Property developer One Living, backed by former Macquarie banker turned investment manager Chris Green’s investment firm, has unveiled plans to bring more institutional capital into housing to help address the national supply crisis.

The New York-based investor has focused his firm, GreenPoint Partners, on addressing the supply shortage hitting middle market housing in Australia.

It is backing the new One Living business to develop more than 1000 units along the eastern seaboard. The new firm is starting with a development on Mona Vale Road, on the border of Mona Vale and Pymble, in Sydney’s Northern Beaches, with around 140 apartments planned. They are eyeing off more sites across the city.

With cost pressures rising in the industry, One Living’s model is to be a vertically integrated developer-builder, so it can respond directly to the housing gap by removing the cost inefficiencies embedded in traditional residential delivery.

“We are building a platform designed to operate at scale and starting in a market where there’s a clear need for quality, attainable housing,” One Living joint managing director Joseph Scuderi said.

“It’s that missing middle – it’s that attainable end of housing… that’s what most Australians invest into and what Australians can actually afford.”

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="798dfa93-4941-4db6-a696-31e9dc18e81c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.31.50%E2%80%AFPM.png?VersionId=mKBqi5C_DmeiXS.AtJkcR8LQIxqCqmFi" />

GreenPoint Partners brings years of experience assembling and scaling real estate operating businesses across major markets. And Green sees a big opportunity in Australia.

“For its size, sophistication and importance to the community, Australia’s living sector has remained largely under-institutionalised, which represents significant opportunity,” Green said. “GreenPoint identified that gap, assembled the right team, and is backing One Living to build a platform that is aligned to market needs.”

Green said being a builder-developer would give the company the capacity and flexibility it required to deliver reasonably-priced homes.

“We want it to be at that attainable level; not super high end luxury but at that attainable level,” he said.

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="74a5344a-4b26-4d4a-ada3-056b1220be77" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.32.15%E2%80%AFPM.png?VersionId=vY8hXHO4reBMdO8ZXMWCNtGZJofUPQ3j" />

&nbsp;

One Living will undertake a component of affordable housing in its schemes, which it will own and operate, and it could also run build-to-rent on some sites.

Green praised local policy settings.

“The NSW government is being very supportive, strategic and pragmatic in terms of how do we generate more supply of housing,” he said. “We think it’s actually positive for development and the bit that’s been lacking at that attainable level is that it’s lots of relatively small private developers, whereas we want to create an institutional platform.”

One Living is also&nbsp;looking at high-density projects and could take on more institutional funding in the future.

“The way we will be able to achieve economies of scale is through size,” Green added.

Joel Robinson

One Living enters Sydney's new apartment market with Northern Beaches site acquisition

It's been several years since there's been an opportunity to buy a brand new townhome in Melbourne's coastal suburb of Mordialloc. Even apartment developments in recent times have been few and far between in the area.

Local developer LDS Property identified the gap in new housing, securing a site on White Street, directly opposite&nbsp;Woodlands Golf Club Mordialloc. They've recently launched&nbsp;<a href="https://www.apartments.com.au/new-townhouses/wm-residences-mordialloc-102-white-street-mordialloc-vic-3195">WM Residences</a>, just 13 townhouses which they have already started building.

Projects by Buxton Director Heath Thompson, who is selling WM Residences, says the townhouses x that perfect middle ground be

"Mordialloc residents have had limited options to downsize within the suburb, often forcing them to look elsewhere despite long-standing ties to the area," Thompson says.

"With very little comparable new supply coming to market, projects like WM Residences are well placed, particularly as buyers look to capitalise on current conditions amid constrained supply."

[smartcode_project:default project_id=134646 project_image_fid=6109]

The development, designed by regarded architecture firm&nbsp;<a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a>,&nbsp;adopts a deliberately restrained architectural approach, focusing on simplicity, durability and liveability rather than overt design gestures.

The boutique scale is central to the offering. With only 13 three-bedroom residences, each home is configured to prioritise functional layouts and everyday use, supported by private terraces and secure two-car garages.

Ewert Leaf’s design response leans into a calm, neutral material palette. Interiors are defined by oak flooring, white walls and soft finishes, creating a consistent and understated backdrop. The approach avoids trend-driven detailing in favour of longevity, with an emphasis on natural light and spatial clarity.

[smartcode_project:default project_id=134646 project_image_fid=6110]

Beyond aesthetics, the homes are designed to meet contemporary performance expectations. Each residence targets a minimum 6-star energy rating, incorporating double glazing, comprehensive insulation and all-electric Bosch appliances.

The project’s location supports a walkable coastal lifestyle, sitting within close proximity to Mordialloc’s foreshore, Main Street retail strip and the train station. Local cafés and dining venues, including Suburbia Deli and Hendriks Café, are within a short walk, reinforcing the area’s established neighbourhood character.

[smartcode_project:default project_id=134646 project_image_fid=6116]

While <a href="https://www.apartments.com.au/developments/mordialloc-vic-3195">Mordialloc</a> is often defined by its beach and pier, the project taps into other areas of day to day living, offering easy access to local food, casual dining and transport, rather than positioning itself purely as a lifestyle retreat.

WM Residences reflects a continued trend across Melbourne’s coastal suburbs towards smaller-scale, design-led townhouse developments, particularly on infill sites where proximity to amenity is already established.

With construction commenced prior to its market entry, the project aligns with a growing preference among buyers for developments with visible progress and defined delivery timeframes.

[smartcode_project_cta:default project_id=134646]

WM Residences fills gap in Mordialloc townhouse market

&nbsp;

Developer GURNER™ Group has revealed $1.65 billion in residential sales nationally across the 12 months to December 2025, driven largely by the continued momentum of its Docklands wellness-focused precinct, Elysium Fields.

The sales result was generated across seven projects in Victoria and New South Wales, headlined by Elysium Fields, GURNER™’s $2.75 billion mixed-use precinct planned for Harbour Esplanade in Docklands.

The project has recorded more than $500 million in sales across the first three towers, equating to around 580 apartments sold.

The first tower, Helios, has now sold out of its 240 private residences, with GURNER™ preparing to release a premium penthouse collection comprising 15 three-bedroom penthouses in coming weeks.

[smartcode_project:default project_id=144441 project_image_fid=370975]

Elysium Fields is being developed on the long-held 20,000 sqm Docklands site at 208-226 Harbour Esplanade, which had remained undeveloped for more than two decades prior to GURNER™ taking over the project around four years ago.

Construction has now commenced across four towers ranging between 18 and 30 storeys, with Hamilton Marino and Maxcon appointed as builders.

Once complete, the precinct is expected to comprise around 1,100 residences, alongside retail, hospitality and public realm uses integrated throughout the site.

[smartcode_project:default project_id=144441 project_image_fid=370981]

Designed by Fraser &amp; Partners in collaboration with GURNER™ Design House, the project has been positioned around the developer’s broader focus on wellness-led residential living.

“We don’t sell apartments. We create a true luxury lifestyle that simply doesn’t exist elsewhere in the market today,” Founder and Executive Chairman Tim Gurner said.

“To deliver that requires an extraordinary level of detail, coordination and discipline across multiple verticals, from design and hospitality through to wellness and service.”

“We’ve always believed that living extends far beyond the physical residence. It’s about how you feel the moment you arrive, how you live day-to-day, and the ecosystem that supports that.” 
[smartcode_project:default project_id=144441 project_image_fid=370977]

The project’s design places a heavy focus on landscaping, wellness amenities and biophilic design principles.

Plans include around 3,700 sqm of landscaped gardens and open space throughout the precinct, alongside a retail and dining offering spanning approximately 5,000 sqm.

The broader public realm strategy centres around what GURNER™ describes as the “Path of Life”, an urban forest and landscaped pedestrian environment intended to connect the various buildings and wellness spaces across the precinct.

The apartments themselves will incorporate a range of wellness-focused inclusions, including purified air and water systems, circadian lighting, antimicrobial surfaces, and optional in-home wellness upgrades.

[smartcode_project:default project_id=144441 project_image_fid=370980]

Gurner said the company’s experience through its Saint Haven wellness clubs had directly informed the residential offering now being incorporated into Elysium Fields.

“We’re seeing a clear global shift toward longevity, performance and proactive health,” Gurner said.

“Our role is to deliver that in a way that feels seamless, highly private and beautifully resolved within the environments we create.”

A large component of the wellness offering is planned through the resident amenity and health facilities proposed within the precinct.

That includes plans for bathing and recovery facilities spread throughout the towers, incorporating mineral pools, saunas, steam rooms, flotation therapy, red light therapy and wellness lounges.

The developer is also seeking approvals for what it describes as a “reverse ageing medical clinic” within the precinct.

[smartcode_project:default project_id=144441 project_image_fid=370978]

According to project information released by the group, the proposed facility would include cryotherapy, IV infusion therapy, infrared and dry saunas, PEMF beds, MRIs, DEXA scans, brain scans and blood analysis services.

Within the first tower, Helios, residents will also have access to a dedicated amenity offering known as the Sky Private Club.

The upper 15 levels of the building will include private lounges, dining spaces, rooftop amenities and optional private wellness studios integrated within residences.

The Helios tower itself comprises 260 apartments ranging between 60 sqm and 300 sqm, including a collection of penthouses.

That includes a planned two-storey penthouse spanning around 600 sqm with uninterrupted bay views.

The Elysium Fields precinct is being delivered in partnership with Digital Harbour Holdings, a consortium that includes the Liberman family, which controls the development rights across the Docklands site.

[smartcode_project:default project_id=144441 project_image_fid=370979]

The sales result comes as GURNER™ continues expanding its national development pipeline beyond Victoria.

“We have a strong pipeline across Australia and are now focused on scaling into key markets including New South Wales and Queensland, while continuing to build on our Melbourne base,” Gurner said.

“We currently have more than $3 billion in the market, growing to over $5 billion by October, and expect to materially outperform last year in the 2026 calendar year.”

The result also reflects the continued strength of the upper-end apartment market in Melbourne, particularly for owner-occupier-focused product with large-scale amenity and lifestyle offerings.

[smartcode_project_cta:default project_id=144441]

Record result anchored by the Group’s “utopian” Elysium Fields precinct – defying market headwinds in Docklands.

Elysium Fields drive Gurner to $1.65 billion in apartment sales over 2025

National Australia Bank (NAB) will fund <a href="https://www.apartments.com.au/new-apartments/palmera-residences-gold-coast-18-garfield-terrace-surfers-paradise-qld-4217">Palmera</a>, a $1 billion, 52-level luxury residential tower being developed by Central Equity in one of the Gold Coast’s most tightly held coastal locations at Northcliffe.

The project, launched recently by <a href="https://www.apartments.com.au/developers/central-equity">Central Equity</a>, one of Victoria’s largest private residential developers, comes at a time when construction funding for large residential developments has become increasingly competitive as lenders tighten exposure to the sector.

Multiplex has been appointed the builder, and construction is now underway.

[smartcode_project:default project_id=108274 project_image_fid=365784]

Since its first project, Central Equity has delivered more than 85 residential developments with a combined end value exceeding $8 billion.

Palmera reflects Central Equity’s growing focus on the Gold Coast luxury apartment market and continues a relationship between Central Equity and NAB that dates back to the late 1980s, when the bank funded one of Melbourne’s earliest inner-city residential towers at a time when high-rise apartment living in the CBD was largely unproven.

“NAB’s funding of Central Equity’s $36 million CBD development in the late 1980’s to the financing of the billion-dollar tower today highlights the long-term relationship between the two organisations in delivering major residential projects” said Central Equity Founder and Chairman Eddie Kutner.

He said NAB’s early support was instrumental in helping establish the company’s development model.

“When we commenced our first residential tower in the late 1980s the concept of funding off-the-plan apartments was still largely untested in Australia,” Kutner said.

“NAB recognised the opportunity early and supported the project when others were uncertain. That relationship has now continued for more than 37 years across many developments.”

[smartcode_project:default project_id=108274 project_image_fid=365771]

Central Equity was established in 1987 when Melbourne’s CBD and Southbank precinct were still dominated by warehouses and commercial buildings. Fewer than 100 residents lived in Southbank at the time, and large-scale residential development in the inner city was not widely considered.

Recognising changing demographics and lifestyle preferences, the company began developing high-rise residential projects designed to bring permanent residents into the city centre.

Central Equity has provided accommodation for approximately 40,000 residents across Melbourne’s CBD and Southbank, while also incorporating supporting infrastructure including essential lifestyle facilities like retail spaces, childcare facilities and neighbourhood activity centres.

Central Equity has spent many years assembling the Palmera development site on the corner of Garfield Terrace and Frederick Street in Northcliffe, creating a supersite of around 3,300 sqm.

The developer said the Palmera apartment tower reflects its long-term view of the Gold Coast as a growing and increasingly diversified economy.

[smartcode_project:default project_id=108274 project_image_fid=365768]

Supported by infrastructure including the light rail network, major road upgrades expanded education, hospital and medical facilities and continued expansion at the Gold Coast Airport with more internation and domestic flights.

Positioned in the tightly held Northcliffe precinct, the 52-level tower will deliver 347 apartments, targeting buyers seeking a high-end coastal lifestyle, from downsizers to interstate investors.

Designed by Marchese Partners with interiors by DBI, Palmera has been conceived as a next-generation residential offering, featuring a collection of oversized apartments, with premium three-bedroom residences offering sweeping northern views stretching from Surfers Paradise through to Burleigh Heads.

[smartcode_project_cta:default project_id=108274]

NAB funds $1 billion Surfers Paradise apartment development, Palmera

Two years after completing one of the newest developments in North Sydney, developer <a href="https://www.apartments.com.au/developers/aqualand-australia">Aqualand</a> is turning its attention to the rapidly evolving St Leonards apartment market.

The developer, which completed AURA by Aqualand on North Sydney's Walker Street, has lodged plans for a 5,918 sqm site at <a href="https://www.apartments.com.au/new-apartments/33-37-herbert-street-st-leonards-nsw-2065">33-37 Herbert Street, St Leonards,</a> seeking approval for a pair of residential towers rising above a shared podium opposite Royal North Shore Hospital.

The proposal forms part of the broader transformation underway across the St Leonards-Crows Nest precinct, where former industrial and commercial sites are increasingly being redeveloped into high-density mixed-use projects tied to major transport infrastructure.

<img alt="Aqualand" data-entity-type="file" data-entity-uuid="2cc428cf-fe70-4cac-9cd5-264ad53af62c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.51.56%E2%80%AFAM.png?VersionId=otKSnHtbjAvAddOnovyXQMgcAwE6DMe1" />

According to the planning documents, the site sits “within the St Leonards–Crows Nest Strategic Centre, identified by the NSW Government as a key area for accommodating future jobs and housing across Sydney.”

The proposal has been designed by fjcstudio, formerly FJMT Studio, and is being progressed through the State Significant Development pathway due to its scale and affordable housing provision.

The scheme would comprise 413 apartments, including 46 affordable housing units, alongside retail and commercial uses fronting Herbert Street. The project would also include communal open space, landscaping, a swimming pool, gymnasium, children’s play areas and podium-level resident amenities.

Planning documents show the development would consist of a part-13, part-39 storey tower form positioned above a four-storey podium.

“The development comprises a unified podium that activates the street interface, and two setback towers to accommodate new housing supply while maintaining an appropriate human scale at ground level,” fjcstudio noted in its Design Report.

The northern and southern towers have been shaped to respond to the surrounding skyline while also limiting overshadowing impacts to nearby public open space, particularly Talus Reserve.

The design report said the differing tower heights were intended to “contribute to a varied skyline while responding to the surrounding built form context and solar access considerations.”

<img alt="Aqualand" data-entity-type="file" data-entity-uuid="36da62dc-ff9e-41f2-a7e3-7be38373751c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.51.45%E2%80%AFAM_0.png?VersionId=Mo6Rp2r.XRLTzIfg_PEEpw8NepDH8UBs" />

The site sits directly opposite Royal North Shore Hospital and within walking distance of both St Leonards Station and the new Crows Nest Metro station.

While the site itself sits just outside the formal Crows Nest Transport Oriented Development boundary, the planning documents repeatedly reference its alignment with the broader TOD objectives reshaping the Lower North Shore.

“The site is located adjacent to St Leonards Station and in close proximity to Crows Nest Metro which is within the Crows Nest Transit Orientated Development Accelerated Precinct which has been identified by the NSW Government to support housing delivery,” the Design Verification Statement noted.

According to fjcstudio, the project has been designed to respond to the broader transition occurring across St Leonards, where increasing residential density is being concentrated around transport infrastructure and employment hubs.

“The broader precinct is undergoing significant change, with a mix of existing mid-rise buildings and newer high-density developments,” the report stated.

“Recent and approved projects indicate a consistent shift toward taller built form, typically organised as tower-and-podium typologies with more active ground levels.”

The proposal includes close to 6,000 sqm of retail and commercial space across the ground floor and podium levels, designed to create a more activated street edge along Herbert Street.

Aqualand’s plans would also introduce a landscaped podium shared between the two towers, with communal open space in the form of a podium rooftop designed to support resident interaction and improve urban greening outcomes. The scheme would also introduce pocket parks at the northern and southern ends of the site, including a landscaped area at the corner of Herbert and Ella streets designed to improve pedestrian amenity and soften the streetscape.

&nbsp;

The proposal is being progressed through the NSW Government’s Housing Delivery Authority pathway, which was introduced to accelerate housing supply across the state. The application was declared State Significant Development in April 2025 following an expression of interest process.

<img alt="Aqualand" data-entity-type="file" data-entity-uuid="faf6d97d-2671-454f-b85a-fe1c6a7be608" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.51.49%E2%80%AFAM.png?VersionId=diVd28OBVr5.YV.7prrOz.uAanwwwm7a" />

St Leonards has been particularly active with new developments in recent weeks. Developer SP Setia’s <a href="https://www.apartments.com.au/news/nsw/first-look-sp-setia-targets-st-leonards-skyline-with-40-storey-tod-tower">plans for a new 42-storey tower</a> recently went on exhibition through the same pathway, while <a href="https://www.apartments.com.au/news/nsw/first-look-stockland-plans-52-storey-538-apartment-st-leonards-tower">Stockland’s 52-storey tower proposal</a> was also recently unveiled.

Aside from the St Leonards project, which is expected to take around nine months to move through the approvals process ahead of a potential 2027 launch, Aqualand is also preparing to launch Boronia, a new apartment project in Roseville comprising around 111 apartments on Larkin Street.

The developer also has approvals in place for the next stage of the Barangaroo precinct, which will feature new residential, retail, hospitality and community uses, alongside a new metro entry across the five-hectare site.

More than 50 new retail destinations are planned for Central Barangaroo, alongside a 270-metre-long boulevard connecting Hickson Park to Nawi Cove. Together with Harbour Park, more than 50 per cent of the precinct will comprise public open space and parkland.

First look: Aqualand joins St Leonards apartment party

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There's been plenty of speculation about the looming cliff faced by the interest only borrowers who are due to have their loans reset to the pricier principal and interest loans.
It comes as large price falls in some parts of Australia has meant some borrowers are facing negative equity – where the outstanding balance on the loan exceeds the value of the property it is secured against.
While this negative equity creates vulnerabilities both for borrowers, especially if they are selling, and their lenders, the Reserve Bank of Australia (RBA) recently noted it doesn't anticipate risk to the financial stability of the economy.
Certainly nothing like the impact of negative equity peaks in the United States at over 25% in 2012 and in Ireland at 35%, as prices fell 30 and 50% respectively.
The RBA noted around 10% of loans in negative equity have interest only terms expiring in 2019.
Loans currently in negative equity were, on average, taken out around five years ago and had higher average Loan to Value Ratios (LVRs) at origination, of around 85%.
For these borrowers, the increase in repayments may be distressing for the borrowers and for the communities they live in.
The RBA research shows that negative equity is concentrated in Western Australia, Queensland and the Northern Territory, largely restricted to mining-exposed regions.
These locations account for 90% of mortgage debt in negative equity.
The RBA maintains the low rates of negative equity outside the mining-exposed regions reflect three factors: the previous substantial increases in prices; the low share of loans written at high LVRs; and the fact that many households are ahead on their loans.
The RBA cautions that further significant housing price falls in Sydney and Melbourne would see negative equity increase, but widespread defaults are unlikely, the RBA financial stability review suggested.
Any increase the incidence of negative equity will only arise with those high LVR borrowers.
Across Australia, around 11% of national loans have a current LVR between 95 and 100%.
Housing prices in some areas of Sydney and Melbourne have fallen by close to 20% from their 2017 peak.
But the RBA review noted only a small share actually purchased at peak prices, and many experienced rises before prices fell.
Properties purchased in Sydney and Melbourne since prices peaked account for 2% of the national dwelling stock.
Properties purchased in these two cities since prices were last at current levels only account for 4.5% of the dwelling stock.
Few recent borrowers have had been allowed loans with high LVRs.
In fact, over the past five years, the share of loans with LVRs above 90% has halved.
Since 2017, it has averaged less than 7%.
Around 80% of loans are issued with an LVR of 80% or less.
Given most borrowers do not have high LVRs, housing price falls will need to be larger for widespread negative equity.
Of course, if a borrower has also paid off some of their debt then price declines will need to be larger still.
Around 70% of loans are estimated to be at least one month ahead, with 30% ahead by two years or more.
When a borrower is behind on repayments, banks classify the loan as impaired.
Currently the impaired housing loans rate sits at 0.2% of all mortgages. 
This article first appeared in The Daily Telegraph. 
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jchancellor-FAypfDUnLy

Australian negative equity remains below 2% of borrowers: RBA

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EXPERT OBSERVATION 
The RBA minutes clearly indicate that they are willing to cut the cash rate and have set out the conditions that need to be fulfilled for it to occur.
We are encouraged by this new detail, and continue to believe the RBA will cut the cash rate in August and November this year.
The minutes of the April monetary policy meeting of the Reserve Bank Board have provided the clearest signal yet that the Bank would be prepared to cut the cash rate.
Firstly, the final section “Considerations for Monetary Policy” states “a lower level of interest rates could still be expected to support the economy through a depreciation of the exchange rate and via reducing required interest payments on borrowing, freeing up cash for other expenditure”.
The Board even sets out the conditions for a rate cut, “members also discussed the scenario where inflation did not move any higher and unemployment trended up, noting that a decrease in the cash rate would likely be appropriate in these circumstances”.
The Board also notes that “members agreed that there was not a strong case for a near-term adjustment in monetary policy”. We would interpret the “near-term” concept as referring to the next Board meeting in May. We do not believe that statement excludes the possibility of our target timing of August for the first rate cut.
Of course, while the Board refers to “continued strength in the labour market data and moderating GDP growth sending different signals”, it would appear that the labour market data has a higher weighting from a policy perspective.
We are somewhat perplexed by that approach, given that employment is seen to be a lagging variable, and while the lags may be longer in this cycle, we think it is reasonable that the slowdown in expenditure and income growth will eventually weigh on jobs growth.
The minutes even refer to the evidence around forward looking indicators of labour demand being mixed with job advertisements having eased but job vacancies having increased as a share of the labour force. What is unclear is whether businesses, in a climate of softening demand, actually intend filling these vacancies.
We were interested that the Governor excluded his standard growth forecast for the current year in his Statement immediately following the April Board meeting. The minutes also exclude that forecast while pointing out that the 2018 growth rate of 2.3% was “below the forecasts presented in the February Statement on Monetary Policy”.
It appears almost certain that the RBA will lower its growth forecast for 2019 from 3% (above-trend) to 2.75% (around trend). Of course, the RBA has consistently argued that growth in 2020 will be a 0.25% below 2019 due to a slowdown in the contribution to growth from LNG exports. If it is to be true to that approach then it will have to forecast growth in 2020 at 2.5% (below trend).
Traditionally, central banks which are forecasting below trend growth should at the least be adopting an easing bias.
The tension between growth and the labour market data may allow a looser interpretation of the policy stance. Certainly, the approach taken in these minutes appears to point to a bias towards lower rather than higher rates, although ongoing strength in the labour market will keep rates on hold, at least for the time being.
Further support for this ‘bias’ interpretation comes with the observation that “financial market pricing implied that the cash rate was expected to be lowered in the second half of 2019 and then again in 2020”.
While in previous commentaries, the RBA was dismissive of a significant wealth effect, or a near-term downturn in dwelling construction, these minutes are more realistic.
Weakness in consumption, is noted to be concentrated in those items that are historically most correlated with housing prices and housing turnover, and the RBA’s liaison suggested that growth in housing related consumption had remained soft in recent months.
Dwelling investment is noted to be past its peak but there is still uncertainty about how quickly dwelling investment might decline with a large amount of work still in the pipeline. Westpac expects a contraction in new dwelling investment of around 10% in 2019.
Conditions in the established housing market are noted to have remained weak in recent months, with house prices continuing to fall in Sydney, Melbourne and Perth, and even declining in most other capital cities and regional areas.
The RBA offers no forward guidance as to how far this cycle has to run. Westpac expects that this market will remain soft throughout the course of 2019 and well into 2020.
Conclusion
We have been encouraged by these minutes from the perspective of our rate cut call.
The Board has made a clear case for the benefits of lower interest rates, discounting arguments to suggest that it sees little benefit from lowering rates given the very low starting point.
The Board also lays out clearly the conditions for lowering those rates around inflation and the labour market. It appears that it has resolved the uncertainty around the conflicting signals between growth and employment by favouring the labour market.
That is disappointing for us, given that the previous policy responses have been linked to growth forecasts, although we expect that persistently slow growth should begin weigh on the labour market.
While prospects for a policy response in May have disappeared, there is still ample time and data releases to justify our timing that there will be cash rate cuts in August and November.
BILL EVANS is Chief Economist for Westpac.
You can read the full <a href="https://www.rba.gov.au/monetary-policy/rba-board-minutes/2019/2019-04-02">RBA Statement here</a>.
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bevans-rYk9SxEa4r

RBA Board minutes set out the conditions for a rate cut: Westpac's Bill Evans 

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EXPERT OBSERVATION
This is an extract from the Reserve Bank of Australia's (RBA) Financial Stability Review.
<hr>
Over the past three years, there has been a shift in lending for property towards non-ADI lenders, also referred to as non-bank lenders.
Residential mortgage lending by non-banks is estimated to have been growing much faster than the rate of banks’ mortgage lending.
Non-bank lending to property developers has also grown at a fast pace.
They perform similar functions to banks and lend to a wide range of borrowers.
They finance their lending by securitising loans or with funding from private investors, such as high net worth individuals and institutional investors.
Non-bank lenders are prohibited from accepting deposits, and are therefore not prudentially regulated.
Non-bank lending supports economic growth by providing an alternative form of funding and increasing competition for lending. But the activities of non-bank lenders can pose risks to financial stability, as they have in some countries internationally.
These risks arise when non-banks exacerbate credit and asset price cycles, prompt banks to weaken their lending standards or have financial links with the banking sector that see credit losses at non-banks transmitted to banks.
This box assesses these risks today, in light of the recent pick-up in growth of non-bank property lending.
Non-bank residential mortgage lending is estimated to have grown by roughly 15% per annum over recent years, well above growth in lending by banks.
This has seen their market share of outstanding lending continue to trend up.
While these estimates are based on incomplete data that may be revised over the coming year, they are broadly consistent with the information available on non-banks’ liabilities.
Almost all non-bank mortgage lending is funded by issuing residential mortgage-backed securities (RMBS) and non-bank issuance of these securities has trebled over the past three years.
The flow of non-bank RMBS issuance in 2018 was close to the pre-crisis peak.
<img src="https://www.urban.com.au/images/2019/4/12/Non%20bank%20credit%201.JPG" alt="">
A factor that had supported non-banks’ increased market share has been banks’ repricing of certain types of housing loans.
Specifically, banks have increased the interest rates they charge on investor and interest-only (IO) loans, which are now on average around 50 basis points higher than interest rates on owner occupier principal and interest loans.
Banks increased interest rates on these products as a way of meeting the investor and IO lending benchmarks introduced by the Australian Prudential Regulation Authority (APRA) in 2014 and 2017.
Non-bank lenders, which were not required to meet APRA’s benchmarks, often do not apply this differential to investor and interest only loans.
These benchmarks have both been removed for most lenders. But other prudential standards are changing, as have perceptions of risk, so, to date, banks’ interest rate differentials based on type of loan remain.
Data from the RBA’s Securitisation Data set show that non-banks generally charge higher interest rates than banks for owner-occupier principal and interest loans; however, the interest rates they charge on other loans are typically much closer to those charged by banks (Graph D2).
As a result, investor loans have made up a growing proportion of nonbank lending, while their proportion of IO loans has fallen by much less than banks (Graph D3).
In contrast, banks have retreated from both these market segments.
<img src="https://www.urban.com.au/images/2019/4/12/Non%20bank%20credit%202.JPG" alt="">
In addition, a perception that finance is more difficult to obtain from the major banks has seen even some higher quality borrowers shifting to non-bank lenders.
The RBA’s liaison with nonbank lenders indicates that borrowers have been attracted by their faster approval times and the greater likelihood of approval compared with the major banks. 
<img src="https://www.urban.com.au/images/2019/4/12/Non%20bank%20credit%203.JPG" alt="">
… but remains small and financial stability risks are limited at this point
Non-bank mortgage lenders account for less than 5% of outstanding housing credit and so are not a substantial financial stability risk (Graph D1).
In particular, their small share reduces the risk that non-bank lenders will exacerbate the credit cycle. More generally, growth in non-bank lending has accelerated as housing markets and credit growth have both been weakening overall.
There is also no evidence of banks loosening lending standards to compete.
Banks have instead tightened lending standards since 2015, although there continues to be strong competition for the highest quality borrowers.
Non-bank lenders have also tightened their lending standards over recent years, even while writing a larger share of higher risk investor loans than previously.
This is because they are still subject to responsible lending laws, for which compliance expectations have increased over recent years, and because long-term investors often expect non-bank RMBS to broadly conform with APRA standards.
Consistent with this, arrears rates for non-bank lenders are slightly lower than for banks and have not increased materially to date.
Whether this would remain true if the unemployment rate was to rise remains to be seen.
The potential for contagion from non-banks to banks also remains small because interconnections between them are limited.
Banks have some exposure to non-bank mortgage lending through short-term ‘warehouse’ funding facilities, but these are small compared with banks’ own mortgage lending and their capital.
Banks’ willingness to increase these exposures significantly is limited by APRA monitoring the growth of these facilities, a liquidity requirement to match the undrawn exposures with highquality liquid assets, and the capital required to be held against such exposures.
The main constraints to a more rapid expansion of non-bank mortgage lending stem from their funding. RMBS pricing is well above the cost of bank funding (deposits or senior unsecured bank debt) and remains significantly higher than pre-crisis levels.
The cost of funding from RMBS markets has also risen significantly since early 2018, reflecting both a rise in spreads on RMBS and the increase in the bank bill swap rate, which forms the base for RMBS pricing.
This means that non-bank lenders will struggle to compete with banks for the highest quality owner-occupier principal and interest mortgages, unless they are able to secure alternative long-term funding.
In addition, it does not currently appear feasible to significantly increase the capacity of RMBS markets.
This is because the investor base for such instruments is relatively narrow and securing new investors has been a prolonged and challenging task.
Non-bank lending to property developers is also growing fast, and poses more risk
The pick-up in non-bank lending to property developers has occurred as banks pulled back from this market due to concerns about increased risks.
Non-bank lending for property development has come from a range of sources, but the most prominent providers have been managed funds that specialise in financing property development.
This lending is mostly funded by equity investments from wealthy individuals and institutional investors, including foreign funds.
This is an area where data are very limited; however, liaison contacts report that non-bank financing of property development is widely available and still growing strongly, especially in Melbourne.
Non-bank lenders generally require lower levels of pre-sales than banks and allow greater leverage for borrowers, but also charge much higher interest rates.
Presales became harder to achieve as the property market cooled, and this contributed to the demand for non-bank financing from developers.
If more marginal developments proceed, because developers are able to obtain funding from non-bank lenders, the boost to supply would place further downward pressure on property prices.
This could have flow-on implications for banks’ property portfolios. In particular, the performance of banks’ exposures to property developers would deteriorate if apartment sales and prices experience further significant declines and settlement failures rise.
However, much of the lending by non-banks is expensive mezzanine debt (debt which is ranked below senior debt in the capital structure).
This debt is relatively expensive and so reduces the likelihood that low-return projects will proceed, minimising the financial stability risk.
Further, this mezzanine lending is subject to some external oversight because when a bank provides the senior debt it has visibility of the mezzanine debt and the risks this may pose to the developer.
This oversight may diminish as non-bank involvement in senior debt is becoming more common.
The financial stability risks from non-bank property lending are judged to be limited at this point, although risks associated with property development bear watching.
Incomplete data on non-bank lending activity currently make it challenging to assess these risks.
However, legislation passed in March 2018 expanded APRA’s data collection powers to encompass a wider range of non-bank entities.
Since then, a working group, consisting of APRA, the Australian Bureau of Statistics and the RBA, has been working to improve the coverage of non-bank data.
This should help APRA and the RBA in their ongoing monitoring of financial stability risks arising from non-bank lending.
The Reserve Bank of Australia's Financial Stability Review provides the Bank's assessment of the current condition of the financial system and potential risks to financial stability. It contains a number of boxes on topics of special interest, along with occasional articles. The Review is issued half-yearly. 
Download the complete <a href="https://www.rba.gov.au/publications/fsr/2019/apr/pdf/financial-stability-review-2019-04.pdf" target="_blank" title="Link, opening in a new window, to PDF file.">Review here</a>.<abbr title="Megabytes"> </abbr>
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No evidence of banks loosening lending standards to compete: RBA

How the RBA looks at property, debt and financial stability: RBA's Michele Bullock

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EXPERT OBSERVATION
Westpac now expects the Reserve Bank to cut the cash rate by 25bps in both August and November this year.
We have revised down our GDP growth forecasts for 2019 and 2020 from 2.6% to 2.2%. With the slower growth profile we now expect to see the unemployment rate lift to 5.5% by late 2019. That makes a strong case for official rate cuts to cushion the downturn and, in turn, meet the RBA’s medium term objectives.
The Reserve Bank recently revised down its growth forecasts for 2019 and 2020 from 3.25% and 3.0% to 3.0% and 2.75% respectively. It also cut its estimate for 2018 from 3.5% to 2.75%.
Momentum in 2018 slowed dramatically through the year. The annualised growth rate in the first half was 4% whereas in the second half we estimate that the pace slowed to 1.5%.
Moving from a 1.5% pace to a 3% pace in 2019 seems to be a very large stretch.
Westpac’s growth forecast in 2019 and 2020 has been a much weaker 2.6% in each year but even that number now appears too high.
Our new forecast for GDP growth in 2019 and 2020 is 2.2%.
In particular, we have been expecting only a modest impact on consumer spending from the likely negative wealth effect associated with falling house prices in Sydney and Melbourne.
Our growth forecasts have assumed a lift in the savings rate across 2019 from 2.4% to 2.9%. That would be consistent with consumption growth of 2.4%. Note that we expect momentum in consumption growth in the second half of 2018 to be closer to 1.5%.
A more reasonable assessment of the lift in the savings rate in 2019 is from 2.4% to 3.5% with a lift towards 5.0% expected in 2020. Those savings rates imply consumer spending growth around 2%.
That lift assumes that house prices in Sydney and Melbourne will continue to fall through 2019. Our estimates of the need to restore affordability and the impact of tighter lending standards on prices point to falls of around 5%-10% in Sydney and Melbourne over the course of 2019 complemented by softness in other markets.
Absent any policy response from the RBA we expect that further falls will be necessary in 2020 before stability in these markets will be achieved.
These headwinds for the housing market and activity are also apparent in developments around credit. In the second half of 2018 new lending for housing fell by 14.9% with both investors (-15.5%) and owner occupiers (-14.7%) being affected. This is a sharper correction than
we had anticipated. These falls are a combination of both demand (concerns around falling prices and stretched affordability) and supply (new regulations and caution from some lenders in a falling market).
We expect these falls, albeit at a much slower pace, to continue through 2019 representing a negative feedback loop to prices.
That negative wealth effect is therefore likely to persist through 2020 with a further extension of the soft profile for consumer spending.
Other important dynamics will be around the sharp downturn in residential housing construction. We have revised down our forecast for residential housing construction in 2019 to –10% from –7% and –5% in 2020 from –3%. We also envisage a weaker profile for business equipment investment as businesses adjust their plans to a softening growth environment.
Overall we have revised down our GDP growth rates in 2019 and 2020 from 2.6% in both years to 2.2% respectively.
Consumer spending; residential housing construction and equipment investment are all key to the outlook for jobs growth.
With reasonable estimates for the participation rate our weaker jobs growth profile has the unemployment rate lifting to 5.5% in the second half of 2019 and further by end 2020.
Our process for forecasting monetary policy has always been to assume that the economy will evolve as we expect and then to anticipate the policy response once the authorities react to the new reality.
The decision by the Reserve Bank Board to accept the possibility that interest rates could fall further, despite the current record low levels, is profoundly important.
We can now be confident that if our growth profile does evolve the Reserve Bank will be prepared to act. Prior to this more balanced approach to rates it was reasonable to assume that it was most reluctant to lower rates. The view seemed to be that the adjustment in the housing market was a necessary development with limited spill over effects on the rest of the economy.
Lowering rates, as we last saw in 2016, would only disrupt that adjustment while the rest of the economy was not in need of further stimulus.
The approach now seems to be that the spill over effects to the rest of the economy are real and the “adjustment” process may be more substantial than earlier anticipated. Certainly the collapse in new lending and sharp falls in house prices would be attracting considerable attention.
Note that the current view of the Reserve Bank is GDP growth of 3% in 2019; and 2.75% in 2020. That profile is, in their view, consistent with a gradual fall in the unemployment rate from 5.0% to 4.75% by end 2020.
The rise in the unemployment rate which we envisage through 2019 will not be severe since unit labour costs are contained and labour enjoys a relative cost advantage over capital. However it will be contrary to the Reserve Bank’s expectations and prompt a significant revision to the 4.75% forecast for 2020.
When might this decision be taken?
The forces around a slowing economy, falling house prices, and weak consumer spending are already apparent. However the current forecasts do not indicate that the Bank expects these conditions to persist.
Recognition of this persistence is likely to take some time, but not too much time. Our preferred estimate would be the August Board meeting. A full explanation of the reasons behind the decision can be set out in the August Statement on Monetary Policy.
That timing will also allow two more inflation prints to confirm that the further widening of the output gap, as growth remains stuck well below trend, is constraining inflation with little likelihood of achieving the current forecast of 2.25% inflation in 2020.
A second cut at the November Board meeting is likely to follow.
Unlike the response of the markets in 2016 to two rate cuts we do not expect that these two cuts will immediately stabilise housing markets. However there will be sufficient progress for the Reserve Bank to resume its cautious stance.
Adjustments will also be accommodated by the Australian dollar, possibly in lieu of even lower rates.
Partially offsetting our weaker profile for the AUD will be more “patience” on the part of the Federal Reserve with the federal funds rate. Following my trip to the US over the last few weeks where I met with a number of officials and market participants it is clear that even if the Federal Reserve decides that higher rates will be necessary it will take considerable time to make the case.
Accordingly we have eliminated our forecast for hikes in the federal funds rate in June and September leaving one more hike in December to recognise the need to finally settle on the neutral rate setting.
The net impact of these forecast changes is for a further 25bp deterioration in the overnight cash rate differential. That puts downside risks to our current target of USD 0.68 for the AUD in the second half of 2019 particularly if the expected cuts from the Reserve Bank are ineffective in settling markets.
The Risks to This Rate Outlook
Housing markets may stabilise more quickly than we anticipate and the extended negative wealth effect may not materialise.
The labour market may hold up more strongly than we expect. (Note the January Employment Report showing 39,000 new jobs). Certainly evidence from other countries points to unusually strong labour markets despite other less constructive developments in these countries. A relative improvement in the cost of labour may hold up labour markets despite soft demand conditions. Unit labour costs in Australia have been flat for many years.
We may be overestimating the appetite of the RBA to respond to the environment we are describing.
Wages growth may lift more quickly than we expect, boosting household incomes and supporting spending despite a negative wealth effect. That lift may be supplemented by unexpected increases in the terms of trade as China boosts its own growth through housing and infrastructure. On the other hand while this is a perfectly reasonable scenario, there is still likely to be little flow through from higher commodity prices to household incomes as mining companies remain cautious. Mining wages continue to languish highlighting the limited effect a strong terms of trade has on the broader economy.
There is mixed evidence around wealth effects in other countries although the scale of the adjustment in house prices in Sydney and Melbourne is too large to downplay.
Conclusion
Since the last rate cut in August 2016 Westpac has consistently held the line that the RBA cash rate would remain on hold for the foreseeable future (a standard two to three year window). That has been despite markets, the RBA and most economists expecting higher rates.
To an extent this view was influenced by the perception that the Bank welcomed the adjustment in the housing markets and saw insignificant spill over effects to the rest of the economy.
The recent change of rhetoric from the Bank on that issue is important.
Our revised growth, inflation and unemployment forecasts now make a convincing case for lower rates.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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Westpac now expects the RBA to cut the cash rate twice: Bill Evans

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The minutes of the Reserve Bank Board meeting for February have largely confirmed the themes which were set out in the February Statement on Monetary Policy.
Key to these themes is “the probabilities around these scenarios were now more evenly balanced than they had been over the preceding year when an eventual increase in the cash rate had appeared more likely”. Of course, the two scenarios relate to an eventual increase and an eventual decrease in the cash rate.
The policy outlook is firmly linked to progress in reducing the unemployment rate and moving the inflation rate back into the 2-3% policy band.
The risks around the outlook centre on the household sector and dwelling investment. The Bank remains generally comfortable with the outlook for business investment; government spending and external conditions.
Clearly, developments in the housing market, particularly in Sydney and Melbourne, are attracting considerably more attention than we had seen in the minutes of meetings held in 2018. In particular, the Bank’s current position that the effect of recent price falls on overall economic activity was expected to be relatively small is noted.
However, in a very significant warning around the policy outlook, the minutes state “if prices were to fall much further, consumption could be weaker than forecast, which would result in lower GDP growth, higher unemployment and lower inflation than forecast”. This statement directly links developments in house prices to the Bank’s key policy forecasts.
The causal mechanism would be around a larger wealth effect than currently expected impacting consumer spending, and a sharper downturn in residential building activity than has been recognised, even in the Bank’s new much more subdued forecasts relative to the November Statement on Monetary Policy.
Note that for the record, the RBA’s GDP growth is forecast at 3% in 2019 and 2.75% in 2020. These forecasts are down from 3.25% in 2019, and 3% in 2020. The downward revisions are largely attributed to softer consumption growth and a sharper downturn in dwelling investment.
Westpac has long argued that the RBA’s previous growth forecasts were too high, and indeed, our current forecasts for 2019 and 2020 of 2.6% are still below the RBA’s numbers.
The RBA’s handle on the outlook for housing prices in Sydney and Melbourne appears tenuous. The minutes note that the recent falls “were relatively large by historical standards, and that it was unusual for housing prices to fall significantly in an environment of low mortgage interest rates and a declining unemployment rate”.
Note that in previous periods of falling house prices, large interest rate cuts have followed, and were successful in stabilising the markets.
The current period of low mortgage rates means that the usual policy response to stabilise markets with large rate cuts will not be possible, and it is therefore not unreasonable to expect that further falls in house prices may occur.
Based on the comments in these minutes, such an outcome is likely to lead to further downward revisions in the RBA’s forecasts.
Conclusion
The minutes note that financial market pricing implied that the Australian cash rate was expected to remain unchanged for a considerable period with some expectation of a decrease by late 2019.
Over most of last year when markets; the RBA, and most economists were forecasting higher rates, Westpac’s view was consistently that rates would remain on hold in 2019 and 2020. That was largely because our growth, inflation and employment forecasts did not justify higher rates.
Our current forecasts remain lower than those of the RBA and we therefore expect that, over time, the RBA will further revise down their forecasts.
However  we do not think that those downward revisions will be sufficient to trigger a rate cut. As usual, our forecasts will continue to be reviewed.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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RBA emphasises the importance of house prices: Bill Evans

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The RBA has acknowledged the decline in housing turnover over the past year had "weighed on demand" for items such as household appliances and furnishings that are more likely to be purchased when moving into a new home.
"More generally, the decline in household wealth associated with falling housing prices has likely put some downward pressure on consumption growth," the February RBA statement of monetary policy noted.
"However, these recent falls have followed several years of very strong growth in prices," the RBA suggested.
"If households take a longer- term perspective of their wealth, they may look through the recent declines; even if they do react, it is unclear how quickly this might occur," the central bank advised.
The bank also noted the high level of household debt also remains a key consideration for household consumption. 
"In general, more indebted households are likely to be more sensitive to changes in their expected income growth and household wealth; consumption growth may be weaker for a time if households become concerned about their debt levels and choose to pay down debt more quickly. 
"It is also possible that households that are highly indebted or credit-constrained will be more sensitive to falling housing prices than to rising prices.
"Weaker housing construction and prices could have pervasive economic effects, it said.
The statement n monetary policy also noted there are a number of channels other than consumption through which housing market conditions can affect economic activity. 
"These channels have been incorporated into the central forecasts, but the effects are uncertain, particularly when there is uncertainty about the outlook for housing prices.
"The decline in housing prices will have a direct effect on dwelling investment but the timing and magnitude of the effect is uncertain. 
"The pipeline of work to be done is large and is expected to support dwelling investment for some time even though residential building approvals have already declined considerably.
The extent of the support from the pipeline could be more protracted than currently expected.
"But there is a risk that dwelling investment declines sooner and by more than currently forecast.
"This would have flow-on effects to the outlook for employment and household income.
"Very weak conditions in the earlier stages of residential development identified in business liaison point to further downside risk to dwelling investment in 2020 and beyond.
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There are also a number of indirect channels through which a decline in housing prices could affect the economy. 
"Lower housing prices could limit how much small businesses can borrow when using housing as collateral."
The report noted the decline in housing market turnover associated with the decline in housing prices has implications for business and household services, such as real estate and legal services.
"Changes in housing prices and turnover can also affect public demand through their effect on state government stamp duty revenue."
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Uncertainty on house prices set to impact on demand for appliances and furnishings: RBA 

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EXPERT OBSERVER
This month’s RBA Board meeting saw interest rates left on hold for a record 27th meeting in a row.
No surprises there.
Since its December meeting the RBA has become less upbeat - acknowledging that downside risks have increased globally, revising down its Australian growth forecasts from “around 3.5%” to “around 3% for this year and a little less in 2020”, acknowledging the threat to consumer spending from falling house prices, revising down its inflation forecasts yet again to 2% this year (from 2.25%) and sounding a bit more concerned about the downturn in house prices.
However, despite its growth and inflation downgrades and increased downside risks it retains the view that “further progress in reducing unemployment and having inflation return to target is expected” implying that it still believes that the next move in rates will be up rather than down. 
This probably explains why the $A bounced from around $US0.72 around the time of the rates announcement to around $US0.726 an hour or so later.
Tomorrow’s address by Governor Lowe and Friday’s Statement on Monetary Policy may provide greater clarity as to whether it retains its “next move is more likely to be up” bias on interest rates.
Nevertheless, our view is that RBA is underestimating the impact of the housing downturn on the economy – both directly via reduced housing construction and also indirectly via reduced consumer spending – and as a consequence we see weaker growth and lower inflation than the RBA is forecasting.
Consistent with this we have seen a string of soft economic data releases this year including for business conditions, business conditions PMIs, consumer confidence, retail sales, housing approvals and housing starts, house prices and job ads.
As a result our view remains that the RBA will cut the cash rate to 1% by year end.
DR SHANE OLIVER is the Head of Investment Strategy and Chief Economist at AMP Capital
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The RBA will cut the cash rate to 1% by year end: Shane Oliver

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Chris Joye's AFR column says the biggest winners from the royal commission are demonstrably the big banks while the largest losers are Australia’s mortgage brokers.
"Indeed, the top end of town have done an amazing job convincing everyone that brokers should be made the “fall guys” for their own deeds, surreptitiously fattening their profits, despite no evidence of pervasive misconduct," Joye noted.
Joye noted the single biggest cost a lender incurs when selling a home loan is the 0.6 per cent upfront commission and 0.2 per cent annual trailing commission that they pay to a mortgage broker.
Mortgage brokers currently settle around 59 per cent of all mortgages in Australia.
"If the royal commission has its way and/or Labor comes to power, these commissions will disappear completely, destroying the existing business models of the 20,000 mortgage brokers (and their employees) that rely on this revenue.
"This is horrific news for aggregator businesses that have built up large networks of brokers licenced by them in exchange for a share of the revenue they generate."
The only hope the latter have is to quickly shift into lending and securitising themselves, he says, adding the ban on broker commissions will radically reduce bank and non-bank mortgage distribution costs, which is "ironically going to be a huge profitability fillip for funders."
According to CBA evidence cited by the commission, a bank typically has to pay a mortgage broker $6,600 in fees to sell a loan via this channel, which accounts for almost 60 per cent of all residential mortgages written in Australia.
Under the commission’s proposal, these costs will disappear and be shunted on to consumers, whom CBA says should be prepared to pay about $2,310 for the service.
Brokers are also set to be regulated for the first time under the much stricter future of financial advice (FoFA) laws that apply to planners.
Mortgage brokers will be subjected to a "best interests" duty.
The government has said it will move to ban trailing commissions from July 2020, after the royal commission final report declared the chief value of trail commissions to the recipient, "to put it bluntly, is that they are money for nothing".
The government said it would not immediately adopt Commissioner Kenneth Hayne's call for upfront commissions to also be banned and be replaced by a customer-paid fee, which Labor indicated it would support.
 
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