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

Joel Robinson

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

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

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

Maréa Residences brings parkside apartments to Coolangatta

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

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

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

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

Rba Rate Decision

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The consumer price index rose by 0.6% over the three months to March, which pushed Australia’s annual inflation to 2.9%.
But most economists had predicted it to edge above 3% for the first time since 2011.
The lower than expected figure decreases the prospect of imminent interest rates rises, which was previously tipped possibly in the fourth-quarter of 2014.
Economists were tipping headline inflation to grow by 0.8% and take the annual rate to 3.2%, pushing inflation above the Reserve Bank’s 2-3% comfort zone target band.
Underlying inflation, which is closely followed by the Reserve Bank of Australia, came in below expectations too.
The trimmed mean CPI rose by 0.5 percent, 2.6 percent annually, after economists had forecast a 0.7 percent jump to 2.9 percent.
ANZ economist Warren Hogan <a href="https://twitter.com/anz_warrenhogan" target="_blank">tweeted</a> "low CPI reading will be welcomed by the RBA after the high Q4 reading esp."
Hogan added the CPI data does not change our rates view.
"We expect cash rate on hold in ’14 before gradual rise in ’15," he forecast.
Economist Stephen Koukoulas <a href="https://twitter.com/TheKouk" target="_blank">tweeted</a>, however, that "Inflation no longer low. The question is whether a 2.5% cash rate is needed with inflation now locked in above 2.5%."
The Australian dollar fell half a US cent following today's softer than expected inflation data.
The ABS data showed the most significant price rises this quarter were for tobacco (+6.7%), automotive fuel (+4.1%), secondary education (+6.0%), tertiary education (+4.3%), medical and hospital services (+1.9%) and pharmaceutical products (+6.1%). 
These rises were partially offset by falls in furniture (-4.3%), maintenance and repair of motor vehicles (-3.3%), international holiday travel and accommodation (-2.4%) and domestic holiday travel and accommodation (-2.4%).
The tobacco price increase was caused by the federal excise tax rise from 1 December 2013 as well as the March 2014 biannual indexation based on the ABS' Average Weekly Ordinary Times Earnings (AWOTE) rate.
Education prices have risen with the commencement of the new school year, the ABS noted.
Rises for medical and hospital services and pharmaceutical products were a result of the cyclical reduction in the proportion of patients who qualify for subsidies under the Medicare Benefits Scheme and Pharmaceutical Benefits Scheme at the start of each calendar year.
 
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Lower CPI rise may delay RBA cash rate hike prospect

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The Reserve Bank of Australia board has noted the most prudent course ahead was likely to be a period of stability in interest rates.
Members observed housing market conditions remained strong, with housing prices rising in March to be 10.5% higher over the year on a nationwide basis. 
They also noted that dwelling investment had increased moderately in the December quarter, with a pick-up in renovation activity and that the high level of dwelling approvals in recent months foreshadowed a strong expansion in dwelling investment.
The April meeting minutes also noted financial markets and money market rates in Australia continued to imply that the cash rate was expected to remain unchanged over the remainder of the year.
Members began their discussion of the domestic economy acknowledging a range of indicators of labour demand suggested a modest improvement in prospects for employment, although the unemployment rate was still expected to edge higher for a time.
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RBA says period of stability in interest rates lies ahead: April minutes

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As widely expected the Reserve Bank of Australia (RBA) decided again to leave the cash rate in a holding pattern for the seventh straight meeting although somewhat surprising the rhetoric was considerably different this time around.
Sydney is the elephant in the room with house prices jumping 15.6% in the last year according to RP Data, although I would add that this is a lazy way of explaining and defining the property markets across Sydney given they are all performing differently – some are hot and some are not.
Back to the RBA where in an extraordinary week we heard both Glenn Stevens and treasury secretary Martin Parkinson publicly declaring that Australia needs to be closely looking at and discussing taxes and government spending. Well not before time. We are fast drawing the conclusion that the elected ones in Canberra have absolutely no idea how to run a business – they appear to be the only ones who don’t believe that the rate of GST needs to be increased.
Reading between the lines there was a clear concern about what will be brought down in the May budget with a clear indication together with framed criticism by Glenn Stevens: “Put simply, there are things that we want to do as a society, and have voted for, that are not fully funded by taxes over the medium term, as is starting to become clear in the lead up to the May budget.”
<blockquote>
As strange as it might sound, I’m looking forward to seeing the cash rate increases.
</blockquote>
Personally I think it is fabulous when the likes of Messrs Parkinson and Stevens have the fortitude to publicly speak their minds by firing shots at the government on the eve of the budget. Let’s fill in a few gaps – NDIS and paid parental leave are the main culprits to which they were referring.
A perfect case in hand that should be at the forefront of the Abbott government's mind is that $16.2 billion Building and Education Revolution, the master class of the Rudd and Gillard terms which has now been condemned as an international case study of legislative and bureaucratic failure. Reading between the lines again, it would appear that Messrs Stevens and Parkinson are politely pointing out that the Australian economy can ill afford repeats of policy failures.
When you’ve been selling real estate for nearly 30 years, interest rates scare the living daylights out of you! And, as strange as it might sound, I’m looking forward to seeing the cash rate increases. Many economists are suggesting that this will happen in 2015 although I am of the opinion we will start seeing increases sooner rather than later with small increment increases.
<img src="/images/2014/04/07/simeon-april-7-one.jpg" alt="">
<img src="/images/2014/04/07/simeon-april-7-two.jpg" alt="">
<a href="https://www.smh.com.au/business/the-economy/housing-bubble-fears-property-prices-could-fall-10-to-20-per-cent-20140331-35sg7" target="_blank" title="Housing bubble fears: property prices could fall 10 to 20 per cent">Housing bubble fears: property prices could fall 10 to 20%</a> was an interesting piece by Christopher Joye although it lacks market definition. Yes, certain parts of the Australian real estate market are over inflated, those being the new suburbs crashing through the $1,000,000 mark for the very first time which will, as history has shown, be the hardest and fastest hit. By comparison the traditional markets such as Paddington, Mosman, Pymble and Bondi, for example, are tracking upwards although at nowhere near the pace of the hotspot suburbs.
I can see the cash rate moving from its current rate of 2.50% to 3.50% next year which will in time place a number of households under increasing financial pressure, although we have seen this happen time and time again. Most notably in the early 2000s the cash rate fell from 6.25% in <a href="https://www.rba.gov.au/statistics/cash-rate/cash-rate-1997-2001" target="_blank" title="September 2000 to 4.25 per cent in December 2001">September 2000 to 4.25% in December 2001</a>. We then witnessed dramatic market corrections in south-west Sydney as the cash rate started climbing to <a href="https://www.rba.gov.au/statistics/cash-rate/cash-rate-2008-2014" target="_blank" title="7.25 per cent in March 2008">7.25% in March 2008</a> where it then started being eased to where we find it today at 2.50%.
So what amazes me more is that currently we are seeing record numbers of investors entering the market, which can be best described as panic buying – investors now make up 40% of value of total housing loan approvals in NSW and Victoria. So when and where we do see property market corrections this is when we see the astute investors entering the market – the experienced ones are certainly keeping their powder dry.
What this does clearly identify is that politicians and investors pay very little attention to history where more often than not they become part of history.
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When it comes to interest rates investors should learn a bit from history

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The Reserve Bank has kept rates on hold today, at a record low 2.5%. While debate rages over what might happen next, it appears many are predicting a rise in the last quarter of the year.
RP Data's Tim Lawless noted that the housing market statistics are likely to be the factor causing the Reserve Bank some additional deliberation.
"Dwelling values were up 2.3% in March taking the cumulative increase in dwelling values to 15.8% over the current growth cycle which commenced in June 2012," he said.
"While the headline growth rate is very high, it is really Australia’s two largest cities, Sydney and Melbourne, which are responsible for driving such high capital gains.  Dwelling values are up 22% and 17% across these two cities since June 2012."
He noted that it's not just these capital gains that will be a concern, but the amount of investment in the market, with investors comprising 38% of all new housing finance commitments. The last time investor numbers were this strong was before the housing boom in 2003.
"Clearly the rate of value appreciation across the Australian housing market has been unsustainably strong over the short-term, however the national economy is seeing a great deal of benefit from the increased level of both developer and buyer confidence which the RBA is likely to see as a positive outcome from the currently exuberant housing market conditions," he said, pointing to a potential increase in the future if value growth continues along its current mark.
"If value growth continues along the current trajectory through I think the Reserve Bank will be forced to take action to quell the level of exuberance via higher interest rates," he said.
This ties in with Property Observer's previously reporting an <a href="/expert-insights/finance/borrowers-warned-of-interest-rate-hikes-by-late-2014">increasing number of economists pointing to a late-2014 increase</a>.
Meanwhile, L Janusz Hooker, deputy chairman of LJ Hooker, said that leaving the cash rate at 2.5% should assist prices stabilising following a year of growth. Hooker also siad that the rate easing cycle is over.
"We have been seeing the benefits of those cuts every weekend at open inspections, people are still out house hunting or looking for investment properties," said Hooker.
"Buyers know it is likely rates will be on the increase some time in the next year and are factoring it into their budget."
Michelle Hutchison, money expert for Finder.com.au said that it's cheaper than ever to switch home loans at present, making the RBA's decision to keep rates on hold good news for consumers.
"More lenders are waiving application fees now than they were three years ago, and coupled with the banning of early exit fees on variable home loans in 2011, it's now cheaper to refinance than what borrowers may think," said Hutchison.
"The average cost to switch now out of variable loans that charge these fees is $719 compared to almost $900 in 2011," she said, noting that borrowers shouldn't wait for any further cuts from the Reserve Bank before seeking out a better deal.
The lack of change today was <a href="/expert-insights/finance/paul-bloxham-expects-rba-to-keep-rates-on-hold-next-week">also predicted by HSBC's Paul Bloxham last week</a>.
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jduke-EHk3XBmHkn

Reserve bank holds interest rates, but property prices make an increase likely

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Glenn Stevens' April statement:
At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent.
Growth in the global economy was a bit below trend in 2013, but there are reasonable prospects of a pick-up this year. The United States economy, while affected by adverse weather, continues its expansion and the euro area has begun a recovery from recession, albeit a fragile one. Japan has recorded a significant pick-up in growth. China's growth remains generally in line with policymakers' objectives, though it may have slowed a little in early 2014. Commodity prices have declined from their peaks but in historical terms remain high.
Financial conditions overall remain very accommodative. Long-term interest rates and most risk spreads remain low. Equity and credit markets are well placed to provide adequate funding, though for some emerging market countries conditions are considerably more challenging than they were a year ago.
In Australia, the economy grew at a below trend pace in 2013. Recent information suggests slightly firmer consumer demand over the summer and foreshadows a solid expansion in housing construction. Some indicators of business conditions and confidence have improved from a year ago and exports are rising. But at the same time, resources sector investment spending is set to decline significantly and, at this stage, signs of improvement in investment intentions in other sectors are only tentative, as firms wait for more evidence of improved conditions before committing to expansion plans. Public spending is scheduled to be subdued.
The demand for labour has remained weak and, as a result, the rate of unemployment has continued to edge higher. It will probably rise a little further in the near term. Growth in wages has declined noticeably. If domestic costs remain contained, some moderation in the growth of prices for non-traded goods could be expected over time, which should keep inflation consistent with the target, even with lower levels of the exchange rate.
<blockquote>
Credit growth is slowly picking up. Dwelling prices have increased significantly over the past year.
</blockquote>
Monetary policy remains accommodative. Interest rates are very low and savers continue to look for higher returns in response to low rates on safe instruments. Credit growth is slowly picking up. Dwelling prices have increased significantly over the past year. The decline in the exchange rate from its highs a year ago will assist in achieving balanced growth in the economy, but less so than previously as a result of the rise over the past few months. The exchange rate remains high by historical standards.
Looking ahead, continued accommodative monetary policy should provide support to demand, and help growth to strengthen over time. Inflation is expected to be consistent with the 2–3 per cent target over the next two years.
In the Board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates.
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Dwelling prices have increased significantly: RBA Governor Glenn Stevens

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The official cash rate set by the Reserve Bank of Australia has been at a historic low of 2.5% since August 2013. In line with that low rate, borrowers are paying less for home mortgages now than they have in over 15 years.
 <img src="/images/2014/03/28/zoe-march-28-one.jpg" alt="" style="line-height: 1.3em;"> 
Source: RBA
Lenders typically cut and lift mortgage interest rates roughly in line with the RBA’s movements, charging a margin over the official cash rates. Since late 2007, the extra amount of interest that consumers pay on a variable rate home loan above the official cash has been increasing.
Finder.com.au money expert Michelle Hutchison says lenders have been moving their rates out of cycle with the RBA and failing to pass on rate cuts in full, so the gap between the official cash rate and home loan rates available to borrowers has widened.
RBA data shows that the difference between the official cash rate and the mortgage managers’ basic variable rate – which approximates the average of interest rate actually available to borrowers – was fairly stable at just below 1 percentage point from September 1998 to September 2007. If that relationship still held true, home mortgages with variable interest rates of 3.5% and lower would be common in the market now.
In fact, RBA data shows that the mortgage managers’ basic variable rate was 5% in February 2014, a full 2.5 percentage points more than the official cash rate. Hutchison says the cheapest basic variable rate loan available is 4.49% for a $150,000 mortgage over 30 years from Loans.com.au.
 <img src="/images/2014/03/28/zoe-march-28-two.jpg" alt="">
Source: Reserve Bank of Australia
So, why aren’t headline lending rates lower?
Hutchison says one reason is that borrowers are letting lenders get away with charging more by not shopping around.
“If borrowers are not taking action and doing something about it by comparing home loans and switching to a better, cheaper deal, [lenders are] not going to do anything about it,” she says.
“There are hundreds of home loans on the market and the range of home loan prices is from 4.49% to over 9%. The best thing people can do is keep track of [interest rates]. Don’t sign up to a home loan and forget about it. Review your financial situation every year or two.” 
UBS interest rate strategist Matthew Johnson says few people pay the headline interest rates advertised by lenders. Advertised rates are higher in relation to the cash rate, but lenders have realised that people feel good about getting a discount. Those who are prepared to negotiate can get lower rates than the advertised rate.
Another key reason for the widening gap between the official cash rate and mortgage rates on offer to consumers is that the cost of funding and running a bank has gone up, Johnson says.
Two main sources of funding are available to lenders: financial markets and domestic deposits.
During the financial crisis, lenders found it very difficult and costly to borrow on financial markets as investors lost their appetite for risk. The banks were instead forced to tap local deposits to fund lending, using elevated interest rates on term deposits to lure consumers to save their cash.
As the chart below shows, the amount lenders had to offer on deposits over the cash rate increased dramatically from around 2007. Term deposit interest rates have fallen since mid-2012, but they are still high by historical comparisons. At-call savings account interest rates have remained above average.
<img src="/images/2014/04/01/zoe-april-1-one.jpg" alt="">
“Banks have shifted their funding base away from financial markets to domestic deposits. Banks have passed on a part of their increased funding costs to borrowers,” Johnson says.
Banks also consider credit risk associated with loans and the liquidity risk of funding long-term assets with short-term liabilities when setting interest rates, according to <a href="https://www.rba.gov.au/publications/bulletin/2014/mar/pdf/bu-0314-8.pdf" target="_blank">a report by the RBA</a>.
“Banks’ growth strategies, competitive pressures and the desire to provide a return to equity holders also affect banks’ lending rates,” the report noted.
“An important element in determining the overall cost of banks’ funding is the level of the cash rate, which acts as an anchor for the broader interest rate structure of the domestic financial system. Nevertheless, changes in the level of compensation demanded by investors to hold bank debt, competitive pressures and non-price factors can exert significant influences on banks’ funding costs.”
Johnson says the trend for lenders to charge a large premium over the cash rate will reverse as financial markets stabilise further and investors in financial instruments regain their appetite for risk.
House prices are rising and banks are well capitalised, easing investor concerns. Fund managers face a shortage of yield-producing assets. Under these conditions, and amid stabilising financial markets, demand will increase for yield-producing assets such as residential mortgage-backed securities (RMBS).
“That will again make securitisation [through RMBS] a viable funding strategy for the mortgage lenders,” Johnson says.
Non-bank lenders that lack the deposit-base of the big banks will be better able to compete as financial market funding costs fall, putting pressure on the banks to reduce their margins over the cash rate. 
But Johnson warns that might not lead to lower interest rates for consumers.
He says the wide margin between the RBA cash rate and mortgage rates is a big part of the story of why official interest rates are as low as they are now. The RBA has been compensating for the lenders’ higher costs, he says.
“If that [gap] goes back to 1%, then the official cash rate could rise,” Johnson says.
The RBA estimates in its report that even though funding costs have reduced over the past year, they are likely to remain close to 130 percentage points higher than they were before the global financial crisis.
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