For most new apartment buildings, the Owners Corporation starts life with little more than a bank account and the first quarterly strata levies.

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.

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.

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.

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.

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.

[smartcode_project:default project_id=147685 project_image_fid=359136]

<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.

"The $11 million bond established for the Skyview Castle Hill development represents exceptional value, providing genuine financial security for purchasers," Huxley said.

"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."

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.

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.

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.

[smartcode_project:default project_id=147685 project_image_fid=359127]

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.

Equitifund National Sales Director Ben Hamblett said demand in the Hills District continues to be driven by buyers seeking convenience and connectivity.

"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.

"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."

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.

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.

[smartcode_project_cta:default project_id=147685]

Joel Robinson

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

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.

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.

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.

"Melbourne continues to present one of Australia's strongest long-term investment stories," Bekiaris says.

"While other capital cities have experienced stronger recent growth, that relative underperformance is exactly what's attracting sophisticated counter-cyclical investors."

[smartcode_project:default project_id=1979 project_image_fid=363268]

Equitifund isn't just commenting on Melbourne's property market, it's investing in it.

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.

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.

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.

[smartcode_project:default project_id=1979 project_image_fid=363229]

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.

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.

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.

[smartcode_project:default project_id=1979 project_image_fid=363284]

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.

Greg Huxley, Founder of Equitifund, believes those qualities become even more valuable over time.

"Premium real estate has always rewarded buyers who take a long-term view," Huxley said.

"Victoriana represents the kind of asset that's increasingly difficult to recreate today, particularly in an established location like Queens Road."

He said rising construction costs are also changing the way buyers assess completed developments.

"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."

[smartcode_project:default project_id=1979 project_image_fid=363228]

According to National Sales Director Ben Hamblett, enquiry has been driven largely by Melbourne downsizers and buyers upgrading from smaller apartments.

"Interest in Victoriana continues to build, with strong buyer focus on the larger owner-occupier residences within the development," Hamblett says.

"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."

He said interstate enquiry has also strengthened as buyers reassess Melbourne's position within the national property cycle.

"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."

[smartcode_project_cta:default project_id=1979]

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

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.

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.

A new Colliers report, Brisbane 2032 Olympic and Paralympic Games: Creating Solutions, 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.

The broader construction pipeline paints an even clearer picture.

Construction Skills Queensland's Horizon 2032 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.

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.

[smartcode_project:default project_id=150489 project_image_fid=373834]

Colliers Queensland Residential Director Andrew Scriven said the convergence of these projects is creating a clear window of opportunity for both developers and buyers.

"From 2027 onwards, the market will shift dramatically," Scriven said.

"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."

Scriven said the same dynamic would also affect buyers, with fewer apartment projects expected to launch once construction capacity tightens.

"If you're looking to change your lifestyle over the next five years, now is your window of opportunity to buy."

[smartcode_project:default project_id=150713 project_image_fid=373827]

Developers are already positioning themselves ahead of that window.

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.

Hutchinson Builders will deliver both projects, with early works already underway at Yeerongpilly and Newstead expected to commence later this year.

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.

Colliers Queensland researcher Pragya Sharma said Greater Brisbane is forecast to require around 40,000 new apartments between 2021 and 2031.

"There's a real mismatch emerging between when housing is needed and when it will be feasible to build," Sharma said.

"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."

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

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.

&nbsp;

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.

[smartcode_project:default project_id=151449 project_image_fid=357458]

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.

"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.

"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.

"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."

[smartcode_project:default project_id=151449 project_image_fid=357463]

Construction is now progressing following development approval, with trusted builder LPS Group delivering the project and completion anticipated in Q3 2027.

Oasis forms part of Sherpa Group's successful Flourish collection, which has become recognised for its focus on wellness, community and elevated coastal living.

[smartcode_project:default project_id=151449 project_image_fid=357469]

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.

"The success of Oasis demonstrates that buyers continue to prioritise quality, location and lifestyle," Leet said.

"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."

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>.

[smartcode_project_cta:default project_id=151449]

Sherpa sells out Flourish Oasis in booming Palm Beach

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.

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.

[smartcode_project:default project_id=134951 project_image_fid=368645]

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.

"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.

"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."

[smartcode_project:default project_id=134951 project_image_fid=358802]

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.

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.

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.

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.

[smartcode_project:default project_id=134951 project_image_fid=364551]

<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.

Urban Property Group CEO Patrick Elias said the additional protection reflects changing buyer expectations in the off the plan market.

"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.

Following completion of the building later this year, buyers will move into their apartments well before Christmas.

[smartcode_project_cta:default project_id=134951]

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

Property Crash

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Commentator Alan Kohler says property doesn’t look like it will crash and the feared bubble is yesterday’s scare story after the interventions of APRA’s Wayne Byres between 2014 and 2017.
But the Australian newspaper columnist still says there is still time for a crash, "but so far so good, and at this stage it doesn’t look like happening."
He suggests all the bubble talk is about bitcoins and cryptocurrencies so the housing bubble is yesterday’s scare story. "The Australian housing bubble, so derided around the world and feared here, is having a soft landing," he wrote.
Kohler says Byers, the chairman of the Australian Prudential Regulation Authority can take much of the credit for "gently taking the air out of what was looking a pretty stretched balloon."
He started just a few months after taking over as chairman of APRA, with letters to the banks in December 2014 effectively firing a shot across the bows. The press release at the time advised it was watching especially property investor lending above 10 per cent growth and increases in high loan-to-value ratio (LVR) loans. Its other significant intervention in more recent times was on onterest-only lending which was restricted to 30 per cent of new loans, and only if LVRs were above 80 per cent, growth in investor lending had to be below 10 per cent. Kohler says APRA was forced into this because the RBA felt unable to raise interest rates to lean into the housing boom. "It must be acknowledged that APRA’s interventions over the past two years were exquisitely timed and directed — in effect APRA produced a much more targeted monetary policy than the RBA ever could." "Whereas RBA rate moves affect everyone and all rates, APRA was able to specifically increase interest rates for investor and higher risk loans only, and leave owner-occupier mortgage rates where they were, simply by leaning on the banks to restrict investor lending."
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j.ballantyne1990-6AQqhLzZaK

APRA looks to have saved Australia from a housing crash in 2018: Alan Kohler

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Perth bargains are harder to find, according to the valuation firm, Herron Todd White.
"All in all, the market is ripe for owner occupiers to make a purchasing decision," a recent report to clients advised.
"Many speculators have already called the bottom of the market and they may well be right – just not in all areas.
"Many areas remain price sensitive, but the ability to snag a bargain is becoming harder by the week," it suggested.
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"There are definite signs things are changing.
"Discussions with selling agents reveal more frequent incidents of multiple offers on properties and a higher level of open home attendance at lower price levels.
"The number of properties advertised for sale has declined over the previous 12 months, from 14,000 to 13,200 – with the market commonly interpreting 12,000 as a balanced market.
"Given that in an average week, 500 sales are recorded in the Perth metro area, a short period of undersupply could lead to a market correction in a very short period of time," it suggested.
The market appears to be at the stage of understanding that the window of opportunity to pick the bottom of the market is narrowing, with a level of optimism becoming apparent.
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Perth property bargains harder to find: HTW

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The Sydney apartment market was now suffering serious falls in certain locations, according to The Australian columnist Robert Gottliebsen.
He said Sydney's building rate for apartments in the city was set to fall by at least 50 per cent which will have a severe downward flow on to economic activity in Australia’s biggest city.
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He tips the big banks will be reporting a significant rise in their problem loans — particularly if global interest rates rise on the back of US tax cuts, though not in the current reporting season.
He says the level of apartment decline is much greater than most were predicting three to six months ago.
The repercussions will quickly spread to Melbourne, although the blows may not be as severe because apartments are much cheaper.
"Brisbane is already in trouble so may be insulated from further big falls," he wrote."
"Those looking for a fall in Sydney dwelling prices will be cracking the champagne today but unfortunately the repercussions will be nasty so the celebrations may be short lived," he added.
"If you want a headline figure, apartments sold as used apartments in the big Sydney apartment estates have fallen by at least 20 per cent.
"The fall rate for individual sales can rise to 25 per cent," although no further details were given.
"However the price fall in new apartments bought either off the plan or as the developer sells a completed apartment are down in the vicinity of 12 per cent."
He blames fewer deductions from depreciation for the gap.
"Very quietly in the last budget, Treasurer Scott Morrison stopped the deduction of depreciation on used apartments from July 1, 2017.
"That means that for an investor, a used apartment is now worth substantially less than a new apartment — hence the 20 to 25 per cent price fall which is greater than the new apartment decline."
He says the 20 to 25 per cent fall in used near city apartment prices will not be duplicated across the Sydney dwelling market "but auction clearance rates will stay low or fall back and many areas will be soft."
Gottliebsen concluded his article series with the claim the "most dangerous people" are real estate agents "who will be spruiking that there is no crisis and regulators who don’t understand the power of what they have unleashed."
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Gottliebsen says some Sydney unit prices have fallen 25 percent as market has cracked

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Treasurer Scott Morrison has reassured US investors – and Australian mums and dads – that Australia is not heading towards any housing market crash.
He noted house prices were high but their value was still "real".
<a href="https://sjm.ministers.treasury.gov.au/speech/025-2017/" target="_blank">In a speech in New York to investors overnight</a>, Mr Morrison pushed back at a recent warning from the International Monetary Fund about particularly high levels of household debt in Australia.
He pointed to a series of measures taken by prudential regulator APRA to constrain access to credit.
"The rise in housing values has been driven principally by genuine economic forces of supply and demand, where mortgages are subject to full recourse finance, supported by a strong, stable and resilient banking system and world's best practice credit standards.
"Low or no doc loans that crippled US housing markets are a rarity in Australia."
Morrison acknowledged household debt in Australia was high, with about 80 per cent of Australia's $2.1 trillion in household debt tied up in mortgages.
"This is a real risk, if not properly managed, and we get it", but added the figures needed context.
"While Australia's housing markets, especially in our largest cities, have experienced strong growth over the past decade this, of itself, is not evidence of an underlying weakness in housing asset values, nor that a hard landing for our housing markets is ahead," he said.
"Australian housing values, while high, are still real. 'Safe as houses' still broadly means something in Australia."
He noted the two occasions when we have seen considerable price pressures in homes in the last decade have both coincided with periods when the construction of new homes simply wasn't keeping up with population growth.
"In the last four years, supply has moved ahead of population to now build the strongest cumulative growth in stock in 25 years.
"This increase in stock is now working its way through the backlog, and there remains a strong pipeline going forward.
"In this year's Budget I announced additional measures to ensure supply keeps up with demand in the future, and am now working with our provincial Governments to improve the responsiveness and forward planning of the zoning and regulatory approvals system.
"This includes providing tax incentives for affordable housing investment, through managed investment trusts, that would be of real interest to US pension funds, providing a fifty percent withholding tax reduction from 30 per cent to 15 per cent for such investments, including development projects."
He noted as observed by Moody's in their credit report last month, when they once again maintained Australia's AAA credit rating, APRA's "proactive prudential policies bolster the resilience of the banking sector" and mitigate the risks of high household debt.
"And the proof, as always, is in the pudding."
Citing capital city house prices only rose 0.3 per cent in September to be 8.5 per cent higher through the year, he said APRA's measures, which have the full support of the government, are working to smooth the landing in our housing markets.
Morrison has visited New York and Washington for meetings at the IMF, the World Bank and of G20 Finance ministers.
 
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jonathanchancellor-7SQnKwU6yx

No low-doc helps ensure no housing market crash, says Treasurer Scott Morrison

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While a property market crash and its impact on the Australian economy is a topic of hot debate, some experts say a slump in consumer spending is a more immediate threat to the economy.
The view comes in the wake of the latest ABC Four Corners show which noted that “for every $1 earned, on average, Australians have nearly $2 of debt” and it stems from a national obsession with buy property.
Household debt hit a record high of 190 per cent of yearly disposable income in the March quarter, according to the Reserve Bank.
Show presenter Sarah Ferguson said the programme would explore “what happens if Australia’s debt-fuelled housing boom comes to a crashing end”.
Two of the interviewees, Roy Palleson and Rowena Ebona, a Sydney couple on a combined income of $135,000, said they owed $1.2 million on five investment properties worth $1.5 million.
A fall in property prices would leave Roy and Rowena, and thousands of other investors, holding more in mortgage debt than they owned in property, with little or no buffer.
However, University of New South Wales economist Richard Holden said a drop in consumer spending was a more immediate concern.
“If you have more of a drop on consumer spending, you’re going to see a contraction on the business side. It flows straight into business investment and business expansion, and that has a multiplier effect,” he told The New Daily.
“They’re not going to be in the mood to give big pay rises or wage rises at all. They’re not going to be employing people and so that then compounds on the consumer side. It just goes round in a vicious circle.”
The latest GDP figures from the March quarter reveals that the share of economic growth flowing to wage earners fell to 51.5 per cent, the lowest since 1964.
Household consumption currently accounts for about 57 per cent of GDP and any drop in consumer spending from cash-poor workers would hit growth.
The economy only grew by 0.4 per cent in the March quarter.
The widely-cited consumer confidence index compiled by Roy Morgan has fallen for the past three weeks. The latest ‘confidence’ rating fell to 109.2 points on August 20, down from 118.4 on July 30.
Dr Holden also says that there are far more factors – such as state and federal stimulus – propping up house prices than those aimed at boosting consumer spending and wage growth.
“It’s been well discussed what is propping up the property side, with negative gearing and things like that,” he said.
“On the consumer side, when you’ve got high personal income tax rates and not much talk of cuts to those, that’s not going to help consumer spending. And then of course wage growth has been really low and stagnant.”
“We learned last week that wages grew in 2016-17 by just 1.9 per cent, the lowest of any financial year since at least 1997, and exactly the same speed as inflation. This meant wages are failing to outpace the cost of living.”
Wages in the private sector grew just 1.8 per cent over the fiscal year, meaning the majority of the workforce actually copped a wage cut in real terms, he said.
Meanwhile, property prices continue to be resilient in spite of regulatory measures.
Brendan Coates, a fellow at the Grattan Institute, said the bigger risk “at the moment” from the property market was a drop in household consumption.
“If households found themselves in difficulty with servicing their debts, the more likely scenario would be that they curb their spending in order to meet their obligations, to keep repaying those debts,” he was cited as saying by The New Daily.
He pointed to RBA research that found that the spending of households on variable-rate mortgages was very sensitive to changes in interest rates.
The effects would likely reverberate through the economy, especially the labour market, he said.
“If you have households reducing their spending, that slows income growth through the economy, which presents risks for unemployment,” he said.
“If households are not confident in where things are going, they won’t spend as much and that will have flow-on impacts to other sectors and other industries.”
An example of how this might hurt the economy is the recent warning from G8 Education, the Gold Coast-based childcare centre operator, that sluggish wages growth had contributed to a drop in demand for childcare, cutting into its revenue.
Even without such a consumer-led crisis, Coates said record-low wage growth and low inflation meant mortgage debt would “loom larger for much longer”, instead of being eroded away.
 
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Anaemic consumer spending bigger threat than property crash: Experts

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Standard &amp; Poor's has placed 25 second tier Australian banks, insurers and buildings societies on negative watch as it becomes concerned about rising household debt and property values.
The change in ratings comes as the agency adjusted its assessment of Australia's economic risk trends from stable to negative. 
While S&amp;P said that growth in debt and property prices would likely moderate, there was a one in three chance that the strong growth would continue, leading to increased risks of a sharp correction that would hurt lenders. 
Among the largest institutions impacted are AMP Bank, Bank of Queensland, Bendigo and Adelaide Bank, Macquarie whose current ratings were placed on negative outlook.
Several other building societies and regional lenders such as Cuscal and CUA also had their ratings outlook revised to negative.  
</div>
<div>The ratings outlooks of the major banks had already been placed on negative outlook because of the action taken on the AAA Australian sovereign rating.</div>
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<div>S&amp;P said that private sector debt as a percentage of GDP had grown to 139 per cent  to 118 per cent in 2012, an average increase of 5.2 per cent while property prices had increased by 5.3 per cent, after adjusting for inflation.   </div>
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"Strong growth in private sector debt (to about 139 per cent of GDP in June 2016 from 118 per cent in 2012, or an annual average increase of 5.2 percentage points) coupled with an increase in property prices nationally (average inflation-adjusted increase for the past four years was 5.3 per cent nationally) are driving the potential increase in imbalances in the economy, in our view.
"Consequently, we believe the risks of a sharp correction in property prices could increase and if that were to occur, credit losses incurred by all financial institutions operating in Australia are likely to be significantly greater; with about two-thirds of banks' lending assets secured by residential home loans--the impact of such a scenario on financial institutions would be amplified by the Australian economy's external weaknesses, in particular its persistent current account deficits and high level of external debt."
The impact of any sharp drop in property prices would be greater on banks, because more than 60 per cent of their loans were for residential property, it said.
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jchancellor-FAypfDUnLy

One in three chance of strong growth triggering sharp correction in property: S&P

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The property market may be in for a hard landing as early has 2017, according to investment bank Morgan Stanley’s recent predictions.
The reasons cited are a soft rental market, an oversupply of new apartments and worsening affordability, says an article in the Australian Financial Review based on Morgan Stanley’s outlook.
It predicts apartment approvals to fall by more than half over the next two years as settlement risks and a sharp cut in development financing hurts developers.
"In short, we believe the growth contribution from the housing boom has already peaked and look for a plateau over 2017 and decline through 2018," strategists Daniel Blake, Steven Ye, Chris Nicol and Antony Conte write.
"New apartment projects should slow sharply as focus turns to settlement of the existing pipeline."
The outlook is based on more pessimistic expectations about net migration rates than others, according to Morgan Stanley, and is the result of a new index  — MSHAUS — combining six factors including oversupply, rental vacancy rates that could rise to 4.5 percent from 3 percent in two years, tighter lending standards and lower expected growth in home values.
The index is in a range close to its lowest level since 2004, says the report. 
<a href="/images/2016/10/21/MorganStanley.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/21/MorganStanley.jpg" alt="">
"A growing overbuild, deteriorating rental market conditions, further worsening in housing accessibility, tighter credit supply and more subdued price expectations all suggest a further softening in the outlook over 2017," it says.
Planning approvals of apartments, townhouses and semi-detached homes will fall to 57,000 in the fourth quarter of 2018 from 124,000 in trend terms in July this year, the report says. 
Settlement risk – both for individual buyers and whole developments – is a major concern. 
"In our view, the greatest vulnerability is settlement risk on the 160,000 apartments that we forecast completing through end 2017," the report says. "Listed developers report low failure rates currently, but also confirm credit availability has tightened, especially for foreign investors."
It also applies to buildings, despite the growth of alternative financing sources. 
The report says the nearly $120 billion in settlements due by end-2018 makes this a genuine concern.
The rental market is also the softest since 2003, it says. 
"We think they will weaken further, on the back of an increasing apartment overbuild. Rent inflation has already slowed sharply and is running at a record low of 0.9 percent, year on year."
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Housing boom to decline through 2018 as soft rental market, oversupply bite: Morgan Stanley

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Finance commentator and Channel 7's Sunrise breakfast host, David Koch has offered six signs which show the housing market could be about to change.
"The recent Reserve Board minutes showed it was quite comfortable with the state of the property market," he told the Telegraph.
"Some international commentators however are predicting an imminent crash in values."
He said that rather than speculate, the more important thing is to understand the major signals which could points to a change in the property market.
1. Rising interest rates
"Borrowing money has never been cheaper," David says.
Record low interest rates have meant property buyers have been borrowing more for less.
But this period of easy money can lead to a financially deadly "debt trap" for those who overdo it.
A rise in interest rates on a four percent home loan doesn't sound much until you realise it would mean a 50 percent jump in repayments.
2. Rising unemployment 
With 25 consecutive years of positive economic growth, the job market has been pretty solid and unemployment has been relatively low.
That has been good news for the property market because stable employment gives buyers the confidence to get into the market or trade up.
If the economy slows, the job market deteriorates, unemployment rises, incomes become uncertain, confidence falls and property prices suffer.
3. Falling auction clearance rates
Auction clearance rates are a regular, consistent barometer of a property market health.
It's an indicator on the balance between buyers and sellers, which is the fundamental supply and demand foundation of all property markets.
The higher the clearance rate, the healthier the market as it indicates there are plenty of buyers competing for stock on the market. 
4. Rising vacancy rates
Investors buy property for both capital growth and income from rents.
The key to making an investment property stack up financially is they must have tenants paying rent.
Rising property vacancy rates means there aren't enough tenants to go around so investors will either have to slash their rents to attract tenants or sell the property.
5. Falling rental yields
Linked to increasing rental vacancy rates.
A property is valued on the rental income it can produce and its capital growth prospects from rising values.
If vacancy rates rise, landlords will have to lower their rents to attract tenants or the property will be vacant and earn no income.
6. Above-average construction numbers
 Property is about demand and supply.
If construction outstrips demand then values will fall as sellers compete to attract buyers.
That's the current concern about the Melbourne, Sydney and Brisbane inner-city home unit market.
A huge amount of construction is under way and there are fears that when these developments are finished, there will be an oversupply and values will fall.
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Six signs to look for if a property crash is on the way: David Koch

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GUEST OBSERVER
To modify Benjamin Franklin, it seems that in Australia nothing can be said to be certain, except death, taxes and endless debate about property prices.
Why is it so unaffordable? Are foreigners to blame? Is it a good investment? Is negative gearing the problem? Are property prices about to crash?
Worries about a property crash have been common since early last decade. In 2004, The Economist magazine described Australia as “America’s ugly sister” thanks in part to a “borrowing binge” and soaring property prices which had seen it become “another hotbed of irrational exuberance”. At the same time the OECD estimated Australian house prices were 51.8% overvalued.
Since the GFC, predictions of an imminent property crash have become more common with talk that a property crash will also crash the banks and the economy.
Our view since around 2003 has been that overvaluation and high levels of household debt leave the housing market vulnerable. As such it could be seen as Australia’s Achilles heel. However, in the absence of a trigger it’s been hard to see a property crash as a base case. Not much has really changed.
This note takes a look at the key issues and what it means for investors.
Overvalued, over loved and over indebted
The two basic problems with Australian housing are that it is expensive and household debt is high. Overvaluation is evident in numerous indicators:
According to the 2016 Demographia Housing Affordability Survey the median multiple of house prices in cities over 1 million people to household income is 6.4 times in Australia versus 3.7 in the US and 4.6 in the UK. In Sydney it’s 12.2 times and Melbourne is 9.7 times.
The ratios of house prices to incomes and rents are at the high end of OECD countries and have been since 2003.
Real house prices have been above trend since 2003.
<a href="/images/2016/03/10/Screen%20Shot%202016-03-10%20at%2011.21.21%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/10/Screen%20Shot%202016-03-10%20at%2011.21.21%20AM.png" alt="">
 
The shift to overvaluation more than a decade ago went hand in hand with a surge in the ratio of household debt to income, which took Australia’s debt to income ratio from the low end of OECD countries to now being around the top.
<a href="/images/2016/03/10/Screen%20Shot%202016-03-10%20at%2011.25.17%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/10/Screen%20Shot%202016-03-10%20at%2011.25.17%20AM.png" alt="" width="793" height="460">
 
Overvaluation and high household debt are central elements of claims that Australian house prices will crash. These concerns get magnified whenever there is a cyclical surge in prices as we have seen recently in Sydney and Melbourne.
But a crash seems elusive.
However, given the regularity with which crash calls for Australian property have been made over the last decade and their failure to eventuate, it’s clear it’s not as simple as it looks.
First, the main reason for the persistent "overvaluation" of Australian home prices relative to other countries is constrained supply. Until recently Australia had a chronic under supply of over 100,000 dwellings, as can be seen in the next chart that tracks housing completions versus underlying demand.
Completions are at record levels but they are just catching up with the undersupply of prior years.
<a href="/images/2016/03/10/Screen%20Shot%202016-03-10%20at%2011.27.01%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/10/Screen%20Shot%202016-03-10%20at%2011.27.01%20AM.png" alt="">
 
Secondly, Australia has not seen anything like the deterioration in lending standards other countries saw prior to the GFC. There has been no growth in so-called low doc and sub-prime loans which were central to the US housing crisis. In fact in recent years there has been a decline in low doc loans and a reduction in loans with high loan to valuation ratios. See the next chart. And much of the increase in debt has gone to older, wealthier Australians, who are better able to service their loans.
<a href="/images/2016/03/10/Screen%20Shot%202016-03-10%20at%2011.28.32%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/10/Screen%20Shot%202016-03-10%20at%2011.28.32%20AM.png" alt="">
 
Third, and related to this, there are no significant signs of mortgage stress. Debt interest payments relative to income are low thanks to low interest rates. See the next chart.
<a href="/images/2016/03/10/Screen%20Shot%202016-03-10%20at%2011.29.34%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/10/Screen%20Shot%202016-03-10%20at%2011.29.34%20AM.png" alt="">
By contrast in the US prior to the GFC interest rates were starting to rise. Yet in Australia bad debts and arrears are low.
While new loan sizes have increased, Australians seem focussed on cutting their debt once they get it.
Finally, while some seem to think that because property prices in mining towns like Karatha are now crashing this is a sign that other cities will follow. This is non-sensensical. Property prices in mining towns surged thanks to a population influx that flowed from the mining boom. This is now reversing. Perth and Darwin are also being affected by this but to a less degree. By contrast the surge in property prices in cities like Sydney and Melbourne that occurred into early last decade predated the mining boom and their latest gains largely occurred because the end of the mining boom allowed lower interest rates.
The current state of play
Our assessment is that the boom in Sydney and Melbourne is slowing thanks in large part to APRA’s measures to slow lending to property investors. However, house price growth is likely to remain positive this year. Price growth is likely to remain negative in Perth and Darwin as the mining boom continues to unwind. Hobart &amp; Adelaide are likely to see continued moderate property growth, but Brisbane may pick up a bit.
Nationwide price falls are unlikely until the RBA starts to raise interest rates and this is unlikely before 2017. And then in the absence of a recession or rapid interest rate hikes price falls are more likely to be 5-10% as was seen in the 2009 and 2011 down cycles rather than anything worse.
<a href="/images/2016/03/10/Screen%20Shot%202016-03-10%20at%2011.31.43%20AM.png" target="_blank"> Click to enlarge</a>
<img src="/images/2016/03/10/Screen%20Shot%202016-03-10%20at%2011.31.43%20AM.png" alt="">
 
What to watch for a property crash?
To see a property crash – say a 20% average fall or more – we probably need to see one or more of the following:
A recession – much higher unemployment could clearly cause debt servicing problems. At this stage a recession looks unlikely though.
A surge in interest rates – but the RBA is not stupid; it knows households are now more sensitive to higher rates.
Property oversupply – this is a risk but would require the current construction boom to continue for several years.
Implications for investors
There are several implications for investors:
While housing has a long term role to play in investment portfolios it is looking somewhat less attractive as a medium term investment. It is expensive, offers very low income (rental) yields compared to all other assets except bank deposits and Government bonds and it’s vulnerable to possible changes to taxation arrangements around property.
There are pockets of value, eg in regional areas. You just have to look for them.
As Australians already have a high exposure to residential property (directly and via bank shares and property trusts), there is a case to maintain a decent exposure to say unhedged global shares because it could provide an offset if it turns out I am wrong and the Australian property market does have a crash.
<a href="https://www.propertyobserver.com.au/https://plus.google.com/110172465327488162875?rel=author" target="_blank">SHANE OLIVER</a> is head of investment strategy and economics and chief economist at <a href="https://www.ampcapital.com.au/home" target="_blank">AMP Capital</a> and is responsible for AMP Capital's diversified investment funds.
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