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

<html><body>
GUEST OBSERVER
The Reserve Bank has maintained its “neutral stance” – meaning that rate hikes are as likely as rate cuts in the period ahead.
In practice though no change in rates is likely.
What does it all mean?
The Reserve Bank Board is comfortably on the interest rate sidelines. Much would need to go wrong at home and/or abroad for the Reserve Bank to cut rates again. At the same time, rate hikes are off the agenda. In essence policymakers are giving households and business more time to work with record low interest rates, and forget about rate movement and get on with spending, hiring and investing.
There are signs that the economy is lifting from its early 2017 malaise. Retail activity is lifting, unemployment is at 4-year lows, job vacancies are at 61⁄2-year highs and importantly record home building and a large pipeline of infrastructure spending will support the economy over 2017.
The key is how business investment plans evolve over the coming year. And most of the indicators suggest that the future outlook is encouraging. Corporate Australia is being supported by strong business conditions, upbeat confidence, high capacity use, and healthy profits – all conducive to a lift in hiring and investment over the coming year.  
No surprises there are still a couple of ‘hot button’ issues to monitor at present: home prices; household debt levels, subdued wage growth and the Aussie dollar. And while policymakers remain upbeat about the medium term prospects for the economy there is a clear understanding that “consumption growth remains subdued” largely due to “slow growth in real wages and high levels of household debt”. 
Importantly the RBA reiterated its view that while the “growth in housing debt has outpaced the slow growth in household incomes. The recent supervisory measures should help address the risks associated with high and rising levels of household indebtedness”.
Perspectives on interest rates 
The Reserve Bank has left the cash rate at 1.50 per cent. The previous move was a rate cut in August 2016 (25 basis points). There have now been 12 rate cuts since November 2011, with the Reserve Bank cutting rates from 4.75 per cent to 1.50 per cent. 
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 per cent to 4.75 per cent. 
What are the implications of today’s decision? 
<a href="https://www.propertyobserver.com.au/images/2017/07/05/Screen%20Shot%202017-07-05%20at%208.07.08%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/05/Screen%20Shot%202017-07-05%20at%208.07.08%20AM.png" alt="">
 
There is no urgency for rates to move in any direction. On the positive side of the ledger are record corporate profits; strong business conditions; a lift in infrastructure spending; firm home building; and the prospect of further job growth.
On the other side of the ledger, wage and price growth is low; consumer spending is fluky; home price growth is slowing; and the Aussie dollar remains firm.
The Reserve Bank is expected to maintain its neutral policy stance for an extended period.We expect the Reserve Bank to stay on the interest rate sidelines for the 2017 year.
Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/">CommSec</a> 
<div class="page" title="Page 1">
<div class="section">
<div class="layoutArea">
<div class="column"> </div>
</div>
</div>
</div>
</body></html>

jchancellor-FAypfDUnLy

Reserve Bank alert but not alarmed

<html><body><div class="page" title="Page 1">
<div class="section">
<div class="layoutArea">
<div class="column">
GUEST OBSERVER
Higher home prices: The Bureau of Statistics reports that Australian home prices rose by 2.2 per cent in the March quarter to stand 10.2 per cent higher over the year.
More homes: At the end of March there were 39,800 more homes than at the end of December. But the number of NSW homes rose by just 7,600 – the smallest quarterly gain in three years.
Reserve Bank Board minutes: The minutes from the June 6 Board meeting shows the Reserve Bank weighing up a raft of factors including the Federal Budget, signs of improvement in retail spending and reports of localised labour shortages feeding into higher wages.
Consumer confidence eases: The weekly ANZ/Roy Morgan consumer confidence rating eased from an 8- week high of 112.9 to 112.4 in the week to June 18.
The Reserve Bank Board minutes provides guidance on interest rate settings. Consumer confidence data is important for retailers. The residential property price data is important for housing-dependent businesses.
<a href="https://www.propertyobserver.com.au/images/2017/06/20/Screen%20Shot%202017-06-21%20at%208.18.33%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/20/Screen%20Shot%202017-06-21%20at%208.18.33%20AM.png" alt="">
What does it all mean?
It is taking some time for homes to be built to meet the demands of the population. That is particularly the case in NSW where the number of homes lifted by just 7,600 in the March quarter – the smallest gain in three years. Based on recent trends, the NSW population may have lifted by around 30,000 people in the March quarter. As the Reserve Bank has observed, the preference for apartment building is creating delays for home supply to bridge the gap with demand.
The wealth held in Aussie homes has passed $6,600 billion, up almost 11 per cent over the past year. While many bemoan poor housing affordability, wealth levels continue to soar for the two-thirds of Aussies that own homes or are paying them off.
The Reserve Bank Board has given no hints that rates will change any time soon. Board members considered all manner of factors at the June meeting although it is clear that the housing are job markets are being watched carefully. Since the meeting, data shows stronger job markets but softer home prices, further entrenching the Reserve Bank on the interest rate sidelines.
Consumer confidence remains just OK. Aussie consumers still believe that it is a good time to buy a major household item like a fridge or TV, but they are fretting over bills like council and utility rates and insurance premiums. And then there is the on-going adjustment to the new reality that annual wage growth will be closer to 2 per cent rather than 3- 4 per cent as in the past. 
What do the figures show?
Reserve Bank Board minutes:
Last paragraph: “The Board continued to judge that developments in the labour and housing markets warranted careful monitoring. Taking into account all the available information, including that year-ended growth in output was expected to have slowed in the March quarter, the Board judged that holding the accommodative stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.”
“ wage growth and inflation were expected to increase gradually as the economy strengthened.”
“ economic growth was still expected to increase gradually over the next couple of years to a little above 3 per cent per annum.”
“Over recent times, with interest rates at low levels, the Board has set monetary policy to support the economy in its transition following the mining investment boom, while also paying close attention to trends in household borrowing and related financial stability considerations. Members discussed the effect of monetary policy decisions on financial stability and on future inflation, employment and output. They also discussed the role that prudential supervision can play in promoting financial stability. In view of this, members acknowledged the importance of a strong relationship between the Bank and other regulators, particularly APRA.”
“According to liaison and survey data, retail trading conditions had remained challenging, although they had appeared to have improved a little since the start of the year, and this assessment had been supported by the large rise in retail sales in April.”
“Liaison suggested that, while wage growth is likely to remain subdued for some time yet, there had been isolated reports of localised and skills-specific labour shortages feeding into higher wages.”
“The Australian Government Budget had reported little change to the expected cash deficits over the next few years and, as a result, had had little effect on the Bank's near-term outlook for the Australian economy. Some new large infrastructure projects had been announced as a part of the Budget, but most of that spending would occur after 2019.”
Residential property prices
The Bureau of Statistics (ABS) has released its Residential Property Price indexes.
“The price index for residential properties for the weighted average of the eight capital cities rose 2.2 per cent in the March quarter 2017. The index rose 10.2 per cent through the year to the March quarter 2017.
The capital city residential property price indexes rose in Sydney (+3.0 per cent), Melbourne (+3.1 per cent), Adelaide (+1.5 per cent), Canberra (+2.8 per cent) and Hobart (+3.4 per cent) and fell in Perth (-1.0 per cent) and Darwin (-0.9 per cent). Brisbane was flat (0.0 per cent).
Annually, residential property prices rose in Sydney (+14.4 per cent), Melbourne (+13.4 per cent), Hobart (+11.3 per cent), Canberra (+8.9 per cent), Adelaide (+5.0 per cent) and Brisbane (+3.5 per cent) and fell in Darwin (-5.9 per cent) and Perth (-3.5 per cent).
The ABS notes that as at March 2017 there were 9.858 million homes in Australia. In the March quarter the number of homes rose by 39,800 with an extra 11,200 homes in Victoria, 9,600 homes in Queensland and 7,600 homes in NSW.
<a href="https://www.propertyobserver.com.au/images/2017/06/20/Screen%20Shot%202017-06-21%20at%208.19.43%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/20/Screen%20Shot%202017-06-21%20at%208.19.43%20AM.png" alt="">
“The total value of residential dwellings in Australia was $6,602,132.3 million at the end of the March quarter 2017, rising $163,122.9m over the quarter.
The mean price of residential dwellings rose $13,900 to $669,700 and the number of residential dwellings rose by 39,800 to 9,858,400 in the March quarter 2017
Consumer sentiment
The weekly ANZ/Roy Morgan consumer confidence rating eased from 112.9 to 112.4 in the week to June 18.
But confidence is down 3.3 per cent over the year and below the average of 113.2 since 2014. 
Three of the five components of the index rose in the latest week:
<ul>
<li> The estimate of family finances compared with a year ago was down from +9 to zero;</li>
<li> The estimate of family finances over the next year was unchanged at +23;</li>
<li> Economic conditions over the next 12 months was up from -7 to -6;</li>
<li> Economic conditions over the next 5 years was up from +1 to +4;</li>
<li>The measure of whether it was a good time to buy a major household item was up from +38 to +41:</li>
</ul>
What is the importance of the economic data?
The Reserve Bank releases minutes of its monthly Board meeting a fortnight after the event. The minutes give a guide to Reserve Bank thinking on interest rate settings.
The Australian Bureau of Statistics (ABS) provides quarterly data on residential prices. The figures provide further perspectives on the state of the housing purchase sector.
The ANZ/Roy Morgan weekly survey of consumer confidence closely tracks the monthly Westpac/Melbourne Institute consumer sentiment index but the former measure is a timelier assessment of consumer attitudes and is now closely tracked by the Reserve Bank.
What are the implications for interest rates and investors?
CommSec expects the Reserve Bank to remain on the interest rate sidelines for an extended period.
It takes time to build apartments – especially in light of the more common high-rise developments that dot the Sydney landscape. The homes are coming but the gap between demand and supply is closing only slowly. The longer it takes for the homes to be built, the greater the upward pressure on prices. The risk is that housing supply will come on with a rush, leading to a messy correction of home prices.
According to the Bureau of Statistics, sales of combined houses and apartments in Sydney in the March quarter were the lowest in 14 years. That is remarkable in a city where population is growing faster than the average rate over the past decade.
The Reserve Bank Board has highlighted the importance of the ‘third wheel’ – that is, regulatory policy to complement monetary and fiscal policy. But no arm of policy is precise in its impact on the economy so regulators must stand ready to change policy when required. 
Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>.
</div>
</div>
</div>
</div></body></html>

cjames-5S2v74qSNK

Not enough homes, rates firmly on hold: Craig James

jonathanchancellor-7SQnKwU6yx

Minutes of June 2017 Monetary Policy Meeting of the Reserve Bank Board

<html><body>
The June RBA chart pack highlights the stats influencing the central bank.
The following charts illustrates what the Reserve Bank of Australia knows about Australia's household finances, housing prices and residential building approvals.
<a href="https://www.propertyobserver.com.au/images/2017/06/14/Screen%20Shot%202017-06-14%20at%2012.49.31%20PM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/14/Screen%20Shot%202017-06-14%20at%2012.49.31%20PM.png" alt="">
 
<a href="https://www.propertyobserver.com.au/images/2017/06/14/Screen%20Shot%202017-06-14%20at%2012.51.44%20PM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/14/Screen%20Shot%202017-06-14%20at%2012.51.44%20PM.png" alt="">
<a href="https://www.propertyobserver.com.au/images/2017/06/14/Screen%20Shot%202017-06-14%20at%2012.47.57%20PM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/14/Screen%20Shot%202017-06-14%20at%2012.47.57%20PM.png" alt="">
 
</body></html>

RBA's June chart pack reveals house price movements

<html><body>
Statement by Philip Lowe, Governor: Monetary Policy Decision
At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 percent.
The broad-based pick-up in the global economy is continuing. Labour markets have tightened further in many countries and forecasts for global growth have been revised up since last year. Above-trend growth is expected in a number of advanced economies, although uncertainties remain. In China, growth is being supported by increased spending on infrastructure and property construction, with the high level of debt continuing to present a medium-term risk. Commodity prices are generally higher than they were a year ago, providing a boost to Australia's national income. The prices of iron ore and coal, however, have declined over recent months as expected, unwinding some of the earlier increases.
Headline inflation rates in most countries have moved higher over the past year, partly reflecting the higher commodity prices. Core inflation remains low, as do long-term bond yields. Further increases in US interest rates are expected over the year ahead and there is no longer an expectation of additional monetary easing in other major economies. Financial markets have been functioning effectively.
Domestically, the transition to lower levels of mining investment following the mining investment boom is almost complete. Business conditions have improved and capacity utilisation has increased. Business investment has picked up in those parts of the country not directly affected by the decline in mining investment. Year-ended GDP growth is expected to have slowed in the March quarter, reflecting the quarter-to-quarter variation in the growth figures. Looking forward, economic growth is still expected to increase gradually over the next couple of years to a little above 3 per cent.  
Indicators of the labour market remain mixed. Employment growth has been stronger over recent months, although growth in total hours worked remains weak. The various forward-looking indicators point to continued growth in employment over the period ahead. Wage growth remains low and this is likely to continue for a while yet. Inflation is expected to increase gradually as the economy strengthens. Slow growth in real wages is restraining growth in household consumption.
The outlook continues to be supported by the low level of interest rates. The depreciation of the exchange rate since 2013 has also assisted the economy in its transition following the mining investment boom. An appreciating exchange rate would complicate this adjustment.
Conditions in the housing market vary considerably around the country. Prices have been rising briskly in some markets, although there are some signs that these conditions are starting to ease. In other markets, prices are declining. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Rent increases are the slowest for two decades. Growth in housing debt has outpaced the slow growth in household incomes. The recent supervisory measures should help address the risks associated with high and rising levels of indebtedness. Lenders have also announced increases in mortgage rates, particularly those paid by investors and on interest-only loans.
Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.
<a href="https://www.rba.gov.au/media-releases/2017/mr-17-12" target="_blank">The RBA statement</a>.
</body></html>

First signs housing price growth was easing: RBA Governor Philip Lowe's June 2017 statement

<html><body>
At its meeting today, the Reserve Bank Board decided to leave the cash rate unchanged at 1.5 percent.
RBA Governor Philip Lowe said that conditions in the housing market vary considerably around the country.
"Prices have been rising briskly in some markets, although there are some signs that these conditions are starting to ease," he said.
"In other markets, prices are declining. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years."
Tim Lawless, CoreLogic head of research, said while the cash rate has remained on hold in June, financial markets are starting to lean more towards a cut in official interest rates rather than a stable rate setting.
"Importantly, one of the key barriers to rate cuts - the hot housing markets of Sydney and Melbourne - have shown signs of slowing," he said.
"CoreLogic has reported only one month of negative dwelling value movements, albeit during the seasonally weak month of May.
"However, if this recent slowing develops into a more sustained trend, the RBA may be able to consider alternative scenarios to a steady cash rate.
"The last time rates were cut, which was May and August of 2016, the housing market reignited with capital gains accelerating and investors surging back into the market.
"The situation is very different now, with new macro prudential regulations dampening investment demand while mortgage rates have stepped higher, particularly for investors and interest only borrowers.
"The housing market will be the subject of much scrutiny over coming months, particularly the Sydney and Melbourne markets where CoreLogic figures show dwelling values have risen by approximately 75 percent and 55 percent respectively over the past five years.
"A longer trend of slowing value growth and overall softer housing conditions will lend further support to the notion that house price growth has moved through its cyclical peak and may take some pressure away from the RBA to keep rates steady especially given that other sectors of the economy other than housing seeming need interest rates set at a lower level to what they currently are.”
AMP Capital chief economist Shane Oliver took to Twitter.
"RBA on hold as exp: slower Q1 growth but to still exps rise to 3% growth; slower growth in wages constraining holds; signs of easing in Syd &amp; Melbourne," he tweeted.
"RBA <a class="twitter-hashtag pretty-link js-nav" href="https://twitter.com/hashtag/RBA?src=hash" data-query-source="hashtag_click"></a>bias still looks neutral overall. Our view remains rising risk of another rate cut given soft consumer, wages &amp; inflation. Housing to slow."
</body></html>

RBA holds again as brisk housing price growth starts to ease: June 2017

<html><body>
With the Australian Prudential Regulation Authority (APRA) clamping down on interest-only loans, experts and economists think interest-only borrowers may have a hard time refinancing to principal and interest loans, according to finder.com.au, the comparison website.   All 33 experts and economists in the monthly <a href="https://www.finder.com.au/rba-cash-rate" target="_blank" rel="noopener noreferrer">finder.com.au RBA survey</a>, which is the largest of its kind in Australia, are expecting the cash rate to hold at 1.5 percent at today's board meeting.   When asked about future cash rate movements (regardless of when it will happen), the majority (80 percent, 24 of 30) of panellists think the next move will be a rise.    Of the minority who are expecting a cash rate fall, most of this group believe the rate will dip no lower than 1.00 percent. However, Stephen Koukoulas of Market Economics and Jordan Eliseo of ABC Bullion believe the rate will fall even lower to 0.75 percent and 0.50 percent respectively.
"The RBA continues to place far too much weight on Sydney and Melbourne housing markets and not enough on the rest of the economy which is crying out for lower interest rates," Stephen Koukoulas, Market Economics said.   The majority of experts and economists (74 percent) expect the next rise to come in 2018. However, some are indicating that a rise may be due sooner with four respondents anticipating a rise between October and December this year.   As APRA is aiming to keep all new interest-only loans below 30% of total new residential mortgages, most panellists (57 percent) surveyed on this topic believe borrowers switching from interest-only to principal and interest, or those whose fixed interest-only terms are nearing expiring, may have a hard time refinancing.   Graham Cooke, Insights Analyst, at finder.com.au, says with potential rate rises in store, interest-only borrowers may be hit the hardest.   “Borrowers shifting from an interest-only loan to a principal and interest loan may be struck with a higher repayment initially, and they may find it difficult to service the principal portion, but ultimately it’s important to pay down the principal of the loan.   “With the next rate move likely to be in a positive direction, and with many lenders already lifting product rates, interest-only mortgage holders will be the most directly affected,” he says.   For example, for a $800,000 interest-only loan with 4 percent interest, repayments will be $2,667 versus $3,819 for those borrowers also paying down the principal.    However, increasing the interest rate from 4 percent to 6 percent would up the interest-only loan repayments by $1,333 per month, yet the principal and interest repayments would rise by only $997.   “To shield yourself from rate rises, look at your budget and find ways to free up your cash flow so you can cope with higher repayments. For instance, you may decide to consolidate personal debt to save on account fees or ongoing interest charges,” he says.   Regarding Standard &amp; Poor (S&amp;P)’s recent downgrading of 23 Australian financial institutions, most panellists (15, 63 percent) thought S&amp;P’s perception of the increased risk of a sharp fall in property prices was not justified. However, nine (37 percent) disagreed.   “We’re looking at a higher-interest future. So it’s time to start planning for higher interest rates," Mr Cooke says.    “Interest-only investors are reliant on prices continuously going up, but we’re starting to see prices either slow or fall in some cities across the country, so ensure you have a 2-3% buffer to cushion yourself against any future rate rises." Here’s what our experts had to say:
 Jordan Eliseo, ABC Bullion (Hold): "There is no compelling case to move rates in either direction at this stage. Despite generally soft economic data (today's retail sales notwithstanding), we expect the RBA will wait to see further evidence that the Australian property market is indeed cooling, before cutting rates in the second half of this year."   Shane Oliver, AMP Capital (Hold): "Not enough has changed since the last meeting when the RBA actually revised up slightly its growth outlook."   John Hewson, ANU (Hold): "Insufficient info so monitoring data."   Alison Booth, Australian National University (Hold): "The fundamentals are little changed."   Darryl Gobbett, Baillieu Holst (Hold): "The RBA will still be concerned about systemic stability being possibly adversely impacted by increased debt if rates were cut while likely seeing little benefit to increased growth. Uncertainty about impacts of  a rate rise with the current economic, property and political uncertainties put well off the possibility of a rate rise."   Peter Munckton, Bank of Queensland (Hold): "The economy is improving, and the RBA would prefer not to reduce rates."   Dr Kishti Sen, BIS Oxford Economics (Hold): "The Reserve Bank won't cut rates because it won't improve business investment. Business investment remains weak despite historically low financing rates. In addition, recent increases in the residential property market have been too high. They won't raise rates as underlying inflation is expected to remain close to 2% over the next two years."   Paul Dales, Capital Economics (Hold): "The RBA is willing to put up with underlying inflation being below its 2-3% target range as long as the unemployment rate remains below 6% and as long as it is still worried about the strong housing market and high level of household debt. In other words, lower interest rates may just exacerbate the housing issue."   Michael Blythe , CBA (Hold): "House price concerns vs low inflation."   Savanth Sebastian, CommSec (Hold): "RBA comfortable about the medium term outlook for Australia. Is likely to keep a close eye on how household consumption evolves over the rest of this year."   Dr Andrew Wilson, Domain Group (Hold): "Although case growing for a cut in rates Bank still more likely to continue with optimistic steady settings - but decision should be closer than recent as ANOTHER negative quarter of GDP looms."   Scott Morgan, Greater Bank (Hold): "Current data indicates that there will not be a change."   Mark Brimble, Griffith University (Hold): "The outlook is weak for the next 12-24 months and thus the bias is for the economy needing more support.  The financial institutions have not helped by pushing rates up, however this has assisted with APRA's desire to reduce property and credit risks.  All in all, the RBA is likely to sit on its hands again."   Shane Garrett, Housing Industry Association (Hold): "Inflation is at comfortable rate, growth does not require further support at this time. The foreign exchange rate is balanced."   Paul Bloxham, HSBC (Hold): "Because underlying inflation is past its trough."   Alex Joiner, IFM Investors (Hold): "There is no justification for a rate move. If anything economic performance and risks still suggest there should be an easing bias and property markets/debt accumulation suggest a tightening one. The former argument remains stronger in my view."   Michael Witts, ING Bank (Hold): "The RBA would be happy with the current state of the economy and will await until the release of Q1 GDP data before considering interest rate changes."   Leanne Pilkington, Laing+Simmons (Hold): "The latest data suggests subdued house price easing is occurring in major markets, there are conflicting opinions on the near-term growth prospects of the economy, the crackdown on interest-only loans seems to have caused investors to back off, and the threat of the major banks adjusting rates to counter the bank levy cannot be entirely discounted. A steady cash rate is the constant among this broader uncertainty.”   Nicholas Gruen, Lateral Economics (Hold): "Because the economic is flat and, though it would like to increase rates, the economy remains sluggish."   Matthew Tiller, LJ Hooker (Hold): "No material change in economic environment since RBA last met."   Stephen Koukoulas, Market Economics (Hold): "RBA continues to place far too much weight on Sydney and Melbourne housing markets and not enough on the rest of the economy which is crying out for lower interest rates."   John Caelli, ME (Hold): "The RBA won’t cut rates because it remains concerned about fuelling further increases in house prices and household debt."   Michael Yardney, Metropole Property Strategists (Hold): "Our economy is stumbling along so until job numbers improve it would be safe to assume the RBA won’t be hiking interest rates to slow the property markets down. On the other hand they can't afford to drop rates and fuel our property markets. So rates will remain on hold."   Mark Crosby, Monash University (Hold): "While there are some indicators of softening inflation and weakness in the economy, including slowing house price growth there is no case for a rate cut. Given this weakness and a softer US inflation outlook reducing the probability of an imminent Fed rate increase, there is also little case for raising rates."   Christopher Schade, MyState Bank (Hold): "The hurdle for another cut is high. While inflation remains subdued and the outlook for economic growth over the next year couple of years is slightly below trend, interest rate settings in Australia are very accommodative and remain appropriate at their current level. The RBA appears particularly reluctant to deliver further cuts given heightened financial risks on the back of high household debt levels."   Saul Eslake, Economist (Hold): "Nothing has happened since the last meeting that is likely to have materially altered the RBA's view of the outlook for inflation, economic growth or unemployment from that set out in the May Statement on Monetary Policy, and hence nothing will have altered their view that current monetary policy settings are appropriate."   Alan Oster, Nab (Hold): "RBA still weighing rates v house prices. Too early to tell"
Jonathan Chancellor, Property Observer (Hold): "They are low enough for the bank to continue to watch as is."   Noel Whittaker, QUT (Hold): "No reason to move either way."   Nerida Conisbee, REA (Hold): "The RBA still likely to be concerned about economic growth and particularly underemployment and low inflation. Unwilling to cut due to the state of housing. RBA will be cautious not to accelerate. For home buyers the RBA's decision doesn't really matter as banks will increase rates anyway driven by APRA and potential banking tax."   Christine Williams, Smarter Property Investing (Hold): "Retail spending over this month will increase due to retail sales and EOFY, which in turn will increase the nation's credit card debt. This will portray a false positive outlook from an economic point of view."   Janu Chan, St.George Bank (Hold): "RBA unlikely to have altered its on hold stance over the past month. Housing indicators suggest cooling conditions but its concerns over risks associated with housing and household debt will remain. Employment was the other development the rba is watching closely. On this front the fall in the unemployment rate would have been encouraging."   Steven Milch, Suncorp (Hold): "Mixed economic signals don't adequately make the case to cut or hike at this stage."
</body></html>

j.ballantyne1990-6AQqhLzZaK

RBA to hold at June 2017 meeting, but the Kouk expects three more cuts

<html><body><div class="page" title="Page 1">
<div class="section">
<div class="layoutArea">
<div class="column">
GUEST OBSERVER
What if you had the lowest interest rates in a generation but no one wanted to borrow.
While Aussie consumers continue to take out loans to buy homes, they continue to slash other debt.
In fact personal credit is falling at the fastest rate for over seven years. Businesses are also not keen to borrow – credit growth is the slowest in three years. Banks and other lenders certainly have the funds – in fact annual growth of bank deposits exceeds that of loans by the biggest margin in four years.
In these more conservative and less volatile times, borrowers are also less keen to embrace margin lending. The number of client accounts stands at 13-year lows while the average number of daily margin calls is at record lows (almost 17 years of records).
The Chinese economy continues to turn over nicely despite constant worries from doomsayers to the contrary. The economy is transitioning from manufacturing to services. And the good news is that the services sector is expanding just below the fastest pace in three years. The 54.5 result for the services gauge in May was just below the recent high of 55.1 in March. The results of the purchasing manager surveys are good news for Australian exporters and importers.
<a href="https://www.propertyobserver.com.au/images/2017/05/31/Screen%20Shot%202017-06-01%20at%208.12.26%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/05/31/Screen%20Shot%202017-06-01%20at%208.12.26%20AM.png" alt="">
What do the figures show?
Private sector credit
Private sector credit (lending) rose by 0.4 percent in April after a 0.4 percent gain in March. Annual credit growth eased from 5.0 percent to a near 3-year low of 4.9 percent.
Housing credit grew by 0.5 percent in April to be up 6.5 percent on a year ago – annual growth is lifting from the lowest levels in 30 months.
Owner occupier housing credit rose by 0.5 percent in April to stand 6.1 per cent higher than a year ago – the slowest growth in 19 months. Investor housing finance lifted 0.6 percent in April to stand 7.3 percent higher over the year – the fastest growth in 15 months.
Personal credit fell by 0.1 percent in April to be down 1.5 percent over the year – equalling the biggest annual decline in 71⁄2 years.
Business credit rose by 0.4 percent in April after a 0.1 percent rise in March and 0.1 percent fall in February. Business credit is 3.1 percent higher than a year ago – the slowest growth in almost 3 years (35 months). 
Loans and advances by banks rose by 6.3 percent in the year to April – the slowest pace in 31⁄2 years. Bank deposits (term, current, other and certificates of deposit) rose by 7.8 percent in the year to April – the fastest pace in 21⁄2 years.
<a href="https://www.propertyobserver.com.au/images/2017/05/31/Screen%20Shot%202017-06-01%20at%208.15.50%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/05/31/Screen%20Shot%202017-06-01%20at%208.15.50%20AM.png" alt="">
What is the importance of the economic data?
 Private sector credit figures are released by the Reserve Bank on the last working day of the month. Credit is separated into three categories – housing, other personal and business. Private sector credit is effectively the amount of loans outstanding in the economy. If growth in lending is strong then it suggests that credit from financial institutions is freely available, underlying demand for assets such as cars and houses is firm and that the price of credit (interest rates) is attractive.
The National Bureau of Statistics in China releases purchasing manager survey results for manufacturing and services sectors around the end of the month/first day in the month. The data is useful in tracking the health of the Chinese economy – Australia’s major trading partner. The data is valuable for Australian exporters and importers. 
<a href="https://www.propertyobserver.com.au/images/2017/05/31/Screen%20Shot%202017-06-01%20at%208.17.00%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/05/31/Screen%20Shot%202017-06-01%20at%208.17.00%20AM.png" alt="">
What are the implications for interest rates and investors?
The Chinese economic data remains encouraging, showing that the transition from the industrial sector to household sector remains on track. The manufacturing sector is expanding, while the services sector is clearly the driver taking up any slack.
The Reserve Bank may fret that housing debt is exceeding that of wages, but that is only part of the story. Consumers are trimming other debt including personal loans and credit card debt. Margin loans are out of favour despite low interest rates, low sharemarket volatility and healthy returns on investments. The issue for banks is that inflows of cash are growing at a faster rate than outflows, putting pressure on margins, profitability and potentially dividends.
Interest rates will remain on hold over the rest of 2017. There is no pressing need for a change in rates in any direction. 
</div>
<div class="column">
<div class="page" title="Page 1">
<div class="section">
<div class="layoutArea">
<div class="column">
<div class="page" title="Page 2">
<div class="layoutArea">
<div class="column"> Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>.
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div></body></html>

Slowest pace of borrowing in three years: Craig James

Household debt, housing prices and resilience: Philip Lowe

<html><body>
GUEST OBSERVER
The minutes of the monetary policy meeting of the Reserve Bank Board for May provide no real changes from the April minutes.
As with April, the minutes concluded with “the Board continued to judge that developments in the labour and housing markets warranted careful monitoring”.
This comment was not included in the Governor’s statement following the May board meeting possibly suggesting that the Board had become more relaxed on these issues.
Consequently, repeating the statement in these minutes confirms the Board’s most prominent areas of interest.
The commentary on the housing market was little changed from April with conditions in the Sydney and Melbourne markets being described as “robust” (compared to April – “strengthened further”) -while prices had been falling in Perth.
The threat of additional supply, particularly from apartments, was repeated, with Brisbane being held out for particular attention.
Concerns with household leverage continued to be emphasised - “the risks associated with household balance sheets had been rising”.
Equally, the Board expects that recently announced supervisory measures will assist in this regard, although time will be needed to assess the full effects.
Data on the labour market is described as “somewhat mixed”, although forward indicators provide some comfort that “spare capacity in the labour market will decline gradually”.
Since April, the Board received an update on inflation with the release of the March quarter inflation report.
This report was described as “in line with forecasts” and consistent with, in the Board’s view, that the underlying inflation rate would pick up to around 2% by early 2018.
(Note, that still represents the bottom of the 2-3% target band and the forecasts in the May SoMP do not have inflation back in the middle of the 2-3% band until mid 2019).
The Board neatly describes the inflation dynamics around strong competitive pressures in the retail sector and soft wages growth being partly offset by higher utilities and housing construction costs, although these costs are around materials rather than wages.
The forecasts that growth will lift above 3% in the first half of 2018 is attributed to “the drag from declining mining investment waned and as resources exports continued to pick up”.
Consumption is still forecast to expand above its average rate of recent years, with risks being balanced.
It is interesting to note that these minutes include a comment “a fall in housing prices would also weigh on consumption growth” – this prospect has not been discussed in recent minutes.
The Board expects that commodity prices will continue to fall, probably moving back towards the levels of mid 2016 when the spot iron ore price was around USD$50 compared to the current USD$60.
They are also cautious about the impact of the rising terms of trade on activity particularly boosting mining investment.
There is limited confidence around the outlook for non-mining business investment with some surveys pointing to a lift in intentions and others indicating that it will be some time before we see stronger mining investment growth.
Commentary around global conditions is more positive. “The broad-based nature of the data… provided some confidence that the expansion could become self-reinforcing”.
Monetary policy clearly remains on hold as the Board assesses developments in those key markets – housing and the labour markets.
The persistent view remains that despite clear evidence that the housing construction cycle will turn down (and regulation and recent rate hikes are likely to slow housing activity and price appreciation), risks are still evident around household leverage.
On the other hand, while the Board appears to be increasingly more confident on the global outlook, there is limited optimism around the labour market; household consumption; and non-mining investment.
From our perspective, the persistent view that growth will evolve around 0.5 percent above trend in 2018 and 2019 seems overly optimistic.
While it may seem that the Bank expects to be tightening policy in 2018, our view remains that developments in the housing market; labour market; and global environment will not justify such a policy.
We remain comfortable with our view that rates will remain on hold for the remainder of 2017 and 2018.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a><a href="https://www.rba.gov.au/monetary-policy/rba-board-minutes/2017/2017-05-02" target="_blank">.</a><a href="https://www.rba.gov.au/monetary-policy/rba-board-minutes/2017/2017-05-02" target="_blank"> </a>
</body></html>

Reserve Bank

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News

Reserve Bank

Editor's Picks

Receive the latest news stories to your inbox

Have something to contribute?

Developments

New apartments

New townhouses

News