Can a new 'objective' rebuild confidence in construction?

By Associate Professor Matthew Bell, Co-Director, Studies for Construction Law, Melbourne Law School, University of Melbourne

Dr Matthew Bell joined Melbourne Law School as an academic after several years in full-time practice as a solicitor, primarily as a non-contentious construction lawyer. Matthew is an Associate Professor and Co-Director of Studies for the Law School's Construction Law Program.

The push to deliver thousands of much-needed new homes across Australia carries an uncomfortable risk: speed and volume can come at the expense of quality.

This is particularly relevant in a system already struggling with compliance and cost pressures.

The catastrophic cladding-fuelled fire at Grenfell Tower in London in 2017 put the spotlight on devastating residential building defects.

Victoria’s response – the combustible cladding rectification program – is now regarded by the Government as all but complete.

It’s an instructive example of how to deploy a combination of public and private money to fix a massive problem caused by years of regulatory failure.

A 2024 report for the Victorian Building Authority (VBA) gave stark insights into what it is like to have to live with or litigate other types of defects, including water ingress, mouldy bathrooms and structural failures.

Now a new bill, being debated in the Victorian Parliament, aims to entrench occupant health and safety at the heart of the building system.

Is this bill a worthwhile addition to the already massive body of building regulations or does it contribute to making the business of building unviable?

What is the BPAE Bill?

Six months after the 2024 VBA report, the Victorian government released its March 2025 Building Statement, pointing to the need for holistic reform to ensure safer, higher-quality buildings.

A raft of reform legislation followed, now added to by the Building and Plumbing Administration and Enforcement Bill 2026 (BPAE).

The BPAE is both ambitious and immensely complex, running more than 600 pages and 75,000 words.

It proposes very substantial structural changes to the regulatory system, and makes significant changes to building compliance, including expansion of the criminal penalties for people involved in breaching the regulations.

A guiding star for better building quality?

In the early part of the BPAE is a new “building system objective”.

The objective is “to promote and protect the health and safety of building occupants and the public” through construction activities and the regulation of those activities.

The breadth of this provision is very wide.

It applies to the entire “building system”, which includes the building and plumbing industries, regulators, building surveyors, local councils and a range of other agencies.

What it also does is require that all building legislation must recognise and “have regard” for this objective.

This means that the promotion and protection of health and safety is intended to become the industry’s guiding star for how decisions are made.

Why objectives matter

The approach of the building system objective reflects principles for which I have long argued based on my research into effective construction industry regulation.

These principles include that occupant health and safety should be paramount; prevention is better than cure; and, in an industry prone to being a “merry go round of buck passing”,  that buck of responsibility must stop with someone who is able to respond appropriately.

While the new legislation will take time to become operational once passed and brought into force, it will allow regulators, industry professionals and – ultimately – courts to look to this objective to guide them through difficult legal decisions.

This matters because many regulatory failures occur in grey areas: especially, when corners are cut based on interpretation of standards, codes or words in contracts.

A clear objective does not remove discretion, but it makes those grey areas harder to defend when they undermine health and safety.

And Victoria is not acting in isolation.

Since Grenfell, governments around the world have sought to rebalance construction regulation towards occupant safety.

The UK’s response was framed cautiously: the regulator must act “with a view to” securing safety.

Victoria’s “promote and protect” wording is stronger.

Whether that difference translates into better outcomes will depend on how assertively regulators and courts are prepared to apply it.

What’s the impact on the industry?

The deeper challenge is embedded in the culture of the construction industry.

The amount of risk taken on by developers and builders (usually, passed down to subcontractors and consultants) means that construction quality is always at the mercy of time and cost demands.

As risks materialise, so do costs.

This is always an issue for businesses across the supply chain – from multi-national construction firms down to individual tradies.

So, any well-meaning regulatory change needs to balance its goals against the burden it loads up on an already fragile industry – especially in the face of the current disruption from the war in the Middle East.

So it is unsurprising that industry peak bodies like the Housing Industry Association have called for a pause to the introduction of the already-passed reforms.

The Victorian Opposition also moved a motion calling for debate on the BPAE to wait for further consultation with the industry, which was then defeated. So the Bill will remain before the Parliament when it meets in mid-May.

Where to from here?

Ultimately, an express building system objective alone will not stop poor behaviour or guarantee better buildings.

But it may change incentives by making regulatory inaction harder to justify and sharpening accountability.

For now, everyone with an interest in getting the balance right in residential construction – and that is everyone – should also take an interest in the BPAE and its building system objective.

It could well turn out to be a game changer in the ongoing quest to restore the community’s confidence in the safety of the homes we live in.

This article has been republished from The University of Melbourne Pursuit under a Creative Commons license. Read original here.

This little‑known government scheme can help retirees tap into $3 trillion of housing wealth

By Katja Hanewald, Associate Professor in Risk & Actuarial Studies, UNSW Sydney

Katja Hanewald is an Associate Professor in the School of Risk and Actuarial Studies at UNSW Sydney and the President of the Asia-Pacific Risk and Insurance Association (APRIA). Her research focuses on longevity trends, healthy ageing, and insurance strategies for ageing populations.

For many Australians, most of their retirement wealth is tied up in their home. A simple, well-designed program to tap into those trillions in home equity could help boost their retirement incomes.

Such a program exists. However, it remains little known and underused.

The federal government’s Home Equity Access Scheme (HEAS) allows older Australians to access their housing wealth. It is open to Australian residents aged 67 or older who own real estate in Australia, regardless of whether they receive the age pension.

Similar to a reverse mortgage with a bank or specialist lender, the scheme lets older Australians supplement their retirement income through a federal government loan, secured against the equity in their home or other Australian real estate.

Yet government data shows just 18,691 people are currently taking part in the scheme, a relatively low take-up.

A recent report from Deloitte estimates reverse mortgages are used to access only about 1% of the A$3 trillion value of housing wealth owned by Australians aged 60 and over.

So, why isn’t the government scheme more popular?

How does the scheme work?

Retirees can “top up” any pension payment they receive up to a maximum of 150% of the maximum pension rate. People who do not receive the age pension (self-funded retirees) can receive up to the same maximum.

Participants can choose to receive:

• fortnightly payments, or

• a lump sum advance.

Compound interest is charged on the loan and accumulates over the life of the loan. This is the key difference from standard mortgage loans: people are not required to make regular repayments or interest payments (voluntary repayments can be made at any time).

The interest rate on the scheme is currently 3.95% and has been unchanged since January 2022. This is below the Reserve Bank’s official cash rate of 4.1% and well below commercial reverse mortgages, making it relatively cheap compared with other options.

It was previously known as the Pension Loans Scheme and was introduced in 1985 alongside the pension assets test.

Since 2019, the government has made several changes to the scheme to make it more attractive and expand eligibility. In 2022, lump sum advances were introduced.

A “no negative equity guarantee” was also introduced, meaning participants will never have to repay more than their home is worth, even if house prices fall.

How the scheme stacks up against private lenders

The government scheme shares many similarities with reverse mortgages offered by some banks and specialist lenders.

In both cases, the payments received are added to a loan that increases over time with interest. The loan is usually repaid when the home is sold, or from the estate after the borrower dies.

Voluntary repayments can be made at any time, but are not required.

Both commercial reverse mortgages and the government scheme offer regular or lump-sum payments, and include protections such as the no negative equity guarantee.

The payments have no impact on age pension payments if the loan is taken as a regular income stream to spend on living expenses or non-assessable assets.

The main differences are:

• under the government scheme, the payments are capped at 150% of the maximum age pension rate, whereas the commercial reverse mortgages can offer higher borrowing amounts.

• but banks and specialist lenders charge a higher interest rate on reverse mortgages, currently 8–9% per year, due to higher risks and market-based pricing.

Why such a low take-up rate?

Government data on its scheme shows the average loan amount was about $35,700 in December 2025. Of those taking part, 74% received the full age pension, 17% received a part pension, and 5% were self-funded retirees.

But with only 18,691 people taking part, take-up is still low.

As a government program, the scheme is not widely advertised. So it is good to see more superannuation funds providing their members with information about the scheme.

Some financial advisers may be unsure whether they can advise on the scheme. In January 2023, the Australian Securities and Investments Commission (ASIC) clarified that financial advisers can provide advice on the government scheme without needing an Australian Credit Licence.

Behavioural factors, such as debt aversion and a preference to leave the home as an inheritance, may also explain the low take-up rate. The loan will be repaid out of the sale of the home, meaning proceeds from the sale will be reduced.

However, in our research, we argue that accessing housing wealth can allow families to bring forward bequests and reduce the uncertainty around the timing of inheritances.

Another barrier may be the perceived complexity of the scheme, particularly for retirees with limited financial literacy.

While the rules can seem complex, applications are handled through Services Australia and can be completed online via the MyGov portal, using a standard Centrelink claim process.

The home equity access scheme allows older Australians to access an affordable government loan to supplement their retirement income. It can help retirees who are “asset rich, but income poor” to improve their financial wellbeing, while allowing them to remain at home and in their communities.

This article has been republished from The Conversation under a Creative Commons license. Read original here.

What the Escalating US-Iran Conflict Could Mean for Australia’s Construction Industry

By The Good Builder editorial

The construction industry in Australia may look a long way from the battle lines in the Middle East, but it is tightly connected to them through fuel, freight, imported inputs, project finance and business confidence. As of March 2026, the conflict has expanded beyond direct US-Iran strikes, with Reuters reporting that the US and Israel are conducting operations against Iran, while Iranian retaliation has affected Israel, the UAE, Qatar, Bahrain and Kuwait, and wider regional airspace and shipping routes have been disrupted. Reuters also reported that the Strait of Hormuz has been closed, or severely choked, long enough to push crude prices sharply higher and raise global growth concerns. 

For Australia, the most immediate consequence is not likely to be a physical shortage of bricks, timber or steel on day one. It is more likely to be a rolling cost shock. Construction is a fuel-intensive industry. The Australian government notes that the sector uses large volumes of diesel for machinery and equipment, and that energy is a major operating input. That matters because diesel touches almost every part of the building chain: earthmoving, quarrying, concrete haulage, steel transport, crane logistics and regional delivery. When oil rises, construction costs usually feel it quickly, especially on civil, infrastructure and heavy commercial jobs. 

That fuel channel is the clearest transmission mechanism from the conflict to Australian building activity. Reuters reported this week that oil settled at its highest in more than a year and then rose again by roughly 5% as the Iran crisis widened and supply concerns intensified. Another Reuters report said the closure or disruption of Hormuz had already helped lift crude by around 12%. Because about a fifth of the world’s oil and LNG trade passes through the Strait of Hormuz, even a temporary interruption can reset freight and energy pricing well beyond the Gulf. ABC similarly noted that Australia would not be immune from a slowdown in traffic through the strait. 

For Australian builders, higher oil does not just mean dearer fuel at the bowser. It increases the cost base of upstream manufacturing and transport. ABS data for the latest Producer Price Index release show that house-construction input prices were broadly stable into late 2025, with only a 0.2% quarterly rise, but the ABS also said cost pressures that did appear were linked to energy, fuel and raw materials. In other words, the sector had only just moved into a more stable pricing environment after the earlier post-pandemic surge. A new oil shock risks interrupting that stabilisation. 

The effect would probably be most visible first in roads, subdivisions, earthworks and infrastructure. Bitumen is petroleum-based, so a sustained oil spike usually feeds directly into asphalt and road surfacing costs. Large civil contractors are also more exposed to diesel consumption than many residential builders. Australia’s infrastructure pipeline remains substantial, with the federal department highlighting continued work on major transport and Olympic-related projects, while Infrastructure Australia says fabricated steel remains a crucial input to the delivery of the national infrastructure program. In that environment, even a modest rise in fuel, steel fabrication and freight can have outsized budget consequences because public megaprojects run on thin assumptions across enormous volumes. 

Freight and shipping are the second major risk. Even if Australia does not import most construction materials directly from Iran or the war zone, global shipping is a connected market. Disruption in the Gulf raises tanker rates, reroutes vessels, increases insurance premiums and can tie up ship capacity that would otherwise service Asia-Pacific trades. Reuters reported that Exxon is sending unusually long-haul fuel cargoes from the US Gulf Coast to Australia because normal trade flows have been disrupted by the Hormuz crisis, and that freight costs and vessel scarcity could limit how workable those alternatives are. That is important for construction because it shows Australia may still get supply, but often at a higher landed cost and with more timing risk. 

This can spill into building materials in indirect ways. Steel, aluminium, glass, fixtures, mechanical equipment and electrical components all depend on shipping markets and energy-intensive production. Infrastructure Australia has already warned that fabricated steel is a critical input across foundations, beams, girders and major infrastructure systems. If conflict-driven freight costs rise at the same time as energy prices increase, imported or trade-exposed construction products can become more expensive even when domestic demand is not especially strong. The result is not necessarily a blanket shortage, but a more volatile procurement environment where quotes expire faster, contingencies grow and lead times become harder to trust. 

There is also a financing and confidence effect. The European Bank for Reconstruction and Development said this week that the Iran conflict threatens economic growth by reducing investment risk appetite, and Reuters reported that the shock could complicate monetary policy if higher energy prices lift inflation. Australia has already been trying to manage the cost of housing delivery, and external inflation pressure is unhelpful. The RBA has previously noted that higher materials and transport costs can pass through to prices across goods-related sectors, while more recent RBA commentary has discussed the broader pass-through of higher import costs into inflation. For construction, that means the war may hit not only project costs but also the cost of capital, buyer confidence and the willingness of developers to proceed with marginal projects. 

Residential construction may therefore feel the impact differently from engineering construction. Home builders are less exposed to bitumen and bulk diesel than civil contractors, but they are highly sensitive to interest rates, consumer sentiment and subcontractor pricing. Australia is already behind the pace needed to deliver its national housing ambitions, with independent reporting based on ABS data showing the country is building materially fewer homes per quarter than required to stay on track for federal targets. A fresh inflation shock that keeps financing tight or lifts freight-sensitive imported products such as fixtures, appliances, glazing systems and some steel items would make that challenge harder, not easier. 

Another issue is project risk allocation. During stable periods, builders can absorb some short-term movements in fuel or imported products. During geopolitical shocks, that becomes more difficult. Fixed-price contracts are especially vulnerable when sudden input changes arrive after tender. Contractors then either wear margin compression or try to negotiate variations, delays or substitutions. This is where the current conflict matters even if it fades quickly: it reminds principals, developers and governments that global geopolitical risk now needs to be priced into procurement. After the cost blowouts of the past several years, many Australian construction businesses do not have much room left to absorb another external shock. ABS data show house-construction input inflation cooled sharply from the peaks of 2021–22, but the industry has not forgotten the damage caused by rapid cost escalation and delayed pass-through. 

How severe could the impact become? That depends on duration. If the disruption is short-lived and Hormuz traffic normalises, the effect on Australian construction may be noticeable but manageable: higher diesel, some freight volatility, tighter tendering and a little more caution from developers. If the conflict drags on, however, the consequences become more structural. Reuters has already reported wider regional attacks, sustained operations, and a market reassessment of oil and shipping risk. In that scenario, Australian contractors could face a second-round cost problem: not just expensive fuel, but dearer logistics, higher insurance, longer procurement times, and a more cautious lending environment. 

Australia also has a fuel-security angle. The federal government says it is trying to improve resilience through minimum stockholding obligations, support for domestic refining capability and expanded diesel storage. That is positive, but it also underlines the underlying vulnerability: Australia remains exposed to imported liquid fuels and international trade routes. In practical construction terms, that means the industry cannot assume it is insulated simply because many projects use domestic labour and some locally sourced raw materials. The machines still run on diesel, the roads still depend on petroleum-linked products, and major projects still rely on globally traded steel, equipment and shipping. 

The bottom line is that the US-Iran bombing campaign and the wider countries being drawn into the conflict are unlikely to stop Australia’s construction industry overnight, but they do raise the risk of renewed cost escalation at exactly the wrong moment. After a period of partial stabilisation in construction input prices, the industry is exposed again through fuel, freight, imported manufactured products, inflation expectations and financing conditions. Civil and infrastructure work are likely to feel the first and hardest hit, while residential construction may suffer more through financing pressure and cautious consumer demand. If the conflict is contained quickly, the damage may be limited to margins and pricing uncertainty. If it is prolonged, Australia’s construction sector could face another difficult cycle of tender stress, project repricing and slower delivery. 

This article has been republished via a Creative Commons license. Read original here.

RLB Crane Index Q1 - 2026

By Oliver Nichols, Director Rider Levett Bucknall

Construction activity remains near record levels across Australia, with 838 cranes operating nationwide. While overall numbers have eased slightly, the data points to a market that is evolving, not declining.

Australia’s construction sector continues to demonstrate resilience, with 838 cranes operating nationwide in Q1 2026, according to the latest RLB Crane Index®.

While crane numbers have dipped slightly from 845 in the previous quarter, activity remains high and reflects a sector that is adjusting to new drivers of demand.

The volume of work done reached a record $318 billion in 2025, reinforcing the strength of the underlying market.

A market in transition, not decline

What is emerging is not a slowdown, but a shift.

Across Australia, construction activity is moving between sectors, locations and project types. Residential activity remains a key driver, while engineering, infrastructure and data centres are becoming increasingly prominent.

Melbourne provides a clear example of this transition. Residential cranes now account for 41% of activity, down from more than 50% in recent years, as major civil and infrastructure projects accelerate.

At the same time, data centre construction is expanding rapidly, particularly in Melbourne’s west.

Sydney remains the national centre

Sydney continues to anchor construction activity in Australia, with 346 cranes in operation, representing 43.8% of the national total.

While this is a modest decline from the previous quarter, activity remains significantly higher than any other city.

Melbourne follows with 207 cranes, with the gap between the two cities remaining substantial.

Growth in emerging regions

Beyond the major capitals, several regions are gaining momentum.

Adelaide has reached a record 29 cranes, supported by strong residential, commercial and health sector activity.

The Gold Coast has also recorded a new high of 75 cranes, driven predominantly by residential development.

These increases highlight a broader redistribution of activity across the country.

Engineering and infrastructure gaining ground

Engineering activity continues to strengthen, supported by investment in energy, water and major infrastructure.

Large-scale projects such as the North East Link and Suburban Rail Loop are reshaping the construction landscape, particularly in Victoria.

Together, these projects account for a significant share of national crane activity and reflect a shift toward infrastructure-led growth.

Pipeline signals remain positive

Forward indicators suggest continued momentum.

Building approvals increased by 15.9% in 2025, pointing to a strong near-term pipeline of work.

While some sectors are moderating, the overall outlook remains one of steady activity, supported by population growth, infrastructure investment and evolving demand. However, new cost pressures are beginning to emerge.

Emerging cost pressures

Geopolitical tensions in the Middle East are now feeding into construction costs, with higher fuel, freight and insurance costs flowing through supply chains.

These pressures are particularly evident in oil-linked materials such as steel, cabling and bitumen, contributing to longer lead times and increased pricing uncertainty.

Diesel-powered crane operations are also exposed, with rising fuel costs placing additional pressure on project preliminaries and overall delivery costs.

Outlook

Australia’s construction market is not standing still.

It is adapting. Rebalancing. Moving toward new opportunities.

The cranes are still there. What’s changing is where they are, and what they represent.

This article has been republished with permission from RLB. Read the original here.

National State of the Market Report H2 2025

Charter Keck Cramer's National State of the Market - Residential Build to Sell (BTS) and Build to Rent (BTR) Apartments, H2 2025 report for key metropolitan areas.

Report Overview

The Charter Keck Cramer Research team has consolidated their market-leading insights into a National State of the Market Report, delivering a comprehensive overview of Australia’s apartment market.

Drawing on their extensive national database, this report examines key indicators including apartment releases, commencements and completions, while offering deep insights into each capital city’s performance. Notable trends and broader market drivers are also analysed to provide essential context at both the national and metropolitan levels.

Download the full report here…

Executive Summary

Welcome to State of the Market H2-2025 Build to Sell (“BTS”) and Build to Rent (“BTR”) apartment market report.

Link Between Established Markets and New Housing Supply

Our readers are reminded that there is a strong and consistent relationship between established housing markets and the feasibility of delivering new housing supply across Australia. Charter Keck Cramer Research confirms that prices for new dwellings (apartments, townhouses and house & land products) are linked to the median house price of the established market in each capital city. As established house prices move, the achievable price points for new housing move with them.

Financial Viability and Housing Trade-Offs

For new medium and higher density housing supply to be financially viable, established detached house prices must reach levels that support these forms of more compact and affordable housing. This dynamic has shaped housing outcomes for decades and across multiple market cycles. It reflects a long-standing housing “trade‑off”, where households make compromises between competing priorities such as price vs location, size vs affordability, quality vs cost, ownership vs renting, or commuting time vs housing costs. These trade-offs continue to drive demand patterns and product typologies in all housing markets.

Diverging Market Performance Across Cities

Over the past five years, cities such as Brisbane, the Gold Coast, Perth and Adelaide have experienced strong and sustained growth in established house prices. This growth has lifted realisable revenues for new dwellings and in particular made apartment development increasingly viable in these markets. In contrast, Melbourne and Canberra have experienced flat or negative house price growth, while Sydney has seen only modest house price growth. In many sub‑markets across these three cities, realizable revenues for new dwellings remain below the current cost of delivery, rendering new supply financially unfeasible.

Rising Delivery Costs

At the same time, the cost of delivering new housing has risen sharply across all dwelling types (apartments, townhouses and house & land). Key drivers include a high and growing burden of taxes and charges, increasingly complex and over regulated planning and building systems, declining construction productivity relative to 20 years ago and higher labour and material costs.

National Cost of Delivery Crisis

Charter Keck Cramer’s research identifies a systemic cost of delivery crisis across all Australian cities. This represents the most significant barrier to addressing the national housing shortage and requires substantial reform from all levels of government.

2026 Market Outlook: Short-Term and Long-Term Drivers

Looking ahead to 2026, Charter Keck Cramer expects ongoing tension between short term cyclical pressures and longer-term structural forces. Short term challenges include higher interest rates and subdued consumer sentiment, while longer term drivers include chronic undersupply of new dwellings and shifting housing preferences across generations. The structural fundamentals supporting medium and higher density living are evident across all cities and are expected to strengthen over the next decade as demographic change accelerates.

Affordability Constraints and Housing Choices

As housing affordability thresholds are reached, markets are increasingly characterised by a mismatch between achievable revenues and household purchasing power. The trade-off thematic is clear: households will rent for longer and, when buying, increasingly opt for more affordable medium and high-density housing. In this environment, Build to Rent is expected to play a growing role, with institutional capital better positioned to absorb risk and deliver supply than traditional Build to Sell apartment models.

Expectations for 2026

Overall, Charter Keck Cramer expects 2026 to be an improvement on 2025, supported by greater certainty and market adaptation to the new operating environment. While interest rates are expected to rise and lending serviceability buffers remain in place, price falls are not anticipated due to the widening gap between established housing values and the cost of delivering new supply, which is expected to place a floor under prices.

Construction Capacity Risks

A key ongoing risk across all markets remains builder availability and construction capacity. This is particularly acute in Southeast Queensland, where pressures are expected to intensify in the lead‑up to the Brisbane 2032 Olympics.

Full access to this article is here, with a section to subscribe to Charter Keck Cramer future news, insights and events information.

This article has been republished with permission from Charter Keck Cramer.

How to tackle Sydney’s housing crisis

By Matthew Bowes, Senior Associate in Grattan’s Economic Prosperity and Democracy Program.

Matthew Bowes is a Senior Associate in Grattan’s Economic Prosperity and Democracy Program. He has previously worked at the Parliamentary Budget Office and Commonwealth Treasury in various roles analysing personal income tax, budgets, and social policy.

Since 2023, the Minns Government has introduced the most ambitious reforms to improve housing affordability that NSW has seen in a generation. 

But the NSW reforms fall short of those adopted by the Allan Victorian Government in one crucial way. Victoria is now allowing more ‘gentle’ density – townhouses and flats up to three storeys – across most residential-zoned land in the capital city. NSW is not.

That’s a huge missed opportunity to get more housing built in Sydney. 

This presentation shows why Premier Minns should follow Premier Allan’s lead and allow terraces and low-rise flats in all areas currently zoned for low-density, as long as they meet reasonable set-back, height, and site coverage requirements. 

Download the presentation pack

Since 2023 the Minns Government has introduced the most ambitious reforms to improve housing affordability that NSW has seen in a generation.

The government is allowing for mid- and high-rise apartments within walking distance of transit hubs and commercial centres, via the Low- and Mid-Rise Housing and the Transport Oriented Development policies. A range of other policies – such as the Housing Delivery Authority and the In-fill Affordable Housing Bonus – are also making high-rise apartments easier to build in more places.

But the NSW government’s reforms fall short of those adopted by Jacinta Allan’s Victorian Government in one crucial way.

Like NSW, the Victorian Government is allowing taller mid- and high-rise apartments around 60 transit hubs.

But unlike NSW, Victoria is now allowing more ‘gentle’ density – townhouses and flats up to three storeys – across most residential-zoned land in Melbourne.

Victoria’s new Townhouse and Low-Rise Code allows these homes ‘as of right’ across most residential zones, meaning that councils can’t knock back proposed developments that meet clear standards for building heights, setbacks, and site coverage. Heritage protections still apply. 

We estimate that Victoria’s Townhouse Code reforms have unlocked capacity for nearly 1 million extra homes in Melbourne’s suburbs, with about 400,000 of these homes being profitable to build today.

While recent NSW Government reforms have made dual-occupancies legal to build in low-density zoned areas across the state, much gentle density remains illegal to build.

Whereas an 800 square metre site in suburban Melbourne can now accommodate five or more townhouses, similar sites in Sydney are often limited to just two homes

And these reforms are still frustrated by other planning rules, such as minimum lot sizes. In Ku-ring-gai Council, for instance, subdivisions for dual occupancies in low-density areas are only allowed on blocks exceeding 1,000 square metres. It’s why we estimate that dual occupancy reforms in NSW unlock just 50,000 homes that are commercially feasible to build today.

The Low- and Mid-Rise Housing (LMRH) Policy allows more gentle density through to four- to six-storey apartments around 131 sites in Sydney, covering 9 per cent of residential land, but restrictive floor space ratio requirements still apply, especially in the R1 and R2 zones which make up about 77 per cent of LMRH area. 

That’s a huge missed opportunity to get more housing built in Sydney

Subdividing large family homes for townhouses is an easy way to allow more housing on scarce inner-city land, offering new housing options for families and downsizers alike.

Half of all residential-zoned blocks in Sydney are larger than 600 square metres, meaning more homes can be built without the need to amalgamate sites. And by avoiding the complexities of high-rise construction, these low-rise projects are cheaper and quicker to build than taller apartment towers.

For example, if all housing types were permitted in all Low- and Mid-Rise Housing areas in Sydney, we estimate that three-storey townhouses would be feasible to build on 40 per cent of sites, compared to less than 20 per cent of sites for a five-storey apartment building.

Premier Minns should follow Premier Allan’s lead and allow terraces and low-rise flats in all areas currently zoned for low-density, as long as they meet reasonable set-back, height, and site coverage requirements.

Such a reform could create capacity for more than 1 million extra homes that could be profitably built in Sydney today.

In R2-zoned areas alone, there are more than 400,000 sites in Greater Sydney that could be profitably redeveloped for townhouses, including 37,000 on the Northern Beaches, 37,000 in Canterbury Bankstown, 19,000 in Parramatta, and 18,000 in Ku-ring-gai.

In fact, more than half all R2-zoned properties in Sydney could profitably accommodate three-storey townhouses, if NSW followed Victoria’s example.

Given residential properties in Sydney typically turn over every 10 years, that implies that 40,000 sites that could be profitably redeveloped could hit the market each year in Greater Sydney.

Allowing more homes in Sydney’s inner and middle-ring suburbs will make them cheaper. Newly built townhouses and apartments are much cheaper, on average, than the existing freestanding homes they replace.

Similar reforms in Auckland, which upzoned 75 per cent of its land area in 2016, led to a building boom that added 4 per cent to the city’s housing stock in just six years and reduced rents by 28 per cent.

Most of the extra housing built in Auckland following its 2016 reforms were two- and three-storey townhouses, rather than taller apartment towers.

And the benefits of these reforms have now been sustained for a decade,  House prices in Auckland have diverged sharply from the rest of New Zealand: house prices in Auckland have fallen by 15 per cent in real terms in the past decade but have increased by nearly 30 per cent increase in real terms for the rest of New Zealand.

Download the presentation pack

Read our ‘More Homes, Better Cities’ report.

This article has been republish under a Creative Commons license. Read the original here.

Australia sees record construction activity while New Zealand shows early signs of recovery

By Oliver Nichols, Director of Research & Development, RLB in Oceania and Trent Wiltshire, Research & Development Manager, RLB in Oceania

Australia entered 2026 with construction activity at historically high levels, driven by growth in engineering construction – mainly energy infrastructure such as transmission lines, solar, wind and pumped hydro. There has also been a pick-up in apartment construction activity, boosted by lower interest rates and government policy changes aimed at increasing the supply of apartments and townhouses.

The pipeline of construction activity is also robust, especially in public infrastructure, defence and energy projects. Order books are particularly strong in Western Australia, South Australia and Queensland.

New Zealand is earlier in the cycle, with activity lifting slightly through 2025. The early uplift is residential-led, with growth strongest in apartments and townhouses. Activity has picked up most in Auckland and Canterbury. Non-residential demand remains subdued – particularly in healthcare, social buildings and retail – despite pockets of strength in some regions, notably Wellington and more recently Auckland.

Overheated market maintains pressure on costs

Construction cost escalation eased across most of Australia in 2025, but the Tender Price Index is still growing at a faster pace than pre-pandemic. The high volume of work underway will keep the market overheated, maintaining pressure on construction costs and delivery timelines. A lack of competition among Tier 1 contractors and subcontractors on large-scale projects, the risk of builder and subcontractor insolvencies, sluggish productivity, and high levels of public sector activity, are also combining to keep costs elevated.

Construction cost growth is expected to increase during 2026 and 2027 in Brisbane, the Gold Coast and Townsville as Olympic construction and government initiatives ramp up. Construction cost escalation is also forecast to rise in Adelaide and increase modestly in Sydney from 2027.

In contrast, pricing remains comparatively subdued in New Zealand, reflecting the softer conditions. TPI growth in all major cities is expected to pick up from the very low escalation rates of 2025. Levels of escalation across the main cities in New Zealand are forecast to be in the range of 0.5% to 2.5% for 2026.

There is a strong near-term pipeline of work in Australia. In the building sector, approvals, work yet to be done, commencements, and work under construction are all at decade-highs.

“The high volume of work underway will keep the market overheated, maintaining pressure on construction costs and delivery timelines.”

Prospect of higher interest rates clouds outlook

The longer-term outlook in Australia has become more uncertain. The Reserve Bank of Australia raised interest rates in February and further increases are expected in the year ahead. Higher interest rates are likely to dampen construction activity in the short to medium term, particularly in interest-rate sensitive markets such as high-density residential.

Ongoing skilled labour shortages and sluggish productivity are expected to continue pushing up wage costs. At the same time, a transition in the public infrastructure pipeline, from transport toward utilities, energy and other sectors, may not occur smoothly. State government policies aimed at boosting apartment and townhouse construction could support residential volumes but are also likely to add to cost escalation.

In New Zealand, there are tentative signs of a recovery in construction activity, led by residential construction. Lower interest rates are the key driver of the expected recovery – the Reserve Bank of New Zealand cut the official cash rate from 5.5% in August 2024 to 2.25% in November 2025. Stronger population growth will also support demand, but any rebound is likely to be uneven and sector specific.

This article has been republished with permission from RLB. Explore more of the RLB 2026 analysis of global construction trends here.

Here’s how to investigate corruption in Victoria’s construction industry – and it’s not a royal commission

By William Partlett, Associate Professor of Public Law, The University of Melbourne

Bryan Liem / Unsplash

The Victorian government is facing growing calls for a royal commission to investigate allegations of corruption in the construction sector.

There is no question these calls for accountability are important. Something must be done to understand how corruption was able to infiltrate so deeply into the Victorian construction sector.

But there is a better and more far-reaching way to secure lasting accountability than a royal commission. The government should endorse amendments introduced into parliament by the Greens and supported by the Coalition that empower Victoria’s Independent Broad-based Anti-Corruption Commission (IBAC) to investigate what has been happening in the construction industry.

Empowering Victoria’s anti-corruption investigation is a more practical response. It is a more long-lasting one that will ensure that we don’t see similar corruption in the multibillion-dollar construction sector in the future.

Corruption in Victoria’s ‘Big Build’

Victoria’s Big Build is a massive, ongoing state infrastructure program comprising more than 180 road and rail projects. These projects are not carried out by official Victorian institutions; instead, they are delivered by private firms such as John Holland, CIMIC and MC Labour. Since 2015, these private firms have been given around $100 billion in public money to deliver the various Big Build projects.

Complaints of wrongdoing, intimidation and rorts were reported to the Victorian government as early as 2023. But in 2024, several news outlets revealed that organised crime and bikie gangs had infiltrated the Big Build project through a key construction union: the CFMEU.

This 2024 scandal prompted Victorian Premier Jacinta Allan to call for accountability from two institutions: the Victorian Police and the Victorian Independent Broad-Based Anti-Corruption Commission (IBAC). The police have responded, setting up Operation Hawk and arresting some key figures. This is an important step. But the police lack the powers to carry out a broad-based investigation.

IBAC is precisely the body for this kind of broader investigation. But the referral to IBAC was a dead end. IBAC responded to Allan that it did not have the “follow the money” power to investigate private subcontracting activity in the Big Build project.

This lack of power should have been known to the Victorian government. Since 2017, IBAC has been calling for additional powers to investigate the kind of corruption allegations we are seeing in the Victorian construction sector. The Daniels and Allan Labor governments have consistently failed to give it those powers.

Royal commissions are not always the answer

In mid February 2026, the Queensland parliament released a report by leading anti-corruption barrister (and Director of the Centre for Public Integrity) Geoffrey Watson, containing further allegations of the depth of corruption in the Victorian construction sector. The report concluded the Victorian government had failed to take action on this corruption. This has led some to call for a royal commission.

Royal commissions are a temporary public inquiry called by the executive government to investigate particular matters within a specific term of reference. Within this remit, they have extraordinary powers to compel evidence, requiring witnesses to give sworn testimony and produce documents, with penalties for non-compliance.

Although they cannot deliver binding legal rulings or determine criminal guilt, they provide recommendations that can prompt referrals to authorities for further investigation. Probably the most recent high-profile royal commission focused on the Robodebt scandal. This commission was crucial in showing how Australian public servants misused public power.

A better approach

A royal commission into misconduct in the Victorian construction sector would certainly be helpful. But a better approach would be for the Victorian government to endorse reforms to IBAC currently sitting in the Victorian parliament. This newly empowered IBAC is better for two reasons.

First, it is far more practical. Once it has the legal authority to investigate the private contracting arrangements that pervade the Victorian construction sector, IBAC would have similar powers to a royal commission to seriously investigate this scandal.

In addition, standing up a new royal commission takes time and money. A commissioner and investigators would need to be hired and briefed. IBAC already has a commissioner and a staff that understand how to investigate public corruption. Although it would likely need additional funding to ensure that it could adequately investigate a matter as complex and far-reaching as corruption in the Big Build, this amount would be less than the cost of a separate royal commission.

Second, it would improve integrity oversight in Victoria generally. A royal commission would only be a temporary solution, investigating the current scandal and then dissolving itself. A reformed IBAC would be able to investigate the current scandal and remain a permanent institution focused on combating corruption in Victoria.

Since its creation in 2012, IBAC has been criticised for being one of the weakest anti-corruption commissions in Australia. Parliamentary committees and integrity experts have been calling for reforms since at least 2017. Empowering IBAC by adopting the current amendments in parliament would fix this.

Crisis can be clarifying. The current crisis in the Victorian construction sector shows how deficient Victoria’s anti-corruption oversight system is. Empowering IBAC will not only provide real accountability in the Big Build project, but will also deter similar corruption in the future. Now is the time for long-lasting reform in Victoria.

This article has been republished from The Conversation under a Creative Commons license. Read original here.

Why your brain has to work harder in an open-plan office than private offices: study

By Libby (Elizabeth) Sander, MBA Director & Associate Professor of Organisational Behaviour, Bond Business School, Bond University

Arlington Research/Unsplash, CC BY

Since the pandemic, offices around the world have quietly shrunk. Many organisations don’t need as much floor space or as many desks, given many staff now do a mix of hybrid work from home and the office.

But on days when more staff are required to be in, office spaces can feel noticeably busier and noisier. Despite so much focus on getting workers back into offices, there has been far less focus on the impacts of returning to open-plan workspaces.

Now, more research confirms what many suspected: our brains have to work harder in open-plan spaces than in private offices.

What the latest study tested

In a recently published study, researchers at a Spanish university fitted 26 people, aged in their mid-20s to mid-60s, with wireless electroencephalogram (EEG) headsets. EEG testing can measure how hard the brain is working by tracking electrical activity through sensors on the scalp.

Participants completed simulated office tasks, such as monitoring notifications, reading and responding to emails, and memorising and recalling lists of words.

Each participant was monitored while completing the tasks in two different settings: an open-plan workspace with colleagues nearby, and a small enclosed work “pod” with clear glazed panels on one side.

The researchers focused on the frontal regions of the brain, responsible for attention, concentration, and filtering out distractions. They measured different types of brain waves.

Brainwaves are grouped into five different wavelength categories. Florida TMS Clinic. CC BY

As neuroscientist Susan Hillier explains in more detail, different brain waves reveal distinct mental states:

“gamma” is linked with states or tasks that require more focused concentration“beta” is linked with higher anxiety and more active states, with attention often directed externally“alpha” is linked with being very relaxed, and passive attention (such as listening quietly but not engaging)“theta” is linked with deep relaxation and inward focusand “delta” is linked with deep sleep.

The Spanish study found that the same tasks done inside the enclosed pod vs the open-plan workspace produced completely opposite patterns.

It takes effort to filter out distractions

In the work pod, the study found beta waves – associated with active mental processing – dropped significantly over the experiment, as did alpha waves linked to passive attention and overall activity in the frontal brain regions.

This meant people’s brains needed progressively less effort to sustain the same work.

The open-plan office testing showed the reverse.

Gamma waves, linked to complex mental processing, climbed steadily. Theta waves, which track both working memory and mental fatigue, increased. Two key measures also rose significantly: arousal (how alert and activated the brain is) and engagement (how much mental effort is being applied).

In other words, in the open-plan office participants’ brains had to work harder to maintain performance.

Even when we try to ignore distractions, our brain has to expend mental effort to filter them out.

In contrast, the pod eliminated most background noise and visual disruptions, allowing participant’s brains to work more efficiently.

Researchers also found much wider variability in the open office. Some people’s brain activity increased dramatically, while others showed modest changes. This suggests individual differences in how distracting we find open-plan spaces.

With only 26 participants, this was a relatively small study. But its findings echo a significant body of research from the past decade.

What past research has shown

In our 2021 study, my colleagues and I found a significant causal relationship between open-plan office noise and physiological stress. Studying 43 participants in controlled conditions – using heart rate, skin conductivity and AI facial emotion recognition – we found negative mood in open plan offices increased by 25% and physiological stress by 34%.

Another study showed background conversations and noisy environments can degrade cognitive task performance and increase distraction for workers.

And a 2013 analysis of more than 42,000 office workers in the United States, Finland, Canada and Australia found those in open-plan offices were less satisfied with their work environment than those in private offices. This was largely due to increased, uncontrollable noise and lack of privacy.

Just as we now recognise poorly designed chairs cause physical strain, years of research has shown how workspace design can result in cognitive strain.

What to do about it

The ability to focus and concentrate without interruption and distraction is a fundamental requirement for modern knowledge work.

Yet the value of uninterrupted work continues to be undervalued in workplace design.

Creating zones where workers can match their workplace environment to the task is essential.

Responding to having more staff doing hybrid work post-pandemic, LinkedIn redesigned its flagship San Francisco office. LinkedIn halved the number of workstations in open plan areas, instead experimenting with 75 types of work settings, including work areas for quiet focus.

For organisations looking to look after their workers’ brains, there are practical measures to consider. These include setting up different work zones, acoustic treatments and sound-masking technologies, and thoughtfully placed partitions to reduce visual and auditory distractions.

While adding those extra features in may cost more upfront than an open plan office, they can be worth it. Research has shown the significant hidden toll of poor office design on productivity, health and employee retention.

Providing workers with more choice in how much they’re exposed to noise and other interruptions is not a luxury. To get more done, with less strain on our brains, better design at work should be seen as a necessity.

This article has been republished from The Conversation under a Creative Commons license. Read original here.

RBA starts the year off with a rate hike

By Dr Shane Oliver, Head of Investment Strategy and Chief Economist, AMP

The RBA’s decision to hike rates to 3.85% was no surprise with it being about 70% factored in by the money market and 22 of the 28 economists surveyed by Bloomberg expecting a hike.

Key points

• The RBA hiked its cash rate by 0.25% to 3.85% as widely expected in response to inflation running above target.  

• Its commentary was cautious and hawkish with inflation now expected to stay above target for longer even with assumptions for two more rate hikes and the stronger $A.

• We thought it was a close call and leaned to a hold. But having hiked we expect the RBA to hold for the remainder of the year as we see underlying inflation as having peaked in the September quarter and falling back to target.

• Valid concerns about capacity constraints though are likely to keep the risk of a further rate hike high.

• The best thing government can do to help alleviate this is to lower the level of public spending.
   

Introduction

The RBA’s decision to hike rates to 3.85% was no surprise with it being about 70% factored in by the money market and 22 of the 28 economists surveyed by Bloomberg expecting a hike. We thought that the RBA should and (wrongly as it turned) thought it would hold but we also saw it as a very close call. The decision means that the RBA has already reversed one of the only three rate cuts we saw last year, which of course followed 13 rate hikes seen in 2022 and 2023. Once passed on to mortgage holders it will leave mortgage rates around levels prevailing 13 years ago. Of course, it should also mean a slight rise in bank deposit rates.

Source: Bloomberg, AMP

The decision to hike largely reflected the increase in annual inflation through the second half last year with quarterly trimmed mean (or underlying) inflation rising to 3.4%yoy and monthly trimmed mean inflation at 3.3%yoy, which is well above the 2-3% inflation target and was above the RBA’s forecast for 3.2%yoy. This has led the RBA to conclude that the economy has less spare capacity than it previously thought.

Governor Bullock’s press conference comments basically reinforced these concerns and indicated caution regarding the outlook leaving the door wide open for further interest rate hikes if needed.

Consistent with its decision to hike the RBA now sees inflation staying above target for longer, despite assuming a higher $A and two more rate hikes the RBA now sees underlying inflation staying higher for longer and not really getting back to the midpoint of the inflation target until June 2028. This reflects its revised assessment that the economy has more capacity pressures than previously assessed – compared to say back in August last year when it saw inflation around target even with two or three more cuts! Of course, as the lagged impact of the forecast growth slowdown flows through inflation could conceivably fall below target in 2028-29 but that’s a long way off.

Source: RBA, AMP

We expect the RBA to leave rates on hold

There is an old saying that rate hikes are like cockroaches – if you see one there is likely to be another! However, we lean a bit more optimistic and expect this to be a case of one and done:

• Monthly trimmed mean inflation has progressively trended lower from 0.47%mom in July to 0.23%mom in December and slowed from 1%qoq in the September quarter to 0.9%qoq in the December quarter. 

Source: Macrobond, AMP

• We still expect underlying inflation to fall back to target this year.

• Business surveys show output price indicators around levels consistent with the inflation target – see the pink & purple lines in the next chart.

Source: NAB, Bloomberg, AMP

• Consumer spending is likely to take a hit as we have swung quickly from rate cuts to hikes as mortgage stress likely remains high.  For mortgage holders - who are far more responsive in their spending decisions to changes in their disposable income than outright homeowners - the RBA’s 0.25% hike will mean that their interest payments will start going back up again. For someone with a $660,000 average new mortgage this will mean roughly an extra $110 in interest payments a month or an extra $1300 a year. This will likely dent spending, particularly as expectations will now be for more hikes. Sure those relying on bank deposits will be better off but household debt in Australia is almost double the value of household bank deposits.

• The rise in the Australian dollar is a defacto monetary tightening that will help lower imported inflation.

That said, the risks are still skewed on the upside for the cash rate if domestic demand growth continues to strengthen adding to concerns about the economy bumping into capacity constraints and if inflation does not fall as we expect.

On balance we expect to see the cash rate remain at 3.85% for the remainder of the year, and we see money market expectations for two more rate hikes as being a bit too much.

The key to watch for what happens next year will be the monthly inflation data. Another move in March seems unlikely given that the RBA has just moved but March quarter CPI data to be released in late April, ahead of the RBA’s May meeting will likely be key. If it shows a further cooling in trimmed mean inflation as we expect then the RBA will likely hold.
 

How can government take pressure off inflation?

Whether it was a hold or a hike, inflation has proven more sticky than expected a year ago. Pressure to deal with this has largely fallen on the RBA but Australian governments could make life a lot easier for it. Government is contributing to the strength in inflation in Australia in two ways. First, prices for items administered by government or indexed are rising around 6%yoy, well above the 2.9%yoy price rises for items in the market sector of the economy. So governments should be looking for ways to lower this.

Second, and more fundamentally while public spending growth slowed to around 1.4%yoy in the September quarter, that followed many years of 4% plus growth which left public spending around a record 28% of GDP. As Governor Bullock noted, aggregate demand includes public and private spending. So high levels of public spending as a share of the economy are constraining the recovery in private spending that can occur without seeing the economy bump up against capacity constraints, which flows through to higher prices. So, the best thing that Australian governments can do to help bring down inflation would be to cut government spending back to more normal levels which would free up space for private sector growth without higher inflation. Lower public spending will also help boost productivity by freeing up resources for the more productive private sector which should help lower inflation longer term.

Source: ABS, AMP

The bottom line on rates    

While the return to rate hikes on the back of inflation running above target is disappointing, I can understand the RBA’s desire to get back on top of it and avoid perceptions that its tolerant of high inflation. As they say “a stitch in time saves nine.” Looking forward we are confident that underlying inflation will continue to fall back to target and so see the RBA remaining on hold for the remainder of the year, even though the risks are on the upside. The best thing Federal and state governments can do is to quickly reduce the level of public spending to free up more space for private sector spending.
 

Implications for the economy and financial markets

For the economy the implications from the RBA’s rate hike with talk of more to come are as follows:

• Somewhat weaker economic growth from later this year. 

• A bigger slowdown in home price growth – we were assuming home price growth this year of 5-7% but with rate hikes its possible we now see falls. Sure home prices rose in 2023 despite rate hikes but that was because immigration surged. Roughly speaking each 0.25% rise in mortgage rates knocks about $10,000 off how much a person on average earnings can borrow to buy (and hence pay for) a home.

• The $A is likely to continue to rise as the gap between Australian and US interest rates widens further.

Source: Bloomberg, AMP

All up this could have a dampening impact on the Australian share market’s relative performance this year although I still expect it to have a reasonable year as profits rise after three years of falls.

This article was republished with permission by AMP. Read the original article here.

We know how to cool our cities and towns. So why aren’t we doing it?

By A/Prof. Elmira Jamei, Associate professor, Victoria University

Last week, Victoria recorded its hottest day in nearly six years. On Tuesday, the northwest towns of Walpeup and Hopetoun reached 48.9°C, and the temperature in parts of Melbourne soared over 45°C. Towns in South Australia also broke heat records.

This heatwave is not an outlier. It is a warning shot.

These weather conditions rival the extreme heat seen in the lead-up to the 2019–20 Black Summer, and they point to a future in which days like this are no longer rare, but routine.

What makes this summer so confronting is not just how hot it has been, but this: Australia already knows how to cool cities, yet we are failing to do it. Why?

Urban heat is not inevitable

Cities heat up faster and stay hotter than surrounding areas because of how they are built. Dense development, dark road surfaces, limited shade, and buildings that trap heat and rely heavily on air-conditioning create the “urban heat island” effect.

This means cities absorb vast amounts of heat during the day and release it slowly at night, preventing the city from cooling down even after sunset. During heatwaves, this trapped heat accumulates day after day and pushes temperatures well beyond what people can safely tolerate.

Future urbanisation is expected to amplify projected urban heat, irrespective of background climate conditions. Global climate change is making the urban heat island effect worse, but much of the heat we experience in cities has been built in through decades of planning and design choices.

Hot cities are not only a result of climate change, they are also a failure of urban planning.

Heat is a health and equity crisis

Heatwaves already kill more than 1,100 Australians each year, more than any other natural hazard. Extreme heat increases the risk of heart and respiratory disease, worsens chronic illness, disrupts sleep and overwhelms health services.

Poorly designed and inadequately insulated homes, particularly in rental and social housing can become heat traps. People on low incomes are least able to afford effective cooling, pushing many into energy debt or forcing them to endure dangerously high temperatures. Urban heat deepens existing inequalities. Those who contributed least to the problem often bear the greatest burden.

Australia has expertise, but not ambition

Here is the paradox. Australia is a major contributor to global research on urban heat. Australian researchers are developing national tools to measure and mitigate urban heat, and studies from cities such as Melbourne have quantified urban heat island intensity and investigated how urban design can influence heat stress.

Additionally, Australia already has the technologies to cool cities, from reflective coatings and heat-resilient pavements to advanced shading systems. Yet many of our cities remain dangerously hot. The issue isn’t a lack of solutions, but the failure to roll them out at scale.

Internationally, we are lagging behind countries where large-scale heat mitigation projects are already reducing urban temperatures, cutting energy demand and saving lives.

For example, Paris has adopted a city-wide strategy to create “cool islands”, transforming public spaces and schoolyards into shaded, cooler places that reduce heat stress during heatwaves.

In China, the Sponge City program, now implemented in cities such as Shenzhen and Wuhan, uses green infrastructure and water-sensitive design to cool urban areas and reduce heat stress.

Paris has a city-wide strategy to create cool zones by transforming public spaces into shaded environments.CC BY 42 North/Unsplash,

Symbolic change can’t meet the challenge

Too often, urban heat policy stops at small, symbolic actions, a pocket park here, a tree-planting program there. These measures are important, but they are not sufficient for the scale of the challenge.

Greening cities is essential. Trees cool streets, improve thermal comfort and deliver multiple health and environmental benefits. But greenery has limits. If buildings remain poorly insulated, roads continue to absorb heat and cooling demand keeps rising, trees alone will not protect cities from extreme temperatures in the coming decades.

Urban heat is a complex systems problem. It emerges from how cities are built, and is largely shaped by construction materials, building codes, transport systems and planning decisions locked in over generations. Scientists know a great deal about how to reduce urban heat, but many responses remain piecemeal and intuitive rather than systemic.

People trying to keep cool in Melbourne on January 27, 2026, during the hottest day in six years. Will Li/Unsplash

Designing an uncomfortable future

Research suggests that even if global warming is limited to below 2°C, heatwaves in major Australian cities could approach 50°C by 2040. At those temperatures, emergency responses alone will not be enough. Beyond certain temperature thresholds, behaviour change, public warnings and cooling centres cannot fully protect people.

The choices we make now about buildings, streets, materials and energy systems will determine whether Australian cities become increasingly unliveable, or remain places where people can safely live, work and age.

The battle against urban heat will be won or lost through design, technology, innovation and political will. Cities need to deploy advanced cool materials across roofs, buildings and roads, in combination with nature-based solutions. This will only work if governments use incentives to reward heat-safe design. Heat must be planned for systematically, not treated as a cosmetic problem.

With leadership and a handful of well-designed, large-scale projects, Australia could shift from laggard to leader. We have the science. We have the industry. We have the solutions. The heat is here. The only real question is whether we act, or keep absorbing it.

This article has been republished from The Conversation under a Creative Commons license. Read original here.

The investment Outlook for 2026 - expect a rough but, ultimately, ok ride

By Dr. Shane Oliver, Head of Investment Strategy and Chief Economist, AMP

Despite uncertainty around US President Trump’s policies, geopolitics and interest rates, 2025 saw strong investment returns on the back of falling interest rates, solid economic and profit growth globally and expectations for stronger profit growth in Australia. AI enthusiasm boosted US shares although they were relative underperformers globally.

Key points

• 2025 was another strong year for investors with shares up strongly on the back of better than feared growth and profits and global central banks cutting rates. Balanced super funds returned around 9%. Volatility rose though mainly on the back of worries about Trump’s tariffs. 

• 2026 is likely to see good returns but after the strong gains of the last three years, it's likely to be more constrained. And another 15% plus correction is likely along the way again.

• We expect the RBA to leave rates on hold, the ASX to return around 8% and balanced growth super funds to return around 7%. Australian home price gains are likely to slow to around 5-7%. 

• The key things to watch are interest rates; the AI boom; US midterms; China; geopolitics; and the Australian consumer. 

Introduction

Despite uncertainty around US President Trump’s policies, geopolitics and interest rates, 2025 saw strong investment returns on the back of falling interest rates, solid economic and profit growth globally and expectations for stronger profit growth in Australia. AI enthusiasm boosted US shares although they were relative underperformers globally. This saw average superannuation funds return around 9%. This is the third year in a row of returns around 10% and over the last five years, they returned 7.7% pa.

Source: Mercer Investment Consulting, Morningstar, Chant West, AMP

Here is a simple dot point summary of key insights & views on the outlook. 

Five key themes from 2025 

• US tariff turmoil - Trump’s Liberation Day tariffs caused volatility, but fortunately he backed down, retaliation was limited, deals were cut, and a trade war was averted. 

• AI enthusiasm - It surged along with related investment.

• Global resilience - Despite Trump’s shock and awe global growth remained just above 3% and Australian growth picked up. 

• Lower interest rates - Despite sticky inflation around 3%, central banks continued to cut rates. In Australia rates were cut three times.   

• Gold a “safe haven” - There was lots of geopolitical noise, but it failed to dent investment markets significantly, but it did help gold prices!

Five lessons for investors from 2025

1. Government intervention in markets is still rising. It was evident under Biden with increasing subsidies, and it’s ramped up dramatically under Trump with tariffs a key example along with the US Government buying shares in companies like Intel and charging Nvidia a fee for selling chips to China. “Socialism with American characteristics” is becoming more apt. In Australia it’s also evident in government moves to prop up failing steel works and aluminium smelters. Ultimately, it will mean a high cost to taxpayers and consumers.

2. Trump’s bite is often worse than his bark. Variations are “take Trump seriously but not literally” or “Trump always chickens out” (TACO). Trump often puts something out there (like Liberation Day tariffs around 30%) then backs down as markets rebel or deals are cut.

3. Timing markets is hard. It was tempting to switch out of shares in response to the plunge around Trump’s silly Liberation Day tariffs and on the back of concerns around stretched valuations or an AI bubble. But the trend remained up. As Keynes once said, “markets can remain irrational for longer than you can remain solvent.”

4. Geopolitical risk remains high in an age of populists and nationalism, and this can create periodic setbacks in markets.

5. By the same token, geopolitical events are hard to predict & then can be less impactful than feared. There was much fear that a US strike on Iran would lead to a flare up and surge in oil prices, but it was all a bit of a non-event from a market perspective and quickly forgotten about.

Some of these are covered in detail by my colleague Diana Mousina here.

Seven big worries for 2026

• Share valuations – these remain stretched relative to history with US shares offering little risk premium over bonds and Australian shares not much better. Fortunately, Eurozone and Asian shares are cheaper.

• The surge in AI shares shows some signs of being a bubble - including surging data centre capex increasingly being funded by debt. 

• Some central banks are at or close to the bottom on rates - this includes the ECB, Bank of Canada and the RBA. In Australia, higher inflation since 2025 could see the RBA hike prematurely. 

• Trump’s policies - there is much uncertainty about the impact of his policies in relation to tariffs, immigration, university research, the rule of law and his attacks on Fed independence which are hotting up ahead of Chair Powell’s term expiring in May. And now his crazy grab for Greenland to get its minerals and threat of tariffs on Europe if they don’t let him have it. All of which threaten “US exceptionalism.” 

• Risks for China’s economy remain - as its property slump continues.

• High public debt in the US, France the UK and Japan is a problem - it runs the risk that governments will try and inflate their way out of it. 

• Geopolitical risk remains high - the Ukraine war is yet to be resolved, problems with Iran could flare up again with a possible US military strike, US tensions with China could escalate again, political uncertainty will likely be high in Europe with the rise of the far right, the US intervention in Venezuela could turn bad for the US (and may be interpreted as a “green light” for China and Russia to act in their own spheres of influence). Trump’s grab for Greenland threatens the NATO appliance. And the midterm elections in the US are often associated with share market volatility with an average 17% drawdown in US shares in midterm election years since 1950. This is arguably evident in Trump’s increasingly erratic and populist policies.

These considerations point to another year of high volatility. 

Five reasons for optimism

1. First, while AI may be in the process of becoming a bubble it could still be early days. Compared to the late 1990s tech bubble: valuations are cheaper; Nasdaq is up less; tech sector profits are very strong; bond yields are lower; and its early days in the associated capex build up around data centres.

2. Second, while central banks are likely close to the bottom on interest rates, rate hikes are likely a way off (probably a 2027 story). For the Fed, another rate cut is likely in 2026, and a Trump appointee will likely be given some leeway before Fed independence worries really kick in. In Australia we expect some fall back in underlying inflation to allow the RBA to avoid rate hikes, but it’s a close call.

3. Third, despite lots of noise Trump is pivoting to more consumer-friendly policies ahead of the midterms which will boost demand, and ultimately, he wants shares to rise ahead of the midterms and not fall. There is a chance he could now pivot further towards the populist left. But mostly his shift will likely be more market friendly and given the elections he has an interest in keeping geopolitical flareups low. Pressure to reduce the cost of living suggest the threatened tariffs on Europe over Greenland are a bluff & won’t stick.

4. Fourth, global growth is likely to stay just above 3% as the lagged impact of rate cuts feed through along with some policy stimulus in the US and China.  Australian growth is likely to edge up to 2.2%.

5. Finally, okay economic growth likely means solid profit growth globally & about 10% profit growth in Australia (after 3 years of falls).

Key views on markets for 2026

• After three years of strong returns, global and Australian share returns are expected to slow in the year ahead to around 8%. Stretched valuations in the key direction setting US share market, political uncertainty associated with the midterm elections and AI bubble worries are the main drags, but returns should still be positive thanks to Fed rate cuts, Trump’s consumer friendly pivot and solid profit growth. A return to profit growth should also support gains in Australian shares. Another 15% or so correction in share markets is likely along the way though.

• Bonds are likely to provide returns around running yield. 

• Unlisted commercial property returns are likely to stay solid helped by strong demand for industrial property for data centres. 

• Australian home price growth is likely to slow to around 5-7% in 2026 after 8.5% in 2025 due to poor affordability, rates on hold with talk of rate hikes & APRA’s ramping up of macro prudential controls. 

• Cash & bank deposits are expected to provide returns around 3.6%.

• The $A is likely to rise as the rate gap in favour of Australia widens as the Fed cuts & the RBA holds or hikes. Fair value is about $US0.73.

• Precious metals like gold are likely to remain strong as a hedge against Trump related inflation risks and geopolitics.

• Balanced super fund returns are likely to be around 7%.

Six things to watch

1. Interest rates – if underlying inflation fails to fall, central banks including the RBA could start hiking rates.

2. The US midterms – historically these drive more volatility in markets & uncertainty is high this time around given Trump’s erratic approach. 

3. The AI boom – watch for signs that it may be becoming more bubble like with investor euphoria and excessive debt driven capex. 

4. The Chinese economy – China’s property sector is continuing to struggle, and more measures are needed to support consumers.

5. Geopolitics – risks remain high on several fronts including the US/China détente, Iran, Ukraine and now Greenland.

6. The Australian consumer – consumer spending has seen a decent pick up but may be vulnerable if rates start to rise.

Nine things investors should always remember (yeah, I know I say this every year, but they are important!)

1. Make the most of compound interest to grow wealth. Saving in growth assets can grow wealth significantly over long periods. Using the “rule of 72”, it will take 16 years to double an asset’s value if it returns 4.5% pa (ie, 72/4.5) but only 9 yrs if the asset returns 8% pa.

2. Don’t get thrown off by the cycle. Falls in asset markets can throw investors off a well-considered strategy, destroying potential wealth.

3. Invest for the long-term. Given the difficulty in timing market moves, for most it’s best to get a long-term plan that suits your wealth, age and risk tolerance and stick to it. 

4. Diversify. Don’t put all your eggs in one basket.

5. Turn down the noise. We are increasingly hit by irrelevant, low quality & conflicting information which boosts uncertainty. The key is to avoid the click bait, turn down the noise and stick to a long-term strategy. 

6. Buy low, sell high. The cheaper you buy an asset, the higher its prospective return will likely be and vice versa. 

7. Avoid the crowd at extremes. Don’t get sucked into euphoria or doom and gloom around an asset.

8. There is no free lunch! If an investment looks dodgy, hard to understand or has to be justified by odd valuations, then stay away.  

9. Seek advice. Investing can get complicated.

This article was republished with permission by AMP. Read the original article here.

Housing rebound defies affordability strain as 2025’s standout suburbs revealed

By Eliza Owen, Cotality Australia Head of Research

Eliza Owen is the Head of Residential Research Australia at Cotality (formerly CoreLogic).
Eliza has a wealth of experience in property data analysis and reporting. She worked as an economist at Residex, a research analyst at Domain Group and previously as the commercial real estate and construction analyst at Cotality. Eliza is passionate about economics, and is a popular keynote speaker, having presented to thousands across the real estate, finance and construction sectors.

Overview

• Lower-value suburbs delivered the strongest value gains, led by Kalbarri (WA), up 40.2% for houses, and Cranbrook (Qld), up 29.3% for units.

• Sydney’s premium suburbs remained the country’s highest value markets, with Point Piper recording a house median of $17.3 million and unit median of more than $3.1 million.

• Mosman recorded the highest total value of house sales nationally, with $1.58 billion transacting across 229 sales.

• WA’s resource-linked towns produced the nation’s strongest rental yields, with Newman at 12.6% for houses and South Hedland at 17.8% for units.

• Pegs Creek (WA) had the highest annual house rent increase at 23.5%, unit rents rose highest in Rockhampton (QLD) up 21.1%.

Australia’s housing market staged a turnaround in 2025, defying intense affordability and cost of living pressures to deliver an above decade-average growth rate of 7.7% through the year-to-date.

Cotality’s annual Best of the Best report, a detailed nationwide breakdown of the suburbs that rose fastest, had the highest rent return or offered the most accessible entry points, identifies which markets led the year’s recovery.

National dwelling values are set to close 2025 at least 8% higher, a result Cotality Australia Head of Research Eliza Owen says highlights how quickly conditions shifted after a challenging start.

“Markets entered 2025 under considerable pressure. Affordability had hit a series high, serviceability was stretched and price growth had flattened out. What followed was an unexpectedly strong rebound as interest rate cuts, easing inflation and limited supply reignited competition,” Ms Owen said.

Three rate cuts, an expansion of the 5% Home Guarantee Deposit Scheme and persistently low listing volumes helped drive the recovery, with the housing market recording three consecutive months of growth of at least 1% by November and reaching a new high of $12 trillion.

Ms Owen said the turnaround was most visible across lower value markets and regions where buyers were able to respond quickly to more favourable credit conditions.

“Tight supply meant even modest demand created upward pressure on prices. Cheaper markets were had the most acceleration because they remained within reach for buyers navigating higher living costs,” she said.‍

Prestige Sydney remains Australia’s price leader

Sydney’s top-end suburbs sat in their own price bracket in 2025, widening the gap between premium enclaves and the rest of the country.

Point Piper led the national list with a median house value of $17.3 million and unit medians above $3.1 million, followed by long-established areas such as Bellevue Hill, Vaucluse, Tamarama and Rose Bay.

Ms Owen said the resilience of premium Sydney markets was in sharp contrast to affordability pressures elsewhere.

“Affordability constraints were a defining feature of 2025, yet premium markets continued to operate on their own cycle. These suburbs are far less sensitive to borrowing costs and listing trends, which is why their performance often diverges from the broader market,” she said.

Mosman recorded the highest total value of house sales nationally at $1.58 billion across 229 transactions, underlining the scale of turnover even in a year of strained serviceability.

Lower value suburbs delivered the strongest gains

Western Australia dominated high house value growth in 2025, with Kalbarri increasing 40.2% to $515,378 followed by Rangeway (32.2%) and Lockyer (32.0%).

Similar trends emerged in the unit market, with strong results concentrated in Queensland’s mid-priced regions such as Cranbrook (up 29.3%) and Wilsonton (up 26.9%).

Ms Owen said the performance of these markets highlighted the role of affordability at a time of constrained borrowing power.

“Lower value areas offered buyers an opportunity to get into the market if they had the capacity to service a mortgage. Once interest rate cuts started to flow through, demand lifted quickly in those areas where prices had further room to grow,” she said.

“Investors were a particularly strong driver of demand in markets across WA and QLD, where the share of new mortgage lending to investors reached 38.3% and 41.1% respectively.”

Perth, Brisbane and Darwin lead capital-city upswing

Darwin posted the strongest rise among the capitals at 17.1% through the year-to-date, following a flat result in 2024, joined by Brisbane and Perth as Australia’s three top-performing capital cities.

The fastest growing capital-city suburb for houses was Mandogalup in Perth (up 33.0% to $944,609), alongside several outer Darwin suburbs where more moderate entry points below $600,000 supported stronger value growth.

The most affordable capital-city suburbs for houses were clustered around Greater Hobart, including Gagebrook, Herdsmans Cove and Bridgewater, all with medians under $450,000. Suburbs in Adelaide and Darwin provided some of the best value for unit buyers, with medians ranging from less than $250,000 in Hackham, Adelaide to $328,416 for Karama in Darwin.

Biggest gains and the steepest falls in Regional Australia

Strong upswings in WA and Queensland contrasted with declines in other regional pockets.

House values fell 11.6% in Millthorpe (NSW) and 10.5% in Tennant Creek (NT) while several unit markets recorded annual declines, including South Hedland (down 14.1%) and Mulwala (down 11.8%).

Ms Owen said these differences reflected the uneven backdrop of supply levels, migration flows and localised demand.

“Some regional areas are still benefiting from relative affordability and tight rental conditions. Others are adjusting to earlier periods of rapid growth or shifts in local economic activity,” she said.

Mining towns produced the highest yields

Rental demand remained firm across key resource corridors in regional WA and parts of regional Queensland, where constrained supply, strong employment bases and short-stay workforces contributed to some of the highest yields in the country.

Newman, in the Pilbara, delivered the strongest house yields at 12.6%, reflecting demand linked to iron ore operations, Kambalda East, near the Goldfields mining belt, followed at 12.2%, supported by nickel and gold activity.

Unit yields were even stronger, with South Hedland leading the country at 17.8%, while Newman recorded 14.3% and Pegs Creek recorded 13.2%, as apartment stock is limited and worker demand remains consistent.

Pegs Creek, located in Karratha, recorded a 23.5% increase in house rents over the year and Rockhampton City recorded a 21.1% jump in unit rents.

Constraints to shape 2026

Market conditions are expected to be more restrained in 2026 as borrowing capacity, affordability and credit assessments place limitations on demand.

National listings remain 18% below the five-year average and new housing completions continue to trail household formation, maintaining the structural imbalance that supported stronger conditions in 2025.

Ms Owen said that imbalance alone is not enough to drive the same level of growth next year.

“Supply remains tight, but the demand environment is shifting. Inflation forecasts have been revised higher, interest rate expectations have adjusted with them, and households are facing stricter borrowing assessments. Those factors can temper buyer activity even when stock levels are low,” she said.

“Lower value markets may still outperform because they carry less sensitivity to credit constraints, but overall growth is likely to be more measured compared with 2025.”

This article has been republished with permission from Cotality. Read original here.

A Middle Path: How Gentle Density Can Help Solve Australia's Housing Crisis

By Danika Adams, Senior Economist, CEDA and Mark Dawson, Partner, Urbis

REPORT OVERVIEW

Australia has some of the least affordable housing in the world. With population growth projected to exceed 14 million people over the next 40 years, much of it concentrated in our major cities, housing pressures will continue to intensify. Without a serious commitment to change, we will not be able to meet the housing needs of current or future generations of Australians.

The current debate too often overlooks the significant opportunity presented by medium-density housing. Dual occupancy homes, terrace housing, townhouses and mid-rise apartments in well-located areas can deliver diverse, attainable housing while making better use of existing infrastructure and transport networks.

Even modest increases to housing density could add close to one million new homes across Australia’s five largest cities. The success of broad-based housing policy reforms in Auckland demonstrates that meaningful urban planning reform can increase supply and improve affordability. 

Building consents doubled in Auckland within five years of the reforms being introduced in 2016.

Unlocking density requires planning reforms that are large-scale, encourage feasible development and enable ‘by-right’ development – housing that can be built without specific approval if it complies with local planning rules.

These changes should be supported by federal and state incentives to accelerate delivery and help overcome barriers to development such as entrenched regulation and planning restrictions, and local opposition that can outweigh broader community needs. 

Without change, Australia risks perpetuating the status quo: some of the world’s highest housing prices, inadequate supply and increasingly unequal access to housing. 

CONCLUSIONS

Australia’s housing crisis is decades in the making and requires action on many fronts. High-density infill and low density fringe development alone cannot provide enough homes to meet demand and aren’t always the right outcome. Embracing the middle ground of gentle density in well-located and serviced middle-ring areas is key to increasing Australia’s housing supply. States and territories should include upzoning in their housing policy mix, applying the lessons learned in Auckland, where it has helped to increase housing supply and stabilise house prices. 

RECOMMENDATIONS

Zoning and planning (state and local) 

1. Update planning controls to facilitate an increase in dwellings per hectare and floor-area ratios. This should be done across sizable areas, such as an entire local government area or several LGAs.
   

2. Revise zoning to allow for a broader range of mixed-use developments and land use. Thoroughly review legacy zoning from unused or underutilised land that could be updated to residential and mixed-use.
   

3. Introduce ‘by-right’ planning rules that specify what can be built without objection based on land size. These rules should apply across large parts of the city. Few exceptions should be made for heritage, environmental and character overlays.
   

4. Introduce fast-tracked and limited approval times. If a development is not assessed within a certain timeframe, it should be deemed automatically approved.
   

5. Continue to pursue planning policies aimed at speeding up housing delivery, such as Transport Oriented Development (TOD), infill and Low and Mid-rise housing in NSW, and the Development Facilitation Program (DFP) and Townhouse and Low-Rise Code in Victoria. 

Encourage development in well-located areas

1. State governments should offer financial incentives to councils that meet their housing targets, and penalise local governments that do not. Targets can signal how much housing should be approved, and where.
   

2. The Federal Government should set clear criteria for planning reform targets that are broad, feasible and ‘by right’, and reward state governments that deliver successful planning reforms. 
   

3. Unlock pilot programs to support local government proof of concept, such as applying pattern book standardisation to government sites.

This article has been republished under creative Commons license. Read original here.

Housing Stress is now a business crisis

By Robert Pradolin, Founder & Executive Director of Housing All Australians

Australia's housing crisis has crossed a dangerous threshold. What began as a social equity issue is now an economic emergency with productivity impacts threatening businesses in every sector and region. 

The 2025 Rental Affordability Index, released by National Shelter, SGS Economics and Planning and Housing All Australians, reveals how essential workers are struggling to find homes they can afford after years of declining affordability in most cities and regions.

In the ACT, a minimum-wage couple has to spend 31% of their income on rent, exceeding the threshold for housing stress and classifying their rent as “unaffordable”.

The situation is worse for hospitality workers who face “severely unaffordable” rents taking up 38% of their income.

Outside the national capital, hospitality workers in Sydney spend 42% of their income on housing while minimum wage couples across Brisbane, Adelaide, Perth, and Sydney spend between 32% and 38% of their income on rent.

These are people who serve customers in restaurants, teach children, care for elderly Australians, and staff early childhood centres. When essential workers cannot afford to live near where society needs them, they are forced to commute for hours and turn up to work exhausted, reducing their productivity. 

Businesses everywhere are struggling to find staff because there’s nowhere affordable for them to live nearby. This is forcing companies to reduce their operating hours, consider re-relocation, or close their doors for good. When we force businesses to compete not just wages, but on how far the job is away from a worker’s home, we push economic activity away from where it's most efficient. There is an unmeasured economic cost to this all too frequent scenario and the underlying cost trend in increasing.  

Tackling this challenge requires action at all levels of government in conjunction with the private sector. Australia’s housing crisis is too big for government to solve on its own. It is a problem for the entire community, and that includes business.

There are encouraging signs, however, that governments have recognised the urgency and are taking meaningful action. Green shoots are appearing across the country as policymakers are starting to recognise, and embrace, housing as critical and essential economic infrastructure.

The Commonwealth Government has moved housing policy into Treasury, a symbolic but significant shift that signals housing's role in economic productivity. Federal initiatives including reformed build-to-rent tax arrangements, bringing forward first home buyer support schemes, and committing to a Better Deal for Renters demonstrate recognition that housing affordability directly impacts workforce productivity and business competitiveness. The upcoming shared equity scheme and third round of the Housing Australia Future Fund represent further commitment to addressing supply constraints at scale. 

State governments are also stepping up. The ACT continues to demonstrate that policy intervention works. While much further relief is needed, affordability has improved 4% in the past year. This type of intervention looks like continuing as the ACT considers reduction in the Lease Variation Charge with the aim of delivering a greater level of affordable housing.  

And planning reforms across multiple jurisdictions are removing regulatory bottlenecks that have constrained housing supply for decades. It will not solve the housing crisis in itself, but it does remove one more of the hurdles that has impacted on the delivery of new housing supply.

Governments know that investing in housing delivers enormous cost and productivity benefits, in terms of health cost savings, reduced domestic violence, reduced costs of crime, enhanced human capital, improved labour market productivity and better education. In fact, research commissioned by Housing All Australians showed that every dollar spent delivers more than two dollars in returns to future taxpayers. That is better than investments in roads, hospitals, and schools.

However, the scale of challenge means that governments cannot solve it on their own. To meet our national shortfall of social and affordable homes, estimated by federal government, actuaries, we need to build 44,500 every year over the next 20 years. The Housing Australia Future Fund aspires to deliver 11,000 homes annually every year for five years, leaving a significant gap of 33,500 homes per year. We must activate the entire property ecosystem to have a chance of solving this current shortfall.

The private sector's engagement through organisations like Housing All Australians signals business community recognition that we all must be part of the solution. The private sector has a vital role to play, through innovative financing and the use of technology, increased direct investment in workforce housing, and partnership with government to deliver housing where it's needed.

We also need bipartisan commitment to long-term strategies that transcend electoral cycles. Housing supply constraints didn't develop overnight, and they won't be solved in a single term of government. It will require decades of commitment and consistency of policy.

When both major parties commit to consistent housing policy frameworks, it sends powerful signals to private sector investors that Australia is serious about addressing this crisis. Long-term investment in affordable housing requires long-term policy certainty. Political point-scoring on housing policy might win short term electoral battles, but it ensures we will lose the war against housing affordability in the longer term.

Business leaders are calling for this stability. Our employees, customers, and communities need housing policy that persists regardless of which party holds power.

With sustained investment, bipartisan commitment to long-term housing strategy, and ongoing political will, we can create a system that delivers affordable homes for Australia's workers so they can serve the communities that need them.

This article has been published with permission by the author.

CBD Office Market Commentary H2 2025 - Charter Keck Cramer

By Mark Willers - National Director, Mathew Young - Director, Harry Davidson - Associate Director, Charter Keck Cramer

Australia’s CBD office markets are showing early signs of stabilisation, with a clear “flight to quality” emerging across all major capitals as tenants prioritise premium spaces and investors navigate a high interest rate environment.

Sydney Summary

The Sydney office market has recently shown signs of improvement, particularly in premium grade spaces, while overall vacancy rates remain high due to ongoing tenant consolidation, flexible work arrangements, and a supply lag from previous cycles. Elevated tenant incentives continue, especially in sub-markets with greater vacancy, though face rents appear stable or slightly rising. The market is also experiencing a “flight to quality”, with premium buildings recording positive absorption and secondary grades facing negative absorption, a trend driven by businesses seeking higher quality spaces and incentives.

Investment activity has been subdued, with the bifurcation between prime and secondary yields becoming more pronounced as secondary yields soften more than those of prime assets. The higher interest rate environment has increased debt costs and softened yields, making loan serviceability more challenging and stifling transaction volumes. However, the ongoing reshaping of the CBD—supported by major infrastructure projects like the new Metro lines—along with government efforts to encourage a return to the office and narrowing price gaps between buyers and sellers, is expected to boost sales activity and gradually improve occupancy rates as the market continues to adjust.

Melbourne Summary

The Melbourne office market is demonstrating early signs of recovery, with some improvement in occupancy, especially within Premium and A-Grade spaces. However, vacancy rates remain high and overall occupancy is subdued, driven by ongoing tenant consolidation, flexible working patterns, and a lag in supply from previous cycles. Tenant incentives are still elevated, particularly in sub-markets with higher vacancies, though face rents have stabilised and are beginning to edge upwards for higher quality assets.

Charter Keck Cramer notes a widening gap between prime and secondary yields, with secondary yields likely having softened more noticeably, a trend expected to become clearer as transaction volumes pick up. The elevated interest rate environment continues to challenge net cashflows and interest cover, stifling investment activity. Ongoing major infrastructure projects, including the nearing completion of the Metro Tunnel, are expected to enhance CBD connectivity and may positively influence office occupancy in certain precincts. As price expectations between buyers and sellers converge, increased sales activity is anticipated in the latter part of 2025 and into 2026, particularly as some owners are compelled to recycle capital due to rising costs and weaker cashflows

Brisbane Summary

In Brisbane, leasing demand strengthened post-lockdowns, with face rents increasing due to both higher demand and inflationary pressures, although recent evidence suggests a slight tapering in activity. Tenant incentives remain elevated, especially in premium and A-grade buildings, reflecting increased construction and fitout costs. The market continues to see a "flight to quality," with premium and A-grade buildings outperforming secondary assets in terms of vacancy and rental growth. As of July 2025, Brisbane CBD vacancy rates stood at 10.7%, with ongoing and future developments largely pre-committed, indicating sustained demand for high-quality office space and limited relief from new supply.

The Queensland office property market experienced strong demand for securely leased, highquality assets throughout 2021 and early 2022, driven by low interest rates and a limited supply of investment options. However, following the Reserve Bank of Australia's rate hikes starting in May 2022, demand softened, with fewer purchasers and properties available. As the market adjusts, yields have softened—particularly for larger and secondary assets with higher cashflow risk— leading to a decline in capital values, despite rising rents. By early 2025, yields for premium grade office buildings averaged 6.75% to 7.00%, with secondary assets at around 8.25% to 8.50%. Owneroccupiers have remained active, less affected by traditional investment returns.

This article has been republished with permission from Charter Keck Cramer. Read full report here.

More homes, better cities: Letting more people live where they want

by Brendan Coates, Joey Moloney, Matthew Bowes, The Grattan Institute

Three-storey townhouses and apartments should be permitted on all residential land in all capital cities as part of a concerted policy assault on Australia’s housing crisis.

Download the report

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Download the chart data

Housing developments of six storeys or more should be allowed as-of-right around major transit hubs and key commercial centres. 

Housing in Australia’s major cities is among the least affordable in the world.

Restrictive planning controls add hundreds of thousands of dollars to the cost of new housing in our capital cities.

For decades, Australia has failed to build enough homes in the places that people most want to live.

Now we have a housing affordability crisis that is dividing families and communities and robbing young Australians of their best chance in life.

The key problem is that state and territory land-use planning systems say ‘no’ to new housing by default, and ‘yes’ only by exception.

About 80 per cent of all residential land within 30km of the centre of Sydney, and 87 per cent in Melbourne, is zoned for housing of three storeys or fewer. And three quarters or more of residential land in Brisbane, Perth, and Adelaide is zoned for two storeys or fewer.

The upshot is that our capital cities are among the least dense of their size in the world.

Allowing more housing in established suburbs would mean cheaper housing in all suburbs.

It would boost Australians’ incomes and quality of life, by letting more people live closer to high-paying jobs as well as transport, schools, and other amenities.

And it would mean shorter daily commutes and hence lower greenhouse-gas emissions.

Developments of up to three storeys that meet clear standards should not need a planning permit. 

Larger developments that meet pre-set criteria should be assessed via ‘deemed-to-comply’ approval pathways.

Allowing three-storey townhouses and apartments on all residential land in capital cities would unlock commercially feasible capacity for more than one million new homes in Sydney alone.

Our modelling for this report shows that these reforms could lift housing construction across Australia by up to 67,000 homes a year, which over a decade could cut rents by 12 per cent and slice more than $100,000 off the cost of the median-priced home, and by much more in the longer term.

Australia needs a housing policy revolution. The equation is simple: If we build more homes where people most want to live, housing will be cheaper and our cities will be wealthier, healthier, and more vibrant.

 Australia has built too few homes where Australians most want to live

• Australia’s housing stock per adult has gone backwards, whereas housing demand has risen rapidly

• Australia’s capital cities are among some of the least dense of their size in the world

Restrictive planning systems prevent many more homes from being built

• Land-use planning is necessary to mediate between land uses and coordinate the public realm. But there are three problems:

1. Much inner-city land in our major cities is subject to restrictive zoning & built form controls that prevent greater density

2. Development approval processes are costly, slow, and uncertain

3. The governance of planning systems favours existing residents and is biased against change

States should reform their planning systems to permit more housing

• Upzone their capital cities, particularly in high-demand areas:

- A Low-Rise Housing Standard: three-storey townhouses should be permitted on all residential-zoned land in capital cities

- A Mid-Rise Housing Standard: allow for 6+ storeys around transit hubs, and higher densities where there is unmet demand

• Modest density should use complying development pathways & higher density should mostly be deemed-to-comply

• Improve evaluation and review: subject planning controls to cost-benefit analyses and regularly evaluate feasible capacity

Recent planning reforms in NSW and Victoria don’t go far enough

• Victoria’s planning reforms are more ambitious than those in NSW, especially in allowing modest density via the Townhouse Code

• Both states’ have upzoned for higher density around transit hubs, but higher density is more feasible in Sydney currently

The federal government should sharpen incentives to encourage states to get more housing built

• The New Home Bonus isn’t working: most states are not on track to qualify for incentive payments

• The federal govt. should pay the states for specific residential planning reforms in a revitalised National Competition Policy

• The Productivity Commission should regularly assess the performance of planning systems, including feasible capacity

This article is republished from The Grattan Institute under Creative Commons license. Read it here.

Latent conditions: The silent killer of civil construction projects

Author: Alex Cox, Practice Leader, Bellrock Advisory  

Whilst losses from natural perils like flood, cyclone and fire fill the headlines, there is a silent risk which is derailing civil construction in Australia. This silent threat is latent conditions.

“A latent condition is a physical condition on or near the site that could not reasonably have been anticipated by an experienced contractor at the time of tendering.”
Common examples of potential latent conditions include:

• Contaminated soil such as asbestos or PFAS; which contributed to the 2 year delay of The West Gate Tunnel in Victoria.

• Below ground conditions (e.g. sink holes, cavities, fault lines); sink holes and a reverse fault line have contributed to the 3 year delay of Sydney’s M6 Motorway. Sinkholes were also to blame for the 2 year delay to the Forrestfield Airport Link tunnel in Perth.

• Concealed building services, such as power, water, data, cabling or other features (whether active or redundant) hidden behind walls, above ceilings or below floors; and below ground. There are many recent examples including in 2016 when Sydney light rail was delayed due to the discovery of 400 disused utilities in the CBD.

It is important that civil contractors are aware of these exposures and the contractual options available to them prior to executing a contract.

Contracts

Commercial realities

In the first instance it is best to push back on the acceptance of these risks (whether you are a contractor or a principal) however this isn’t always a commercial reality. So, the questions becomes… “if I have to accept, then how do I mitigate the risks internally?”

Mitigating the risk – tender phase

Has enough information been provided to be able to price the risk accurately?

A complete and comprehensive review of the geotechnical reports, site surveys, and utility plans must be complete to then be able to identify the gaps in data. Where uncertainty exists, assumptions should be clearly documented and clarified during tender queries.

If uncertainty cannot be clarified, then allowances or contingencies must be built into the program and pricing. These may take the form of:

• Provisional sums – agreed upfront to address unknowns.

• Contingency allocations – internal buffers in time and budget.

• Exclusions and clarifications – expressly set out in the tender submission to avoid later disputes.

Mitigating the risk – post award

Once the contract is awarded, attention shifts from pricing to active management. At this stage, risk mitigation hinges on:

• Early works and site investigations: front-loading investigative works (trial pits, boreholes, service proving, and ground-penetrating radar) to confirm conditions before bulk construction begins.

• Design risk management: ensuring that design consultants are engaged early and held accountable for the accuracy of their inputs.

• Stakeholder engagement: working closely with utility providers, authorities, and landowners to resolve conflicts before they impact the program.

Transferring the risk – insurance

There are some instances where principals and contractors can then transfer this risk off their balance sheets via insurance. Refer to the risk matrix below for details:

Transferring the risk– downstream

An equitable and fair allocation of risk is always in the project’s best interest. However, as this might not be achievable the next best option would be to ensure that you have a robust and comprehensive subcontracting regime, to then pass on the risk downstream. At Bellrock advisory our experts and legally trained advisors support our clients in achieving this.

Conclusion

Clients should be aware of the dangers of accepting latent condition risk. Assumptions or gaps in information can cause time delays and cost blow-outs if they’re not actively managed. The most reliable defence is layered:

1. Allocate the risk fairly in the contract and record clear assumptions at tender.

2. Reduce uncertainty early through targeted investigations, service proving and accountable design inputs.

3. Run tight post-award controls—notice, records, stakeholder coordination.

4. Partner with an experienced risk advisor like Bellrock to transfer risk off your balance sheet where possible, supported by wordings that fit the project.

5. Accept that some exposures are uninsurable and must be priced, programmed, or subcontracted downstream with clarity.

Done well, this approach lowers disputes, keeps projects moving, and protects margins without paying unnecessary insurance premiums.

If an entirely “equitable” allocation isn’t commercially achievable, discipline in assumptions, contingencies and subcontract flow-downs is the next best way to keep the project bankable.

Bellrock Advisory can help test your allocation, tighten your mitigation plans, and structure the insurance programme so that it responds effectively in the event of a claim, when it matters most. Contact a Bellrock Advisor today.

This article was originally published as part of Bellrock's library of risk trending articles here. 

Author: Alex Cox, Practice Leader, Bellrock Advisory  

Bellrock is a national risk advisory and advocacy firm with a specialisation in risk management and insurance for the construction industry. Discover more about our unique methodology here. 

The future of finance could be written by private credit not banks

Written by Andrew Schwartz, Group Managing Director, Co-Founder and CIO of Qualitas.

If we get that balance right, private credit can protect inexperienced investors, empower professionals, and strengthen the real economy – without taxpayer backing. That’s a goal worth pursuing.

The ASIC-commissioned report into private credit by independent financial services experts Nigel Williams and Richard Timbs provides a timely and much-needed diagnosis of how the financial industry can lift its game, and why private credit plays a vital role in building Australia’s future.

Private credit mobilises long-term capital to fund real assets and plugs the gaps where banks can’t or won’t lend. However, this growth brings increased responsibility. Regulators have a duty to protect investors who may not fully grasp the risks they are taking on.

That duty is even more pressing as the global economy undergoes structural change. Artificial intelligence, decarbonisation, and the reshoring of supply chains are reshaping capital flows.

Banking institutions – formed long before the rise of large superannuation and sovereign wealth funds – are maturing in sophistication. The need for government guarantees to underpin bank liabilities is diminishing as other pools of capital step up to meet growing debt demand.

The appeal of private credit is obvious: it offers attractive returns at a time when many investors are searching for yield. But higher returns often mean higher risks. Many retail investors need better disclosure and education to understand complex credit structures, illiquidity constraints, and subordination in the capital stack.

Investor protection, then, is not about stifling the industry but about curbing its weakest practices. In recent years, retail investors have gained increasing exposure to private credit. Although Australia has seen retail participation in credit markets before, history shows it hasn’t always ended well. Poor asset quality, excessive leverage and liquidity pressures drove the collapse of building societies and merchant banks in the 1990s when redemptions surged.

It’s encouraging that the regulator is focused on transparency and accountability for investors without throttling innovation.

“To sustain the vitality of the private credit sector, we need smarter standards – transparent fees, realistic liquidity terms, and differentiated regulation that recognises the industry’s diversity.”

Leverage can be a liability

Many still assume that banks represent the safest and best form of lending. Unfortunately, history says otherwise. Bank crises in 1991 and again in 2008 showed that leverage, not lending, is what brings down institutions.

When banks take excessive risk, taxpayers step in – through deposit guarantees and central bank liquidity – because banks hold the public’s money and sit at the core of the payments system.

While this taxpayer-funded safety net is understandable, it creates a massive market distortion. Banks routinely leverage their balance sheets tenfold, knowing their solvency is backstopped by an implied government guarantee. This effectively subsidises their cost of capital and masks the true risks of their funding costs. It also gives them an advantage over private credit providers who operate without such support.

From the outset, banks and private credit therefore aren’t competing on equal ground, so they should not be regulated the same way. While the report doesn’t seek to equalise them, it should be more explicit in recognising that each plays a different role in the financial system.

Measuring true risk

Risk, moreover, isn’t just about the borrower. It’s also about the relationship between asset risk and the leverage supporting it. The sub-prime mortgage crisis that contributed to the 2008 financial crisis proved this point: it wasn’t just risky borrowers but excessive leverage that caused collapse. True risk equals asset risk multiplied by leverage – not simply the quality of the loan.

Moreover, liabilities are often overlooked in discussions about financial stability. In private credit, leverage is limited, but redemption risk is real. Redemption risk is the danger that a fund cannot meet investor demands to withdraw their money in a timely manner.

When funds offer liquidity mismatched to asset terms, pressure arises precisely when markets tighten and redemptions spike. Liquidity management and honest labelling of redemption terms are vital. Outside leverage, liquidity mismatch is the biggest solvency risk the industry faces.

The report suggests the riskiest part of Australia’s private credit market is real estate construction and development finance.

While that segment carries risk, history tells a bigger story. The 1980s saw bad corporate lending, which caused banks and merchant banks to lose billions. The 1990s then brought a real estate crash, with office values falling about 40 per cent amid soaring interest rates. Even prudent lenders struggled to avoid losses.

This history shows that disciplined lending can still be hit by systemic shocks – something retail investors need to better understand. What matters is the discipline of underwriting, transparency, and proper alignment of risk and reward, whatever the sector.

On the report’s treatment of provisioning, construction lending should never be judged halfway through. As I often say, you don’t eat the cake while it’s still baking.

Interim valuations are meaningless because the building’s value is being assessed in the middle of a project before it is fully completed, sold or generating revenue. The only valuation that matters is when the project is complete.

The report also misses an important distinction: concentrated portfolios, where loans are individually managed, require different approaches than diversified portfolios that use statistical provisioning to build up reserves against expected loan losses over an economic cycle. Australia also needs stronger specialist credit-rating capability if the industry is to mature.

Transparency matters

One of the most important parts of the Williams-Timbs report concerns fees. The question isn’t whether managers should be paid for their work – of course they should. The question is whether those fees are transparent and aligned with investor interests. Borrower-paid fees and margins vary widely across funds. There’s nothing wrong with sharing in upfront borrower fees – provided it’s capped and disclosed. The problem arises when arrangements are hidden or inconsistent.

Some of this stems from ASIC’s Regulatory Guide 97 (RG 97), which governs how funds, including super funds, disclose fees and costs to retail investors. Designed for transparency, it has made it difficult for funds to pay private credit managers fairly for the labour-intensive work of origination, monitoring and restructuring.

The solution isn’t to demonise them but to modernise the rules. Regulators should clarify how super funds can legitimately pay for credit expertise without distorting the appearance of low fees. Otherwise, the market will drift toward misleading ‘low-fee’ models that hide true costs and misalign incentives.

The interim report gets many things right: transparency, liquidity management, and consistent terminology. But it understates how low fund-level leverage makes private credit more stable than banks, and it does not fully differentiate between institutional and retail segments.

A more detailed report due in November will no doubt expand on these themes and address some of the concerns that have been raised.

To sustain the vitality of the private credit sector, we need smarter standards – transparent fees, realistic liquidity terms, and differentiated regulation that recognises the industry’s diversity. If we get that balance right, private credit can protect inexperienced investors, empower professionals, and strengthen the real economy – without taxpayer backing. That’s a goal worth pursuing.

This article has been republished with permission from Qualitas under a copyright licence. Read original here.

GST and Build-to-Rent: It’s Time to Fix the Missing Link

By Ken Fehily, GST Specialist, Fehily Advisory

Ken Fehily is Director of Fehily Advisory, specialising exclusively in consulting on GST. He was a member of the Federal Treasurer’s GST Technical Advisory Committee during the introduction of GST in 2000, served nearly 10 years on the ATO’s GST Rulings Panel, and is a long term and continuing member of the ATO’s GST Stewardship Group.

The Build-to-Rent (BTR) sector has gathered extraordinary momentum as Australia grapples with housing undersupply and affordability pressures. Developers, superannuation funds, and institutional investors increasingly view BTR as a stable, long-term asset class. Yet a fundamental obstacle remains: the way Australia’s Goods and Services Tax (GST) applies to large-scale residential developments intended solely for long-term rental.

Having advised the ATO, Treasury, industry, and the private sector on GST since its introduction in 2000, I can say with authority that BTR faces a unique and unintended disadvantage. The GST system was never designed to deal with BTR at scale, and reform is now overdue.

The GST Mismatch

Under the law, largely unchanged since July 2000, GST treatment depends on the end use of the property:

• Build-to-Sell: Developers claim full GST input tax credits on land and construction. GST is payable on sales later, often reduced under the margin scheme, and is passed on to purchasers. Developers carry no permanent GST cost.

• Build-to-Rent: Rental income is GST “input-taxed” so no GST is charged on the rent, but no input tax credits are available during the development. The 10% GST becomes a permanent cost embedded in the project carried by the developer.

For BTR, this can mean millions in unrecoverable GST before the first tenant even moves in. That distorts feasibility, deters institutional capital, and limits the sector’s growth. In effect, GST favours Build-to-Sell over Build-to-Rent despite today’s clear policy objective of expanding long-term rental supply.

Realistic Options for change

The GST settings were defensible in 2000, but the housing and investment landscape is very different today. Reform is now essential:

1. Efficiency: Allowing credits on construction costs would remove a deadweight cost during the development phase and create neutrality between BTR and BTS.

2. Supply: With credits restored, more projects stack up financially, more become bankable and more rental housing comes online.

3. Investor confidence: Offshore investors are particularly sensitive to after-tax returns. A permanent 10% impost on capital expenditure makes Australian BTR less competitive.

4. Revenue integrity: GST is meant to tax private consumption, not business inputs. Denying credits contradicts that design principle.

5. Parity: Even if GST was imposed later on rental flows, maybe at a concessional rate like the current half GST rate for long-term residential accommodation and/or capping it till it reaches the GST that would be payable on the margin scheme for sales, removing the upfront denial would make BTR feasible and fair.

Learning From Abroad

Australia is not alone in grappling with a housing crisis. Other jurisdictions have acknowledged that when governments prioritise affordable housing, tax systems should not undermine feasibility and delivery.

The ATO’s Role

The ATO can only apply the law Parliament gives it. Its current draft update to GSTR 2012/6 confirms that modern BTR developments will be assessed against existing principles, but the Commissioner’s view is unchanged. The ATO is clear that it cannot rewrite the rules. That responsibility lies squarely with government.

Industry and Policy Momentum

Developers, investors, and peak bodies are increasingly vocal about the GST barrier. Federal, state and territory governments already support BTR through planning reforms and other tax concessions. But GST problem remains the missing link, undermining otherwise supportive policy settings.

Having worked with Treasury, the ATO, and the property sector for decades, I have seen how pragmatic GST adjustments can unlock investment. The law was designed to be flexible and now is the time to use that flexibility to meet today’s housing challenge.

Conclusion

BTR has enormous potential to reshape Australia’s housing landscape. Without GST reform, however, the sector will fall short of what it’s capable and desirous of delivering. The cost of inaction will be measured not only in stalled projects and subdued investment, but in the thousands of Australians who miss out on secure, long-term rental homes.

The solution is not really that radical. It is a reasonable alignment of GST laws with current housing realities. What was fit for purpose in 2000 is no longer fit for 2025. If government is serious about addressing housing supply and affordability, it must act and fix the missing link.