2013 Deer Park Property Market Outlook - Mid Year Update

2013

Property Market Outlook Mid Year Update et , k r ma tions dic and e r p ds s! n e r t ot p s hot

Borg & Associates

2

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Contents Introduction

02

National Outlook

08

Market Trends } Residential } Property Prices } Rental Market } Growth

11 15 17 19

Commercial Property Market

20

Rural/Regional Outlook

23

Business Outlook

24

Deer Park Outlook

26

New South Wales Outlook

29

Victoria Outlook

39

Queensland Outlook

47

South Australia Outlook

55

Western Australia Outlook

63

Tasmania Outlook

71

Northern Territory

73

Sources

75

Introduction First National Real Estate has again surveyed its 400+ member network to provide its 2013 Property Market Outlook Mid Year Update.

This Outlook 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 responses to government initiatives, levels of confidence and varying approaches 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 to twelve months.

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

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.

The first half of 2013 has seen the market consolidate to some extent and strengthen, resulting in a much more positive outlook for the remainder of 2013. There is a general feeling that the current trend of revival will continue in the coming six months, although with Queensland and Tasmania displaying some levels of concern and caution.

02

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Introduction While interest rates are at historic lows, world economies are still adding to the insecurity of the market. Property values may also still be vulnerable to local influencing factors such as the upcoming federal election and resulting policy changes. Of particular focus will be changes to first home buyer and upgrader incentives, stamp duty and new home building and construction.

Even the Budget handed down in May this year called on all jurisdictions to reform inefficient state taxes including stamp duty. While this ignores the leadership role the Commonwealth should be taking, it is further support that something desperately needs to be done in this area.

It is incumbent upon whichever party leads this nation to introduce and implement incentives aimed at both established and new homes to support the construction industry, and further improve affordability for first home buyers, upgraders and retirees.

Quality stock is needed and this will only be freed up if people have a reason to enter the market, or move from their existing homes. In addition, incentives need to become uniform across the states, easy to understand, apply for and redeem.

The May Budget failed to deliver a credible housing plan that would improve affordability, deliver supply or cut red tape. A long-term plan is urgently needed to deliver housing supply to meet the needs of all Australians. While industry has the capacity to deliver affordable housing outcomes, it requires the commitment and support of the government of the day to address the issues outside of its control.

For the building and construction segment, Australia will need 1.3 million new homes built by 2020 and on current figures we will fall short by at least 150,000. Taxes, levies, fees and charges account for 40 per cent of the cost of a new home, which acts as a deterrent and makes it more economical to purchase existing properties. At 1 June 2013, building and construction had contracted every month for the last 34 months, and this year, Australia is expected to build 25,000 less homes than it did a decade ago.

The result from the upcoming federal election will be positive for the Australian property market, regardless of who comes into power. However, until the election is over, the market will, to some degree, hold its collective breath.

2013 Property Market Outlook Mid Year Update | First National Real Estate

03

Introduction Recent legislative changes introduced at the state and federal level in relation to the real estate market include: } The newly introduced Significant Investor Visa policy targeting foreign investors } Aged Pensioners Trial, a pilot programme designed to encourage retirees and empty nesters out of their existing homes to free up stock } South Australian vendors required to reveal their reserve prices to bidders } Expiration of first home buyer initiatives such as the Home buyer concession scheme in ACT for first home buyers, removal of subsidies from buyers of existing homes in the First Home Owners Grant in Victoria and the $8,000 Housing Construction Grant in SA } A new property tax with fire levy in NSW These changes are yet to result in any real changes, but their effects will ultimately be felt – whether they are enough to do what is necessary remains to be seen. While conditions are currently optimal with the historic low interest rates, excellent affordability and improved consumer sentiment, the long election lead up is serving to dampen market activity for longer than normal. This can also be seen as a positive for home buyers, with reduced activity meaning less competition amongst homes for sale, and lower prices, which further improves affordability.

Economic activity is currently predicted to grow for the remainder of 2013 and into next year, promoting speculation that interest rates may be even further reduced – a fact supported by our members. All First National state chairmen said interest rates should be cut further – 51 per cent of our members expect this will occur, while 43 per cent said they expect rates to hold at current levels.

Either way, the low interest rates are expected to see an increase in fixed rate mortgages, according to 86 per cent of our members, with some even saying home buyers may hold off for longer in the expectation rates may lower even further.

The challenge of low interest rates is that they could potentially lead to a quicker than expected rise in house prices on the back of households taking on higher debt. The associated boost to wealth and sentiment could in time generate stronger than expected consumption growth.

04

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Introduction On other fronts, First National Real Estate’s state chairmen and chief executive all agree – house prices across the nation have stabilised and are slowly beginning to trend upwards. Price growth will, however, be modest and nowhere near the 5 per cent to 7 per cent predicted by some economists.

At the state level, first home buyers are expected to be the most active in WA, while for NSW, SA, Vic, NT and QLD the upgrader segment, including retirees and investors, is anticipated to be the most active.

Property sales volumes should remain at current levels, and for some states such as NSW, Victoria and NT, begin to trend upwards. There is potential for stock volumes to drop off at election time, but to return once the federal government has been decided.

Stock levels are trending downwards, which may be partially responsible for the high auction clearance rates currently shown in the leading indicator states of Victoria and NSW. Auction clearance rates have been consistently higher than 60 per cent nationally, and around the 70 per cent mark in the key Melbourne and Sydney markets. This will place additional upward pressure on prices, which have already shown to be trending upwards in some areas – a trend expected to continue for the remainder of 2013.

Throughout 2013, the proportion of homes selling for more than double their initial purchase price has increased, continuing a trend evident since September 2012. Our member survey supports this data, showing that 48 per cent of members nationally expect prices to rise. However, it is unlikely we will see a solid upturn in house prices before 2015, due to cautious spending and borrowing behaviours.

The housing construction upturn has also continued. Indicators and enquiries suggest demand for new housing is strengthening. Approvals for housing and personal loans increased over recent months with a lift of 5.2 per cent in the number of home loans issued to owner/occupiers in March, led by strong gains in NSW and Victoria.

The two key market health indicators, the Days on Market (number of days it takes to sell a property) and Vendor Discounting (the reduction needed from the initial asking price), are both showing signs of a downward trend, signalling a positive outlook for the market.

2013 Property Market Outlook Mid Year Update | First National Real Estate

05

Introduction Our members are reporting the market is moving faster and buyers are becoming more decisive: City Sydney

Days on Market* 35

Vendor Discounting 6.1%

Melbourne

38

8.7%

Brisbane

70

7.7%

Adelaide

70

7.7%

Perth

77

5.1%

Darwin

56

4.3%

Canberra

37

5.0%

Hobart

81

12.2%

Vendor discounting levels fell in January, with evidence that buyers and vendors are becoming more realistic, adjusting their price expectations to find some common ground, and this points to an improving market. The average discount on a typical house was 7.5 per cent in January 2013, compared to 8.16 per cent for the same time the previous year.

As of June, the average discount has fallen to 6.8 per cent, according to RP Data.

Other good news for the property market in the coming six months is the gap between the resources and non-resources driven regions and states is closing. This should result in the market becoming more balanced across the country, creating stability and further supporting and strengthening any recovery.

The quietening in the resources sector is bringing new challenges, such as uncertainty over policy changes, for the market in resources driven states such as Queensland and Western Australia. However, some of the negative impacts may be offset by positive market trends such as increased interest from superannuation fund investors, finance loosening up to make funds more readily available for buyers, and improvements in forecast growth for the oil and gas sector.

A key trend to watch for is the rise of the foreign investor, especially in the commercial property market where they have increased by $11 billion since 2007, with almost 62 per cent of this being in the office sector.

06

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Introduction Foreign investment in Australia’s property market has continued to increase on the back of the country’s stable economy and high yielding assets, with Asian buyers leading the charge.

Some say Australia needs to attract as much investment capital from overseas as possible, and rather than just waiting for it to arrive like driftwood on our shores, we should be making efforts to garner every possible investment dollar and flicker of interest that increasingly wealthy overseas investors may be prepared to entertain in this country.

The flip side is too much interest may force prices to levels even more unaffordable for the average Australian.

Another trend is the rise in the number of people purchasing property through their superannuation funds, which 76 per cent of members say they expect will increase in the coming six months.

Real estate is much more affected by the domestic outlook rather than global influences at this stage. In Australia, the fundamentals of population growth and economic resilience are strong, although this does not prevent cyclical excesses from time to time, such as many believe are now being experienced in the Melbourne apartment market, where apartments are flooding the market and more are in the pipeline.

The labour market remains loose, with an unemployment rate above our full employment estimates of around 5 per cent. Retail sales rose strongly in January and February; consumer sentiment rose sharply in February/March and although it retracted a little in April, is still above average.

Regional areas of Australia will continue to remain subdued, with recovery from the tough economic conditions being waylaid by the weakening of the mining and resources sector.

However, property prices and rental prices for rural and regional areas should hold up for the remainder of the year, with little to no movement expected in general.

Lifestyle preferences will underpin the rural property markets across the nation.

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.

2013 Property Market Outlook Mid Year Update | First National Real Estate

07

National Outlook Overall, the housing market in Australia is in much better shape than it was a year ago, where values were still falling and market sentiment was very low. According to our survey, all state chairmen agree with the monetary policy of the RBA. Today, asset prices have strengthened, market conditions have improved, consumer confidence lifted and a lower exchange rate with the US has been achieved.

Recent media reports indicate: } Nationwide, the measure of house prices has increased by around 4 per cent since 2012, following a decline for the previous 18 months } Home lending approvals and auction clearance rates have both risen } Equity prices are up over 20 per cent since mid 2012 } Consumer confidence levels are well above long-run averages } Auction clearance rates are consistently higher than 60 per cent nationally, and around the 70 per cent mark in Melbourne and Sydney

08

First National Real Estate | 2013 Property Market Outlook Mid Year Update

National Outlook Market Snapshot as at 19 May City

Median Median House Unit Price Price $

Annual Auction Average Average home clearance Days on Vendor value rate Market Discounting change % $ % % House Unit House Unit

Sydney

593,000

470,000

+5.1

75.3

36

32

-6.6

-4.1

Melbourne

445,000

402,500

+2.6

72.7

48

54

-9.2

-4.4

Brisbane

430,000

349,900

+1.7

43.5

69

73

-7.4

-6.6

Adelaide

390,000

326,500

-1.9

53.5

71

71

-7.7

-6.5

Perth

480,000

425,000

+5.1

60.0

56

63

-5.8

-4.0

Hobart

325,000

240,000

–

14.3

60

95

-8.3

-7.6

Darwin

557,500

375,000

–

–

57

73

-2.2

-5.0

Canberra

520,000

489,000

–

45.9

36

109

-4.7

-3.7

While all state chairmen agreed interest rates should be cut further before the end of 2013, most believed this would not be enough to sustain the nation’s property market over that time. All agreed stamp duties and other property taxes should be abolished and the government needs to introduce more initiatives to support first home buyers.

In NSW, Victoria and Tasmania, state chairmen would also like to see a change in policy for new home building and approval process, while in the Northern Territory, Tasmania and Victoria they would like to see more certainty over policies concerning positioning of wind farms, coal seam gas mining operations, etc.

2013 Property Market Outlook Mid Year Update | First National Real Estate

09

National Outlook A key challenge for Australia’s property market is the lack of listings. Even though affordability is good at the moment, and market conditions are ideal, people are cautious to put up their homes for sale. There are a number of reasons that could be causing this: } People are staying in their homes longer. The average length of individual home ownership in Australia has risen by 36 per cent over the last decade. In 2002, it was 6.8 years and in 2012 it was 9.3 years } The cost of moving has become a deterrent for people who traditionally would have upgraded } The increasing popularity of home DIY renovation TV programmes has resulted in people renovating their homes } The increasing number of property investors who look at their investments as long term prospects, and so hold onto them longer

10

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Market Trends Residential The residential market is expected to continue its trend of steady and gradual improvement.

According to the vast majority of our members (93 per cent), the market has steadied or risen It is generally expected the market will improve, with only a small percentage of members anticipating any further deterioration, mainly in Queensland and Western Australia. While 70 per cent of members believe the market has turned, most of the remaining 30 per cent believe it will do so by the end of the year.

Market improvements are expected to be due to investors returning to the market, improving confidence, supply and demand ratios and a change of government. Market declines will result primarily from the downturn in the mining industry, although these could be tempered by improving coal and gas commodity prices.

Sales are also anticipated to improve in the coming six months, with 67 per cent of members saying they would increase and 28 per cent saying they would hold at current levels.

Even though there is currently strong affordability, our members say there is more required to improve confidence and get transaction volumes back to more normal levels: } Economic stability } Stronger consumer sentiment } Improved business confidence } Better fiscal management of Australia’s economy

2013 Property Market Outlook Mid Year Update | First National Real Estate

11

Market Trends Property listings volumes are expected to hold their current levels (44 per cent), with some members saying they may actually increase (39 per cent). Western Australia has the greatest proportion of members who believe property listings will not increase, followed closely by South Australia and Queensland. Victoria has the most members who expected property listings would increase.

According to our members, the key market indicator, Days on Market (DOM) is showing signs of stabilisation, or improvement, led by Queensland, then Victoria and NSW/ACT. Across the nation, members are evenly split on whether they will fall or remain steady (49 per cent for each).

Although Hobart is currently the country’s slowest market, taking 84 days to sell a house, Sydney has moved into pole position, taking just 35 days on average.

A change in government is expected to have a positive impact on the property market, according to 81 per cent of our members. This is primarily because with the change, confidence will be strengthened, especially if fiscal management improves.

12

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Market Trends Our members say that with any change in government, they would like to see: 45

62.32%

40

50.72%

35

42.03%

Respondees

30 25 20 15

15.94%

10 5 0

Abolish stamp duty

More first home buyer incentives

More incentives for upgraders

Replace stamp duty with land tax

Answer Growth of economic activity is likely to remain below trend into next year – promoting speculation rates may be even further reduced. According to our members, interest rates are generally expected to hold at their current rates or possibly even trend downwards further.

94 per cent of members expect interest rates will either fall further, or at the least, hold at current rates for the remainder of the year Any changes in interest rates should increase buyer and investor demand, stimulate vendor activity, and improve consumer confidence.

The low interest rates are expected to generate an increase in Fixed Rate Mortgages according to 86 per cent of our members, with some saying home buyers may defer their purchase even further as there is an expectation rates may continue to drop.

2013 Property Market Outlook Mid Year Update | First National Real Estate

13

Market Trends The residential market’s Entry Levels will be the most active in Australia, followed by the middle market, with very little activity anticipated for the prestige market New industry research suggests home buyers are prepared to spend a bit extra to go green – and according to our survey, members say solar PV power is the most sought after energy efficient feature, followed by ceiling insulation, eaves or window shades for westerly sun, and then motion sensor lights and drought resistant gardens, which are most popular in Western Australia.

By far the trend to watch out for in the coming six months is the increase in the numbers of foreign investor across all sectors of the property market, especially Asian investors, particularly from China.

Over the year to December 2012, Australia was the most active investment market in Asia Pacific and the most popular port of call for investors outside the region.

Chinese buyer interest in Australian real estate is up significantly compared to 2012, due to Australia’s stable housing market, regulatory protection and close time zone.

Recent initiatives such as the Significant Investment Visas have had an impact on cementing Australia as a preferred property investment destination. The impending convertible currency deal, where the AUD and RMB convert directly, will encourage Chinese buyer interest into the future.

Australia remains attractive to investors – largely because it is a mature, transparent real estate market where pricing looks attractive relative to the very low yields prevailing elsewhere in the world.

14

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Market Trends This trend of Chinese investors snapping up Australian real estate is expected to drive property prices upward, spurred on by the recent introduction of the Significant Investment Visa programme and the prediction of policy changes by the Chinese Government.

There is also a strong expectation by our members (76 per cent) that the number of people purchasing property through their superannuation funds will increase in the coming six months, led by Queensland and South Australia/Northern Territory, followed

by Victoria and then New South Wales and Western Australia.

Property Prices Between May 2012 and February 2013, capital city home values increased by 3.3 per cent, bringing them to around 4 per cent above their low point of mid 2012. Property experts predict capital city prices to grow 2.2 per cent in the coming 12 months, led by Western Australia (3.8 per cent), then Victoria (2.4 per cent) and NSW (2.2 per cent).

According to one industry report, house price rises in the vicinity of 3.5 per cent are forecast over the next two years to March 2015.

However, it is unlikely we will see a solid upturn in house prices before 2015, due to cautious spending and borrowing behaviours.

In the coming six months, our members expect house prices to hold and begin shifting upwards, led by Victoria, Western Australia and NSW. Queensland and SA/NT are the most conservative in their outlook, with the greater majority of members in those states expecting prices to remain flat.

2013 Property Market Outlook Mid Year Update | First National Real Estate

15

Market Trends House prices – Next six months 2013 Flat Downwards Upwards

National

NSW

VIC

QLD

WA

SA/NT

TAS

48%

40%

42%

66%

29%

60%

100%

4%

4%

–

7%

14%

–

–

48%

56%

58%

27%

57%

40%

–

Any price rises will be due to increased consumer confidence, improving market conditions and low supply compared to increasing demand. Overseas economic factors and the upcoming election will serve to put a ceiling on any potential increases.

Apartment prices – Next six months ABS forecasts that within the next 25 years, strata titled apartments are likely to out-rate houses as the number one choice of housing in Australia.

National

NSW

VIC

QLD

WA

SA/NT

TAS

Flat

60%

53%

42%

84%

57%

67%

100%

Downwards

15%

12%

25%

8%

14%

22%

–

Upwards

25%

35%

33%

8%

29%

11%

–

The upcoming election and rising body corporate fees are serving to keep price movements at bay, however any increases are expected to result from strong supply and demand ratios, improving affordability of houses compared to rentals and growing consumer confidence.

The NSW and Victorian markets appear to be the strongest performing for the coming six months, followed closely behind by WA.

16

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Market Trends Land prices – Next six months According to our survey, land prices are expected to remain flat or trend upwards, due mainly to the growing consumer confidence, strong supply and demand ratios and government policy changes. However, the upcoming election, up-front development costs and headwork charges are dampening any potential further gains.

Flat Downwards Upwards

National

NSW

VIC

QLD

WA

SA/NT

TAS

48%

48%

55%

64%

29%

30%

100%

4%

4%

9%

7%

14%

10%

–

45%

48%

36%

29%

57%

60%

–

Rental Market 2013 has been hailed as ‘the year of the property investor’ where interest rates are now below rental yields in many areas and attracting investment.

Rents are predicted to keep pace with an anticipated lift in house prices of 3.5 per cent according to one survey, depending on location. Western Australia is expected to produce the strongest gains.

There is relatively measured growth in the rental market. Over the 12 months to April 2013, capital city rental rates increased by 3.5 per cent for houses and 3.3 per cent for units. Across all capital cities, the weekly median rent for a house is $474 per week and $440 per week for a unit.

Gross rental yields currently sit at 4.3 per cent – ranging from 4.25 per cent for houses in Melbourne to 6.22 per cent for units in Darwin, compared to currently achievable 4.59 per cent fixed rates.

2013 Property Market Outlook Mid Year Update | First National Real Estate

17

Market Trends NSW and Western Australia are considered the most expensive rental markets, although there is high demand for units in Sydney, Melbourne and Perth, driving up median weekly asking rents in the March quarter. Upward pressure on rents is set to continue in Sydney, Perth and Darwin due to an ongoing chronic shortage of housing.

According to our members, the rental market in Australia will continue to be relatively tight, with little room for movement. Vacancy rates are expected to remain flat or trend downwards due to ongoing strong demand tightening the market even further. This is exacerbated by the improved affordability of houses in comparison to weekly rental prices.

Vacancy rates – Next six months National

NSW

VIC

QLD

WA

SA/NT

TAS

Flat

46%

44%

27%

50%

57%

60%

100%

Downwards

38%

37%

55%

43%

43%

10%

–

Upwards

16%

19%

18%

7%

–

30%

–

The ongoing tight rental markets across Australia will continue to place upward pressure on weekly rental prices. However, given the strong affordability of housing at the moment, there is not much more the market can bear in terms of weekly rental prices.

Queensland and Western Australia lead the anticipated weekly rental price increases, followed by NSW and then Victoria and then South Australia.

Weekly rentals – Next six months

18

National

NSW

VIC

QLD

WA

SA/NT

TAS

Flat

35%

33%

41%

27%

14%

60%

100%

Downwards

11%

11%

17%

–

14%

20%

–

Upwards

54%

56%

42%

73%

72%

20%

–

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Market Trends Growth Members anticipate the strongest growth in their regions will come primarily from investors, followed by upgraders, then first home buyers, and lastly, from retirees Investors will be the strongest growth area for NSW and Queensland, while Upgraders will reign supreme for South Australia and Victoria. Western Australia will see most action from first home buyers who are also expected to be relatively active for South Australia.

Investor activity will be driven by higher returns and yields with improved potential for capital growth.

A key indicator for investors of potential capital growth areas are locations with strongly rising sales numbers, and/or strong rising residential rents which are likely to translate into price rises, like those in: } Tonsley area of Adelaide including Clovelly Park, Marion Mitchell Park, Seacombe Gardens, St Marys and Sturt recording a 46 per cent rise in sales in four months } Rockingham City, Murdoch precinct of Perth where recent figures show annual sales numbers have risen by 21 per cent in four months } Dromana on the Mornington Peninsula in Victoria, including the towns of Rosebud, Rosebud West and Safety Beach, all recording a 10 per cent rise in sales volumes over the past four months.

2013 Property Market Outlook Mid Year Update | First National Real Estate

19

Commercial Property Market The 2013 commercial property market continues its trend of revival with commercial members reporting increased activity levels and record sales.

Our member survey shows 60 per cent of our members believe the commercial property market will remain steady for the next six months, led by Queensland, NSW, South Australia and Western Australia. However, Victorian members believe the sector will strengthen in their state over the coming six months.

Any weakness in the sector is seen as a result of reduced business sentiment especially for retail, and the downturn in the mining and resources sector.

According to 71 per cent of our members, commercial property prices should remain relatively steady, fairly equally divided across all states.

However, 60 per cent of members believe commercial rental prices will remain steady over the coming six months, with 15 per cent expecting them to trend upwards, led

by Victoria.

Our members anticipate the commercial property sector over the coming six months, will be driven by improving confidence, especially following the upcoming federal election, strengthening economies both locally and overseas and the growing trend for tenant incentives in the form of discounting.

According to our survey, 58 per cent of our members are already seeing this trend occurring, and 68 per cent say they believe it will continue for the remainder of 2013.

20

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Commercial Property Market Commercial tenants have the upper hand in current conditions, with landlords resorting to offering tenant incentives of up to 30 per cent across the Melbourne, Sydney and Brisbane CBD’s office markets in a bid to retain them.

Incentives range from 22 per cent to 30 per cent, with B grade space in Sydney’s Southern precinct having the highest incentive of 28 per cent to 30 per cent. Melbourne and Brisbane CBD’s are not far behind, ranging from 20 per cent to 30 per cent, while Adelaide CBD incentives range from 5 per cent to 20 per cent, Perth CBD incentives range from 5 per cent to 10 per cent and Canberra ranges from 8 per cent to 20 per cent.

Office vacancy rates are rising, new stock is coming on line and an abundance of backfill spaces, especially in Melbourne, are flooding the market. But this trend is expected to spread across all CBDs over the next two years as large tenants seek to consolidate operations or improve cost efficiencies.

There are clear signs of rising transactional activity in the retail sector, driven by the attractive yields relative to borrowing, coupled with the reasonable returns that can be generated.

According to industry reports, approximately 45 per cent of all real estate investment in the Asia Pacific is flowing into the Australian commercial property market.

Foreign investors remain significant players in the commercial property market, increasing by $11 billion since 2007, with almost 62 per cent of this being in the office sector.

Offshore buyers of Australian commercial properties are approximately four times greater in number than those selling their investments.

Foreign investment in Australia’s property market has continued to increase on the back of the country’s stable economy and high yielding assets, with Asian buyers leading the charge.

Australia will remain attractive for Asian commercial investors, given its political and economic stability, ease of access, familiarity with many Asian investors, and the lack of property investment alternatives in the south east Asia region.

2013 Property Market Outlook Mid Year Update | First National Real Estate

21

Commercial Property Market The office investment market is generating demand, given the currently attractive yields on offer. However, half of our members believe the greatest growth will come from the industrial sector The biggest challenges facing Australia’s commercial property market are consumer confidence, raising finance and lack of suitable development sites. As consumer and business confidence starts to build, this will become less of an issue, however, the challenge of raising finance and lack of supply will continue to plague the sector for some time to come.

22

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Rural/Regional Outlook According to our survey, almost 60 per cent of members expect the rural/regional property market to perform steadily over the coming six months, however there is still residual weakness from the recent difficult market conditions – of particular relevance in NSW. The subdued market is seen to result from the ongoing tough post GFC lending conditions, supply and demand ratios and the low interest rates propping up the market.

Rural property prices will be affected by oversupply, lack of demand, and some over-inflation of prices. This will produce relatively stable prices, with little room for any upward or downward movement, apart from in Victoria 63 per cent of members expected rural property prices to remain flat, while 50 per cent in Victoria say they will trend upwards.

Rural rental prices will also remain relatively flat according to 60 per cent of members, due to reducing demand and falling commodity prices. Although, 83 per cent of Victorian rural members expect rental prices for the rural sector will actually strengthen and only 12 per cent of members across the nation expect any weakening at all.

The most active sectors will be driven by lifestyle changes and preferences and increasing buyer confidence.

Across the board, the Lifestyle sector is expected to demonstrate the greatest growth over the coming six months, although horticulture and broadacre farming sectors will also have some growth.

2013 Property Market Outlook Mid Year Update | First National Real Estate

23

Business Outlook Our members have a very positive outlook for their businesses over the remainder of 2013, with 79 per cent of them anticipating their businesses will grow and the remainder expecting them to maintain their status quo. Interestingly, all Victorian members expect to grow their business over this period.

The anticipated growth in their businesses is expected to result in 37 per cent of our members employing additional staff members, while 60 per cent said they will perform the work with the same workforce numbers.

The most active sector will be the residential property market according to 65 per cent of our members, followed by property management (34 per cent) and then commercial (1 per cent).

Not one member said they would decrease their marketing spend in the coming six months, with 40 per cent saying they anticipated increasing their spend, and the remaining majority saying they would maintain their current levels.

However, 73 per cent said they would increase their use of social media tools, and 14 per cent saying they would hold their current level of use. Facebook continues to dominate as the most preferred social media tool to use for marketing properties.

24

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Business Outlook Which social media tools will you use most – next six months?

60

85.07%

Respondees

50 40 30 28.36%

20 10 0

7.46% Facebook

Twitter

28.87%

20.90%

Blog

5.97%

1.49% LinkedIn

Pinterest

Google+

Instagram

Answer When asked if they would increase their Vendor Paid Advertising, 52 per cent said they would and 32 per cent said they would continue at current levels.

2013 Property Market Outlook Mid Year Update | First National Real Estate

25

Deer Park Outlook The Deer Park district property market in Melbourne’s North West is set to improve over the remainder of 2013, with strengthening market conditions on the back of a stable market in the first half of the year.

Underpinning the market will be increased market activity, strengthening buyer confidence and interest rate reductions.

Key performance indicators show the average number of days a property is on the market is expected to fall in the coming six months, with an increase expected in Sales while Property Listings will hold their current levels – all signs the market is improving after having already upturned.

The market will further improve following the upcoming Federal Election, where there is expected to be a change in government. This will have a positive impact on the market, where any change is seen as good, and should inject further confidence into the market.

Projects identified as having a significant impact on the local property market in Deer Park include the Deer Park Bypass and it is hoped the electric train will have a similar impact, however it would have been much better for there region if the state government had taken it up to Melton, with all the development proposed for that region.

It is evidence the West needs more infrastructure with all the growth the state government is proposing and it needs it now before all the developments commence.

Even with the current high affordability, more is required to see transaction volumes return to more normal levels including improved stability in domestic and overseas economies, better fiscal management of Australia’s economy and stronger consumer and business sentiment.

26

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Deer Park Outlook It is also incumbent on the Australian government, whichever party is in power, to support Australia’s property market over the coming six to 12 months and it should consider abolishing stamp duty.

Stable jobs equal confidence and reduction in interest rates or even stability, equals confidence. Confidence generates spending and spending generates manufacturing which equals employment. The demographics of the Deer Park region, and economy, is mainly manufacturing and in the last three years there has been an increase in the amount of manufacturing heading offshore, especially to Asian countries due to economic cost efficiencies.

Little movement is expected for all sectors of the property market, including houses, apartment/strata and land. House prices will suffer from reduced activity, as home buyers realise the absence of any further grants. The improved affordability level has brought apartment/strata property prices in line with houses, which will keep a lid on any potential price gains for this sector. Low building and construction activity, in the face of plenty of land supplies, will keep land prices relatively flat as well.

The rental market is expected to put in a strong performance, with vacancy right tightening further. However, some relief is in store for renters, with weekly rental prices expected to trend downwards due to lack of affordability.

Investor activity is expected to increase in the Deer Park region, representing the strongest growth in activity over the coming six months. They will be driven by the improving returns and yields as well as potential capital growth given the strength of the renal market.

Of particular interest is the current trend for increasing numbers of people to purchase investment properties through their superannuation funds which is expected to continue in the second half of the year.

Foreign investors in particular will have a greater impact on the region’s property market, due to the abundance of land classified as UGB, and it attracts land banking.

2013 Property Market Outlook Mid Year Update | First National Real Estate

27

Deer Park Outlook Interest rates are expected to continue to reduce further, which will see increased demand by buyers, especially investors, as well as increased vendor activity and even greater improvement in consumer confidence.

The historic low interest rates are expected to see the number of people applying for fixed rate mortgages to increase in the coming six months. Mortgage-holders will be keen to lock in their interest rates for financial security in the future, before rates inevitably rise again.

The Entry Level market, where properties are priced below $350,000, is expected to show the most activity in the coming six months. Solar PV power will be the most sought after energy efficient feature of a property in the region.

28

First National Real Estate | 2013 Property Market Outlook Mid Year Update

New South Wales The New South Wales property market is expected to continue its revival into the second half of 2013. House prices are expected to continue heading upwards, due in part to lower stock levels placing further pressure on property values as well as key market indicators also showing the market is set to strengthen.

The average Days on Market (DOM) is expected to steady, or fall further, according to 52 per cent and 48 per cent of members respectively. Across the regions of Greater Western Sydney, Central Coast, The Hunter, Illawarra, North Coast, Northern Rivers, Snowy Mountains, South Coast, Southern Highlands, Southern Tablelands, Sydney and the ACT our members are all reporting expectations the DOM will hold at current levels.

Sydney is the main region where the DOM is expected to fall.

The average days on market for Sydney in June was sitting around 35 days and this is expected to fall further.

There has been a market upturn for 74 per cent of our members. The remaining 26 per cent say it will still trend downwards although this is not expected to be the case for much longer. The Hunter, Illawarra, South Coast, Southern Tablelands and the ACT regions say the market has yet to turn, however most believe it will do so before the end of 2013, or early in 2014.

Sydney in particular is performing very strongly, with inner west Sydney recording an auction clearance rate of 86 per cent in April, the third highest recorded for any April over the past decade.

Sydney also recorded the highest quarterly increase in asking prices for houses, rising 4 per cent in the March quarter. It also recorded a rise of the asking price of units of 3.4 per cent.

2013 Property Market Outlook Mid Year Update | First National Real Estate

29

New South Wales First home buyers continued to lack confidence in the first half of the year with government grants to first home buyers falling by 56 per cent in the last quarter of 2012.

As a proportion of the mortgage market, first home buyers fell to their lowest share of the market in more than eight years in February. First National members call on the state government to reinstate first home buyer incentives and explore other options such as including established homes in the first home buyer grants.

Market outlook 67 per cent of our New South Wales members expect market conditions to improve as a result of prime market conditions of low interest rates, improving market confidence with the potential change in government, investors returning to the market and stock shortages to meet strong demand.

New England/North West, Mid North Coast, Snowy Mountains, South Coast and Sydney are the regions where conditions are expected to improve the most, followed by Greater Western Sydney, The Hunter, Northern Rivers and the ACT. This comes on the back of a market that steadied in the first half of the year, according to 51 per cent of members and rose according to 41 per cent.

However, the downturn in the mining sector and increasing job insecurity means any recovery will not be state wide, with 29 per cent of our members saying they expect conditions to remain the same and 4 per cent expecting some deterioration to occur.

Sales are expected to increase in the coming six months, according to 67 per cent of members, however property listings will continue to struggle with only 37 per cent of member expecting any rises in stock volumes.

30

First National Real Estate | 2013 Property Market Outlook Mid Year Update

New South Wales Given the strong affordability, our members see more being needed to bolster the state’s property market including: } Stronger consumer sentiment } Better fiscal management of Australia’s economy } Improved infrastructure within the state The key influencing factors underpinning the state’s property market in the second half of 2013 remain low interest rates, low stock levels and low levels of new properties coming onto the market, improving consumer confidence and the upcoming federal election.

Residential Prices Property prices in New South Wales are anticipated to climb 2.2 per cent according to industry experts. This is in accordance with the findings of our survey, where members say prices will stabilise and or rise in the coming six months.

56 per cent of members expect house prices to increase whereas 40 per cent anticipate no change. With apartments, the majority anticipate prices to remain static - just 35 per cent see possible increases Any rise in house and apartment/strata prices will be driven by improving consumer confidence resulting from the improved market conditions with low interest rates and strong affordability. Supply and demand ratios will continue to influence the market, however the upcoming federal election will diminish potential for more increases. Price increases are anticipated for the regions of Greater Western Sydney, Central Coast, New England/North West, Mid North Coast, Northern Rivers, Snowy Mountains, South Coast and Sydney in general.

Limited stocks will drive land price increases, while oversupply will underpin flat land prices. Building and development costs are also dampening potential activity for new homes and construction.

2013 Property Market Outlook Mid Year Update | First National Real Estate

31

New South Wales Rental The ongoing tight rental markets across the state are set to continue in the coming six months, with little room for movement in vacancy rates 37 per cent of members say these will trend downwards over that period especially in the New England/North West, Mid North Coast, Northern Rivers, Snowy Mountains, South Coast and Sydney regions, while 44 per cent say they will remain flat.

The mining downturn is serving to ease vacancy rates in some areas along with increasing investor activity easing supply pressures, particularly in the regions of Greater Western Sydney, the Hunter and some parts of Sydney.

The tight rental market will continue to place upward pressure on weekly rent prices, with 56 per cent of members indicating they expect them to rise in the coming six months, while 33 per cent say they will remain flat. Rental increases are expected in the Central Coast, New England/North West, Mid North Coast, Northern Rivers, Snowy Mountains, South Coast, Southern Highlands, Southern Tablelands and Sydney regions.

In the Sydney rental market, house rentals remained flat at an average of $500 in the March quarter, but unit rents rose by 2.2 per cent to $470 per week.

Demand for units in Sydney in particular is being influenced by low first home buyer numbers as well as emerging lifestyle preferences which will see prices rise for this area of the market, particularly at the more affordable end of the price spectrum.

32

First National Real Estate | 2013 Property Market Outlook Mid Year Update

New South Wales Growth Sydney in general is a hot spot, but other areas include Sydney’s western suburbs of Blacktown and Penrith and the south western suburb of Campbelltown, which was among the favourites for capital growth over the coming 12 months.

Investor activity is expected to increase by 52 per cent of New South Wales members, driven by strong rental returns, better yields and improved potential for capital growth.

Investors will be particularly active in the Greater Eastern Sydney, Central Coast, The Hunter, New England/North West, Mid North Coast, Northern Rivers, Snowy Mountains, South Coast, Southern Highlands, Sydney and ACT regions.

The investor segment is expected to represent the strongest growth in activity (44 per cent of NSW members), followed by upgraders (26 per cent) then retirees (19 per cent). First home buyers (11 per cent) will be the least active

Trends The current trend of New South Welshman leaving the state in droves and heading for the resources rich states of Western Australia and Queensland is expected to continue into the second half of the year.

There is also an expectation that the increasing number of people purchasing property through their superannuation funds will strengthen, with 70 per cent of members saying they expect the trend will continue in the second half of 2013.

Foreign investors, already an active segment of the Sydney and regional markets where there are infrastructure projects, are expected to impact on the state’s property market over the next six months.

The majority of New South Wales members (52 per cent) believe interest rates will drop further in the second half of 2013, which will increase buyer demand, vendor activity and improve consumer confidence

2013 Property Market Outlook Mid Year Update | First National Real Estate

33

New South Wales The most active market sector for the New South Wales property market will be the Entry Level market (properties priced less than $350,000) according to 56 per cent of members, with the remaining 44 per cent saying it will be the Middle market. The Middle market will be most active in the Greater Western Sydney, Snowy Mountains, Southern Highlands and Sydney regions. Bargain hunters will be most active in the Central Coast, The Hunter, Illawarra, New England/North West, Mid North Coast, Northern Rivers, South Coast, Southern Tablelands and ACT regions.

Historically low interest rates are expected to influence an increase in the number of people taking out fixed rate mortgages, according to 85 per cent of our New South Wales members, as home buyers and owners seek more future financial security.

However, interest rates alone will not sustain the property market in New South Wales for the remainder of 2013. After the upcoming federal election, it is hoped the returning, or new government will:

18

69.23%

16 50.00%

Respondees

14 12

46.15%

10 8 6 4

7.69%

2 0

Abolish stamp duty

More first home buyer incentives

More incentives for upgraders

Replace stamp duty with land tax

Answer

34

First National Real Estate | 2013 Property Market Outlook Mid Year Update

New South Wales In addition, changes to policies for new home building and approval processes need to be reviewed and may even require a complete overhaul.

Solar power and ceiling insulation continue to be seen as the most sought-after energy efficiency features for New South Wales property buyers.

Commercial While the commercial property market in New South Wales is expected to hold up quite well in the coming six months, more members are expecting some softening in the coming six months compared to the first half of the year.

67 per cent of New South Wales members say the commercial property market will remain steady. There is a need for greater business confidence before any real improvement will be seen The commercial property markets in the Illawarra and Mid North Coast regions will see the most strengthening.

The downturn in the mining sector has bitten in New South Wales, accounting for the increasing number of members who expect some weakening across the sector.

There is a general feeling amongst members that the upcoming federal election will inject some positive sentiment, when small business incentives are likely to be introduced.

Our member survey highlights that 61 per cent of New South Wales members expect commercial property prices to remain the same, which will result in rental prices also remaining the same.

The greatest growth for the sector will come from the industrial segment, according to 50 per cent of New South Wales members, while 7 per cent say it will be the office segment and 14 per cent say it will be for each of retail, service and hospitality segments.

2013 Property Market Outlook Mid Year Update | First National Real Estate

35

New South Wales 65 per cent of New South Wales members are currently seeing the trend for landlords to offer tenant incentives, and 73 per cent expect this trend to continue for the remainder of 2013.

Rural The rural New South Wales property market is a mixed bag, where 50 per cent of our state members say the market will remain steady, but 50 per cent say it has the potential to weaken in the coming six months An oversupply of rural properties on the market, in the face of low demand, is serving to keep rural property prices at current levels, according to 56 per cent of New South Wales members, while 38 per cent say they will decrease before the end of 2013.

Falling commodity prices is the determining factor for rural rental prices, which 80 per cent of New South Wales members say will also hold at current levels. The regions of Illawarra and Southern Highlands are the only regions where any potential increase in prices is expected.

No real improvement is expected for the state’s rural property market until consumer confidence strengthens and the federal government is decided.

The greatest growth is expected to come from the lifestyle sector, according to 93 per cent of New South Sales members, with the remaining 7 per cent saying it will come from horticulture.

36

First National Real Estate | 2013 Property Market Outlook Mid Year Update

New South Wales Regional hot spots include: } Mudgee where house prices increased by 17.22 per cent over 2012, the biggest growth of all regional New South Wales areas, and with a new median house price of $299,500. Rents increased 16.13 per cent to $360 producing yields of 6.28 per cent } Boggabul, which was named among the best performing suburbs in the country New South Wales property market for the year ending April 2013, with 24.37 per cent growth } Singleton, where units recorded growth of 13.07 per cent for the year ending April 2013, ensuring its place in the best performing New South Wales country suburbs } Cessnock in the Hunter Valley, being named among the nation’s top 10 regional growth suburbs, where it experienced a 14.8 per cent jump in the median house price for the year ending March 2013, driven largely by the local mining industry } Port Stephens in the Hunter region, which grew 8.6 per cent, attributed to local mining industry, defence force housing needs, infrastructure inputs and an influx of lifestyle changers to the region

Real estate business outlook 74 per cent of New South Wales members expect their businesses to grow in the coming six months, while the remaining 26 per cent expect them to stay the same The regions of Greater Western Sydney, Mid North Coast and Sydney in general are expected to generate the most business growth, while Central Coast, Illawarra, New England/North Coast, Northern Rivers and South Coast, Southern Highlands also have potential business growth opportunities.

2013 Property Market Outlook Mid Year Update | First National Real Estate

37

New South Wales The majority of New South Wales members (59 per cent) expect staff numbers to remain the same, however, 37 per cent expect to put on additional staff, which is significantly up from the first half of the year.

The most active market sector for 74 per cent of members is Residential sales, while for 26 per cent of New South Wales members it will be Property Management.

Marketing spend is expected to remain at current levels or increase for 90 per cent of members, with 70 per cent saying they would increase their use of social media tools to market properties.

Facebook continues to dominate as the preferred social media tool by New South Wales members, followed by Twitter, LinkedIn, Google, Blog and then Pinterest and Instagram.

56 per cent of members said their take of Vendor Paid Advertising would increase in the coming six months, while 26 per cent said it would remain at current levels.

38

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Victoria The Victorian economy is weak and key markets are over-supplied so the market itself is still relatively subdued. However, suburbs such as those around Dromana on the Mornington Peninsula including Rosebud, Rosebud West and Safety Beach recorded a 10 per cent rise in sales volumes in the first quarter of 2013.

Interestingly, Victoria is the only state where members predict any movement in the high end property market – probably as a result of expectations the market will begin to move and cashed-up home buyers hoping to capitalise on the subdued market conditions before the prestige market becomes unaffordable for them once again.

Melbourne unit prices increased by 2.9 per cent, averaging $360 per week – the same current weekly asking rent as houses. Despite the growing popularity of inner city living, Melbourne remains a relatively tenant-friendly market with lower rents set to continue as significant numbers of new apartments are released to the market.

Vendor discounting over the March quarter saw Melbourne vendors record a drop in their asking prices for houses of 0.7 per cent, however, units experienced an increase of 1.1 per cent.

Melbourne’s average Days on Market (DOM) was 45 days in May 2013.

A clearance rate of 72 per cent was reported for the state in early May.

Market outlook Ongoing low interest rates, easy access to services and good transport linkages are the key factors underpinning Victoria’s property market in the coming six months. The upcoming election, consumer confidence and improving investor returns and yields will all serve to bolster the market before the end of 2013.

2013 Property Market Outlook Mid Year Update | First National Real Estate

39

Victoria On the back of a predominantly stabilising market for the first six months of this year, 83 per cent of members believe the market will improve in the latter half of 2013, with 92 per cent saying the market had already up-turned. The remaining 17 per cent of members say the market will steady, expecting it to trend upwards around the end of the year or beginning of 2014.

92 per cent of Victorian members expect sales and 64 per cent expect property listings to increase in the coming six months. This means there is still some room for Victoria’s property prices to fall further in pockets of Melbourne, particularly around the Eastern and North Eastern suburbs and Victoria’s North East and East Gippsland regions.

Victorian members are evenly split on their expectations for the average number of Days on Market (DOM) to fall or remain steady. In the main, Melbourne’s Eastern, Western, North and North Western suburbs are expected to see DOM fall, while the South Eastern corridor and North East and East Gippsland regions should see them hold at current levels.

Affordability levels are very strong at the moment, however more is required to see market transaction volumes back to more normal levels. Greater stability in overseas and domestic economies, stronger consumer sentiment, improved business confidence and better fiscal management of Australia’s economy would all assist.

Residential Prices With improving market conditions, property prices in Victoria are, in the main, expected to hold or rise House prices are expected to remain flat, or rise according to 42 per cent and 58 per cent of members respectively. Apartment/strata prices will remain flat according to 42 per cent of members, or increase (33 per cent). Land prices will also remain relatively flat for 55 per cent of members, or increase for 36 per cent of members.

40

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Victoria Apartment/strata and land values will potentially fall in the regions of Melbourne’s eastern suburbs and Victoria’s North East.

Property prices are expected to rise approximately 2.4 per cent in the coming 12 months, according to industry experts.

The looming federal election and residual lack of consumer confidence is dampening further price growth potential for houses.

Increasing body corporate fees are serving to curtail activity and interest in the apartment/ strata property market across the state. Inner city Melbourne’s prime apartment/strata sub market however, seems to be getting ahead of the trend for apartment living and will be primed to capitalise on it when it hits full force.

According to recent reports, about 25,500 new apartments will be completed in Metropolitan Melbourne by the end of 2014, four times what was built in 2005, when the market last peaked. There are more in the pipeline: 19,250 are under construction across Melbourne and 16,300 marketed, but not yet under construction.

Melbourne’s Eastern suburbs may be suffering to some degree as a result of the recent influx of apartments flooding the market, at a time when supply is good in the region.

However, this trend is not expected to continue and will soon start to rise again, as the state’s economy picks up.

Subdued land prices are resulting from the high costs of development and building and lack of government-backed incentives in a market where purchasing established houses is more cost effective, in many cases, than buying new or building. In Melbourne’s South East, there is currently an oversupply of land which is dampening home buyer enthusiasm in the region.

2013 Property Market Outlook Mid Year Update | First National Real Estate

41

Victoria Rental Victoria recorded the slowest growth for the rental property market in the March quarter of 0.3 per cent, and this lacklustre performance is expected to continue for the remainder of the year.

The market may continue to be vulnerable due to the abundance of apartments coming onto the market in the coming few years, which is relieving pressure on prices and may result in an oversupply of properties. Some corrective action may be required, which may stall any full recovery.

55 per cent of Victorian members expect the rental market to tighten further, with vacancy rates trending downwards or holding (for 27 per cent of members), however the balance are split on whether weekly rents will rise or remain flat. Victoria’s North East region will have a relatively strong performing rental market, where vacancy rates should hold steady but weekly rental prices will potentially increase.

In Melbourne’s north western suburbs, the rental market may ease slightly where lowering weekly rental prices will be offset by a drop in vacancy rates. In the city’s South Eastern suburbs, flat vacancy rates with little room for movement will force weekly rental prices to trend upwards.

Growth Half our Victorian members anticipate investor activity will increase as a result of improving rental yields and increased affordability - with low interest rates producing good buying opportunities and bargains.

While investors are expected to represent a strong growth sector in Victoria according to 25 per cent of members, it is the upgrader segment which most members again expect to be the strongest (42 per cent). 17 per cent of members say the strongest growth will come from retirees’ changing lifestyles, and 16 per cent say it will be first home buyers.

42

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Victoria Victorian first home buyers remain shy to dip their toes into the market, despite the fact those purchasing an existing home receive the highest amount of financial support from their state government.

Melbourne’s South Western suburbs expect first home buyers to be most active in their region, along with some areas of Melbourne’s South East region, such as Cranbourne.

Upgraders are expected to be the most active in Melbourne’s Eastern suburbs and other regions of the South East growth corridor. Investors will be most active in Melbourne’s North Western region.

Trends Victorian members are equally divided on whether they believe interest rates will drop further in the latter half of 2013 or remain at current levels (42 per cent each). Members expect to see increased buyer demand including investors, stronger vendor activity and improved consumer confidence.

Around 42 per cent of Victorian members believe foreign investors will have an impact on the state’s residential property market over the coming six months. This will be driven by the decreasing value of the Australian dollar and the lure of value, growth and possible returns.

Given historically low interest rates and improving market conditions, 92 per cent of Victorian members expect to see an increase in the number of people applying for fixed rate mortgages in the next six months. Some members believe, however, that a percentage of existing and potential mortgage holders are still holding out until they believe interest rates have bottomed before taking this step.

Half our Victorian members expect the entry level market, with properties less than $350,000, to represent the strongest sector of activity in the latter half of 2013, followed by the Middle Market (42 per cent) and then the prestige market (8 per cent).

In inner Melbourne, hot spots are seen as Thornbury, with a 96.4 per cent clearance rate, followed by Mill Park at 92 per cent, Camberwell at 90.7 per cent and Surrey Hills at 90 per cent in April.

2013 Property Market Outlook Mid Year Update | First National Real Estate

43

Victoria With more than 11 per cent of Melburnians considering relocating to regional Victoria, any major areas within one to two hours drive will experience an increase in real estate growth.

Given that, the best performing country Victorian towns for the year ending April 2013 are said to include: } Lethbridge, where houses showed price growth of 20.88 per cent } Wollert, where units showed price growth of 10.75 per cent.

Victoria’s 10 largest regional cities are growing twice as fast as five years ago and include Ballarat, Bendigo, Geelong, Horsham, Latrobe, Mildura, Shepparton, Wangaratta, Warrnambool and Wodonga.

However, it is Victoria’s Bellarine Peninsula that is considered to be the best performing area for the state.

Solar power and ceiling insulation are seen to be the most sought-after energy efficient features of a Victorian property.

Commercial Victoria’s commercial property market is expected to strengthen in the coming six months according to 83 per cent of members, with the remainder saying it will stabilise. The significant factors affecting the local commercial property markets include general business confidence and lack of developer activity.

While there is some potential for gains, commercial property prices and weekly rental prices should mainly hold at current levels 71 per cent of members expect commercial property prices to remain flat, with the remaining 29 per cent expecting them to increase.

Rental prices are expected to remain flat by 57 per cent of members, while 29 per cent expect them to increase.

44

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Victoria Members are evenly split on the most active market sectors, with each of Industrial, Retail and Service taking a third.

67 per cent of members expect the current trend of landlords offering incentives to tenants to continue for the remainder of 2013.

Rural The rural property market is also expected to put in a stable performance in the second half of 2013, although there is some potential for a weakness to occur, primarily reserved for the state’s North East region.

Property prices are expected to increase for the rural sector according to 50 per cent of members, while the remaining half are evenly split on whether they expect them to remain flat or decrease.

Rental prices are expected to remain stable for 75 per cent of members, or increase for 25 per cent.

Activity in the rural property markets of Victoria will be driven by good returns on all products produced, good rains and seasonal conditions and the possibility of no major natural disasters.

The Lifestyle sector is expected to be the most active for 50 per cent of Victorian members, while Horticulture will be for 25 per cent of members and Broadacre for the remaining 25 per cent.

Strong enquiry from China and India is expected to see foreign investors impact on Victoria’s rural property market. Our members would like to see the government provide more encouragement to existing families and incentives to stay on the land, as weak foreign policies are seeing Australian ownership of rural properties reduce.

2013 Property Market Outlook Mid Year Update | First National Real Estate

45

Victoria The top rural regions for annual price growth have been recorded as: Region

Price Growth

Macedon Ranges

23.1%

Latrobe

13.7%

Mitchell

11.9%

Surf Coast

10.9%

Greater Shepparton

10.6%

Mornington Peninsula

8.5%

Real Estate Business Outlook All Victorian members expect their businesses to grow in the coming six months, with the residential market expected to be the most active sector according to 83 per cent of members.

Members are equally split (45 per cent each) on whether they expect staff numbers to remain the same or increase, with only 9 per cent expecting to make any cut backs.

Marketing spend is expected to remain at current levels or increase for 64 per cent and 27 per cent of members respectively, with 75 per cent saying they would increase their use of social media tools to market properties.

Facebook remains the preferred social media tool used by 91 per cent of members, followed by the Twitter (36 per cent), Google and LinkedIn (27 per cent each), Instagram (18 per cent) and then Blogs (9 per cent).

58 per cent of members said their take of Vendor Paid Advertising would increase, and 17 per cent said it would remain at current levels.

46

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Queensland Better housing affordability, low interest rates and growing employment opportunities are contributing to a brighter outlook for the Sunshine State.

Sales for units and townhouses in Queensland were up almost 9 per cent in the year to March 2013, after the state’s south east region performed extremely well, continuing the property market’s upward trend. Of particular note is the increasing number of sales in Brisbane itself and the Gold and Sunshine Coasts – reflecting the concentration of, and demand for, those types of properties in south east Queensland.

First home buyers continue to lose confidence as a result of the changes to first home buyer grants where numbers fell by 66 per cent between September 2012 and January 2013.

Top performing country Queensland suburbs for the year ending April 2013 include Wandoan for houses which is showing 24.74 per cent growth and West Gladstone for units, with 12.83 per cent growth.

While the RBA is considered to be doing a good job of managing Australia’s economy, the state government is having to work hard to reign in borrowings/debt levels left by the previous state government. The austerity measures, spending cuts and asset sales are deemed necessary to help get state finances under control and the state’s triple A rating reinstated. Until this is done, significant infrastructure investment will not be possible, retarding potential growth and gains for the state.

However, even a modest recovery in the state’s property market would be stalled should Labor’s proposal to fund the $12 billion deficit by cutting negative gearing be implemented. Investor purchases would crash, once again resulting in a shortage of rental stock and upward pressure on rent rates – something the state can ill afford.

2013 Property Market Outlook Mid Year Update | First National Real Estate

47

Queensland Market outlook Queensland’s property market is expected to improve in terms of sales volumes, values and rental yields in the coming six months according to 80 per cent of Queensland members, however, much of the anticipated improvement may not be seen until after the federal election.

This comes on the back of a steady market, according to 60 per cent of members, a rising market for 27 per cent of members and a falling market for 13 per cent of members.

The key influencing factors underpinning the state’s property market in the second half of 2013 will be sensible state government fiscal management, low interest rates, and affordable, competitive property prices.

Queensland’s lead indicators suggest confidence is returning but this varies between regions.

Improvements in property values and rents will be driven by limited stock availability (increasing demand), low interest rates and improving consumer confidence. Brisbane, the Gold Coast and Sunshine Coasts are all expected to continue their trend for improvement, while Far North Queensland and the Darling Downs will also see some market strengthening.

The average Days on Market (DOM) across the state are expected to hold at current levels, with some potential to fall especially on the Gold and Sunshine Coasts. In May, Brisbane’s DOM was sitting at around 82 and there is a strong expectation that this may drop after the election. Around 60 per cent of Queensland members expect DOM in their local regions to fall, while the remaining 40 per cent said they remain steady.

In some areas of Brisbane and the Gold Coast, North Queensland, Far North Queensland and West Moreton the market is yet to turn. However, 53 per cent of members say a market upturn has already occurred in their regions and most of the remaining 47 per cent say it will do so before the end of 2013.

48

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Queensland While market values are still relatively low, there is a marked improvement in sales volumes compared to the slump in 2011 and the first half of 2012.

Around 53 per cent of members say property listings volumes will remain at current levels, while 33 per cent say there is the potential for volumes to increase before the end of 2013.

While current affordability is good, more is required to get the state’s transaction volumes back to more normal levels, including stability in overseas economies, improved business confidence, better fiscal management of Australia’s economy and stronger consumer sentiment.

There is currently a balance between supply and demand, which is expected to continue throughout the latter half of 2013. Any rise in property values will be dependent on demand outweighing supply.

Residential Prices Although there is potential for price increases in Brisbane, the Sunshine Coast and the Darling Downs, property prices in Queensland are expected to remain relatively flat House prices are expected to remain flat by a majority (66 per cent) of members, but 27 per cent expect them to trend upwards.

Apartment/strata property prices will remain flat according to 84 per cent, with the remaining 16 per cent evenly split for upward or downward price movements.

Land prices will also remain flat, say 64 per cent of members, but 29 per cent saying they expect them to begin trending upwards over the coming six months.

2013 Property Market Outlook Mid Year Update | First National Real Estate

49

Queensland The main reasons cited for flat property prices are lack of consumer confidence, flat demand/supply and market conditions in general. The upcoming Federal Election is also serving to dampen any potential price growth. Job insecurity is still serving to plague Queensland property prices, especially in areas reliant on the resources sector and major tourism hot spots. However, any downward movement in the dollar will have a positive effect on tourism based local economies.

Rental The rental market in Queensland will remain tight in the face of growing strong demand, which is forcing rents upwards.

43 per cent of Queensland members say vacancy rates will trend downwards, while 50 per cent say they will remain flat, having little room for downward movement.

The Gold Coast and North Queensland regions, in particular, are experiencing very tight vacancy rates, and in some cases they are down to zero per cent.

Weekly rental prices are generally expected to trend upwards, according to 73 per cent of members, given the ongoing high levels of demand and low vacancy rates. The remaining 27 per cent expect weekly rental prices to hold at current levels.

50

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Queensland Growth More than half the members (53 per cent) expect an increase in investor activity as a result of improving rental returns and improved consumer confidence.

Different sectors of the market, (i.e. first home buyers, investors, upgraders, retirees) are expected to be the driver of strong growth across the state.

40.00%

6

Respondees

5 26.67%

4

20.00%

3 2

13.33%

1 0

First home buyer

Investors

Upgraders

Retirees

Answer Brisbane should see strong growth from first home buyers, investors and upgraders, while first home buyers will be markedly absent from the Gold Coast and Sunshine Coast markets. Investors represent the strongest likely growth in North Queensland, Far North Queensland, West Moreton and Darling Downs regions.

Little activity is expected for Queensland’s Prestige market (properties priced above $1 million), however the Entry Level market (properties priced below $350,000) will be relatively active in Brisbane, Gold Coast, Sunshine Coast, West Moreton and North Queensland, along with Middle Market properties. Far North Queensland and Darling Downs will see Middle Market properties doing well in the second half of 2013.

2013 Property Market Outlook Mid Year Update | First National Real Estate

51

Queensland Mackay is set to overtake Gladstone for capital growth potential over the coming year, while Townsville and the inner Brisbane suburb of Kelvin Grove were earmarked as favourites. Logan Shire, with its current strong affordability, is one of Queensland’s potential hot spots as well. Brisbane in general is considered to be the best performing area for the state.

Top investor locations for the state include Goodna in Brisbane’s south west, offering investors the highest gross rental yield potential of 8.2 per cent, along with Wooldridge (7.6 per cent yields), Dinmore (7.3 per cent yields), Wynnum West (7.2 per cent yields), Gailes (7.2 per cent yields) and Waterford West (7.0 per cent yields).

Trends The majority of Queensland members (87 per cent) expect the current trend in the number of people buying investment property through their superannuation funds will continue over the coming six months.

Interest rates are expected to hold their current low levels for the remainder of the year according to 47 per cent of members, however, 53 per cent say rates will decrease further. This would serve to further improve consumer confidence, increase investor and buyer demand and the volume of property for sale.

The low interest rates are also expected to see an increase in the number of people applying for fixed rate mortgages before the end of 2013, according to 93 per cent of Queensland members.

Solar PV power and ceiling insulation remain the most sought-after energy efficiency features for property hunters in Queensland.

52

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Queensland Commercial The commercial market in Queensland will continue to moderate, according to 80 per cent of members, although there is some potential for movement in property and rental prices for the sector.

60 per cent of members expect commercial property prices to hold at current levels. However, a majority of members are equally split on whether commercial rents will hold or decrease. Just 20 per cent anticipate any increase Gold Coast commercial property and rental prices are expected to remain flat or trend upwards, while the Sunshine Coast and Far North Queensland should remain stable and North Queensland will see prices trend downwards.

The industrial, retail and hospitality sectors are expected to show the greatest growth.

The current trend for landlords to offer incentives in the commercial property market is expected to continue over the last six months of 2013.

Rural The rural property market is expected to hold across the state, with lifestyle properties representing the strongest market growth across all sectors.

Rural property and rental prices are expected to remain at current levels, with some potential for drops in rural properties on the Gold Coast.

2013 Property Market Outlook Mid Year Update | First National Real Estate

53

Queensland Real estate business outlook 87 per cent of Queensland members expect their businesses to grow in the coming six months.

All members expect staff numbers to remain the same or increase over the coming six months.

Marketing spend is expected to increase for 47 per cent of members, with the remaining 53 per cent saying it would remain at current levels. 80 per cent of members say they would increase their use of social media tools to market properties. Facebook remains the top choice, followed by Google, Twitter and then Blogs and LinkedIn. 60% of Queensland members say they will increase their current levels of Vendor Paid Advertising, with the remaining 40 per cent saying they would maintain them at the same level.

54

First National Real Estate | 2013 Property Market Outlook Mid Year Update

South Australia Market conditions in the second half of 2013 will largely depend on government policy on first home buyers and building incentives, interest rates and local and global consumer confidence.

According to our survey, 60 per cent of South Australian members expect market conditions will improve, on the back of a relatively stable market in the first half of the year, while 40 per cent say they will stay the same. Most improvements will be in the Adelaide Plains regions of Para Hills, Tea Tree Gully and Adelaide Hills/Mount Lofty Ranges, along with the state’s Limestone Coast and Fleurieu Peninsula regions.

Demand for property in South Australia has been steadily rising since the last quarter of 2012 as more people realise its relative affordability. It dominates the nation’s national list of top 10 sellers’ suburbs with six of the 10 listed suburbs including Parkside at the top. Unley, Crafers, Kensington Gardens, Norwood and Fullarton also made it into the top 10.

The significant developments, infrastructure projects and regulatory changes expected to impact on the state’s property market in the coming six months include: } The completion of the $842 million South Road Superway project, an elevated roadway from the Port River Expressway to Regency Road, which is the biggest single investment in a South Australian road project } The duplication of the Southern Expressway, which together with the South Road Superway project will have a positive impact on property, particularly those benefiting from these transport corridors.

Further cuts in car manufacturing jobs will have a detrimental effect on the property market, along with the South Australian government’s intention to discontinue the first home owner’s grant of $15,000 for those building or buying newly constructed homes and the $5,000 for those first time buyers who purchase an existing dwelling.

2013 Property Market Outlook Mid Year Update | First National Real Estate

55

South Australia Market outlook Interest rates and consumer confidence will underpin the state’s property market performance in the second half of 2013. Government policy on first home buyers and building incentives will also be key influencing factors.

Adelaide Plains is expected to be the best performing area for the state, with most suburbs within a 5 to 10 kilometre radius of the city continuing to perform well, given their reasonable affordability and great development opportunity.

The Southern suburbs in particular are tipped to perform well with the duplication of the Southern Expressway.

The average Days on the Market (DOM) are expected to remain at current levels by 60 per cent of members, with the remaining 40 per cent saying they will fall.

50% of members say they expect sales to increase, especially in the regions of Tea Tree Gully, Flexistow, Adelaide Hills/Mount Lofty Ranges, Limestone Coast and the Fleurieu Peninsula regions. The remaining 50 per cent say they will stay the same.

60 per cent of members say the market has up-turned, with Para Hills, Warradale and the Limestone Coast regions saying their market has yet to do so, but will within the next six to 12 months.

Property listings are expected to increase for 30 per cent of members, while 60 per cent say they will stay the same.

56

First National Real Estate | 2013 Property Market Outlook Mid Year Update

South Australia While all South Australian members expect there will be a change in government after September, regardless of who is in power, they would like to see the following in terms of supporting Australia’s property market over the coming six to 12 months: } Abolish, reduce or replace stamp duty, and } More incentives for upgraders and first home buyers.

Even more is required to get market transaction volumes back to more normal levels in the state, including stability in overseas economies, improved business confidence and consumer sentiment and better fiscal management of Australia’s economy.

Residential Prices While there is potential for land values to increase, property prices in South Australia are expected to remain relatively flat 60 per cent of members expect house prices will remain flat, with the remaining 40 per cent saying they will trend upwards. Apartment/strata property prices are expected to also remain flat by 67 per cent of members, with 11 per cent expecting an upward trend.

Land will be the strongest performer, where prices are expected to trend upwards by 60 per cent of members, while 30 per cent expect them to remain flat.

For the Adelaide Plains areas of Tea Tree Gully, Felixstow and Adelaide Hills/Mount Lofty Ranges, along with the Limestone Coast, price hikes are expected to be across all sectors. Para Hills, Warradale, Mawson Lakes, Mt Barker and Fleurieu Peninsula should remain relatively flat with potential increases mainly in land values.

2013 Property Market Outlook Mid Year Update | First National Real Estate

57

South Australia Stable market conditions and lack of stimulus will keep the market flat while strengthening consumer confidence and improving affordability will underpin any price rises where they occur. Land values will also benefit in areas where local council policy changes are being implemented.

Rental The rental market in South Australia is expected to hold up, with 60 per of members saying the market will remain flat and there will be little movement on vacancy rates.

However, 30 per cent of South Australian members say vacancy rates may ease, trending upwards, particularly in the regions of Mawson Lakes and the Limestone Coast.

The regions of Tea Tree Gully and the Adelaide Hills/Mount Lofty Ranges should see a strengthening rental market, with weekly rental prices potentially increasing as a result of continued strong demand and the resulting upward pressure.

Growth Investor activity is expected to increase, according to 40 per cent of South Australian members, as a result of improved returns and better yields.

56 per cent of members believe upgraders will represent the strongest growth segment, while 33 per cent say it will be first home buyers and 11 per cent say it will be investors.

First home buyers will be particularly aggressive in the regions of Para Hills and the Limestone Coast. Upgraders will be busy in the Tea Tree Gully, Mawson Lakes, Mt Barker and Fleurieu Peninsula regions. Flexistow will be of particular interest for investors.

58

First National Real Estate | 2013 Property Market Outlook Mid Year Update

South Australia South Australian members are equally divided as to which market segment is expected to be the most active in the coming six months: the Entry Level market (where home values are less than $350,000) and the Middle Market. Both are seen to be a result of the improved affordability and bargain hunters looking to secure that first home or investment property.

Entry Level market buyers will be most active in the areas of Para Hills and Tea Tree Gully in the Adelaide Plains region, and Stirling in the Adelaide Hills/Mount Lofty Ranges region and Limestone Coast.

All other regions will see the Middle Market buyers most active.

Trends 60 per cent of South Australian members expect interest rates to reduce further, stimulating activity and improving confidence.

There has been an increase in the number of people buying investment properties through their self managed superannuation funds in South Australia, according to 60 per cent of our members.

Foreign investors are expected to impact on the property market in South Australia, with a certain degree of interest already being shown in high end properties from Chinese investors.

2013 Property Market Outlook Mid Year Update | First National Real Estate

59

South Australia The current market conditions of historically low interest rates and a strengthening economy are expected to see an increase in the number of people applying for fixed rate mortgages, according to 80 per cent of South Australian members.

Solar PV power and ceiling insulation are seen to be the most sought-after energy efficiency features of a South Australian property.

Commercial The commercial property market in South Australia is expected to continue to moderate in the coming six months, with little change in market drivers. However, 33 per cent of members did indicate they thought it may actually strengthen to some degree, especially in the regions of Flexistow and the Adelaide Hills/Mount Lofty Ranges.

The industrial and retail sectors are expected to represent the strongest growth in activity over the second half of the year for 40 per cent of members, while the remaining 20 per cent say it will be the office sector.

Commercial property prices should remain at current levels, according to 67 per cent of members, however the balance are equally split about whether rental prices will increase or decrease. A third say commercial property prices may increase.

The current trend for landlords to offer incentives to tenants in the commercial property market is expected to continue for the remainder of 2013.

60

First National Real Estate | 2013 Property Market Outlook Mid Year Update

South Australia Rural There is a general feeling among South Australian members (67 per cent) that the rural property market will be relatively static in the second six months of 2013, however the remainder believe it will soften.

Interestingly, there is consensus that rural property prices and rental prices will hold at current levels.

South Australia’s top performing country areas for the year ending April 2013 include: } Laura, where houses showed growth of 15.84 per cent } Tanunda, where units showed growth of 2.52 per cent.

Port Lincoln tops the list of regional growth areas with a 30.3 per cent rise in house prices over the year to March, due in part to the local tuna quota, vital to the economy, being up and encouraging spending. In addition, talk of mines, ports and rail links has spurred confidence in the region.

Gawler also makes it onto the top 10 list, where prices jumped 9.4 per cent over the year to March as more home buyers recognised the benefits of living in the area with its great schools, close proximity to the Barossa Valley, good restaurants, defence force housing demand and improved road network.

2013 Property Market Outlook Mid Year Update | First National Real Estate

61

South Australia Real estate business outlook Half of South Australia members expect their businesses to grow in the coming six months, and 10 per cent also expect to put on additional staff.

The residential and property management sectors are expected to be the most active with members equally divided between the two.

Marketing spend is expected to remain at current levels for most South Australian members, with 40 per cent saying it will increase, however 70 per cent say they will increase their use of social media tools to market properties.

Facebook will be used by all South Australian members for this purpose, followed

by LinkedIn and Google (33 per cent each), Twitter (22 per cent) and then Instagram (1 per cent).

Most members said their Vendor Paid Advertising would remain the same for the second half of the year (50 per cent), while 30 per cent said they expected to increase it.

62

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Western Australia Market conditions in Western Australia are expected to improve according to 71 per cent of members, due in part to the anticipated change in federal government and growing demand in the face of strong population growth.

With the ongoing increase in population coming into Western Australia, there will be continued demand for property both from the owner occupier market and those in the rental market seeking accommodation. In reading the market, diverse sales and price results seem to be impacting on average and median price statistics.

The resources rich regions of Geraldton, Goldfields and Esperance are vulnerable to the downturn in the mining industry however this will be offset to some degree by planned infrastructure and other projects coming to fruition.

There have been considerable increases in sales volumes in the $600K to $700K price range.

Strong activity is expected to continue closer to the Perth CBD and along the major transport routes. This and population growth are seeing the market return to normal, buoyant conditions. Evidence of this trend is highlighted by industry reports saying sales activity in Perth’s housing market has returned to its 15-year average after three years of volatility.

WA’s South West and East have shown renewed activity in major towns such as Albany, Augusta, Margaret River, Busselton and Kalgoorlie and this trend is expected to continue.

North West regional Centres such as Port Hedland, Karratha and Broome are expected to bounce back from low sales numbers in late 2012.

The Mandurah-Murray region of the Peel district will be a stand out performer for the state. The region is expected to show strong growth, partly because they had a very slow 2012 but also because there has been some great property buying in the area in the first half of 2013.

2013 Property Market Outlook Mid Year Update | First National Real Estate

63

Western Australia Market outlook The WA property market is considered buoyant and is expected to return to more normal conditions on the back of solid population growth and a strong state economy.

57 per cent of our members say the market has been steadily rising in the first six months of 2013.

Housing shortages and increasing population are among the numerous strong drivers underpinning Perth’s market. Perth also has a relatively low entry point, compared to Sydney and Melbourne.

But even with the improved affordability, more is still required to see transaction volumes return to more normal levels, including stronger consumer sentiment, improved business confidence, better fiscal management of Australia’s economy and more stability in overseas and domestic economies.

The Perth property market has been performing well with sales volumes up. However, buyers still expect good value for money and price continues to be a consideration for many.

72 per cent of members are saying their market has up-turned in their region, with 57 per cent expecting sales to increase in the second half of 2013 and 47 per cent expecting property listings to rise or stay the same.

43 per cent of our Western Australia members expect the average days on market (DOM) to fall, while 43 per cent say they will hold at current levels. Falls are expected particularly in Perth’s Midland and Wangara/Wanneroo region and the state’s Pilbara region.

Perth vendors recorded an increase in asking prices for units of 2.3 per cent for the March quarter of 2013.

First home buyer numbers in Perth are bucking the national trend. In the December 2012 quarter, 34.6 per cent of Perth’s home loans were taken out by first home buyers, well above the national average of 24.5 per cent.

64

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Western Australia Major developments, infrastructure projects and regulatory changes expected to impact on the Western Australian property market in the coming six months include: } The announcement in the federal budget of development projects in the Swan Valley bypass to Muchea } Road upgrades to Tonkin Highway and Leach Highway, and } The $500 million over 10 years for the Perth Public Transport Package including the MAX Light Rail project and Airport Rail.

These will impact confidence in these regions and property owners and investors are set to reap the many resulting benefits.

Residential Property experts predict Western Australia is expected to lead property prices growth in the coming 12 months, with a rise of 3.8 per cent.

Prices The median house price in Perth is now $510,000, a new record, driven by a lift in turnover and more sales activity above the median price. There was a marked increase in sales between $500,000 and $1,000,000, a healthy illustration of consumer confidence through trade up activity.

With steadily improving market conditions, property prices are expected to gradually improve According to 57 per cent of members, house and land prices are expected to increase, or remain flat (29 per cent). While these figures reverse for apartment/strata property prices, where 57 per cent of members expect prices to remain flat and 29 per cent expect them to trend upwards.

2013 Property Market Outlook Mid Year Update | First National Real Estate

65

Western Australia House price increases, in areas such as Perth’s Midland, Wangara/Wanneroo, Cockburn Central and the state’s Pilbara region, will result from improving consumer confidence, planned projects coming online, shortage of supply and low interest rates.

Uncertainty and low job prospects in the Goldfields/Esperance region will underpin any price drops.

Lifestyle preference is driving apartment/strata property prices in regions such as Perth-Midland and Pilbara.

Rental The Western Australia rental market was the stand out performer in the March quarter, recording a growth of 2.4 per cent on the back of a resources-led population growth.

This trend is expected to continue for the remainder of 2013.

Rents are predicted to rise 3.6 per cent over the next two years to March 2015, with most of the forecast gains seen in the state according to industry reports.

The market is expected to tighten even further, with vacancy rates expected to hold or trend downward, driving weekly rental prices upward 57 per cent of members say vacancy rates will hold at current levels, with 43 per cent expecting them to decrease, while 72 per cent expect weekly rentals to increase and the remaining 28 per cent evenly split on whether they will remain flat or decrease.

Perth’s Midland region and Pilbara will see the strongest rental market, followed by Wangara/Wanneroo, Central Cockburn and Midwest regions. The Goldfields/Esperance region will see a relatively flat rental market, where vacancy rates will ease and trend upwards, which is being offset by rising weekly rental prices.

Perth, in particular, continues to record massive increases in both house and unit rental prices. The rental vacancy rate for the city is just 1.8 per cent and median weekly rents jumped by nearly 14 per cent over the last year.

66

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Western Australia Properties in Midland are popular with renters as it has a high level of social infrastructure such as schools, shops and public transport.

Yanchep has also been earmarked as an investor hot spot with planned large new land developments set to increase property values in the coming years.

Other investor hot spots to watch include: Heathridge, Craigie, Padbury, Warwick, Scarborough, Victoria Park, Thornlie, South Perth and Northbridge.

Growth Investor activity is expected to increase by 57 per cent of Western Australian members as a result of improving rental yields and returns, while 29 per cent say they will stay the same.

First home buyers are expected to represent the strongest growth sector in the state by 71 per cent of members, followed by investors (29 per cent).

Improved affordability will continue to drive growth activity for the state, both for first home buyers who can now afford to enter the market, and for investors who seek to take advantage of the low property prices producing improved yields and better returns.

Perth’s Ellenbrook and Wangara/Wanneroo regions and the Goldfields/Esperance and Midwest regions of the state will see first home buyers as the strongest growth sector, with the Entry Level market (properties valued at less than $350,000) being the most active.

The Midland region of Perth will see investors as the strongest growth sector. They will be seeking to capitalise on the improved affordability of Middle Market properties, which are expected to generate the most activity in the coming six months.

2013 Property Market Outlook Mid Year Update | First National Real Estate

67

Western Australia The Central Cockburn area of Perth will see first home buyers represent the strongest growth, with the Middle Market properties generating the most activity before the end of the year.

The number of people buying investment properties through their superannuation funds is expected to increase in the state according to 86 per cent of members – spread across the state.

Foreign investors are also expected to increase their activity according to 43 per cent of members, due to the strength of Australia’s economy. Most activity from foreign investors is expected to continue to be in the prime Perth market.

The best performing country suburbs for WA for the year ending April 2013 include: } Kambalda East, where houses showed growth of 24.11 per cent } South Hedland, where units showed growth of 20.1 per cent.

Victoria Park and Bayswater are highlighted for their stand out growth prospects, making them two of the top hot spots for the state.

First time property investors should be targeting northern coastal suburbs where new building land is scarce and homes are more than 25 years’ old, resulting in high levels of capital growth. Beldon, where the average median price of a home increased by 1.7 per cent a year over the past decade is a good example.

68

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Western Australia Trends The majority of Western Australia members (57 per cent) believe interest rates will remain unchanged for the remainder of the year, although 43 per cent believe they will still drop further. Naturally this is expected to improve consumer confidence, increase buyer demand, including among investors, and generate stronger vendor activity.

Around 71 per cent of Western Australia members expect the number of people applying for fixed rate mortgages to increase over the coming six months, especially in Perth’s Ellenbrook and Central Cockburn regions and the state’s Pilbara, Goldfields/Esperance and Midwest regions.

The Entry level market is expected to be the most active sector in the second half of 2013, by 71 per cent of Western Australia members. The remainder believe it will be the Middle Market sector.

Solar PV power and ceiling insulation remain the most sought-after energy efficiency features of a Western Australian property by 71 per cent of members and drought resistant gardens by 14 per cent of members.

Commercial 60 per cent of Western Australian commercial property members say the commercial property sector will remain steady, however, Midland and Perth’s Central Cockburn regions may see some activity stimulated as a result of strengthening consumer and business sentiment.

80 per cent of commercial property members in Western Australia say commercial property and rental prices will remain steady, with the remaining 20 per cent saying they will increase.

40 per cent of members say there has been a growing trend for landlords to offer tenants incentives and they expect this to continue into the second half of 2013.

The industrial and service sectors of the commercial property market are expected to show the greatest growth for the state’s commercial property market.

2013 Property Market Outlook Mid Year Update | First National Real Estate

69

Western Australia Rural All Western Australian rural property members expect the rural property market to be steady in the second half of 2013, where rural property and rental prices will hold at current levels.

If the primary production regions can hang on, get a crop in and get the rains they need, this will point to a strong finish for the 2013 rural property market in Western Australia.

Speculation about offshore investment in the rural and regional market is strong by foreign investors, which is expected to impact on the property market in the state. All members in the state say foreign investors are expected to impact on the rural property market in their region.

Ironically, successive bad years of primary production are seeing offshore investors consider the long term benefits of owning regional holdings in order to guarantee future food security.

Real estate business outlook 86 per cent of Western Australian members expect their businesses to grow in the coming six months, while the remaining 14 per cent say they will stay the same.

43 per cent expect their staff numbers to increase, while 57 per cent say they will stay the same.

Property management is expected to dominate as the most active sector, according to 57 per cent of members, followed by residential for the remaining 43 per cent.

The greater proportion of members, 43 per cent say they will maintain their current levels of marketing spend, while 29 per cent say they will increase it. However, 71 per cent say they will increase their use of social media tools for marketing properties, predominantly through the use of Facebook.

43 per cent of members also say they will increase their Vendor Paid Advertising in the last six months of 2013, while 29 per cent

70

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Tasmania The static Tasmanian property market is expected to remain unchanged for the remainder of 2013, with buyers and sellers waiting until prime market conditions are set to turn. It could be a year or two until minimal population growth and lack of employment opportunities no longer dog the market.

Sales volumes across all sectors of housing, apartment/strata and land in Hobart are beginning to return to steady numbers, along with property listings and turnover. In areas such as the state’s West Coast/Burnie regions volumes will remain relatively flat in the coming six months.

However, more support from the government is required including: } Abolishing/reducing/replacing stamp duty } More incentives for first home buyers and upgraders } Removal of all government taxes } Reduced costs of development.

Land prices will begin to trend downwards, as the costs of development and taxes are extremely high in Tasmania and have become prohibitive. The rising cost of compliance and safety are acting to curtail any activity in this market segment.

Hobart leads the decline as house prices drop. The fledgling recovery in the housing market stalled in April, as property prices drifted lower. Hobart was April’s worst capital city performer, with prices dropping 3.1 per cent followed by Perth where prices fell 2.5 per cent.

There is some sense that there will be more of the same to come, while the experts indicate there may be more interest rate cuts.

Hobart vendors recorded an increase in asking prices for units of 4.8 per cent.

2013 Property Market Outlook Mid Year Update | First National Real Estate

71

Tasmania Investor activity is expected to increase in the Hobart region. Ongoing low interest rates will also produce better yields, stronger returns as well as greater capital growth opportunities.

It is the upgraders that will be the strongest growth sector across Tasmania, driven by the ongoing low interest rates and affordability, especially when looking to upsize their homes. In Hobart however, first home buyers are expexted to stop waiting for the bottom of the market and have confidence in purchasing. Upgraders will be particularly active on Tasmania’s West Coast/Burnie region.

However, it is incumbent upon the state government to ensure the first home owners grants continue, for both established homes as well as new builds.

Interest rates are expected to decrease, or remain unchanged over the coming six months, which should stimulate buyer and seller activity as well as improve consumer confidence.

The historic low interest rates are expected to see an increase in the number of people purchasing an investment property through their superannuation funds, especially in Hobart.

The Entry Level market (properties priced at less than $350,000) will be the most active market sector, particularly in Hobart and West Coast/Burnie regions. Ceiling insulation is the most sought after energy efficient feature of all Tasmanian properties.

Hobart will be the best performing area for the state, especially in the regions of inner city Sandy Bay and Battery Point, which are still performing steadily as they are in the upper end of the market.

The best performing country Tasmanian areas for the year ending April 2013 are: } Greens Beach, where houses showed growth of 11.14 per cent } Riverside, where units showed growth of 5.25 per cent.

The commercial property market in Hobart is expected to soften before the end of 2013.

Property prices in this sector will decrease, while rental prices will remain the same.

Hospitality, especially tourism related, should show the greatest growth for the Hobart commercial property market.

72

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Northern Territory The Territory ranks number one in Australia on a number of key economic and property indicators. It has the lowest unemployment rate (3.9 per cent against a national average of 5.4 per cent) and employment growth is running at almost three times the national average.

It also leads the nation on three key real estate indicators: growth in loans to home buyers, the increase in investor loans and growth in building approvals.

The overall outlook for the Northern Territory is that conditions in the second half of the year, compared to the first half, will improve. This will be mainly due to the Inpex gas development creating new jobs and sponsoring community activities as well as creating more study opportunities within Charles Darwin University.

Upgraders are expected to be the most active sector in the territory over the coming six months, especially in the Top End, which is expected to be the best performing area for the state.

The Darwin CBD and Palmerston areas will be the stand out performers with excitement for the Inpex Gas project building, creating a knock on effect within other businesses in the area and generally improving business confidence and consumer sentiment across the board.

Strong yields and housing demand are currently underpinning the Darwin market, setting it for further growth.

Darwin revealed the highest quarterly increase in asking prices for units, rising 7 per cent during the March quarter.

2013 Property Market Outlook Mid Year Update | First National Real Estate

73

Northern Territory It also continues to have the highest residential rents among the state and territory capital cities (the typical house is $650 per week and apartments average $550) and rental growth in 2012 was exceptional – the home median rent up 16 per cent and the apartment median rising almost 20 per cent.

The current growth market and strong yields on offer in the Territory are serving to create foreign investor interest in the region, and the upcoming federal election is expected to bring about a change in government – also welcome news for the market in general.

In Alice Springs, little change in market drivers will see conditions remain as they were in the first half of the year. Even in light of the current affordability of the Centre’s properties, stronger consumer sentiment is required to get market transaction volumes back to more normal levels.

Property prices across all sectors of houses, apartment/strata and land are expected to remain relatively flat for Alice Springs. However the rental market is expected to ease somewhat with vacancy rates trending upwards and weekly rental prices also heading downwards.

First home buyers will be the strongest growth sector for Alice Springs, driven by lower interest rates, costs of funds and overall improved affordability.

74

First National Real Estate | 2013 Property Market Outlook Mid Year Update

Sources Newspapers National, metropolitan and local suburban press.

Websites Property Observer, Residentialpropertymanager.com, money management, propertyoz.com.au, realestate.com.au, realwealthaustralia, smart property investment, realestateview.com.au, Domain.com.au

Industry reports NAB, Residex, REIA and state chapters, Pitcher Partners, RP Data

First National Real Estate members across the country

2013 Property Market Outlook Mid Year Update | First National Real Estate

75

facebook.com/ FirstNationalRealEstate

twitter.com/ Auction_Action

twitter.com/ RealEstateCast

firstnationalnews.com