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ongf
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r
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ral
ianBur
eauofStat
ist
ics(
ABS)whichshow t
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dent
ial
proper
typr
icesros
eby2.2%i
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chquar
terof201
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TheEconomy
Austr
ali
a
seconomyemergedasthel
eastaect
edbytheGlobalFi
nancial
Cri
si
s(GFC)wit
hthecount
rybei
ngoneoftheveryf
ew t
oavoidrecess
ion. TAGS

Atit
slastboardmeet ingonJune6201 7
, t
heReserveBankofAus
tral
ia(
RBA)
MONEY CASH RUPEES FI
NANCE MORTGAGE
for
ecastthatthi
ss ol
i
dper f
ormancewillcont
inuewit
heconomicgrowth LENDI
NG RESPONSE POLI
CY EXPERI
ENCE
REGI
STERED PROPERTY DEVELOPMENT TERMS
expectedtoincreasegradual
lyovert
henextcoupleofyear
stoalit
tl
eabove DEVELOPERS BRI
DGING CUSTOMISED SOLUTIONS
EVALUATE
3%p.a.

I
ndicat
orsoft
helabourmarketr
emainmixedwi
thf
orecastempl
oyment
gr
owt hbei
ngaccompaniedbylow r
eal
-wageappr
eciat
ion.

Popul
ati
onGr
owt
h
I
nrecentyear
s,Aus
tral
i
ahashadoneoft
hehighestpopul
ati
ongrowt
hrat
es
i
nthewes t
ernworl
dwitht
herat
ebeingmor
et hantwi
cetheaver
ageof
Organi
s at
ionforEconomi
cCo-oper
ati
onandDevelopment(
OECD)member
countr
ies,e.
g.betweenSept
ember2009andSeptember2014,
Aust
ral
i
as
popul
ati
ongr
ew by1
.79mi
l
li
onper
sonsorby8.
23%.
Accordi
ngtoamedi
um- l
evelproj
ect
ionbyInf
ras
tructureAust
ral
i
a(an
Austr
ali
angover
nmentbody)
,therat
eofgrowthwillconti
nueandAustr
ali
a
s
populat
ionwil
lgrow byar
ound7.
8mil
li
onpers
ons(or34.
3%)f
rom 22.
72
mil
li
onper s
onsinJune2012to30.
50mil
li
onpers
onsinJune2031
.

Suppl
yandDemandofPr
oper
ty
Ther
ehasbeensubst
antial
resident
ial
devel
opmentact
ivi
tyi
nmanymar
ket
s
i
nAustr
ali
a
seas
ter
ns t
atessince2012.

Todate,NSW hasbeenabl etoabsor

btheincr
easedunitsuppl
ycomf or
tabl
y
duetoitbeinginas t
ateofchr
oni
cundersuppl
yinalls
ectorsoft
he
res
ident
ialmarket.
However,somef or
ecaster
spredi
ctanovers
upplyofunit
sintheBri
sbane
andMelbourneCBDmar
ket
sint
hes
hor
t-t
erm duet
oas
lowi
ngi
ninves
tor
sal
escausedby:
Ti
ght
eni
ngyiel
ds;
Thei
mposi
ti
onofmor
eoner
ousl
endi
ngcr
it
eri
abyt
hebanksupon
i
nves
tors;
Theplacementofr
est
ri
cti
onsupont
heper
cent
ageofnew
developmentsabl
etobes ol
dto
f
oreigninves
tor
sbytheFederalGovernment
;and
Stri
ctmoneyt r
ans
fercont
rol
sinChina.

I
ncont
ras
t,t
hef
orecas
tsar
emor
epos
iti
vei
nthel
owerdens
ityhous
ing
sectorwitht
heUr banDevel
opmentI nst
it
uteofAustr
ali
a(UDIA)est
imating
thatapproxi
mately40,
000landlotsareneededimmedi at
elyint
heeas t
er n
seaboardcapit
alstobri
dgethegapbet weenthelandsuppliedoverthelast
veyearsa ndthenew detachedhous i
ngrequi
redunderthemet ropol
itan
populati
onandpl anni
ngtar
gets.
Curr
entl
y,supplyofhousebl
ocksintheeasternstat
esisbarel
ymatching
demandwi t
hbuyer si
nSydney,Melbour
ne, andSouth-EastQueens
land
ei
therpayi
ngmor efortr
adi
ti
onals
izeall
otment sorsett
li
ngforsmal
ler
bl
ockswhilstdevel
opershol
drecordlow l
evelsofstock.

Int
er estRat es
Duet ol ower -t
han-expect edi nat
ionar ypressures,theRBAr educedt he
cashr atetot helowes teverl evelof1.5%i nAugus t201 6andleftit
unchangedatt hatlevelatitslastboar dmeet ingonJ une6,2017 .
Atthiss tage,thecas hrateisexpect edt oremains t
abl eat1.
5%f orthe
remai nderof201 7wi t
hmar ginalupwar dpr essur
eappear i
ngint hes econd
halfandmor epar ti
cularl
yi n201 8.
Des pitetheabove, manyl ender shaveannouncedi ncreaseinthemor tgage
rat
espayabl ebyi nvestorsanduponi nterest
-onlyloanst omiti
gat eagainst
ther i
sksas sociat
edwi thloansoft hi
st ypeandbecaus eofsuper vi
sory
meas uresimpos edbyi ndus tryregulators.

Avai
labi
li
tyofCr
edi
t
Austr
ali
a
sr esi
dential
mortgagemarketisapproxi
mat
ely$1
.6t
ri
ll
i
oni
nsi
ze
anddomi natedbyt hecountr
ysf
ourl
argestbankswhohol
dacombi
ned
marketshareex ceedi
ng82%.

Al
thoughthebanks
loanbooksconti
nuetoexpand,t
heirgrowthr
ateshave
sl
owedbecauseofrestr
icti
onsimpos
eduponthem bybot h,t
heAustr
ali
an
Pr
udenti
alRegul
ati
onAut hori
ty(
APRA)andt
hems el
ves.
Theserest
ri
ctionsincl
uderequi
rement sforli
mi t
ingnew i
nteres
t-onlyloans
to30%ofnew r esi
denti
almort
gagel ending,vir
tualceasi
ngoflendingt o
f
oreignbuyers,imposi
ti
onofmor eoner ouslendingconditi
onsupon
Austral
i
ancit
izenswhoear nmos toftheiri
ncomeos hor
e,andlimitat
ionon
thetypeofproperti
esthatf
orm acceptables ecuri
ty.
Whilstsomeoft hedemandforloansofthes
et ypeshavebeenmetby
non-banklenders,t
her
eisli
ttl
edoubtthatcreditavai
l
abi
li
tyforbuyer
sof
res
identi
alpropert
yhasti
ghtenedoverthepas t24months.

Thesamecanal sobes aidforpropertydevelopersthems elveswithnance

opti
onsbeingextr
emel yli
mi t
ed,asituat
ionthatresult
edi nNat i
onalAustr
ali
a
Bank
sQuar t
erl
yAus t
ral
iaRes i
denti
al Pr
opertySurveyofDecember201 6
concludi
ngthat
TightCreditCondit
ionsar
et hemos tsignicantconst
rai
nt
onnew housingdevelopment s.

Hous
ingAor
dabi
li
ty
Stronghousepri
cegrowthi
nSydneyandMel bour
nesi
nce2012/13has
reducedaordabi
li
tyi
nthes
ecit
iesmarkedl
yandindi
cat
esli
mitedscopef
or
continuedpr
icegrowt
hinmanyareas
.

Accor
dingtoBI
SShrapnel,
aor
dabili
tyrati
osi
nallot
hercapi
tal
cit
iesar
e
ar
oundt hemi
dpoi
ntofthei
rhi
stor
icalrangeorsl
i
ghtl
ybetter
.

Whi
l
sti
tcoul
dbear
guedt
hathous
ingaor
dabi
l
ityi
sapr
obl
em l
argel
y
connedt oSydneyandMel bourne,opi
nionpollss
how thati
tisaconcernfor
mos tvot
ersandt her
efor
es omeSt at
eGover nmentsoeri
ncenti
vesinthe
form ofs
tampdut yconces s
ionsandcashgr ant
storst
-ti
mehomebuyer s
.
Additi
onall
y,t
heFeder al
Gover nment
slastbudgetcontai
nedmeas ur
es
aimedatAus tr
ali
ansofallages.

Negat
iveGear
ing
Despi
tesomedebat
e,i
tremai
nsi
npl
aceandi
sunl
i
kel
ytober
emovedi
nthe
shor
tter
m.

Conclus
ion
Alt
houghhousepri
cesandconst
ruct
ionl
evelsremainatelevatedl
evel
sinsomear eas,
the
under
lyi
ngfundamental
soft
heeastcoastr
esident
ialmarketremai
nsoundwi t
hhigh
popul
ati
ongrowth,
str
ongemployment,s
ubs t
anti
alongoi
ngdemand, l
ow i
nter
estrat
es,and
pr
udentr
egul
ator
ysuper
vis
ionoft
hemor
tgagemar
ket
.
Whilstr
atesofcapit
alappreci
ati
onwil
lvar
y(e.g.I
tisunli
kel
ythatt
heresr
oom forsubs
tanti
al
pr
icegrowthinsomear easofSydneyandMel bourneduetolowwagegr owt
handt hepri
ces
al
readybeingachieved)
,thisi
sli
kel
ytoremainthecas eunt
ilt
ri
ggersforasust
ainedcorr
ecti
on
i
nhous
epr
icesoccur
.
However,gi
vent
hewarningsignalsemanati
ngfrom s
omemar ketsegments(
e.g.Br
isbaneand
Melbour
nehigh-
ri
semar ket
s)andt hematur
it
yofthepropert
ycycleinsomear eas,
buyers
needtobeawarethats
omer esidenti
alpr
opertyi
nvestment
sar epotent
ial
lyr
iski
ert
han
ot
her
s.
Themostprudentmeansbywhichsuchari
skcanbemi t
igatedistofocusuponsector
swi
th
subs
tant
ial
ongoingdemandandlimi
tedchanceofover
suppl yInourvi
ew,rel
ati
vel
y
aor
dabl
e,lowerdensi
tyhous
ingl
ocatedi
nareaswit
hadi verserangeofemployment
oppor
tuni
ti
esmeet
sthi
scr
it
eri
aper
fect
ly.

Twi
tt
er@Ni
: chol
asHer
ps

Emai
l:nher
ps@az
zamnance.
com.
au

ABOUTAUTHOR

Ni
chol
asHer
ps
HoldingaBa chel
or'
sa ndMa st
er'sde gr
e einComme r
ce
fr
om Bon dUn i
versi
ty,
NicholasHe rpscome stoAzzam
Fi
n ancewit
ho ver20y ear
so fexperience.Heo ver
sees
businessandproduct devel
opme nt
,transacti
on
or
igi
nat
ion,andcapi
talr
ais
ingact
ivi
ti
esatt
heor
gani
sat
ion.

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