Residential Housing

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<p><span>GUEST OBSERVER</span></p>
<p><span>Proposals by the NSW government to make it harder for foreign investors to buy housing will only slow down housing supply. </span></p>
<p><span>The proposals by NS</span><span>W Treasury to impose a 1.5 percent surcharge on land tax on foreign investors in housing will be </span><span>a disincentive to invest in NSW.</span></p>
<p><span>It </span><span>seems that the aim is to match the surcharge in Victoria which will remove the point of </span><span>difference that NSW has.</span></p>
<p><span>The Sydney region needs 33,200 new homes a year according to the Department of Planning </span><span>but last financial year only 27,348 were built leaving a shortfall of nearly 6,000 homes. We must do all we can to boost housing supply and foreign investors have been contributing to this particularly through new apartments. To send a message that these investments are not wanted </span><span>in NSW can only reduce the flow of capital into new housing.</span></p>
<p><span>Foreign investors often help make development pro</span><span>jects become feasible by underpinning the </span><span>pre sales with up to 15% of purchases and this helps local purchasers buy into a viable project.</span></p>
<p><span>The argument for the surcharge seems to be to free up more housing for first home buyers by </span><span>reducing the number of purchasers but this can only lead to less new homes being built. With an undersupply already pushing prices up a further reduction in supply is likely to only increase home </span><span>prices.</span></p>
<p><span>There has been a slow</span><span>-down in housing approvals in NSW over the last 6 to 8 months and an additional tax on foreign investment in housing will only lead to a further slow-down. Already Sydney has the council amalgamations causing some concerns over planning and discussion about adding value capture levies to new development beginning to affect confidence in the </span><span>market so the possible extra levy on foreign investment will further erode industry confidence.</span></p>
<p><span><em>Chris Johnson is chief executive officer of property development industry group Urban Taskforce and can be contacted <a href="https://www.urbantaskforce.com.au/index.php?option=com_content&amp;view=article&amp;id=97&amp;Itemid=126#.Vdaart55dFI" target="_blank">here</a>.</em></span></p>
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jchancellor-FAypfDUnLy

Foreign investment in housing helps with much needed supply: Urban Taskforce

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<p>GUEST OBSERVER</p>
<p>The Eastern seaboard markets have performed counter-cyclically to growth in wages and GDP, both of which are trending below the historical average.</p>
<p>When wages are low but growth in housing is high, the credit used to fund this growth in housing is found elsewhere.</p>
<p>Reportedly, an increased number of Australians coming into retirement have used money in a Self-Managed Super Fund (SMSF) to take out a loan for property. The new normal of low economic growth and low yields from most assets makes east-coast property an economic anomaly.</p>
<p class="Body1">Graph 3 shows the latest data from the Australian Taxation Office on SMSFs. The graph plots the number of SMSFs and the asset allocation to property, at each quarter over the last 5 years.</p>
<p><span><strong>Graph 3: Percentage of Real Estate Assets in SMSFs vs No. SMSFs</strong></span></p>
<p><a href="/images/2016/08/04/Graph_3.jpg" target="_blank"><span><strong>Click to enlarge</strong></span></a></p>
<p><img src="/images/2016/08/04/Graph_3.jpg" alt=""></p>
<p><em><span>Source: ATO, SMSF Statistical Report September 2015</span></em></p>
<p>Without a longer time series, it is difficult to say whether residential property has made up an increasing percentage of retirement portfolios. However, the increase of SMSFs with a fairly consistent rate of allocation to residential real estate suggests this could be one source of growth in the Australian housing market.</p>
<p>From the March to September quarter of 2015, there was an increase of allocation to residential property from SMSFs, of 0.43 percent. This was a time when the Sydney market was coming into its peak growth rates for this cycle.</p>
<p>Interestingly, the same period saw a higher increase in the share of commercial property that composed SMSFs assets. This could be because the ATO sometimes permits the purchase of business premises for fund members to operate in. Commercial property also presents a favourable tax environment, with a capital gains tax of just 10 percent if the property is held for over 12 months.</p>
<p>These trends are important to note as they highlight the sources of demand outside of Australian wages and employment. When there are multiple sources of demand flowing into a locally supplied market, property prices could be affected by the current regulatory uncertainty around superannuation.</p>
<p>It is also important to note that the oldest baby boomers in Australia are now at retirement age. The property purchased through SMSFs will one day need to be liquidated in order to supplement pension income and address extremely high health and aged care costs. If a large number of stock is to be liquidated at once, this could erode some value in the properties owned by retirees, unless offset by an increased population.</p>
<p>Eliza Owen, is market analyst for Onthehouse.com.au and can be contacted <a href="https://www.onthehouse.com.au/" target="_blank">here</a>.</p>
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Housing and an ageing population: Eliza Owen

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<p>APRA reported that residential housing loan ADI exposures continued to power on, up to $1.49 trillion in the December quarter (and beyond $1.5 trillion in January).</p>
<p>Owner-occupied loans totalled $971 billion, comprising 65 percent of outstanding residential property exposures, an increase of $86.5 billion or 9.8 percent from the prior year.</p>
<p>Meanwhile, the total of outstanding investor loans was $522.4 billion (the balancing 35 per cent of outstanding exposures), for an increase of $23.5 billion or 4.7 percent from last year.</p>
<p>New investment loan approvals were down by 5.8 percent from the prior year, yet still accounted for a punchy 34.2 percent of total new residential loans. </p>
<p>Loans to investors appear very likely to be the target of a crackdown as 2017 rolls on.</p>
<p>As I looked at in a little more detail here, each of the major lenders appear likely to be approaching the speed limit for the growth in their mortgage books, including those that have lodged revisions to historical figures (since these will be adjusted for). </p>
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<strong><span style="text-decoration: underline;"><br></span></strong><br><div><strong><span style="text-decoration: underline;">Impairment rise for ADIs</span></strong></div>
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<div><span>I'm not going to provide much detailed analysis or opinion on this site, but it is worth noting the following from APRA's reported headline figures for ADIs.</span></div>
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<div><span>-impaired facilities and past due items as a proportion of gross loans and advances was 0.92 percent as at Q4 2016 (an increase from 0.86 percent in the prior year);</span></div>
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<div><span>-specific provisions hit $7.3 billion at Q4 2016, an increase of $0.8 billion or 12.9 percent from the prior year; and</span></div>
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<div><span>-specific provisions as a proportion of gross loans and advances was 0.24 percent at Q4 2016, an increase from 0.22 percent in the prior year.</span></div>
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<div>To summarise:<br><br>
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<div class="separator"><a href="https://www.propertyobserver.com.au/images/2017/03/06/APRA.jpg" target="_blank">Click to enlarge</a></div>
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<div><em><span style="text-decoration: underline;"> </span></em></div>
<div><em><span style="text-decoration: underline;">Source: APRA </span></em></div>
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<div>This should demand your attention, since it indicates that the cyclical low for impairments has now passed. </div>
<br><div><strong><span style="text-decoration: underline;">Change to new lending</span></strong></div>
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<div>APRA's figures show that riskier "low doc" and other non-standard lending now comprise only a small and decreasing share of the residential mortgage market, which is a positive development.</div>
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<div>Furthermore, most new loans have a loan to value ratio (LVR) of 80 per cent or lower, meaning that - theoretically at least - the majority of new buyers have a significant buffer built in to their purchase. </div>
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<div class="separator"><a href="https://www.propertyobserver.com.au/images/2017/03/06/A3.jpg" target="_blank">Click to enlarge</a></div>
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<div><span>A potential challenge to this case is that in many instances those using 20 percent deposits have likely sourced their deposits from existing residential property assets, and therefore the risk in such loans may be higher than it appears at first blush. </span></div>
<div><span> </span></div>
<div><span>Interest-only loans, while accounting for a smaller share of the market than has previously been the case, still represent a very significant chunk of new lending at 36.6 percent (even if the total of interest-only lending for the quarter of $162 billion represents a decrease of 10.5 percent from the prior year).</span></div>
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<div><a href="https://www.propertyobserver.com.au/images/2017/03/06/A2.jpg" target="_blank"><span>Click to enlarge</span></a></div>
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<br><div>The inherent risk here is that when these loans reach the end of their interest-only period the repayments may jump higher in the event that the loan cannot be rolled over into a new interest-only period, a point which has aroused the scrutiny of short sellers.</div>
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<div>Summarily, residential property exposures now comprise a very significant sum of interest-only mortgages in Australia. </div>
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<div><a href="https://www.propertyobserver.com.au/images/2017/03/06/PARA2.jpg" target="_blank">Click to enlarge</a></div>
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<div><em><span style="text-decoration: underline;">Source: APRA</span></em></div>
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<div>If mortgage rates were to rise, of course, then these risks may be multiplied. </div>
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<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>
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pwargent-M4siyDbqQY

APRA reports non-performing loans on the rise

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<div>There's a theory that hosing down investor demand should have no impact on rents.</div>
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<div>That's because <em>in theory</em> for every property that isn't bought by an investor, an owner-occupier buys instead, and thus  the balance of supply and demand for rental properties remains unchanged. <br><br>In the real world capital city property markets don't work like that. In reality, many are renters either by choice or by circumstance, such as new graduates, transient employees, international or interstate visitors, and other folk who prefer taking a rental close to the city to ownership in the outer suburbs. Many others simply don't have an available deposit saved, so buying is not an option for them. </div>
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<div>As such rental growth is to a large extent determined by the growth in demand for rentals - underpinned over time by population growth - and by the relative activity of investors. For example, rents in Australian capital cities (and especially Sydney) boomed in 1986 and again in 2008 both of which were periods when investor buying had crashed in half.</div>
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<div><a href="/images/2016/04/11/A2.jpg" target="_blank">Click to enlarge</a></div>
<div><img src="/images/2016/04/11/A2.jpg" alt=""></div>
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<div>For this reason it will be interesting to see what impact APRA's crackdown has on apartment rents in Sydney.</div>
<div> </div>
<div>I've rented out several properties in Sydney in recent months, all of them for more than last year. However, the properties in question are in high demand areas such as on the Sydney harbourside, and as such are not likely to be very representative of what is happening in construction pockets like, say, Parramatta or Green Square. </div>
<div> </div>
<div>Domain reported last week that as at March 2016 Sydney apartment rents were up by +4.0 per cent of 2016 from one year ago to a record median high of $520/week, with apartment rents now nearly as high as median house rents of $530/week in the harbour city. CoreLogic-RP Data has Sydney apartment rents +3.4 per cent higher than one year ago, and SQM Research records an increase of +5.7 per cent.</div>
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<div>To date this may in part simply be due to newer stock coming online, which typically is advertised for rent at higher prices than the older stock it often replaces. And we shouldn't be expecting runaway growth in rents any time soon, since investor activity is still at a historically high level, even after APRA's dampening of the buy-to-let sector.</div>
<div> </div>
<div>While it's still early days, this trend is certainly one to watch. Markets are quite complex beasts when you drill into the detail, with endless subtle balances and counter-balances, and in an expensive capital city such as Sydney with a growing population rental growth is likely to continue to have an inverse relationship to investor activity. </div>
<div> </div>
<div>Another trend that is worth watching I looked at here, and that is that inner Sydney vacancy rates have tightened while vacancy rates in secondary and outers areas of Sydney are rising.</div>
<div> </div>
<div>A question for today, then: could it be that foreign buyers of apartments are leaving their inner city units vacant?</div>
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<div><strong><span style="text-decoration: underline;">FIRB data curve ball</span></strong></div>
<div> </div>
<div>In the 1980s Japanese buyers famously  bought heavily into Gold Coast property, but then promptly withdrew funds as the economic outlook soured. As I mused in some detail here, the FIRB data shows that through this cycle there has been an unprecedented surge in Chinese investment in Australian real estate, on a scale never before seen.</div>
<div> </div>
<div><a href="/images/2016/04/11/FIRB4.jpg" target="_blank">Click to enlarge</a></div>
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<div><img src="/images/2016/04/11/FIRB4.jpg" alt=""></div>
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<div>If you've been following some of my pieces over the years, you'll know that I aim to identify new trends well before you read about them in the wider media, which of course sometimes means being wrong. </div>
<div> </div>
<div>On the topic of localised apartment oversupply, such as in Sydney's inner south, for example, I was yapping on about this emerging risk way back in 2013, long before it ever became a standard media topic <em>du jour</em>.</div>
<div> </div>
<div>In that spirit, here's a possible anti-counter-contrarian view for you: maybe the high-rise building approvals boom won't prove to be such a big a deal after all? There are plenty of risk areas around, for sure, including some already alluded to above, but here are some lines of reasoning to consider:</div>
<div> </div>
<div>-<a href="https://petewargent.blogspot.com.au/2016/04/immigration-alley-oop" target="_blank">i</a>mmigration is rising again - and therefore so is population growth - while the construction boom will soon pass its peak</div>
<div> </div>
<div>-in the most populous capital cities at least, annual population growth never really slowed down anyway: it's still tracking at monumentally strong levels in Greater Sydney (+83,300 in FY2015) and Melbourne (+91,600)</div>
<div> </div>
<div>-the numbers of international students forecast to immigrate into the largest cities is vast - I mean, really vast </div>
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<div><a href="/images/2016/04/11/A5.jpg" target="_blank">Click to enlarge</a></div>
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<div><img src="/images/2016/04/11/A5.jpg" alt=""></div>
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<div>-although the take-up of permanent residency by international students to date has not yet been as strong as had been suggested by earlier forecasts, the cumulative intake over the next five years is expected to be truly enormous.</div>
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<div><a href="/images/2016/04/11/A6.jpg" target="_blank">Click to enlarge</a></div>
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<div><img src="/images/2016/04/11/A6.jpg" alt=""></div>
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<div>-the most timely available indicators of education arrivals suggest an unprecedented boom is well underway, with another new record high hit in the month of February.</div>
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<div><a href="/images/2016/04/11/A2.jpg" target="_blank">Click to enlarge</a></div>
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<div><img src="/images/2016/04/11/A2.jpg" alt=""></div>
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<div>-with about 58 per cent of new construction approvals accounted for by foreign  buyers, especially driven by buyers from the Chinese mainland, many may choose not to rent their apartments out, and as such, might not add to the new supply of rental stock at all.</div>
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<div><strong><span style="text-decoration: underline;">Absorption?</span></strong></div>
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<div>Mostly these are familiar points. Certainly both Sydney (35,231) and Melbourne (32,614) have approved a historically high number of attached dwellings over the past year.</div>
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<div><a href="/images/2016/04/11/BA3.jpg" target="_blank">Click to enlarge</a></div>
<div><img src="/images/2016/04/11/BA3.jpg" alt=""></div>
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<div>However, some of these apartments are destined to forever remain in the "approved but not yet commenced" column, approvals are now trending down again, and in the grand scheme of things although there are certainly many cranes on the horizon, these are not outlandish numbers for cities of such a large and expanding population (Greater Sydney will blaze past 5 million in the next few months).</div>
<div> </div>
<div>Moreover, the latest FIRB data show that the Chinese appetite for the purchase of new dwellings through this cycle is statistically unique. What if those Chinese buyers opt to rent out the apartments only on a short-stay basis? Or save them for their soon-to-be international student offspring? Or, most likely, simply never bother to ever bring them to market at all?</div>
<div> </div>
<div>Suddenly Australia's apparent inner city apartment glut, represented by the green line below, could prove to be yet another doomsday scenario that never eventuates.</div>
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<div><a href="/images/2016/04/11/BA1.jpg" target="_blank">Click to enlarge</a></div>
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<div><img src="/images/2016/04/11/BA1.jpg" alt=""></div>
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<div>This is mostly conjecture, and it's not necessarily a base case, or even probable. And there are plenty of risks for the new and high-rise apartment markets in particular, as we have known now for some years.</div>
<div> </div>
<div>Settlement risks are now considerably higher than they were, with increased deposit requirements. And what if there are legislative changes in China which force sales and repatriation of funds? This may not seem rational or realistic, but then again nobody forecast the scale of the Chinese investment boom in the first place, so who really knows what comes next?</div>
<div> </div>
<div>In my opinion, most mainland Chinese investors deliberately invest in Australian and other overseas property markets with no intention of repatriating funds. In many cases, the financial return may not be the only objective, or even the primary objective.</div>
<div> </div>
<div>Keep a close eye on asking rents and vacancy rates. If the inner city markets do begin to tighten contrary to expectations, then this may be an indicator that mainland Chinese buyers are electing not to bring their shiny new apartments to the rental market, at the same time as domestic investor activity is being throttled. </div>
<div> </div>
<div>An interesting week of news ahead, commencing this morning with the Housing Finance data for February.</div>
<div> </div>
<div>January had been a weaker month for housing loan approvals, but then January is never a big month for activity, so the February figures will give us a much clearer picture of likely activity levels of 2016.</div>
<div> </div>
<div>The market consensus forecast is for a moderate rebound in the number of approvals in the month, which broadly fits with what I've been seeing and hearing, that being a steady increase in home loan activity in aggregate. </div>
<div> </div>
<div>On Thursday, the ABS will release the latest March Labour Force figures, which will be the most important data of the week. </div>
<div> </div>
<div>Last month the reported seasonally adjusted unemployment rate declined to 5.8 percent, but there is a fair chance that this volatile monthly reading could revert higher, with analysts expecting a bit of a rebound in both employment and the participation rate (following last month's surprise drop from 65.14 percent to 64.9 percent).</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>
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Sydney unit rents rise to record high? Pete Wargent

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<p>Magnolia, an apartment project in Sydney's Lane Cove, is offering luxury abodes with a 2017 completion.</p>
<p>Built by SJD Property at 27-43 Little Street in Lane Cove, the apartments comprising one, two and three-bedrooms, are close to nature reserves, shops and schools.</p>
<p><a href="https://www.magnolialanecove.com.au/?utm_source=Property+Observer+List&amp;utm_campaign=34db017cdd-14_October_2015&amp;utm_medium=email&amp;utm_term=0_a523fbfccb-34db017cdd-245347537" target="_blank">The display suite</a> is at 126 Longueville Road with sales through Ray White Projects.</p>
<p>SJD Property has extensive international property development experience in Asia and Australia, its most recent project Watsons Grove, three five-level buildings at Epping.</p>
<p>Mijollo International is the architecture firm who designed the project, led by Milton Lloyd and Matthew Cumming. </p>
<p><span>The apartments have modern interiors, with engineered timber flooring.</span></p>
<p><span>There will be a neutral colour palette accented by timber veneers and joinery. </span></p>
<p><span>The exterior architecture combines sandstone, brick and timber.</span></p>
<p><span>Penthouse level apartments feature generous living spaces and entertaining decks. </span></p>
<p><span>Contemporary bathrooms include frameless shower screens.</span></p>
<p><span><span>The mostly four-story buildings will sit in gardens developed by Sturt Noble.</span></span></p>
<p><span>The median sale price of units in Lane Cove is $674,000, while the median rent is $510 per week, recent data from <a href="https://www.urban.com.au/property-observer" target="_blank"><span>propertyvalue.com.au</span></a> shows.</span></p>
<p><span>Over the last 12 months, 168 apartments were sold in the suburb with an average of 18 days on the market.</span></p>
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Magnolia, Lane Cove's latest residential luxury garden complex

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<p><span lang="EN-US">Real estate company JLL has bought the management rights of a Brisbane boutique residential development, Newstead Series.</span></p>
<p><span lang="EN-US">The purchase is the first ‘off the plan’ acquisition of residential management rights in Queensland for JLL, said a media release.</span></p>
<p><span lang="EN-US">Newstead Series is being developed by JGL Properties and</span> comprises four boutique buildings – The Carlyle, The Donaldson, The Ajax and The Koerstz – named after Australia’s famous wool presses.</p>
<p>The buildings are set amongst half an acre of subtropical landscaped gardens with a 25 m pool, gymnasium, alfresco dining areas, outdoor cinema and recreational lawns. The project is due for completion in 2017.</p>
<p>“JLL’s property management business continues to be a major engine room for growth, and the Newstead Series acquisition further expands and diversifies our reach and allows us to leverage our extensive commercial management portfolio,” said Geoff McIntyre, managing director of JLL’s Queensland business.</p>
<p><span lang="EN-US">JLL is the largest property manager in Australia. </span></p>
<p><span lang="EN-US">National head of Property and Asset Management Richard Fennell said, “diversifying our business has been a key strategy, and growing into the residential sector has been a successful factor.”</span></p>
<p><span lang="EN-US">“We believe there will be strong future rental demand, driven by the boutique nature of Newstead Series, its spacious apartment and townhome designs, as well as the generous half an acre of lifestyle and community amenities.  </span></p>
<p>Newstead Series developer John Livingstone from JGL Properties said the investment by JLL delivered a strong endorsement for the project. </p>
<p><span lang="EN-US">“To have Australia’s largest property services firm acquire the Newstead Series management rights is a huge vote of confidence in the project and for the stakeholders involved,” said Livingstone.</span></p>
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JLL buys into Brisbane residential project Newstead Series

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<p>A sharp fall in household wealth is likely to have a severe negative effect on consumer sentiment and household balance sheets, implying less household consumption at a time when Australia’s economy is precariously balanced and aiming for a pickup in consumer spending according to CoreLogic RP Data head of research Tim Lawless.</p>
<p>In his May housing market report, he said with 52 percent of household wealth held in residential land and housing a better way to improve affordability is to provide better value in the housing market, without trying to orchestrate a crash in existing home values.</p>
<p>He referenced a report on the ABC television program 4 corners that said for housing affordability to improve, house prices had to come down and added a crash in housing prices is one way to improve affordability, but a crash in asset values involves more than just a substantial drop in the price of a home.  </p>
<p>"The economic consequences of a major fall in home values would be far reaching and long lasting; remember the Global Financial Crisis started with a crash in the US housing market," he said.</p>
<p>"Lower consumer sentiment would likely see households become more conservative with a preference for saving rather than spending, which in turn, would place a drag on economic growth. </p>
<p>"Given that Australian banks have a large exposure to residential property, an economic slowdown could see the banking sector impacted by rising arrears and default rates. Higher rates of negative equity would place the banking sector under pressure, push loan to valuation ratios into unhealthy territory and lead to tighter lending conditions for all borrowers.  </p>
<p>"Take Sydney as a key example; on our latest data there are 66 suburbs across Sydney that have a median house value under $500,000 (8.5% of all suburbs) and eight suburbs where the median house value is under $400,000. The problem is that these suburbs are mostly located in areas that are either hard to get to and from, they may lack essential amenities such as shopping facilities and health care, or they suffer from low socio-economic conditions (or mixture of all three). "</p>
<p>He added that providing more efficient and affordable transport linkages that connect these areas to the major working and social centres would be a good first step towards making these regions more desirable and opening up demand for these affordable areas.</p>
<p>"Of course, large infrastructure projects are expensive, but after the stamp duty windfall the NSW state government has seen over the past four years, it makes sense this money would be reinvested back into the state. Major infrastructure projects are also stimulatory in the sense that they create jobs and provide a foundation for stronger economic growth," he said.</p>
<p>"Another step in the right direction would be improving local zoning regulations to allow for smaller lot sizes. Once again, focussing on Sydney, where the affordability challenges are the most pressing, the size of newly developed blocks of land remains substantially higher than most other capital cities. Based on land sales over the past year, the median block area was 515sqm which is larger than every other capital city except Hobart and Darwin.  </p>
<p>"Considering the land value is the largest factor in the price of a new house, reducing the block size could provide enormous affordability dividends. Based on the median rate per square metre of land, a 100sqm reduction the typical block size should reduce the typical land cost by nearly $80,000.</p>
<p>"There are plenty of other strategies, including smarter home designs that allow for smaller floor plates but maximize the amount of usable space, reducing the tax burden on buyers and reducing development charges for developers.</p>
<p>"I haven’t even touched on the affordability associated with higher density living, ramping up infill targets within established areas to ensure existing transport infrastructure is leveraged to the greatest extent. Nor have I discussed making regional markets, which are generally very affordable compared with the capital cities, more attractive for businesses to locate there which will attract jobs and inter-city/inter-state migrants."</p>
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Fall in household wealth will hit consumer sentiment severely: CoreLogic RP Data's Tim Lawless

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<p>The fringe suburbs of Warrnambool in Victoria consist of North Warrnambool, Dennington and the Gateway Road subdivisions.</p>
<p>These locations provide an affordable housing option for low to middle income earners as well as good entry level investments, according to valuation firm Herron Todd White's latest property clock, April 2016, a simple broad brush means to indicate where property prices are and where they are headed to.</p>
<p>Warrnambool was at the start of the recovery market for houses, while for units it was at the bottom of the market, according to HTW.</p>
<p>The majority of Warrnambool's fringe suburbs consists of recently built, brick veneer dwellings with house and land packages starting from $320,000 and established dwellings averaging approximately $370,000.</p>
<p>These suburbs are providing good rent returns for investors, with rents ranging from $350 to $450 per week based on the size and age of the dwelling. Agents advise that tenants are preferring these suburbs, which provide newly constructed properties with at least three-bedrooms and two-bathrooms, to those closer to the CBD with older dwellings with a single bathroom.</p>
<p>North Warrnambool appears to be the suburb performing best which can be attributed to the recently completed infrastructure and access routes to the CBD. Long term you would expect a higher capital growth closer to the CBD but these suburbs appear to be able to maintain good rental levels and relatively good affordability. </p>
<p>Property Observer found a recently sold home in Warrnambool's fringe suburb of Dennington around the average prices mentioned by HTW.</p>
<p>A three-bedroom house at <a href="https://www.realestate.com.au/property-house-vic-dennington-119752087" target="_blank">45 Adriana Crescent Dennington Vic 3280</a> for $345,000, according to RP Data.</p>
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