secure basement parking and a concierge-style arrival experience.</p>

<p>[smartcode_project:default project_id=1979 project_image_fid=363229]</p>

<p>The apartments have been designed with owner-occupiers firmly in mind.&nbsp;Open-plan living and dining areas flow onto generous balconies framing views across Albert Park Lake, Fawkner Park, the Royal Botanic Gardens and the Melbourne skyline.</p>

<p>Kitchens feature Gaggenau appliances, stone benchtops and generous preparation space. Bedrooms include built-in robes, while bathrooms feature full-height textured tiling. Hardwood flooring and ducted air conditioning complete residences designed for long-term living.</p>

<p>Rothelowman's architecture takes its cues from the landscape opposite the site. Sweeping horizontal glazing references the movement of Albert Park Lake, while generous balconies and expansive glazing strengthen the connection between the apartments and the surrounding parklands. The result is a building designed to deliver the scale and amenity expected of luxury apartment living, while offering the larger floorplans increasingly sought by owner-occupiers.</p>

<p>[smartcode_project:default project_id=1979 project_image_fid=363284]</p>

<p>The location is one of Victoriana's defining characteristics. Positioned on Queens Road, residents are directly opposite Albert Park Lake and within easy reach of Fawkner Park, the Royal Botanic Gardens, South Melbourne, St Kilda Road and the CBD. With few comparable development opportunities remaining in the precinct, buyers are increasingly placing value on outlooks that are unlikely to be interrupted by future construction.</p>

<p>Greg Huxley, Founder of Equitifund, believes those qualities become even more valuable over time.</p>

<p>"Premium real estate has always rewarded buyers who take a long-term view," Huxley said.</p>

<p>"Victoriana represents the kind of asset that's increasingly difficult to recreate today, particularly in an established location like Queens Road."</p>

<p>He said rising construction costs are also changing the way buyers assess completed developments.</p>

<p>"When you combine an irreplaceable location with thoughtful architecture and premium finishes, you create something that becomes increasingly difficult to reproduce as construction costs continue to rise."</p>

<p>[smartcode_project:default project_id=1979 project_image_fid=363228]</p>

<p>According to National Sales Director Ben Hamblett, enquiry has been driven largely by Melbourne downsizers and buyers upgrading from smaller apartments.</p>

<p>"Interest in Victoriana continues to build, with strong buyer focus on the larger owner-occupier residences within the development," Hamblett says.</p>

<p>"Enquiry is increasingly driven by local buyers who recognise the rarity of what's on offer: park-facing apartments in an established neighbourhood where new development opportunities are becoming increasingly scarce. At Victoriana, the view is not just a feature; it's an appreciating asset in its own right."</p>

<p>He said interstate enquiry has also strengthened as buyers reassess Melbourne's position within the national property cycle.</p>

<p>"Melbourne currently stands as the most compelling entry point of any major Australian capital, and discerning buyers are beginning to recognise what those who move early always understand: the best opportunities are taken before the price rise confirms them."</p>

<p>[smartcode_project_cta:default project_id=1979]</p>


Why now is the time to buy in Melbourne's premium apartment market

<p>Developers and apartment buyers have a narrowing window of opportunity before Brisbane's Olympic infrastructure pipeline begins competing directly with residential construction, pushing up costs, tightening labour supply and making new projects increasingly difficult to deliver.</p>

<p>While Brisbane's apartment market continues to benefit from strong population growth and limited housing supply, industry research suggests the years leading up to 2027 could prove to be the most important period for developers looking to secure builders and buyers hoping to purchase before the next wave of price increases.</p>

<p>A new Colliers report, <em>Brisbane 2032 Olympic and Paralympic Games: Creating Solutions</em>, highlights the scale of the challenge. While thousands of new homes are planned across South East Queensland, the Brisbane Olympic Athletes Village alone will deliver more than 10,500 beds during the Games before being converted into around 1,750 to 2,000 apartments. Equivalent to almost two years of typical inner-city apartment supply, the project will also absorb a significant share of the construction workforce and building materials.</p>

<p>The broader construction pipeline paints an even clearer picture.</p>

<p>Construction Skills Queensland's <em>Horizon 2032</em> report forecasts Queensland's annual construction pipeline will average $69 billion over the coming years before peaking at $75 billion in 2027-28. Demand for construction workers is expected to increase by 17 per cent to almost 150,000 people, with the industry facing an annual shortfall of around 19,000 workers that could blow out to as many as 35,000 during the peak construction period.</p>

<p>The Olympic venues, athletes village and supporting infrastructure will account for billions of dollars worth of work across South East Queensland through to 2032, creating intense competition for labour at a time when Australia's residential construction sector is already under pressure.</p>

<p>[smartcode_project:default project_id=150489 project_image_fid=373834]</p>

<p>Colliers Queensland Residential Director Andrew Scriven said the convergence of these projects is creating a clear window of opportunity for both developers and buyers.</p>

<p>"From 2027 onwards, the market will shift dramatically," Scriven said.</p>

<p>"Labour will increasingly be locked into government-led infrastructure and Olympic projects, which means private residential developments will face higher costs and tighter margins. The developers who move now are the ones most likely to get projects off the ground."</p>

<p>Scriven said the same dynamic would also affect buyers, with fewer apartment projects expected to launch once construction capacity tightens.</p>

<p>"If you're looking to change your lifestyle over the next five years, now is your window of opportunity to buy."</p>

<p>[smartcode_project:default project_id=150713 project_image_fid=373827]</p>

<p>Developers are already positioning themselves ahead of that window.</p>

<p>Following the success of Monarch at Toowong, Consolidated Properties is preparing to launch two new Brisbane apartment projects in the second half of 2026. They include <a href="https://www.apartments.com.au/new-apartments/gloriette-30-bedivere-street-yeerongpilly-qld-4105">Gloriette</a> at Yeerongpilly Green, a 25-storey tower within one of Brisbane's key Olympic precincts, and <a href="https://www.apartments.com.au/new-apartments/castile-47-skyring-terrace-newstead-qld-4006">Castile</a>, a recently approved 25-storey riverfront development at 47 Skyring Terrace in Newstead.</p>

<p>Hutchinson Builders will deliver both projects, with early works already underway at Yeerongpilly and Newstead expected to commence later this year.</p>

<p>The timing comes as Brisbane's fundamentals continue to strengthen, with strong interstate migration, population growth and vacancy rates remaining below 1.5 per cent.</p>

<p>Colliers Queensland researcher Pragya Sharma said Greater Brisbane is forecast to require around 40,000 new apartments between 2021 and 2031.</p>

<p>"There's a real mismatch emerging between when housing is needed and when it will be feasible to build," Sharma said.</p>

<p>"As a result, the period leading up to 2027 presents a key window of opportunity for developers to secure approvals, funding and construction capacity, while buyers will have greater choice before supply constraints intensify."</p>


Colliers research outlines a critical pre-2027 window to start residential projects before labour squeeze: now is the time to buy

Developers, buyers on watch in South East Queensland ahead of construction crunch: Colliers

<p>It's taken less than nine months for developer Sherpa Property Group to sell out all 51 apartments in its <a href="https://www.apartments.com.au/new-apartments/flourish-oasis-palm-beach-7-9-sixth-avenue-palm-beach-qld-4221">Flourish Oasis</a> development in <a href="https://www.apartments.com.au/developments/palm-beach-qld-4221">Palm Beach</a>, over a year before its anticipated completion.</p>

<p>&nbsp;</p>

<p>Located at 7-9 Sixth Avenue, the $67 million development has resonated strongly with both local owner-occupiers and downsizers seeking high-quality apartments within walking distance of the beach, dining precincts and everyday amenities.</p>

<p>[smartcode_project:default project_id=151449 project_image_fid=357458]</p>

<p>Christie Leet, Founder of <a href="https://www.apartments.com.au/developers/sherpa-property-group">Sherpa Group</a>, said the sell-out reflected both the strength of the Palm Beach market and the success of Sherpa's community-first approach to development.</p>

<p>"The sell-out of Oasis is a fantastic outcome and reinforces the strong demand we're seeing for thoughtfully designed apartments in lifestyle locations," Leet said.</p>

<p>"From the outset, our vision was to create a development that genuinely enhanced the Palm Beach community while providing residents with exceptional homes and wellness-focused amenities.</p>

<p>"We've been incredibly encouraged by the level of local support throughout the campaign, 72.5 per cent of buyers are locals, with a significant proportion of purchasers choosing Oasis as their future home rather than an investment."</p>

<p>[smartcode_project:default project_id=151449 project_image_fid=357463]</p>

<p>Construction is now progressing following development approval, with trusted builder LPS Group delivering the project and completion anticipated in Q3 2027.</p>

<p>Oasis forms part of Sherpa Group's successful Flourish collection, which has become recognised for its focus on wellness, community and elevated coastal living.</p>

<p>[smartcode_project:default project_id=151449 project_image_fid=357469]</p>

<p>Residents will have private access to a rooftop amenity space featuring a pool, gym, sauna, steam room, hot and cold plunge pools, spa and barbecue facilities.</p>

<p>"The success of Oasis demonstrates that buyers continue to prioritise quality, location and lifestyle," Leet said.</p>

<p>"We are proud to have delivered a project that has resonated so strongly with the market and look forward to bringing Oasis to life for our future residents."</p>

<p>Sherpa recently launched <a href="https://www.apartments.com.au/new-apartments/flourish-soleira-palm-beach-1150-1160-gold-coast-highway-palm-beach-qld-4221">Flourish Soleira</a>, its third instalment of the Flourish brand in Palm Beach following Flourish Oasis and <a href="https://www.apartments.com.au/new-apartments/amargo-6-12-sixth-avenue-palm-beach-qld-4221">Flourish Amargo</a>.</p>

<p>[smartcode_project_cta:default project_id=151449]</p>


Sherpa sells out Flourish Oasis in booming Palm Beach

<p>Urban Property Group's <a href="https://www.apartments.com.au/new-apartments/la-vera-macquarie-park-94-talavera-road-macquarie-park-nsw-2113">La Vera</a> is leading the next phase of Macquarie Park's residential evolution, with the new apartment development set to become the first of several new apartment projects in the precinct to complete.</p>

<p>The 169-apartment building has now topped out ahead of its scheduled completion in the third quarter of 2026, as new residential investment continues to reshape one of Sydney's largest employment hubs into a true mixed-use precinct.</p>

<p>[smartcode_project:default project_id=134951 project_image_fid=368645]</p>

<p>Cox Architecture has designed La Vera to capture the best of its unique positioning on Talavera Road, orienting the building towards Lane Cove National Park.&nbsp;The building features a sculpted northern façade with flowing curves inspired by the surrounding landscape, while its city-facing elevation adopts a more structured architectural expression to maximise skyline views.</p>

<p>"The vision for the project was to conceive a building that adopted an organic and curvilinear form to the northern portion that faces the Lane Cove National Park," <a href="https://www.apartments.com.au/architects/cox-architecture">Cox Architecture</a> Director Felipe Miranda said.</p>

<p>"The residents that reside in the northern portion of the building benefit by having beautifully crafted curved balconies that speak to the natural context and heighten the relationship of their internal living spaces to the external balconies."</p>

<p>[smartcode_project:default project_id=134951 project_image_fid=358802]</p>

<p>La Vera offers a diverse mix of one, two, three, and four-bedroom configurations, with prices currently starting from $740,000. Buyers so far have been a mix of Sydney-based investors,&nbsp;metro commuters, owner-occupiers and downsizers from surrounding North Shore suburbs.</p>

<p>Both investors and owner-occupiers have been drawn to La Vera's proximity to Macquarie University, Macquarie University Hospital, Macquarie Centre and the Sydney Metro, infrastructure that supports both strong rental demand and a convenient lifestyle for residents.</p>

<p>The apartments feature full-height glazing, timber flooring throughout living areas, stone kitchen benchtops, SMEG appliances, floor-to-ceiling bathroom tiling and ducted air conditioning.</p>

<p>Residents will have access to a rooftop recreation level featuring a swimming pool, sauna, barbecue facilities and landscaped relaxation areas, complemented by additional communal space at ground level. Many apartments enjoy uninterrupted views across Lane Cove National Park, reinforcing the project's connection to its natural setting.</p>

<p>[smartcode_project:default project_id=134951 project_image_fid=364551]</p>

<p><a href="https://www.apartments.com.au/developers/urban-property-group">Urban Property Group</a>, a family-owned developer and builder with nearly four decades of experience, holds a 4.5-star iCIRT rating and was Australia's first developer to introduce 10-Year Latent Defects Insurance (LDI). La Vera is the first apartment development in <a href="https://www.apartments.com.au/developments/macquarie-park-nsw-2113">Macquarie Park</a> approved to offer the additional insurance protection, alongside a five-year warranty on SMEG appliances.</p>

<p>Urban Property Group CEO Patrick Elias said the additional protection reflects changing buyer expectations in the off the plan market.</p>

<p>"Consumers are a lot more weary and a lot more concerned in buying off the plan than they ever have been. Having LDI is a tool to portray the confidence that we have in our product, and a confidence we want buyers to share," Elias said.</p>

<p>Following completion of the building later this year, buyers will move into their apartments well before Christmas.</p>

<p>[smartcode_project_cta:default project_id=134951]</p>


La Vera closes in on completion as Macquarie Park continues residential transformation

Property Correction

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<div id="post-body-2934597644349298689" class="post-body entry-content">
<div class="separator">Some years ago there were doomsday predictions of a property correction in Australia since dwelling prices had reached three times the value of our Gross Domestic Product (the exact relevance of the three times figure was never adequately explained).</div>
<div class="separator"> </div>
<div class="separator">Today, the ratio is just over 3.6 times, having ticked down slightly over the past six months of publicly available official figures.</div>
<div class="separator"> </div>
<div class="separator">Is there a link between the two measures? Kind of, but it's not very strong.</div>
<div class="separator"> </div>
<div class="separator">In fact, as a predictor of property prices the ratio has been useless in recent years. Actually, no, it's been worse than useless - it has been a contra-indicator!</div>
<div class="separator"> </div>
<div class="separator">One problem with GDP is that it's historic in nature, so at best it tells you what was happening in the economy months ago - thus as an indicator of future outcomes it's necessarily all that useful.</div>
<div class="separator"> </div>
<div class="separator">More pertinently this ratio doesn't make a lot of logical sense since it compares a <strong>stock</strong> value at a fixed point in time with a <strong>flow</strong>, being the value of goods and services produced over a specified period of time (in the example in the chart below, one year).   </div>
<div class="separator"> </div>
<div class="separator"><a href="/images/2016/07/06/STOCK.jpg" target="_blank">Click to enlarge</a></div>
<div class="separator"><img src="/images/2016/07/06/STOCK.jpg" alt=""></div>
<br><div>Furthermore, some types of property in thinner markets fare much better in times of boom, and worse in times of bust. And some types of property in some inner suburban locations tend to outperform the averages over time, while properties is lower demand generally fail to keep pace with the averages.</div>
<div> </div>
<div class="separator"><strong><span style="text-decoration: underline;">Key national accounts aggregates</span></strong></div>
<div class="separator"> </div>
<div class="separator">In today's electronically connected world, hordes have wanted to be the person to 'call' the next Australian recession. But the economy has proved to be surprisingly robust, with the annualised rate of GDP growth for the past six months accelerating to 3.6 per cent. </div>
<div class="separator"> </div>
<div class="separator">The riposte has been that GDP is the "wrong" measure - we should ignore GDP and look at national income. </div>
<div class="separator"> </div>
<div class="separator">It is indeed true that real (i.e. adjusted for inflation) gross national income has stalled, but then again Australia's commodity prices could not and did not grow to the sky, so this isn't necessarily that surprising. </div>
<div class="separator"> </div>
<div class="separator">Another way to look at this is that national income has more than doubled over the past twenty years, even after accounting for inflation.</div>
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<div class="separator"><a href="/images/2016/07/06/GDP.jpg" target="_blank">Click to enlarge</a></div>
<div class="separator"> </div>
<div class="separator"><img src="/images/2016/07/06/GDP.jpg" alt=""></div>
<div class="separator"> </div>
<div class="separator">Moreover, if GDP is an unreliable measure of the performance of the economy, how can it be a good measure of dwelling prices? Can't have it both ways! </div>
<div class="separator"> </div>
<div class="separator"><strong><span style="text-decoration: underline;">National accounts</span></strong></div>
<div class="separator"> </div>
<div class="separator">The national accounts provide us with a range of figures relating to the property markets, but as implied by the name of the data release the figures are national and backward-looking in nature, and therefore don't really tell us much of interest about what sub-regional property markets are up to or will be up to.</div>
<div class="separator"> </div>
<div class="separator">As noted, the national accounts lag a bit, but broadly home owners owe about $1 trillion in mortgage debt, and investors about $550 billion. What is not so well shown by these figures is that mortgage buffers and offset accounts are also at record high levels. </div>
<div class="separator"> </div>
<div class="separator"><a href="/images/2016/07/06/DEBT1.jpg" target="_blank">Click to enlarge</a></div>
<div class="separator"><img src="/images/2016/07/06/DEBT1.jpg" alt=""></div>
<br><div>With dwelling price growth having outpaced the growth in household debt, gearing ratios have declined in recent years.</div>
<br><div class="separator"><a href="/images/2016/07/06/DEBT2.jpg" target="_blank">Click to enlarge</a></div>
<div class="separator"><img src="/images/2016/07/06/DEBT2.jpg" alt=""></div>
<br><div class="separator">None of which tells of much of any predictive value. We can all think of housing markets in Australia that are overvalued; but equally we can all name others where prices are getting walloped or have already crashed. </div>
<div class="separator"> </div>
<div class="separator">If there is one ratio from the national accounts which is useful in predicting where to next for dwelling prices - and I'm not saying that there necessarily is - it's the ratio of housing interest payable to income. </div>
<div class="separator"> </div>
<div class="separator">The actual quoted percentage figure is skewed lower since so many households have no mortgage debt at all, but has declined from a peak of 16.4 per cent in June 2008 to 9.7 per cent by December 2015. </div>
<div class="separator"> </div>
<div class="separator">On this measure, mortgage repayments are more than 40 per cent cheaper than they were at their 2008 peak.</div>
<br><div class="separator"><a href="/images/2016/07/06/INTEREST%20PAYABLE.jpg" target="_blank">Click to enlarge</a></div>
<div class="separator"><img src="/images/2016/07/06/INTEREST%20PAYABLE.jpg" alt=""></div>
<div class="separator"> </div>
<div class="separator"><strong><span style="text-decoration: underline;">Rates heading lower?</span></strong></div>
<div class="separator"> </div>
<div class="separator">It would be fair to say that if mortgage rates head back to where they were at their most recent peak of about 8 to 9 per cent, then many of Australia's housing markets are heading into correction territory. </div>
<div class="separator"> </div>
<div class="separator">It's an interesting bet if you want to take it on. But money markets are begging to differ, with yields grinding out new lows in anticipation of possible Brexit turmoil. </div>
<div class="separator"> </div>
<div class="separator">Yesterday Australia's 10 year government bond yield fell to its lowest ever level at well below 2 per cent.</div>
<br><div class="separator"><a href="/images/2016/07/06/RBA.jpg" target="_blank">Click to enlarge</a></div>
<div class="separator"><img src="/images/2016/07/06/RBA.jpg" alt=""></div>
<br><div>Meanwhile, OIS rates are on a seek and destroy mission to crunch out new record lows, and they are winning that particular battle. We are now just one benign inflation print from seeing a new record low cash rate in August.</div>
<br><a href="/images/2016/07/06/OIS.jpg" target="_blank">Click to enlarge</a>
</div>
<div class="post-body entry-content">
<img src="/images/2016/07/06/OIS.jpg" alt=""><br><br><strong><span style="text-decoration: underline;">The wrap</span></strong><br><br><div>GDP is a useful measure of the strength or otherwise of the economy. And over the long term stronger economic growth may be reflected in higher dwelling prices - but not necessarily so, since there are so many other contributory factors, such as tax settings or the supply of new dwellings, for example. </div>
<div> </div>
<div>It's true that property prices can fall during recessions. But then again they can fall when GDP is positive such as they did in 2011 and early 2012.<br><br>And what about China, where real GDP growth has slowed from above 13 per cent in 2007 to just 6.7 per cent (if you can call 6.7 per cent slow), yet house prices in Shenzhen have skyrocketed by more than 50 per cent within the past year?<br><br>Obviously there are many other factors at play than purely economic growth.  And if there is a correlation between GDP and dwelling stock valuations, it's a tenuous one. </div>
<div> </div>
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<div class="post-footer"> 
<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>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>.</em></p>
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pwargent-M4siyDbqQY

The GDP myth and doomsday property predictions: Pete Wargent

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<p>The Australian states' mid-year reviews (MYRs) revealed that revenue pressures from the housing market correction will partly offset gains from the GST funding reform, according to Moody's Investors Service.</p>
<p>Moody's Investors Service noted that at the same time, they expect higher-than-budgeted capital spending to become a major challenge for states as most embark on record capital spending programs, causing debt to rise more rapidly than revenue.</p>
<p>They added that for some states, debt will start rising from a lower level than in earlier budget projections, overall debt burdens will remain elevated over the next four years, increasing vulnerability to risks such as unbudgeted health and education reform costs.</p>
<p><strong>Housing correction will partly erode revenue gains from GST reform:</strong></p>
<p>Additional Commonwealth GST top-up payments will be offset by a weaker housing market according to Moody's</p>
<p>However, a weaker housing market will offset these gains.</p>
<p>John Manning, Vice President, Moody’s Investors Service said, "following strong growth in transfer duty revenue in recent years, particularly driven by very strong house prices along the Australian east coast, the MYRs forecast a larger drop in property-related revenue than previously budgeted."</p>
<p>"Despite already projecting lower property-related revenue in their FY2019 budgets, the larger states of NSW and Victoria now forecast further declines in transfer duty and land tax revenue as a result of weakening residential property market prices and falling sales volumes."</p>
<p>He noted however, "revenue projections for both states increased overall."</p>
<p>"Both NSW and Victoria expect to receive additional Commonwealth grant revenue to offset lower transfer duty revenue."</p>
<p>"Higher payroll tax revenue, mineral royalties and an upward revision to GST also increased NSW’s revenue projections, while Victoria’s projections improved due to higher payroll taxes from stronger full-time employment and wage growth," he concluded.</p>
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j.ballantyne1990-6AQqhLzZaK

New South Wales and Victoria feeling the pressure from housing correction: Moody's

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<p>Australia’s property market isn't going to crash, according to the Commonwealth Bank economist Gareth Aird.</p>
<p>Nor even a hard landing, but something not too dissimilar to the corrections of 2010 and 1989, he said.</p>
<p>But he has forecast that house prices in Sydney and Melbourne will continue declining until the end of next year.</p>
<p>“We (CBA) see the peak to trough being around 10% in Sydney and a little less in Melbourne (8.8%)," he told Business Insider.</p>
<p>Click <a href="https://edge.alluremedia.com.au/uploads/businessinsider/2018/09/CBA1.jpg" target="_blank">here</a> to enlarge</p>
<div>
<img src="https://edge.alluremedia.com.au/uploads/businessinsider/2018/09/CBA1.jpg" alt="">Source: <small>Commonwealth Bank</small>
</div>
<p>Aird’s model is calculated as a function of the four variables listed below.</p>
<p>1. Annual changes in mortgage rates (1 year advanced);</p>
<p>2. The annual change in the flow of credit (six months advanced);</p>
<p>3. Auction clearance rates (four months advanced);</p>
<p>and 4. The house price expectations index from the Westpac/Melbourne Insitute consumer sentiment survey (2 months advanced).</p>
<p>He concedes that “predicting property prices can look foolish retrospectively”.</p>
<p>However, the chart below shows that the four leading indicators outlined above track actual movements in house prices “very well”.</p>
<div>
<img src="https://edge.alluremedia.com.au/uploads/businessinsider/2018/09/CBA2.jpg" alt="">Source: <small>Commonwealth Bank</small>
</div>
<p>“Clearly, we can’t forecast auction clearance rates or the household perception around the future path of dwelling prices.”</p>
<p>CBA’s base case is that Sydney home prices will decline by 5% annually in 2018 — a relatively mild assessment given the latest weekly data from CoreLogic Sydney house prices are currently 5.9% lower than this time last year.</p>
<p>That would take overall declines from Sydney’s July 2017 peak to around 7.5%.</p>
<p>“For Melbourne, prices would be down by around 5% from their November 2017 peak,” Aird said.</p>
<p>“Nationally, we think prices will end the year down by around 3% with a roughly similar outcome likely in 2019."</p>
<p>Aird noted the broader economy outside of housing is still performing well, along with the continued strength in Australia’s labour market.</p>
<p>He expects the unemployment rate will decline further which lowers the risk of mortgage defaults.</p>
<p>There’s Australian rate of population growth, he added.</p>
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CBA's Gareth Aird forecasts 10 percent decline in Sydney house prices into 2019

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<p>McGrath founder and real estate veteran John McGrath has said he was misquoted in a report that the Sydney market was 40% overvalued.</p>
<p>“The Sydney market is most of the way thought its sales cycle and very near the top of its cycle.</p>
<p>"My view is there is no bubble, and no chance of a 40% correction,” clarified McGrath. </p>
<p>He had been misquoted saying he thought the Sydney market was 40 per cent overvalued, comments first published by Mortgage Business website, repeated on the Smart Property Investment site and then picked up by Business Insider, prompting a denial by John McGrath.</p>
<p>At the same time - and in the same article - he'd advised he thought there might be a <span> “small correction while the market catches its breath.”</span></p>
<p>The real estate expert had been attending the mortgage broker AussieThink conference on Monday on the Gold Coast where he sat on a panel with Aussie John Symond and banker Ian Narev, hosted by 2GB's Ross Greenwood.</p>
<p>He noted that there are “two housing markets” in Australia, and according to him the one that incorporated the two major cities of Sydney and Melbourne was at the end of its cycle.</p>
<p>“There are two markets in Australia, the Sydney/Melbourne market being one and the rest of Australia, and that could be broken into regionals and other capitals. If you look at the last 10 years, we have seen Sydney/Melbourne [prices] have doubled and we’ve seen most of the other capital cities increase by 10–20 per cent, so it really is a big separation of the two markets,” McGrath was quoted as saying by the Mortgage Business.</p>
<p>The report quoted him as saying that the two cities were “at least 95 per cent through their current cycle”, adding that “it could be 100 per cent in Sydney”.</p>
<p>“I don’t see any material capital growth in the next few years and, equally confidently, I don’t see any material drop either. I’ve been through five cycles and each time the market does see significant growth over a two- to three-year period."</p>
<p>“Yes Sydney is overvalued compared to other areas of Australia, however it is a world class international city and a major financial centre. I’ve long said that South East Queensland is undervalued and shows great growth potential,” said McGrath in a media release clarifying his remarks. </p>
<p>He said the market had strong drivers including deep demand, population growth, overseas investment and low interest rates but there was a possibility of a small and short correction of a few percent, and “I believe that is healthy for the sustainability of the market”.</p>
<p>His firm's profit fell 42 percent for the year ended June 30 and the company announced a share buyback to support its sliding share price.</p>
<p>The Australian Financial Review's Street Talk column has written private equity firms are "circling" the company.</p>
<div>
<p>It advised Anchorage Capital, Adamantem Capital, Advent Partners and Crescent Capital Partners are among firms reputedly having run the numbers on McGrath.</p>
<p>Street Talk was not suggesting any approach has been made to the board, or that talks are under way ahead of a formal end to an escrow period - for about 46.3 per cent of total issued capital - on September 8. </p>
</div>
<div>More than half of these shares are held by founder John McGrath, who retains the biggest shareholding with a 27 per cent stake.</div>
<div> </div>
<div>"Once the escrow period ends as much as 20 per cent of the register could change hands, should founding agents and others opt to sell," the AFR suggested.</div>
<div>
<p>McGrath is speculated as potentially proceeding with a privatisation of the the nation's third-largest real estate sale business.</p>
</div>
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