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<p><span>GUEST OBSERVER</span></p>
<p><span>Our forecasts for global growth to stay around the 31⁄4% yoy mark remain basically unchanged; a sub-trend outcome that falls well short of the IMF’s rosier predictions. The hard data provides no evidence that overall global growth has picked up and our leading indicators suggest further stagnation through to September. The bursting of the share market bubble will probably only worsen China’s trend slowdown. </span></p>
<span style="line-height: 1.3em;">The main issues of market focus are the likely timing of US/UK interest rate increases, the recent devaluation of the CNY (intended to align the currency more with market expectations and support exports), and the implications of measures Chinese authorities have used to prop up the share market. Apart from that, bond yields have reversed some of their recent recovery from exceptionally low levels. Facing an improving labour market, we think the Fed will start lifting rates in September, although they have signalled that the process will be gradual. Given recent USD strength, it is not yet clear whether the devaluation of the CNY will have any consequences for the timing of Fed rate hikes. </span>
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<span style="line-height: 1.3em;">The decline in Chinese share prices from the mid-June bubble peak has wiped out a significant amount of market capitalisation. However, as investors only held recent paper gains for a short time the consequences on spending behaviour may prove to be relatively limited. If investors have borrowed heavily on margin to then face margin calls, there is potential for broader problems.</span><br><br><span style="line-height: 1.3em;">The disappointing trends in global industrial output and trade have continued. Industrial growth was disappointing in March quarter 2015 and the June quarter is shaping up to be even weaker. World exports are faring even worse with volumes trending down, mainly because of poor Asian data. The strong $US has depressed trade flows but there is also an underlying weakness. There is, however, a more fundamental problem at work with export volumes falling below year-earlier levels and faring worse than global trade. Commodity prices have fallen heavily, lowering export earnings and national income across a range of primary exporting countries. Lower commodity prices do boost incomes and spending power in importing economies but the immediate impact on global activity could be negative.</span><br><br><span style="line-height: 1.3em;">After a disappointing start to the year, economic growth in key advanced economies picked up in the June quarter. Business survey results look better in the Euro-zone, despite the Greek crisis, with the upturn broadening out to include services activity. Monthly Japanese business surveys also look slightly better</span><span style="line-height: 1.3em;">, </span><span style="line-height: 1.3em;">but the quarterly GDP figures are volatile and kicked up in March, posing the risk of a slowdown in June. Canada is the weakest G7 economy with GDP falling through the first 5 months of the year as investment activity falls. </span>
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<span style="line-height: 1.3em;">The acceleration in US and UK growth in June continues the trend recovery trajectories seen through the last few years in their economies. Timely monthly business surveys generally point to ongoing moderate growth. This growth is generally broad-based with upturns in both the manufacturing and services sectors with the US and UK service sectors being the stand-out performers for growth</span><span style="line-height: 1.3em;">, </span><span style="line-height: 1.3em;">whereas Japan has been the laggard when it comes to growth in all areas.</span><br><br><span style="line-height: 1.3em;">Given that the emerging market economies have been the main drivers of global output growth in recent years, the slowdown in China along with very weak outcomes in Brazil and disappointing data in India all present a major headwind to the world economy. The monthly trade volume and industrial output data that allows us to track how the emerging economies are faring does not look positive, signalling that there is little sign of an imminent upturn in their growth momentum. The monthly data for China and India continues to show a slowing trend in the pace of growth. </span>
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<span style="line-height: 1.3em;">Recent trade figures have been particularly soft but there is also evidence of a softening in expansion across key sectors of activity like fixed investment spending in China and infrastructure output in India. The People’s Bank of China surprised markets with a large devaluation of the renminbi in mid-August – signalling a greater role for markets in setting the exchange rate in the future. This move may also provide support for struggling exporters. The picture is even worse when we turn to the other emerging market economies in East Asia and Latin America. Industrial output and exports are falling in both regions as sluggish global trade and weaker commodity markets take their toll.</span><br><br><span style="line-height: 1.3em;">Overall our global forecasts have been left broadly unchanged in 2016 (3.3%) and 2017 (3.4%), although this sub-trend outcome falls well short of the IMF’s rosier predictions. The hard data provides no evidence that overall global growth has picked up and our leading indicators suggest further stagnation through to September.</span><br><span style="line-height: 1.3em;"> </span><img src="file:///page1image41080" alt="page1image41080" width="0.720000" height="12.180000" style="line-height: 1.3em;"><img src="file:///page1image41240" alt="page1image41240" width="3.660000" height="0.600000" style="line-height: 1.3em;"><img src="file:///page1image41400" alt="page1image41400" width="0.720000" height="12.120000" style="line-height: 1.3em;"><img src="file:///page1image41560" alt="page1image41560" width="3.600000" height="0.600000" style="line-height: 1.3em;"><br><span style="line-height: 1.3em;">Australia: The economic outlook remains mixed and patchy. Mining investment is declining sharply, public spending is limited and national income growth is weak amidst declining commodity prices. Meanwhile, monetary policy is highly stimulatory and the AUD is acting as a shock absorber, with tentative evidence of recovery in non-mining activity. Our GDP forecasts are marginally stronger than last month – 2.4% in 2014/15, 2.8% in 2015/16 and 3.2% in 2016/17 – with domestic demand weak and net exports making a large contribution. </span>
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<div class="column"><span style="line-height: 1.3em;">The unemployment rate is forecast to stay around 61⁄4% before easing slightly into 2016/17. Central forecast is for the RBA to hold rates steady, with the next move likely to be up, but not till late 2016.</span></div>
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<span style="line-height: 1.3em;">Recent exuberant readings on business confidence were pared back in July. While confidence eased in most industries, much of the change stemmed from mining and construction firms (which includes a large share on non-residential and engineering firms), suggesting an escalation in Chinese growth concerns could be putting firms on alert. Confidence fell back below the long-run average but remains positive and the trend has held up around average levels. Business conditions also dropped back. Looking through the volatility in conditions and confidence, however, suggests a turnaround in the non-mining economy. Yet, leading indicators from the Survey – such as forward orders and capacity utilisation – generally eased.</span><br><br><span style="line-height: 1.3em;">The labour market appears to be performing more strongly than suggested by traditional relationships with economic activity at present. The average pace of employment growth has strengthened, which has been enough to stabilise the unemployment rate between 6 and 6.3% over the past year. The July reading of 6.3% likely reflects some statistical noise (as it was accompanied by an unusually sharp increase in the participation rate) and we expect some retracement. </span>
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<span style="line-height: 1.3em;">Readings from various forward-looking measures of the labour market are mixed, but in general suggest employment growth should be sufficient to stabilise the unemployment rate in coming months. Capacity utilisation, which has historically led the unemployment rate, continues to improve and the employment series in the NAB survey (while soft) is suggesting job creation of 15k per month - enough to keep pace with now slower population growth.</span><br><br><span style="line-height: 1.3em;">Consumers remain cautious, but spending has picked up moderately with growth in retail sales volumes accelerating a little in Q2. Retail sales for the month of June were particularly strong (both traditional and online), which could partly reflect spill-over from small business spending encouraged by Budget measures targeted at micro-businesses. Rising dwelling investment in the Eastern states could be another factor behind strong household goods sales. Nevertheless, consumers are nervous, with unemployment expectations high. Against a backdrop of subdued household income growth, we expect a modest pick up in consumer spending growth through to 2017, underpinned by a gradual decline in the household savings rate.</span><br><br><span style="line-height: 1.3em;">Dwelling prices in Australia have risen to 11.1% in the year to July according to RP Data- Rismark. Strength remains concentrated in Sydney (18.4% y/y) and Melbourne (11.5%), but more moderate in the other states and negative in Perth (-0.6%) and Darwin (-5.3%). Undersupply of housing is particularly prevalent in Sydney, and to a lesser degree Melbourne. These markets are also being supported by foreign demand, as well as investor demand, which should slow somewhat as APRA attempts to limit growth in investor housing credit to 10% y/y (currently at 10.7%). Overall we see Australian house price increases to be around 6.1% in 2015 and slowing to 3.0% in 2016, a rate more consistent with household income growth.</span><br><br><span style="line-height: 1.3em;">The outlook for mining investment remains starkly negative, with recent falls in commodity prices further questioning the viability of marginal projects. Dwelling investment is helping to plug the gap, although it’s potential to do so is limited by its small share of GDP (5%). Higher density developments (namely in Sydney and Melbourne) are contributing significantly to the construction pipeline, and the long lag times for these projects means high levels of approvals should drive further growth in construction until late 2016. In other sectors, trend improvement in business conditions, confidence and capacity utilisation (despite the payback in July), suggest an improving outlook for business investment. </span>
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<span style="line-height: 1.3em;">However, non-residential building approvals remain weak and firms are reporting very high required ‘hurdle rates of return’ (13%) before investing. Indicators of medium-term investment expectations are at best mixed, with the ABS capex survey suggests an outright decline in non-mining capex in 2015/16, while the NAB Business Survey measure of capex intentions suggest a slightly less pessimistic outlook.</span><br><br><span style="line-height: 1.3em;">Our GDP forecasts are marginally stronger than last month – 2.4% in 2014/15, 2.8% in 2015/16 and 3.2% in 2016/17. Despite recent volatility in the labour market figures, our peak unemployment rate is unchanged at 61⁄4%, although spare capacity in the labour market is expected to remain for an extended period. Our central case is for the RBA to sit on its hands until late 2016 when a gradual tightening cycle begins.</span>
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<br><em><span style="line-height: 1.3em;">Alan Oster is group chief economist, National Australia Bank, and </span>can<span style="line-height: 1.3em;"> be contacted <a href="https://business.nab.com.au/author/alan-oster/" target="_blank">here</a>.</span></em>
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Non-residential building approvals remain weak: Alan Oster

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<p><img src="https://counter.theconversation.edu.au/content/82320/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1"></p>
<p>GUEST OBSERVER</p>
<p>Australia’s state governments, as well as some ambitious local councils, community housing providers and forward-looking private developers, are finally taking note of the housing affordability crisis in our cities.</p>
<p>One proposed solution is to provide relief to cash-strapped households that cannot afford skyrocketing deposits by incentivising a new “build-to-rent” affordable housing sector.</p>
<p>Build to rent simply means developers build housing with the intent of retaining the building and renting it out to lower-income families at prices affordable for those families.</p>
<p>Australia has almost everything it needs to kick-start this sector. These efforts could not come soon enough: failing to tackle the situation will cost us billions of dollars. However, state and local efforts cannot reach their full potential unless the federal government steps in with something only it has: cash.</p>
<p>US model shows the way</p>
<p>The federal government has tried build-to-rent schemes before, with the National Rental Affordability Scheme. Built off a similar US model, the program rewarded investors in affordable housing with tax credits. </p>
<p>The program’s US counterpart, known as “tax credit housing”, is so popular that a bipartisan group of senators are working to expand its funding by 50%. Australia’s super funds have even invested in US tax credit housing. </p>
<p>However, Australia abandoned the National Rental Affordability Scheme in 2013. The government is instead creating a “bond aggregator” agency to support build-to-rent affordable housing. This agency will issue government-backed bonds to provide cheap loans to housing associations to build affordable housing.</p>
<p><a href="https://www.propertyobserver.com.au/images/2017/08/31/file-20170829-10454-1xs49oh.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/08/31/file-20170829-10454-1xs49oh.jpg" alt=""></p>
<p>Mind the gap</p>
<p>But truly affordable rents for Australia’s low-income households cannot cover the combined cost of building and operating apartment buildings, even with cheap loans. US housing experts call this problem the “housing finance gap”, and many of their Australian counterparts have called on the federal government to help fund it.</p>
<p>To illustrate, below is a rough hypothetical example of a breakdown of tax credit housing funding sources, based on real numbers out of several Californian tax credit housing projects from between 2006 and 2016.</p>
<p>In Victoria, most of the pieces are being set up for the middle band of funding (in purple) as part of Plan Melbourne and other local government initiatives. Similar efforts are under way in New South Wales and Queensland. </p>
<p>The federal government’s bond aggregator will be in place to maximise revenue of the project (plotted in green). Victoria is set to soon join NSW in providing a regulatory framework defining “affordable rents”. This will enable estimates to be made of how large this segment of funding can realistically be.</p>
<p>What Australia lacks is federal support to cover the remaining gap (shaded in orange). </p>
<p>This is a rough sketch based on US numbers, which will not translate exactly. But so long as the project contains any truly affordable housing, as NSW defines it and as Victoria is looking to define it, projects will need more cash to close the gap.</p>
<p>Filling the gap while keeping things simple</p>
<p>Capital gains tax deductions and negative gearing cost the federal government roughly A$11 billion per year, even if the houses are vacant. It spends roughly half as much on public housing and rental assistance. </p>
<p>A modest rebalancing of federal tax policy toward affordable housing could fill the funding gaps in build-to-rent housing. This would enable the bond aggregator to unlock hundreds of millions of dollars in matching private capital. </p>
<p>The federal government should set a goal of shifting 20% of the tax dollars currently written off on negative gearing into a gap-financing fund managed by the bond aggregator. Unlike the National Affordable Housing Agreement schemes of the recent past, these funds should be dedicated exclusively to building new housing.</p>
<p>Alternatively, Treasury could issue cash vouchers to affordable developers to fill the gap. To keep this simple, the value of the voucher could be pro-rated, on a per affordable unit basis, using up-to-date construction cost data. </p>
<p>The government could also offer this funding to private developers that are willing to set aside 30% of their units for low-income families, in exchange for gap financing of that 30% of units and the certainty the bond aggregator provides for the entire project. </p>
<p>It can be done</p>
<p>Asking the federal government to cover around $90,000 per affordable unit may sound like a lot. But a decent apartment can last for 30 years before requiring substantial rehabilitation. That translates to just $60 per week. </p>
<p>Although Australian construction costs are higher than in the US, even if we double it we are still spending only $120 per week. This amount is paltry compared to how much money the low-income family living in such an apartment will save if the apartment is located in inner Melbourne or Sydney. </p>
<p>Add the long-term healthcare, social service and educational benefits and cost savings into the mix, and this is one smart investment.</p>
<p><em><span class="fn author-name"><a href="https://theconversation.com/profiles/matthew-palm-399340" target="_blank">Matthew Palm</a> is </span>Postdoctoral Research Fellow, Transforming Housing Research Network, University of Melbourne and author for <a href="https://theconversation.com/au" target="_blank">The Conversation</a>.</em></p>
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‘Build-to-rent’ could be the missing piece of the affordable housing puzzle

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<p>GUEST OBSERVER</p>
<p>If you gave ancient Romans iPhones, it would blow their minds… but if you took them to a modern construction site they would get it – for, thousands of years ago, they too built in concrete and brick as well as stone.</p>
<p>Today, about a third to half of the carbon emissions associated with a building over its lifecycle comes from creating the materials used to build it, but developers, builders and architects have been reluctant to change.</p>
<p>The solution doesn’t have to be invented. It already exists, in the form of modern engineered timbers. Unlike conventional materials, sustainably sourced engineered timber actually stores carbon. Engineered timbers are also cheaper, faster to build and can be pre-cut in factories, so there is less time lost to weather and safety risks are easier to control. The resulting buildings are sturdy, safe and well insulated.</p>
<p>In a world where housing affordability is an issue, where homelessness is a problem and where climate change is a real threat, I see engineered timbers in mid-rise apartments as being the future of building in urban areas.</p>
<p>Compared to tall towers, mid-rise building in cross laminated timber (CLT) – sometimes referred to as plywood on steroids – has a number of environmental advantages.</p>
<p>Tall buildings are highly inefficient. When you’ve got a tall tower, you’ve got to pump water up great heights, you need cooling as there’s no natural shade and they’re also often badly insulated and acoustically poor because developers cut costs by building in lightweight materials.</p>
<p>And a whole lot of tall towers together leads to poor urban spaces, which would be far better built at between seven and 12 storeys.</p>
<p>The problems are not just practical. We’re living in an age where many architects strive to achieve a design that is amazing, incredible and completely different – (translation: they draw a funny shape and give it to an engineer to work out how to build).</p>
<p>Sometimes it’s better to keep it simple, and make sure that the bedroom has a window and that you can get to the staircase and so on. Simplicity can have its own beauty, particularly when you’re building in timber. Architects also need to think about the construction material and incorporate this in the initial design stage.</p>
<p>In the UK, there are now about 500 buildings made of CLT, including civic spaces, schools and housing complexes. That number is set to explode.</p>
<p>There are currently three factories on the drawing board that will create modular CLT housing in the UK alone, and the largest of these is being designed to produce 5000 homes a year – at a cost of about 20 per cent cheaper than conventional materials.</p>
<p>I’ve also designed the world’s largest (by volume) CLT housing complex, Dalston Lane, in the UK, which is currently under construction. The ten-storey, 121-unit development is made entirely of CLT, from the external, party and core walls, through to the floors and stairs, weighing a fifth of a concrete building of this size, and reducing the number of deliveries during construction by 80 per cent.</p>
<p>Meanwhile, the record for tallest mass timber building – containing engineered timbers other than CLT – is constantly growing and currently sits at around 18 storeys in height.</p>
<p>In Australia, CLT has been successfully used, but is not as common as in the UK. That may change with a recent update in the construction code making it easier to build mid-rise CLT buildings – and with the imminent opening of Australia’s first CLT factory, meaning the material will no longer have to be import_ed.</p>
<p>There are a number of ways governments can help promote the use of timber, including:</p>
<p>Policies promoting a reduction in carbon emissions from buildings – regardless of building material</p>
<p>Timber first policies, which are used in many countries to ensure that timber should be considered as a building material in any public building project before design begins</p>
<p>Commissioning public buildings, including social housing, in engineered timbers to help increase industry knowledge and support local manufacture of CLT</p>
<p>Introduction of a carbon tax</p>
<p>However, in the UK, CLT has taken off without much in the way of government promotion because the business case for it is so compelling, and the environmental benefits a bonus.</p>
<p><em>Andrew Waugh is a founding director of Waugh Thistleton and can be contacted <a href="https://waughthistleton.com/" target="_blank">here</a>.</em></p>
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Tall towers are not the answer to environmental challenges: Andrew Waugh

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<p>GUEST OBSERVER</p>
<p>Construction work is trending lower from historic highs, led lower by the mining investment downturn.</p>
<p>With the construction sector accounting for around 14 percent of the economy this is a material headwind.</p>
<p>Total construction work fell by 4.9 percent in Q3, exceeding expectations (Westpac f/c -1.5 percent and market median -1.6 percent).</p>
<p>Over the past year, construction activity is down by 11.1 percent.</p>
<p>The September quarter outcome will subtract in excess of 0.5ppts from quarterly GDP.</p>
<p>This outcome adds to evidence that the economy hit a soft spot in the middle of 2016, as suggested by soggy labour market conditions.</p>
<p>We expect the economy to emerge from this weakness, with conditions to improve in 2017, supported by recent RBA rate cuts and a spike in commodity prices.</p>
<p>Downside surprises were in housing and public works, both of which are likely to improve in coming quarters given the recent strength of approvals and commencements.</p>
<p>Housing approvals rebounded to hit record highs in 2016, supported by lower rates, and state governments are committing to additional infrastructure projects – particularly for transport.</p>
<p>The private non-residential building cycle has turned down, reflecting earlier weakness in approvals. The drop in activity in the quarter was sharper than anticipated, -12.9 percent vs f/c -1.4 percent.</p>
<p>More recently, non-residential building approvals have begun to lift from their lows, pointing to an emerging stabilisation and potential improvement in 2017.</p>
<p>The decline in private infrastructure was largely as anticipated, -6.6 percent vs f/c -8 percent.</p>
<p>By state, construction work fell across the mainland in Q3 – including falls of 2.1 percent in NSW and 6.9% in Victoria.</p>
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<p><span>Details</span></p>
<p>Total construction                –4.9 percent<br><span>Private construction            –6.0 percent<br></span><span>Public construction             –0.2 percent<br></span><span> </span></p>
<p><em>Private - by segment</em></p>
<p>Infrastructure                        –6.6 percent<br><span>Dwelling, new                      –3.2 percent<br></span><span>Dwelling renovations          –0.7 percent<br></span><span>Non-res. building                 –12.9 percent<br></span><span> </span></p>
<p><em>Public - by segment</em></p>
<p>Infrastructure                        +1.4 percent<br><span>Building                                 –5.5 percent</span></p>
<p><em>Andrew Hanlan is senior economist for Westpac and can be contacted <a href="https://www.propertyobserver.com.au/https://au.linkedin.com/pub/andrew-hanlan/3/222/430" target="_blank">here</a>. </em></p>
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Total construction work fell by 4.9 percent in Q3: Westpac's Andrew Hanlan

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<p><img src="https://counter.theconversation.edu.au/content/69277/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1"></p>
<p>GUEST OBSERVER</p>
<p>Construction accounts for one dollar in seven of Australia’s total economic activity, making this week’s construction numbers a big deal.</p>
<p>Australian residential construction fell 3.1 percent on a seasonally adjusted basis to A$17.6 billion in the quarter to September 2016. Non-residential construction, which is about half the size of residential, fell 10.9 percent. Engineering construction was down, too, leaving the total construction figure down 4.9 percent to A$46.1 billion.</p>
<p>Construction is at its lowest level since 2010. This will surely factor in to upcoming RBA rate cut decisions, especially if they maintain their recent belief that prudential regulation has dampened concerns about property bubbles in Sydney and Melbourne.</p>
<p>In the US, the flash purchasing managers’ index rose to 53.5, well ahead of expectations. A reading above 50 indicates an expansion, so this was certainly good news for the US economy.</p>
<p>The US Federal Reserve minutes were keenly anticipated and pored over by market participants. Most reporting I saw focused on the following quotation:</p>
<p><em>“Most participants expressed a view that it could well become appropriate to raise the target range for the federal funds rate relatively soon, so long as incoming data provided some further evidence of continued progress toward the Committee’s objectives.” </em></p>
<p>That was interpreted as the Fed being quite likely to raise the Fed funds rate by 25 basis points at the December meeting.</p>
<p>Well, perhaps. Elsewhere in the minutes we got some insight into the data the Fed is looking for to prove it is meeting its objectives. The minutes noted:</p>
<p><em>“Although real GDP growth in the third quarter was appreciably above the slow pace of the first half, it had been boosted in part by transitory factors … Growth of consumer spending had slowed from its brisk pace earlier in the year, residential investment had fallen again, and business fixed investment had remained soft … Participants noted that economic growth in many foreign economies remained subdued, and that inflation rates abroad generally were still quite low. Some participants observed that important international downside risks remained … Participants expressed uncertainty about how long the [labor force] participation rate could be expected to continue rising.”</em></p>
<p>Translation: the labour market, consumer spending and inflation data better come in pretty strong for the Fed to hike. They copped a lot of criticism for what subsequently looked like a premature hike last December, and they won’t want to make the same mistake again.</p>
<p>It is also clear that there is a real division on the committee, with members in one camp gunning for a hike right away, and those in the other expressing cautious optimism. Fed Chair Janet Yellen is in the latter, and that matters. Whatever happens in December, the next set of minutes will be fascinating reading to gain further insight into how the two camps are interacting, and if there is any shift in group membership.</p>
<p>Vital Signs typically focuses on Australia, the US and China, plus whatever country is causing global economic trouble that week. This week we introduce a new feature, G20 country focus, where we pick a G20 country not regularly featured. This week: France.</p>
<h2>G20 country focus: France</h2>
<p>The French economy, with GDP of US$2.5 trillion, is the ninth largest in the world (adjusting for purchasing power). GDP growth was a fairly anaemic 1.2% in 2015. Inflation in the year to October 2016 was a dangerously low 0.4%, with the economy risking a deflationary spiral.</p>
<p>Unemployment sits at 10.0%, though the youth unemployment rate is a shocking 23.9% (compared to 6.8% in Germany).</p>
<p>In terms of public finances, France is running a budget deficit of 3.6% of GDP, although it has been steadily bouncing back from a level of double that since the financial crisis. Government debt to GDP is 96.1%, which is slightly above the Euro area average of 90.7%.</p>
<p>What should we make of those figures? Since France is a big and important part of the Euro area, and that area is struggling, is is not surprising that France is too. Almost all those figures are concerning – especially because France does not issue its own currency – but not at panic station levels.</p>
<p>Youth unemployment, however, is. Although there are European countries with worse levels (like Spain), having nearly a quarter of young people out of work can lead the social compact to be gravely stressed. First, there is the phenomenon of “hysteresis”, where being unemployed makes it hard to become re-employed. And that is particularly problematic in a rather inflexible labour market like France’s. </p>
<p>So even if the budget is slowly recovering, debt is manageable and growth is OK, having millions of disaffected youth roaming the streets is never a good idea.</p>
<p><em><span class="fn author-name">Richard Holden is p</span>rofessor of economics and PLuS Alliance Fellow, UNSW Australia and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">here</a>.</em></p>
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Construction slump points to cooling economy

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<p>Once again we see a fast backtrack by many commentators who predicted a strong easing of real estate prices for the March quarter of 2016.</p>
<p>Then again there are those (like myself) who predicted an about-turn in property prices which is precisely what has happened. For the last four years the December quarter has been the worst performing quarter which can be simply put down to human fatigue.</p>
<p>For those who read the property markets wrong they then seamlessly move to Plan B – the debt debate and yes, Australia’s housing market does have a $1.45 trillion debt blister.</p>
<p>This debate is then marinated with housing affordability, which I must admit has everyone confused given the apparent lack of care or interest. Sydney and Melbourne, and Brisbane to a lesser extent, are flooding the markets with new developments, although in the majority of instances these properties are sold direct to non – resident Australians, so how does that work?</p>
<p>Take Sydney for instance – in the 1980’s the average house price ratio to median yearly household income was 3.0. In 2005 this ratio increased in Sydney to 8.5 and in 2015 it climbed to a staggering 12.2. I can’t see this breaking the back of house prices but I do see plenty of trouble ahead for the Sydney apartment market which has approximately another 22,000 new apartments in the investment pipeline over the next 24 months.</p>
<p>This is the market that requires closer examination and should not be confused with the family house market as the two are distinctly opposite.</p>
<p>We also need to look under the bonnet of the Australian economy to see what is driving it more particularly GDP. Sydney is way ahead of the pack with a 23.3 percent share overall Sydney has outperformed the rest of Australia for the last three years. Next in GDP is Melbourne with 17.7 percent, then Brisbane at 9.6 percent, Perth at 9.5 percent and then Adelaide at 4.6 percent.</p>
<p>If you look at the Green Square development (currently under construction) located between Alexandria and Moore Park in South Sydney – this development will deliver 27,276 apartments so they would be hoping that 60 percent are going to owner occupiers, as if! It is more like 80 per cent to property investors this will send rents in that area spiraling down as there will be a market flood when they all hit the market seeking tenants.</p>
<p>Investor beware! Australia is currently locked in to its biggest apartment development boom ever seen and the big problem is that these developments are congested into the same post codes and are not spread, so a cold can quickly turn to pneumonia.</p>
<p>What scares me the most is that we can trace this boom starting back in December 2008 when the ratio of foreign buyers was moved from 50 percent of new developments to 100 per cent. This ignited property developers and respective state and territory governments to move over night without any analysis to high density.</p>
<p>Again without analysis these developments have been contained into developing areas – so what if the foreign buyers decide not to proceed as the vast majority of these developments are yet to be completed?</p>
<p>It will be property investor mayhem because it’s one big Ponzi scheme totally reliant on the good faith of foreign investors completing on their transactions. Melbourne has another 123,622 apartments in the pipeline and Sydney has 88,013 and there are plenty more on the way awaiting approval. In the case of New South Wales, Victoria and Queensland the state governments are only focused on millions and millions of dollars in stamp duty and land tax.</p>
<p>Sorry to tell you but nobody has a contingency plan should these new developments start to collapse, because if they do the prices will drop 30 per cent minimum overnight.</p>
<p>So whilst housing affordability is directly a responsibility of government I, like many, are not feeling comfortable at how they plan to make it more affordable. With Sydney and Melbourne building the lion’s share of apartments we should also note they are contributing 41 per cent of the Australia’s GDP.</p>
<p>This is precisely the conversation our elected politicians need to be having and this should have started years ago. We may be building an apartment revolution but just like the share market we could be looking at the biggest ‘shorting’ in the property market we have ever seen before too.</p>
<p>Very, very happy to be wrong on this.</p>
<h5>MOSMAN – 2088</h5>
<p>• Number of houses on the market this time last year – 72</p>
<p>• Number of houses on the market last week – 54</p>
<p>• Number of houses on the market this week – 48</p>
<p>• Number of apartments on the market this time last year – 61</p>
<p>• Number of apartments on the market last week – 42</p>
<p>• Number of apartments on the market this week – 45</p>
<h5>CREMORNE – 2090</h5>
<p>• Number of houses on the market this time last year – 6</p>
<p>• Number of houses on the market last week – 4</p>
<p>• Number of houses on the market this week – 6</p>
<p>• Number of apartments on the market this time last year – 17</p>
<p>• Number of apartments on the market last week – 28</p>
<p>• Number of apartments on the market this week – 28</p>
<h5>NEUTRAL BAY – 2089</h5>
<p>• Number of houses on the market this time last year – 15</p>
<p>• Number of houses on the market last week – 7</p>
<p>•Number of houses on the market this week – 6</p>
<p>• Number of apartments on the market this time last year– 36</p>
<p>• Number of apartments on the market last week – 26</p>
<p>*Number of apartments on the market this week – 25</p>
<p> </p>
<p><em><span>ROBERT SIMEON</span> is a director of </em><em><a href="https://www.rwm.com.au/" target="_blank" title="RWM" rel="nofollow">Richardson Wrench Mosman and Neutral Bay</a> </em><em>and has been selling residential real estate in Sydney since 1985. <br>He has also been writing real estate blog </em><em><a href="https://www.rwm.com.au/news/" target="_blank" title="Virtual Realty News" rel="nofollow">Virtual Realty News</a> </em><em>since 2000. </em></p>
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Are we about to see our property investors short the market? Robert Simeon

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<div>There have been many predictions of a Melbourne property crash over the past decade.</div>
<div> </div>
<div>The crash was variously to be triggered by Baby Boomers retiring, China, falling iron ore prices, the mining cliff, spiralling bank funding costs, slowing population growth, apartment oversupply, budget deficits, the loss of the AAA-rating, rising unemployment, higher interest rates, the Ebola virus, and dozens of other things. </div>
<div> </div>
<div>I've been pretty bearish on a few of these points myself - in particular I worried about the overbuilding point a few years back. </div>
<div> </div>
<div>And yet, Melbourne's housing market is powering on harder than ever. </div>
<div> </div>
<div>One of the biggest hurdles in recent months has been how the housing market would respond to additional levies on foreign investors and a crackdown on interest-only loans domestically.</div>
<div> </div>
<div>July's housing finance figures delivered an emphatic answer: record homebuyer commitments of $6.12 billion in a single month, for a crunching +12 per cent year-on-year increase. </div>
<p><a href="https://www.propertyobserver.com.au/images/2017/09/11/A3.jpg" target="_blank">Click to enlarge</a></p>
<div class="separator"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/09/11/A3.jpg" alt=""></div>
<div> </div>
<div><strong><span style="text-decoration: underline;">Stock absorbed</span></strong></div>
<div> </div>
<div>The iron ore price didn't crash in the end, and bank funding costs have remained very low - discounted home loans are now available from just 3.65 per cent, and lenders are busily dropping their rates to entice new business.</div>
<div> </div>
<div>Meanwhile, the Baby Boomer cohort became net buyers of property in search of return on their capital. </div>
<div> </div>
<div>One of the surprising outcomes through this cycle has been the sheer pace of population growth in Melbourne, which just got faster, and faster, and faster, at the expense of Perth, Adelaide, and any number of regional centres.<br><br>
</div>
<div>Until this rate of population growth turns down in Melbourne, even record building activity can barely keep pace, and vacancy rates have fallen to their lowest levels in about 7 years. </div>
<div> </div>
<div>Median asking rents for apartments in Melbourne are now about +12 per cent higher over the past 3 years, according to SQM Research, while asking rents for houses have increased by about +11 per cent. </div>
<div> </div>
<div>Unlike Sydney, Melbourne has affordable suburbs, and this is even helping to attract migrants internally from the harbour city.<br><br>One of the most vociferous property bears of the past decade, Philip Soos of LF Economics, now predicts that the next property correction won't happen for another 9 year, in 2026 (not that I'd reach too much into that). </div>
<div> </div>
<div><strong><span style="text-decoration: underline;">Jobs outlook</span></strong></div>
<div> </div>
<div>The global economy generally looks set for a stronger period ahead, with all regions now delivering growth. </div>
<div> </div>
<div>Australia's economy has added full time jobs at a tremendous pace in 2017. </div>
<div> </div>
<div><a href="https://www.propertyobserver.com.au/images/2017/09/11/A1.jpg" target="_blank">Click to enlarge</a></div>
<div> </div>
<div class="separator"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/09/11/A1.jpg" alt=""></div>
<div> </div>
<div>However, that dream run looks set to slow a little as we head in 2018, once residential building slows down, while the inflation figure will be re-weighted for the December 2017 quarter, probably reducing the inflation rate even lower than it already is. </div>
<div> </div>
<div>
<p class="p1"><span class="s1">PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank"><span class="s2">AllenWargent</span></a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank"><span class="s2">blogger</span></a>.</span></p>
<p class="p2"><span class="s3"><em>His latest book is </em><a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank"><span class="s2"><em>Four Green Houses and a Red Hotel</em></span></a><em>.</em></span></p>
</div>
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Melbourne property correction nowhere to be seen: Pete Wargent

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<div id="post-body-3241568079110976919" class="post-body entry-content">
<div>Australia's construction boom hit "peak apartments" in the March 2016 quarter the latest Building Activity data from the ABS showed, with developers now beginning to crunch their way through the record number of dwellings approved but not yet commenced. </div>
<br><div class="separator"><a href="/images/2016/07/18/A1.jpg" target="_blank">Click to enlarge</a></div>
<div class="separator"><img src="/images/2016/07/18/A1.jpg" alt=""></div>
<div> </div>
<div>Total quarterly commencements accordingly rose to a record high of 59,684.<br><br>Attached dwelling commencements - townhouses, units, and apartments - were up by 21 per cent from the first quarter of calendar year 2015, leading to just shy of 230,000 dwellings commenced in the year to March 2016, also a record.<br><br><div class="separator"><a href="/images/2016/07/18/A1-1.jpg" target="_blank">Click to enlarge</a></div>
<div class="separator"><img src="/images/2016/07/18/A1-1.jpg" alt=""></div>
<br>As you can see in the chart above, annual house commencements have already passed their peak for this cycle, with Sydney in particular constructing fewer detached dwellings through the cycle as the harbour city becomes more dense - building up, not out - while on the other hand Melbourne continues its heroic sprawl.  </div>
<div> </div>
<a href="/images/2016/07/18/A6.jpg" target="_blank">Click to enlarge</a>
</div>
<div class="post-body entry-content">
<img src="/images/2016/07/18/A6.jpg" alt=""><br><br><div>Annual attached dwelling commencements are now at their highest ever level.</div>
<br><a href="/images/2016/07/18/A5.jpg" target="_blank">Click to enlarge</a>
</div>
<div class="post-body entry-content">
<img src="/images/2016/07/18/A5.jpg" alt=""><br><br><div><strong><span style="text-decoration: underline;">Completions slower to come online</span></strong></div>
<div> </div>
<div>The curious aspect of this cycle is that with so many of the commencements being multi-unit developments, the supply has been considerably slower to come online.<br><br>Why? Because on average it's much faster to build a house on a shovel-ready block of greenfield land (perhaps only a few months) than it is to deliver a block of apartments on a brownfield site, which could chew up a period of several years from approval to completion. <br><br>The outcome of this is an epic supply bottleneck.<br><br><strong><span style="text-decoration: underline;">Bottleneck!</span></strong><br><br>There are now more dwellings stuck in the "under construction" phase than we have ever witnessed before: a thunderous total of 218,262 dwellings, more than 150,000 of which are attached dwellings.<br><br>If you can see a lot of cranes on the city horizon, this is why!<br><br>
</div>
<div>A record 74,530 of the dwelling units under construction are located in New South Wales (including more than 56,000 attached dwellings), 67,748 are in Victoria (nearly 48,000 of which are attached dwellings), and 39,816 are in Queensland (more than 31,000 of which are attached dwellings, an eye-popping ratio).<br><br>In other words, lots and lots of apartment projects are underway but not yet finished.</div>
<div> </div>
<div>Indeed, completions have been so slow to come online that actual dwelling completions have declined for the past four quarters on the bounce, from 49,733 in the first quarter of last calendar year to just 45,619 in the first quarter of this year.</div>
<br><div class="separator"><a href="/images/2016/07/18/A2.jpg" target="_blank">Click to enlarge</a></div>
<div class="separator"><img src="/images/2016/07/18/A2.jpg" alt=""></div>
<br><div>This huge lag between record approvals and completion helps to explain why super-strong population growth in the two most populous capital cities has to date continued to outpace and absorb dwelling supply. </div>
<div> </div>
<div>Annual attached dwelling completions in NSW (22,400) and VIC (23,000) not only remain below previous peaks, but are also tracking way behind the romping pace of state population growth of 106,000 and 109,000 per annum respectively.</div>
<div> </div>
<div class="separator"><a href="/images/2016/07/18/A3.jpg" target="_blank">Click to enlarge</a></div>
<div class="separator"><img src="/images/2016/07/18/A3.jpg" alt=""></div>
<br><div>
<em>The Australian</em> recently reported an estimated year's oversupply of dwelling based upon an assumption of 47,000 net additions to the dwelling stock per quarter. </div>
<div> </div>
<div>Yet reported vacancy rates in Sydney and Melbourne - even if the figures are arguably incomplete - have actually declined, the slowdown in rental price growth as much reflective of the number of <em>investors</em> in the market through this cycle as the number of physical dwellings.<br><br>Because the record high volume of units and apartments under construction are slower to come online than houses, the assumptions reported by <em>The Australian</em> have been over-egged when compared to the number of actual completions by some 85,000 dwellings. </div>
<br><div class="separator"><a href="/images/2016/07/18/A4.jpg" target="_blank">Click to enlarge</a></div>
<div class="separator"><img src="/images/2016/07/18/A4.jpg" alt=""></div>
<div> </div>
<div class="separator"> </div>
<div class="separator">Moreover these assumptions overlook that up to 25,000 commencements per annum simply replace existing stock, as pointed out by the good Prof. Philips of the ANU.</div>
<div class="separator"> </div>
<div class="separator"><a href="/images/2016/07/18/PHILLIPS.jpg" target="_blank">Click to enlarge</a></div>
<div class="separator"><img src="/images/2016/07/18/PHILLIPS.jpg" alt=""></div>
<div class="separator"> </div>
<div class="separator">The picture is complicated somewhat further by the addition of granny flats which are not well captured by the data, but after accounting for demolitions the new supply has so far had a relatively muted impact in Sydney and Melbourne.</div>
<div class="separator"> </div>
<div>What has transpired to date is localised bursts of oversupply, not nothing too dramatic at the macro level.</div>
<div class="separator"> </div>
<div class="separator"><strong><span style="text-decoration: underline;">The wrap</span></strong></div>
<div class="separator"> </div>
<div class="separator">There are more than 150,000 units, townhouses, and apartments now under construction in Australia, easily the highest figure on record, so construction activity will remain at or close to full capacity for some time yet. </div>
<div class="separator"> </div>
<div class="separator">Attached dwellings can take a long period of time to complete, so to date at least the impact of new supply hasn't been all that great. </div>
<div class="separator"> </div>
<div class="separator">But what is Australia going to do with all these new high-rise dwellings during a period when its post mining-boom economy isn't supporting such high levels of immigration? </div>
<div class="separator"> </div>
<div class="separator">Mr. Turnbull does have a plan. And like most of Australia's cunning plans these days, it involves tapping demand from China. </div>
<div class="separator"> </div>
<div class="separator">It's only been a fortnight since the new "streamlined" student visa rules kicked in, but early anecdotal indications suggest that the plan might just be working. </div>
<div class="separator"> </div>
<div class="separator"><a href="/images/2016/07/18/VISAS.jpg" target="_blank">Click to enlarge</a></div>
<div class="separator"><img src="/images/2016/07/18/VISAS.jpg" alt=""></div>
<div> </div>
<div>
<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
</div>
</div>
<div class="post-footer"> </div>
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Making sense of Australia's super-duper construction boom: Pete Wargent

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<p>Property developing can throw many different challenges at you and one thing I have learnt after managing over one hundred developments is that there is always a solution to a problem.</p>
<p>The trick is to understand what possible issues could arise and preparing yourself for them. </p>
<p>You see, the development process is not an exact science because every development site is different.  So the construction costs will rarely if ever, be the same from project to project, even if you are using the same plans.</p>
<p>Depending on the fall of the site, some will need more retaining than others, some may need more concrete due to the length of the site and driveways and then there are the sites where you find unexpected items lurking below the surface. We once uncovered an old asbestos shed that had been buried many years ago. This did not come up on our geo technical report and had to be removed as contaminated rather than normal waste. </p>
<p>If you develop in the same area, you can work out fairly quickly, after a few developments, what is likely to happen. With experience, you will be able to look at a site and determine how much retaining may be required. You can also base your construction estimates on the soil type as an example. If developing within the same land estate, it’s likely to contain similar soil types. The engineer uses the soil and site classifications for the slab design. Once the site preparations and slabs are laid, most of the unknown or little surprises are behind you.</p>
<p>But before construction commences, there is a process to follow. </p>
<p>When pricing a development and running feasibilities, it is important to understand that your building estimate is an organic creature. By this I mean the building estimate you start with will nearly always be different to the one you end with.  It will evolve throughout the process as you obtain more and more details.  Once you have all the fine details, the building estimate can be finalised to the fixed price builder’s tender. </p>
<p>When designing our villa plans, we follow this process:</p>
<p>1  Concept Planning – this show the number and size of villas we can get on the land. There is not too much detail on the plans at this stage.</p>
<p>We run the numbers to see if the project is viable.</p>
<p>1  Development Application (DA) plans – these are started after we’ve secured the land and the plans give enough information to satisfy council’s requirements.</p>
<p>2  Construction Certificate (CC) plans – more detail is added to the plans including the engineer’s drainage and slab design.</p>
<p>The starting point for our build estimate will be based on similar projects that we have recently completed and an allowance for the different development site.</p>
<p>This progresses to an estimate based on the Concept Plan.  Still a very ‘loose’ estimate as there is usually not enough detail on the Concept Plan for the builder to have all information needed.  The build estimate we have at this stage will tell us whether we are tracking within budget.  If not, we can make the necessary changes required, perhaps reducing the size of the villas working with both our builder and architect to design the right dwellings for our project to be successful.</p>
<p>Once the Concept Plan is approved and the site secured the architect will proceed to full DA plans.  It is here that much more detail is added and we will have our builder price the DA plans.  Again, this does not give us a final build cost but we will be getting closer to the expected outcome.  Once approved by our client, the DA plans are finalised and the DA is prepared.</p>
<p>During the DA process, council may request some changes to the plans, so it is important to understand we are still ‘evolving’ at this stage. We also need to review the Conditions of the DA Consent before we have more detail to finalise the build costs.</p>
<p>Once council have approved the DA, we will start to prepare the CC plans.  Engineers will be briefed and a drainage and engineered slab design or footings for the foundations will be produced. More detail is added to the CC plans, finalising levels and double checking schedules. </p>
<p>Before we lodge the CC plans with our private certifier we will have our builder issue a third costing. It is this costing that will give us the final build costs...well almost.  We still need to have the CC approved and ensure there are no further revisions to the plans required.  </p>
<p>After we have the CC stamped plans, our builder will issue their final tender and building contract. This will be a fixed price contract; however, there may still be a few items that will be ‘provisional’. They are usually some site works, removal of fill and retaining walls.  The builder may mark these items as provisional as they won’t know until works proceed exactly what the cost is. For instance, if rock is hit during the site cut, this will increase the site costs. If the site cut differs slightly to the plans, this may impact on the height of retaining walls.  So these ‘provisional’ items will be charged at actual cost whether it is lower or higher. We do often enjoy credits on these items when the allowance is not required.   </p>
<p>So you can see how the build estimate must evolve through the development process and until your development is completed, you really won’t know the exact cost.  It’s important you allow a contingency amount for variations that may crop up along the way. </p>
<p>As a developer, you will embark on a challenging journey from start to finish and the path you choose can be simplified with the help of a project manager to guide you along the way.  Always take the time to have full builder’s estimates done at each stage to avoid any nasty surprises. </p>
<p><em><em>Jo Chivers is chief executive officer of property development project managers <a href="https://www.propertybloom.com.au/about" target="_blank">Property Bloom</a><a href="https://www.propertybloom.com.au/">.</a></em></em></p>
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Determining construction costs from the outset of your development: Jo Chivers

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<p>Quite remarkable that the Lower North Shore property markets are showing no signs of slowing as we edge closer to Christmas.</p>
<p>What is very clear is that all but guarantees another very strong March quarter for 2017, where beyond that would be anyone’s guess.</p>
<p>Whilst many expect that the Reserve Bank of Australia will cut the cash rate in the next six months we are now starting to witness some small Australian lenders increasing their rates which sends a loud signal that we may now be witnessing the end of the low rates. I made a phone call and was advised that ING have the lowest rate presently at 3.84 percent over five years fixed. ME head of home loans, Patrick Nolan, said: “The increases were based on increasing swap rates – up 40 basis points since the end of August – and increasing cost of deposit funding.”</p>
<p>Yes, there will be casualties, more particularly the interest only borrowers. I read a sage quote by a banker on Twitter who said: “If anyone is taking out a 20 – year mortgage and they don’t believe rates will rise, I’d ask them if they should be making this investment. It is an unrealistic proposition,” he said.</p>
<p>What needs to be factored in is that wages rose by 1.9 per cent during the September quarter, which was a record low according to the Australian Bureau of Statistics.</p>
<p>The NSW Government’s property development arm known as the Greater Sydney Commission released this week the first draft for the five – year housing targets by Local Government Area. A total of 23,250 new properties have been approved, with Mosman to build 300 new properties and North Sydney 3,000 and the Northern Beaches an additional 3,400.</p>
<p><a href="/images/2016/11/28/Draft-Districts.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/11/28/Draft-Districts.png" alt=""></p>
<p> </p>
<p>I really find this quite intriguing with present data suggesting that Sydney is now facing an imminent over – supply. NSW is in the process of building 55,000 new apartments with thousands more on the planning desks awaiting approval.</p>
<p>As these apartments are completed this will be a significant lever in reducing rents. When I look at Mosman I observed from CoreLogic that the rental median for a house in Mosman is $1,600.00 per week which is a 16.4 per cent increase over the last five years. The rental median for an apartment is $580.00 per week which is a 16.0 per cent increase over the last five years.</p>
<p>From an economic perspective, this is good news for NSW as it will drive employment as well as productivity. Property investors need to look closely at where their respective investment properties are within the Local Government Areas to ascertain what impact this unprecedented apartment building bonanza will have. One would have to say that in the short – term in the case of Mosman that apartment rents will be coming down. Even more so in North Sydney as they have a massive 3,000 apartments to be built over Mosman’s 300. For the fortunate ones if you own a residential development because it just doubled and trebled in value with the new high density legislation.</p>
<p>What needs to be acknowledged is this is what we call the new market and should not be confused with the established housing market as we are building apartments not houses. Although one point that springs to mind is that investors will be forced to renovate existing apartments if they are going to compete in the market on a rental dollar basis as they will be up against brand new apartments.</p>
<p>The building industry has never seen a better future although little consideration has been given to existing property owners who must contend with greater traffic congestion on our roads. So, if you thought our roads are congested now this week’s announcement will only make the situation worse.</p>
<p>Over time this will see more businesses moving to the suburbs, so a smart town planner must be marinating these development sites with a combination of commercial, retail and residential. Although we all know that this won’t happen as that would be the intelligent outcome to try and ease traffic congestion. Happy to bet now that these new developments will be strictly residential only although I will be more than happy to be wrong with this.</p>
<p>What is happening in Sydney will also see many leave Sydney for quieter and a more stable lifestyle. Whatever the outcome this will have plenty of Sydneyites re – considering their respective futures.</p>
<p><em>ROBERT SIMEON is a director of </em><em><a href="https://www.rwm.com.au/" target="_blank" title="RWM" rel="nofollow">Richardson Wrench Mosman and Neutral Bay</a> </em><em>and has been selling residential real estate in Sydney since 1985. </em></p>
<p><em>He has also been writing real estate blog </em><em><a href="https://www.rwm.com.au/news/" target="_blank" title="Virtual Realty News" rel="nofollow">Virtual Realty News</a> </em><em>since 2000.</em></p>
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