PALM BEACH 2012 Property Market Outlook - Mid Year Update

CONTENTS INTRODUCTION

02

ECONOMIC OUTLOOK

04

MARKET OUTLOOK

05

PROPERTY PRICES

09

COMMERCIAL PROPERTY MARKET

15

RURAL/REGIONAL PROPERTY MARKET

16

REAL ESTATE BUSINESS OUTLOOK

17

PALM BEACH OUTLOOK 18 NEW SOUTH WALES OUTLOOK

19

VICTORIA OUTLOOK

25

QUEENSLAND OUTLOOK

31

SOUTH AUSTRALIA OUTLOOK

37

WESTERN AUSTRALIA OUTLOOK

41

TASMANIA OUTLOOK

47

NORTHERN TERRITORY OUTLOOK

51

SOURCES

53

2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE FIRST NATIONAL REAL ESTATE

01

INTRODUCTION First National Real Estate has again surveyed its 400+ member network to provide its 2012 Property Market Outlook – Mid Year Update.

This Update serves to compare actual market conditions with the predictions of economic commentators and property market analysts.

First National Real Estate members are broadly distributed across Australia, throughout cities, suburbs and country towns. As such, the network’s estate agents are exposed to mainstream Australia and are intimately acquainted with the views of the public, their response to government initiatives, their levels of confidence and their approach to property investment.

Our agents’ survey responses have been compiled to develop a picture of the Australian property market’s performance over the last six months, and their outlook for the coming six. Where we refer to ‘members’ throughout this Update, we apply this term to those network members who responded to the various parts of the survey. Where we refer to ‘Chairs’ we refer to the First National State Chairs for respective states.

Results and trends highlighted in this document represent the majority view of all respondents. A full breakdown of survey responses can be provided if requested.

There is an overall Australian outlook, followed by a state-by-state outlook and then, most importantly, an outlook that provides an in-depth overview of what the residential, rental and commercial property markets are doing at the local level.

In the light of the doom and gloom in global economies and the effect on the market here in Australia, the domestic property market is holding up quite well and the second half of 2012 should see things stabilise further, if not slightly improve.

There is an overall sense of optimism among First National’s members that the current prime buying conditions will stimulate activity across all sectors. According to the network’s members, the strongest growth is expected to be in the upgrader and investor sectors, for all states except Western Australia, where first home buyers are expected to be in the best position to capitalise on bargain properties as a result of improved affordability and low interest rates.

Weak consumer sentiment and nervousness around job security will keep the housing market soft.

While there are many positive signs that the market has turned a corner, these negative indicators will act as barriers, impeding the process to some degree – making any recovery slow and gradual.

02

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE

INTRODUCTION This period has also seen the end of government incentives and other post GFC conditions that created historically unique market characteristics.

The market is becoming increasingly price sensitive, with buyers being spoilt for choice and therefore being choosey as well as negotiating harder.

The two vendor metrics of average time on market and vendor discounting (the difference between the price a property is initially offered for sale at and what the vendor eventually accepts), provide an insight into selling conditions and both are showing signs towards market stability, on the back of a predominantly falling market over the last 12 months.

Other positive indicators are that mortgagee in possession sales declined as a proportion of total sales in the first three months of this year. While there has been a general improvement, there have also been some exceptional growth pockets, such as Darwin where yields and house prices have skyrocketed, up by 6%. Our Rockhampton and Gladstone members are also reporting a housing boom in those key regional Queensland centres.

In Adelaide, home prices were up 1% over the quarter ending 31 May, according to industry statistics.

Perth saw rents surge by more than 14% over the year ending 30 April, with smaller rent increases recorded in Sydney and Brisbane.

All this augers well for Australia’s real estate market in 2012, where things are looking up – all that is needed is for businesses and consumers to show a bit of confidence!

Disclaimer: There are many uncertainties in forecasting movements in the market such as government policy changes, interest rate changes and global economies. Therefore, the forecasts in this report should be taken to be indicative of anticipated market directions only. First National Real Estate takes no responsibility for actions taken on the basis of this report and encourages all vendors and buyers to conduct their own research.

2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE FIRST NATIONAL REAL ESTATE

03

ECONOMIC OUTLOOK This economic outlook is based on industry insights and responses to the survey sent to First National State Chairs in May this year.

According to recent reports, there is some good news that says Australia’s economy surged by 1.3%, in the first quarter for 2012, and the Reserve Bank of Australia (RBA) has shown optimism for Australia’s economy, largely due to the anticipated pick up in business investment over the coming year, particularly mining.

First National’s state chairs are unanimous in their view that the Federal Government is not doing a good job managing our economy. However, there is a general feeling that even in the light of this, the economy will stand up to global economic uncertainty, given our growing strength and importance to the stronger performing ‘Chindia’.

Chinese tourism spending is expected to go from $43 billion to $76 billion by 2020. Chinese nationals currently represent 5% of passengers to and from Australia, but they account for 55% of our wine sales at airports. Expenditure by Chinese visitors in 2011 was $3.8 billion. This is up 1.5%. Thanks to China and Asia, we will continue to see improvements in our economy over the next two years.

Other recent good news that shows Australia’s economy may be improving comes from the latest figures for tourism and retail. These industries may have a recovery in store shortly.

Government tourism figures show domestic tourism is on the rise, with 73 million overnight trips taken in the year to March – up 5% from the same period last year. Domestic travel spending also rose 10% to $50 billion, with more than two-thirds of people travelling within their own state or territory.

In addition, the number of international trips was at a four year high – with 7 million trips being recorded.

Interest rate cuts are at the heart of a gradually strengthening retail sector, which recorded growth of 2%, freeing up substantial amounts of disposable income. Growth in retail is expected to hit 3% in 2012-13, amply aided by lower interest rates and Federal Government payouts for parents of school children. Real wages growth will also help sustain the industry in the coming 12 months.

The Chairs were evenly split on whether they thought the Reserve Bank of Australia (RBA) was doing a good job of managing monetary policy: • Tasmania, Victoria, Darwin and South Australia all thought the RBA was doing a good job, while • Northern Territory, Western Australia, New South Wales and Queensland said they were not.

While the RBA has been fiscally responsible with lowering interest rates, any economic or market recovery is subject to consumer confidence and increasing nervousness around job security.

04

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE

MARKET OUTLOOK Australia’s property market is showing signs of stabilising and potentially strengthening, although it is expected to remain relative soft for the remainder of 2012.

Experts say Australia’s housing market is likely to avoid a US style collapse due, in the main, to mortgage holders’ determination to keep ahead of mortgage repayments and pay off their home loans sooner.

The fundamentals of yields, population growth, lower purchase costs and pent-up demand should support a lift in activity in the latter half of 2012.

According to First National’s survey, 58% of our members say market conditions will steady, the balance are almost evenly split in their expectation that the market will either rise or fall.

This is a marked improvement on conditions for the first half of 2012, where 55% of members said the market was falling, 31% said it was steady and the balance said it was rising.

Queensland and Western Australia members were the most optimistic with approximately 40% of both states’ members saying the market would rise in the coming six months. Except for Western Australia, the majority of members in each state said the market would steady.

Type Of Market - Last Six Months 2012 National

NSW

VIC

QLD

SA

TAS

WA NT - Alice

Steady

58%

76%

50%

53%

75%

–

43%

–

Rising

20%

6%

7%

40%

–

–

43%

–

Falling

22%

18%

43%

7%

25%

100%

14%

100%

The main reasons cited for the anticipated steadying market is that improving market conditions will offset any worsening consumer sentiment.

2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE FIRST NATIONAL REAL ESTATE

05

MARKET OUTLOOK Other indicators that the market is stabilising include:

• Vendor discounting has reduced from 7.9% to 7.1% showing vendors are becoming more realistic in their price expectations. Across capital cities, vendor discounting levels for houses were lower than for the corresponding time elsewhere. Discounting levels for units are the same as the previous year in Sydney and lower in Brisbane, Perth and Darwin. In Melbourne, vendor discounting levels are much higher than they were the year before, but it must be remembered this city experienced the highest exponential growth over the longest protracted period in the preceding years.

• Days on market has fallen from 70 days - for a capital city home - down to 63, evidence there is still glut of houses on the market not moving as quickly as they should, but improving. 41% of members say average number of days will remain steady but 32% suggest they will fall, which is great news for vendors. The greater proportion of Queensland and Western Australia members expect them to fall, while in South Australia they are evenly split between falling and steadying. In Victoria, the greater proportion of members expects them to steady, while in New South Wales the greater proportion expects them to rise. Tasmania and Western Australia members are unanimous that their average number of days on market will rise.

• Industry data shows auction clearance rates improved in the first six months of 2012, levelling to around 50%.

Housing affordability is continually improving, mainly as a result of the combination of interest rates reductions, declining home values and growth in disposable income. Affordability improved for the fifth straight quarter by the end of March this year, according to industry figures. The March quarter Housing Affordability Index was 11% higher than a year ago. In that quarter, lower interest rates and softer prices all helped improve affordability. This improvement was diluted by banks widening the margin between mortgage rates and the cash rate – a gap set to widen further when interest rates go down in the second half of 2012. These factors will continue to improve affordability. Industry data shows households are paying on average 3.25% more than the cash rate for their loans, higher than during the GFC. All State Chairs agreed interest rates would be cut further in the coming six months, but 75% of them said this would not be enough to boost Australia’s property market on its own. Only Western Australia and New South Wales chairs said interest rate cuts alone would improve the market.

While interest rate cuts are no band-aid solution, they can provide substantial assistance in restoring confidence and activity.

06

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE

MARKET OUTLOOK In addition to lower interest rates, the following are issues that could also help to improve the market: • Increased population growth to strengthen demand. Australia’s rate of population growth is slipping, which has seen housing demand fall. However, ABS estimates show population growth remains quite rapid in many regions across Australia including the Gold Coast and south east regions of Queensland; Pakenham, Wyndham, Melton, Casey, Whittlesea and Cardinia in Victoria; and the south west regions of Western Australia, especially Harvey, Mandurah and Capel.

• More land releases especially in urban areas, particularly for new housing starts • Improved planning and processes for building and development, especially for new housing activity and approvals • Cease incentive schemes and initiatives that create false markets and demand • Reform of stamp duty and other government taxes • Improved job prospects.

Vendors also need to correctly price to meet the changing market conditions or reduced buyer numbers, lower property prices, weakening demand and increased earnings.

In states where the majority of First National members indicated property listings volumes will increase, such as Victoria, Tasmania and Alice Springs, vendors also need to be particularly realistic in their price expectations, if they wish to make a timely sale.

Healthy supply rates run at about 200,000 homes for sale at any given time. Australia currently has 301,414 homes for sale. Even a 1% or 2% drop in interest rates is unlikely to make an impact on their saleability unless it is combined with sharp market pricing and aggressive marketing.

According to the survey, the majority of members indicate their marketing spend would remain the same for the coming six months, while 20% said they would increase expenditure.

The acceptance of social media as a component of real estate marketing has clearly increased. 61% said they would be increasing their use of social media tools to market properties, including (in order of preference), Facebook, web and smartphones. Twitter, LinkedIn and blogs were also social media tools members were intending to use.

In all states, except New South Wales, sales volumes are expected to increase by the majority of members, although property listings volumes are expected to remain at current levels by nearly half the network. 36% of members believe volumes will increase.

2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE FIRST NATIONAL REAL ESTATE

07

MARKET OUTLOOK Will Sales Increase - Last Six Months 2012?

National

NSW

VIC

QLD

SA

TAS

WA NT - Alice

Yes

56%

24%

64%

80%

50%

–

86%

100%

No

44%

76%

36%

20%

50%

100%

14%

–

Will Property Listings Increase - Last Six Months 2012?

National

NSW

VIC

QLD

SA

TAS

WA NT - Alice

Yes

36%

24%

69%

39%

–

100%

–

100%

No

18%

29%

15%

15%

–

–

14%

–

Same

46%

47%

16%

46%

100%

–

86%

–

The number of residential listings around Australia fell by 4.2% in April across all capital cities, providing another indication of strengthening property markets through increased buying activity.

08

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE

PROPERTY PRICES RESIDENTIAL Despite a more stable start to 2012, national home values declined cumulatively, by 2.2%, for the first five months of the year - bringing overall values down by 5.3% over the 12-month period for: • a median dwelling price of $470,000 • a median house price of $490,000, and • a median unit price of $430,000.

Median Prices For Dwellings, Houses And Units Capital city

Median dwelling price

Median house price

Median unit price

Sydney

$555,000

$628,450

$480,000

Melbourne

$490,000

$534,450

$440,000

Brisbane/GC

$410,000

$437,500

$352,500

Adelaide

$370,000

$385,000

$317,000

Perth

$460,000

$470,000

$411,500

Hobart

$350,000

$360,000

$284,500

Darwin

$472,500

$510,000

$420,000

Canberra

$495,000

$519,000

$420,000

Brisbane

$415,000

$434,050

$362,000

Australia – 5 capital cities

$465,000

$489,000

$427,000

Australia – 8 capital cities

$470,000

$490,000

$430,000

2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE FIRST NATIONAL REAL ESTATE

09

PROPERTY PRICES However, according to our members, property prices across all sectors of houses, land and apartment/ strata, are expected to stabilise in the coming six months:

Property Prices – Survey Responses Flat

Increase

Decrease

Houses

53%

22%

25%

Apartments/Strata

59%

5%

36%

Land

63%

5%

32%

Weak consumer sentiment remains a barrier to recovery in dwelling values.

Industry statistics show house price declines nationally, year-on-year, at 5.8%, while units are at 1.5%.

Melbourne was the hardest hit in the first six months of the year, where values sank by 8% and units fell by 5.4%. This trend is expected to continue by 50% of Victorian members, with only 14% saying they will rise across the state. 43% of members expect apartment/strata prices to be flat, while 57% said they would also trend downwards in the coming six months.

Brisbane saw house and unit price declines of 6.8% and 3.9% respectively, and this trend is expected to stabilise.

Half of Queensland’s members say house prices will be static across the state. Just 20% expect further price falls.

However, with apartment/strata and land prices, a greater share of Queensland members expect the market to remain static (64%) whereas 24% said they would trend downwards, in the second half of the year.

Sydney house prices fell 4.6%, but units increased by 1.8%. Our member survey indicates New South Wales house prices will stabilise, with 63% of members saying house, apartment/strata and land prices will be flat, and 18% optimistically predicting house prices will trend upwards.

Only 5% say land prices will trend upwards and a third said both apartment and land prices would trend downwards.

All South Australia members said house and apartment/strata prices in the state would be static in the coming six months. Land values would remain flat according to 75% of South Australia members, but the balance said they would trend downwards.

10

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE

PROPERTY PRICES In the Northern Territory, Alice Springs house prices are expected to trend upwards, as a result of the strong resources sector in the state, while unit prices will trend down and land prices will be flat for the remainder of 2012.

Tasmanian members unanimously expect house, apartment/strata and land prices to fall.

In Western Australia nearly two thirds of members said house prices would trend upwards, the balance expect them to be static. A similar majority said apartment/strata/land prices would be flat for the remainder of 2012. Only 14% said they would rise, a third expect price falls.

RENTAL MARKET The rental market is expected to continue performing well for the remainder of 2012.

Generally, tight rental markets across the country (averaging 1.8% vacancy across the eight capital cities), will see steady, if not tightening, vacancy rates, which will continue to put pressure on weekly rentals, forcing rent prices upwards for many areas.

Where rental prices remain steady, this will be mainly as a result of levelling supply and demand.

All of this will work together, generating even higher rental yields for investors, which are already outperforming the share market. According to industry data, the average capital city house is now returning a gross yield of 4.3% and units 4.9%.

City

Yield – Houses

Yield – Units

Sydney

4.4%

4.9%

Melbourne

3.7%

4.5%

Brisbane – Gold Coast

4.7%

5.3%

Adelaide

4.3%

4.5%

Perth

4.4%

4.7%

Hobart

5.3%

5.3%

Darwin

6.0%

5.9%

Canberra

4.8%

5.8%

Brisbane

4.7%

5.6%

Australian – 5 Capital Cities

4.2%

4.8%

Australia – 8 capital cities

4.3%

4.9%

2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE FIRST NATIONAL REAL ESTATE

11

PROPERTY PRICES This is also the picture developing by First National members, where two thirds see vacancy rates remaining flat or trending downwards. 52% expect weekly rentals to also remain flat or rise.

Vacancy Rates - Last Six Months 2012 National

NSW

VIC

QLD

SA

TAS

WA NT - Alice

Up

21%

41%

23%

6%

25%

–

–

–

Down

39%

41%

31%

27%

25%

–

100%

–

Flat

40%

18%

46%

67%

50%

100%

–

100%

Weekly Rentals - Last Six Months 2012 Up Down Flat

National

NSW

VIC

QLD

SA

TAS

WA NT - Alice

40%

47%

14%

29%

50%

–

100%

–

9%

6%

21%

–

25%

–

–

–

51%

47%

64%

71%

25%

100%

–

100%

Strong demand will continue to underpin rental markets across Australia, compensating for any weakening that may result from improved affordability turning renters into home owners.

In Perth, rents surged by more than 14% over the year, and all Western Australia members expect this rising trend to continue for the overall state.

Rental increases were also recorded in Sydney, Brisbane, Darwin and Canberra. For the coming six months, 47% of NSW members expect weekly rents to remain flat, the balance expect them to continue trending upwards. Queensland members say rents will either be flat (71%) or trend upwards (29%).

Alice Springs should see weekly rents remain flat, along with Tasmania rental prices, which should steady – an improvement on the first half of the year, when rents in Hobart went backwards by 3.9%.

The flat Melbourne rental market experienced in the first half of the year should continue into the latter half. 64% of Victorian members said they thought rentals would be flat for the second half, while 21% said they would trend downwards.

House rents nationally have increased at an average rate of 6% over the past five years – an envious rate compared to other investment avenues such as the share market, which adds to the attraction of real estate as an investment option.

12

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE

PROPERTY PRICES ACTIVITY AND GROWTH Across Australia, investor activity is anticipated to increase as this market sector capitalises on great buying opportunities, particularly in Melbourne and Brisbane - which historically over the long term, have both been consistent growth performers. South Australia is also predicting strong growth in investor activity.

High rents and lower home values are contributing to higher rental yields, which is what the investor is focusing on at the moment. With less to gain from capital growth, investors are looking more at cash flow from rents.

The improved affordability levels will make investors and upgraders the big winners as first home buyers remain reluctant to dip their toes in the property market pool, missing out on the improved market conditions.

Nationally, 50% of members expect investor activity to increase in the coming six months, broken down by state, as follows:

Will Investor Activity Increase – Next Six Months?

National

NSW

VIC

QLD

SA

TAS

WA NT - Alice

Yes

50%

41%

57%

50%

75%

–

57%

–

No

26%

35%

21%

29%

–

100%

14%

–

Same

24%

24%

22%

21%

25%

–

29%

100%

Tasmania, New South Wales and Alice Springs in the Northern Territory are the only places where less than 50% of members expect investor activity not to increase.

Members say investors and upgraders will be the sectors where the most growth will be experienced.

In Tasmania and Alice Springs, all growth is expected to come from upgraders, while in Victoria, the greater proportion of members expect it to come from upgraders. The greater proportion of Queensland and New South Wales members say most growth will come from investors, while South Australia is in line with the national average, being evenly split between the two. Western Australia is the only state where first home buyers are expected to generate the strongest growth.

2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE FIRST NATIONAL REAL ESTATE

13

PROPERTY PRICES Strongest Growth Sectors National

NSW

VIC

QLD

SA

TAS

WA NT - Alice

First Home Buyers

13%

–

14%

13%

–

–

57%

–

Investors

36%

47%

29%

40%

50%

–

14%

–

Upgraders

36%

29%

36%

33%

50%

100%

29%

100%

Retirees

15%

24%

21%

13%

–

–

–

–

TRENDS The majority of members, 81%, expect interest rates to reduce further over the coming six months, adding to improving affordability levels, which it is hoped will stimulate activity in a slow property market.

Rising unemployment and increasing living expenses, including the introduction of the carbon tax, are expected to put pressure on mortgage holders. 47% of respondents expect this will result in increased mortgage defaults in their region.

Expect Increase In Mortgage Defaults – Next 6 Months National

NSW

VIC

QLD

SA

TAS

WA NT - Alice

Yes

47%

41%

50%

57%

25%

100%

29%

100%

No

53%

59%

50%

43%

75%

–

71%

–

While only 2% of respondents expect the prestige market to be the most active sector in the second half of 2012, it is the entry segment of the market - less than $350,000 - which 63% of members say should show the greatest strength, followed by 35% for the middle market.

Most Active Sectors National

NSW

VIC

QLD

SA

TAS

WA NT - Alice

Bargain

63%

71%

57%

67%

100%

100%

14%

100%

Middle

35%

29%

36%

33%

–

–

86%

–

Prestige

2%

–

7%

–

–

–

–

–

The Bargain market is expected to be the most active by the majority, if not all members, in all states except for Western Australia, where it is expected to be the middle market.

14

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE

COMMERCIAL PROPERTY MARKET 2012 is the third year of recovery since the GFC and, although sentiment is still a little fragile, there is definite growth in demand for commercial properties, especially in the Sydney and Melbourne markets.

International investors appear to be far more confident about the Australian economy than we are here at home. Domestic investors are still finding it difficult to source finance and, like many of our members, lack confidence in the government.

China-led demand for commodities should continue for the rest of 2012 and this will help shape Australia’s commercial property market.

Almost two-thirds of members (62%) think commercial property prices will remain the same for the remainder of 2012, while the remainder said they think they will decrease.

All South Australia and Western Australia members said commercial property prices would stay the same, while all Tasmanian and Alice Springs members said they would decrease.

The greater proportion of New South Wales, Victorian and Queensland members said they would remain at current levels, whereas 14% of Victorian and 8% of Queensland members said they would increase.

It is a similar trend for commercial rental prices with 53% of members saying they thought they would stay the same and the majority of the balance saying they would decrease. A key factor here is low business confidence as a result of ongoing economic uncertainty both here in Australia and overseas – although there is much more nervousness domestically.

Commercial Rental Prices – Next 6 Months National

NSW

VIC

QLD

SA

TAS

8%

–

14%

18%

–

–

–

–

Down

39%

47%

50%

27%

–

100%

17%

100%

Flat

53%

53%

36%

55%

100%

–

83%

–

Up

WA NT - Alice

Almost half the commercial property member respondents (49%) said they thought the industrial segment represented the strongest growth in the coming six months, followed by retail (20%), office (13%), hospitality (10%) and then the service industries (8%).

2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE FIRST NATIONAL REAL ESTATE

15

RURAL/REGIONAL PROPERTY MARKET The majority of members said they thought rural property prices would remain the same. However, 36% think they will trend downwards.

Rural Property Prices – Next 6 Months National

NSW

VIC

QLD

SA

TAS

9%

10%

10%

–

33%

–

–

–

Down

36%

60%

20%

50%

–

–

–

–

Flat

55%

30%

70%

50%

67%

100%

100%

–

Up

WA NT - Alice

The majority of Victoria, South Australia, and all Tasmanian and Western Australia members said rural property would be flat, while in New South Wales and Alice Springs they said they would fall.

In Queensland, members were evenly split between staying the same or falling.

Rural rental property prices are expected to remain the same by most of the rural respondents (74%), while the balance said they might trend downwards.

Rural Rental Prices – Next 6 Months National

NSW

VIC

QLD

SA

TAS

9%

27%

–

–

–

–

–

–

Down

17%

27%

10%

20%

25%

–

–

–

Flat

74%

46%

90%

80%

75%

100%

100%

100%

Up

WA NT - Alice

New South Wales, Victoria, Queensland and South Australia were the only states where price drops were expected at all (27%, 10%, 20% and 25% of member respondents respectively). New South Wales was the only state where members said they expected any increases in rental prices (27% of members).

Tasmania, Western Australia and Alice Springs all expected weekly rentals to remain at current levels.

Key factors influencing rural property markets are the low Australian dollar and changing market conditions, due to ongoing consumer nervousness.

Lifestyle properties are expected to dominate the rural property market across Australia in the coming six months, with 93% of members identifying this sector as representing the greatest growth opportunities.

16

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE

REAL ESTATE BUSINESS OUTLOOK The majority of members are optimistic about their business prospects as they see out 2012. 64% say they expect to grow their business and only 10% say they expect business to decline.

The most optimistic states, in order, are Western Australia, South Australia, Queensland, Victoria and then New South Wales. Tasmania and Alice Springs are the only two places where members expect their businesses to continue operating at the same level as they are currently.

Most members (63%) expect to service their growing businesses with current staff levels, however nearly a third say they plan to hire more staff.

Staff Number Increases – Next 6 Months National

NSW

VIC

QLD

SA

TAS

WA NT - Alice

Increase

27%

24%

36%

33%

25%

–

14%

–

Decrease

10%

12%

21%

7%

–

–

–

–

No Change

63%

64%

43%

60%

75%

100%

86%

100%

The residential market is expected to be the most active sector for the majority of members (61%), followed by property management (35%) and then the balance is equally split between commercial and rural. Western Australia, Queensland, Tasmania and Alice Springs expect commercial to be the most active for their states, while Victoria says it will be the residential sector and New South Wales says it will be the property management sector. South Australia is evenly split between commercial and property management.

59% of members said they expected their take of Vendor Paid Advertising to remain the same, while the balance said it would increase in the next six months.

2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE FIRST NATIONAL REAL ESTATE

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PALM BEACH OUTLOOK Market conditions in Palm Beach on the Gold Coast are expected to improve in the second half of 2012, after a poor market in the first 6 months of the year as a result of low growth, uncertainty surrounding the carbon tax and the changing political situation.

The new Gold Coast council is starting to approve some more projects, but this will not translate into early starts at the current inflated prices.

The challenge will be keeping interest rates low and an adjustment in prices for off-the-plan projects.

Sales are expected to increase in the second half of the year, while the average number of days a property is on the market will remain at current levels. This is a result of reduced demand forcing properties to be keenly priced to sell, and vendors are still catching up with this market trend.

This will keep property prices relatively flat across the board, although apartment/strata property prices may trend downwards. Palm Beach’s market is currently 30% units, with many held by investors and the weak market may see their investments decrease marginally in the coming six months.

The rental market is expected to ease, with vacancy rates trending upwards as a result of slowing population growth and tenants becoming first home buyers due to improved affordability. This will see weekly rental prices remain flat until the end of the year.

An increase in investor activity is anticipated over the coming six months, however, it is the upgrader segment that likely represents the strongest growth in activity. This is due to improved affordability levels, especially in the light of stamp duty reform, which will see this inefficient tax reduced for owner/occupiers by $7,000 after July 1.

Interest rates are expected to decrease over the last six months of 2012, which should help stimulate activity further, especially for the Middle Market, which is expected to be the most active sector in the coming six months.

Mortgage defaults for the Palm Beach region are expected to increase, with most failures related to business loans being secured by residential property. In the local economic circumstances, most businesses are struggling and this is leading to many more stressed mortgages.

Solar power and energy are the most sought after energy efficient features of a property in Palm Beach.

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FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE

NEW SOUTH WALES OUTLOOK ECONOMIC OUTLOOK There is a general feeling of optimism in New South Wales, that reducing interest rates will increase confidence in the property market.

If the Reserve Banks (RBA) cuts interest rates further, this will serve to boost Australia’s property market in the coming six months. However the banks are proving to the marketplace they can, and will, do what is right for their profit, rather than what is right for the consumer.

The New South Wales state government needs to release more land and lower head works costs to do their part to help the property market over the second half of the year. The state government’s lack of funds to complete any major infrastructure works could restrict the amount of land available.

Vendor discounting levels for units are the same in Sydney as this time last year, but higher for houses, according to industry data.

Economic conditions are of particular concern and affecting the market in the regions of the Snowy Mountains, South Coast, Southern Highlands and Southern Tablelands.

MARKET OUTLOOK Interest rates, buyer confidence levels, the global economy and lower levels of new listings will be the key influencing factors affecting the state’s property market in the coming six months.

It appears that fewer listings are coming onto the market, and while pricing is relatively stable, some evidence of price reductions still shows. Against these trends, buyer enquiry is improving and days on the market are reducing.

As buyer confidence improves, so should conditions and the market. Market conditions in the areas of the metropolitan Sydney, Hunter, Central Coast, Mid North Coast, Greater Western Sydney and Northern Rivers are all subject to consumer confidence and low interest rates.

In the main, 59% of New South Wales members believe the market conditions will stay the same in the second half of 2012, but the balance anticipate they will improve. However, ongoing consumer uncertainty is keeping market conditions soft.

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NEW SOUTH WALES OUTLOOK Property listings volumes are expected to remain the same by 47% of members, with the remainder being split for an increase or decrease. Low stocks are key to market conditions in the regions of New England (north west) and Central Coast.

Almost half of New South Wales members (47%) expect the average number of days a property takes to sell to rise in the coming 6 months, as a result of the need for price adjustments in the face of a falling market in the first six months of 2012. The market is expected to steady in the second half of the year, as buying conditions improve and economic uncertainty reduces.

A rise in the average number of days on market is expected in the vulnerable regions of The Hunter, Northern Rivers, Snowy Mountains, South Coast, Southern Highlands and Southern Tablelands.

However, the stronger performing Central Coast and Greater Western Sydney regions expect days on market to fall, while New England (north west), Mid North Coast expect them to stay at current levels.

Auction clearance rates are strong and the amount of new listings coming on the market is lower, which will create some much-needed competition, and a sense of urgency, between buyers.

Property sales are expected to increase in the state over the months leading up to the end of the year, especially in the regions of Greater Western Sydney, Central Coast and Sydney metropolitan. Listings are also expected to increase in some parts of Sydney and the regions of Hunter and Snowy Mountains.

The key challenges facing local New South Wales property markets are: • Vendor price adjustments to meet market expectations due to lower house prices, oversupply of stocks • Consumer nervousness due to unstable global and domestic economic conditions (including rising unemployment levels) and rising costs of living • Lack of buyers due to low population growth and some buyers playing a ‘wait and see’ game

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FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE

NEW SOUTH WALES OUTLOOK RESIDENTIAL Prices With stabilising market conditions, property prices in New South Wales are expected to remain relatively flat across the state. Sydney currently enjoys above national average property prices of $555,000 for dwellings (national average $470,000), $628,450 for houses (national average $490,000) and $480,000 for units (national average $430,000).

65% of New South Wales members expect house prices to remain flat, and the remainder are equally split between house prices trending upwards and downwards. Buyer confidence will underpin any price movements which are expected in the areas of Mid North Coast, Southern Highlands, Central Coast and Greater Western Sydney.

Apartment/strata property prices are expected to also remain flat (63%), or trend downwards amongst the balance, driven by low demand or oversupply. The Mid North Coast, Southern Highlands and Snowy Mountains are the main regions that expect price falls for this sector.

71% of New South Wales members expect land prices to remain flat, while the rest say they may trend downwards. Price falls for land are expected in Greater Western Sydney, Mid North Coast and the Southern Highlands, due in the main to an oversupply of stock or the end of new home buyer concessions, particularly Stamp Duty.

Upward movements in land prices are expected, only in areas where land supply is limited. Downward movements are expected to be the result of a lack of buyers, ongoing uncertainty over economic conditions, and the potential for resultant job losses.

Rental The rental market in New South Wales will remain relatively strong overall, although this will depend on the region. Members in Greater Western Sydney, Sydney Metropolitan, Mid North Coast, Northern Rivers and Snowy Mountains have strong rental markets and are expecting vacancy rates to fall or remain the same.

82% of New South Wales members are equally divided on whether they expect vacancy rates to trend upwards or downwards, while the remaining members say they will remain flat.

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NEW SOUTH WALES OUTLOOK Tight vacancy rates will result from ongoing strong demand, due to first home buyers being forced to remain in rental accommodation, ongoing consumer nervousness and rising unemployment.

An oversupply of available rental properties will drive any easing of vacancy rates.

Overall, weekly rentals will remain flat or trend upwards, due mainly to tight supply conditions – 94% of members expect weekly rents to trend upwards or remain flat.

Over the year, small rental price increases were recorded, and according to industry statistics, Sydney saw modest rental growth in April. The Central Coast, Hunter, New England (north west), Snowy Mountains and Southern Tablelands all expect rent increases in the coming six months.

Growth Investor activity is expected to increase by 41% of New South Wales members, as a result of improved buying opportunities and better rental yields. The investor segment is expected to represent the strongest growth in activity (47% of NSW members), followed by upgraders (29%) and retirees (24%).

The Hunter region and around Newcastle should be the best performing area in the state along with hot spots in mining regions such as the Hunter Valley and coastal suburbs. These will be strong performing property markets with reduced prices making them attractive for upgraders.

According to industry statistics, the top five areas with growth predicted over 8% during the next eight years are: Region

Predict Growth - %

Lower North Shore

8.17

Manly Warringah

8.57

Blue Mountains

9.07

Newcastle South Coast

8.4 9.02

Parramatta and Bankstown are the most affordable median house priced suburbs within 20km of the Sydney city centre.

New South Wales members also highlighted parts of Sydney, Central Coast, Greater Western Sydney, Northern Rivers and the South Coast as areas where investors should be active.

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FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE

NEW SOUTH WALES OUTLOOK Trends The majority of New South Wales members (88%) believe interest rates will drop further in the latter half of 2012, which will improve affordability, strengthen buyer confidence and stimulate market activity.

This is especially true in the entry-level market (less than $350,000), which 71% of members expect will be the sector which will see the most activity. The middle market is anticipated to account for the remainder of activity.

The Sydney, Central Coast, Hunter, New England, Mid North Coast, Snowy Mountains, South Coast and Southern Tablelands property markets in particular will see the bargain market particularly active. Greater Western Sydney, Northern Rivers and Southern Highlands will see a lot of activity in the middle market.

The rising costs of living, including the introduction of the carbon tax, coupled with increasing unemployment levels, may negate any positive market influences.

These issues could affect mortgage defaults in New South Wales – where 41% of members are expecting them to increase in the second half of 2012, especially in areas where businesses are coming under increased financial pressure, resulting in job insecurity.

Solar power and energy are still seen to be the most sought-after energy efficient features according to 75% of New South Wales members, followed by eves or window shades for westerly sun (19%) and drought resistant gardens (6%).

COMMERCIAL Rising business costs such as taxes, power/gas and electricity will have a significant effect on the commercial property market in New South Wales, along with stunted growth in business sectors, especially in the retail and tourism industries.

If job opportunities and consumer confidence improve, then an improvement in general economic conditions could see the sector prosper.

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NEW SOUTH WALES OUTLOOK RURAL The relatively high value of the Australian dollar will dampen activity in rural property markets, along with slow buyer activity.

Economic and political uncertainty, subdued commodity and stock prices, and, unrealistic vendor price expectations will all have a significant, negative impact on rural property markets.

REAL ESTATE BUSINESS OUTLOOK 53% of New South Wales members expect their businesses to grow in the coming six months, while the balance expect them to hold their ground.

47% of New South Wales members derive 60-80% of their business from sales; 24% have 80-100% from sales; and 12% have 20-40% from sales. The remainder of their respective business comes from property management, which is expected to represent the most active sector for 53% of members, followed by residential (41%) and then rural (6%).

The majority of New South Wales members expect staff numbers to remain the same, however, 24% expect to put on additional staff. Just 12% anticipate making cut backs.

Marketing spend is expected to remain at current levels or increase for 94% of members, with 65% saying they would increase their use of social media tools to market properties, the balance saying they’d continue at current levels.

The web, Facebook and Smartphones were also popular, with 82%, 71% and 65% respectively, saying they would be their preferred social media tools.

65% of members said their take of Vendor Paid Advertising would remain the same for the second half of the year, 29% said it would increase.

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FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE

VICTORIA OUTLOOK ECONOMIC OUTLOOK The Victorian economy has slowed and deteriorated over recent months, following several years of strong growth. This slow down is expected to continue into the latter half of 2012. Business and consumer confidence in the state are now low and it will take more than reducing interest rates to see any real improvements in the market.

Any improvements though, will be the result of lower interest rates and returning consumer confidence, according to Victorian members, while rising unemployment levels and toughening financial conditions will continue to place pressure on the market.

First National Real Estate Victoria members see the need for competent business and social leadership, which is lacking at local government, state and federal level, to improve market conditions.

Small to medium sized businesses need assistance, existing businesses should be encouraged to decentralise; and start-up assistance for new immigrants should be reformed to instil business confidence in the state.

Government needs to provide incentives to businesses to induce growth as well as provide employment subsidies for periods longer than 12 months. This will go some way towards providing a level of stability and retard job losses.

Victoria is already experiencing the downsizing of many government agencies. Larger corporations too are closing business operations in Melbourne and many regional locations.

New initiatives and low interest rates loans should be offered to existing and start up businesses.

Vendor discounting levels in Melbourne are much higher than they were at this time last year, according to industry data.

Economic conditions are of particular concern and affecting the market in regions such as Central Victoria, the North East and some parts of Greater Melbourne.

However, members are divided on the outcome of changing market conditions. Equal numbers believe conditions will stay the same as they were in the first half of the year, or deteriorate, while the balance say they will improve.

Mortgage defaults are expected to increase in areas of Greater Melbourne, the Mornington Peninsula, Northeast and East Gippsland. This will be due to rising unemployment levels and increasing costs of living, especially for those who overcapitalised and now find themselves highly geared.

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VICTORIA OUTLOOK MARKET OUTLOOK Interest rates, buyer confidence levels, the global economy and job security will be the key influencing factors affecting the state’s property market in the coming six months.

On the back of a predominantly falling market for the first six months of this year, 50% of members believe the market will steady in the latter half of 2012, while the balance anticipate it will fall further.

However, almost two-thirds of members expect sales and property listings volumes to increase in the coming six months – meaning the main Victoria’s property prices will fall further.

Greater Melbourne is expected to the best performing area for Victoria, with state hot spots earmarked in the growth corridors emanating from the capital city, namely: • Cranbourne, Berwick, Pakenham, Warragul and Drouin for the south eastern region • Craigieburn, Whittlesea, Wallan, Gisborne and Sunbury for the north corridor • Melton, Bacchus Marsh, Ballan to Ballarat in the north west, and • Werribee, Bendigo, Little River, Lara through to Geelong and its environs to the west.

Half of Victorian members believe the average number of days a residential property is on the market will stay the same. Of the balance, the majority anticipate the market will rise (36%). Regional lifestyle and commercial property is taking longer to sell than metropolitan locations and this is anticipated to remain unchanged for 2012. Vendor price ambitions need to adjust further in order to match buyer expectations.

A rise in the average number of days on market is expected in the vulnerable regions of Bellarine Peninsula, Northeast and Western Districts. However, the stronger performing areas of Greater Melbourne, Yarra Valley, Mornington Peninsula and East Gippsland are expected to stay at current levels or begin to fall.

Property sales are expected to increase in the state over the months leading up to the end of the year, in all areas except the Bellarine Peninsula, Mornington Peninsula and East Gippsland. Listings volumes are also expected to increase in some parts of Greater Melbourne and the regions of Central Victoria, Yarra Valley, Mornington Peninsula, Northeast and East Gippsland. In early June, there were 52,094 homes sitting unsold in the Melbourne market, an increase of 19.24% year on year.

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FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE

VICTORIA OUTLOOK The key challenges facing local Victorian property markets are: • Vendor price adjustments to take account of an oversupply of stock, especially for the Greater Melbourne and Central Victoria regions • Consumer nervousness due to unstable global and domestic economic conditions (including rising unemployment levels) and rising costs of living, particularly relevant for the areas of Greater Melbourne, Mornington Peninsula and Northeast regions • Lack of buyers and stock surpluses especially in Greater Melbourne and Central Victoria

RESIDENTIAL Prices With stabilising market conditions, property prices in Victoria are, in the main, expected to trend downwards or remain flat (36%) across the state.

Despite Melbourne being the worst performing capital city over the March to June quarter, with dwelling values decreasing by 4.6%, it still enjoys above national average property prices of $490,000 for dwellings (national average $470,000), $534,450 for houses (national average $490,000) and $440,000 for units (national average $430,000).

However, for the remainder of 2012, 50% of Victorian members expect house prices to trend downwards, or remain flat (36%). Just 14% say they will rise in the coming six months. House prices will be driven by consumer confidence levels, interest rate reductions, unemployment concerns and toughening financial conditions.

Vendor price expectations will place downward pressure on house prices in Victoria’s Western region, while low market sentiment and uncertainty will be the cause in the East Gippsland and Greater Melbourne regions. The suburbs of Hume and Brimbank offer the most affordable median house prices within 20km of Melbourne’s city centre.

A lack of buyers, evident in the coastal regions of the Mornington Peninsula and Bellarine Peninsula, will dampen any improvement in house prices there.

However, improved market conditions (including current low interest rates) are expected to see house prices increase in Central Victoria.

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VICTORIA OUTLOOK Apartment/strata property prices are expected to trend downwards (57%), or remain flat by the balance, driven by low demand or oversupply in some parts of Greater Melbourne, the Mornington Peninsula, Northeast or Western regions of Victoria. Rental yields in Melbourne are the lowest in the country, at 3.7%, indicative of the impact of Victoria’s stagnant economy on prices in this sector, especially in the regions of Yarra Valley and East Gippsland.

Victorian members are equally split (50/50) on whether land prices will trend downwards or remain flat.

Recent influxes of land coming onto the market have produced an oversupply in key growth corridors, while a lack of demand is having a negative impact on land prices in Victoria’s Western region.

In Central Victoria and the Northeast, land prices in the coming six months will be a result of the market correcting itself and vendor expectations becoming more realistic.

Rental The rental market in Victoria will be lack-lustre for the remainder of the year, with ongoing consumer nervousness keeping many in rental accommodation even though improved affordability makes purchasing a viable option for many renters.

Vacancy rates are expected to be static by 46% of members, or trend downwards by the majority of the balance 31%. Any upward movements will be a result of improved purchase affordability for Central Victorians, or an oversupply of stock in the East Gippsland and Western regions.

However, along the Mornington Peninsula, many will be forced to remain as renters, with prices still too high to make it financially viable to purchase.

Unemployment will impact on vacancy rates in the Yarra Valley and the slow market will continue to keep vacancy rates steady in the Bellarine Peninsula, Greater Melbourne and North East regions.

Melbourne continues to have the highest vacancy rates at 3%, but experienced the biggest monthly drop in February falling 0.5%.

Overall, weekly rentals will remain flat or trend downwards, due mainly to market conditions making it a renters’ market or sufficient stock levels to meet demand – 65% of members expect weekly rents to be flat 21% expect them to trend downwards.

Melbourne has the lowest gross rental yields in the country, at 3.7%, but this is expected to strengthen in the second half of the year.

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FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE

VICTORIA OUTLOOK Growth Victorian members anticipate investor activity will increase by 57% as a result of improving rental yields and increased affordability - through low interest rates producing good buying opportunities and bargains.

While investors are expected to represent the strongest growth sector in Victoria, according to 29% of members, it is the upgrader segment which most members expect to be the strongest (36%). 21% of members say the strongest growth will come from retirees’ changing lifestyles, and 14% say it will be first home buyers.

Improved affordability will also drive the upgrader market, which will capitalise on market conditions that make it easier for them to make the move. Pent up demand and low interest rates will entice first home buyers back into the market.

Trends The majority of Victorian members (86%) believe interest rates will drop further in the latter half of 2012, however it is not expected this will impact too greatly on the state’s property market as any gains will be offset by negative market factors.

While lower interest rates will improve market conditions and strengthen buyer confidence, job uncertainty, increasing living costs and tightening lending criteria will all act against this and, for some areas, may result in increased mortgage defaults.

In the main (57%), Victorian members expected the entry level market, with properties less than $350,000, to represent the strongest sector of activity in the latter half of 2012, followed by the middle market (36%) and then the prestige market with the balance.

According to industry statistics, the top five areas with growth predicted over 8% during the next eight years are: Region

Predict Growth - %

Warrnambool

3.19

Shepparton

3.14

Wodonga

2.93

Mildura

2.52

Bendigo

2.14

Solar power and energy and drought resistant gardens remain the most sought-after energy efficient features of a Victorian property.

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VICTORIA OUTLOOK COMMERCIAL The Victorian office market may be set for ongoing turbulence, being more likely to suffer the effects of weakened traditional office occupying businesses, and most residential tower sites sold in Melbourne over the past year have been sold to Asian developers.

The slow retail sector and rising unemployment, as a result of a stagnant economy, will be the key significant factors affecting Victoria’s commercial property market in the second half of 2012.

RURAL State planning rules for Victoria’s rural areas are being increased to a 40ha minimum. However, this new policy will not automatically see land come with approval to build, which presents a conundrum for many and the full impact of this policy change is yet to be seen.

The government should revisit some areas which have not been included as part of this new policy, to encourage people to relocate from the city to build in areas on the urban fringe. This would serve the dual purpose of creating employment opportunities as well as taking the pressure off Melbourne property market.

Market confidence and supply and demand issues will continue to plague the rural property market in Victoria for the remainder of 2012.

REAL ESTATE BUSINESS OUTLOOK 64% of Victorian members expect their businesses to grow in the coming six months.

57% of members derive 60-80% of their business from sales; 15% have 80-100% from sales; and 14% each have 20-40% and 40-60% from sales. The remainder of their respective businesses come from property management, which is expected to represent the most active sector for 14% of members, while 79% say it will be residential and 7% say it will be commercial.

The greater proportion of members (43%) expect staff numbers to remain the same, however, 36% expect to hire additional staff. The remainder see cut backs ahead.

Marketing spend is expected to remain at current levels or increase for 57% of members, with the same amount saying they would increase their use of social media tools to market properties.

Facebook is the preferred social media tool used by 64% of members, followed by the web (57%), smartphones (43%), Twitter and Linkedin (36%) and then Google (14%) and Blog (7%).

Approximately one thirds of members said their take of Vendor Paid Advertising would remain the same for the second half of the year, the balance equally split as to whether it would increase or decrease.

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FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE

QUEENSLAND OUTLOOK ECONOMIC OUTLOOK The change of government in Queensland is expected to build on the growing sense of optimism seen in the first half of the year.

While the strong resources sector will underpin the state’s economy to some degree, weak retail and tourism sectors will continue to impact on job security and ongoing confidence.

Ongoing economic uncertainty, both for the state and overseas, coupled with the high Australian dollar, will also serve to curtail confidence from a market, business and consumer perspective.

Towns or cities near to the major mining and resources regions will be property hot spots, especially those in Central Queensland, which is expected to be the best performing area for the state.

MARKET OUTLOOK Interest rates, buyer confidence levels, the economy and job security will be the key influencing factors affecting the state’s property market in the coming six months.

The greater majority of Queensland members believe market conditions will improve in the second half of the year (67%), with the balance saying conditions will remain the same. The main reasons for the upswing are cited as interest rate reductions and the market bottoming out, which has significantly improved affordability, coupled with stamp duty reductions, which have been instigated by the new state government.

Sales volumes are expected to increase by 80% of members. Property listings volumes expected to stay the same by nearly half the membership, with the balance expecting they may rise.

While, in the main, members in Queensland have experienced a steadying or falling market over the last six months (20% and 53% respectively), the majority expect similar conditions in the second half of the year.

40% are optimistic, however, that the market will rise.

Central Queensland is the only area where members expect an increase on the average number of days on the market for a property, until consumer confidence grows on the back of a strengthening local economy.

The key reasons for the improved outlook are stamp duty reductions and lower interest rates generating better buying and economic conditions and improved confidence in the market.

However, economic uncertainty is still causing some concern, which is dampening what would have been an even greater market improvement

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QUEENSLAND OUTLOOK The key challenges facing local Queensland property markets are: • Vendor price adjustments to meet buyer expectations due to flat house prices, oversupply of stocks, especially for the Atherton Tablelands, Central Queensland and Wide Bay/Burnett regions, along with some parts of Brisbane proper. Vendor discounting levels for units in Brisbane are lower than this time last year and higher for houses • Consumer nervousness due to unstable global and domestic economic conditions (including rising unemployment levels and the high Australian Dollar) and rising costs of living, particularly relevant for the areas of Atherton Tablelands, Gold Coast, Sunshine Coast, Wide Bay Burnett, Darling Downs and some parts of Brisbane

RESIDENTIAL Prices Property prices in Queensland, across all sectors, are expected to be relatively steady for the majority of members, with house prices faring a little better than apartments/strata and land prices, especially in the Darling Downs and Sunshine Coast regions, and some parts of Brisbane.

Property Price Trends For Next Six Months House Prices

Apartment/Strata

Land Prices

Up

27%

7%

7%

Down

20%

29%

29%

Flat

53%

64%

64%

The main reasons cited for the flat property prices are economic uncertainty and a stagnant economy, lack of buyer confidence to capitalise on improved affordability, and, market adjustment to cater for changing conditions.

The unit market is under stress from an oversupply of stock, and, land prices are suffering due to a lack of demand and increasing costs of development - including exorbitant head charges. New subdivisions about to become available in Brisbane and on the Sunshine Coast may see land prices begin to trend downwards in the second half of 2012.

Brisbane dwelling prices are expected to improve slightly from their below-the-national-average property prices of $410,000 (national average $470,000), $437,500 for houses (national average $490,000) and $352,500 for units (national average $430,000).

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FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE

QUEENSLAND OUTLOOK Suburbs to the south and west of Brisbane offer the most affordable median house prices within 20km of the city centre.

Improved job prospects in the Darling Downs region should see some slight increases in house and apartment/strata property prices.

Rental In general, the rental market in Queensland should remain fairly stable, with 67% of members saying vacancy rates should be flat, in the coming six months, and any movements will occur as a result of population growth or decline.

Even with the improved market conditions, affordability remains an issue for many renters, especially in the area of Moreton, the Sunshine Coast and some parts of Brisbane. This will result in flat vacancy rates and rental prices for those areas.

Weekly rentals should also hold firm with 71% of members saying they will remain static. The balance anticipate they will rise.

Upward rental price movements are due mainly to high demand and limited supply. They come on the back of rental increases recorded over the year, with Brisbane’s vacancy rates dropping 0.2% in February.

Downward movements are seen as a result of business growth bringing improved job opportunities, especially in the Darling Downs region.

According to industry figures, Brisbane’s houses yield is 4.7% and 5.6% for units.

Growth Investors are expected to represent the strongest growth in activity by 40% of Queensland members, followed by upgraders (33%) and then first home buyers and retirees making up the balance.

Half the members expect investor activity to increase, while 21% say it will stay the same and the remainder say it will decrease.

Investor activity will be driven by greater returns on investment dollars and improved affordability with lower prices and reducing interest rates.

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QUEENSLAND OUTLOOK Trends The majority of Queensland members (73%) believe interest rates will drop further in the latter half of 2012, which is expected to improve affordability, stabilise prices, create more market confidence and stimulate activity.

Mortgage stress is expected for areas with rising unemployment levels, such as Atherton Tablelands, Gold Coast and parts of Brisbane. There is also an expected increase in mortgage defaults as a result of economic conditions and rising livings costs in regions such as the Sunshine Coast, Gold Coast and parts of Brisbane.

57% of Queensland members expect mortgage defaults to increase throughout the remainder of 2012.

In the main (67%), Queensland members expected the entry level market, (properties less than $350,000) to represent the strongest sector of activity in the latter half of the year, with the balance saying it will be the middle market.

According to industry statistics, the top four regional areas with growth predicted over 8% during the next eight years are: Region

Predict Growth - %

Redcliffe

7.28

Mt Tamborine

7.95

Mt Isa

7.17

Ipswich

6.99

Solar power and energy are the most sought-after energy efficient features for property hunters in the regions of Moreton, Central Queensland, Darling Downs, Gold Coast, Sunshine Coast and some parts of Brisbane. Eves or window shades are the most popular for Atherton Tablelands, Wide Bay Burnett and Sunshine Coast, while the Gold Coast favours drought resistant gardens.

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FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE

QUEENSLAND OUTLOOK COMMERCIAL There are signs of recovery in the office and industrial markets, especially on Queensland’s Gold Coast, where investors are locking in strong returns.

The commercial market in Queensland has moderated in recent times, with property prices remaining stable. This is expected to continue for the remainder of 2012, according to 67% of members.

Commercial rental prices are also expected to stay the same in the state, by 55% of members, while the balance say they will increase.

Construction for the 2018 Commonwealth Games, the election of Campbell Newman and the Gold Coast rapid transit project (that will boost access along the coast) has delivered a lift in confidence for the region.

Vacancies on the Gold Coast, however, remain the highest in south east Queensland at 21.8%. Forecasts of a limited amount of stock coming online in the next year will afford the market a chance to work through its surplus, adding to the sense that the office market for the region will soon bounce back.

The main drivers and significant influencing factors for the Queensland commercial property market include interest rates, access to finance as well as local development and infrastructure plans, and, the ability to attract new businesses, especially for the regions of the Sunshine Coast, Gold Coast, Atherton Tablelands and Wide Bay Burnett.

The Darling Downs commercial property market, which expects to see prices and weekly rents increase, will be driven by coal and gas sectors. Demand and yield will drive the Gold Coast commercial property market where reduced confidence and low tourism numbers is forcing some businesses to close.

Industrial, followed by retail and the office sectors are expected to represent the greatest growth in the coming six months, according to 57%, 29% and 14% of members respectively.

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QUEENSLAND OUTLOOK RURAL The strength of the mining and resources sectors is propping up the rural property markets in Queensland, where investors are expected to capitalise on strong rental markets.

Members are evenly split on rural property prices remaining the same or decreasing.

Rent prices in rural areas are expected to stay the same by 80% of members, with the balance saying they will decrease.

Activity in rural property markets will be driven by the key significant factor of commodity prices and value of the Australian dollar as it impacts on the state’s export potential.

Central Queensland, the Gold Coast, Sunshine Coast and Wide Bay Burnett represent the stronger performing rural markets.

REAL ESTATE BUSINESS OUTLOOK 73% of Queensland members expect their businesses to grow in the coming six months, while the balance expect to hold their ground.

20% of members derive 60-80% of their business from sales; 13% have 80-100% from sales, 40% have 2040% and 20% have 40-60% from sales.

The remainder of their respective business comes from property management, which 33% say will be the most active in the coming six months, while the majority say it will be sales.

Nearly two thirds of members (60%) expect staff numbers to remain the same over the coming six months, however, the balance expect to hire additional staff.

Marketing spend is expected to remain at current levels for 73% of members, with 73% saying they would increase their use of social media tools to market properties.

Facebook is the preferred choice of social media tool to be used by 80% of members, followed by the web (73%), Google+ (33%), LinkedIn (27%), Twitter (20%), Blog (20%) and Smartphones (13%).

60% of members said their take of Vendor Paid Advertising would remain the same for the second half of the year, while the remainder said it would increase.

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SOUTH AUSTRALIA OUTLOOK ECONOMIC OUTLOOK The South Australia economy is expected to improve in the second half of 2012, on the back of what has been a steadying market for the state thus far.

The optimism in the state’s economy is a result of a strengthening state economy and better consumer confidence as a result of lower interest rates and growing job prospects.

The average number of days on the market is expected to remain at current levels or fall, however, 50% of members expect sales will increase, although they all agree property listings volumes will remain the same.

Ongoing economic uncertainty in some pockets of the state, outside those stimulated by mining, is dampening consumer confidence.

However, significant developments and infrastructure projects are proving to build some confidence and having a positive impact, especially the Bowden redevelopment, Adelaide Oval and River Torrens Precinct development, the construction of the new Royal Adelaide Hospital and the doubling of the South Eastern Freeway.

MARKET OUTLOOK Following a steady market in the first half of the year, parts of South Australia, such as the Fleurieu Peninsula, will begin to rise in the coming six months, , as a result of improving marketing conditions and a strengthening local economy, which is already showing increasing sales activity.

Elsewhere in the state, 75% of members expect the market to steady, especially in the Adelaide Plains and Yorke Peninsula regions, due to ongoing nervousness because of economic uncertainty.

While reducing interest rates are expected to underpin improved sales activity and affordability levels in the state, they will not be enough to build the levels of consumer confidence required to bring about a full recovery.

Both sales and property listings are expected to remain relatively flat across the board by all South Australian members. Any increase in sales activity is offset by price reductions and while interest rate reductions, if passed on by the banks, will continue to steady the market, they are not seen as being enough to stimulate any real lift in demand.

Consideration should also be given to stamp duty reform and some incentives or assistance for first home buyers to further stimulate activity.

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SOUTH AUSTRALIA OUTLOOK Vendor discounting levels for houses is higher in Adelaide than at this time last year.

Property transactions are at their lowest levels in 25 years and well below their five year average at the end of May – a fact which forced the South Australia government to face a ‘record revenue write down’ as a result of reduced property related taxes. This also prompted the government to introduce measures, such as the extension of the first home buyer scheme, to get the state building more houses and people entering the property market.

Salisbury and Port Adelaide are the most affordable median house priced suburbs within 20km of Adelaide’s city centre.

The key challenges facing local South Australia property markets are: • Vendor price adjustments to meet buyer expectations, due to lower house prices, especially in some parts of the Fleurieu Peninsula • Consumer confidence will improve, especially in the Adelaide Plains and Fleurieu Peninsula regions The most significant factors affecting the state’s property market in the coming six months will be a stable economy, interest rates, lending criteria to secure finance, confidence levels and local business and infrastructure projects.

Property hot spots will be where affordability is high within a reasonable commuting distance of the city, particularly with first home buyers and, to a lesser degree, investors. The best performing area for the state should be the Adelaide Plains. The far west of the state is already earmarked as an investor hot spot.

RESIDENTIAL Prices Across the board, property prices in South Australia are expected to remain relatively flat, with some potential falls in land values, particularly in the Adelaide Plains region due to lack of demand, evidenced by the low levels of building approvals.

This is a result of low sales volumes, oversupply, and/or lack of demand.

At the beginning of June, industry data shows Adelaide was the best performing capital city for the March to June quarter, with dwelling values improving 1.0%.

Despite this, dwelling prices remain below the national average at $370,000 (national average $470,000), $385,000 for houses (national average $490,000) and $317,000 for units (national average $430,000).

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SOUTH AUSTRALIA OUTLOOK Rental The rental market in South Australia is expected to be flat, except in the state’s west where job losses are putting additional pressure on those in tighter financial circumstances. This should see flat vacancy rates, especially on the Yorke Peninsula and Adelaide Plains region, with some downward trend on the Fleurieu Peninsula. In areas susceptible to job insecurity, vacancy rates may rise slightly.

Strong demand will keep pressure on weekly rents, where any falls will be a result of an oversupply situation.

In the first six months of 2012, rents in Adelaide were reasonably flat, and vacancy rates dropped by 0.1% in February.

The average yield for houses in Adelaide is 4.3% and the average yield for units is slightly better at 4.5%.

Growth Investor activity is expected to increase by 75% of South Australia members, as a result of prime market conditions. These include improving rental yields and returns, increased affordability through low interest rates, and falling prices.

50% of members believe investors represent the strongest growth segment, however, the balance say it will be upgraders looking to capitalise on improved affordability, making it cost effective to upgrade now.

Trends Interest rates are expected to continue being low, if not further decrease, for the remainder of 2012 by South Australia members, which will serve to underpin sales.

The most active sector of the market, according to all South Australia members, will be the entry level market where home values are less than $350,000.

Solar power and energy, drought resistant gardens and the ability to open windows remain the most sought-after energy efficient features of a South Australia property.

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SOUTH AUSTRALIA OUTLOOK COMMERCIAL The commercial property market in South Australia is expected to hold up in the coming six months, driven by ongoing strong demand.

Industrial, retail and hospitality sectors are all expected to represent good growth in the second half of the year.

Commercial property prices and rents should remain at current levels, according to all members.

REAL ESTATE BUSINESS OUTLOOK 75% of South Australia members expect their businesses to grow in the coming six months.

50% of members derive 60-80% of their business from sales; with the other half evenly split between 20-40% and 40-60% from sales. The remainder of their respective businesses come from property management, which, along with residential, is expected to represent the most active sector for 50% of members.

The majority of members (86%) expect staff numbers to remain static; however, 14% plan to hire additional staff.

Marketing spend is expected to remain at current levels for all South Australia members, with 50% saying they would increase their use of social media tools to market properties.

Facebook, smartphones and the web are the preferred choice of social media tools used by the state’s members.

All members said their take of Vendor Paid Advertising would remain the same for the second half of the year.

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FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE

WESTERN AUSTRALIA OUTLOOK ECONOMIC OUTLOOK The Western Australia economy is expected to improve in the second half of 2012, on the back of what has been a steadying market for the state thus far.

The optimism in the state’s economy is a result of new projects translating into employment opportunities and a steadily improving property market, according to First National Real Estate Western Australia members.

The mining and resources sector will continue to underpin the state’s economy, which continues to attract strong levels of population growth.

Port Hedland could soon emerge as a major link to rapidly growing Asian economies, with an ambitious $300 million proposal to expand its airport so it can handle larger passenger aircraft as well as more air cargo.

The creation of a Port Hedland freight hub would drastically cut mining component delivery times. Currently, parts for machinery are flown to Melbourne, then take five days on trucks to reach their destinations, causing millions in losses.

In general, 86% believe market conditions will improve, with 57% saying they expect the average number of days a property is on the market will fall and the remainder expecting no change.

Vendor discounting for units and houses in Perth is down, compared to the same time last year.

Perth’s projected population growth of 13,000 people a year should assure ongoing steady demand for years to come.

While indications are good that Western Australia’s economy will steadily climb, it is not clear - from recent state and federal government announcements - which planned infrastructure projects will proceed and when.

Business confidence and the flow-through effects to employees will be an important influencer on how the public perceives conditions and ultimately on their behaviour.

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WESTERN AUSTRALIA OUTLOOK MARKET OUTLOOK Consumer confidence, especially as a result of current and planned infrastructure projects, coupled with better buying conditions, will see the Western Australia property market further stabilise and steadily improve in the coming six months.

Kalgoorlie in particular is optimistic about its local property market, and Perth will be one of the strongest in the country.

Both sales and property listings are expected to increase in the second half of the year, by 86% of members in each case.

The main significant factors members see as influencing the Western Australia property market until the end of the year are interest rates, bank lending criteria, infrastructure plans and changes and job security.

There is also concern that global and domestic economies will affect the state’s resources sector – of particular concern for mining and resources dependent areas such as Kalgoorlie.

While building approvals have been on the rise, increasing 25 per cent in May, they remain 31 per cent lower than May last year. The state’s strength therefore still depends on the resources sector. With the last decrease in interest rates and the low vacancy rates for rental properties, investors may be influenced to return to the market. However, as with the rest of Australia, there are still some areas of the market that are vulnerable.

Property hot spots for the state will be those areas with a median price range around $300,000 or below.

Suburbs surrounding Rockingham, Kwinana and Armadale need more support, while Western Australia’s Northwest region with its strong resources will fare well including areas of Onslo, Karatha, Port Hedland and Broome.

The key challenges facing local Western Australia property markets are: • Vendor price adjustments to meet market expectations due to lower house prices, especially in some parts of Perth • Availability of suitable properties, especially in Kalgoorlie and some parts of Perth • Banks and securing finance particularly in Kalgoorlie

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FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE

WESTERN AUSTRALIA OUTLOOK RESIDENTIAL Prices With steadily improving market conditions, property prices are expected to stabilise or steadily improve.

57% of members say house prices will rise as a result of improving consumer confidence, especially in Kalgoorlie and parts of Perth, while reducing stock levels with increased demand will also push Perth house prices upwards.

Despite Perth’s improving outlook, dwelling prices are just below the national average at $460,000 (national average $470,000), $470,000 for houses (national average $490,000) and $411,500 for units (national average $430,000).

Swan and Gosnells council areas offer the most affordable median house priced suburbs within 20km of the Perth City Centre.

Apartment/strata property prices are expected to remain relatively flat by 67% of members, as supply and demand reach a balanced state, although infrastructure plans, particularly in some of Perth’s areas and Karratha, may see prices in this sector increase, according to the remaining third of members.

Western Australia members expect land prices to remain flat, although there is some room for movement.

14% of members say land prices will increase as a result of limited supply, while 29% say they will decrease, with buyers preferring to buy established homes given the improved affordability levels or availability of stock, especially around Karratha and some parts of Perth.

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WESTERN AUSTRALIA OUTLOOK Rental The rental market in Western Australia is expected to perform well in the second half of 2012, with vacancy rates expected to trend downwards by all members due to high demand and an undersupply of stocks.

This will also drive weekly rent prices upwards, creating a more competitive and even tighter rental market in the state.

In Perth, weekly rents surged by more than 14% in the first five months of 2012 and the market was extremely tight, with vacancy rates steadily declining over the past year on the back of strong population growth – an estimated 700 people arriving in Western Australia every week, drawn to the thriving mining sectors.

Rental returns in some parts of Perth are 6% to 7%, which is a standard return for investment dollars. The average yield for houses is 4.4% and the average yield for units is slightly better than houses, at 4.7%.

Growth Investor activity is expected to increase by 57% of Western Australian members, as a result of improving rental yields and returns plus increased affordability through low interest rates and falling prices.

While investors are expected to represent the strongest growth sector in Western Australia, according to 14% of members, it is the first home buyer segment which most members expect to be the strongest (57%), driven by low interest rates improving affordability for many. 29% of members say the strongest growth will come from upgraders who can capitalise on prime market conditions.

Potential growth areas for the state are seen as Stirling and Belmont, which are especially attractive for investors as they are undergoing town-centre redevelopments. Murdoch, particularly near Fiona Stanley Hospital, is also seen as a potential hot spot being considered an employment node. The cities of Stirling, Bayswater, Joondalup and Cockburn are all excellent examples of areas with high residential development potential, creating ideal investment opportunities.

If Port Hedland’s proposed Centauri and Laing O’Rourke airport expansion plan is approved, the consortium will develop an adjacent 650 room hotel and apartment development. This would enhance tourism to the nearby Karijini and Millstream National Parks as well as incubate other industries.

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WESTERN AUSTRALIA OUTLOOK Trends The majority of Western Australia members (86%) believe interest rates will drop further in the latter half of 2012, which is expected to have a positive impact on the property market. This will be especially seen in Kalgoorlie where higher activity is expected to result from improved affordability, and strengthening consumer confidence will underpin growth.

However, the slow market recovery to date is pushing the hand of many financial institutions, which are being forced in some areas of Perth to foreclose, and so increase mortgage defaults.

Solar power and energy and drought resistant gardens remain the most sought-after energy efficient features of a Western Australian property.

COMMERCIAL The Western Australia commercial property market will be driven by the strengthening mining industry, particularly in Kalgoorlie. The strengthening demand in resource markets will also positively affect the Perth office market. Tight vacancy rates in the city centre will see demand begin to flow to the outer regions of Perth.

Commercial property prices are expected to stay the same by all Western Australia members. Rental prices are expected to remain the same as well, with only 17% of members expecting them to trend downwards.

Increased job opportunities will significantly impact on the Western Australia commercial property market with the strongest growth expected to be in the industrial sector by 75% of members, and service industry for the remaining members.

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WESTERN AUSTRALIA OUTLOOK RURAL The Western Australia rural property sector will be driven by limited availability of stock in built up areas, and a need for price adjustments where demand is low.

Lifestyle properties represent the greatest growth in the rural sector for the state, especially in areas like Swan Valley, which is always a popular spot.

REAL ESTATE BUSINESS OUTLOOK 86% of Western Australia members expect their businesses to grow in the coming six months.

29% of members say 60-80% of their business comes from sales; 29% say 20-40% comes from sales; 29% say 40-60% comes from sales; while 14% say 80-100% comes from sales. The remainder of their respective business is expected to come from property management, which is expected to represent the most active sector for 43% of members, while 57% say it will be the residential sector.

The majority of members (86%) expect staff numbers to remain the same, however, the balance plan to hire additional staff.

Marketing spend is expected to remain at current levels, or increase for 57% of members, with 43% saying they would increase their use of social media tools to market properties.

Facebook is the preferred choice of social media tool used by 43% of members, followed by smartphones and Google (29% each), Blog, LinkedIn and Twitter (14% each) and then the web (10%).

71% of members said their take of Vendor Paid Advertising would remain the same for the second half of the year and 29% said it would increase.

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FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE

TASMANIA OUTLOOK ECONOMIC OUTLOOK The state of Tasmania’s economy is dependent upon global and national domestic economies.

According to industry experts, including First National members, the current budget deficit and economic times are ones that require and demand prudent spending and strong leadership, both of which are currently lacking.

Market conditions, in general, are not expected to improve, especially with the Tasmanian Budget charging property buyers more Stamp Duty.

Tasmania’s economy and the state of the property market are intertwined, and the state needs to progress incentives that will grow the state and increase its revenue. Tasmania needs first home buyers to get back into the market, which will then stimulate activity across the board. More sales will mean more revenue generated – as Winston Churchill said, “a national will never tax itself into prosperity”, yet that is exactly what is the current government is attempting to do.

The forestry industry, one of the state’s largest employers, has faced a number of setbacks, but it has been reported that tens of millions of dollars have been allocated in the budget to prop up Forestry Tasmania, pending a review.

Few, if any, significant regional projects were included in this year’s Tasmanian Budget, which demonstrates state leader’s lack of appreciation of what it takes to get things moving.

Irrespective of what happens to the local property market, the view is that Tasmania will bounce along, for a few years, as economies around the world sort themselves out and everyone gets their house in order.

MARKET OUTLOOK Market conditions in Tasmania are expected to deteriorate in the second half of the year, due to continuing job losses that will contribute to rising unemployment levels, low confidence in the state economy and high numbers of properties on the market.

The North Coast market will continue to fall, with more property listings coming onto the market (rising stock levels) and lower sales volumes, which will lead to a rise in the average number of days it takes to sell a property

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TASMANIA OUTLOOK Vendor discounting levels, for homes in Hobart, are higher than at this time last year.

There are increasing numbers of sellers who have had their properties on the market for months, even years, while some have called it a day and decided to simply stay put. Sellers with property still on the market are waiting for the return of the good old times, hoping for some sort of price peak, which was a feature in the market of old, but the market has well and truly changed.

The cold hard reality is the boom is gone and loss in equity is now occurring. Future gains will occur from today’s base, today’s actual market price – the price that would be achieved if the property did sell.

The good news is, that unlike previous markets, this time there are still many active buyers, interest rates are at historic lows for the state, and the only missing piece for a recovery is consumer confidence.

The key challenges facing local Tasmanian property markets are: • Increased costs of living, especially with the rising costs of essential services • Job security, and • Consumer confidence, particularly as it is affected by the current large cuts to the state budget The most significant factors affecting the state’s property market in the coming six months are the current state government, the resultant lack of confidence, and the continued cuts in state spending. This includes the government not producing any incentives for first home buyers to drive the lower end of the market.

Investors are selling their investments in the state due to the possibility of minimal capital growth over the next few years, which has also contributed to the increasing number of listings on the market.

Due to Tasmania’s weak economy, home buyers are nervous and are reluctant to purchase. Banks are tightening their lending policies - first home buyers need to save longer for a larger deposit because the banks require more savings, and stamp duty incentives were abolished last year.

Tasmania’s West Coast, Northwest Coast, areas of Hobart and East Launceston will be the best performing regions in the state in the second half of the year, with hot spots in locations exposed to the mining industry development continuing to outperform those that are not.

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TASMANIA OUTLOOK RESIDENTIAL Prices In general, property prices in Tasmania are expected to trend downwards, due to the ongoing consumer nervousness and lack of confidence in economic conditions. Land prices will suffer as an additional result of increasing building costs and lack of incentives for new home builds.

The most affordable median house priced suburbs within 20km of Hobart’s city centre are Herdsmans Cove and Gagebrook.

Dwelling prices in the city remain below the national average at $350,000 (national average $470,000), $360,000 for houses (national average $490,000) and $284,500 for units (national average $430,000).

Rental The rental market in Tasmania is expected to be flat for the remainder of 2012, in terms of both vacancy rates and weekly rents, with an ongoing steady supply meeting consistent demand.

Rents in Hobart went backwards, dropping by 3.9% over the year to date, bringing the average yield for houses and units to 5.3%.

Vacancy rates increased from 1% to 2.3% over the past 12 months, but this is expected to steady in the second half of the year.

Growth The upgrader segment represents the strongest growth in activity for the North Coast as buyers capitalise on prime market conditions of improved affordability and low interest rates.

Trends It is expected interest rates will decrease further, however any positive impact this could have had on the property market will be negated by the increasing costs of living such as rising electricity bills.

Abolishing Stamp Duty would help sustain the state’s property market over the coming six months.

The expected hikes in electricity, rates and water/sewerage rates will put financially strapped mortgage holders under further pressure, generating an increase in mortgage defaults in the area.

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TASMANIA OUTLOOK The most active sector of the market, according to Tasmanian members, will be the entry-level market where home values are less than $350,000.

Solar power and energy remain the most sought-after energy efficient features of a Tasmanian property.

RURAL The rural property market in Tasmania is expected to hold up for the remainder of the year, with the lifestyle segment representing the greatest growth sector on Tasmania’s North Coast.

COMMERCIAL The commercial property market in Tasmania is expected to weaken, with decreases in property and rental prices.

Low consumer, business and market confidence will drive decreases across the board. The market will also be affected by poor retail figures and increasing outgoings, putting businesses under financial pressure and forcing them to close down or relocate to more affordable precincts.

REAL ESTATE BUSINESS OUTLOOK Tasmanian members expect their business to remain the same until the end of the year, with 21-40% of their business coming from sales and the remainder from property management.

The residential market sector is expected to be the most active in the coming six months.

Members expect to spend the same amount of money on marketing in the second half of the year, and expected to maintain their current levels of social media activity to market properties, which includes Facebook, Twitter, the Web, Pinterest, Google and blogs.

All members said their take of Vendor Paid Advertising would remain the same for the second half of the year.

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FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE

NORTHERN TERRITORY OUTLOOK ECONOMIC OUTLOOK According to First National Northern Territory members, the Federal Government is not doing a good job managing the economy. However, there is a general feeling that even in light of this, the local economy will hold up, given the Territory’s strong resources sector.

Mining projects in Darwin will underpin its local economy, while Alice Springs will look to conditions improving as a result of growing consumer and business confidence.

Government tourism figures show domestic tourism is on the rise, with 73 million overnight trips taken in the year to March – up 5% from the same period last year. Domestic travel spending also rose 10% to $50 billion, with more than two-thirds of people travelling within their own state or territory.

In addition, the number of international trips was at a four year high – with 7 million trips being recorded. Both Darwin and Alice Springs will benefit from a stronger performing tourism sector.

Northern Territory members were split on whether they thought the RBA was doing a good job of managing monetary policy: • Darwin members believed it was, while • Alice Springs member said it was not.

While the RBA has been fiscally responsible by lowering interest rates, any economic or market recovery in Alice Springs is dependent on consumer confidence and increasing nervousness around job security. Northern Territory members say that investment in infrastructure is required to sustain any recovery in the state.

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NORTHERN TERRITORY OUTLOOK MARKET OUTLOOK Property market conditions in the Territory are mixed. Alice Springs is expected to continue contracting in the second half of 2012, while Darwin will strengthen and improve.

The high dollar is affecting tourism numbers; resulting in loss of jobs associated with the industry, further eroding confidence in both Alice Springs and the market.

Darwin is expected to be the best performing area in the state, growing on the back of Oil and Gas and US Defence projects. The $34 billion INPEX gas plant is providing enormous confidence in the Territory’s economy and future.

Bellamack and Johnston are Darwin’s most affordable suburbs within 20 km of its city centre.

There is also a large marine supply base under construction, which, along with several other projects that will gather momentum as Darwin is promoted internationally as an Oil and Gas hub, will influence the state’s property market in the coming six months.

In Darwin, home values stabilised in the first six months of the year, as evidenced by lower vendor discounting levels for units and houses than this time last year. Darwin now has an average median dwelling price of $472,500 (just above the national average), median house price of $510,000 (just above the national average) and a median unit price of $420,000 (just below the national average).

For the next six months, the INPEX project and Marine Supply Base will put enormous pressure on accommodation and while landlords/investors will reap the rewards, it may become very difficult for tenants to find suitable accommodation.

According to industry statistics, Darwin had the highest rental yields over the March-June quarter, with gross rental yields of 6.0% for houses and 5.9% for units.

Rent increases were recorded in Darwin over the March-June quarter, and vacancy rates slipped by 0.2% in February.

An ongoing undersupply of land will continue to be an issue for the Northern Territory property market, especially when there is demand. The Territory government will need to ensure they are able to create new freehold land to cater for future growth and increased demand.

Upgraders and investors are expected to be the most active drivers of the market for the state.

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SOURCES First National Real Estate members across the country Newspapers National, metropolitan and local suburban press

Websites Domain.com.au Hotspotting.com RPdata.com Smartcompany.com.au

HIA reports Property Observer QBE LMI Housing Outlook REI releases – national and state Residex Rismark International Smartline

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