Building approval figures give mixed signals amid rebound in apartments

Interesting contrast …

DOES this point to?
-land banking providing the supply of lots paid for years ago

The projects proceeding as finance deals were close to expiring, and penalties and potential credit rating decline more important to avoid than losing some of their already handsome margins?

-recent sales generated in markets overseas in place of those that have come but Chinese now less frequently

-or a combination of all of the above, and

-local developers selling out to foreign vertically integrated commercial conglomerates

Building approval figures give mixed signals amid rebound in apartments


2 APRIL 2019
Land sales signs along street at a new housing estate at Ellendale at Upper Kedron on Brisbane's northside in November 2018.

Permits to build private houses are 12 per cent down on a year ago.



The latest housing approval figures provide a mixed picture of the sector, with a flood of new apartment permits balanced against a slide in permits for stand-alone houses.

In the volatile, seasonally adjusted analysis from the Australian Bureau of Statistics, overall building approvals jumped 19.1 per cent in February— with a massive 65 per cent surge in apartment approvals outweighing an almost 4 per cent slide for house permits.

The less volatile trend series reported a fairly flat result for total dwellings, up 0.4 per cent for the month, with apartment permits up 2.6 per cent and houses down 0.8 per cent.

Over the year in trend terms, the overall number of permits issued is down about 22 per cent, with apartment approvals down by almost a third and the number of house permits issued sliding 12 per cent.

BIS Oxford Economics analyst Maree Kilroy said the jump in approvals was surprising, but likely to be a statistical anomaly.

Apartment approvals in New South Wales and Victoria drove the positive figure but this is an expected blip given the lumpy nature of the high-density sector,” Ms Kilroy said.

Ms Kilroy said considering the negative leads for house prices and lot sales, approvals and home building were likely to weaken over the year.

“The latest data saw house approvals fall below their historical average of the past 35 years and they are expected to soften further throughout 2019,” she said.



Approvals increase ‘a flash in the pan’

Citi’s Josh Williamson described the February data as “a flash in the pan” and said he expected a payback in the coming months.

Mr Williamson said the monthly gain was the largest since 2012 and was entirely driven by apartment approvals — largely in New South Wales.

“The February data does not mark the start of a new wave of investment,” he said.

“We expect the downward trend in approvals to resume, which could see dwelling starts decline from around 225,000 last year to 185,000 this year, or potentially lower,” he said.

Apartment supply risks

The Reserve Bank is likely to keep a close eye on the data given its recent concerns about financial stability risks around apartment development.

“The concern is the increase in supply exacerbates the housing cycle downturn and adversely impacts households’ and developers’ financial positions,” CBA’s Belinda Allen said.

“Households could have to find additional funds to settle on apartments whose values have declined as banks reduce valuations and are willing to lend less.”

“Also, developers could be faced with increasing settlement failures and their own cash flow issues.”

The RBA has previously noted risks in the apartment sector “appear to be elevated but contained”.

Across the states and territories, total dwelling approvals rose in New South Wales (3.1 per cent) and Western Australia (2.0 per cent), in trend terms.

Falls were recorded in the Northern Territory (6.5 per cent), the Australian Capital Territory (6.3 per cent), Queensland (2.0 per cent), South Australia (1.1 per cent) and Victoria (0.8 per cent). Tasmania was flat.






CoreLogic: Aussie house price crash deepened in March


IT’s a real property crash happening now … CoreLogic dwelling price results for March … with another .73% decrease in values for 5 Cities …


Photo: CoreLogic; Report Tim Lawless 1 April 2019

CoreLogic: Aussie house price crash deepened in March

By Leith van Onselen

CoreLogic’s dwelling price results have been released for March, which reveals another 0.73% decrease in values recorded over the month at the 5-city level:

It was the 18th consecutive monthly decline in home values, with values down a cumulative 9.8% over that period at the 5-city level:

In the first quarter, dwelling values fell by 2.8% across the major capitals:

Over the March quarter, values were down across all major markets, with heavy losses recorded across Sydney, Melbourne and Perth:

In the year to March 2019, home values crashed by 8.6% at the 5-city level, driven by Sydney (-10.9%), Melbourne (-9.8%) and Perth (-7.7%):

The next chart, which tracks trend annual price growth, shows a collapsing trend driven by Sydney, Melbourne and Perth:

However, the below chart tracks price growth on a quarterly basis, which shows a seasonal bounce:

Melbourne, Sydney and Perth have each experienced double-digit peak-to-trough falls, with the 5-city decline following closely behind:

A bonafide property crash is happening right now.








Photo: NDT Macquarie Park

REMEMBER it is the LNP that brought ‘the death of the Australian Dream’ with its 2012 NSW Planning Law Changes for higher density at the behest of the URBAN TASKFORCE, the Property Council of Australia and others …

Facilitated by the FIRB ruling of the 100% sell-off Overseas of High-rise Apartments that too attracted the local Investor Market

-storey upon storey the high-rise development was very lucrative for developers

HENCE the UT push for apartments to make up half of Sydney’s dwellings mid-century …

VOTE the Scummo LNP Govt out!

Millennials don’t prefer apartments, they want a house


By Leith van Onselen

The AFR has published a propaganda piece claiming “Millennials don’t want to buy Boomers’ sprawling, multi-bedroom homes”:

Boomers and Millennials also want very different types of houses…

Fifteen years ago, Boomers were building large, elaborate houses in states like Arizona, Florida, North Carolina, and South Carolina, The Wall Street Journal reported. Now, faced with the effort of maintaining such houses, they’re looking to downsize.

The only problem? Young people aren’t interested in buying their houses, according to the Journal…

Hilariously, a separate article from the WSJ claims the exact opposite, with interest in exurban single family homes booming:

The exurbs, the engine of the American housing market, are back…

Analysis by the National Association of Home Builders, set to be released later this year, shows that single-family construction rose nearly 7% in exurban areas in 2018 compared with a year earlier. Home building overall rose less than 3% in the same period. The group defines exurbs as outlying counties in major metropolitan areas.

These buyers, often millennials and retirees, purchased homes on average more than 16 miles from central business districts in 2018, the greatest distance since 2004, according to Fannie Mae loan data…

*In recent years, millennials have driven demand for rental apartments in downtown areas. Some in the industry thought this could be a permanent phenomenon. And yet, as they begin to marry and have children, millennials are proving like generations before them that they are willing to move to more affordable outlying areas.

*I can count on one hand the number of Millennials that I have met that would prefer to live in an apartment over a house, if given the choice.

*The reason why they are increasingly living in an apartment is not by choice, but rather necessity. They have been forced into apartment living because that is all they can afford. Apartments also tend to be rented, rather than owned:


While apartment living might be fine when living as a single or a couple, it is a sub-optimal choice when it becomes time to have a family. An this is a problem because Millennials are being locked out of family friendly homes, according to BIS Oxford Economics:

Investor demand has seen apartment construction boom — particularly in Sydney, Melbourne and Brisbane — but Mr Zigomanis said the studio, one and small two-bedroom apartments that are attractive to Generation Y as they rent in their 20s are unlikely to hold the same appeal as they age…

The large-scale, high-rise developments that sell apartments off the plan to investors do not hold the same appeal to owner-occupiers…

The growing over-65s segment of the population is not tipped to favour smaller apartments either.

BIS notes downsizing has been growing at a “glacial” pace and, even if it picks up, demand is not expected to be fulfilled by small, high-rise dwellings.

“Previous research that we’ve undertaken suggests that many baby boomers would still like to stay in the area that they’re living in, where they’ve already made friends and social connections,” Mr Zigomanis said.

The situation looks particularly dire in Sydney, which is Australia’s immigration capital. According to projections from the Urban Taskforce, apartments will make up half of Sydney’s dwellings mid-century, whereas only one quarter of Sydney dwellings will be family-friendly detached homes:

That’s the death of The Australian Dream right there.








SYDNEY added 93,411 residents through 2017-18, but at the same time, 27,264 locals departed the city

Suggest one only needs to look at Sydney’s housing market to see why!  Prices will have to fall a lot more for First Home Buyers …  And SYDNEY oh, what a Mess!

WHAT SCUMMO and the ABS appear to overlook are the 2.2 MILLION VISA HOLDERS IN AUSTRALIA … of which probably half are here in Sydney!


UNIONS … it would appear are onto it as they want a CUT to the 1.6 Million Visa Workers


As one commentator wrote ….


‘ …  I feel a lot of sadness for the loss of a wonderful city to developers, hordes of overseas students and greedy self interested politicians.
I am a product of migrants from opposite ends of the world who met and fell in love in Sydney in the 1970s.  I grew up with a backyard big enough to try and emulate my sporting heroes (peter sterling), I would go to the footy at suburban tribal grounds on weekends when it wouldn’t take you all day to get there and swam at the beach back when you could still park there.
I grew up before the motorways were built and you could still get to the airport on time.
My kids will never enjoy that childhood in Sydney and each time I go back I cannot believe how much more it becomes a third world overcrowded megapolis full of aggressive, frustrated unhappy residents. Its a real shame.’

Sydney residents move out as city depends on migrants for growth



Thousands of Sydneysiders are leaving their home suburbs for other parts of the city and the state with new figures revealing a slowdown in the capital’s runaway population growth.

Australian Bureau of Statistics data showed the Greater Sydney area added 93,411 residents through 2017-18, taking the city’s total population to a record 5.2 million. It was the smallest increase in the population since 2014-15.

Greater Sydney added 93,411 residents in 2017-18.
Greater Sydney added 93,411 residents in 2017-18.CREDIT:WOLTER PEETERS


It was driven by net overseas migration which added 71,000 residents to the city over the year, offsetting a 27,300 loss from existing Sydneysiders who moved to another part of the country. The rest of the increase was made up by natural increases.

But the overseas and internal migration numbers hid big changes in different parts of the city.


Across the Canterbury-Bankstown area, almost 4000 residents moved out, or 11 people a day. The loss of so many existing residents was offset by a 3877 natural increase while net overseas migration added another 5615 people.

Other areas to suffer large falls due to internal migration included Cumberland (3714), Randwick (3120) and Georges River (2842).

More than 2800 people moved out of the Sydney City council area but this was made up by 8111 in net overseas migration and 1781 in natural increases.

The figures also point to the problems the Morrison government’s plan to encourage overseas migrants into the regions face.

Net overseas migration added just one person to the Brewarrina council area in the state’s Far North West, while in neighbouring Bourke the increase from immigration was just two.

Prime Minister Scott Morrison, announcing a range of road projects aimed at reducing congestion in suburban Sydney on Wednesday, said the government understood the importance of encouraging overseas migrants into parts of the country outside of Sydney and Melbourne.

“We know that there’s a lot of pressure on our cities and we are going to continue to ensure that there is a positive migration program to Australia, but we’re going to ensure that the benefits of that are spread more broadly across the country,” he said.


Next week’s federal budget will confirm a cut in the official migrant intake to 160,000.

CAAN:  More smoke n mirrors from the Scomo Government as this cut was implemented two (2) years ago as reported by Judith Sloane in the Australian recently!

The bureau’s demography director, Beidar Cho, said the nation’s capitals kept powering population growth.

“The number of people living in our capital cities increased by 307,800 people in 2017-18. This is on par with the average growth over the previous three years,” he said.

CAAN: What both Scomo and Demography Director, Beidar Cho fail to mention are the 2.2 MILLION TEMPORARY VISA HOLDERS IN AUSTRALIA of which 1.6 MILLION ARE  VISA WORKERS (Reported midway through 2018)


Sydney’s population grew by 1.8 per cent while for the rest of the state it was up 1 per cent to reach 2.8 million. In the regions, the fastest growing included Byron Shire on the North Coast, Albury on the NSW-Victorian border, Cessnock in the Hunter Valley and Dubbo in the Central West.

Nationally, Melbourne remains the fastest growing city with its population up by 2.5 per cent or 119,421 to take it to 5 million.

Melbourne reached 4.5 million residents in mid-2016 and has now added more than 460,000 people in three years. Over the same period, Sydney added 300,000 residents.

Darwin’s total population fell by 355 despite it being home to one of the fastest growing suburbs in the country while regional Western Australia shed 583 residents even as Perth’s total resident count increased by more than 21,500.

CommSec chief economist Craig James said the figures showed the stark differences in population growth between the capital cities and its regions.

“The latest regional population data highlights the need for re-balancing of both internal and overseas migration flows,” he said.

CoreLogic tells first home buyers: ‘don’t buy now’

‘Sage advice. Given the various stiff headwinds facing the housing market, dwelling values will likely fall well into 2020.’

Photo: Core Logic


CoreLogic tells first home buyers: ‘don’t buy now’


By Leith van Onselen

With Australia’s housing market suffering the worst price bust in modern history:

And losses accelerating:

CoreLogic’s research director, Tim Lawless, has advised first home buyers (FHBs) to hold-off from buying. From The AFR:

CoreLogic research director Tim Lawless says there is “no urgency” to buy given his company’s forecast of Sydney and Melbourne prices falling between 18 and 20 per cent from peak to trough…

“Prospective first-home buyers should be getting their finances in order to get the best mortgage rates,” he adds.

“And then they should look for the property that suits their budget and lifestyle because property won’t be rising for some time.”

Sage advice. Given the various stiff headwinds facing the housing market, dwelling values will likely fall well into 2020.









AND can even sway Electoratesdespite what’s been goin’ on across Sydney

IT has been a very effective tool!

WHERE did it come from, do you suppose?

AT CAAN we suggest this has been a highly successful ploy of the developer lobby and the political party that serves them here in New South Wales and at the Federal Level

THAT has enabled ‘Social Engineering’ in this case when Sydneysiders and Melburnians began to notice a massive demographic change occurring … that when they attended house auctions week in week out … they were outbid by people from overseas … many of High Net Worth!

WITH more and more competition for housing the prices escalated

IT was said the annual permanent immigration was some 190,000

MEANWHILE Temporary Migration was exploding … it was the ‘New Growth Industry’ … with many forms of Visas! Enticed by the prospect of ‘Permanent Residency’

-457 Visa for Workers … a series of 400 numbered Visas
-PhD Visa
-Skilled Worker
-Investor Stream
-Significant Investment and many more!

In Sydney, houses (2015/6) were commonly purchased for $1.5M … which happened to coincide with the Investor Stream Visa and likely others … this purchase enabled the buyer to gain a ‘Permanent Resident’ Visa.

ANY reference to this, to the ever-growing number of Visas, trains, buses full-up, demountable classrooms, the High-Rise Precincts, the loss of bushlands and farmlands for tenements and townhouses across the fields being purchased by people from overseas … the conversation is shut down … ‘that’s racist, xenophobic’! ‘You’re a Racist!’

BUT it’s about NUMBERS … midway through 2018 it was revealed that there were 2.2 MILLION Visa Holders in Australia! Of which there were 1.6 MILLION Visa Workers!

THIS has led to our Major Cities bursting at the seams:

“the net result of this ‘Big Australia’ policy is that living standards are being eroded as the capacity of the economy and infrastructure to absorb all of the extra people is overwhelmed, and the country’s natural resources base is diluted among more people.

*John Howard never explicitly mentioned that he was in favour of high immigration because he knew the electorate would be against it.

Instead, he SCAPEGOATED REFUGEES to give the impression that he was stemming the migrant inflow while proceeding in secret with his ‘Big Australia’ Plan.” Extract:
The Unconventional Economist: ‘Return of the immigration ‘bait-and-switch’

In the late 1990s during the Howard Government Middle Class Chinese were lured by ‘Flexible Citizenship’ when they invested in Australian education and Real Estate!


Image may contain: skyscraper, sky and outdoor

Photo 1:  Aerial view of Chatswood; favoured by GSC Chief Commissioner Lucy Turnbull


WITH the arrival of the GFC in 2008 the FIRB Ruling allowing developers to sell 50% of “new homes” off the plan to foreign buyers then jumped to a 100% sell-off overseas! Particularly in China!

“Fast forward 15-plus years and we are witnessing the immigration ‘bait-and-switch’ all over again, with our federal politicians at war over Australia’s humanitarian intake and offshore detention, while totally ignoring the flood of migrants arriving every year by plane.” Extract: The Unconventional Economist: Return of the immigration ‘bait-and-switch’

SO what do you suppose it is all about if not to boost the coffers of the Big End of Town Party Donors?

THE second Tranche of the Anti-Money Laundering Legislation for the Real Estate Gatekeepers has been shelved now for more than 12 years …

DESPITE the warnings of International Organisations of the FATF, Transparency International and the OECD the Scomo Government exempted the Real Estate Gatekeepers as recently as October 2018!

IT is the absence of this LEGISLATION which has allowed BLACK MONEY to be awash in Australian Real Estate

-our families locked out of home ownership

-where we live is being annihilated

.our neighbourhoods, Heritage, Bushlands, Flora and Fauna, Farmlands also destroyed!

IF elected in May the Federal ALP will implement this legislation.

View:  Labor to target Lawyers, Accountants, Real Estate Agents

‘Labor will target lawyers, accountants and real estate agents under tough new anti-money laundering laws, amid growing concerns over illegal “hot money” from China artificially inflating the property market’

That will restore housing affordability, market value and sustainability to the Australian Property Market and with that the onshore Proxy, Syndicates and Property Alliances will disappear


When Developer and Planning Consultant Shane Geha was interviewed this was borne out!

And a Commentator on Macro Business summed this up!

“NOTICE the developer’s rhetorical sleight of hand?

He reframes calls to reduce the rate of migration to cutting immigration to zero, which nobody has called for.

He reframes concerns with increased congestion, strains on public services, infrastructure etc. as people being scared of migrants.

A complete B.S. artist.

His condescending lecturing of everybody else to get with the modern world and live in shitty, poor quality, fibre clad apartments while he lives a nice big house in the eastern suburbs is just the cherry on the garbage heap.”

COME ON! WHY are we being so thin-skinned … it is obvious, isn’t it, we are being robbed blind of our quality of life?

WITH overdevelopment, Growth, land clearing, more Growth, and climate change destroying Our Earth … isn’t this more offensive?







Image may contain: skyscraper and outdoor

Photo 2 the Opal Tower Sydney Olympic Park


Image may contain: skyscraper, sky, ocean, outdoor and water

Photo 3 Barangaroo high-rise



Image may contain: 1 person, smilingCAAN Photo:  Lindfield Station



THIS was on ABC TV last night …

We failed to see:

-any reflection about how good they have had it since 2011

-any signs of embarrassment or humility about high margins, over-charging and advantages enjoyed within the sector, especially those write-off concessions given to Tradies on replacement equipment etc.

SHOULD we all feel guilty that this sector is now going through some tough times like the rest of the community?

SHOULD we feel guilty the Building Industry has had to come down to Earth?

COULD it be we may return to a more sustainable Building Industry that is not driven by:



.meeting local demand, and not foreign buyers?

THEN sufficient time could be found to ensure the emerging over-supply of apartments to allow a breathing space to emerge for infrastructure to catch up

.to perceive the damage to our Society from the high growth and foreign demand

.that tradies fees for home maintenance relate to the incomes of their home owner clients


Developers still seem to fail to understand it’s not all about them!


Home builders start laying off workers as they face sharp downturn



Roofs of several houses, house under construction in background.

Home construction accounts for around 8 per cent of the Australian economy.



Since building its first house in 1957, Zuccala Homes has seen its fair share of highs and lows in Melbourne’s residential construction market.

With housing well and truly in a downturn, director Greg Zuccala said this was one of the worst he had seen.

“Builders are just battening down the hatches and looking after their costs,” Mr Zuccala told ABC’s The Business.

Melbourne house prices have fallen 9.6 per cent since their 2017 peak, and that is having big implications for home builders.

“We’ve probably seen a reduction of about 30 per cent of sales,” Mr Zuccala said.

“We do a bit of business with some investors, but mostly our bread and butter is owner occupiers.”

Zuccala Homes director Greg Zuccala

PHOTO Greg Zuccala’s family have been building homes for 60 years.



That huge fall in demand for new home builds meant Mr Zuccala had to find savings.

To do that, he was forced to lay off four workers.

“We’ve had to adjust things there to meet the market,” he said.

“I think a lot of building companies at the moment find themselves in the same situation.”

Residential construction is a $105 billion business in Australia and, as Australia’s fourth biggest sector, it accounts for 8 per cent of GDP.

Housing’s downward trajectory is not just hurting builders.


Construction hammered by falling prices and confidence


Flow-on effect


Electrician Ray Sherriff employs nine electricians and four apprentices working on a mix of residential and commercial projects in Sydney.

“Two years ago we literally didn’t have time to price all the [residential] jobs that were coming in,” he explained.

“Now it’s rare and there are lots of jobs getting postponed and put back.”

Residential work used to fill a big part of his work orders.

Ray Sherriff

PHOTO Electrician Ray Sherriff is looking outside home building for new work.



“Maybe three to four years ago we were looking at probably 50 to 60 per cent of our business,” he said.

“Now we’re probably looking at 20 to 30 per cent.”

Mr Sherriff said the diversification of his business was keeping the work orders coming in.

It starts with approvals

Bureau of Statistics figures showed national dwelling approvals were down almost 29 per cent in the year to January, to their lowest level since May 2013.

Doing the maths, it is easy to see residential construction will continue to slow.

Only Western Australia and Tasmania are bucking the trend, with dwelling approvals on the way up.

Right now, the rate of contraction in house construction is the fastest it has been in six-and-a-half years, according to figures from the Australian Industry Group’s Performance of Construction Index.

Activity in apartment construction has fallen for 11 months in a row to its lowest point in six years — a time when the industry was still recovering from the GFC.


With national house prices down 6.8 per cent since the 2017 peak, and down 13.2 per cent in Australia’s biggest housing market — Sydney — economists say it is no wonder those in construction are feeling the heat too.

“When you have house prices falling as they are at the moment, the risks of entering into that are greater,” said Master Builders Association chief economist Shane Garrett.

“That’s one of the reasons why activity is starting to move down.

“It’s a riskier predicament for all concerned.”

Work is drying up

Demand for the more than 1 million workers employed in the residential construction sector is waning.

Seek job ads show a 14 per cent fall in demand for construction workers in the year to February.

Mr Garrett said he was increasingly being approached by workers.

“The hire agencies are ringing us regularly now and its not just with one or two guys. They’re ringing with 15, 20 guys looking for work,” Mr Garrett said.


The lack of opportunities in the housing sector is forcing workers to look outside the box.

“It’s just a matter of people finding if there are industries or new construction, different sorts of construction, projects to work in, for example mining and infrastructure,” Seek’s Stephen Tuffley said.

Highest low on record

But it is not all doom and gloom.

While there is no denying Australia is in the midst of a downturn, and that is hurting the construction sector, the numbers are still good in a historical context.

Nationally, new home building peaked in 2016 with about 230,000 new dwellings.

“We see it bottoming out to about 175,000 over the next few years,” Mr Garrett forecast.

“It’s worth emphasising, that 175,000 as a low point would still be the highest ever low point for new home building on record.”





Close up of an apartment construction site in Cronulla sits idle after the developer went under



‘Why developers are delaying or abandoning half the apartments they planned to build’




‘Unemployment is going to rise. Interest rates are irrelevant. Immigration is in outright chaos and, at minimum, Labor will cut temporary visas.

Millennials with no pay rises and no Bank of Mum and Dad are useless to anybody.

The one good thing in the pipeline is Labor’s negative gearing reforms shifting to new builds. But that will not arrive before mid-2020 and likely won’t work much until house prices stop falling.

It’s going to get a lot worse before it gets better for developers.’








EXCELLENT READING … this is what happens when housing:
-is turned into a commodity to be traded like any other

sites are banked for future use

zoning can so easily be manipulated 

-extremely lucrative profits can be achieved, margins are huge

IT is clear foreign entrants into the Australian domestic housing market face few hurdles!
-virtually no restrictions face foreign capital financing Australian real estate developments

IT opens up opportunities for foreign investors to make local connections and use their leverage to include the importation of building materials from ‘friendly’ sources, creating a back door added benefit

THIS ARTICLE, quoting operatives in the industry readily admits their fortunes have been closely tied to foreign buyers, and now it is more about foreign investors, and in particular foreign financiers who:
-don’t necessarily follow the rules like our market is accustomed to doing

-readily seek to value add,and are not adverse to equity deals on the side

-greater ‘vertical integration’ from plan to patio

-will happily set up local entities to push their agenda

*-we could see a lot more of this ‘local face, foreign body’ players taking an even bigger slice of Australian domestic housing market

IMAGINE having to deal with a building company effectively controlled offshore, financed off- shore, using substantial materials and more than likely labour from offshore, in a dispute over defects in a new apartment that even under current obligations gives the owner little redress, what hope would you have of getting some justice?

Half-built blots on the landscape testify to the construction slowdown … and it will get uglier


An apartment construction site in Cronulla sits idle after the developer went under, March 20, 2019.

A half-finished apartment block in Cronulla sits idle while it waits for a buyer.



The property market upheaval brings billionaire investor Warren Buffett’s oft-quoted piece of wisdom to mind: “Only when the tide goes out do you discover who’s been swimming naked.”

We are witnessing more naked developers as half-finished projects dot the landscape of our major cities.

As the year progresses, many more operators who’ve pushed the boundaries will join them.

“Areas of oversupply will see a bit more chaos in the next six to twelve months,” Scott Gray-Spencer, local head of capital markets at the global real estate firm CBRE, told ABC’s The Business.

Mr Gray-Spencer sees areas more than 10 kilometres from the city centres of Sydney and Melbourne, and parts of Queensland, as the most vulnerable.

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume.


The building bust up after the boom


Job losses mounting up

Construction jobs are an important support for the economy. Spending in the sector flows through to other industries, including the manufacturing, retail and services sectors.


Given the importance of this part of the economy, it’s hardly surprising the Reserve Bank is keeping a close eye on activity — or lack of it.

Governor Philip Lowe and his deputies have been at pains to point out that the property slump has been contained and will not derail the economy.

However, almost 40,000 jobs have already been lost in the construction sector during the past year as the regulator-driven crackdown on lending started to bite.

Investors sidelined

Property investors, who were major targets of the crackdown, accounted for almost 50 per cent of mortgages two to three years ago.

They have largely left the market and political uncertainty may keep them on the sidelines for longer as they await the outcome of the looming federal election.

Should Labor win, it’s likely investors will wait to see how its plans to curb the negative gearing and capital gains tax concessions pan out.

Even though Labor’s proposed negative gearing changes will not affect new housing, investors may still be worried about price growth because the next buyer is unable to negatively gear.

So it could be some time before developers see an important group of buyers return in force. If the banks don’t stop them, the less generous tax laws might.

“At the moment we’re seeing a lack of sales in the marketplace,” said Luke Mackintosh, partner with EY Real Estate Advisory Services.

*”There’s a lack of foreign buyers, a lack of investors and not much confidence in the marketplace for first home buyers, and hence sales rates of 24 to 30 a month are lucky to be one or two a month on a project.”*

Projects stalled

It means developers are finding it hard to get to what’s called financial close.

Financial close tends to happen about 12 months after a site is purchased. During that 12 months, developers go through the planning process and start marketing.

Typically, 80 per cent of the development must be sold to get finance. Once that’s achieved, a developer can get finance and start construction.

Close up of an apartment construction site in Cronulla sits idle after the developer went under

PHOTO The property market is expected to be hit the hardest in the next six to 12 months.



Construction research group BCI Australia looked at the fate of projects started in 2015 when the property boom was in full swing.

It found that 50 per cent of those projects reached the construction phase in NSW and South Australia.

In Victoria it was only 20 per cent. Queensland fared marginally better with 23 per cent, and in Western Australia none started building.


Even if developers do get enough buyers, there is an increasing risk that their customers can’t come up with the money.

Banks were willing to lend borrowers more money two or three years ago amid the property boom, when buyers put down their deposit and signed a contract.

Now property valuations are lower.

“The bank might say, ‘I’m now only going to lend you x per cent‘ rather than the original amount, and the purchaser will have to come up with the extra cash from somewhere,” property lawyer Richard Harvey warned.

Most analysts think there’s worse to come for developers over the next six to 12 months.

“If you’re settling a project between now and Christmas, you’d want to be closely looking at your defaults,” EY’s Luke Mackenzie said.

Some projects, like this one in the southern beachside Sydney suburb of Cronulla have already hit financial trouble.

A sign announces the appointment of receivers to this development site in Cronulla, March 20, 2019.

PHOTO A sign announces the appointment of receivers to this development site in Cronulla.



Despite the increasing signs of stress, many analysts don’t see this downturn ripping through the industry’s heart.

Still buyers for distressed sales

The more experienced players have seen this coming and can wait it out. Some operators have switched the zoning on their sites while others have had to sell.

For the most part there is still strong demand for good development sites and projects offloaded by stressed operators.

Mr Gray-Spencer represents some of those buyers.

“There’s one of my clients who’s in the process of trying to buy distressed stock and he has had 2,000 apartments put to him in different forms.”

An abandoned building site in Cronulla

PHOTO Agents say there are still buyers for distressed or abandoned projects, but they are not being financed by banks.


Established players with good reputations have managed to circumvent the credit squeeze imposed by banks to find alternative sources of funding from offshore — including money from the US, Singapore and Hong Kong — and domestic lenders, such as wealthy family investors.

“We never had a business raising debt for developers four years ago,” Luke Mackintosh said.

“Last year alone we did circa $800 million in construction funding. Now most of that went offshore.

“That should have been done by Australian banks. That was good debt and good projects, but they couldn’t.”

Mr Mackintosh is bullish. He’s telling his clients to snap up good development sites on the cheap if possible because in two years’ time they’ll be richly rewarded by demographics.

“We have 50 per cent of the population that are under 35; 35 per cent of millennials still live with their parents. The oldest of the millennials are turning 35 this year. They are the buyers’ market. They are the market that developers will be selling into.”

This apartment building site in Cronulla has sat vacant for several months after the developer went bust.

PHOTO This apartment building site in Cronulla has sat vacant for several months after the developer went bust.



Mr Gray-Spencer prefers to look at some of the economic fundamentals.

“I look at unemployment, I look at indicators such as interest rates, net migration which are three key factors people look at when considering the housing sector. And they’re all sitting at very positive levels.”

But the tide is still going out. Hopefully when it comes back in again some will at least still be swimming, naked or not.








THERE is more to this!
THIS is what happens when housing becomes a commodity 

Scott Farquhars Elaine estate is next door to the Fairwater estate of Lady Mary Fairfax

Photo: Domain: Pt Piper

THIS is what happens when people who have more than enough are encouraged to have even more dwellings than they need and receive tax breaks for it

Frank Lowy's Point Piper home was extended in the early 1990s after they bought their son Stephen Lowy's house next door.

Photo: Domain: Pt Piper

THIS is what happens when a growing number of people in Australia are stuck with renting, never owning a home; just there to be exploited for life by a landlord class of ‘entitled’ opportunists

Australia has never had a ‘build to rent’ sector, so investors are wary of an untried product.

Photo:  SMH: Build to rent

THIS is the flip side of a system that is unsustainable 

.growth forever concept; we will need another EARTH to continue
.population demands that cannot be met

THE MODEL we have been propping up is cracking under the strain

-no real wage increases for over 5 years
-no expansion of anti-money laundering legislation
-a black economy that remains unchallenged
-political dogma and agendas shrinking governments capacity to do more with less

AND now a concern about falls in house prices flowing onto the rest of the economy, well halalooya 

BUT what about housing being about shelter, being about health and community?

IT doesn’t need to be a commodity, to be traded like gravel or sand

AND what  about the big picture issues like:
-having sufficient potable water
-energy security
-climate change events




House price falls could spill over into small business, financial regulators warn


Vitamin shop

Many small businesses have personal and business finances tied up.


Falling house prices could spill over into small business lending, squeezing already tight credit conditions and their ability to raise much needed cash, according to Australia’s top financial regulators.

In its second quarterly statement, the Council of Financial Regulators said it would closely monitor lending to small business and urged banks to maintain the supply of credit to the sector.

New lending to small business has slowed noticeably over the past year, and the situation was being complicated by the dependence of small business owners on residential property as collateral for loans, the council noted.

Roughly half the $220 billion of small business loans currently outstanding are secured against houses and apartments.

The council — chaired by Reserve Bank governor Philip Lowe and including representatives from the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission and Treasury — are influential in regulating banks’ lending behaviour through their control of macroprudential policy which can be used to tighten or loosen available credit.

“For many small businesses, personal and business finances are intermingled. As a consequence, the higher standards that lenders apply to personal borrowing are affecting some small business loan applications,” the Council’s statement said.

“Further falls in housing prices could constrain small business borrowing, given that around half of loans to unincorporated businesses are secured by residential property.

“The council will continue to monitor developments closely and stressed the importance of lenders supplying credit to small and medium-sized businesses.”

Business lending in Australia

PHOTO Small business lending started to decline around the same time as house prices started to fall.


Orderly correction … so far

However, the regulators found while housing markets remained weak, falling prices did not pose a threat to the broader economy.

“To date the adjustment in housing prices and activity has been orderly and does not raise material financial stability concerns.”

It found slowing residential lending was largely due to a decreased appetite for borrowing, particularly from investors, as well as a more stringent scrutiny of borrowers’ expenses and other liabilities.

“The improvement in banks’ lending standards — including a lower share of high loan-to-valuation ratio lending — means that households and lenders generally are less vulnerable to falling housing prices than in the past.


“Despite historically high household debt, signs of financial stress remain relatively contained given a strong labour market and low interest rates.”

NAB’s Kieran Davies said, while the regulators appeared comfortable, they may need to change their policy settings if lending continues to dry up.

“Our view is that monetary policy remains the first line of defence against the slowing economy as we factor in the RBA cutting the cash rate to 1 per cent over the coming months, but that prudential policy might be tweaked if the supply of credit tightens further,” Mr Davies said.