<a href="https://www.apartments.com.au/developers/skymark-group">Skymark</a>'s boutique Cronulla development Solis has secured a 10-year Latent Defects Insurance policy through Resilience Insurance, providing buyers of the 16-residence building on Ewos Parade with structural and waterproofing protection that extends a decade beyond the building's completion.

Currently under construction and due for completion in late 2027, <a href="https://www.apartments.com.au/new-apartments/solis-cronulla-8-ewos-parade-cronulla-nsw-2230">Solis</a> is one of a small number of new developments in the Sutherland Shire to carry Resilience LDI coverage, a distinction that carries increasing weight as buyer confidence in the off-the-plan sector continues to be shaped by how developers stand behind their product.

Latent Defects Insurance, which entered the Australian market in 2022 when Resilience Insurance was approved to offer the cover, protects buyers against major structural or waterproofing defects for ten years post-completion. Unlike traditional statutory warranties, it operates as a first-resort policy, if a covered defect arises, the insurer responds directly, without the buyer needing to pursue the builder or developer through a lengthy claims process.

Resilience Insurance CEO Corey Nugent has noted that the product addresses something fundamental to the new apartment market.

"The overarching feedback from prospective buyers in the new development space is that they want more confidence and assurances around the quality of the build," Nugent says.

"Resilience Insurance Latent Defects Insurance not only gives them complete peace of mind for 10 years, but it shows the developer they are buying from is standing by their product."

[smartcode_project:default project_id=150499 project_image_fid=370898]

For Solis, the Resilience LDI policy adds a meaningful layer of accountability to an already considered project. The development comprises nine two-bedroom and seven three-bedroom residences, including one dual-level three-bedroom apartment, across a five-storey building on Ewos Parade, positioned between Shelly Beach and South Cronulla.

Garden apartments connect directly to private landscaped courtyards, while upper-level homes capture beach views to the east from level four and above.&nbsp;

All 16 residences include at least one balcony or courtyard, and select apartments on the upper floors feature bar areas and secondary flexible living spaces.

Hiba Sander, Managing Director of Skymark, says Solis offers a rare balance, nestled between the quiet beauty of secluded beaches and the lively charm of South Cronulla's esplanade.

"It's a place to choose your pace and live gracefully, seaside'," Sander says.

[smartcode_project:default project_id=150499 project_image_fid=370900]

The architecture, designed by <a href="https://www.apartments.com.au/architects/ida-design-group">IDA Design Group</a>'s Michael Trinh, draws from the natural erosion patterns of <a href="https://www.apartments.com.au/developments/cronulla-nsw-2230">Cronulla</a>'s sandstone headlands, translating the organic forms of the coastline into soft curves, pavilion-style massing, and a material palette chosen for longevity in a salt-tinged environment.&nbsp;

Textured natural stone, soft renders, and timber-look battens reference the tones of the surrounding cliffs, while the building has been oriented to maximise natural light and passive ventilation, with primary living spaces facing north and east to capture morning sun and sea breezes.

"At Solis, our aim was to create architecture that feels quietly confident, grounded in natural materials like stone and timber, and elevated by light and landscape," Trinh says.&nbsp;

"The buildings are designed to sit gently within their coastal surrounds, with expansive glazing and abundant greenery creating a seamless dialogue between inside and out."

[smartcode_project:default project_id=150499 project_image_fid=370897]

Interiors by <a href="https://www.apartments.com.au/architects/hot-black">Hot Black</a> carry the same material language through to every room. Kitchens feature integrated Gaggenau appliances, sculpted stone benchtops, and Lo &amp; Co joinery, while bathrooms feature natural stone, timber, and brushed metal finishes.&nbsp;

Hot Black Founder and Design Director Sophie Safrin describes the intent as one of considered restraint: "At Solis, every detail has been thoughtfully considered to create a timeless coastal retreat, calm, refined, and effortlessly liveable. From natural finishes to seamless indoor-outdoor flow, Solis offers a quiet elegance that's deeply connected to its surroundings.

The landscape, designed by Julian Brady of <a href="https://www.apartments.com.au/landscape-architect/sitedesignstudios">Site Design Studios</a>, treats green space as an integral part of the resident experience rather than an afterthought.&nbsp;

"Gentle curves and layered native plantings mirror the ebb and flow of the ocean," Julian Brady says, "creating a serene connection between architecture and place."&nbsp;

Coco Republic has provided bespoke furniture packages tailored to the project's coastal palette.

[smartcode_project:default project_id=150499 project_image_fid=370899]

Skymark has an established track record in the Sutherland Shire, with a portfolio spanning Cronulla, Woolooware and Burraneer that includes Isla, Sylva, Bask, Shells, Sula and Mist. Securing LDI on Solis reflects a broader shift in how the developer is positioning its buildings to buyers, at a time when Resilience Insurance expects the policy to become mandatory in New South Wales by 2028.

Sales at Solis are launching soon through Ray White Projects, with an official event scheduled for 11 June. Enquire for more information.

[smartcode_project_cta:default project_id=150499]

Joel Robinson

Skymark takes out 10-year Resilience Insurance LDI at Solis Cronulla

Investors may soon find themselves with fewer reasons to buy established property and more incentives to look towards the new apartment market.

Proposed changes to negative gearing and capital gains tax concessions would see new and off-the-plan apartments retain access to the tax benefits, while established properties would miss out, creating a clear advantage for buyers purchasing newly built housing.

The policy direction aligns with what many developers have been saying for several years. Australia needs more housing supply, and governments are increasingly looking for ways to encourage investment into new stock rather than existing homes.

The challenge for investors is that suitable product is becoming harder to find.

For much of the last decade, one-bedroom apartments were the cornerstone of investor demand. They offered a lower entry price, strong rental appeal, and were a common feature across most apartment developments.

Today, the development pipeline looks very different.

Across both New South Wales and South East Queensland, developers are increasingly targeting owner-occupiers and downsizers, delivering larger two, three and four-bedroom apartments in response to changing buyer preferences. While one-bedroom apartments still exist, they now form a much smaller portion of many new projects.

That shift has created a shortage of investor-friendly stock, particularly in well-located projects close to transport, employment hubs and lifestyle amenity.

At the same time, rising apartment prices have pushed many new developments beyond the reach of traditional investors. On the Gold Coast and across South East Queensland, it's becoming increasingly difficult to find new apartments priced around the $1 million mark, particularly those offering strong rental fundamentals and long-term growth prospects.

We've rounded up four new apartment developments where investors can still secure a foothold in the market for around $1 million or less.

<h2 data-end="1140" data-start="844">Flourish Soleira</h2>

<h2>Priced from: $1.07 million</h2>

Popular Palm Beach developer Sherpa is soon to officially launch its newest local apartment development, Flourish Soleira.

The one-bedroom apartments in the building were only offered to first home buyers rather than investors, and all of those have been snapped up. The two-bedroom apartments will start from $1.07 million, and the three-bedrooms, still a good investment given the popularity of Palm Beach for owner-occupiers, starting at $2,045,000.

&nbsp;

[smartcode_project:default project_id=150017 project_image_fid=370964]

Flourish Soliera will comprise 153 apartments across two buildings, connected by a skybridge, the first ever delivered in the suburb.

True to Sherpa's booming Flourish brand of apartment projects, Flourish Soleira will have extensive rooftop amenity across both buildings including a&nbsp;wellness centre with gym, work from home, yoga, pilates, a&nbsp;heated pool, private dining rooms, pizza oven and barbecues, basketball court, and golf simulator.

<h2>Corallo, Palm Beach</h2>

Priced from: $841,500

Nearby Flourish Soleira is Changfa Group's beachfront-inspired Corallo development. They still have some one-bedroom apartments remaining, priced from $841,500.

The 105-apartment project on Palm Beach Avenue is otherwise dominated by larger two and three-bedroom residences, many of which are aimed at owner-occupiers and downsizers.

[smartcode_project:default project_id=112194 project_image_fid=808]

For investors, the appeal lies in Palm Beach's continued transformation from a laid-back beachside suburb into one of the Gold Coast's most sought-after residential markets. Residents at Corallo will be within walking distance of Palm Beach's surf beaches, the recreational amenity of Tallebudgera Creek, and the increasingly popular collection of cafes, restaurants and boutique retailers along the suburb's central dining precinct.

<h2>Corner House, Stones Corner</h2>

<h2>Priced from: $880,000</h2>

One of only two Brisbane apartment developments to make the list with prices under $1 million is DeMartini Fletcher's Corner House development in Stones Corner.

One-bedroom apartments start from $880,000 within the 88-apartment development, providing investors with exposure to one of Brisbane's most established inner-south locations.

[smartcode_project:default project_id=149098 project_image_fid=330594]

Stones Corner has long been supported by strong tenant demand due to its proximity to major employment and education destinations. The suburb sits less than five kilometres from Brisbane's CBD and is within easy reach of the Princess Alexandra Hospital, Greenslopes Private Hospital, Queensland Children's Hospital and several university campuses.

The project's location within a walkable urban village environment, surrounded by retail, dining and public transport infrastructure, continues to attract both professionals and healthcare workers seeking accommodation close to work.

Parkdrive Apartments, Chermside

Priced from: $749,000

The most affordable apartments across Brisbane's new and off the plan market are in Chermside where developer AusDev is selling one-bedroom apartments from $749,000, and two-beds from $929,000, at its recently launched Parkdrive development.

The development is strategically positioned in one of Brisbane's largest employment and retail precincts, placing residents within easy walking distance of Westfield Chermside, The Prince Charles Hospital, St Vincent's Private Hospital Northside and the suburb's major bus interchange.

[smartcode_project:default project_id=152125 project_image_fid=363782]

Already under construction and scheduled for completion in early 2028, Parkdrive benefits from Chermside's ongoing evolution into Brisbane's northern metropolitan centre. The suburb continues to attract significant public and private investment, supporting population growth and underpinning long-term rental demand.

For investors focused on yield and tenant depth, the combination of healthcare, retail and transport infrastructure within close proximity provides a strong foundation for occupancy and rental performance.

Investors to turn to new apartments after Federal Government changes spark hunt for Queensland's best $1 million apartments

A mix of Gold Coast locals, fly-in, fly-out purchasers from Sydney and Melbourne, and Brisbane-based families has driven early sales success at Broadbeach's newest apartment tower, Lumara.

The 26-level project, a joint venture between builder-developer 5Point Projects and Bourke Projects, comprises just 37 luxury residences and is attracting a buyer profile that is looking for exclusivity, above the most amenity-rich suburb on the Gold Coast.

[smartcode_project:default project_id=150454 project_image_fid=364156]

Jamie Bourke, Director of Bourke Projects, says every buyer secured so far intends to use Lumara as a lock-up-and-leave residence, combining holiday use with the ability to work remotely when required.

“The size of the apartments, both half- and full-floor options, and the different zones within the floorplans, lends itself perfectly to dedicated home office setups and multi-generational family holidays,” Bourke says.

That flexibility has become a key drawcard for affluent buyers seeking a second residence on the Gold Coast without sacrificing the ability to conduct business away from their primary home base.

The absence of holiday letting within the building has also resonated strongly with purchasers.

“This type of buyer doesn't need to generate holiday rental income,” Bourke says. “They're paying for exclusivity, privacy and certainty around who their neighbours are.”

[smartcode_project:default project_id=150454 project_image_fid=366491]

The strong demand comes amid broader shifts in the high-end apartment market following the Federal Budget announcements in May.

“We were already seeing strong enquiry from high-net-worth buyers, but that has only accelerated since the policy changes,” Bourke says.

“A lot of those buyers are looking to place more capital into premium lifestyle assets rather than investment-grade stock that has been targeted by the Federal Government.”

[smartcode_project:default project_id=150454 project_image_fid=366486]

Designed by Cottee Parker, Lumara adopts a slender, sculpted form with an emphasis on natural materials suited to its beachfront setting. The architectural approach draws on coastal influences, with a palette of stone, timber and concrete selected for durability and the ability to weather over time.

Apartments are limited to three and four-bedroom configurations, with a maximum of two residences per floor through the mid-levels and a selection of full-floor and dual-level homes in the upper levels. All apartments are oriented to the north to maximise natural light, cross-ventilation and views across the ocean, city skyline and hinterland.

A two-level amenity offering is positioned high within the building on levels 20 and 21, conceived as a sky wellness retreat. Facilities include a magnesium pool, spa, sauna and steam rooms, alongside more social spaces such as a private dining room, resident lounge, workspaces and outdoor barbecue areas integrated with landscaped greenery.

The uppermost levels are reserved for larger-format residences, including several full-floor homes and a dual-level penthouse with its own private wellness features and recreational spaces.

&nbsp;

To give buyers confidence, 5Point and Bourke commenced construction ahead of the apartments launching to the market, a sure-fire way to prove they mean business, and the building will be delivered. They are targeting a 2028 completion date.

[smartcode_project_cta:default project_id=150454]

Locals, interstate holiday makers, drive early sales at Lumara, Broadbeach's newest luxury apartment tower

Often when it comes to purchasing property, the biggest barrier to entry is the deposit. Buyers of established homes typically aim for a 20 per cent deposit to avoid the added cost of Lenders Mortgage Insurance, while most property transactions require around a 10 per cent deposit when contracts are exchanged.

The off-the-plan market works differently, with buyers typically paying a deposit during construction and settling the balance upon completion. As completion approaches at <a href="https://www.apartments.com.au/new-apartments/fabbrica-fitzroy-369-gore-street-fitzroy-vic-3065">Fabbrica Fitzroy</a>, developer <a href="https://www.apartments.com.au/developers/pace-development-group">Pace</a> is making it easier for buyers to secure a residence through a deposit-matching incentive. Purchasers need only contribute a five per cent deposit*, with Pace matching the remaining five per cent.

The offer comes as Pace unveils a completed display apartment and townhouse, now available for inspection by appointment ahead of the project's Spring completion.

[smartcode_project:default project_id=139552 project_image_fid=371009]

Designed by <a href="https://www.apartments.com.au/architects/sjb-architects">SJB</a> with interiors by <a href="https://www.apartments.com.au/interior-designers/winwood-mckenzie-architecture">Winwood Mckenzie</a> and landscaping by <a href="https://www.apartments.com.au/landscape-architect/acre">Acre</a>, Fabbrica draws on Fitzroy’s industrial and manufacturing history, incorporating references to the former Argyle Shirt Factory and Life Savers Confectionery Company that once occupied the site.

The development comprises 85 residences, spanning low-maintenance apartments through to larger-format townhouses with private street access and double lock-up garages, a relatively uncommon offering in Fitzroy’s higher-density apartment market.

Pace says the project has been designed to appeal to buyers seeking inner-city convenience without sacrificing space, flexibility, or amenity.

[smartcode_project:default project_id=139552 project_image_fid=371016]

Inside the residences, Winwood Mckenzie has focused on adaptable layouts and integrated detailing, with features including custom joinery, and concealed storage solutions. The material palette leans into warm, tactile finishes intended to complement the building’s industrial architectural language.

Fabbrica’s rooftop amenity is a key part of the project offering. Spanning around 800 sqm, the communal rooftop includes a private dining room, communal kitchen, lounge spaces, work-from-home zones, and outdoor dining areas overlooking the Melbourne CBD skyline.

[smartcode_project:default project_id=139552 project_image_fid=371017]

Landscape architecture studio Acre has introduced a layered rooftop garden designed to soften the urban setting while creating a more communal environment for residents.

The Fitzroy location also positions residents within walking distance of Brunswick Street, Smith Street, parks, cafés, galleries, and public transport, while remaining only minutes from Melbourne’s CBD. The project has an enviable Walk Score of 96.

[smartcode_project:default project_id=139552 project_image_fid=371025]

Pace, which is also delivering the project as builder, has developed more than 100 projects across Melbourne over the past three decades. The vertically integrated approach has become increasingly common among developers seeking greater control over construction delivery amid broader market pressures affecting the apartment sector.

The strikingly contemporary Gore Street development is now around 70 per cent complete, with purchasers expected to move into their new homes in Spring 2026. A limited number of residences remain available under the current deposit match offer.

*Conditions apply in relation to the deposit match offer.

[smartcode_project_cta:default project_id=139552]

Pace offers five per cent deposit match at Fabbrica Fitzroy ahead of Spring completion

Sydney developer Hyecorp's roots on the Lower North Shore stretch back three generations, and that deep understanding of the market continues to shape where and how it develops today.

From high-rise towers to boutique apartment projects, the family-run developer has built its reputation by focusing on a part of Sydney it knows intimately. Founded by Michael Abolakian in the early 1990s, Hyecorp is now led by his sons Stephen, Troy and Patrick.

Stephen Abolakian, joint managing director alongside Troy, has spent more than two decades in the business, overseeing development, planning, finance, marketing and sales.

Abolakian says the developer's disciplined focus on where it chooses to operate has been, and continues to be, one of Hyecorp's greatest strengths.

“We know the buyer profile exceptionally well,” Abolakian says.

“The demographics between places like Willoughby, Chatswood, St Leonards and Roseville are very similar. There are nuances between suburbs and projects, but culturally and from a buyer perspective, there’s a strong overlap.”

That buyer has historically been overwhelmingly owner-occupier driven.

Unlike many Sydney apartment developers that have traditionally relied heavily on investor demand, Hyecorp’s projects have typically attracted downsizers, upsizers, rightsizers and family owner-occupiers seeking long-term homes rather than short-term investments.

“Historically, investors have been a much smaller portion of our demand profile,” Abolakian says.

“We design for owner-occupiers. We don’t design for yield, we design for comfort, amenity, family living and long-term usability.”

That philosophy extends well beyond apartment layouts.

From landscaping and communal gardens to shared amenities and circulation spaces, Hyecorp’s developments are designed around how people actually live, something Abolakian believes has become increasingly important in Sydney’s apartment market.

“There was probably a period where having an approved project in market was enough,” he says.

“There wasn’t as much competition and if you built it, buyers would come. That’s no longer the case.”

“There’s more supply in the pipeline now, particularly with TOD precincts and low and mid-rise reforms opening up opportunities across Sydney. Buyers have more choice, so if you get the product wrong, they’ll simply go elsewhere.”

[smartcode_project:default project_id=110379 project_image_fid=311393]

The shift has forced developers to become more sophisticated in how they approach apartment design, particularly as owner-occupier expectations continue to rise.

For Hyecorp, that means thinking beyond who the buyer is today and designing for who they may become in five or 10 years' time.

“People buying now often aren’t moving in for several years,” Abolakian says.

“You might have a young couple buying today, but by the time they move in they may have children, older children, or changing lifestyle needs. You’ve got to think about how families evolve.”

That thinking also shapes Hyecorp’s approach to amenity, which positions wellness at the forefront.

[smartcode_project:default project_id=149594 project_image_fid=362634]

While resort-style facilities have become increasingly common marketing tools across Sydney apartment developments, Abolakian says the challenge is ensuring amenities are genuinely usable and appropriate for the scale of the project.

“If amenities are done right, they can materially improve the living experience,” he says, adding however that if you&nbsp;overdo it or get it wrong, you can end up with facilities nobody uses that simply create ongoing strata costs.”

That balance is something Hyecorp is aiming to strike with projects like Roseville Avenue, one of the group's upcoming Lower North Shore developments, which Abolakian describes as bringing a resort-style living experience into a metropolitan setting.

“It’s about creating something that feels special without being excessive,” he says.

“Good gardens, quality apartments, thoughtful amenity. Creating that resort feeling in a metro location.”

<img alt="Hyecorp" data-entity-type="file" data-entity-uuid="13c4c0f3-b1b7-44cf-9344-0b3d1d07797a" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-06-02%20at%2012.14.57%E2%80%AFPM.png?VersionId=9OLWjyj2bYkDV35F78WJnyMSPfc2bJ2z" />

The focus on owner-occupier product comes as Sydney’s apartment market continues to navigate a difficult development environment.&nbsp;For Hyecorp, maintaining an in-house operating model across construction, sales, marketing and development management has become increasingly important in navigating that environment.

“We’ve always believed in keeping a lot of the process in-house,” Abolakian says.

“It creates efficiencies, but it also creates quality control. You can make faster decisions and ensure the end product stays aligned with the original vision.”

Despite the challenges, Abolakian believes demand for quality owner-occupier apartments across Sydney remains strong beneath the surface, particularly across established Lower North Shore suburbs where downsizers continue to seek new housing options close to existing communities.

“There are definitely people waiting,” he says.

“Once some of the broader uncertainty settles, whether that’s the global environment or some of the local economic noise, I think the right projects will perform very strongly.”

Hyecorp currently has three residential developments on the market across Sydney’s Lower North Shore.&nbsp;Audrey, St Leonards, positioned opposite Newlands Park, is nearing completion and preparing to welcome its first residents, with the project now almost sold out.

Hyecorp has also recently launched&nbsp;<a href="https://www.apartments.com.au/new-apartments/celine-chatswood-37-archer-street-chatswood-nsw-2067">Celine Chatswood</a>, an architectural tower, while continuing to deliver&nbsp;<a href="https://www.apartments.com.au/new-apartments/juliet-roseville-64-pacific-highway-roseville-nsw-2069">Juliet Roseville</a>, a more boutique scale of development with just 34 apartments.

Why Hyecorp continues to back Sydney's Lower North Shore apartment market

Property Investors

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The May 9 federal budget proposed changes to the way property investors claim depreciation, but it is not all bad news, according to quantity surveying firm Washington Brown’s CEO and director Tyron Hyde.
Explaining the changes in a recent webcast, <a href="https://washingtonbrown.pages.ontraport.net/budgetchanges" target="_blank">Hyde alluded to the changes from July 1</a> when government will limit plant and equipment depreciation deductions to what is actually incurred by investors in residential properties.
Pointing out that the key was “actually incurred”, it just means that if an investor bought a second-hand property it probably means that he did not buy some of the equipment like the oven or dishwasher which the earlier owner or the developer may have bought.
So, as the investor didn’t actually incur that expense, it can't be claimed as depreciation.
Depreciation is a tax deduction for the wear and tear on an investment property over time and recognises the fact that the building itself, as well as its plant and equipment will become worn out over time and eventually need to be replaced.
Plant and equipment in a building are things like the ovens, the dishwashers, the carpets. The other part of a report of depreciation schedule is what’s called the Division 43 allowance. That’s the building allowance. That’s the structure of the building, that’s the brickwork, the concrete, the windows etcetera.
To make a claim those allowances, the property has to be built after 1987. 
The silver lining is that the proposed changes are grandfathered, meaning if an investor bought a property prior to the budget, nothing changes.
“If you exchanged contract, let’s be clear on this if you exchanged a contract prior to the budget, nothing changes,” said Hyde. 
He added that if an investor already has a depreciation report, he can claim exactly how it is.
So an investor bought a property two years ago but didn’t get a depreciation report, it would be helpful to get it now because the old rules will be applied before the commencement date for changes.
In fact, Hyde suggested that if a property three years ago or two years ago, and haven’t got a report, now would be a good time to do that.  
“You can actually amend tax returns to factor in that property that you haven’t claimed, so you can actually amend your tax returns for a two-year period.”
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jonathanchancellor-7SQnKwU6yx

Old depreciation rules still apply before July 1 investor property changes: Washington Brown's Tyron Hyde

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GUEST OBSERVER
For active investors, the Budget comes with positive changes such as in super and home ownership but many are negative such as targeted measures against the banks and sharp cutbacks on property tax breaks. Everyone will be affected by the recently delivered Budget and here are some key features that affect properties:
The government has constantly been pressured to scrap borrowing in super but it has not reversed its position and SMSF operators can still borrow. However, there is a new super cap of $1.6 million and borrowed funds will be computed based on the $1.6 million cap.
Starting 1st July 2017, first-home buyers may salary sacrifice up to $15,000 or a total of $30,000 a year into their superannuation account at a concessional tax rate. They will be allowed to withdraw the cash to use as a deposit on their first home. This measure allows super to be accessed early.
Those who will sell a property investment will be subject to CGT at a marginal tax rate but those who hold a property for more than a year will get a discount of 50 percent on their CGT tax assessment. The negative gearing tax rate remained the same and investors can claim expenses and interest for the cost of an investment property against their tax bill. One advantage of higher interest rates among commercial banks is that the amount that can be deducted in negative gearing increases.
Downsizers may be able to make post-tax contribution to superannuation of up to $300,000 from the proceeds of selling their home, even if they exceed the $1.6 million cap. Investors will no longer be able to claim tax deductions for travel expenses related to inspection, maintenance or rent collection of a property. Many investors have properties a long distance away from their home and they incur travel expenses when they visit their investments.
This change may upset many investors because an outright ban on claims for travel expenses is an absolute loss. It used to have no limit and the allowance may have been abused because the government expects to collect $540 million from the scrapped tax allowance starting 1st of July.
Depreciation deductions may only be claimed on personally purchased items for an investment property, excluding plant and equipment which was included with the purchase. These measures will not please many investors but the truth is, it is to their advantage that negative gearing remained untouched because any changes related to this could have been more dramatic. Investors are relieved that the changes have not gone further as well.
Lastly, foreign property investors will lose the CGT exemption on the sale of their main residence and are now required to report all sales over $750,000 or have a withholding tax applied upon sale. There will also be a new annual levy of at least $5,000 for properties left vacant for more than six months a year.
PS.
Disallowing deductions for travel expenses and depreciating assets not directly bought by the investor may be the thin edge of the wedge and increasing deductions for work-related expenses can be quite worrisome. This change is controversial and some people suggest that if it is a step towards a slow-down of deductions for Australian taxpayers, debate has to begin now.
Ed Chan is the founding partner of <a href="https://www.chan-naylor.com.au/" target="_blank">Chan &amp; Naylor</a>.
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jchancellor-FAypfDUnLy

Federal Budget 2017 features that affect Australia's real estate: Ed Chan

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<img src="https://counter.theconversation.edu.au/content/77402/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Investors have played an increasingly important role in the Australian housing market in recent years. Our new research shows the actual return rate for housing investors almost doubled a layman’s expectation. Experienced investors are taking advantage of the knowledge gap and might continue to price out other housing buyers. 
The sharp increase in investor credit in recent years could be partly attributed to the strong growth of housing prices, particularly in Sydney and Melbourne. However, the reported capital gains might not have fully reflected investors’ actual returns as the impact of debt financing in property investment has been neglected. 
Since housing investors typically use large amounts of debt to fund their investment, using the return on equity (after adjusting for debt financing) more accurately reflects their actual return. 
In recent years, regulators such as the Australian Prudential Regulation Authority and lenders have implemented measures to moderate the growth of investor lending. Despite these efforts, investors have come back into the housing market since the second half of 2016. 
Proportion of housing investment loans
<a href="https://www.propertyobserver.com.au/images/2017/05/26/file-20170523-8895-1g4m2hp.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/05/26/file-20170523-8895-1g4m2hp.png" alt="">
<div class="enlarge_hint">ABS, Housing Finance, Australia: February 2017</div>
 
<h2>Higher returns come with greater risk</h2>
Our research sampled properties in 14 suburbs across Sydney, using the Property Investors Alliance database. The results provide some empirical evidence to demonstrate the housing return on equity with debt financing is significantly higher, at an annual return of nearly 14 percent per year, than the housing return on property without debt financing of about 7 percent per year.
This could explain the increasing proportion of investment loans in the housing market. The knowledge of investors’ advantage should also be used to inform the ongoing debate about regulating investment housing loans to enhance housing affordability for first home buyers in particular.
It is important to highlight the effect of debt financing on decisions to invest in housing. The results clearly show the enhanced returns are likely to have an acute impact. 
At the same time, a higher risk level as a result of the use of debt financing has also been documented. This highlights that housing investors should closely manage their exposure to financial risk from using debt financing by using a prudential risk-management tool.
Returns and risk on housing portfolios: 2009-2015
<a href="https://www.propertyobserver.com.au/images/2017/05/26/file-20170511-21598-1gyjv43.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/05/26/file-20170511-21598-1gyjv43.png" alt="">
Author provided
<h2>Explaining the increased rate of return</h2>
We used an assumption of 20 percent equity to demonstrate the impact of debt financing, which is in line with the current deposit requirement from major banks. Here’s an example to demonstrate the effect of debt financing. 
Say an investor buys a house for A$1 million. The investor provides a 20 percent deposit ($200,000); therefore $800,000 was borrowed. The investor took an “interest-only” loan with an interest rate of 5 percent per year – so the interest cost is $40,000 per year. The investor also receives a net rental income of $30,000 in Year 1.
A year later, the investor decides to sell the property for $1.1 million (its value having increased by 10 percent over the year). The traditional performance analysis of property (without debt financing) would show the return on this housing investment is 13 percent: ($1,100,000-1,000,000+$30,000)/$1,000,000 = 13 percent. 
Given the housing investor used debt financing, 13 percent is not the actual return for the investor. The investor’s actual return on equity for the investor is 45 percent: ($300,000-$200,000)+($30,000-$40,000)/$200,000 = 45 percent. 
Property returns vs equity returns
<a href="https://www.propertyobserver.com.au/images/2017/05/26/file-20170520-12263-sf1nd0.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/05/26/file-20170520-12263-sf1nd0.png" alt="">
Author provided
<h2>Experienced investors exploit their advantage</h2>
Overall, the results suggest the actual return rate for housing investors is significantly higher than the layman might expect from the major housing index providers. 
The documented returns may not be applicable, however, to owner occupiers who are also using debt financing, via mortgages, to buy their property. There are two main reasons for this:
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owner occupiers mainly use their houses for their own residency purposes, so no rental income will be generated to offset the mortgage repayment; and
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housing investors are able to sell their properties whenever they want to realise gains in value, while owner occupiers do not have that flexibility.
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Importantly, experienced housing investors, in the current low interest rate environment, have realised the benefits of debt financing and taken advantage of the knowledge gap to exploit the higher returns available to them.
These findings also highlight the need for an innovative product to assist home buyers to enter the housing market.
Chyi Lin Lee is associate professor of Property, Western Sydney University and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/chyi-lin-lee-368009" target="_blank">here</a>.
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Investors exploiting returns on debt financing to muscle out home buyers

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The 2017 Budget sees rules being tightened around what can be claimed by property investors, specifically around depreciation deductions.
Under new rules coming into effect from July 1, depreciation deductions for plant and equipment items such as washing machines and ceiling fans will only be allowed if the investor actually bought them.
Of the nation's 2 million landlords, about 1.3 million are negatively geared.
It is described as an “integrity measure.”
It is intended to address concerns that items are being claimed as tax write-offs by successive investors in excess of their actual value.
It is calculated to claw back $260 million over the next four years of the budget.
The changes will apply to any items purchased after budget night, May 9, but existing investments will be grandfathered.
"Acquisitions of existing plant and equipment items will be reflected in the cost base for capital gains tax purposes for subsequent investors."
Those investments will continue to give rise to deductions for depreciation until the investor no longer owns the asset or the asset reaches the end of its effective life.
Assets purchased after budget night will attract a deduction over the effective life of the asset but subsequent owners will not be able to claim deductions on that asset.
Investors will also no longer be able to claim <a href="/expert-insights/69959-property-investors-to-lose-travel-expense-tax-claims-2017-budget" target="_blank">tax deductions for travel expenses</a> “related to inspecting, maintaining or collecting rent for a residential rental property” from July 1.
The government expects the travel changes to bring in an extra $540 million in revenue over the next four years.
It intends to use the “integrity measure” to fund a first-home buyers’ scheme, which will allow $30,000 to be salary sacrificed into a superannuation account at a concessional tax rate.
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Property investors to lose depreciation deductions on furniture: 2017 Budget  

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Over recent years the level of investor participation in the national housing market has hit historic high levels and at the same time, housing finance commitments to owner occupier first time buyers has shrunk. 
As an example, January 2017 housing finance data shows that based on the total value of housing finance commitments, a record-low 7.1% of commitments were to owner occupier first home buyers while 39.0% of the value of all commitments were to investors.
Click to enlarge
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/03/24/chart-1-2.jpg" alt="">
The above chart looks at the proportion of the total value of housing finance commitments going to owner occupier first home buyers and investors nationally.  As the level of lending to investors has increased over recent years it has done so at the expense of owner occupier first home buyers. 
Except for briefly in 1992, investors have consistently outweighed owner occupier first home buyers in terms of housing finance demand.  The only time first home buyer lending has got close to that of investors was in 2008 and 2009 during the financial crisis. 
At that time, investors were fearful and first home buyers were receiving substantial stimulus from the Federal Government which led to heightened housing demand to those that don’t already own property.
It is a similar story surrounding first home buyer activity being much lower than that of investors across the individual states and territories.  Furthermore, in 2008 and 2009 the combination of stimulus and investor caution resulted in a lift of first home buyer activity at the expense of investors. 
The data here has been paired between housing finance and lending finance data.  We have multiplied the average first home buyer loan size by their number of loans to determine the value of first home buyer loans and taken the investor loan data from lending finance.  Note that the following figures include refinances.
<a href="https://www.propertyobserver.com.au/images/2017/03/24/chart-2-3.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/03/24/chart-2-3.jpg" alt="">
In January 2017, an historic low 3.4% of all housing finance commitments in New South Wales were to owner occupier first home buyers compared to 46.9% of total lending to investors. 
The 46.9% of housing finance commitments to investors was their highest level since July 2015.
<a href="https://www.propertyobserver.com.au/images/2017/03/24/chart-3-3.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/03/24/chart-3-3.jpg" alt="">
Victorian investors accounted for 37.5% of the total value of housing finance commitments in January 2017 compared to 7.7% of the total value to owner occupier first home buyers.  The level of activity from first home buyers is currently at an historic low level while investor participation is sitting at levels not seen since July 2015.
<a href="https://www.propertyobserver.com.au/images/2017/03/24/chart-4-3.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/03/24/chart-4-3.jpg" alt="">
Owner occupier first home buyers are more active in Queensland than they are in New South Wales or Victoria however, they still only accounted for 10.8% of the value of housing commitments in January 2017 compared to investors accounting for 31.6%.  Housing affordability has not deteriorated in Queensland to the extent it has in New South Wales and Victoria however, first home buyers continue to be well and truly outnumbered by investors.
<a href="https://blog.corelogic.com.au/wp-content/uploads/2017/03/chart-5-2.jpg" target="_blank">Click to enlarge</a>
<img class="aligncenter size-full wp-image-8414" src="https://blog.corelogic.com.au/wp-content/uploads/2017/03/chart-5-2.jpg" alt="" width="1685" height="596">
In January 2017, owner occupier first home buyers in South Australia accounted for 6.9% of the value of housing finance commitments compared to investors accounting for 30.1%.
<a href="https://blog.corelogic.com.au/wp-content/uploads/2017/03/chart-6-1.jpg" target="_blank">Click to enlarge</a>
<img class="aligncenter size-full wp-image-8415" src="https://blog.corelogic.com.au/wp-content/uploads/2017/03/chart-6-1.jpg" alt="" width="1687" height="599">
Owner occupier first home buyers in Western Australia accounted for 14.3% of the total value of housing finance commitments in January 2017 compared to investors that accounted for 27.3%.  Dwelling values are falling across most regions of the state and investor borrowing still far outweighs first home buyers. You would think that falling prices would scare investors away from purchasing and create an opportunity for first home buyers but that hasn’t really occurred in Western Australia over the past few years.
<a href="https://blog.corelogic.com.au/wp-content/uploads/2017/03/chart-7.jpg" target="_blank">Click to enlarge</a>
<img class="aligncenter size-full wp-image-8416" src="https://blog.corelogic.com.au/wp-content/uploads/2017/03/chart-7.jpg" alt="" width="1688" height="603">
In January 2017, owner occupier first home buyers in Tasmania accounted for 10.3% of total housing finance commitments compared to investors that accounted for 27.6%.  The proportion of lending to investors in Tasmania is at its highest level since April 2015.
<a href="https://blog.corelogic.com.au/wp-content/uploads/2017/03/chart-8.jpg" target="_blank">Click to enlarge</a>
<img class="aligncenter size-full wp-image-8417" src="https://blog.corelogic.com.au/wp-content/uploads/2017/03/chart-8.jpg" alt="" width="1706" height="603">
Northern Territory investors accounted for 38.8% of the value of all housing finance commitments in January 2017 compared to owner occupier first home buyers who accounted for 8.3%.  Despite the fact that dwelling values are falling across most of the Northern Territory, fist home buyer volumes remain low and investors remain quite active.  This is probably due to the fact that in Darwin in particular, the population tends to be more transient than in other parts of the country.
<a href="https://blog.corelogic.com.au/wp-content/uploads/2017/03/chart-9.jpg" target="_blank">Click to enlarge</a>
<img class="aligncenter size-full wp-image-8418" src="https://blog.corelogic.com.au/wp-content/uploads/2017/03/chart-9.jpg" alt="" width="1687" height="602">
Across the Australian Capital Territory in January 2017, 9.1% of the total value of housing finance commitments was to owner occupier first home buyers compared to 35.5% to investors.
The national and individual state and territory data shows that historically the only way to substantially boost first home buyer participation has been at the expense of investors, as occurred in 2008/09.  At the time this didn’t occur through a policy specifically targeted at slowing investor demand it happened more so organically due to significant first home buyer stimulus and investor fears at the time.  Keep in mind that these policy choices also led to, in certain areas, a substantial increase in dwelling values.
Including in 2008/09, investors have consistently outweighed owner occupier first home buyers in terms of new mortgage borrowing. 
This shouldn’t really surprise anyone given that most investors already have a residential property asset and many of which use at least a portion of the equity in that asset to fund the investment.  First home buyers don’t have the existing foothold in the housing market and are always going to find it difficult to compete with borrowers that already have assets and equity. 
Unfortunately the ABS does not publish data on the number of loans to investors so we can’t see a true picture of loans written rather just the value lent.  Keep I mind that investors that already own homes generally have the ability to borrow more than first home buyers and in-turn may typically take out larger loans than first home buyers.
Based on the data is seems that the way to get more first home buyers entering into the market is to do it at the expense of investors.  If you can increase purchasing by first home buyers there will be, at least initially, less demand for rental accommodation. 
Longer-term though, the population grows and people age so deterring investment may have greater repercussions for the housing market. Keep in mind though that heightened housing market activity from first home buyers that don’t own housing assets and have no housing equity may actually create more instability in the housing market.
There is no easy fix to encourage higher levels of housing market participation from first home buyers but the data indicates a heightened level of activity from this market segment is most likely to occur via a reduction in demand from the investor segment.   While people that don’t already own homes may see this as a great solution we should be cautious as it may have larger long-term effects on housing supply and housing market stability. 
I don’t believe that the balance between first home buyers and investors is currently right and we should look at ways to cool some of the market’s current investment exuberance but we should also be cautious about encouraging excess demand from first home buyers who may find it more difficult to repay mortgages once interest rates start to increase.
Cameron Kusher is research analyst for CoreLogic. You can contact him <a href="https://blog.corelogic.com.au/about/">here</a>.
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Investors historically outweigh first home buyers but gap widens: Cameron Kusher

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As hard as it is for first home buyers to secure their place on the Sydney property ladder, it is important not to exaggerate the effect of their absence.
Investors are instead taking up the listings at the cheaper end, so the market is ticking over.
Sitting on the sidelines also means the first timers aren't mugs, overpaying in the current boom, and so will escape the hurt of the higher interest rate shock when it eventually hits.   
First home buyers have typically played a volatile role in our housing market. They can rush in and can also be quiet for lengthy periods.
There was an amazing spike in activity after the global financial crisis with government incentives thrown at first timers bringing forward any number of years of demand ahead of schedule.
Not surprisingly the numbers for the subsequent few years have been subdued, indeed at the lowest level since data has been collected.
Of course renewed wider stamp duty concessions could always be used to attract first home buyers back into the marketplace especially if they were also applied to established homes rather than just new homes.
The state government has saved billions by limiting concessions to new house/new apartment first time buyers since 2012. 
My biggest concern regarding market inactivity is with two other key buying demographic age groups.
These are the growing families who are increasingly staying put to build up or out on their suburban blocks.
And then there are the reluctant downsizers.
Both demographics are creating roadblocks for the orderly flow of market listings, and no doubt contributing to the escalating trend of less stock on the market, which means prices keep going up quicker than normal.
The elderly staying put means their four and five bedroom homes are long under utilised, sometimes for decades.
Their reluctance to move isn't solely due to the desire to keep the happy family memories intact.
They actually want housing options such as single level patio garden homes that are few and far between in their desired neighbourhoods.
Additionally they are not that keen on paying stamp duty on any downsized property.
They are old enough to recall the tax has been at current 4.5 percent level since the 1986 Unsworth government. The median stamp duty was $1500.
Last year’s 15 percent increase alone in the median Sydney property price means they as downsizing buyers will need $33,000 duty for a $850,000 median price acquisition. 
If Premier Gladys Berejiklian is smart she will introduce a postponed partial payment option catering for each of these demographics.
The cost of these deferments will likely be offset by higher sales activity.
The government is after all eyeing another record $7 billion annually to be collected from residential stamp duty.
This article first appeared in the Daily Telegraph.
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Stayput families and downsizers blocking flow of market listings

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New borrowers should be better placed to withstand any adverse shocks to income or decline in housing prices than would otherwise have been the case, the latest RBA research suggests.
Its comments comes noting lenders have announced many changes to a range of price and non-price lending terms and conditions to strengthen their lending practices in response to supervisory expectations, according to the position paper entitled Macroprudential Policy Frameworks and Tools.
<a href="/images/2016/12/15/Graph%205.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/12/15/Graph%205.jpg" alt="">
It noted by April 2016, the pace of investor housing credit had declined from its recent peak of about 11 per cent to just below 5 per cent on a six-month annualised basis (Graph 6).
<a href="/images/2016/12/15/Graph%206.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/12/15/Graph%206.jpg" alt="">
It also noted loan approvals for investor housing have increased over recent months, accompanied by an increase in housing price growth, driven by Sydney and Melbourne in particular.
"Even so, the earlier tightening in lending standards has helped to increase the resilience of household sector balance sheets, and hence also those of lenders, as new borrowers should be better placed to withstand any adverse shocks to income or decline in housing prices than would otherwise have been the case."
The paper noted the lenders' many changes were to a range of price and non-price lending terms along with conditions to strengthen their lending practices in response to supervisory expectations.
"In particular, interest rates for both new and existing investor loans were increased,10 high-LVR lending.
"There is now a differential between the indicator rate for owner-occupier and investor housing loans for the first time since 1996."
The paper advised it was important new borrowers "do not overstretch themselves to purchase property or rely on expectations of future increases in housing prices to enable them to do so." 
The paper was written by David Orsmond and Fiona Price. The paper was intended to make the results of current economic research within the Bank available for discussion and comment, but the views expressed are those of the authors and not necessarily those of the Bank.
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New borrowers ought be able to withstand adverse shocks: RBA research

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Research on the last election results show seats with the higher numbers of property investors bucked the swing against the Turnbull government.
Analysis by Australian Demographic Strategies, headed by former Labor senator John Black, found seats with large number of investment property owners and people who were negatively geared “voted for the Coalition and swung far less towards the ALP”.
“When we ranked federal seats by per capita investment properties, the top four seats — Reid and Bennelong in NSW, Kooyong in Victoria and Curtin in WA — swung towards the Coalition by an average of 2 per cent, despite a ­national swing of 3 per cent to Labor,’’ ADS reported in an article in The Australian.
“The bottom five seats for per capita investment properties — Bass and Lyons in Tasmania, Macarthur and Chifley in NSW and Blair in Queensland — swung an average of 7.5 percent to the ALP.’’
Treatment of investment property was a significant policy difference between the Coalition and Labor at the July 2 Federal election.
Bill Shorten proposed to limit negative gearing to new properties from July 1 next year and cut the capital gains tax discount from 50 per cent to 25 per cent.
Malcolm Turnbull argued that Labor policy would "smash" property prices and deter investment.
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Labor's negative gearing policy helped keep it from office: research

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<div class="column">GUEST OBSERVER</div>
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<div class="column">Key megatrends relevant for investors are: slower growth in household debt; the backlash against economic rationalism &amp; rise of populism; geopolitical tensions; aging and slowing populations; low commodity prices; technological innovation &amp; automation; the Asian ascendancy &amp; China’s growing middle class; rising environmental awareness; and the energy revolution</div>
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<div class="column">Most of these are constraining growth and hence investor returns. However, technological innovation remains positive for profits and some of these point to inflation bottoming. </div>
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Introduction 
Recent developments – including the rise of populism, developments in the South China Sea and around commodity prices along with relentless technological innovation – have relevance for longer term trends likely to affect investors. So this note updates our analysis on longer term themes that will likely impact investment markets over the medium term, say the next 5-10 years. Being aware of such megatrends is critical given the short term noise that surrounds markets. 
The super cycle slowdown in household debt 
Household debt to income ratios surged from the late 1980s fuelled by low starting point debt levels, financial de-regulation and the shift from high to low interest rates. But it’s likely run its course as the GFC and constrained economic growth have left consumers wary of adding to already high debt levels and banks’ lending standards are now tougher. This has seen growth in debt slow &amp; households run higher savings rates. 
<a href="/images/2016/07/27/Screen%20Shot%202016-07-27%20at%208.11.03%20AM.png" target="_blank">Click to enlarge</a>
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Implications – slower growth in household debt likely means slower growth in consumer spending, lower interest rates and central banks having to ease more to achieve a desired stimulus. Slower credit growth is also a drag for banks.
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The backlash against economic rationalism 
Its arguable that support for economic rationalist policies (deregulation, privatisation and globalisation) peaked over a decade ago. The corporate scandals that followed the tech wreck and the financial scandals that came with the GFC have seen an increase in regulation, the Doha trade round has been stalled for years and now the combination of slow post GFC growth and rising inequality (see the next chart) in the absence of the ability to take on more debt to maintain consumption growth are leading to growing populist angst. 
This is evident in the success of Donald Trump, the Brexit vote and the recent Australian Federal election. Of course this is just the way the secular political pendulum swings - from favouring free markets in the 1920s to regulation and big government into the 1970s, back to free markets in the 1980s and 1990s and now back the other way with each swing ultimately sowing the seeds for the next. But the risk is that the shift away from economic rationalist policies in favour of more populist policies will lead to slower productivity growth and ultimately rising inflation as the supply side of economies are damaged &amp; easy fiscal policy is adopted. 
<a href="/images/2016/07/27/Screen%20Shot%202016-07-27%20at%208.12.22%20AM.png" target="_blank">Click to enlarge</a>
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Implications – populist polices could slow productivity and set the scene for the next upswing in inflation. 
Geopolitical tensions 
The end of the cold war and the stabilising influence of the US as the dominant global power in its aftermath helped drive globalisation and the peace dividend post-1990. Now the relative decline of the US, the rise of China, Russia’s attempt to revisit its Soviet past and efforts by other countries to fill the gap left by the US in various parts of the world are creating geopolitical tensions – what some have called a multi-polar world. This is evident in increasing tension in the Middle East between (Sunni) Saudi Arabia and (Shia) Iran; Russia’s intervention in Ukraine; and tensions in the South China Sea (which have recently been increased by a UN sponsored international court ruling in favour of The Philippines regarding island disputes) and between China and Japan.
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Implications –geopolitical tensions have the potential to disrupt investment markets at times. 
Aging and slowing populations 
The demographics of aging and slowing populations have long been talked about but their impact is now upon us. We are living longer and healthier lives (eg, average life expectancy in Australia is already around 83 years and is projected to rise to 89 years by 2050) but falling fertility rates are leading to lower population growth. The impact is more significant in some countries, which are seeing their populations fall (eg, Japan, Italy and even China) than others (eg, Australia, where immigration and higher fertility is providing an offset) and others still where population growth remains rapid (eg, India, Africa and the Middle East). 
Implications – at the macro level this means: slowing labour force growth which weighs on potential economic growth; increasing pressure on government budgets from health and pension spending and a declining proportion of workers relative to retirees; a "war for certain types of talent"; and pressure to work longer. At the industry level it will support growth in industries like healthcare and leisure. At the investment level it will likely see an ongoing focus on strategies generating income (yield) while at the same time providing for "more stable" growth to cover longevity. 
The commodity super cycle may be close to bottom 
Since around 2008 (for energy) and 2011 (for metals) the commodity super cycle has been in decline as the supply of commodities rose in response to last decade’s commodity price boom combined with somewhat slower growth in China. However, after 50 to 80% peak to trough price declines and with supply starting to adjust for some commodities (eg oil) it’s quite likely that we have seen the worst (in the absence of a 1930s style recession). This doesn’t mean the next super cycle commodity upswing is near – rather a long period of base building is likely as we saw in the 1980s and 90s. 
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Implications – Low commodity prices will act as a constraint on inflation and interest rates but the likelihood that we have seen the worst may also mean that the deflationary threat will start to recede. In other words it adds to the case for a bottom in global inflation. A range bound environment less clearly favours commodity user countries over producers. 
Technological innovation &amp; automation 
The impact of technological innovation is continuing to escalate as everything gets connected to the internet. The work environment is being revolutionised enabling companies to increasingly locate parts of their operation to wherever costs are lowest and increasingly to automate and cut costs via automation, nanotechnology, 3D printing, etc. The intensified focus on labour saving is likely good for productivity and profit margins but ambiguous for consumer spending as it may constrain wages and worsen inequality and could ultimately hamper growth in emerging countries. There is also the ongoing debate that with so many “free” apps and productivity enhancements, growth in activity (GDP and hence productivity) is being underestimated/inflation overestimated and consumers are doing a lot better than weak wages growth implies. So fears around inequality and stagnant real incomes may be exaggerated. Time will tell.
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Implications – technological innovation remains a reason for inflation to stay low and profit margins to remain high. But also a potential positive for growth. 
Asian ascendancy &amp; China’s growing middle class 
Low levels of urbanisation, income and industrialisation continue to mean that the emerging world offers far more growth potential than the developed world. While big parts of the emerging world have dropped the ball (South America and Russia particularly), the reform and growth story remains mostly alive in Asia – from China to India. Both China and India are seeing a surging middle class, with China’s growing from just 5 million people 15 years ago to now 225 million. This means rising demand for services like healthcare, leisure &amp; tourism. 
Implications – favour non-Japan Asian shares (allowing of course for risk). Tourism and services should benefit particularly from the rising middle class in China and India. 
The environment and social values 
Concern about the environment is continuing to grow and higher social standards are being demanded of governments and corporates. This reflects a range of developments including increasing evidence of the impact of human activity on the environment, younger generations demanding higher standards and social media that can destroy reputations in a flash. 
Implications – this will favour companies that adhere to high environmental, social and governance standards. 
The energy revolution 
Renewables share of power production will only grow as alternatives like solar continue to collapse in cost and solar energy storage becomes mainstream. Likewise advances in battery technology are seeing a massive expansion in the use of electric cars which will feed on itself. 
Implications – this has huge negative implications for oil and coal and along with the impact of shale oil production will keep a ceiling on energy prices. 
Implications 
At a general level there are several implications for investors 
Firstly – several of these trends will help keep inflation low, eg, slower growth in household debt, low commodity prices automation &amp; the energy revolution. By the same token if commodity prices have seen the worst and government policy shifts towards stimulus we may have seen the worst of deflationary and disinflationary pressures.
Secondly – several are also consistent with constrained economic growth, notably aging and slowing populations, slower growth in debt, the backlash against free markets and geopolitical tensions. This is not universal though as increasing automation is positive for profits. 
This is all still consistent with ongoing relatively low interest rates (albeit we are likely around the bottom) and relatively constrained medium term investment returns. 
Several sectors stand out as winners including health care and leisure but producers of energy from fossil fuels are potential losers. 
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<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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Megatrends impacting investment markets: Shane Oliver

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New legislation governing the sale of $2 million plus homes will have significant implications for all legal professionals, according to Peter Maloney, the chief at legal technology and services company GlobalX Legal Solutions.
The new laws, which come into effect on 1 July will require all sellers of properties with a market value of more than $2 million to prove they are Australian.
Without proof of citizenship, known as a Clearance Certificate, the legislation will see purchasers act as tax collectors, sending 10 per cent of the purchase price to the ATO.
It centres around clause 31.
GlobalX Legal Solutions CEO Peter Maloney said the changes would have a significant impact on the roles of legal professionals in the industry who would be required to ensure their clients were taking the right steps in the selling or buying of property.  
“These changes will affect the growing number of high value homes of Australian buyers and sellers, so it is imperative legal professionals and conveyancers are prepared come July 1 when these changes go live,” he said.
“The legislation is expected to generate $330 million in revenue over the next four years, with a $770 million compliance cost over the next decade.”
Mr Maloney said while the imposed tax on foreign investors would help boost the Australian economy and recoup investor funds sent offshore, it was crucial for legal and conveyancing professionals to understand the intricacies of the changes.
“The onus of proof will now fall on Australian vendors to prove their residency status to exempt them from the new 10 percent non-final withholding tax but, provided property lawyers and conveyancers are prepared to ensure the necessary documents are readied in advance, this shouldn’t be a timely and complicated process or cause unnecessary delays in the settlement process,” he said.
“We are currently offering our clients a range of informational webinars and sessions to equip them with the knowledge and technical understanding of these changes to ensure the buying and selling process remains a seamless and smooth process for their clients.”
Real Estate Institute of Australia (REIA) President Neville Sanders said the institute supported the legislation, but stressed the importance of real estate and legal professionals understanding their obligations under the new laws.
“Essentially this is the GST withholding tax process coming into effect in the housing market, which is long overdue in Australia,” he said.
 For more information<a href="https://globalx.com.au/news-events/media-centre/media-releases/article/2016/06/08/globalx-legal-solutions-announces-agreement-to-provide-nsw-electronic-contract-for-sale-(ecos)" target="_blank"> about the legislation</a>. 
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