Melbourne developer Spacious Group has completed Voyage Altona, one of the closest new apartment developments to Altona Beach.

Off the plan purchasers have started moving into the 49-apartment project on Pier Street, with the remaining move-in-ready one-, two- and three-bedroom apartments starting from just over $500,000.

Display apartments have now been fitted out, allowing prospective buyers to inspect the completed residences by appointment.

[smartcode_project:default project_id=112195 project_image_fid=372638]

The completed apartments feature open-plan living and dining areas which extend onto private balconies and terraces, while full-height glazing maximises natural light throughout the interiors.&nbsp;

Hybrid timber-look flooring, stone benchtops, Miele appliances, porcelain-tiled bathrooms and generous storage feature throughout the building which also features landscaped communal areas, expansive shared terraces, lift access and secure on-grade parking.

Drawing inspiration from its bayside setting, Voyage adopts a restrained palette of warm neutral tones and textured finishes. Many of the apartments take advantage of views across Port Phillip Bay, while the indoor-outdoor living spaces have been designed to make the most of the coastal outlook.

[smartcode_project:default project_id=112195 project_image_fid=3286]

Voyage was developed to address what Spacious Group identified as an undersupply of higher-quality apartment product in Altona, with a focus on owner-occupiers looking to remain within the bayside community.

"Voyage responds to very strong local buyer demand for quality, owner-occupier-focused product," says Barry Plant Projects Director Jarrod Farey, who has handled sales since the project's launch.

"The project delivers an elevated lifestyle proposition, with its design and quality of finish far exceeding anything previously produced in the area, as well as its proximity to Pier Street Village and the beach."

The majority of purchasers have been local downsizers and owner-occupiers looking to stay within the Altona community but who previously had limited opportunities to buy a brand-new apartment.

[smartcode_project_cta:default project_id=112195]

Joel Robinson

Spacious Group completes Voyage Altona in Altona's beachside precinct

Homecorp has secured approval for a $360 million apartment development at Budds Beach, paving the way for one of the Gold Coast's most amenity-rich residential projects to launch later this year.

Gold Coast City Council has approved Lýon Residences, a 32-level tower that will deliver 178 two and three-bedroom apartments across a prominent corner site at 8-10 Acacia Avenue and 25-27 Oak Avenue.

The approval comes as developers continue to invest in premium lifestyle-driven apartment projects on the Gold Coast, where owner occupiers are increasingly prioritising amenity as much as apartment size and location.

<a href="https://www.apartments.com.au/new-apartments/l-on-residences-25-27-oak-avenue-surfers-paradise-qld-4217">Lýon Residences</a> has been designed around a resort-style wellness offering, headlined by a Moroccan-inspired spa precinct featuring treatment rooms, a Nordic sauna and steam room, hot and cold plunge pools, a soaking pool and a residents-only juice bar.

The rooftop will include a heated infinity pool and spa, residents' lounge with private kitchen and bar, gymnasium, yoga and Pilates studio, outdoor entertaining areas and barbecue facilities overlooking the Surfers Paradise skyline.

<img alt="Lyon" data-entity-type="file" data-entity-uuid="2d3e29af-8793-486e-a684-52cef862241f" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-15%20at%204.32.26%E2%80%AFPM.png?VersionId=ayG2zpLf3SS6Zy8XmKDcQods4kVWb0gm" />

Homecorp Founder and CEO Ron Bakir said Budds Beach provided the ideal location for the company's latest luxury apartment project.

"Budds Beach represents one of the most unique and sought-after pockets of the Gold Coast, and Lýon Residences has been designed to reflect that sense of rarity and refinement," Bakir said.

The project arrives as wellness continues to become a defining feature of new residential developments both in Australia and internationally.

The latest Global Wellness Institute figures show wellness real estate remains the fastest-growing segment of the global wellness economy and is forecast to exceed $1.8 trillion by 2030. Australia continues to rank among the world's 15 largest wellness real estate markets, with developers increasingly integrating health, recreation and community facilities into apartment projects.

Queensland is also experiencing strong population growth, with the Gold Coast continuing to outperform many other Australian cities as demand for new housing remains elevated ahead of the 2032 Olympic and Paralympic Games.

Bakir said the project had been designed to respond to that shift in buyer expectations.

"Strong population growth and sustained demand across the Gold Coast continue to highlight the need for well-designed new housing supply. Lýon Residences responds directly to this demand while setting a new benchmark for residential living," he said.

Each apartment has been designed to maximise views across the coastline, the Nerang River and the Gold Coast hinterland.

Located just minutes from Surfers Paradise beach and the Broadwater, the development also offers easy access to the light rail network, Broadbeach and Burleigh Heads.

Early site works are underway, with construction expected to commence later this year.

Homecorp approved for Budds Beach apartment tower, Lýon Residences

New apartment developments with uninterrupted, north-facing views over Perth's Swan River are exceptionally rare.

Recognising just how limited those opportunities are, <a href="https://www.apartments.com.au/developers/edge-visionary-living">Edge Visionary Living</a>, one of Perth's most respected builder-developers, targeted <a href="https://www.apartments.com.au/developments/applecross-wa-6153">Applecross</a>, assembling an unrepeatable 6,342 sqm riverfront site on the corner of Moreau Mews and Canning Beach Road to create one of Perth's only new north-facing apartment developments directly overlooking the Swan River.

Today, <a href="https://www.apartments.com.au/buildings/riviere-residences-applecross-59-canning-beach-road-applecross-wa-6153">Rivière Residences</a> offers buyers a unique opportunity to choose between completed residences ready to move into now and off-the-plan homes in the final stage, Rivière West.

[smartcode_project:default project_id=28384 project_image_fid=3823]

Across the completed East and Central buildings, residents are already enjoying the development's luxury amenity, while two of the precinct's hospitality venues are now open.

The completed component of the development gives buyers the advantage of experiencing the finished product firsthand, including its uninterrupted river views, while still having the opportunity to secure a residence in the final stage.

"People are wowed by the view and the quality of the apartments,"&nbsp;Edge Visionary Living Sales Executive, Holly McSweeney, says.

"They're looking for the convenience of lock-and-leave living, but they're not looking to downsize on quality."

[smartcode_project:default project_id=28384 project_image_fid=3826]

The rarity of the development hasn't been lost on prospective buyers, McSweeney says.

For McSweeney, it all comes back to a location that is becoming increasingly difficult to replicate.

"Location, location, location," she says. "We are nestled right on the front of the Swan River. You can never get built out, so wherever you are in Rivière Residences, you've got views of the river forever."

The unique waterfront position has resonated particularly strongly with local downsizers. McSweeney says many buyers are long-time Applecross residents looking to transition from large family homes into a luxury apartment without sacrificing space, quality or the lifestyle they've enjoyed for decades.

<iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen="" frameborder="0" height="315" referrerpolicy="strict-origin-when-cross-origin" src="https://www.youtube.com/embed/N_FowNW0wu8?si=vb25XFq1wZ-iufAW" title="YouTube video player" width="560"></iframe>

A major focus for Edge in recent years has been resident amenity. Across its apartment portfolio, from beachfront developments in Scarborough to luxury towers in South Perth, the developer has increasingly invested in the spaces beyond the apartment itself.

The strategy has largely been shaped by downsizer demand. Many buyers are moving from large family homes with swimming pools and established gardens. While they're looking to leave the maintenance behind, they don't want to compromise on lifestyle.

At Rivière, <a href="https://www.apartments.com.au/architects/hillam-architects">Hillam Architects</a> designed the resident facilities as an extension of each apartment. A 25-metre heated swimming pool takes advantage of the north-facing river outlook, complemented by a large gym, sauna and steam rooms, private dining spaces, residents' lounges, a cinema, games room, and dedicated wine and whisky rooms.

[smartcode_project:default project_id=28384 project_image_fid=372542]

The waterfront location has also proved to be a major drawcard. Residents are within walking distance of the Raffles Hotel, South of Perth Yacht Club, the Heathcote Cultural Precinct and the cafés, restaurants and boutiques along Ardross Street.

Beyond the location and amenity, McSweeney says many buyers take confidence from Edge's fully integrated development model.

Having delivered apartments across Perth for decades, Edge now designs, develops and constructs its projects in-house, giving the company greater control over quality, delivery and the finished product.

"What I love is when people walk through their apartment for the first time and say, 'This is better than what we imagined,'" McSweeney says. "We hear that all the time."

Completed apartments in the East and Central buildings are now available to inspect by appointment, while Rivière West, the final stage of the precinct, is expected to be completed in the first quarter of 2027.

[smartcode_project_cta:default project_id=28384]

North-facing Swan River views drive demand at Rivière Residences in Applecross

Nearly 60 per cent of apartments at McNab Group's $220 million The Tannery development in Brisbane's West End have sold ahead of the project's public launch, including a suburb-record $2.57 million sale for a two-bedroom apartment.

The early sales campaign has secured buyers for 50 of the project's 87 apartments, highlighting continued demand for larger owner-occupier apartments that combine generous floorplans with premium lifestyle amenities in one of Brisbane's most tightly held inner-city suburbs.

[smartcode_project:default project_id=143337 project_image_fid=374768]

McNab Group Executive Chairman Michael McNab said selling more than half the project before launch reflected changing buyer expectations.

"Selling more than half the project before public sales open tells us buyers are actively seeking apartments that offer something genuinely different," McNab said.

"Today's buyers are looking beyond four walls. They want homes that genuinely enhance the way they live, with spaces that support health, connection and everyday wellbeing."

[smartcode_project:default project_id=143337 project_image_fid=374767]

A key point of difference for the project is the adaptive reuse of the heritage-listed Dixon's Tannery building, which will become The Retreat, a residents-only wellness precinct rather than being redeveloped into additional apartments.

The Retreat will feature a sauna and steam room, hot and cold plunge pools, a commercial-grade gym, Pilates studio, cinema, library, co-working spaces and private dining room. Rooftop amenities will include a swimming pool, landscaped gardens, outdoor entertaining areas and dog-friendly spaces.

[smartcode_project:default project_id=143337 project_image_fid=374760]

Designed by Cottee Parker Architects with interiors by Tom Mark Henry and landscape architecture by Aspect Studios, The Tannery comprises 87 two, three and four-bedroom apartments across 11 levels overlooking the Brisbane River.

Cottee Parker principal Dee Passenger said preserving the original tannery building had been central to the project's design.

"The easy option would have been to maximise the site's development potential with additional apartments. Instead, McNab has chosen to preserve the original tannery as a shared wellness retreat, ensuring this important piece of Brisbane's history remains at the heart of the community."

Passenger said sustainability also played a key role in the design, with materials from the original industrial site salvaged and repurposed throughout the development.

[smartcode_project:default project_id=143337 project_image_fid=374761]

Motiv CEO Carly Cottam said buyers had responded strongly to the combination of larger apartments, wellness facilities and the West End lifestyle.

"We are seeing more buyers looking for homes in the sky that provide the space and functionality of a traditional home, while benefiting from the convenience and lifestyle that apartment living brings," Cottam said.

She said purchasers included both owner occupiers and investors, with demand coming from local buyers as well as interstate purchasers.

Coinciding with the public launch, McNab also announced a partnership with Queensland Ballet, whose neighbouring Thomas Dixon Centre shares historical ties with the original Dixon family.

Located on a 4,465 sqm site at 439 Montague Road, The Tannery overlooks the Brisbane River and is around 10 minutes from the CBD.

Construction is underway, with completion expected in the second half of 2027.

[smartcode_project_cta:default project_id=143337]

More than half of residences sold before public sales as McNab announces significant partnership with Queensland Ballet

McNab's The Tannery nears 60 per cent sold before public release, sets two-bedroom West End record

Iwan Sunito's vision for a landmark mixed-use precinct in Sydney's Inner West has taken a major step forward, with approval granted for the $1.9 billion Five Dock development first unveiled earlier this year.

The approved scheme by <a href="https://www.apartments.com.au/developers/one-global-capital">One Global Capital</a> will deliver an 80,500 sqm mixed-use precinct comprising 840 apartments, integrated hotel accommodation, commercial and retail space, alongside publicly accessible open space designed to create a new destination for the growing suburb.

"This is a significant milestone for One Global Capital and for the future of housing delivery in Sydney," Sunito said.

"The Housing Delivery Authority was established to identify major housing projects capable of delivering meaningful supply more efficiently, and we are delighted that Spencer Street has been recognised as one of those projects.”

He said the declaration reflected the rapid progress achieved since acquiring control of the site.

"In less than seven months we have progressed from taking control of the site to securing entry into one of the NSW Government's most important planning pathways. It reflects the experience of our team, the strength of our consultant group led by Urbis, and our long-term commitment to delivering transformational projects that contribute to Sydney's future."

When the project was revealed earlier this year, Sunito described the opportunity as one of the strongest development sites he had worked on.

"I probably hadn't appreciated the uniqueness of the site until more recently when putting together the concept plans," Sunito said.

"The proximity to the water, and the golf course opposite, is unlike any other part of Parramatta Road. We have a unique position and view corridors over the water that makes this one of the best sites I've worked on."

The development has evolved since its initial announcement, with the approved plans increasing the residential component from the originally proposed 750 apartments to 840 homes while retaining the project's focus on creating an integrated neighbourhood rather than a standalone residential development.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/a-city-within-a-city-iwan-sunito-flags-1-5-billion-mixed-use-precinct-in-five-dock">"A city within a city": Iwan Sunito flags $1.5 billion mixed-use precinct in Five Dock</a>

The precinct will combine apartments with hotel accommodation, commercial workplaces, retail offerings and public spaces, creating a mixed-use environment intended to serve both residents and the broader Five Dock community. The proposal also continues the collaboration between One Global Capital and internationally recognised architect <a href="https://www.apartments.com.au/architects/koichi-takada-architects">Koichi Takada</a>, whose previous work with Sunito includes Infinity, Arc and Skye North Sydney.

Takada previously said the design was driven by a philosophy of integrating nature into the built environment.

"The concept for this development is born from our design approach to naturalising architecture," Takada said.

"The public realm benefits from biophilic design that integrates generous landscaping, and the development is optimised for natural daylight, airflow and water views to foster wellbeing, sustainability and spaces that foster community interaction."

Sunito has consistently described the project as a "city within a city", with a strong emphasis on creating a destination that extends beyond housing.

"We want to create a development that's not only to be seen, but to be experienced by the whole local community," he said.

The approval comes as Five Dock continues its transformation ahead of the opening of the Sydney Metro West line, with the new Five Dock station set to significantly improve connections between the Inner West, Parramatta and the Sydney CBD.&nbsp;

The precinct will also benefit from its proximity to the Parramatta Road corridor, nearby waterfront parklands and established retail and dining offerings that have made Five Dock one of Sydney's most tightly held Inner West suburbs.

Iwan Sunito secures approval for $1.9 billion Five Dock mixed-use precinct

Shane Oliver

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GUEST OBSERVER:
Australian GDP rose by 1.1 percent in the December quarter 2016, following a 0.5 percent decline in the September quarter and beating market expectations (of a 0.8 percent rise).
Annual growth was running at 2.4 percent in December, which is below potential growth of around 2.75 percent. The key points from the GDP data are:
Much stronger-than-expected consumer spending growth of 0.9 percent quarter on quarter (contributing 0.5 percentage points to fourth quarter growth). The retail data showed a moderate contribution to spending from retail sales but the pick-up in household consumption was quite broad-based across services (recreation &amp; culture, transport services, health services, rent).
The household savings ratio fell further to 5.2% in the December quarter, well down from around 9% in recent years. The wealth effect from the surge in dwelling prices has encouraged households to draw down on their savings in the face of weak income growth, but given already very frothy housing market conditions in Sydney and Melbourne it’s hard to see this trend extending for much longer. Basically wages growth will need to pick up or else consumer spending will slow back a touch;
A rebound in dwelling investment (contributing 0.1 percentage points to fourth quarter growth), as expected, given the positive pipeline of residential construction still to be completed. This positive trend from residential construction will continue in 2017, albeit at a slowing pace;
Better-than-expected private business investment (contributing 0.2 percentage points to fourth quarter growth). Non-residential building growth was stronger than forecast, engineering construction rose (despite partial indicators suggesting a fall) and machinery and equipment capital spending also improved. The quarterly capital expenditure survey showed that mining capex has further downside over the next year and non-mining capex growth will be subdued so business investment growth is still likely to be constrained; Public spending contributed 0.3 percentage points to fourth quarter growth because of a solid lift in investment (following a large fall in the prior quarter). State capex budgets show that government investment are likely to remain elevated for the medium-term; Inventories detracted 0.2 percentage points from growth, as expected; and Net exports contributed 0.2 percentage points to growth, also as expected, with both export and import_ volumes lifting in the December quarter.
<a href="https://www.propertyobserver.com.au/images/2017/03/02/image003.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/03/02/image003.png" width="729" height="475">
Source: ABS, AMP Capital
 
IMPLICATIONS: 
The overall sense from the GDP and the broader activity data is that the Australian economy remains in okay shape, but it’s hard to see a sharp further reacceleration of growth in the near-term. We see growth averaging around 2.5-3% in 2017. Mining investment will remain a drag on growth, housing investment is positive but slowing, net exports will be a positive driver of growth but consumer spending may still be constrained.
The big positive for Australia is in the sharp turnaround in nominal GDP - which is a measure of GDP that also allows for changes in prices. Nominal GDP was up by 3.0% in the December quarter and 6.1% over the year which is due to the surge in commodity prices recently. The upswing in nominal outcomes is also evident in the uplift in company earnings, observed in the just completed company reporting season.
The strength in nominal incomes will flow through to governments and businesses, but the flow back to households may be limited given the constrained Federal budget and uncertainty around how long commodity prices can remain elevated. 
The turnaround in Australia’s nominal income story, better activity data, stability in the labour market and excessive strength in the Sydney and Melbourne housing markets means that it will be hard for the RBA to cut the cash rate again in the months ahead unless we see a further leg down in underlying inflation. As a result we are dropping our forecast for another rate cut in May. Our base case is now for rates to be on hold this year. That said if the RBA is to do anything on rates this year a cut is more likely than a hike given the downside risks on inflation. A rate hike is unlikely until later next year.
CoreLogic dwelling price data today showed that the momentum in Sydney and Melbourne housing markets is not slowing down, with Sydney dwelling prices up by 18.4% over the year and Melbourne 13.5% higher (see chart below). Housing affordability issues are now reaching a critical point in Australia and Australian governments should up their efforts around this issue – with the May Federal Budget providing a good opportunity.
<a href="https://www.propertyobserver.com.au/images/2017/03/02/image007.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/03/02/image007.png" width="743" height="484">
Source: ABS, AMP Capital
 
<a href="https://www.propertyobserver.com.au/https://plus.google.com/110172465327488162875?rel=author" target="_blank">SHANE OLIVER</a> is head of investment strategy and economics and chief economist at <a href="https://www.ampcapital.com.au/home" target="_blank">AMP Capital</a> and is responsible for AMP Capital's diversified investment funds.
 
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Australia avoids recession as growth rebounds: Shane Oliver

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GUEST OBSERVER
As widely expected the RBA left interest rates on hold at its February Board meeting.
The RBA’s post meeting statement didn’t really provide anything new.
The RBA seems a bit more upbeat about the global economy, sees the September quarter GDP slump in Australia as largely temporary, sees inflation remaining low and the labour market as mixed.
Somewhat surprisingly it signalled little change to its growth and inflation forecasts despite the September quarter growth slump.
On growth it sees a return to reasonable growth in the December quarter (as we do) and continues to see growth around 3% in the next few years.
Similarly, its level of concern around the property market does not appear to have increased despite a further pick up in lending to property investors and continued rapid price growth in Sydney and Melbourne.
The RBA’s commentary around the property market was little changed from that seen in its December post meeting statement.
Overall, the basic message from the RBA remains that it is comfortably on hold at present with a neutral bias regarding future rate changes.
While the RBA retained its reference to an appreciating $A complicating the adjustment in the economy away from mining investment, the $A rose about 0.4% after the release of the RBA’s Statement.
This is presumably on the back of the RBA’s neutral bias and lack of any downwards revision to its growth and inflation forecasts.
With the $US undergoing a correction there is a real risk that the $A is on its way to another retest of the $US0.78 level, a break of which would open up a run to around $US0.80 which would be a real concern for the economy and the RBA.
So it’s surprising that the RBA has not ramped up its jawboning to try and lower the $A.
Our view remains that it will take longer for inflation to return to target than the RBA is allowing, particularly with wages growth remaining at record lows and the $A trending higher.
As a result we remain of the view that the RBA will cut rates again probably in May after the next round of inflation data and revisions to the RBA’s inflation forecasts.
Given the conflicting forces though, I would concede that our call for another RBA rate cut is a close one.
<a href="https://www.propertyobserver.com.au/https://plus.google.com/110172465327488162875?rel=author">SHANE OLIVER</a> is head of investment strategy and economics and chief economist at <a href="https://www.ampcapital.com.au/home">AMP Capital</a> and is responsible for AMP Capital's diversified investment funds.
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RBA starts the year on hold and in neutral: Shane Oliver

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Housing matters a lot in Australia. Having a house on a quarter acre block is part of the "Aussie dream".
Housing is a popular investment destination and the housing cycle is a key component of the economic cycle and closely connected to interest rate movements.
But in the last 15 years or so it has taken on a darker side as a surge in house prices that started in the late 1990s has led to poor affordability and gone hand in hand with surging household debt. Reflecting this, predictions of an imminent property crash bringing down the Australian economy have been repeated ad nauseam since 2003.
The big picture view on Australian residential property is well known. First, Australian housing is expensive.
According to the 2016 Demographia Housing Affordability Survey the median multiple of house prices in cities over 1 million people to household income is 6.4 times in Australia versus 3.7 in the US and 4.6 in the UK. In Sydney it’s 12.2 times and in Melbourne it’s 9.7 times.
The ratios of house price to incomes and rents are at the high end of OECD countries and have been since 2003.
Second, the surge in home prices has gone hand in hand with a surge in household debt, which has taken Australia’s household debt to income ratio from the low end of OECD countries 25 years ago to now around the top.
This can be seen in the next chart which shows the deviation in the house price to income ratio against its long term average for Australia against the ratio of household debt to income.
The shift to overvaluation and high debt mostly occurred over the 1995-2005 period.
<a href="https://www.propertyobserver.com.au/images/2016/10/20/Surging%20house%20prices.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2016/10/20/Surging%20house%20prices.jpg" alt="">
While it’s common to look for scapegoats to blame for high home prices and debt the basic driver looks to be a combination of the shift from high to low interest rates over the last 20-30 years which has boosted borrowing and buying power and the inadequacy of a supply response (thanks to tight development controls, restrictive land release and lagging infrastructure) to suppress the resultant rise in the ratio of prices to incomes.
The following chart shows a cumulative shortfall of over 100,000 dwellings relative to underlying demand had built up by 2014.
<a href="https://www.propertyobserver.com.au/images/2016/10/20/Home%20construction.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2016/10/20/Home%20construction.jpg" alt="">
The surge in prices and debt has led many to conclude a crash is imminent. But we have heard that lots of times over the last 10-15 years. Several considerations suggest a crash is unlikely.
First, we have not seen a generalised oversupply and at the current rate we won’t go into oversupply until around 2017-18.
Second, despite talk of mortgage stress the reality is that debt interest payments relative to income are around 2004 levels.
Third, Australia has still not seen anything like the deterioration in lending standards seen in other countries prior to the GFC.
In fact in recent years there has been a decline in low-doc loans and a reduction in loans with high loan to valuation ratios.
<a href="https://www.propertyobserver.com.au/images/2016/10/20/Tightening%20lending%20standards.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2016/10/20/Tightening%20lending%20standards.jpg" alt="">
Finally, it is dangerous to generalise. While property prices have surged 60% and 40% over the last four years in Sydney and Melbourne, they have fallen in Perth to 2007 levels and have seen only moderate growth in the other capital cities.
To see a property crash – say a 20% plus average price fall – we probably need to see one or more of the following:
<ul>
<li>A recession – much higher unemployment could clearly cause debt servicing problems. This looks unlikely though. 
</li>
<li>A surge in interest rates – but rate hikes are unlikely until 2018 and the RBA knows households are more sensitive to higher rates, so it’s very unlikely rates will reach past highs. 
</li>
<li>Property oversupply – as noted above this would require the current construction boom to continue for several years.</li>
</ul>
However, the risks on the supply front are clearly rising in relation to apartments where approvals to build more apartments are running at more than double normal levels.
<a href="https://www.propertyobserver.com.au/images/2016/10/20/Apartment%20surge.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2016/10/20/Apartment%20surge.jpg" alt="">
Due to the rising supply of units, vacancy rates are trending up and rents are stalling, making property investment less attractive.
Nationwide price falls are unlikely until the RBA starts to raise interest rates again. This is unlikely before 2018, at which point we are likely to see a 5% or so pullback in property prices as was seen in the 2009 and 2011 down cycles.
Anything worse would likely require much higher interest rates or recession both of which are unlikely. However, it’s dangerous to generalise:
<ul>
<li>Sydney and Melbourne having seen the biggest gains are more at risk and so could fall 5-10% around 2018.</li>
</ul>
<a href="https://www.propertyobserver.com.au/images/2016/10/20/Divergent%20property%20market.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2016/10/20/Divergent%20property%20market.jpg" alt="">
<ul>
<li>Price growth is likely to remain negative in Perth and Darwin as the mining boom continues to unwind but this should start to abate next year. 
</li>
<li>The other capitals are likely to see continued moderate growth and a less severe down cycle in or around 2018. 
</li>
<li>But units are at much greater risk given surging supply and this could see unit prices in parts of Sydney and Melbourne fall by 15-20% as investor interest fades as rents fall.</li>
</ul>
Slowing momentum in building approvals points to a slowdown in the dwelling construction cycle ahead.
While this might be delayed into 2017 as the huge pipeline of work yet to be done is worked through, slowing dwelling investment combined with a slowing wealth affect from rising home prices mean that contribution to growth from the housing sector is likely to slow.
However, as this is likely to coincide with a fading in the detraction from growth due to falling mining investment and commodity prices it’s unlikely to drive a slowing in the economy.
<a href="https://www.propertyobserver.com.au/images/2016/10/20/Dwelling%20investment%20to%20slow.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2016/10/20/Dwelling%20investment%20to%20slow.jpg" alt="">
However, a likely decline in rents (as the supply of units hits) will constraint inflation helping keep interest rates low for longer.
There are several implications for investors:
<ul>
<li>Firstly, over the very long term residential property adjusted for costs has provided a similar return to Australian shares. Its low correlation with shares, lower volatility but lower liquidity makes it a good portfolio diversifier with shares. So there is clearly a role for property in investors’ portfolios.</li>
</ul>
<a href="https://www.propertyobserver.com.au/images/2016/10/20/Long%20term%20asset.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2016/10/20/Long%20term%20asset.jpg" alt="">
<ul>
<li>Secondly, there remains a case to be cautious regarding housing as an investment destination for now. It is expensive on all metrics and offers very low income (rental) yields compared to other growth assets. This means a housing investor is more dependent on capital growth. 
</li>
<li>Thirdly, these comments relate to housing in aggregate and right now it’s dangerous to generalise. Apartments in parts of Sydney and Melbourne are probably least attractive but for those who want to look around there are pockets of value. 
</li>
<li>Finally, investors need to allow for the fact that they likely already have a high exposure to Australian housing. As a share of household wealth its nearly 60%. Once allowance is made for exposure via Australian shares it’s even higher.</li>
</ul>
Shane Oliver is head of investment strategy and chief economist at <a href="https://www.ampcapital.com" target="_blank">AMP Capital</a>.
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Sydney and Melbourne property price could fall 5-10%: Shane Oliver

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GUEST OBSERVATION
Ever since commodity prices and the mining investment boom peaked three or four years ago there has been a constant chorus of doom regarding the Australian economy: the reversal of the mining boom will knock the economy into recession, house prices will crash and banks will tumble.
This view was particularly prevalent amongst foreign commentators who seemed to think that resource extraction was the only thing Australians do.
While this tale of doom has not happened, the economy has been a bit lacklustre: growth has been sub-par, wages growth has fallen to record lows, unemployment has drifted up and confidence readings have remained poor.
Against this background, the RBA has rightly cut interest rates again.
Interest rates and the economy
There are good reasons for the RBA to be cutting rates further:
<ul class="link-list">
<li>Growth is too low, running at around 2.75% through last year, which is well below potential (of around 3-3.25%) and the level needed to prevent a rise in unemployment. 
</li>
<li>Confidence is subdued, having well and truly given up the post 2013 Federal election boost.</li>
</ul>
<img src="https://www.ampcapital.com/AMPCapitalGlobal/media/contents/Blog/olivers-insights/2015/February/4/chart-1.PNG" alt="Confidence remains subdued">
Source: Bloomberg, AMP Capital
Partly reflecting this, consumers have started to become more focused on paying down debt again, which is a sign of increasing caution and will threaten spending if sustained.
<img src="https://www.ampcapital.com/AMPCapitalGlobal/media/contents/Blog/olivers-insights/2015/February/4/chart-2.PNG" alt="Australia's becoming a bit more cautious again">
Source: Westpac/Melbourne Institute, AMP Capital
<ul class="link-list">
<li>Prices for iron ore and energy have collapsed resulting in a bigger hit to national income than expected a year ago.</li>
</ul>
 
<img src="https://www.ampcapital.com/AMPCapitalGlobal/media/contents/Blog/olivers-insights/2015/February/4/chart-3.PNG" alt="Iron ore and the terms of trade has fallen more than expected">
Source: Bloomberg, AMP Capital
<ul class="link-list">
<li>Outside the US the predominant trend globally is still towards monetary easing and this is putting pressure on the RBA. Massive quantitative easing programs in Europe and Japan are forcing smaller countries to ease unless they want to see their currencies go higher. This should really be characterised as “easing wars” as opposed to “currency wars”. To the extent it is forcing monetary easing around the world, it adds to confidence that sustained deflation can be avoided. Australia is not immune. As the RBA wanted to see a continued broad based decline in the value of the $A it had to re-join the easing party lest the Australian dollar rebounded. Our interest rates are still high globally. 
</li>
<li>Finally, benign inflation provides flexibility for the RBA.</li>
</ul>
The main risk in cutting rates again is that it further inflates the residential property market. However, strong property price gains are largely concentrated in Sydney and the RBA sees this as more of an issue for the prudential regulator, APRA.
Overall, we see the RBA’s cut as justified and, given that there is rarely just one move, we expect another 0.25% cut taking the cash rate to 2% in the months ahead.
Reasons for optimism
However, it’s not that I am bearish on the economy. Rather it makes sense for the RBA to be taking out some insurance to make sure growth holds up and improves. There are several reasons for optimism that growth will improve:
<ul class="link-list">
<li>Borrowing rates are at generational lows. This is bad for bank depositors but the latest rate cut will save someone with a $300,000 mortgage roughly an additional $15 a week. In total Australian households have $850 billion in bank deposits but owe $2,050 billion in debt so the household sector is a net beneficiary of lower interest rates.</li>
</ul>
<img src="https://www.ampcapital.com/AMPCapitalGlobal/media/contents/Blog/olivers-insights/2015/February/4/chart-4.PNG" alt="Record or near record low interest rates">
Source: RBA, Bloomberg, AMP Capital
<ul class="link-list">
<li>The fall in the Australian dollar is removing a major drag on growth. It needs to go down some more but this is very positive for sectors such as manufacturing, tourism, higher education, services, farming and mining. 
</li>
<li>The collapse in oil prices has delivered huge savings to businesses and households. If petrol prices hold around current levels it means the average household will save around $19 a week from mid last year on their petrol bill.</li>
</ul>
 
<img src="https://www.ampcapital.com/AMPCapitalGlobal/media/contents/Blog/olivers-insights/2015/February/4/chart-5.PNG" alt="Weekly petrol bill for a typical Australian household">
Source: AMP Capital
<ul class="link-list">
<li>Stronger export volumes from completed resource projects will provide a partial offset to lower commodity prices.</li>
</ul>
Overall, we see growth picking up gradually as the year progresses to a 3-3.5% pace through next year, but the RBA’s latest rate cut and one more to come provide confidence that this will occur.
Article continues on the next page. Please click below. 
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Implications for investors
There are several implications for investors. First bank term deposit rates are becoming even less attractive and will remain low at least into next year. As a result, there is an ongoing need to consider alternative sources of yield and return.
<img src="https://www.ampcapital.com/AMPCapitalGlobal/media/contents/Blog/olivers-insights/2015/February/4/chart-6.PNG" alt="Not a lot of value in Australian term deposit rates">
Source: RBA, AMP Capital
Second, remain cautious on the Australian dollar. While the Australian dollar is nearly back to the US$0.75 level that marks fair value on the basis of relative prices, past experience tells us it can overshoot and it hasn’t fallen nearly as much against the Euro and Yen putting more pressure on for further weakness against the US dollar.
The RBA has indicated “a lower exchange rate is likely to be needed”, and it is likely to ease further till it gets this. The Australian dollar is oversold short-term and so could have a short-term bounce, but expect a fall to US$0.70 by year end. So continue to favour unhedged over hedged global shares.
<img src="https://www.ampcapital.com/AMPCapitalGlobal/media/contents/Blog/olivers-insights/2015/February/4/chart-7.PNG" alt="The A$ back to around fair value on relative prices">
Source: RBA, ABS, AMP Capital
Third, overweight Australian versus global bonds. While Australian bond yields are low they are high by global standards and likely to provide better returns than global bonds as the global search for yield results in ongoing convergence of Australian bond yields with the lower rates seen globally and as further RBA easing pulls down local bond yields. This should also benefit Australian corporate debt relative to global.
Finally, with low interest rates growth assets providing decent yields will remain attractive. This includes commercial property and infrastructure but also Australian shares which continue to offer much higher income yields relative to bank term deposits.
<img src="https://www.ampcapital.com/AMPCapitalGlobal/media/contents/Blog/olivers-insights/2015/February/4/chart-8.PNG" alt="Australian shares offering a great yield v bank deposits">
Source: RBA, Bloomberg, AMP Capital
<a href="https://www.propertyobserver.com.au/https://plus.google.com/110172465327488162875?rel=author" target="_blank">Shane Oliver</a> is head of investment strategy and economics and chief economist at <a href="https://www.ampcapital.com.au/home" target="_blank">AMP Capital</a> and is responsible for AMP Capital's diversified investment funds.
He also provides economic forecasts and analysis of key variables and issues affecting, or likely to affect, all asset markets.
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