8c9900a5-1c16-4e74-82ba-580f6755225a

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>It&#x27;s been a hell of a year for us poor folk in property, hasn&#x27;t it?</p><p>For the vast majority of the industry, we entered the year with a rather dark cloud hanging over our heads. </p><p>Sydney and Melbourne were leading the country down a <a href="https://theurbandeveloper.com/articles/how-does-the-housing-downturn-compare-to-previous-cycles-">slippery slope</a> in residential housing prices and the rest of the country was holding their breath in anticipation of how low the <a href="https://theurbandeveloper.com/articles/housing-values-record-sharper-decline-than-apartments-moodys">bottom</a> would go. </p><p>The <a href="https://theurbandeveloper.com/articles/nsw-government-releases-final-opal-tower-report">Opal Tower incident</a> over Christmas signalled the first signs of “cracking” hitting the media in the industry&#x27;s battle with <a href="https://theurbandeveloper.com/articles/mascot-towers-moving-downward-update">building quality issues</a>.</p><p>We also returned from summer holidays with the shadow of a <a href="https://theurbandeveloper.com/articles/banking-industry-culture-driven-by-profit-and-greed-banking-royal-commission">royal commission</a> into banking looming over the broader economy. </p><p>By the end of February, most of us were asking ourselves: are we destined for the <a href="https://theurbandeveloper.com/articles/property-prices-fall-at-fastest-rate-since-gfc-abs-">first recession in three decades </a>or will the Australian economy—and property sector—defy history to record another consecutive year of growth?</p><p>Commissioner Hayne then released his findings into the banking sector and the political hot potato of bank bashing (most of it largely justifiable) was intensifying with the prospect of a federal election on the immediate horizon.</p><p>Enter the federal election campaign and the obligatory “tools down” mentality for the industry. </p><p>The industry was weighing up the strong policy and reform agenda of Labor&#x27;s Bill Shorten with the less complex “business as usual” agenda of the unelected incumbent prime minister Scott Morrison. </p><p>Big infrastructure was on the table for both parties, with significant reforms to negative gearing, superannuation and franking credits proposed by the favourite Shorten.</p><p>To nearly everyone&#x27;s surprise, “<a href="https://theurbandeveloper.com/articles/what-the-australian-property-industry-can-learn-from-scomos-miracle">Scomo</a>” pulled off one of the most unexpected victories in Australian political history and, as they say, the rest is history.</p><p>For most across the industry, there was an immediate sigh of relief following the <a href="https://theurbandeveloper.com/articles/what-the-australian-property-industry-can-learn-from-scomos-miracle">federal election result</a> with the certainty of &#x27;business as usual&#x27; and the uncertainty of major tax reform for property off the table for now.</p><p>Author&#x27;s note: I make no comment on the importance of these policy reforms, for now. (Yeah I know, cop out!)</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>With a bit of wind in our sail, the industry dusted themselves off and started calling for some relief from the banking sector, in the form of both <a href="https://theurbandeveloper.com/articles/075-is-a-record-low-but-dont-think-for-a-second-the-reserve-bank-as-finished-cutting-the-cash-rate">interest rate cuts</a> from the Reserve Bank and <a href="https://theurbandeveloper.com/articles/apra-scraps-loan-buffer">relaxations to borrowing limits</a> from the Australian Prudential Regulatory Authority. </p><p>Whilst our industry was indulging in the challenges of the market, the rest of the country was suffering from one of the worst droughts on record. </p><p>With no relief in sight for the farmers, the industry was boosted with a mid-year interest rate cut which was promptly followed by changes to the borrowing caps imposed on Australian banks by the regulator and then a second interest rate cut in October. </p><p>And like a moth to the flame, the resilient residential market in Sydney and Melbourne—followed by most of the country—started to turn around from the middle of the year to finish the year with one of the sharpest declines and subsequent <a href="https://theurbandeveloper.com/articles/-property-prices-forecast-to-rise-in-2020">recoveries</a> in Australian history. </p><p>It has been a remarkable year for those that live and breath property. </p><p>I don&#x27;t think any pundit out there could have predicted how the events of the year transpired. </p><p>It&#x27;s been a year of surprises—many of them painful, many of them pleasant.</p><p>However, we sit here with only weeks remaining in the working year with the same question on our lips: are we destined for the first recession in three decades or will the Australian economy—and property sector—defy history to record another consecutive year of growth?</p></div></div></div></div></div>

The Urban Developer founder and CEO Adam Di Marco shares his views on the year that was. 

Will APRA Stop the Post-Pandemic Housing Boom?

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>In this TUD+ Briefing, ANZ Research senior economist Felicity Emmett discusses the main risk factors that prudential regulators are facing in the midst of the fastest growth in house prices in decades.</p><p>Elevated activity in the housing market, which has pushed up home prices, including 2.8 per cent growth in March, has increased pressure on regulators.</p><p>Emmett discusses the key drivers affecting the run-away housing market and the policy levers available to regulators. </p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><iframe sandbox="allow-forms allow-scripts allow-pointer-lock allow-same-origin allow-top-navigation allow-presentation" class="embed-responsive-item" allowfullscreen="" frameBorder="0" style="max-width:574px" width="100%" height="323" src="https://www.youtube.com/embed/Qqrb5-UX8r8"></iframe></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p style="text-align:center"><strong>You are currently experiencing </strong><em><strong>The Urban Developer</strong></em><strong> Plus (TUD+), our premium membership for property professionals. </strong><a href="https://www.theurbandeveloper.com/membership-plans"><u><strong>Click here</strong></u><strong> to learn more.</strong></a></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/4fb872c4-2507-449c-af93-4c928c2ed849.png" width="800"/></picture><div></div></div></div></div></div></div></div>

ANZ senior economist Felicity Emmett discusses the main risk factors that prudential regulators, such as APRA, are facing as house prices surge...

McGrath Projects Adam Sparkes

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><em>The Urban Developer</em> <a href="https://theurbandeveloper.com/articles/developers-need-shift-focus-changing-market">recently covered McGrath&#x27;s Projects 2017 report</a> which examines key market trends affecting the Australian property market and provides a summary of Australia&#x27;s three largest real estate markets.</p><p>General manager of McGrath&#x27;s Projects, Adam Sparkes, spoke with <em>TUD</em> about Australia&#x27;s real estate markets, buyer sentiment, lending restrictions and regulations targeting foreign investment, and the value gap between Sydney and Melbourne and the rest of the country.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>TUD: In the McGrath Projects recent report, you said after five years of growth, the Australian property market is now beginning to stabilise. What’s your outlook for the next 12-18 months for the Australian real estate market?</strong></p><p><strong>AS: </strong>Land infill sites within a close proximity to the CBD are becoming extremely hard to come by. I believe newly-released projects within close proximity to our major centres will remain in high demand. However, as developers compete on the national stage to attract astute purchasers, they will need to offer a point of difference to remain relevant and sought after. </p><p>[Related reading: <a href="https://theurbandeveloper.com/articles/developers-need-shift-focus-changing-market">Developers Need to Shift their Focus in a Changing Market</a>]</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/GS_hero_curves-2.jpg" width="1139"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p></p><p><strong>TUD: Sydney and Melbourne tend to drive the national headline growth figures, what is your opinion on the “value gap” between these two cities and the rest of the country?</strong></p><p><strong>AS:</strong> I believe Melbourne offers a genuine value proposition when compared with Sydney. To cite a recent example, we are involved with Salta’s Park House project in the suburb of Abbotsford – less than 3km from the Melbourne CBD. </p><p>Park House is positioned on a large north facing parcel of land on the banks of the Yarra River. Offered at less than $11,000 per square metre with exemplary design by SJB Architects and Carr Design Interiors. By contrast you would need to go far along the Parramatta River west of Sydney to get close to that value. </p><p>Sentiment for the off-the-plan apartment market in Brisbane is one of caution – enquiry levels are down, and buyers remain scarce. However, I believe in comparison to the two southern states, south-east Queensland’s apartment market represents not only an affordable entry price but an excellent opportunity. </p><p>It may take a leap of faith purchasing into counter-cyclical conditions, but those with a medium to long term view will be rewarded. I have personally assisted close friends of mine (Sydneysiders), to buy into this market for investment purposes using their superannuation (SMSF).</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>TUD: You work in Sydney, what stands out about the Sydney market at the moment?</strong></p><p><strong>AS:</strong> I believe it is difficult to categorise Sydney as one market – rather there are several &quot;sub markets&quot; that make up the overall greater Sydney metropolitan area.</p><p>As an example, the Sydney inner-city area, including harbour front and CBD, will continue to remain in high demand. Sydney is a truly international city and on par with New York, London, Singapore and Hong Kong. Yet on a square metre rate comparison I believe there is still value in the super prime and prestige end of the market. </p><p>The inner ring suburbs (inner west, inner east, lower and upper north shore), will also remain in strong demand. In 2018, we will be bringing a number of small- to medium-sized projects to the market from Neutral Bay to Warrawee. </p><p>Outer lying areas such as Auburn, Kellyville, Mays Hill (to name a few), will also remain in demand and are typically offered at a lower entry price addressing the notion of affordability for both investors and owners alike.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/shutterstock_644999479.jpg" width="1000"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br><strong>TUD: What makes a good developer? What developments stand out to you as examples of thoughtful and well-designed development?</strong></p><p><strong>AS:</strong> Developers that set about creating buildings they can be proud of and stand the test of time will continue to strengthen their brands. A new breed of developers also see sustainability and the notion of being conscious of our carbon footprint as extremely important elements as a mandate. </p><p>One of the best examples in recent times is the standout success of Frasers&#x27; One Central Park, Chippendale in Sydney. Led in the early days by the vision of Dr Stanley Quek, the precinct is now nearing complete realisation and has won a series of international acclaim. It is a triumph for modern apartment living and will go down in history as the benchmark for true urban regeneration. </p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>TUD: Have you noticed a marked impact on the real estate market from APRA-imposed lending restrictions, regulations targeting foreign investment, or China’s crackdown on outbound investment? </strong></p><p><strong>AS:</strong> APRA has introduced a number of measures designed to dampen the enthusiasm and appetite for foreign buyers. When combined with the capital outflow restrictions from China, off-shore Chinese enquiry has dropped significantly.  </p><p>Long term I see the demand for Australia as a destination of choice will remain high. Drivers will not change – clean air, fresh fruit and vegetables, high-quality education as well as a safe long term investment solution will continue to drive demand from China and South East Asia in general. </p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>TUD: In the past year have you noticed an uplift (or decline) in buyer sentiment generally?</strong></p><p><strong>AS:</strong> Over the last year we have seen a decline in numbers of enquiry levels. In today’s terms buyers are more informed than they ever have been. Potential purchasers are extremely well-researched and will make an actual enquiry only once they are confident with what the research is telling them. With that understood, the role of the sales agent is now all about relationship selling. An enquiry today may lead to a sale in twelve months’ time. </p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/spaced_5800image22.jpg" width="800"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br><strong>TUD: Is the so-called “great Australian dream” of owning your own home — and backyard — alive, or is that changing for Australians as the population grows and cities densify?</strong></p><p><strong>AS:</strong> Affordability will continue as a driver for not only first home buyers, but upgraders and downsizers. Those needing the space of a three or four bedroom home may look at the outer lying areas for a house and land package that meets their size and budget requirements.</p><p>However, as we are becoming more and more entrenched by social drivers, demand for inner urban living will remain high. This is true across all generations from Millennials through to Baby Boomers as inner city living becomes not only acceptable but the preferred lifestyle choice. </p><p>The notion of a ‘lock-up-and-leave’ lifestyle for Baby Boomers will see this group travel the world from their inner city base. However, before they spend the kid’s inheritance, their children (the Millennials) will rely on the ‘bank of mum and dad’ to assist with the purchase of their first home – and also typically choose close to the action of the inner city hotspots. </p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>TUD: How did you first get started in real estate? What is your professional background?</strong></p><p><strong>AS:</strong> I finished the HSC in 1986 and commenced a retail career working in various roles specifically in menswear. As the menswear supervisor of Italian fashion house Giorgio Armani, I built up a regular clientele of both local and international celebrities and business executives. In 1998, I sold a suit to John McGrath and explored the idea of working in real estate. John felt that my skill set and expertise in selling a rack of suits could be utilised in selling a &quot;vertical rack of apartments&quot; and I commenced as a sales agent within the newly formed projects division. </p><p>After almost seven years with McGrath, I took on twelve years of developer-side roles with Multiplex, Frasers Property Group, Crown and Lendlease. This gave me an in-depth understanding of the processes and cyclical nature of off-the-plan selling. In 2016, I returned to McGrath as general manager of McGrath Projects. </p><p>It would be fair to say that the last five years have seen unprecedented selling activity with record sell out scenarios at record sales prices. Having also worked through challenging conditions post GFC, I have firsthand experience in understanding a market where the buyer has a significant advantage. </p><p><strong>TUD: What’s next for McGrath Projects?</strong></p><p><strong>AS:</strong> 2018 will represent new opportunities for the team across the entire east coast. We have a number of exciting new development opportunities in the pipeline stages that will come to the market over the next six to twelve months. I see significant opportunity in Victoria in both the apartment and house and land space and I intend to build a team with experienced leaders. </p></div></div></div></div></div>

Banking01

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>The debate on what drives housing affordability in Australia is a hot topic for state and federal governments. </strong></p><p>The property boom led to decreasing housing affordability and the significant build-up of household debt, triggering APRA’s restrictions on investor and interest-only mortgage lending.</p><p>And as a result of the tighter lending environment, Entourage Finance director Damien Roylance believes Australia is facing a credit crisis.</p><p>“It’s significantly harder to get funds at the moment with changes to investor loans, interest-only loans and servicing restrictions, and the effects are starting to show with the auction clearance rates,” Roylance said.  </p><p>The latest <a href="https://theurbandeveloper.com/articles/investor-lending-fell-15-in-the-last-year">ABS housing lending statistics </a>released last week reveal the total number of new owner-occupier loans fell to the lowest figure since October 2016, while investor lending plummeted by 27.4 per cent since 2015, down 15 per cent for the past year. </p><p>When applied in theory, the regulations make sense explains Marshall White Projects Director Leonard Teplin.</p><p>“What needed to happen was a steady, measured approach to introducing new regulations where each outcome could be evaluated over time, to ensure the pendulum didn’t swing too far in the other direction,” Teplin said. </p><p>“The government and APRA had good intentions when they tightened lending and restricted investment loans, however no investors means less rental supply, which pushes rents up, making it even harder for people to try to save up their first deposit.”</p><p>Principal economist at the Housing Industry Australia Tim Reardon blamed punitive restrictions on the tumble in investor lending. </p><p>“The federal government targeted investors with two successive interventions in the market through APRA and state governments introduced punitive rates of stamp duty on foreign investors,” he said. </p><p>Related reading:<a href="https://theurbandeveloper.com/articles/-incentives-for-developers-could-help-create-more-affordable-housing"> Incentives for Developers Could Help Create More Affordable Housing</a></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/9eec717e-b07a-49e4-a9c0-a717e5e42a62.jpg" width="1000"/></picture><div><span style="align-content:center;opacity:0.8">Nightingale 1 front facade </span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>Related reading: <a href="https://theurbandeveloper.com/articles/buying-a-house-is-finally-getting-more-affordable">Buying a House is Finally Getting More Affordable</a></p><p>Metro Property state manager David Steele said developers are also struggling to gain finance. </p><p>“Credit has been harder to obtain for both developers and buyers, a two-fold problem that will no doubt see residential prices surge and buyers struggle to move in the market,” Steele said.</p><p>“I understand the reasons for the APRA interventions, however the changes have gone too far and produced unintended consequences that will see our economy and our housing market head even further in a damaging direction.”</p><p>By introducing measures that discourage investors into the market, Qualitas senior director of real estate finance Gil Norwood believes the government has inadvertently decreased the amount of rental supply available.</p><p>“Developers should be incentivised by the government to deliver affordable housing and more flexible living arrangements via an offset to existing local and state levies, which would result in better outcomes for the market and keep price growth at an equilibrium,” Norwood said.</p><p> “At this rate, buyer activity will continue to remain subdued as it becomes almost impossible for Australians to pay exorbitant rent and save up for a house deposit at the same time.” </p><p>It’s not all bad news, a recent <a href="https://theurbandeveloper.com/articles/australias-housing-affordability-best-in-10-years-moodys">housing affordability report released by Moody’s</a> said Australia’s housing affordability is the best in 10 years, and will continue to improve for the remainder of 2018.</p></div></div></div></div></div>

The debate on what drives housing affordability in Australia is a hot topic for state and federal governments.

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<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>The Australian Prudential Regulation Authority will ease its curbs on interest-only residential mortgage lending, it announced on Wednesday. </strong></p><p>The supervisory benchmark was put in place as a temporary measure, leading to significant declines in lending to investors and putting downward pressure on boiling house prices and Australia’s record high household debt-to-income ratio.</p><p>The proportion of new interest-only lending is now significantly below the 30 per cent threshold APRA introduced in March 2017.</p><p>APRA will remove the 30 per cent limit from 1 January 2019, with plans to conduct a review into banks’ lending practices next year.</p><p>Related: <a href="https://theurbandeveloper.com/articles/apra-scraps-investor-loan-growth-cap-">APRA Scraps Investor Loan Growth Cap</a></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/b761cc04-d17d-438d-82ff-4ac2699e0b39.jpg" width="960"/></picture><div><span style="align-content:center;opacity:0.8">APRA chairman Wayne Byres said the lending curbs have &quot;served their purpose&quot;.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>In April, APRA removed the 10 per cent investor growth “speed limit” it had imposed in 2014.</p><p>APRA said that the removal of the caps was subject to the banks providing “certain assurances” about the strength of their lending standards.</p><p>“APRA’s lending benchmarks on investor and interest-only lending were always intended to be temporary,” APRA chairman Wayne Byres said.</p><p>“Both have now served their purpose of moderating higher risk lending and supporting a gradual strengthening of lending standards across the industry over a number of years.”</p><p>In a letter to the banks, APRA said that its curbs had reinforced sound residential mortgage lending practices and “significantly improved” the banks’ lending standards. </p><p>The result, APRA says, is more resilient banks and better overall financial system stability.</p><h2><strong>Interest-only lending still ‘higher risk’</strong></h2><p>Owner-occupier interest-only lending remains a higher risk form of lending, the regulator said. </p><p>“APRA expects that ADIs will maintain prudent internal risk limits on interest-only lending. </p><p>“These internal limits should cover both the level of new interest-only lending and the type, including lending on an interest-only basis to owner-occupiers and lending on an interest-only basis at high LVRs.”</p><p>The regulator says it plans to conduct a review of banks’ risk controls on interest-only lending in 2019 and will continue to “closely monitor” conditions in the housing market.</p></div></div></div></div></div>

The Australian Prudential Regulation Authority will ease its curbs on interest-only residential mortgage lending, it announced on Wednesday. 

Apra1

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>The Australian Prudential Regulation Authority has announced plans to remove the 10 per cent investor loan growth benchmark and replace it with more permanent measures to strengthen lending standards.</strong></p><p>Lenders are able to apply to have the limit removed provided they can demonstrate qualifying requirements. </p><p>The 10 per cent benchmark on investor loan growth was a temporary measure, introduced in 2014 as part of a range of actions to reduce higher risk lending and improve practices.</p><p>For the 10 per cent benchmark to no longer apply, boards will be expected to confirm that lending has been below the investor loan growth benchmark for the past 6 months, that the bank’s lending policies meet APRA’s guidance on serviceability and that lending practices will be strengthened where necessary.</p><p>Related reading: <a href="https://theurbandeveloper.com/articles/first-home-buyers-hit-five-year-high">First Home Buyers Hit Five-Year High</a></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/988d086e-60e9-4418-9587-eff9c4bee23f.jpg" width="850"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>APRA chairman Wayne Byres said that while Thursday’s announcement reflects improvements that institutions have made to lending standards, there is more to do to strengthen the assessment of borrower expenses and existing debt commitments, and the oversight of lending outside of policy.</p><p>&quot;The temporary benchmark on investor loan growth has served its purpose. Lending growth has moderated, standards have been lifted and oversight has improved,” Byres said.</p><p>“However, the environment remains one of heightened risk and there are still some practices that need to be further strengthened. APRA is therefore seeking assurances from ADI Boards that they will maintain a firm grip on the prudence of both policies and practices,&quot; Byres said.</p><p>Related reading: <a href="https://theurbandeveloper.com/articles/investor-interest-rates-make-owner-occupiers-optimistic-affordability">Housing Affordability Makes Slight Improvement Following APRA&#x27;s Restrictions</a></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/8b3e2b06-9112-460d-95be-16715df9cac5.jpg" width="1291"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>For lenders that do not provide the required commitments to APRA, the investor loan growth benchmark will continue to apply.</p><p>The changes however do not relate to the limits on interest-only loans which were introduced in March, 2017. The capping of them to 30 per cent of new housing loans will remain in place until further notice. </p><p>“In the current environment, APRA supervisors will continue to closely monitor any changes in lending standards. The benchmark on interest-only lending will also continue to apply,” Byres said.</p><p>“APRA will consider the need for further changes to its approach as conditions evolve, in consultation with the other members of the Council of Financial Regulators.”</p></div></div></div></div></div>

Cap on investor loans has "served its purpose”: APRA eases limits on property investor borrowing.

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<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>In a move that is most likely to benefit owner-occupiers and the wider property market, the Australian Prudential Regulation Authority is proposing the 7 per cent serviceability buffer on home loans be removed.</strong></p><p>With housing prices continuing to fall sharply in Sydney and Melbourne, APRA&#x27;s unwinding of its restrictions is part of a coordinated action by the prudential regulator, central bank and government.</p><p>The decision, in the wake of the weekend&#x27;s federal election, will provide banks with credit growth and reduce pressure on margins by lessening the need for rate cuts.</p><p>This may be more good news for the banks, following their big rise in the markets on Monday, but the news could also have negative implications on Australian household debt levels.</p><p>The banking regulator said it was putting its 7 per cent minimum interest rate &quot;floor&quot; under review, because the policy may have reached its use-by date after reviewing its &quot;appropriateness&quot;.</p><p>APRA first introduced the serviceability guidance in December 2014 as part of its efforts to reinforce sound residential lending standards in an attempt to temper ballooning house prices and surging housing investor loan growth.</p><p>They required the banks to assess all home loans against a floor of 7 per cent or 2 per cent above the rate paid by the borrower, whichever was higher. </p><p>Banks have typically added a further 25 basis points to the 7 per cent threshold taking it to 7.25 per cent and a buffer of 2.25 per cent.</p><p>If the changes were to go ahead, authorised deposit-taking institutions (ADIs) would “be permitted to review and set their own minimum interest rate floor for use in serviceability assessments”.</p><p>“APRA introduced this guidance as part of a suite of measures designed to reinforce sound residential lending standards at a time of heightened risk,” APRA chairman Wayne Byres said.</p><p>“Although many of those risk factors remain – high house prices, low interest rates, high household debt, and subdued income growth – two more recent developments have led us to review the appropriateness of the interest rate floor.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>“With interest rates at record lows, and likely to remain at historically low levels for some time, the gap between the 7 per cent floor and actual rates paid has become quite wide in some cases – possibly unnecessarily so.</p><p>“The changes, while likely to increase the maximum borrowing capacity for a given borrower, are not intended to signify any lessening in the importance that APRA places on the maintenance of sound lending standards.</p><p>“Rather, it is simply recognition that the current interest rate environment does not warrant a uniform mandated interest rate floor of 7 per cent across all products.”</p><p>The proposed revision comes as financial markets are anticipating the Reserve Bank will lower official interest rates to 1.25 per cent in the coming months.</p><p>In an attempt to rebound lending growth, APRA has been quick to support the banking sector, removing its 10 per cent growth cap on investor lending and 30 per cent limit on interest-only lending.</p><p>Lowering the floor could also provide some welcome support for the stricken housing market,<a href="https://theurbandeveloper.com/articles/the-anatomy-of-australias-housing-downturn-bis"> following a 10 per cent slide in national house prices</a>.</p><p>APRA has set a four-week consultation period on the proposals, closing on 18 June, but they are expected to be confirmed.</p></div></div></div></div></div>

In a move that is most likely to benefit owner-occupiers and the wider property market, the Australian Prudential Regulation Authority (APRA).

APRA Tells Banks to Be Cautious

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>The banking regulator has asked banks and insurers to maintain caution in planning capital distributions, by cutting dividend payments in half, as Covid-19 continues to cloud the economic outlook.</p><p>The Australian Prudential Regulation Authority (APRA) updated its capital management guidance easing restrictions around paying dividends.</p><p>This follows a strict recommendation in April telling banks and insurers “seriously consider deferring decisions on the appropriate level of dividends until the outlook is clearer”.</p><p>APRA has indicated that for the remainder of the calendar year boards should keep some money in the stockpile just in case things get worse.</p><p>To do this boards should retain at least half of their earnings when making decisions on capital distributions, conduct regular stress testing to inform decision making and make use of capital buffers to absorb disruptions.</p><p>APRA chair Wayne Byres said the updated guidance balanced the need for banks and insurers to keep supporting households and businesses, while also maintaining a prudent approach in the face of a very sharp and severe economic contraction.</p><p>“Although the environment remains one of heightened risk, we now have a stronger sense of how Australia’s economy and financial institutions are being impacted by Covid-19,” Byres said.</p><p>“On that basis, APRA believes that banks and insurers do not need to continue to defer capital distributions, provided they moderate payments to sustainable levels based on robust stress testing, and continue to prioritise supporting their customers and the economy.”</p><p>The APRA chair said the years spent building up capital strength in Australia’s banking sector to historical highs have been precisely to deal with a time like this.</p><p>“In the current environment, banks face additional challenges to their capital resilience, including the material volume of loan repayment deferrals, greater financial impact from Covid-19, and restrictions on dividends from their New Zealand operations,” Byres said.</p><p>“APRA has therefore set an expectation that dividend payout ratios for ADIs will be maintained below 50 per cent for this year.”</p></div></div></div></div></div>

Banks and insurers should "maintain caution" in planning capital distributions, by cutting dividend payments in half...

Home Buyers

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>The number of Australian home loan approvals for owner-occupiers fell in January as first home buyers took up the slack.</strong></p><p>First home buyers accounted for 18 per cent of home mortgage loans in January, the highest monthly share in over five years.  </p><p>Housing figures released on Tuesday by the Australian Bureau of Statistics showed that approvals fell a seasonally adjusted 1.1 per cent from December. </p><p>Economists surveyed ahead of the announcement had expected a 0.2 per cent fall over the month. </p><p>Related reading: <a href="https://theurbandeveloper.com/articles/home-ownership-falling-among-the-young-and-poor-grattan-institute-">Home Ownership Falling Among the Young and Poor</a></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/8feb9d2e-fedd-4cbc-8237-45e95a49fdeb.jpg" width="1126"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>The value of new home loan approvals for owner-occupiers was up 0.5 per cent – the fourth reported increase in the past five months – while the value of investor loans was up 1.1 per cent.</p><p>The value of lending to investors has actually declined 12.1 per cent from a year ago, but remains high despite APRA’s interventions on interest-only investors. </p><p>The percentage of first home buyers as a percentage of total owner-occupied housing finance commitments rose to 18.0 per cent in January 2018 from 17.9 per cent in December 2017.</p><p>The HIA said that this is the highest monthly share in five years.</p><p>“First Home Buyer participation has been rekindled by the welcome intervention of the NSW and Victoria governments in mid-2017,” HIA senior economist Shane Garrett said. </p><p>“In both states, grants to first home buyers have been increased and the concessions around stamp duty are more favourable.” </p><p>Related reading: <a href="https://theurbandeveloper.com/articles/restrictive-planning-drives-up-australias-housing-prices-">Restrictive Planning Drives Up Australia&#x27;s Housing Prices</a></p><p>Approvals for the construction of new homes <a href="https://theurbandeveloper.com/articles/apartment-building-marks-strong-start-to-2018">had jumped 17.1 per cent</a> in January, easily beating market forecasts of a five per cent increase.</p><p>APRA released data today showing that of all new loans, the proportion of riskier, interest-only mortgages held by the four major banks fell to a new low of 15.53 per cent, down from 38.43 per cent in March 2017.</p></div></div></div></div></div>

The number of Australian home loan approvals for owner-occupiers fell in January as first home buyers took up the slack...

Settlement risk

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>Amid conjecture of an apartment market glut in Australia’s major cities, settlement risk minimisation strategies have been a hot topic for developers over the past 18 months.</strong> </p><p>In that time, the residential development market has undergone some major changes, with APRA’s lending interventions and restrictions on foreign investments triggering a wave of defaults.</p><p>The flow on effect has created uncertainty, undermining positive sentiment in the apartment market. </p><p>So, what can be done to mitigate potential settlement risk in a market that doesn’t respond well to a “one-size-fits-all” approach?</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Improve Your ROI</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/04d84b41-4c4d-495d-8456-e57a96a3e174.webp" width="720"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Due to excess supply in some pockets of the market, renters have a lot of options to choose from and investors, having budgeted on compressed yields early in the pre-sales process, may be caught out.</p><p>“In a stagnant rental market, we find that the inclusion of a furniture package can make the difference [for purchasers to settle]. Developers providing these incentives can ease the purchasers&#x27; concerns by achieving an increase in net rental yield up to 20 per cent,” Conias said.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><blockquote><p><b>“The furnished apartments in our recently completed Spire development are achieving $150-$170 more per week.<br><br>There’s a strong demand for inner-city furnished apartments.”</b></p>--Consolidated Properties head of residential property Lachlan Grantley</blockquote></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>The Pre Sales Process</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/0c0259ee-a90e-4202-918a-ffbabceaa7dc.webp" width="720"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>In a restrictive lending market, the ability to raise finance will generally tip potential buyers over the line. </p><p>For the most part, buyers want to settle just as much as developers do. A buyer’s settlement risk is increased by borrowing limits, restrictive lending policies and changes in their financial circumstances.</p><p>“Settlement is a key goal of a property developer and PPS specialises in accelerating the presales process in high-density residential developments throughout Australia,” PPS managing director Marc Conias said.</p><p>Conias says that “well-dressed” properties don’t tend to suffer from sluggish demand.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Be Prepared to Wait</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/5b3fe48d-1cf5-4cb4-8df6-765348cfd49b.webp" width="720"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>While there has been a drop in foreign buyers across the nation’s major housing markets, it’s not all doom and gloom – buyers are just taking longer to settle.</p><p>Financial advisory firm Ferrier Hodgson said that while buyers are taking longer to settle – time frames doubled from two to four months in the Brisbane market – buyers are still settling their contracts and sourcing finance where required.</p><p>In fact, Queensland-based developer Sunland group <a href="https://theurbandeveloper.com/articles/-jump-in-settlements-lifts-sunlands-profit-314">reported a 314 per cent uplift in profit</a> in the first half of the year, achieving 238 settlements compared to the 204 in the previous corresponding period.</p><h2><strong>Communication </strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/b9088019-0a5a-4c7d-8aaa-3b6e77ebe955.webp" width="720"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Maintaining a conversation about settlement from the earliest stage is vital, providing regular updates to buyers through newsletters on how construction is progressing, or other handy information that will maintain your relationship with buyers.  </p><p>Off-the-plan buyers often place a deposit two years prior to the completion of a project. </p><p>Contacting buyers early on to help guide them through the settlement process is important – with evidence that the rescission rate for developers who maintain communication with buyers about finance and funding is substantially lower. </p><p>Pre-settlement surveys can also yield some great insights as to what your buyers value most and allow for minor design changes that may not have been initially conceived, but will make a huge difference to the occupants of the building.  </p><h2><strong>Know Your Buyer</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/7b2f3723-c14e-4f6e-93f6-4d824a200b01.webp" width="720"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Owner-occupiers and first home buyers are the growing demographic of buyers to watch – taking up close 40 per cent of the market.</p><p>Understanding the mix of occupants in the development will allow for appropriate allocation of marketing, and even allow for the creation of user profiles.    </p><p>When it comes to buying off-the-plan, these buyers want well-designed, well-furnished apartments. The interior design should be crafted in a way that allows a buyer to immerse themselves, prompting an emotional connection with the apartment.</p><p>“Allowing a prospective buyer to engage with the offering – regardless of the price point – by fitting out a property with contemporary and aspirational interior design is key,” Conias said.</p><p>“It allows the buyer to envision how the property can be lived in, used and enjoyed.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><em>The Urban Developer is proud to partner with PPS Furniture to deliver this article to you. In doing so, we can continue to publish our free daily news, information, insights and opinion to you, our valued readers.</em></p><p>For more on PPS Furniture visit their <a href="http://www.perps.com.au/#&amp;panel1-1">website.</a></p></div></div></div></div></div>

Amid conjecture of an apartment market glut in Australia’s major cities, settlement risk minimisation strategies have been a hot topic for developers 

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<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>Measures taken by APRA this year to curb higher loan to valuation ratio lending and investor and interest-only lending shows further signs of taking hold as Corelogic research reveals the proportion of interest-only lending has reduced to a record low.</strong></p><p>The latest data on property exposures of Australia’s authorised deposit-taking institutions (ADI) show the perceived riskier areas of new mortgage lending continue to slow.</p><p>September 2017 quarter data shows the value of lending to investors was actually the lowest it has been since the March 2016 quarter. Of the $98.211 billion provided in mortgages, $30.994 was to investors – a fall of 9.1 per cent over the quarter and 6.6 per cent lower year-on-year. </p><p>[Related reading: <a href="https://theurbandeveloper.com/articles/investor-interest-rates-make-owner-occupiers-optimistic-affordability">Housing Affordability Makes Slight Improvement Following APRA&#x27;s Restrictions</a>]</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/2017-12-11-blogimg1.png" width="570"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>While investor demand has fallen, the value of owner occupier mortgage commitments continues to rise to its highest quarterly value since December 2015.</p><p>The data showed that total value of interest-only lending over the September 2017 quarter was $16.603 billion (16.9% of new mortgage lending) which was 44.8 per cent lower than the value over the June 2017 quarter and 52.8 per cent lower than it was a year ago. </p><p>Corelogic believes that indicates that the higher mortgage rates being incurred by interest-only borrowers are actually curtailing demand more so than the APRA-imposed cap.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/2017-12-11-blogimg2.png" width="570"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>Corelogic’s Cameron Kusher said that the data highlights that there appears to be a more prudent approach being taken towards investment and interest-only mortgage lending.</p><p>“Of course, the macroprudential policies implemented by APRA were specifically targeting these segments of lending which suggests that they are being successful,&quot; he said.</p><p>“Over the coming quarters the most interesting developments to watch will be whether investor lending continues to decline, which we suspect it will.  </p><p>“It will also be interesting to see whether interest-only lending rebounds back to levels closer to the 30 per cent limit or if they continue to languish at much lower levels.” </p><p>&quot;If it is the former it indicates that potentially lenders tightened too hard and that there remains demand for this product. Meanwhile, if it is the latter it suggests that demand for interest-only lending has reduced.</p></div></div></div></div></div>

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>Westpac has announced plans to withdraw new loan offers to self-managed superannuation funds (SMSF) looking to invest in property, following an internal review of its lending practices. </strong></p><p>The nation’s second-largest bank and the country’s largest lender to property investors said it would no longer sell loans to SMSF owners for property investment from the start of August.</p><p>Westpac owns several lenders including RAMS, St. George Bank, Bank of Melbourne and BankSA.</p><p>The decision to &quot;streamline its product offering&quot; comes amid <a href="https://theurbandeveloper.com/articles/further-falls-for-residential-property-experts-warn">falling property prices and oversupply, particularly for apartments in Melbourne, Sydney and Brisbane.</a> </p><p>Currently, using an established SMSF, Australian residents can use their super to borrow between $200,000 and $2 million in order to purchase investment properties.</p><p>“We continually review our products and services to ensure they meet the requirements of our customers,” a Westpac spokesperson said.  </p><p>“In order to simplify and streamline our Self-Managed Super Fund products, we will be withdrawing from sale our SMSF Home Loan product and Business Lending to SMSFs, effective Tuesday 31 July 2018.”</p><p>Westpac said it would continue servicing its existing loans.</p><p>The move follows a widespread tightening of bank lending practices after the <a href="https://theurbandeveloper.com/articles/apra-scraps-investor-loan-growth-cap-">Australian Prudential Regulation Authority announced plans to remove the 10 per cent investor loan growth benchmark</a> and replace it with more permanent measures to strengthen lending standards.</p><p>If the other big banks follow Westpac with this move then there could be even more negativity for the housing market to come.</p><p>Westpac will stop lending to SMSFs as of 31 July 2018.</p></div></div></div></div></div>

Westpac has today announced plans to withdraw new loan offers to self-managed superannuation funds looking to invest in property.