Apartment buyers in New South Wales are set to gain a decade of insurance-backed protection against major building defects, after the NSW Parliament passed the Fair Trading and Building Legislation Amendment Bill 2026.&nbsp;

The Bill establishes decennial defect insurance, known in the market as Latent Defects Insurance (LDI), as an alternative to the existing two-year strata building bond. It cleared the Legislative Council with amendments on Tuesday evening (August 4, 2026), with the Legislative Assembly agreeing to those amendments shortly after.

Under the reform, eligible developers can satisfy their statutory bond obligation by taking out an approved decennial-style policy that gives owners 10 years of cover for major structural defects from completion, claimable directly, without first having to pursue developers or builders through costly legal action.&nbsp;

The change forms the final tranche of amendments arising from the 2021 statutory review of the Strata Schemes Management Act 2015 and related legislation.

Resilience Insurance, which originated the cover in Australia and has delivered it in NSW since 2022, welcomed the passage and credited the NSW Government for delivering it.

“This is protection apartment buyers have needed for a long time, and the credit for delivering it belongs to the NSW Government,”&nbsp;said Corey Nugent, CEO of Resilience Insurance.

“Minister Chanthivong and his team have shown real leadership in replacing an outdated two-year bond with cover that matches the lifespan of the buildings people are buying into. Reform like this is what good, evidence-based regulation looks like.”

Resilience has delivered LDI in NSW since 2022, protecting thousands of apartments, giving the State, and now the country, real-world evidence of how decade-long, no-fault protection works in practice.

The reform also places NSW within a wider national shift.

NSW is the third jurisdiction to put decennial cover into law. The ACT legislated for it in 2024, with the scheme taking effect in late 2025, and Victoria passed its own framework on 17 June. Between them, the three cover the majority of Australia's apartment market.

The reform commences once the legislation is proclaimed, which is expected in the coming weeks. From that point, developers of Class 2 residential apartment buildings can meet their statutory obligation with an approved decennial policy in place of the bond.

Buyers who purchased into projects that took out the cover early are among the first in the country to take keys to apartments carrying decade-long structural protection.

“With the legislation passed, the focus now turns to making it work for buyers,”&nbsp;Nugent said.

“There are already thousands of apartments in NSW covered by this insurance, bought by developers who moved early. The question every buyer should be asking in a display suite is a simple one: does this building come with 10-year defect cover, and who stands behind it?&nbsp;

“We look forward to working with the Government and the Building Commission in coming weeks as the framework moves to implementation, and to sharing what we have learned over the past four years so the protection reaches owners as smoothly and quickly as possible.”

Other states are working through their own reform programs. Western Australia has indicated that decennial cover is within consideration a later stage of its reform sequence, and Queensland has been examining the settings as it looks at the development pipeline ahead of the 2032 Olympics.

Resilience Insurance acknowledges the NSW Government’s continued focus on strengthening consumer protection while supporting housing delivery across the State.

Fast Facts: What the reform means

<ul style="color:#222222; font-family:Arial, Helvetica, sans-serif; font-size:small; font-style:normal; font-variant-ligatures:normal; font-weight:400; text-align:start; white-space:normal; background-color:#ffffff; text-decoration-thickness:initial; text-decoration-style:initial; text-decoration-color:initial">
	<li style="margin-left:15px; font-family:Aptos, Arial, Helvetica, sans-serif; font-size:12pt; color:#000000">Proven at scale:&nbsp;Decennial cover has operated in NSW since 2022, protecting thousand of apartments.</li>
	<li style="margin-left:15px; font-family:Aptos, Arial, Helvetica, sans-serif; font-size:12pt; color:#000000">10 years of cover:&nbsp;Protection for major structural defects runs for a decade from completion, claimable directly and with no legal action required.</li>
	<li style="margin-left:15px; font-family:Aptos, Arial, Helvetica, sans-serif; font-size:12pt; color:#000000">An alternative to the bond:&nbsp;Eligible developers can meet their statutory obligation with an approved decennial-style policy in place of the 2% strata building bond.</li>
	<li style="margin-left:15px; font-family:Aptos, Arial, Helvetica, sans-serif; font-size:12pt; color:#000000">Part of a national shift:&nbsp;The ACT has had decennial provisions in force since 2025 and Victoria passed its framework in June. NSW now joins them.</li>
	<li style="margin-left:15px; font-family:Aptos, Arial, Helvetica, sans-serif; font-size:12pt; color:#000000">No-fault, first resort:&nbsp;Owners corporations claim directly from the insurer without first having to establish who is liable for the defect.</li>
	<li style="margin-left:15px; font-family:Aptos, Arial, Helvetica, sans-serif; font-size:12pt; color:#000000">Cost-competitive:&nbsp;At approximately 1.8% of build cost, LDI is typically priced below the 2% bond while offering broader, longer protection.</li>
	<li style="margin-left:15px; font-family:Aptos, Arial, Helvetica, sans-serif; font-size:12pt; color:#000000">Market position:&nbsp;Resilience originated LDI in Australia and has delivered it in NSW since 2022.</li>
</ul>

Fast Facts: What is Resilience LDI?

<ul style="color:#222222; font-family:Arial, Helvetica, sans-serif; font-size:small; font-style:normal; font-variant-ligatures:normal; font-weight:400; text-align:start; white-space:normal; background-color:#ffffff; text-decoration-thickness:initial; text-decoration-style:initial; text-decoration-color:initial">
	<li style="margin-left:15px; font-family:Aptos, Arial, Helvetica, sans-serif; font-size:12pt; color:#000000">Resilience Latent Defects Insurance (LDI):&nbsp;Covers major structural defects for 10 years from completion.</li>
	<li style="margin-left:15px; font-family:Aptos, Arial, Helvetica, sans-serif; font-size:12pt; color:#000000">Consumer-first:&nbsp;Direct claim access, no need for lengthy legal action.</li>
	<li style="margin-left:15px; font-family:Aptos, Arial, Helvetica, sans-serif; font-size:12pt; color:#000000">Cost advantage:&nbsp;At approximately 1.8% of build cost, LDI is typically priced below the traditional 2% Strata Bond while offering broader protection.</li>
	<li style="margin-left:15px; font-family:Aptos, Arial, Helvetica, sans-serif; font-size:12pt; color:#000000">Market leader:&nbsp;&nbsp;Resilience Insurance originated LDI in Australia and is the national market leader.</li>
</ul>

Joel Robinson

NSW parliament passes 10-year defect insurance laws for new apartment buyers

Builder-developer <a href="https://www.apartments.com.au/developers/mcnab-developments">McNab</a> has wasted little time reshaping one of South Brisbane's most significant undeveloped apartment sites after acquiring the property earlier this year.&nbsp;

McNab has lodged plans to scrap an existing approval for two 30-storey towers and instead deliver a single 28-storey residential building, preserving part of the site for a future development opportunity.

The proposal, lodged over <a href="https://www.apartments.com.au/new-apartments/64-peel-street-south-brisbane-qld-4101">64 Peel Street and 9 Cordelia Street</a>, is for a residential-led mixed-use development comprising 124 apartments above a landscaped podium, alongside a boundary realignment that preserves part of the land for a future residential project.

<img alt="First look: McNab resets decade-old South Brisbane approval with 124-apartment tower" data-entity-type="file" data-entity-uuid="743bf564-3f8f-45fc-b8d3-bbf18f5b628f" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/mcnab%20Peel%20st%20podium.png?VersionId=EhCxGrVn_VFH3qTbKnI4WppGwaMnOn0t" />

Designed by <a href="https://www.apartments.com.au/architects/hayball">Hayball</a>, the development will deliver 119 two-bedroom and five three-bedroom apartments across 23 residential levels. A five-level podium will accommodate 135 car spaces, while the ground floor will include a 66 sqm commercial tenancy, an activated residential lobby with work-from-home spaces, and a publicly accessible landscaped plaza linking Cordelia and Peel streets.&nbsp;

Communal amenities will span Level 6 and the rooftop, including indoor and outdoor recreation spaces, a swimming pool, barbecue facilities, kitchen and dining areas, lawn space, sauna, steam room and yoga facilities.

The application also proposes a boundary realignment to create a standalone 1,290 sqm development lot while retaining an adjacent parcel for future redevelopment, allowing the balance of the site to contribute additional housing over time.

Hayball said the architecture has been shaped by the site's elevated corner position at the intersection of Peel and Cordelia streets and Brisbane's subtropical climate.

The design incorporates generous landscaped setbacks, a masonry podium wrapped with planting, large north-facing balconies, and a slender tower profile intended to maximise natural light, cross ventilation and long-range views. The rooftop has been conceived as a wellness-focused retreat overlooking Brisbane, with amenities positioned to capture views towards Mount Coot-tha and the CBD.

<img alt="First look: McNab resets decade-old South Brisbane approval with 124-apartment tower" data-entity-type="file" data-entity-uuid="c5f99e84-6ad8-4a87-82d1-869685b754d2" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/mcnab%20tower%20perspective.png?VersionId=Gw0IuJaSAlk.tvGBxInhZOcQAdIB..2b" />

The planning submission positions the proposal as a response to both changing market conditions and Brisbane's Kurilpa Sustainable Growth Precinct planning reforms.

McNab acquired the site after the previous approval was granted, with the existing scheme no longer reflecting current residential market demands, economic conditions, construction challenges, construction efficiencies or the quality of development outcome now being pursued, the planning report noted.

McNab continues to expand its residential development pipeline across Brisbane and the Gold Coast. The developer recently launched The Tannery in West End, securing more than 60 per cent of apartments before the project's public release. It is also delivering Elements Budds Beach in Surfers Paradise and Lucia Highgate Hill, an eight-apartment boutique development overlooking the Brisbane River.

McNab resets decade-old South Brisbane approval with 124-apartment tower

A steeply sloping Bellevue Hill site is set to accommodate a new mid-rise apartment development, with plans lodged for 20 homes that respond to the site's dramatic topography.

The proposal for the consolidated land at <a href="https://www.apartments.com.au/new-apartments/138a-140-bellevue-road-bellevue-hill-nsw-2023">138A-140 Bellevue Road</a> has been designed by Sydney architecture practice Common Office, which has used the site’s substantial fall to distribute the building’s scale and unlock 20 apartments without presenting the full height to the street.&nbsp;

“The unique design strategy leverages the site’s substantial topographical fall to facilitate increased density, presenting a seven-storey profile to Bellevue Road while rising to 10 storeys at the rear,” Common Office said in its architectural design report.

The apartment mix spans one, two, three- and four-bedroom residences. Four two-bedroom apartments are designated as affordable housing, while the plans also include two adaptable dwellings. The mix is majority three-beds, with the typical three-bed apartment offering around 144 sqm internally, with balconies of around 15 sqm.

The affordable housing component represents 15 per cent of the residential floor area and allows the project to access additional height and floor space under the NSW Government’s in-fill affordable housing provisions. The site also falls within the inner area of the Low and Mid-Rise Housing Policy because it is within 400 metres walking distance of Double Bay Town Centre.

<img alt="First Look: Plans lodged for topography-led affordable housing project in Bellevue Hill" data-entity-type="file" data-entity-uuid="b1230d0f-3bfa-4a11-abaf-0928c66ef345" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Bellevue%20da.png?VersionId=dZeMK3P.OutGjN8ycjsxm8uNsj_QFWQv" />

Common Office has arranged the building around a masonry podium and a lighter upper volume, drawing on two recurring elements of Bellevue Hill’s established architecture: sandstone bases and the vertical proportions of local Inter-war Art Deco apartment buildings.

“The proposal is governed by a holistic design language that reconciles the solid horizontal masonry of the neighbourhood’s podiums with the elegant verticality of its Art Deco heritage,” the architect said.

“The building maintains a consistent rhythmic logic utilising deep recesses and a sophisticated material transition to break down the 10-storey scale into a series of articulated, human-scale volumes.”

<img alt="First Look: Plans lodged for topography-led affordable housing project in Bellevue Hill" data-entity-type="file" data-entity-uuid="0147f503-1af1-4d51-97fb-c2f1cba63a9d" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Bellevue%20bldg.png?VersionId=GoW7q3NlK67OpnePXhk7zvklrlKb72Qc" />

Large-format sandstone tiles will define the lower levels, establishing a robust base that negotiates the change in elevation from Bellevue Road. Above, red-tinted precast concrete frames, recessed balconies, anodised aluminium screens and expanded metal details will create a more vertically expressed façade. Integrated planter beds will introduce greenery across balcony edges and recessed sections of the building.

The elongated northern façade has been divided into three recessed vertical masses to reduce its perceived length. Triangular window elements and metal privacy screens reference the geometry of nearby Art Deco buildings while controlling overlooking toward surrounding homes. The southern elevation will incorporate further privacy screening, landscaped edges and deep balconies to maintain light and ventilation.

<img alt="First Look: Plans lodged for topography-led affordable housing project in Bellevue Hill" data-entity-type="file" data-entity-uuid="e8679cf1-18bc-4447-8a0f-0052b94ab83c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Bellevue%20da%20rooftop.png?VersionId=5SQqQqRFf76rvE2p1TbxJSweMN70AIbc" />

Private and communal landscaping is distributed throughout the development. A landscaped garden apartment is positioned within the lower portion of the site, while a communal terrace on Level 5 will include a central timber deck, barbecue facilities, resident planting plots and areas for outdoor dining and informal gatherings.

Common Office described the terrace as an elevated sanctuary designed to capture district views and sunlight. Its planting strategy incorporates endemic species associated with the Eastern Suburbs Banksia Scrub, extending the landscape vertically through the building and providing habitat for local flora and fauna.

A second communal outdoor area is proposed at roof level, with built-in seating, paved gathering areas and perimeter planting.

Bellevue Hill is enjoying renewed momentum in the new apartment market, with several boutique developments recently launched and currently under construction. Positive Investment Enterprise is delivering the 16-apartment Kew Palm House on Birriga Road, while Chanine Developments is also under construction at Florian, a 36-apartment project on Banksia Road.

&nbsp;

Bellevue Hill is enjoying renewed momentum in the new apartment market, with several boutique developments recently launched and currently under construction.

First Look: Apartment development pitched for Bellevue Hill, Double Bay fringe

South Brisbane's apartment pipeline continues to build momentum, with <a href="https://www.apartments.com.au/developers/trk-property-group">TRK Property Group</a> lodging plans for a 161-apartment tower on Montague Road as developers accelerate investment across the Kurilpa Sustainable Growth Precinct.

The proposal for 176–186 Montague Road would replace an existing office building with a 20-storey residential tower designed by <a href="https://www.apartments.com.au/architects/cox-architecture">COX Architecture</a>, adding to a growing pipeline of high-density projects reshaping one of Brisbane's fastest-evolving inner-city precincts.

The project has been conceived as a "living building", featuring a flowing tower form, extensive vertical landscaping, and generous communal spaces that respond to the evolving Kurilpa Sustainable Growth Precinct.

TRK Property Group Development Director Matt Kan said the project reflected the confidence developers have in South Brisbane's long-term future.

"South Brisbane is entering an incredibly exciting period, and we see Montague Road sitting right at the heart of that evolution," Kan said.

"With the former Visy site directly opposite us and significant investment planned throughout the broader Kurilpa precinct, there is a real sense of momentum around this part of the city and what it will become over the coming years.

"For TRK, this is an opportunity to be part of that next chapter and deliver a project that responds to where the precinct is heading, while contributing to the continued evolution of Brisbane's river edge."

<img alt="First look: TRK Property joins South Brisbane apartment surge with Montague Road tower plans" data-entity-type="file" data-entity-uuid="590fe1ad-f892-4446-a679-80e33a16d029" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/TRK%20tower%20facade.png?VersionId=uOJStrcKpyHFcPE1w6_9SMAFzVMCcZll" />

The scheme includes a mix of one, two, three and four-bedroom apartments, incorporating multi-purpose rooms in selected residences to provide additional flexibility for home offices or expanded living areas. The proposed mix comprises 15 one-bedroom, 13 one-bedroom plus MPR, 73 two-bedroom, 26 two-bedroom plus MPR, 30 three-bedroom, and four four-bedroom apartments.

Rather than adopting a conventional rectilinear tower, COX Architecture has developed a sculpted form inspired by the movement of the Brisbane River.

"The proposal has been designed by COX Architecture as a 'living building' that responds to the site's riverine setting, floodplain history and evolving urban context within the Kurilpa Sustainable Growth Precinct," the planning report states.

"The architectural form draws from the fluid nature of the Brisbane River, with a curved and undulating tower form that creates a varied architectural edge and avoids a conventional rectilinear tower expression."

The podium has also been designed as an architectural feature rather than a conventional parking structure, with cascading planting, screening and natural-toned materials softening its appearance. Resident parking is elevated above ground level to address the site's flood constraints, while habitable apartments sit above flood planning levels. Upper-level communal facilities are designed to accommodate shelter-in-place arrangements during major flood events.

<img alt="First look: TRK Property joins South Brisbane apartment surge with Montague Road tower plans" data-entity-type="file" data-entity-uuid="01fa15d0-90df-46c7-9555-7941fc45373c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/TRK%20podium.png?VersionId=mHyua.w1pHGBt9qEdWzrlsv.leztUCwO" />

Communal amenity is a major focus of the proposal. Around 1,815 sqm of shared resident space is proposed across the ground floor, level 19 and the rooftop, including co-working areas, indoor and outdoor recreation spaces, wellness facilities, dining and gathering areas, lawn spaces, a rooftop pool and spa, and extensive landscaping. At street level, a landscaped forecourt and approximately 345 sqm of publicly accessible open space along Montague Road are intended to improve the pedestrian experience while activating the building's frontage.

The development will provide 163 car spaces, including 152 resident bays and 11 visitor spaces, together with 144 bicycle spaces incorporating resident storage, visitor parking, bicycle maintenance facilities and e-mobility charging infrastructure.

The site sits within one of Brisbane's fastest-changing inner-city precincts, less than two kilometres from the CBD and within easy reach of South Bank, West End, the Queensland Cultural Centre and extensive public transport connections. The Kurilpa Sustainable Growth Precinct planning framework is encouraging higher-density residential development to help meet Brisbane's housing supply targets while supporting walkable, transit-oriented neighbourhoods.

TRK Property joins South Brisbane apartment surge with Montague Road tower plans

Article summary

<ul data-end="785" data-start="311">
	<li data-end="459" data-section-id="5hbcyr" data-start="311">Pikos Group has released the five-penthouse collection at Skye Kangaroo Point, headlined by a two-storey sky home spanning more than 1,000 sqm.</li>
	<li data-end="561" data-section-id="1p7lq8n" data-start="460">Early buyer interest suggests the residences could set a new Queensland apartment price record.</li>
	<li data-end="667" data-section-id="1y70z0l" data-start="562">The collection includes four move-in ready penthouses and the highly customised Skye One residence.</li>
	<li data-end="785" data-section-id="yvm0y1" data-start="668">The release caps one of Bri​sbane's most ambitious luxury apartment developments overlooking the Brisbane River.</li>
</ul>

<hr data-end="790" data-start="787" />
Pikos Group has released the five-penthouse collection at its <a href="https://www.apartments.com.au/buildings/skye-residences-by-pikos-kangaroo-point-8-river-terrace-kangaroo-point-qld-4169">Skye by Pikos</a> development in Kangaroo Point, with early buyer interest indicating the flagship residences could eclipse every apartment sale previously recorded in Queensland.

The collection crowns the luxury riverfront development with five residences, including four completed penthouses and Skye One, a two-level sky home spanning more than 1,000 sqm that will be tailored to its eventual owner.

[smartcode_project:default project_id=90059 project_image_fid=374075]

Wanting to offer a fully customisable home, Pikos is offering Skye One as a blank canvas, allowing the buyer to work alongside the developer's design team to customise the home's layout, finishes and internal spaces.

The residence will feature a 247 sqm private rooftop terrace with its own swimming pool, sauna, steam room, outdoor kitchen and multiple entertaining areas overlooking the Brisbane River and CBD skyline.

The remaining four penthouses have been completed and are ready for immediate occupation, each offering four bedrooms, expansive open-plan living areas, soaring ceilings and private lift access.

[smartcode_project:default project_id=90059 project_image_fid=374059]

One of the defining features throughout the project is its use of Roman Classic Travertine, with more than 20,000 sqm of the natural stone imported from Italy after being personally selected by Pikos Group Founder and Executive Director Pedro Pikos, interior designer Julie Williamson and third-generation stone specialist Mario Caucci.

Pikos said the penthouse collection represented the culmination of the company's long-term vision for Skye.

"True legacy isn't measured by what we build today, but by what endures tomorrow," Pikos said.

"Our ambition is to create places that become more valuable with time, enrich the lives of generations, and stand as timeless landmarks long after we've stepped away."

[smartcode_project:default project_id=90059 project_image_fid=374060]

Williamson said the interiors were inspired by the natural character of Kangaroo Point and the Brisbane River rather than international design trends.

"Materiality tells the story of a place," Williamson said.

"We looked to the movement of the Brisbane River, the texture of the cliff face and the warmth of the surrounding landscape to create interiors that feel understated, enduring and unmistakably Brisbane."

Positioned above the Kangaroo Point cliffs, Skye places residents within walking distance of Howard Smith Wharves, South Bank and James Street while offering uninterrupted river and city views.

[smartcode_project_cta:default project_id=90059]

Brisbane's next apartment price record? Pikos unveils Skye's exclusive penthouse collection

Unit Market

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Arncliffe is the NSW location where there has been the biggest increase in unit stock compared to last year, according to Investar’s latest market report.
The property advisory firm states that Arncliffe has experienced a unit listing growth of 223 percent, up from 21 to 68 over the past 12 month period.
This is followed by Campbelltown, up from 30 to 80 and Epping, up from 32 to 78 units on sale.
<a href="/images/2016/10/11/Screen%20Shot%202016-10-11%20at%209.05.57%20AM.png" target="_blank">Click to enlarge</a>
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This list was produced using historical listing data at a suburb level for units.
It is designed to identify the suburbs with the biggest increase in stock on market for the current month when compared to the stock on market for the same period 12 months ago.
A large increase in stock on market could indicate weakening demand conditions or an increase in supply from growing activity in the market.
Units for sale at around the $680,000 median in Arncliffe includes a two bedroom unit at <a href="https://www.realestate.com.au/property-apartment-nsw-arncliffe-123669846" target="_blank">H204/9-11 Wollongong Rd</a> (above) that is for sale for $685,000.
Similarly, a two bedroom unit at <a href="https://www.realestate.com.au/sold/property-apartment-nsw-arncliffe-122350770" target="_blank">107/9-11 Wollongong Rd</a> (below) was recently sold for $695,000.
<img src="/images/2016/10/05/1079-11%20Wollongong%20Rd.jpg" alt="">
 
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j.ballantyne1990-6AQqhLzZaK

Arncliffe apartment listings soar to NSW top spot: Investar

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Apartments in Brisbane, Sydney and The Whitsundays are in the peak of the market, according to the Herron Todd White October 2015 property clock.
Townsville, Mt Gambier and Canberra apartments are now deemed at the bottom of the market.  
<a href="/images/2015/10/08/Screen%20Shot%202015-10-08%20at%2011.20.17%20AM.png" target="_blank">Click here to enlarge</a>
For more information, <a href="https://www.htw.com.au/" target="_blank">click here</a>.
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mick.cee-iDmgDDAmu8

Brisbane, Sydney units at peak pricing on October HTW property clock

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GUEST OBSERVER
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Victoria is set to build, for the first time ever, more multi-unit dwellings than detached houses in 2016. 
It will mark a significant shift to more urbanised living by the city destined to have the largest 12 population in Australia, of 8 million, in 2050. Melbourne’s population was 4.4 million at the end of 2014 and Victoria’s was 5.9 million. Total residential building approved in 2014/15 was a record $20.2bn, up 20% from 2013/14, with 50% in detached houses.
<a href="/images/2015/09/24/Screen%20Shot%202015-09-24%20at%2010.13.56%20AM.png" target="_blank">Click to enlarge</a>
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Victoria’s residential building approvals were running at a record annual (or through the year) pace of 68k in July. The equivalent national approvals figure also hit a record 221k in July, driven by a strong rise in multi-unit approvals in Melbourne and Sydney over the past year.
In Victoria, multi-unit dwelling approvals, mainly high rise apartments in the metropolitan areas, now account for around 50% of the Victorian total. It compares to about 60% for NSW which has been building more multis than detached homes since the mid-1990s.
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One of the major trends in the inner Melbourne suburbs over the past decade is that the traditional industrial and warehouse areas have been turned over to residential, usually multi-unit developments. 
The proximity to the city offers distinct travel advantages along with a preference shift to apartment and high-rise life styles. The multi-unit developments are a more affordable alternative to detached houses in nearby suburbs. The State Government’s policies, like exempting off- the-plan purchases from stamp duty, have assisted the upswing. 
Detached houses represent just under 50% of total approvals. Most of the houses tend to be built in outer-metropolitan suburbs or the regional centres where new land prices are more affordable.
<a href="/images/2015/09/24/Screen%20Shot%202015-09-24%20at%2010.16.15%20AM.png" target="_blank">Click to enlarge</a>
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The recently announced height limits on residential buildings by Victoria’s State Government will undoubtedly curb some inner-city construction. We expect that more dwellings will be built in the outer suburbs. Demand conditions are expected to stay relatively firm, unless there are Federal Government changes to investor-related tax policies or foreign investor access to the residential property market. 
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Victoria’s residential construction forecasts 
We expect to see an average of 65k new dwellings built in Victoria across both 2015 and 2016, based on approvals. In our view it means around 33k multi-unit dwellings and 32k detached houses in both years. The multis tend to be built in the inner suburbs. 
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Victoria’s construction boom is dominated by the high-rise developments. The approvals data shows that high rise apartment blocks (four or more levels) account for 80% of all multi-units and 46% of total residential. So there has been a marked change in the building materials used compared to new detached homes. It has coincided with a reduction in Australia’s manufacturing capability through a prolonged period of an over-valued Australian dollar. 
Victorian approvals by region, by number and value 
The detached houses are predominantly constructed where land is available, in the outer suburbs which account for 50% of the 33k total of new houses in 2014/15. However, there are a significant percentage of new detached homes (at least 20% of the 2014/15 total of 33k) that are new-for-old knockdowns in the inner Melbourne suburbs. New construction can be more financially appealing and quicker than renovation in some cases.
The regional centres like Bendigo, Ballarat and Geelong are also building large numbers, about 30% of the total, which is positive for regional jobs in construction, retail and transport. 
Victoria has some features that tend to favour building compared to the other States. It has a large population, in one of the smaller Australian states, with good transport links. There are large supplies of accessible and affordable land around Melbourne and the regional cities suitable for residential. 
For the multi-unit developments the approvals data shows that 74% of the 2014/15 total of 33.5k will be built in the inner-city areas. But that means about 23% will be built in the outer suburbs, usually around the major transport links. The Victorian Government is undertaking a considerable development program that will improve new transport links around the outer suburbs as the population increases. 
There is also a significant contribution from Alterations and Additions (A&amp;As) in the total Victorian residential construction picture. The figures here include A&amp;As approved by local councils but the level of actual A&amp;A expenditures is at least two to four times higher. This is because not all A&amp;A need approval from local councils. In the national accounts, A&amp;As spending is estimated at 40% of the total residential investment. 
In Victoria, A&amp;As approved were valued at $2.3bn in 2014/15 or about 11% of the total value of approved residential construction. But actual spending could be as high as $8bn. Inner-city A&amp;As totalled $1.3bn according to the approvals data, which was about 6% of the total value of approvals. A&amp;As have a major influence on hardware, whitegoods and furnishings retailing. 
The current building cycle – longer duration? 
The current Victorian building cycle differs from the previous ones in a number of ways which could extend its duration. Interest rates look set to stay at relatively low levels for longer. It has fuelled an extended lift in residential property prices, allowing sellers and developers to move more properties. Prices have also risen for commercial, industrial and retail properties.
<a href="/images/2015/09/24/Screen%20Shot%202015-09-24%20at%2010.18.31%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2015/09/24/Screen%20Shot%202015-09-24%20at%2010.18.31%20AM.png" alt="">
On current indications, interest rates do not look they will be rising in Australia until 2017, at the earliest. The inflation outlook remains quite subdued, despite the lower Australian dollar, and wages growth is moderating.
The “pass-through” time between approval and completion is lengthening because there are more high-rise developments. They require more site preparation, including demolition and excavation. They usually have extensive underground car parking and often involve multi- use developments where commercial, retail, accommodation and cafes are included, such as the large new developments underway in the suburbs, like near Box Hill railway station. Construction periods are lengthening and can easily take more than a year. Some of the large high-rise developments in Melbourne’s CBD have reported construction periods close to 3 years.
Overseas investors, ie non-residents, have emerged as a significant new source of demand for the property developers in the last three years. They are playing a much more active role in the new residential market thanks to a significant easing of the Federal Government’s regulations around foreign purchase of all types of local property. At this stage it does not appear that there will be any regulatory changes in the current political cycle. But the newly announced Turnbull Government may be more amenable to future changes.
Population and pent-up demand pressures have been more intense, raising demand levels, for the last ten years. It coincided with an unusually weak new dwelling supply response which underpinned strong rises in rents and dwelling prices. Higher student numbers are an important part of the population increase. Victoria’s population growth has eased back to an annual rate near 100k, but that is still high compared to a decade ago.
If, as expected, new construction activity in 2014/15 is 65k, it will match the underlying demand from population growth and, most probably, some of the pent-up demand from previous years. But the combination of a better jobs market performance and firm population growth should mean demand conditions remain relatively firm.
There have also been press and anecdotal reports, sourced from the power and water providers, that some (possibly as much as 20%) of the new inner-city apartments are not fully utilised, ie they may be not lived in for a majority of the year or leasable. So they may not in the rental market. It may help explain why Melbourne rental growth is running at around 2%pa, rather than weakening in the face of a record increase in supply via high construction levels.
 
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<img src="/images/2015/09/24/Screen%20Shot%202015-09-24%20at%2010.22.58%20AM.png" alt="">
 
The chart showing Melbourne’s residential rents and vacancy rates as departures from their longer term average (1995 to 2015) indicates that despite the large supply increase, vacancy rates are below their average level, while rents are rising again! It may be different for CBD rents, where there are clear oversupply issues. 
Big Population: Melbourne headed for 6 million people in 2031 
The ABS population projections have Melbourne reaching 6 million people in 2031, from 4.4 million in 2014. So another 1.6 million people will create ongoing demand pressure for more dwellings over the next few decades. Victoria’s population is expected to rise from its current 5.9 million to 7.1 million in 2031. 
In terms of households, Victoria currently has around 2.2 million, with Melbourne at 1.5 million, or about 70% of the total. The number of households in Melbourne is forecast to rise by about 600k to 2.1million in 2031. Dwelling construction in Melbourne needs to average around 40k per year to match the lift in households, assuming population per dwelling numbers are unchanged. Dwelling construction in greater Melbourne has averaged around 40k over the past decade. So the relatively robust levels of construction activity need to be maintained over the next decade to match population growth. 
 
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Michael Workman is senior economist, <a href="https://www.commbank.com.au/corporate/research?ei=mv_research" target="_blank">Commonwealth Bank</a>.
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