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 international 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

Reserve Bank

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GUEST OBSERVER
The cash rate has been left at a record low of 2% for a fourth month. The Reserve Bank has left the outlook statement unchanged – almost word-for-word.
What does it all mean?
The last thing that Aussies want at the moment is volatility. So it is encouraging to see that official interest rates have been left unchanged for another month. And it is useful to reflect on the strong position that the Reserve Bank is in. Rates could easily be cut further, if there was the need. That is more than the central banks of most advanced economies can claim. 
The good news is that there is no need for the Reserve Bank to supply more stimulus to the economy. The cash rate is at record lows; market-determined interest rates aren’t far off record lows; the Aussie dollar is near 5-year lows; and the Government is providing stimulus via lower small business tax rate and asset write-down provisions.
Also consider the fact that inflation is at the low end of the 2-3% Reserve Bank target band. The economy continues to record modest, but not great, economic growth and unemployment is largely unchanged on a year ago. The lift in business investment expectations, lift in business spending and record levels for home building approvals highlights the momentum of the economy.
Was there the need to say something new or different? No. The only interesting point is that the Reserve Bank notes “stronger US growth” and also notes that the Federal Reserve is likely to increase rates “over the period ahead” rather than “later this year.” The Reserve Bank appears to be betting on a September rate hike.
On the Australian dollar there has been no change in the Reserve Bank view – seemingly Board members are “happy” with an Aussie near US71-72 cents: “The Australian dollar is adjusting to the significant declines in key commodity prices.”
On the economy, the Reserve Bank continues to mull whether the speed limit of the economy has declined: “In Australia, most of the available information suggests that moderate expansion in the economy continues. While growth has been somewhat below longer-term averages for some time, it has been accompanied with somewhat stronger growth of employment and a steady rate of unemployment over the past year.”
On home prices, the Reserve Bank continues to monitor developments closely: “Dwelling prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities. The Bank is working with other regulators to assess and contain risks that may arise from the housing market.”
Perspectives on interest rates <ul>
<li>The previous rate cut was in May 2015 (25 basis points), taking the cash rate to a record low of 2.00%.</li>
<li>There have been 10 rate cuts since November 2011.</li>
<li>The Reserve Bank had previously lifted rates seven times from October 2009 to November 2010 – a total of 1.75 percentage points, from 3.00% to 4.75%.</li>
</ul>
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<div class="column">What are the implications of today’s decision?</div>
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We remain on the belief that the Reserve Bank is reluctant to cut rates again, with the central bank questioning whether another rate cut would actually give the economy a boost or whether it would be counter-productive. If the Reserve Bank was to cut interest rates again – and it wasn’t in response to a major negative event – then it may very well be the case that many Australians would become less, rather than more, confident, questioning just how bad the economy really was if further rate cuts are deemed necessary.
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 Interest rates may not fall again this cycle. However, having said this, variable rates are unlikely to rise until 2016. The main area to watch is fixed interest rates. If the US Federal Reserve starts its rate hiking cycle in just over a fortnight, the risk is that fixed rates will start to lift across the globe.
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<div class="column">Investors still have plenty of attractive opportunities across financial markets to generate returns. But they need to do their homework. Term deposit rates remain low, but online cash accounts offer greater attraction. And many blue-chip shares are offering dividend yields including NAB (6.31%), Westpac (5.95%), BHP Billiton (6.61%) and Rio Tinto (5.92%). </div>
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Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>. </div>
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cjames-5S2v74qSNK

Interest rates locked in holding pattern: Craig James

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GUEST OBSERVER
The Reserve Bank has made some notable changes to its forecasts in its August Statement on Monetary Policy.
It has retained its forecast for GDP growth in 2015 at a below trend 2.5% but lowered its forecast for growth in 2016 from 3.25% to 3.0%.
It has retained its forecast for growth through to June 2017 at 3.5% and has added an even more optimistic forecast for 2017 of 3.75%.
The lower growth forecast in 2016 can be attributed to a weaker outlook for non-mining investment; lower forecast population growth; and a lower terms of trade (adjusted by 4% from the May Statement).
Significant attention is given in the Statement to the lower forecast for population growth. Annual population growth is forecast at 1.5% over the years to end 2017 – 0.25% below previous forecasts.
That forecast has implications for both demand and supply in the economy. On the demand side both investment and consumption can be expected to be somewhat weaker while growth in supply will also be lower.
Because of weaker supply growth the Bank has been able to adjust its forecast for unemployment despite weaker demand. In May the Bank forecast “unemployment will probably rise further to peak at 6.5% in mid - 2016 and remain elevated for longer”. It is now forecasting that “the unemployment rate is expected to remain little changed from recent levels for some time". Readers should note that this report was finalised on August 6 the day the unemployment rate was announced to have lifted from 6.1% to 6.349%. It is reasonable that the Bank has chosen to look through the monthly volatility of the employment reports and today’s Statement can be read as the Bank formally revising down its peak unemployment rate forecast from 6.5% to around 6%.
In taking 0.25% from its population growth forecast the Bank is effectively revising down its estimate of “trend” or” potential” growth. If, say, it now sees growth in productive capacity at nearer 2.75% than 3% then a lower demand forecast should NOT be interpreted as a signal that policy needs to be adjusted. Demand growth is now seen to be sufficient to stabilise unemployment and therefore rate cuts are seen to be less necessary despite the softer demand.
This discussion neatly overlooks that a central bank should not necessarily be comfortable with unemployment stabilising at above 6% when full employment is generally accepted in Australia to be below 5%.
However this point is covered in the 2017 forecast that growth will reach a stunning 3.75% - well above the assumed “potential” growth of 2.75% (using the lower population growth forecast) and consistent with a solid fall in the unemployment rate. With the drag from the contracting mining investment still set to be running at the current or even more intense pace and the lift from housing investment likely to be easing by then such a growth forecast in 2017 puts a lot of faith in a desired boost to consumer spending and associated non mining investment.
Fortunately the forecast is not based on some expected boost in the terms of trade. Although the Bank does not release point estimates of its terms of trade forecasts Graph 6.2 in the Statement indicates a reasonable assumption that the terms of trade will stabilise in 2016 and 2017.
The Bank’s recent forecasting record highlights downside risks to that forecast. Consider its growth forecasts back in November last year, 3% for 2015 and 3.5% for 2016. Those numbers now stand at 2.5% and 3% respectively.
Overall, however, taking these growth forecasts at face value indicates no pressing need for the Bank to deliver any further policy easing.
While we expected the Bank to lower its growth forecast for 2016 we did not expect it to revise up its very confident underlying inflation forecast for 2016. Recall that in May it revised down its underlying inflation forecast from 2.5% to 2.25%. That represented the first time since 2009 ( aftermath of the GFC) that the Bank had forecast underlying inflation, one year out, below the mid-point of the target range.
The reason given in the text for revising back up the inflation forecast was that the exchange rate assumption for the forecasts had fallen from USD 0.80 to USD 0.74 – a 7.5% fall in the AUD or a 5% fall in the TWI.
It would also be a factor that with the unemployment rate now not expected to rise the degree of spare capacity in labour market would be seen to have lessened imparting a more modest disinflationary pressure.
Other underlying assumptions behind the forecasts are also of interest. The oil price is assumed to be 25% lower than the price used in the May forecasts while the interest rate forecast assumed, ”that the cash rate moves broadly in line with market pricing”. The caveat that “this assumption does not represent a commitment by the Board to any particular path for policy” was noted, as was the case in both February and May.
In February market pricing assumed a 100% probability of a rate cut by May and a cut was duly delivered in May .In May market pricing assumed a 40% probability of a cut by August and no cut was delivered. Current market pricing is in line with May with around a 40% probability assumed by November.
The precedent from May does not provide much encouragement for those folks expecting a November move. It would have been much more interesting if the market pricing of recent weeks had prevailed where the probability of a November cut ranged between 60% and 80%.
Conclusion
Readers will be aware that Westpac expects that we are at the bottom of the cash rate cycle with the next move up not expected until well into 2017. The Bank’s forecasts are certainly in line with those views given its expectations of a 3.75% growth year in 2017. The forecasts for 2016, at 3%, with a stabilising unemployment rate, at around 6%, would be consistent with steady rates in 2015 and 2016.
If, however, it became clear by the second half of 2016 that a 3.75% year was in the offing in 2017 then that rate hike might be delivered earlier than our current timing. However we are much more doubtful about that prospect than appears to be the view of the Bank. Our current view is that 2017 is more likely to be nearer the bottom of the Bank’s 3-4.5% confidence band.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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Reserve Bank's noticeable forecast change: Bill Evans

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GUEST OBSERVATION
A widely expected ‘no change’ decision has now been announced over three consecutive months.
There is still the possibility of a further rate cut this cycle and chatter about this prospect will ebb and flow through the remainder of 2015.
A very low mortgage rate environment is very supportive of new home construction activity. The RBA’s signal that they won’t be taking rates higher in 2015/16 is obviously welcome.
Governments can complement the RBA’s current interest rate environment by progressing vital economic and taxation reform. The imperative for supply-side reforms in housing around planning timelines, land supply, infrastructure delivery, and inefficient taxation has never been greater. 
Successful reform outcomes would generate improved economic and productivity growth, greatly assisting the rebalancing of Australia’s economic growth.
The credit rationing to residential investors and higher barriers to new foreign property investment is, however, a different story entirely. These moves will have some adverse impact on new home building activity. 
You wouldn’t want these controls to get out of hand given new home construction is the key driver of domestic growth through the economy’s current rebalancing.
Harley Dale is chief economist at the Housing Industry Association and can be contacted <a href="https://au.linkedin.com/pub/harley-dale/52/bb7/b8" target="_blank">here</a>.
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Steady RBA rate is only part of the story: HIA's Harley Dale

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GUEST OBSERVER
What does it all mean?
The biggest change in the text accompanying the interest rate decision were the comments relating to the Aussie dollar. Since May last year the RBA has suggested that the Aussie dollar was too high in relation to commodity prices. In April 2015 the RBA indicated that further depreciation of the Aussie dollar was “likely”. And in recent months it has noted depreciation was “likely and necessary”. In the latest statement the RBA merely says that “The Australian dollar is adjusting to the significant declines in key commodity prices.” 
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<div class="column">That doesn’t mean that the Aussie dollar won’t fall further, but the RBA is seemingly happy with the adjustment that has occurred to date. In other words, the dollar is broadly where it needs to be. </div>
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<div class="column">In terms of the economy, the only real issue is the exuberance by property purchasers in Melbourne and Sydney. Still, banks have lifted interest rates on residential investment loans in response to requests from APRA to restrain investor enthusiasm. At the same time, the supply of residential properties is set to lift in Melbourne and Sydney over the coming 18 months judging by data on council approvals to build new dwellings. The increased supply of homes (new construction) will gradually meet the elevated demand and therefore temper growth in home prices. </div>
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<div class="column">The majority of private sector economists believe that official interest rates will be unchanged over the coming year. However, a small number of economists still believe that there is scope for the Reserve Bank to cut rates again. </div>
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On the economy, the Reserve Bank continues to mull whether the speed limit of the economy has declined: “In Australia, the available information suggests that the economy has continued to grow. While the rate of growth has been somewhat below longer-term averages, it has been associated with somewhat stronger growth of employment and a steady rate of unemployment over the past year.” 
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On home prices, the Reserve Bank is watching developments closely: “Dwelling prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities. The Bank is working with other regulators to assess and contain risks that may arise from the housing market.” 
<ul>
<li>Perspectives on interest rates </li>
<li>The previous rate cut was in May 2015 (25 basis points), taking the cash rate to a record low of 2.00%. </li>
<li>There have been 10 rate cuts since November 2011. </li>
<li>The Reserve Bank had previously lifted rates seven times from October 2009 to November 2010 – a total of 1.75 percentage points, from 3.00% to 4.75% </li>
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<a href="/images/2015/08/04/Screen%20Shot%202015-08-04%20at%203.55.09%20PM.png" target="_blank">Click to enlarge</a>
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What are the implications of today’s decision?
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We remain on the belief that the Reserve Bank is reluctant to cut rates again, with the central bank questioning whether another rate cut would actually give the economy a boost or whether it would be counter-productive. If the Reserve Bank was to cut interest rates again – and it wasn’t in response to a major negative event – then it may very well be the case that many Australians would become less, rather than more, confident, questioning just how bad the economy really was if further rate cuts are deemed necessary. 
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Residential property investors need to do their homework. Some lenders have lifted interest rates; other lenders have retreated either in part or in full from the residential investment property market. At the same time, a large number of apartment projects are underway across the country, especially in Melbourne and Sydney. 
</li>
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Those seeking a return on cash investments also have homework to do to ensure they are receiving the best returns available. 
CRAIG JAMES is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>.
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Biggest change from RBA on Aussie dollar: Craig James

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GUEST OBSERVER
As expected the Reserve Bank Board decided to leave the cash rate unchanged at 2.0%.
However, we were very surprised that in the Governor’s statement on the Australian dollar he did not repeat the sentence “Further depreciation seems both likely and necessary”. Since he introduced that language in May, the AUD has fallen from USD0.787 to USD0.728. This strategy had proved to be quite successful in ‘talking down’ the Australian dollar.
It was reasonable to expect that the strategy would be repeated given that even at USD0.728 the AUD was still above most estimates of fair value. However, the Governor’s statement was scaled back to merely observe that “The Australian dollar is adjusting to the significant declines in key commodity prices”. It is reasonable that markets will interpret this comment as indicating that the Bank no longer sees further depreciation of the AUD as “likely and necessary”.
This perception will impact market pricing for both the AUD and the outlook for interest rates. It is reasonable that a key explanation for markets pricing in around a 60% probability of a rate cut by November is the expectation that the Bank would continue to openly discuss the possibility of rate cuts. A key motivation behind cutting rates would be to further lower the AUD. That motivation now seems to have dissipated.
As we did expect, there are very few additional changes to this statement. The Bank remains confident that inflation will remain consistent with the target over the next one or two years and also notes that the economy is likely to be operating with a degree of spare capacity for some time yet.
In July, we noted that the Governor commented that the unemployment rate had been little changed recently and this was emphasised once again, noting somewhat stronger growth in employment and observing that the unemployment rate had been steady now over the past year. In a recent speech the Governor raised the issue that trend growth in the Australian economy may be lower than 3-3.25% partly explaining the stable unemployment rate despite growth only being 2.5%.
Despite recent evidence of rapid house price growth in both Sydney and Melbourne there was no elevated concern around the house price issue. Strong price rises were noted in Sydney with the qualification that trends were more varied in other cities.
Recent increases in interest rates for housing investors were not noted although the observation that the Bank was working with regulators to contain risks was repeated.
There was a mild surprise in the observation that weaker commodity prices largely reflected increased supply given that softer demand conditions must also be a relevant factor.
Finally, the Bank repeated its expectation that the Federal Reserve will start increasing its policy rate later this year. That move of course is likely to contribute to slowing down any recovery in the AUD that might come as a result of the markets’ perception that the RBA is no longer calling for a lower AUD. The Fed’s decision will be known by 17 September although markets are likely to become more focussed on that event than is currently the case where only a modest probability is given to a Fed move at that time.
Outlook
Clearly there is nothing in this statement that would motivate us to move away from our call that rates will remain on hold in 2015 and through the course of 2016.
As discussed, less urgency around the AUD weakens one argument for lower rates in 2015, although if the RBA observes a very strong market response then it may need to reinstitute its successful strategy at the September and/or October statements.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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RBA Governor's statement scaled back on dollar: Bill Evans

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GUEST OBSERVER
Going in to today’s meeting, economists and market participants were in agreement that rates would be left unchanged. As such, there was no surprise in the RBA’s decision to leave the cash rate unchanged at 2.0%.
There were a number of familiar themes in the Governor’s accompanying Statement. Indeed, a large chunk of the Statement was left unchanged from the July Statement (see page 2 for a comparison).
There was a distinct lack of forward guidance with the Bank noting, like last month, that “information on economic and financial conditions to be received over the period ahead will inform the Board's assessment of the outlook and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target”. In other words, another rate cut has not been ruled out. But equally, the RBA doesn’t have an explicit easing bias. What we previously described as a soft implicit easing bias has been further watered down by a change in narrative around the labour market and AUD.
The Bank has clearly become more comfortable with conditions in the labour market. After refraining from commenting on the labour market in last month’s statement, Governor Stevens stated that below trend growth, “has been associated with somewhat stronger growth of employment and a steady rate of unemployment over the past year.”
The previous mantra around AUD depreciation seeming likely and necessary to foster growth was noticeable in its absence. Instead, the Governor simply noted that, “the Australian dollar is adjusting to the significant declines in key commodity prices.” In our view, the change in rhetoric on the exchange rate is likely to reflect the Bank’s assessment that the AUD is trading in the ‘sweet spot’. That is, it’s now low enough to help the Australian economy rebalance, but not so low that is poses a risk to the inflation outlook.
The outlook
We have had a 2% terminal cash rate target for a while now and that remains our base case. Steven’s declaration two weeks ago that further rate cuts remain, “on the table” was hosed down when he said that, “it is not quite good enough simply to say that evidence of continuing softness should necessarily result in further cuts in rates, without considering the longer-term risks involved.”
The change in language today on the AUD and labour market was telling. The RBA would need to see conditions deviate from where they are now to pull the interest rate trigger again. Our take is that further monetary policy easing will be data dependent. This means that the recent strength in the labour market, coupled with a lift in a range of leading indicators, makes a near term rate cut look unlikely.
The focus now turns to Thursday’s employment report and the August Statement on Monetary Policy (SMP), published on Friday. In our view, the RBA is likely to leave its growth and inflation forecasts unchanged. Mechanically a lower AUD means some upside risk to growth and inflation forecasts. But these are likely to be tempered by a bigger than expected fall in the terms of trade. These opposing forces are likely to cancel each other out. 
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The RBA left the cash rate unchanged at a record low of 2.0% at the August meeting. 
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<div class="column">Gareth Aird is economist at Commonwealth Bank and can be contacted <a href="https://www.propertyobserver.com.au/https://au.linkedin.com/pub/gareth-aird/14/790/905" target="_blank">here</a>.</div>
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No surprise in the RBA’s August decision: Gareth Aird

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The Reserve Bank of Australia (RBA) has kept the official cash rate at 2.0% for August.
CoreLogic RP Data head of research Tim Lawless said rather than lifting interest rates in an effort to slow down the pace of appreciation in Sydney and Melbourne home values, the RBA will be looking towards recent prudential supervisory activities by APRA to dampen investment demand.
"We are expecting investor demand will start to moderate as investment loans are both more difficult and costly to obtain," Mr Lawless said
"Additionally, the cumulative effect of low rental yields, worsening affordability, record levels of new dwelling construction and the maturity of the growth cycle are likely to act as a disincentive to any further acceleration in investment demand across Sydney and Melbourne, despite the steady interest rate environment.
"With dwelling values continuing their stellar run of growth through July, the housing market was likely to be a key topic of conversation for the Reserve Bank when they deliberated the cash rate today. Australian regulators, including the RBA and APRA, were probably hoping to see value growth in the housing market decelerating during the winter months, however the opposite has been true in Sydney and Melbourne."
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RBA keeps rates on hold at August meeting

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Governor of the Reserve Bank, Glenn Stevens August 2015 statement.
At its meeting today, the Board decided to leave the cash rate unchanged at 2.0 per cent.
The global economy is expanding at a moderate pace, but some key commodity prices are much lower than a year ago. Much of this trend appears to reflect increased supply, including from Australia. Australia's terms of trade are falling nonetheless.
The Federal Reserve is expected to start increasing its policy rate later this year, but some other major central banks are continuing to ease policy. Hence, global financial conditions remain very accommodative. Despite fluctuations in markets associated with the respective developments in China and Greece, long-term borrowing rates for most sovereigns and creditworthy private borrowers remain remarkably low.
In Australia, the available information suggests that the economy has continued to grow. While the rate of growth has been somewhat below longer-term averages, it has been associated with somewhat stronger growth of employment and a steady rate of unemployment over the past year. Overall, the economy is likely to be operating with a degree of spare capacity for some time yet. Recent information confirms that domestic inflationary pressures have been contained. That should remain the case for some time, given the very slow growth in labour costs. Inflation is thus forecast to remain consistent with the target over the next one to two years, even with a lower exchange rate.
In such circumstances, monetary policy needs to be accommodative. Low interest rates are acting to support borrowing and spending. Credit is recording moderate growth overall, with growth in lending to the housing market broadly steady over recent months. Dwelling prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities. The Bank is working with other regulators to assess and contain risks that may arise from the housing market. In other asset markets, prices for equities and commercial property have been supported by lower long-term interest rates. The Australian dollar is adjusting to the significant declines in key commodity prices.
The Board today judged that leaving the cash rate unchanged was appropriate at this meeting. Further information on economic and financial conditions to be received over the period ahead will inform the Board's ongoing assessment of the outlook and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target.
 
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Sydney property rising strongly: RBA Governor Glenn Stevens' August 2015 statement

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GUEST OBSERVER
The minutes of the monetary policy meeting of the Reserve Bank Board provided no real surprises from the perspective of the policy outlook.
Consistent with the Governor’s statement which was released shortly after the July Board meeting the Board still points out that the Australian dollar had provided less assistance to the economy than would normally be expected and “further depreciation seemed both likely and necessary”.
The outlook for policy remains data dependent with the Board concluding that “information to be received over the period ahead on economic and financial conditions would continue to inform the Board’s assessment of the outlook and hence whether the current stance of policy remained appropriate”.
There was no real enthusiasm about the outlook for growth. Indeed, it was noted that: “early indications were that the strength in the March quarter had not carried through to the June quarter”. Investment intentions remain subdued despite non-mining business profits having increased over the past year and surveys of business conditions improving over recent months.
Of most interest was the discussion around the labour market. Recall that a key policy guideline for the Bank has been that if the economy grows below trend (generally assessed as 3%) then the unemployment rate can be expected to edge up. Over the last year or so, growth in the economy has been stuck around a sub-trend 2.5%yr yet the unemployment rate has remained steady. The Bank attributes that to slowing population growth (1.4% for the 2014 year compared to a peak 1.8% in 2012). It is argued that easing population growth is consistent with below average growth in output and a steady unemployment rate. That may mean that the Bank is reassessing its assessment of trend growth at 3-3.25%. However, the Board is not satisfied with the current level of unemployment arguing that spare capacity remains and that wages growth remains historically low (lowest year end outcomes since the early 1990s) and that unit labour costs have been little changed over four years. Such developments indicated that inflationary pressures were well contained and likely to remain so.
The discussion around housing provided no new insights. The outlook for dwelling investment remains strong while house prices continue to grow rapidly in Sydney and to a lesser extent Melbourne. At this stage there was no evidence that the regulators’ greater scrutiny of investor housing was affecting growth.
Consumption spending continues to disappoint although it has been growing at a faster pace than household income. We were surprised to note that the Banks’ liaison suggested that retail sales were likely to be flat in June, despite the expected lift from the generous tax concessions provided to small business in the Budget.
On the international front there was a slightly more positive take on the Chinese property market: “Chinese property markets had improved somewhat and residential property prices had risen for the first time in a year”. Overall growth in Australia’s major trading partners appeared to have been around average in the June quarter.
Westpac expects that the first tightening by the US Federal Reserve will occur in September. The minutes point out that market pricing suggests a later date although they also highlight commentary from Fed officials that suggests it could be a little sooner. This is far from definitive but it is not unreasonable to conclude from this commentary that the Board is also expecting an earlier move.
The Bank now provides helpful analysis of the impact of mortgage offset accounts on overall household debt. The Board points out that despite this adjustment the household debt to income ratio had increased over the year although there was no apparent discomfort with that observation.
The outlook
From my perspective the most significant insight from these minutes is the reconciliation of below trend growth and steady unemployment. On the one hand that may signal that any decision from the Bank to lower its growth forecast for 2016 below 3% (previously accepted trend) may not necessarily signal a need to cut rates if trend growth is in fact now lower due to weaker population growth. On the other hand the Board makes it clear that it is still uncomfortable with the level of the unemployment rate. Stability in that rate at a rate of growth below previously accepted trend is not enough to argue against further stimulus while spare capacity operates in the labour market.
Markets are giving only a limited chance to a rate cut in August but still persist with around a 70% chance of a move by November. We still believe that there will be insufficient evidence on the growth outlook in 2016 by then and, given a clear apparent high degree of uncertainty from the Bank, would not see the first window for a cut coming before early 2016.
From our perspective evidence around activity momentum in the second half of 2015 will not be apparent until the first half of 2016 and therefore any policy adjustment would need to wait until then.
We are currently looking for some modest improvement in growth in 2016 back towards around 3%, a level that would likely maintain steady rates. Accordingly we maintain our call that rates will remain on hold over the course of 2015 and 2016.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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RBA minutes indicate future policy will be data dependent: Bill Evans

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The Reserve Bank of Australia has called on the federal government to review the capital gains tax break for investment property suggesting it was directing too much money into residential housing.
The call came in its submission to the federal parliament's latest home ownership inquiry.
While the Reserve Bank acknowledged in its housing inquiry submission that negative gearing can assist in keeping rents down, it noted how it worked with other tax rules "may have the effect of encouraging leveraged investment in property."
"The bank believes there is a case for reviewing negative gearing, but not in isolation," the bank said.
"It's interaction with other aspects of the tax system should be taken into account."
The RBA's suggestions follows David Murray, head of the Abbott government's financial system inquiry, seeking a review of capital gains tax and negative gearing.
The head of the government's audit commission, businessman Tony Shepherd also recently recommended lifting the capital gains tax rate to a person's own income tax rate.
"I can't see any reason to treat capital gains any different from income gains," he said last month.
"And I think it does in fact probably lead to a greater emphasis in some respects on negative gearing." 
The RBA noted the proportion of the housing stock owned by investors looks to have risen over recent decades, offsetting the decline in the prevalence of public housing.
" The investor share is also likely to have risen a little further over the past few years, as investors have accounted for an increasing share of property purchases since 2012. 
"Data on the proportion of residential property transactions that involve investors as purchasers or sellers are not readily available, but loan approvals data give some guide as to the prevalence of investors as purchasers. 
"Investors’ share of loan approvals has risen from a little over 30 per cent in 2011 to almost 40 per cent recently, with the increase most pronounced in New South Wales. 
"As noted in 2014, prudent limits on loan sizes are less binding for property investors that have significant equity to deploy than for some other purchasers. 
"Typically the interest rate used to calculate allowable loan sizes does not fall as much as actual interest rates, or only up to a point; this practice has been strengthened recently in light of recent guidance issued by APRA (2014). 
"This means the marginal borrower has less scope to increase their loan size as interest rates fall. This practice is in the long-term interest of borrowers, as it helps ensure they can still service the loan once interest rates rise again. 
"However, it does mean that borrowers for whom these constraints are not binding appear to have a relative advantage during periods of low interest rates, since they can increase their loan size and make larger offers for specific properties. 
"In the Australian environment, the most constrained borrower is usually a first home buyer and the less constrained borrowers are investors or trade-up buyers with considerable equity. 
"As such, this might help to explain the low share of first home buyers in recent new lending for housing. 
"Reductions in state government incentives for first home buyers (of established housing) could also have contributed to this outcome. 
"It also implies that the increase in investor demand is likely to have contributed to the recent strong growth in housing prices, particularly in Sydney," the bank noted.
The submission can be downloaded <a href="https://www.rba.gov.au/publications/submissions/inquiry-into-home-ownership/index" target="_blank">here</a>.
 
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