2013 Property Market Outlook

2013

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

Contents Introduction

02

Economic Outlook

05

Market Outlook

06

Residential

12

Rental Market

18

Commercial Property Market

20

Rural/Regional Outlook

22

Real Estate Business Outlook

24

Nerang Outlook

26

New South Wales Outlook

29

Victoria Outlook

37

Queensland Outlook

45

South Australia Outlook

53

Western Australia Outlook

59

Tasmania Outlook

65

Northern Territory

69

Sources

71

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

This Update serves to compare market conditions experienced by our members with the predictions of economic commentators and property market analysts.

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

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

Results and trends highlighted in this document represent the majority view of 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 local levels.

Over the past year the property market has performed relatively well, given it has been subject to an over-arching environment of weak business sentiment, elevated exchange rates, a confidence-sapping carbon tax, tight credit conditions and seemingly more unproductive turmoil than usual in the Federal Parliament.

02

First National Real Estate 2013 Property Market Outlook

Introduction The impact of this has been that, despite signs of recovery at the end of 2011 and early parts of 2012, the market remained relatively soft throughout 2012. From time to time – in some places – the market appeared to be fighting back, and slowly started to gain ground, after bottoming out across most areas of Australia. This view has been supported by our members in their survey responses.

The ongoing soft market was in line with what our member surveys told us throughout the year – that the market would remain flat even in light of the improved affordability and market conditions.

This appears to be a result of ongoing uncertainty in global and domestic economies, which dampened consumer sentiment so the recovery could not gain any real traction.

There has been a modest upswing in dwelling values and transaction volumes, suggesting a slow consumer response to rate cuts, and there are other signs of a sluggish improvement in market conditions.

Towards the end of 2012, the spring season produced some excellent results. Overall, members expect the market will now continue to gain momentum, going from strength to strength as 2013 progresses.

Vendors are also readjusting their expectations and setting more realistic prices to meet market demand, which should also serve to spur activity in the sector. Nationally, 13.4% of dwelling sales transacted at a price lower than they were purchased for. However, vendors are discounting their asking prices by a less than a year ago.

This growing sense of optimism extends to members’ businesses as well, with the majority expecting their businesses to put in a stronger performance in 2013 - ultimately seeing them expand and, in some areas, even put on additional staff.

That property has turned a corner is evident, not only by our members’ responses, but by observation of what else is happening and being said in the industry.

The September quarter showed there was an upswing in the housing sector, with new lending up by 1.2% in the month, lendings to established market up by 2.1% and finance for new dwellings purchased advancing by 9.0%.

2013 Property Market Outlook | First National Real Estate

03

Introduction In addition, auction clearance rates rose to more than 60% in the peak spring selling season. The number of auctions taking place over the final week of the spring was 2,119, up from 2,102 the previous week. Melbourne recorded the highest percentage of successful auctions over the week, at 58.2% and in Sydney, the nation’s second largest auction market, clearance rates were 50.4% for the week.

While new dwelling construction figures show the sector is still struggling, as the property upswing continues to gain momentum, finance for construction is expected to improve. There is cautious optimism in the industry as 2011/12 saw new projects begin to increase, which, it is hoped, signals a return to decent construction activity in the future.

However, any construction recovery will be reliant to some extent on businesses and government. It is their challenge to set appropriate policies and ensure all forms of construction projects are in line with the requirements of the Australian economy – which means new housing and development projects in all industry sectors, not just around the mining sector which currently dominates new construction projects.

The government also needs to consider tax reform policies to support the property market in Australia. Stamp Duty is widely recognised as the most inefficient of taxes in the country. Abolishing this one property tax will go a long way to stimulating activity, across the board, but especially for first home buyers who are increasingly absent from the market, despite the best market conditions imaginable.

A recovery is certainly underway as this document is being prepared, however it is precariously balanced with conditions still reasonably soft and buyers remaining in the driver’s seat, at least in the short term.

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.

04

First National Real Estate 2013 Property Market Outlook

Economic Outlook This economic outlook is based on industry insights and responses to the survey sent to First National State Chairs in November last year.

Economic activity is Australia is expected to remain relatively soft in the short term, however over the medium term it should prove to be solid, underpinned by strong growth in business investment.

The mining sector will soften as a result of ongoing uncertainty over global economies and a slow down in China’s economy, producing sharp falls in iron ore and coal prices.

This, coupled with a high Australian dollar, is producing challenging conditions for the economy and, ultimately, the Australian property market. However, with China looking to float its currency, these challenges may not seem as daunting.

According to state chairs in New South Wales and Victoria, the floating of China’s currency is expected to have a positive impact on their property markets.

The Reserve Bank of Australia (RBA) remains of the opinion the Australian economy will continue its slow but steady growth over the coming year, and that employment will drift modestly upwards. This view is based on the underlying principle that Europe will ‘muddle through’ and there is no major fallout in global financial markets.

The challenge for Australia will be reduced confidence in the mining sector, where states reliant on mining and resources projects will be vulnerable.

The high Australian dollar will also prove a challenge, especially for rural and agricultural sectors and where property markets expect to see a rise in foreign investor activity.

First National’s state chairs continue to lose faith in the Australian government, unanimously saying they do not believe the federal government is doing a good job of managing the nation’s economy. However, with the exception of Western Australia, all believe the RBA is doing a good job of managing monetary policy.

2013 Property Market Outlook | First National Real Estate

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Market Outlook Australia’s property market is definitely on the rebound, however, there is general consensus that the recovery is slow and gradual. While low interest rates and reducing house prices have helped improve confidence to some degree, it has not been enough to bring about a stronger recovery.

Industry data shows increases in housing finance in September and October, with early data in November suggesting this trend will continue.

New mortgage lending is still low, an indication people are saving rather than spending due to generally low consumer confidence. While there have been significant gains in confidence in the latter part of 2012, job security remains top of most Australian minds and continues to hinder activity.

There is total agreement among state chairs that interest rates should still be cut further, although most (71%) think this will still not be enough to boost Australia’s property market. They also indicate: } Stamp duty, along with other state property related taxes, should be abolished, } More government initiatives to support the first home buyer market would stimulate the market, and } Change in policies for new home building and approval processes are needed The majority of the network’s members expect interest rates will be cut further, which should help to stimulate activity, further improve consumer confidence, help reduce mortgage stress and ultimately, begin to drive property prices.

06

First National Real Estate 2013 Property Market Outlook

Market Outlook Anticipated direction of interest rates National 2%

NSW –

VIC –

QLD –

SA –

TAS –

WA 14%

Downwards

64%

66%

85%

44%

50%

75%

57%

No Change

34 %

34%

15%

56%

50%

25%

29%

Upwards

There is also a suggestion the government should offer Australian investors similar incentives to those offered for foreign investors. Three out of the seven state chairs – Victoria, New South Wales and Western Australia, believe foreign investors are expected to impact on their respective state’s property markets.

Except for Tasmania, all other state chairs believe market conditions will continue to stabilise or further improve in the first six months of 2013. This is supported by our members where 55% say conditions will improve in the first six months of 2013 – led by New South Wales and Queensland. Tasmania is the only state where market conditions are expected to deteriorate, as a result of ongoing concerns over the state’s economy.

Anticipated expected market conditions for first six months of 2013 National

NSW

VIC

QLD

SA

TAS

WA

Same

34%

31%

38%

35%

67%

25%

14%

Improve

56%

62%

62%

65%

33%

25%

86%

Deteriorate

10%

7%

–

–

–

50%

In the first half of 2013, the clear majority of members believe the market will steady (66%). A smaller more optimistic group anticipate it will begin rising in the first half (25%) of the year.

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Market Outlook Direction of market – last six months of 2012 National

NSW

VIC

QLD

SA

TAS

WA

Rise

11%

31%

15%

11%

–

–

14%

Steady

65%

52%

62%

63%

100%

25%

86%

Fall

24%

17%

23%

26%

–

75%

–

Direction of market – first six months 2013 National

NSW

VIC

QLD

SA

TAS

WA

Rise

25%

38%

38%

33%

–

–

43%

Steady

66%

55%

62%

67%

100%

50%

57%

9%

7%

–

–

–

50%

–

Fall

The main reasons cited for the gradually improving market are improved affordability, increasing demand, stronger competition and slightly strengthened consumer confidence.

However, any strengthening in buyer confidence is precarious at best. Consumer confidence has remained stubbornly low, even with the improved conditions of low interest rates.

While recent industry figures show an improvement, this may be undermined by ongoing uncertainty focussed on a mining slow down and high Australian dollar. An upswing in residential building would go some way to offset any slowdown in the mining sector.

Other indications the market is showing a slight resurgence include: } Auction clearance rates are trending above 50%, peaking at 60% during the peak spring selling period, up from the first six months of the year when they were running level at 50%. } Vendor discounting levels are slowly reducing, sitting at 13.4% of all sales nationally in the September quarter. } The average days a property takes to sell (days on market) continues to fall, according to 37% of members, while just over half say it is holding steady at the moment.

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First National Real Estate 2013 Property Market Outlook

Market Outlook Anticipated average days on market 2013 National

NSW

VIC

QLD

SA

TAS

WA

Rise

9%

10%

–

8%

–

25%

14%

Fall

37%

45%

38%

42%

–

25%

72%

Steady

54%

45%

62%

50%

100%

50%

14%

The number of home sales in September stabilised nationally and was higher than the previous year. In August, Australia’s national estimate of sales volume was 15% higher than a year ago and 13% higher across the combined capital cities. With consumer confidence slowly building, it is likely this will translate to a further improvement in transaction volumes – a notion supported by our state chairs and members.

New South Wales, Victoria and Northern Territory state chairs all expect sales volumes to increase, and our members are also optimistic, with 61% expecting sales to increase.

Anticipated increase in sales National

NSW

VIC

QLD

SA

TAS

WA

Yes

61%

72%

67%

78%

50%

25%

71%

No

39%

28%

33%

22%

50%

75%

29%

There is a growing trend for people to purchase investment properties using their superannuation funds. All state chairs, except Queensland and Tasmania, anticipate this increase and members in Victoria, South Australia, Queensland and New South Wales are all, expecting this trend to continue into 2013. Western Australia and Tasmania members also expect to see this trend accelerate even more in their states.

2013 Property Market Outlook | First National Real Estate

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Market Outlook Increase in people buying investment properties through superannuation (SMSFs) National

NSW

VIC

QLD

SA

TAS

WA

Yes

52%

59%

77%

56%

50%

25%

43%

No

48%

41%

23%

44%

50%

75%

57%

Another trend to watch is the rising numbers of vendors who are opting to sell their properties by private treaty rather than auction. Across the board, state chairs see private treaty as the most popular method in today’s property market – although in New South Wales, Sydney is bucking the trend where auctions continue to be the preference.

Property listings are expected to increase by 42% of members, however the majority (51%) anticipate no change in the coming six months.

Anticipated property listings – first half of 2013 National

NSW

VIC

QLD

SA

TAS

WA

Increase

42%

31%

57%

52%

33%

50%

29%

Decrease

7%

17%

–

11%

–

–

14%

51%

52%

43%

37%

67%

50%

57%

Same

This supports industry statistics, which show the total number of properties available for sale continues to increase. Total listings nationally are now 2.3% higher than at the same time last year. Across the capital cities, total listings are 0.9% higher than they were a year ago at the time of writing this report.

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First National Real Estate 2013 Property Market Outlook

Market Outlook Property prices In general, our members are saying the market has bottomed. However, Tasmania proves the exception with members saying the market will continue to decline. The good news for Tasmania is that this trend is expected to reverse toward the middle of 2013.

Has market bottomed?

National

NSW

VIC

QLD

SA

TAS

WA

Yes

73%

76%

100%

81%

83%

–

100%

No

27%

24%

–

19%

17%

100%

–

Given the market is at, or near, the bottom of the property cycle, most members expect prices to remain relatively flat in the near future, however an upward trend is imminent.

Expected property prices – survey responses Flat

Increase

Decrease

Houses

57%

38%

5%

Apartments/Strata

62%

19%

19%

Land

58%

26%

16%

2013 Property Market Outlook | First National Real Estate

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Residential As outlined in our 2012 mid-year update, house prices continued to stabilise across the country, with some areas showing slight increases in the latter months of the year. Nationally, annual price growth returned for the first time since March 2011.

Over the month of September, dwelling values rose by 1.4% across Australia’s eight capital cities, the largest month-on-month capital gain since March 2010. Capital city dwelling values were up 2% in the period May to October 2012 – suggesting a housing recovery is underway.

It is true to say people love a property boom. However, the reality is, Australia needs modest growth in house prices so construction and development activity can be stimulated for a significant recovery to occur.

On a rolling quarterly basis, home values increased over the five months May to October this year. A growing number of members expect this trend will continue into 2013, with 38% saying house prices will trend upwards.

House prices Upwards Downwards Flat

National

NSW

VIC

QLD

SA

TAS

WA

71%

52%

–

–

53%

54%

38%

–

–

25%

–

4%

3%

5%

29%

48%

75%

100%

43%

43%

57%

House price increases will be driven mainly by growing affordability - the result of improved market conditions, strong demand, short supply and improving consumer confidence.

Where supply is currently meeting demand, pressure either upward or downward, is released, keeping prices flat.

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First National Real Estate 2013 Property Market Outlook

Residential Apartment/Strata prices National

NSW

VIC

QLD

SA

TAS

WA

Upwards

19%

41%

25%

26%

–

–

24%

Downwards

19%

7%

35%

2%

17%

50%

–

Flat

62%

52%

40%

72%

83%

50%

76%

Flat apartment/strata property prices are again mainly due to supply meeting demand, especially in South Australia, Queensland and New South Wales.

Price increases for this sector are due to a range of factors: steady supply, strong demand, low house prices making it more affordable for renters to become home owners, and, an increase in investor activity.

A recent report highlighted 388 towns and suburbs in Australia where the monthly mortgage repayment would be cheaper than the rent for that area – based on a principal and variable interest rate. Queensland had the most suburbs in this situation, followed

by New South Wales and Western Australia:

Number of suburbs where mortgage payment cheaper than rent State

No. of Suburbs

Metro Area

Regional Area

NSW

88

41

47

Victoria

17

3

14

147

42

105

South Australia

48

31

17

Western Australia

44

6

38

Tasmania

30

14

16

Northern Territory

11

2

9

Queensland

Canberra National Total

3 388

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Residential Land prices Vacant land prices for capital cities have mostly held firm post 2008 and have risen on rate/sqm basis: Median land sale price

Median price per sqm

Sydney

$286,000

$573

Perth

$246,000

$535

Brisbane

$220,000

$420

Melbourne

$218,000

$475

Adelaide

$182,000

$481

Heading into 2013, land prices across both capital cities and rural/regional areas are expected to remain relatively flat, with some potential for upwards and downwards movement, depending on the area in each state.

National

NSW

VIC

QLD

SA

TAS

WA

Upwards

26%

32%

31%

29%

33%

–

29%

Downwards

16%

11%

31%

6%

–

50%

–

Flat

58%

57%

38%

65%

67%

50%

71%

Building costs are at the heart of land price decreases, serving as a deterrent for building activity, especially in New South Wales. However, government grants for new constructions should assist in areas where they are available, and in areas where supply is short.

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First National Real Estate 2013 Property Market Outlook

Residential Activity and growth A recent national survey found almost two thirds of first home buyers in Australia think it is a good time to buy, because they believe property prices are good value and interest rates are down. According to industry information, first home buyers represent the best opportunity for the strongest growth sector, recording growth in the share of finance for the September quarter, rising to 19.3%.

Affordability and better buying conditions will underpin home buying activity growth over the coming six months.

However, according to First National members, upgraders and investors are expected to represent the most active sectors in the first half of 2013 across the nation. In South Australia and Western Australia it is expected to be first home buyers, in New South Wales, Queensland and Tasmania, it is expected to be investors, while in Victoria it is evenly split between investors and upgraders.

Strongest growth sectors National

NSW

VIC

QLD

SA

TAS

WA

First home buyers

26%

10%

8%

15%

50%

–

71%

Investors

32%

39%

42%

44%

17%

50%

–

Upgraders

33%

34%

42%

37%

33%

25%

29%

9%

17%

8%

4%

–

25%

–

Retirees

Almost half the members (48%) expect investor activity to increase in the first half of 2013.

This will be driven by improved market and buying conditions, stronger investor confidence, better returns and higher yields.

2013 Property Market Outlook | First National Real Estate

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Residential Investor activity – next six months National

NSW

VIC

QLD

SA

TAS

WA

Increase

48%

55%

62%

48%

50%

–

72%

Decrease

22%

21%

8%

19%

17%

50%

14%

Same

30%

24%

30%

33%

33%

50%

14%

According to industry data, investors were strong in September, jumping by 8.6% in the month to be 8.8% higher than September 2011. Most of this gain was in the months just prior, given investor market was mostly flat over the year.

Trends Social media is growing in popularity, proving it will be a major tool for change. Consumers increasingly seek property information, whether buying, selling or renting, via the internet and other social media tools such as Facebook, Twitter, LinkedIn, Google, Pinterest, the web, etc.

A recent industry survey found 15% of people said they had used their personal social media accounts to support online advertising for their properties, and more and more consumers are asking agents what social media strategies they have.

Around 44% of members are expecting an increase in the number of mortgage defaults over the coming six months. Job losses and rising living costs appear to be the main reasons for mortgage stress levels.

The entry level is expected to be the most active sector in 2013, especially for most members in Tasmania, South Australia, Queensland and New South Wales. In Victoria and Western Australia, the middle market is expected to be most active.

In line with industry sentiment, the prestige market will continue to struggle for much of 2013, although 15% of members in Victoria say it will be their most active sector.

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First National Real Estate 2013 Property Market Outlook

Residential Most active sectors Bargain Middle

National 58% 39%

NSW 55% 45%

VIC 39% 46%

QLD 52% 48%

SA 100% –

TAS 75% 25%

WA 29% 71%

Prestige

3%

–

15%

–

–

–

–

Solar power continues to be the most popular energy efficiency feature sought by home buyers (48%), followed by ceiling insulation (32%), according to members.

Most sought after energy efficient features National 10%

NSW 3%

VIC 27%

QLD –

SA 17%

TAS –

WA 14%

Solar power

48%

49%

55%

40%

66%

50%

29%

Ceiling insulation

32%

31%

9%

44%

–

50%

57%

Ability to open windows

8%

17%

–

12%

17%

–

–

Eaves or window shades

2%

–

9%

4%

–

–

–

Drought resistant gardens

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Rental Market The rental market will continue to be a strong performer for the property market. Weekly rents have been generally rising consistently across capital cities, increasing by 4.2% over the past 12 months for houses and 2.9% for units.

The combination of lower property prices and higher rental rates has pushed rental yields higher, improving the gross yield for property investors.

Demand and supply fundamentals continue to tighten the residential vacancy rates, which are expected to remain low across most capital cities, driving real rents higher.

Building activity remains well short of underlying house demand.

While upward pressure on rental yields will attract investor activity, interest rate cuts, along with a modest fall in house prices have driven a significant improvement in affordability across all states, providing favourable conditions for first home buyers.

Our member survey supports this overview, where 81% expect vacancy rates to remain at current levels, or tighten further, and 76% expect weekly rents to stay the same or rise.

Expected direction of vacancy rates

18

National

NSW

VIC

QLD

SA

TAS

WA

Upwards

19%

21%

15%

11%

17%

50%

–

Downwards

26%

38%

8%

52%

17%

–

43%

Flat

55%

41%

77%

37%

66%

50%

57%

First National Real Estate 2013 Property Market Outlook

Rental Market Expected direction of weekly rentals National

NSW

VIC

QLD

SA

TAS

WA

Upwards

44%

55%

15%

59%

50%

–

86%

Downwards

24%

4%

23%

–

17%

100%

–

Flat

32%

41%

62%

41%

33%

–

14%

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

Affordability, however, will continue to present a challenge for the Australian property market. In areas described earlier where the monthly mortgage payment is typically lower than the monthly rent, the rental market is very appealing for investors, but tenants are vulnerable.

There are already areas in each state where vacancy rates are beginning to ease as a result of reducing demand, such as Tasmania, which is starting to have an impact on weekly rent prices. However, Victoria and New South Wales members and state chairs believe any easing of vacancy rates or reductions in weekly rentals is due to the natural property cycle.

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Commercial Property Market Market fundamentals suggest the broader commercial property market is at the early states of a multi-year cyclical upswing.

A robust economic backdrop will underpin tenant demand, while supply will be constrained by rising development costs, heightened risk aversion and tight credit conditions.

A recent industry survey showed: } A third of respondents considering buying a commercial property said they intended to buy using their self-managed superfunds } Half said retail property in their state had bottomed out, while 32% said it still was in a downswing } 45% said their state’s office market had bottomed out

The majority of First National Commercial members, 70%, say the commercial property market in their regions will remain steady throughout 2013. Just 16% believe it will strengthen. In Victoria, 50% of members say it will strengthen, New South Wales 33%, and 17% in Western Australia.

Commercial property prices and weekly rentals are expected, in the main, to remain at current levels or, in a few instances, decrease.

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First National Real Estate 2013 Property Market Outlook

Commercial Property Market Commercial prices and rentals Prices Rentals

Increase

Decrease

Flat

3%

12%

85%

–

18%

82%

This stagnant market is primarily due to ongoing weak consumer and business sentiment – the result of slow global and domestic economies.

The industrial and retail sectors are the two areas expected to show the greatest growth according to a majority of members.

National

NSW

VIC

QLD

SA

TAS

WA

6%

–

17%

–

–

–

–

Industrial

36%

50%

17%

50%

–

–

67%

Retail

32%

40%

50%

50%

–

–

–

Service

16%

10%

–

–

67%

100%

33%

Hospitality

10%

–

16%

–

33%

–

–

Office

2013 Property Market Outlook | First National Real Estate

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Rural/Regional Outlook The rural property market is expected to remain relatively stable into 2013, with 76% of rural members expecting it to be steady.

Type of rural property market National

NSW

VIC

QLD

SA

TAS

WA

Strong

5%

10%

20%

–

–

–

–

Steady

76%

80%

60%

100%

67%

50%

100%

Weak

19%

10%

20%

–

33%

50%

–

71% of members say rural property prices will remain at current levels, but 11% say they will increase.

Rural property prices National

NSW

VIC

QLD

SA

TAS

WA

Increase

11%

10%

20%

17%

–

–

–

Decrease

18%

20%

20%

–

–

50%

100%

Flat

71%

70%

60%

83%

100%

50%

–

The eastern seaboard states of New South Wales, Victoria and Queensland are the states where members anticipate prices will rise.

Rural rental prices are expected to hold firm by 70% of members, but 16% say they will increase.

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First National Real Estate 2013 Property Market Outlook

Rural/Regional Outlook National

NSW

VIC

QLD

SA

TAS

WA

Increase

15%

30%

–

20%

–

–

–

Decrease

15%

10%

20%

20%

–

50%

–

Flat

70%

60%

80%

60%

100%

50%

100%

Only New South Wales and Queensland members expect rental increases of any kind.

The Southern Highlands in New South Wales has the most optimistic outlook for rural properties in the country, followed by The Mallee in Victoria and Darling Downs in Queensland.

This stable market is mainly due to current steady levels of supply and demand, commodity prices, and the high Australian dollar along with economic conditions both at home and overseas.

The Lifestyle sector will continue to dominate the rural property market in Australia, representing the strongest growth area. The floating of the Chinese currency is expected to have a positive effect on Australia’s rural property prices by 30% of members.

2013 Property Market Outlook | First National Real Estate

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Real Estate Business Outlook Members are very optimistic about the outlook for their real estate businesses, with the majority (63%) expecting to grow their businesses in the first half of 2013, while 33% say they will remain the same. A quarter of members in Tasmania expect their businesses to decline.

Expected business growth Grow Decline Unchanged

National

NSW

VIC

QLD

SA

TAS

WA

63%

72%

69%

81%

33%

25%

100%

4%

–

–

–

–

25%

–

33%

28%

31%

19%

67%

50%

–

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

Most members (69%) expect to service their growing businesses with the current staff levels, however 29% did say they would increase them.

Staff number increases – next 6 months?

National

NSW

VIC

QLD

SA

TAS

WA

Yes

29%

21%

31%

38%

17%

25%

43%

No

2%

3%

7%

–

–

–

–

69%

76%

62%

62%

83%

75%

57%

Same

The residential market is expected to continue being the most active sector for the majority of members (57%), followed by property management (41%) and then rural (2% each).

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First National Real Estate 2013 Property Market Outlook

Real Estate Business Outlook Most active sector of the market – next 6 months Residential Commercial Rural Property Management

National

NSW

VIC

QLD

SA

TAS

WA

57%

68%

69%

70%

50%

–

86%

–

–

–

–

–

–

–

2%

3%

8%

–

–

–

–

41%

29%

23%

30%

50%

100%

14%

According to the survey, 40% of members indicated their marketing spend would remain the same for the coming six months, while 34% said it will increase. The greater proportion of members expect to increase or maintain their current Vendor Paid Advertising levels: 40% of members said they would increase it, while 41% said they would maintain them at current levels.

However, 67% said they would be increasing their use of social media tools to market properties, responding to the growing trend of consumers to seek property information via this marketing channel.

Use of social media tools National

NSW

VIC

QLD

SA

TAS

WA

Increase

67%

59%

77%

82%

50%

50%

86%

Decrease

11%

20%

–

7%

–

25%

14%

Same

22%

21%

23%

11%

50%

25%

–

Based on industry information, many consumers use Facebook regularly to create community connections and mention key property listings. They also like to post videos to Facebook and use Twitter, but to a lesser extent.

Members have been quick to recognise the benefits of tapping into this communication and marketing channel, with many indicating they would use the following social media tools in future property promotion campaigns: Facebook (83%), followed by the web (77%) and to a lesser extent SmartPhones, Google, LinkedIn, Twitter and Blogs.

2013 Property Market Outlook | First National Real Estate

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Nerang Outlook The Nerang property market on Queensland’s Gold Coast, is set to continue stabilising into 2013, with market conditions in the region holding in the first half of the year on the back of a steady market in the latter months of 2012.

The market reached the bottom of the property cycle at the end of 2011, and has continued to perform quite well. Job security, fragile business confidence and concern over global markets still influence prospective buyers.

Compared to the post flood period throughout 2011, buyer enquiry and sales volumes rose throughout 2012, but are still well short of what could be called normal/healthy market levels.

Key performance indicators show the average number of days a property remains on the market is expected to hold, along with stock numbers and turnover.

A combination of factors including ongoing economic uncertainty in domestic and global markets, job insecurity and low consumer confidence will serve to keep the market soft even in light of current strong affordability levels. An easing of net migration to the Gold Coast region has also reduced demand.

Property prices across all sectors of houses, apartment/strata and land in the Nerang region are expected to remain at current levels.

House and apartment/strata property prices have been the victim of reducing stock levels, although there is a healthier supply and demand equation. Demand would need to exceed supply for a sustained period before values begin to move upward again.

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First National Real Estate 2013 Property Market Outlook

Nerang Outlook Despite the strong supply of vacant land in the region, land prices are suffering due to buyers opting to take advantage of the very competitive established house prices compared to building a similar home.

The rental market will strengthen as a result of ongoing demand and additional investment stocks coming onto the market. This will result in a tightening of vacancy rates, however weekly rental prices are expected to remain steady with the increased supply.

The upgrader segment is expected to represent the strongest growth in activity driven by the improved affordability. Sellers are realising that to upgrade, in many cases it is financial advantageous to sell their existing property at lower current market values in order to secure the new home at prices which are now more affordable than ever before.

The removal of the First Home Owners’ Grant for the purchase of established homes was detrimental for those seeking to step onto the property ladder. More than 70 per cent of would be first home buyers prefer established homes due to more affordable prices, compared to new home entry level prices which are generally out of reach of most First Home Buyers.

The $15,000 First Home Buyer incentive for the purchase, or construction of a new dwelling will prove to have little influence in stimulating the housing construction sector.

Interest rates are expected to remain unchanged over the coming six months, which will further support any market improvement, especially for the middle market, which is expected to be the most active in the first half of 2013.

The ongoing tough economic conditions and job insecurity may result in the recent increase in mortgage defaults in the Nerang region continuing over the first six months of 2013.

Volumes of mortgage defaults are already at significant levels and will remain high for some period until job markets and the economy improve. Most repossessions reflect properties purchased in peak market periods with minimal equity and highly geared finance arrangements.

2013 Property Market Outlook | First National Real Estate

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Nerang Outlook Key infrastructure projects earmarked for the Nerang and Gold Coast region expected to impact the property market include the construction of the light rail network throughout the Gold Coast, Gold Coast airport redevelopment and increased flight schedules, commencement of some Commonwealth Games infrastructure and possible development of the cruise ship terminal.

These will add some level of improved confidence to local businesses and employment markets.

Solar power is the most sought after energy efficient feature of a property in the Nerang region.

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First National Real Estate 2013 Property Market Outlook

New South Wales Economic outlook There is strong optimism in New South Wales that a property market recovery is underway, although it is considered to still be precarious, subject to the slightest negative action or sentiment.

It is important the New South Wales state government releases more land and lowers head works costs to cement the recovery and ensure it takes root. The state government’s lack of funds to complete any major infrastructure works is restricting the amount of land available.

Market outlook Arguably, among the states prospects are brightest for the New South Wales property market; however the key influencing factors will be the current housing shortage, affordability, new land releases and reducing interest rates.

This is borne out by New South Wales members, 62% of whom say market conditions will improve, mainly as a result of price stability, low interest rates, improved buyer confidence and market conditions.

Regions expected to show the most improvement include Canberra, Sydney, Greater Western Sydney and The Hunter. The Central Coast, Central West, Northern Rivers, Northern Tablelands, Snowy Mountains, Southern Highlands and South Coast regions will also improve, but not to the same extent.

2013 Property Market Outlook | First National Real Estate

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New South Wales Further evidence the market is recovering in New South Wales is that 90% of members say they expect the average number of days a property is on the market to hold at current levels or fall, while 72% say sales will increase. 31% say they expect property listings will also increase – so more stock is coming onto the market and turnover is getting faster, indicating there is strong market activity on the way for 2013.

76% of members say the market has bottomed. This incorporates the regions of Canberra, Central Coast, Central West, Greater Western Sydney, The Hunter, Mid North Coast, Northern Rivers, Northern Tablelands, Snowy Mountains, Southern Highlands, Sydney and South Coast.

Despite this, the market is still considered soft, mainly as a result of consumer confidence, some buyers believing it will fall further, due to ongoing uncertainty and job insecurity.

Overall, New South Wales’ members are very optimistic the market will continue to stabilise (55%) or rise (38%) in the coming six months as a result, primarily, of confidence gradually returning, affordability improving and ongoing supply shortages.

Significant developments or infrastructure projects affecting the New South Wales market in the first half of 2013 will be mining sector stability and government policy in relation to land releases for housing development - which the state sorely needs.

There are currently no major plans for land releases, so mining sector stability will play a critical role in the New South Wales property market.

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First National Real Estate 2013 Property Market Outlook

New South Wales Residential Prices Most New South Wales members expect property prices across the board to remain stable or rise, mainly due to the market bottoming, improved affordability, strengthening consumer confidence and ongoing stock shortages.

Regions across the state where prices are expected to rise include the Central Coast, Central West, Greater Western Sydney, The Hunter, Snowy Mountains, South Coast and Sydney. Sydney house prices will remain well supported by tight market demand/ supply fundamentals.

House Prices

Apartment/Strata

Land

Increase

43%

31%

29%

Decrease

3%

17%

14%

54%

52%

57%

Flat

Rental The rental market in New South Wales is expected to continue to perform strongly with vacancy rates remaining relatively stable, although there is potential for further tightening in areas where there is an not enough supply to meet the high demand.

This tight rental market may force weekly rentals up in some areas. In areas where there is an oversupply, it may place a ceiling on any price increases.

41% of New South Wales members expect vacancy rates to trend upwards, with 41% saying they will remain flat. 55% of members expect weekly rental prices to increase, while 41% say they will remain flat. Only 3% expect there to be any price drops in weekly rents.

2013 Property Market Outlook | First National Real Estate

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New South Wales Growth The best performing areas, according to the New South Wales State Chair, will be the more affordable areas, coast locations and areas affected by mining. The Central Coast, Central West, Greater Western Sydney, Hunter Valley, New England, Mid North Coast, South Coast and Sydney areas are all expected to be strong performers in 2013.

Based on industry data, suburbs where it is cheaper to buy than rent in New South Wales include: Suburb

Region

Type

Difference between buy/rent*

Enmore

Sydney

Unit

$432

Berkeley Vale

Sydney

Unit

$324

Dural

Sydney

Unit

$215

Rushcutter’s Bay

Sydney

Unit

$198

Ambarvale

Sydney

Unit

$165

Thurgoona

Murray

Unit

$522

Northern

House

$490

Muswellbrook

Hunter

Unit

$407

Fern Bay

Hunter

House

$325

North Western

House

$220

Canberra City

ACT

Unit

$231

Macquarie

ACT

Unit

$157

Franklin

ACT

Unit

$97

Boggabri

Cobar

* towns and suburbs in Australia where the monthly mortgage repayment would be cheaper than the rent for that area - based on a principal and variable interest rate

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First National Real Estate 2013 Property Market Outlook

New South Wales Investor activity is expected to increase by 55% of New South Wales members, as a result of improving investor confidence, stronger returns and better yields and excellent buying conditions.

The investor segment is expected to represent the strongest growth in activity (38% of NSW members), followed by upgraders (34%), all of whom are hoping to capitalise on the buying opportunities available.

First home buyers and retirees are expected to represent the strongest growth in activity by 10% and 17% respectively.

Trends The majority of New South Wales members (66%) believe interest rates will drop further in the first half of 2013, which will improve affordability, strengthen buyer confidence and stimulate market activity.

This is especially true in the entry level market (less than $350,000), which 55% of members expect will be the most active sector. The remaining 45% expect the middle market to be most active.

However, interest rates alone will not sustain Australia’s property market. A combination of factors is required, including: } Abolition of stamp duty and other property taxes } Government initiatives to support first home buyers } Policy changes for new home building and approval processes Foreign investors are expected to affect the Australian property market, particularly in the regions of Central Coast and Sydney, given the lifestyle appeal of both areas. In addition, Chinese investors are buying upper end properties, particularly in Sydney, in both commercial and residential property sectors.

2013 Property Market Outlook | First National Real Estate

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New South Wales These same regions, along with Central West, Greater Western Sydney, The Hunter, Mid North Coast, Northern Rivers, Northern Tablelands, Snowy Mountains and South Coast are also expected to see an increase in the number of people buying investment properties through their superannuation funds.

In areas vulnerable to job insecurity, there may be an increase in mortgage defaults – 31% of members in New South Wales expect to see this. Rising costs of living will also place additional pressure on stressed mortgage holders, contributing to any rise in mortgage default figures.

Solar power and ceiling insulation are seen as the most sought-after energy efficiency features.

Commercial Our member survey highlights that 83% of New South Wales members expect the commercial property sector to remain steady, however, encouragingly, 17% say it will strengthen.

Commercial property prices and rentals are primarily expected to remain at current levels by 83% and 92% of New South Wales commercial property members respectively.

The industrial, retail and service commercial property sectors are expected to represent the strongest growth areas for the state’s market.

Foreign investors are expected to impact on The Hunter region’s commercial property market.

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First National Real Estate 2013 Property Market Outlook

New South Wales Rural 80% of New South Wales rural members believe the state’s rural property market will hold, while 10% say it will strengthen.

70% believe rural property prices will stay at current levels while 10% say they will rise.

60% say rural rental prices will stay the same, however 30% say they will rise, mainly because of static supply and high demand.

The relatively high value of the Australian dollar will continue to dampen activity in rural property markets, along with slow buyer activity.

Economic and political uncertainty, coupled with subdued commodity and stock prices, will have a significant, negative impact on rural property markets.

Real estate business outlook 70% of New South Wales members expect their businesses to grow in the coming six months, while the remaining 28% expect them to stay the same.

Responses

As shown in the graph below, 41% of New South Wales members derive 60-80% of their business from sales; 24% have 21-40% from sales; 41% have 41-60% from sales and 10% each derive 0-20% and 81-100% from sales.

0-20% (10.34%)

21-40% (24.14%)

41-60% (13.79%) Answer

61-80% (41.38%) 81-100% (10.34%)

2013 Property Market Outlook | First National Real Estate

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New South Wales The remainder of their respective business comes from property management, however it is the residential sector which is expected to represent the most active sector for 68% of members, followed by property management (29%) and then rural (4%).

The majority of New South Wales members (76%) expect staff numbers to remain the same, however, 21% expect to put on additional staff.

Marketing spend is expected to remain at current levels or increase for 79% of members, with 79% saying they would increase their use of social media tools to market properties.

The internet, Facebook and Smartphones are the preferred social media tools, with 71%, 75% and 36% respectively, saying they would increase their use in the coming six months.

79% of members said their take of Vendor Paid Advertising would remain the same or increase for the first half of 2013.

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First National Real Estate 2013 Property Market Outlook

Victoria Market outlook The subdued property market in Victoria is expected to rebound in the first six months of 2013, with 62% of Victorian members saying it will continue the improving trend of the last six months of 2012, especially in the regions of Greater Melbourne, Mornington Peninsula and The Mallee.

Anticipated market conditions 2012/13 Last 6 months

Next 6 months

Steady

62%

61%

Rising

15%

39%

Falling

23%

–

The spring selling period saw a modest increase in transactions across most market segments. This growing confidence is expected to spill into 2013, provided finance is readily available and low interest rates are maintained.

However, it is incumbent on government and business leaders at all levels to provide and instil positive actions and confidence for communities to follow.

Growth in optimism is due to stabilising global and domestic economies and greater affordability due to improved market conditions.

The key influencing factors underpinning the state’s property market over the period covered by this report will be continuing low interest rates, coupled with a major outflow of metropolitan residents looking to buy affordable housing in regional centres with easy access to Melbourne, particularly those located within two or three hours of Melbourne.

2013 Property Market Outlook | First National Real Estate

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Victoria Significant developments, regulations or infrastructure changes affecting the state’s property market in the coming six months are the number of local government elections that have been held in Victoria recently.

In many instances, major shake ups and new Councillors have been elected and it is reasonable to expect these new players will wish to see the municipality they represent progress and attract population inflows.

As a result, many planning issues may be resolved and a more open and efficient system may evolve.

In the main, (62%) of Victorian members expect the average number of days a property takes to sell to remain steady, although 38% believe days on market will fall – further evidence the market is turning.

54% of Victorian members believe the amount of property for sale will increase. 67% believe sales volumes will also increase, especially in the areas of Greater Melbourne, Mornington Peninsula and The Mallee.

Over the three months ending August 2012, 9.2% of Melbourne dwelling sales were transacted at a price lower than they were purchased for – lower than the national figure, which is indicative of the market being primed for some price recovery.

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First National Real Estate 2013 Property Market Outlook

Victoria Residential Prices Across the state, members are unanimous that the market has bottomed. Up is the only way to go, so price increases, although gradual, are expected in 2013 but will remain fairly stable for the coming six months, providing excellent ongoing buying opportunities.

Even with improving market conditions, low new mortgage discharge figures, combined with a tough economy, will put a ceiling on any real price growth.

Industry September quarter figures show the residential housing market in Melbourne has remained stable, with a median house price of $530,000 compared with the revised June quarter median of $525,000. Units and apartments in the city were also largely stable, with a 0.7% reduction to $442,000.

For the first half of 2013, a majority of members anticipate house prices will hold, a smaller percentage expect a rise, while some drops are forecast for apartment/strata properties and land values.

Increase Decrease Flat

House Prices

Apartment/Strata

Land

46%

15%

31%

–

38%

31%

54%

47%

38%

Limited supply, ongoing demand and improving consumer confidence will drive price growth across all sectors, while oversupply and high building costs will be the foundation of price reductions in apartment/strata properties and land.

2013 Property Market Outlook | First National Real Estate

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Victoria Rental The rental market in Victoria will be relatively lack-lustre for the first half of 2013, with rising living costs keeping many in rental accommodation even though improved affordability makes purchasing a viable option for most.

Based on industry data, suburbs where it is cheaper to buy than rent in Victoria include: Suburb

Region

Type

Difference between buy/rent*

Docklands

Melbourne

House

$1,538

Carlton

Melbourne

Unit

$317

Abbotsford

Melbourne

Unit

$132

Dimboola

Wimmera

House

$120

Warracknabeal

Wimmera

House

$107

California Gully

Loddon

Unit

$91

Red Cliffs

Mallee

House

$89

Irymple

Mallee

House

$89

* towns and suburbs in Australia where the monthly mortgage repayment would be cheaper than the rent for that area - based on a principal and variable interest rate

Vacancy rates are expected to be flat by 77% of members, trend downwards by 8% and rise by 15%. Upward movements will be a result of improved affordability for investors and introducing new, vacant stock to the market. Growing demand will see rates tighten further in areas where stocks are limited.

Overall, weekly rentals will remain flat or trend downwards, due mainly to sufficient stock levels to meet demand – 62% of members expect weekly rents to be flat, 23% expect them to trend downwards and 15% expect them to rise.

The average weekly rent for Melbourne houses is $426, up 1.7% on the year, and yields are now 3.6%. Weekly rents for the city are $382, up 0.6% over the year, yielding 4.5%.

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First National Real Estate 2013 Property Market Outlook

Victoria Growth Investors and upgraders will represent the strongest growth in activity for Victoria according to 84% of the state’s members, divided equally between the two sectors. Upgraders, just like investors, recognise the opportunities afforded in a buyers’ market and will seek to capitalise on them before prices begin to rise and market conditions change.

Overall investor activity is expected to increase by 62% of Victorian members. This activity will be driven by the current buyers’ market creating excellent buying opportunities, improving consumer confidence and affordable financing options.

There has been an increase in the number of people buying investment properties through their superannuation funds in Victoria, according to 76% of Victorian members.

This rings especially true in the areas of Greater Melbourne, The Mallee, North East Victoria and Western Victoria.

The best performing areas in Victoria are expected to be developing major regional areas with good access to Melbourne such as Mornington Peninsula, Bellarine Peninsula, Goldfields, Central Murray, Upper Murray, East Gippsland Coast, Central Gippsland Coast and East Gippsland. Greater Melbourne, especially the precincts of Carlton, St Kilda and Essendon, will also perform strongly.

Trends The majority of Victorian members (85%) believe interest rates will drop further in the first half of 2013.

While lower interest rates will improve affordability, market conditions and strengthen buyer confidence, job uncertainty, increasing living costs and tighten lending criteria will all act against this and, for some areas, may result in increased mortgage defaults (anticipated by 54% of Victorian members).

47% Victorian members expect the middle market to represent the strongest sector of activity in the coming six months, followed by the entry level market (38%) and then the prestige market (15%).

2013 Property Market Outlook | First National Real Estate

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Victoria Foreign investors are expected to affect Victoria’s property market by 30% of Victorian members. Reasonable property values along with a soft foreign investment policy make it too attractive to pass up, especially for those with high disposable overseas incomes.

Low interest rates and the high Australian dollar will continue to make Victoria, and Australia, an easy opportunity.

The main areas of appeal for foreign investors will be Greater Melbourne and Western Victoria.

The floating of China’s currency is expected to have a positive impact on Victoria’s property prices because with the easing of restrictions the movement of money should make it easier for larger sums to be used for investment.

For Victorians, solar power remains the most sought-after energy efficiency feature, followed by drought resistant gardens, ceiling insulation and eaves or window shades for westerly sun.

Commercial Victorian commercial property members are equally divided on whether commercial property prices will strengthen or remain steady – which implies they believe this market sector will hold up relatively well in the first half of 2013.

83% of Victorian members believe commercial property prices and weekly rentals will stay at current levels.

Retail is expected to represent the strongest growth for the state’s commercial property market by 50% of members. Other growth areas will be office, industrial and hospitality.

42

First National Real Estate 2013 Property Market Outlook

Victoria Rural 60% of Victorian rural members expect the rural property market to experience a steady market in 2013. 20% say it will strengthen.

A similar picture is expected for rural property prices, however 80% say weekly rental prices for rural properties will hold, while the remaining 20% say they will fall.

40% of Victorian members expect foreign investors to affect the rural property market, driven by the need to secure a reliable food source.

Real estate business outlook 69% of Victorian members expect their businesses to grow in the coming six months, while the balance expects them to stay the same.

Responses

As shown in the graph below, a third of members derive 60-80% of their business from sales; and a third less than 40%, with the remainder in the middle or at the higher end.

0-20% (8.33%)

21-40% (25.00%)

41-60% (16.67%) Answer

61-80% (33.33%) 81-100% (16.67%)

2013 Property Market Outlook | First National Real Estate

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Victoria The remainder of their respective businesses come from property management.

Residential sales are expected to represent the most active sector for 69% of members, while 23% say it will be property management and 5% say it will be rural.

The greater proportion of members (61%) expect staff numbers to remain the same, however, 31% expect to put on additional staff.

Marketing spend is expected to remain at current levels or increase for 77% of members, with the same number saying they would increase their use of social media tools to market properties.

Facebook is the preferred social media tool used by 85% of members, followed by the web (62%), Smartphones and Google (31% each), Twitter (23%), Blog (15%) and then LinkedIn (8%).

Almost half of members said their Vendor Paid Advertising would increase in the coming six months.

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First National Real Estate 2013 Property Market Outlook

Queensland Economic outlook Key to Queensland’s financial stability in the coming six months will be the mining sector, however the state government’s increase of royalties to offset the federal government share will stimulate a noticeable easing of employment and activity.

Market outlook Overall, there is a general feeling by Queensland members that the market has turned and will improve in the coming six months, especially in the regions of Central Queensland, Darling Downs, Far North Queensland, Brisbane, the Gold Coast and the Sunshine Coast.

Most members (81%) believe the market has bottomed, which is underpinning an improvement in consumer confidence and helping to drive an upswing in the market.

33% of members say market conditions will improve, due primarily to lower interest rates, proper pricing of housing stocks, growing demand and improving confidence.

However, job uncertainty and oversupply is restricting gains across all areas of the state, but especially in regions reliant on the mining sector.

Affordability will also influence the state’s property market in the first half of 2013.

Property prices across the state and particularly South East Queensland have bottomed and are not expected to fall any further. Buyers are taking advantage of lower prices, however over-leveraged owners from previous boom periods are suffering, resulting in higher numbers of mortgagee sales. These are expected to continue over the next six months or more.

Compared to the post flood period of 2011, sales volumes have increased by around 50% and are expected to remain on the improve. However, such activity will not put upward pressure on prices for some time as the volume of property for sale has retracted significantly, effectively balancing supply and demand.

2013 Property Market Outlook | First National Real Estate

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Queensland 78% of members, across the regions of Central Queensland, Darling Downs, Far North Queensland, North Queensland, Brisbane, Gold Coast, Sunshine Coast, West Moreton and Wide Bay Burnett expect sales volumes to increase.

52% of Queensland members expect property listings volumes to increase, and 37% expect them to maintain current levels.

A sustained period of higher demand versus supply would ultimately trigger a gradual rise in property values. This trend is expected to evolve gradually over the coming six months.

Residential Prices Property prices in Queensland are expected to remain relatively flat, with some potential for increases – particularly for houses in Brisbane and the strong mining and resources regions.

Property price trends for next six months Up Down Flat

House Prices

Apartment/Strata

Land

33%

16%

23%

7%

12%

12%

60%

72%

65%

The main reasons cited for flat property prices are lack of consumer confidence, flat demand/supply and market conditions in general. Job insecurity is the key reason prices are not expected to increase overall. A lack of investor interest is also dampening increases for apartment/strata properties. Difficulties securing development funding is placing downward pressure on any land price gains.

46

First National Real Estate 2013 Property Market Outlook

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

52% of Queensland members say vacancy rates will trend downwards, which, according to 59% of members, will place further upward pressure on weekly rent prices.

Flat vacancy rates, for 37% of members, are due predominantly to there being little room to go any lower, given the current tight rental market.

Trend

Vacancy Rate

Weekly Rental Prices

Upward

11%

59%

Downward

52%

–

Stay the same

37%

41%

Growth Almost half the members (48%) expect investor activity to increase as a result of better yields and improving consumer confidence.

Investors are expected to represent the strongest growth in activity by 44% of members in Queensland, followed by upgraders (37%) and then first home buyers (15%) and retirees (4%).

The state government’s $15,000 building grant for first home buyers is not expected to have much impact because the average minimum price for new homes is generally higher than the affordability level for most first home buyers. The removal of the $7,000 grant for first home buyers on established properties will also result in a slow down of these buyers.

80% of first home buyers prefer and generally can only afford established properties.

2013 Property Market Outlook | First National Real Estate

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Queensland Based on industry data, suburbs where it is cheaper to buy than rent in Queensland include:

Suburb Flinders View

Region Brisbane

Type Unit

Difference between buy/rent* $296

Logan Central

Brisbane

Unit

$225

Brisbane City

Brisbane

Unit

$198

Waterford

Brisbane

Unit

$184

Hillcrest

Brisbane

Unit

$175

Moranbah

Mackay

House

$2,859

Blackwater

Fitzroy

House

$1,536

Mackay

House

$1,253

Darling Downs

House

$1,208

Sunshine Coast

Unit

$909

Dysart Miles Kunda Park

* towns and suburbs in Australia where the monthly mortgage repayment would be cheaper than the rent for that area - based on a principal and variable interest rate

The best performing region in Queensland is currently Central Queensland. The Widebay region, in particular Maryborough, Woodgate, Childers, and Bundaberg has experienced improving results with what is believed to be a ‘flow over’ of the mining boom in other regions to the north. In general, confidence is returning to the market place.

The First National Central Queensland offices (Biloela and Gladstone) have steady to strong results off the back of the Gladstone mining boom, however developers have slowed down their activity.

Many employees of the mining activity are now fly in/fly out, however solid results are still expected to continue.

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First National Real Estate 2013 Property Market Outlook

Queensland In North Queensland, around Sarina, Whitsunday Coast, Bowen, Townsville and Magnetic Island, results have been steady and improving – also off the back of the mining boom, which is related to Moranbah and other mines. However, the negative publicity with Moranbah and other mining activities has slowed the pace a little for Sarina and Whitsunday Coast.

The Bowen region has just had approval to proceed with ‘Abbott Point’, which is likely to result in increased activity.

First National’s Townsville office has just recorded its best sales results for the past four and a half years, with the previous four months also proving solid. The network’s Magnetic Island office is also experiencing improved results, but not to the same extent as Townsville. Key to this success has been vendors pricing their properties correctly.

In Far North Queensland, particularly the areas of Mission Beach, Innisfail, Cairns and Atherton, the market has been flat for some time, but it is a widely held belief that the market has now bottomed and an upward swing is expected. The Cairns and Far North precinct averages unemployment rates between 10 and 14%, which also determines the confidence levels of the locality.

Trends The majority of Queensland members (56%) believe interest rates will remain unchanged for the coming six months.

This would serve to generate sales, stimulate activity and improve demand. However, low and reducing rates are not enough – banks also need to act and small to medium businesses need assistance to bring stability back to the overall market.

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Queensland 57% of Queensland members anticipate higher levels of mortgage stress because of rising costs of living and ongoing job insecurity in vulnerable areas.

The majority of Queensland members (52%), expect the entry level market (properties less than $350,000), to represent the strongest sector of activity in the first half of 2013, with the remaining 48% saying it will be the middle market.

Foreign investors are expected to capitalise on the strength of the Australian dollar, with 56% of Queensland members saying there has been an increase in foreign investors in their regions, especially Far North Queensland and Brisbane.

Ceiling insulation and solar power are the most sought-after energy efficiency features for property hunters in Queensland.

Commercial The commercial market in Queensland continues to moderate, with property prices and rents remaining stable, according to 83% of members.

The industrial and retail sectors are expected to show the greatest growth according to members, while foreign investors are expected to affect Far North Queensland’s commercial property market.

Two new mines opening just over an hour west of Cairns, with Chinese involvement, and daily flights to and from China landing in Cairns, are creating a lot more tourism and potential investment excitement in the area.

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First National Real Estate 2013 Property Market Outlook

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

Overall the market is expected to remain steady into 2013 with 83% of rural members expecting rural property prices to hold at current levels, while 17% say they will rise.

Rent prices in rural areas are expected to stay the same by 60% of members.

Real estate business outlook 81% of Queensland members expect their businesses to grow in the coming six months.

Responses

Members are evenly split between those that gain more business from sales and those that gain more from property management, as shown in the below graph.

0-20% (11.11%)

21-40% (25.93%)

41-60% (25.93%) Answer

61-80% (25.93%) 81-100% (11.11%)

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Queensland 30% say property management will be the most active in the coming six months, while 70% say it will be residential sales.

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

Marketing spend is expected to increase or remain at current levels for 80% of members, with 81% saying they would increase their use of social media tools to market properties.

Facebook is the social media tool of choice to be used by 81% of members, followed by the web (70%), Smartphones (44%), Google (19%), LinkedIn (15%), Twitter (15%), Blog (15%) and Pinterest (4%).

85% of Queensland members say they will increase or maintain their current levels of Vendor Paid Advertising.

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First National Real Estate 2013 Property Market Outlook

South Australia Economic outlook South Australia’s economy is currently underperforming and this is expected to continue over the coming six months, ultimately serving to stunt house price growth in the state.

Cancellations and delays with a number of large, uncommitted mining and energy projects, including the proposed Olympic Dam expansion and the Clinton Project (coalbiomass-to-liquid), have weighed on general business confidence and housing market confidence. This is particularly true for the regions and sectors directly exposed to the mining and energy sectors.

However, major developments, regulation changes or infrastructure projects that are expected to build confidence and have an overall positive effect on South Australia’s property market include the Adelaide Oval redevelopment, the new Royal Adelaide Hospital and Research Centre, construction of the Superway, and doubling of the Southern Expressway.

Market outlook The South Australia property market is expected to be relatively flat in the coming six months by the majority of members, but 33% say it will improve. The main gains will be seen in the areas of Adelaide Hills/Mount Lofty Ranges and the Limestone Coast.

83% of South Australia members believe the market has bottomed, particularly in the Adelaide Hills/Mount Lofty Ranges, Limestone Coast, Copper Triangle and Mid North Coast regions. For those anticipating the market may still fall, they expect it to do so in the coming six months.

While consumer confidence is improving it is not considered sufficient to stimulate the market. It is hoped the recent government incentives for construction will generate interest in building new homes and the reintroduction of the first home owners grant will stimulate the first home buyer segment.

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South Australia The average number of days on the market is expected to remain at current levels by all members, although 33% say property listings will increase. 50% of members say they expect sales to increase, especially in the regions of Adelaide Hills/Mount Lofty Ranges, Limestone Coast, Copper Triangle and the Mid North.

The key influencing factors underpinning South Australia’s property market in the first half of 2013 will be established property sales receiving a spin off from the stimulation to the building market, which, if going well, does have a flow on effect to the economy as a whole.

The reduction of the first home buyers grant for established homes from $7,000 to $5,000, whilst not a game changer, will certainly not help the established home sales market.

Based on industry data, the top five suburbs where it is cheaper to buy than rent are:

Suburb Gilles Plains

Region Adelaide

Type Unit

Difference between buy/rent* $225

Athol Park

Adelaide

Unit

$133

Elizabeth Downs

Adelaide

Unit

$132

Evanston

Adelaide

Unit

$109

Davorey Park

Adelaide

House

$104

Port Pirie West

Northern

House

$175

Whyalla Stuart

Northern

House

$156

Murray Lands

Unit

$138

Port Augusta West

Northern

Unit

$114

Whyalla Norrie

Northern

House

$101

Berri

* towns and suburbs in Australia where the monthly mortgage repayment would be cheaper than the rent for that area - based on a principal and variable interest rate

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First National Real Estate 2013 Property Market Outlook

South Australia Residential Prices Across the board, property prices in South Australia are predominantly expected to remain flat, with potential for falls in apartment/strata properties and increases in land values.

Price movements in first six months of 2013 Up Down Flat

House Prices – – 100%

Apartment/Strata – 17% 83%

Land 33% – 67%

This general lack of movement is seen as a result of supply meeting demand, stabilising market conditions and government incentives, particularly for construction.

Rental The rental market in South Australia is expected to hold up, with increased competition in some areas placing upward pressure on weekly rental prices.

67% of South Australian members expect vacancy rates to remain at current levels, while 17% say they will tighten.

50% of South Australian members expect weekly rentals prices to increase due to strong competition for vacant homes, while 33% say they will remain steady.

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South Australia Growth Investor activity is expected to increase by 50% of South Australia members, as a result of improved returns and better yields.

50% of members believe first home buyers will represent the strongest growth segment as a result of government grants, while 17% say it will be investors and 33% say it will be the upgrader segment.

50% of South Australia members find there has been an increase in people buying investment properties through their superannuation funds, and this trend is expected to continue into 2013. The regions most optimistic about this trend include the Limestone Coast, Copper Triangle and Mid North.

The anticipated best performing areas have been identified as Adelaide Plains and the Adelaide Hills/Mount Lofty Ranges areas. The more remote/regional areas suffer in difficult economic times in the absence of other stimulation, such as mining or particularly good yields from crops and livestock.

Trends While 50% of South Australia members expect interest rates to reduce further, stimulating activity and improving confidence, this will not be sufficient to sustain the state’s property market in early 2013. Stamp duty and other inefficient property taxes need to be abolished for any real impact to be felt.

33% of South Australian members expect to see an increase in mortgage defaults in the coming six months as already stressed mortgage holders succumb to the building pressure of job losses and escalating living costs.

The most active sector of the market, according to all South Australia members, continues to be the entry level market where home values are less than $350,000 – this is expected to continue into 2013.

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First National Real Estate 2013 Property Market Outlook

South Australia However, there may also be an increase in foreign investment in city apartments, with the extra incentives in place.

There has been an increase in the number of people buying investment properties through their self managed superannuation funds in South Australia.

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

Commercial The commercial property market in South Australia is expected to continue to be strong in the coming six months, driven by ongoing substantial demand.

The service and hospitality sectors are all expected to represent the strongest growth in activity over the first half of the year.

Commercial property prices should remain at current levels, according to all members, however a minority expect commercial rental prices to decrease.

Rural There is a general feeling among South Australia members (67%) that the rural property market will be relatively static in the first 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, helped in part by the floating of the Chinese currency, which is expected to positively affect the market.

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South Australia Real estate business outlook 33% of South Australia members expect their businesses to grow in the coming six months, and 17% also expect to put on additional staff.

Responses

As shown in the graph below, 50% of members derive 60-80% of their business from sales; 33% of members derive 20-40% from sales and 17% of members derive 40-60% from sales.

0-20% (0%)

21-40% (33.33%)

41-60% (16.67%) Answer

61-80% (50.00%)

81-100% (0%)

The remainder of their respective businesses come from property management, which, along with residential sales, is expected to represent the most active sector for 50% of members.

Marketing spend is expected to remain at current levels for most South Australian members, with 17% saying it will increase, however 50% say they will increase their use of social media tools to market properties.

Facebook (83%), the web (83%), LinkedIn (50%), Smartphones (33%) and Twitter (17%) are the preferred choice of social media tools used by the state’s members.

Most members said their Vendor Paid Advertising would remain the same for the second half of the year, while 17% said they expected to increase it.

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First National Real Estate 2013 Property Market Outlook

Western Australia Economic outlook The Western Australian economy is expected to remain strong into 2013, even with the recent fluctuations in the resources sector.

A number of new infrastructure projects, planned or already taking place across the Perth metropolitan area, are expected to lay the groundwork to cater for increasing population numbers.

Major projects in the city, such as the Perth City Link and the Riverside Development, will certainly help bring new confidence in the area.

Projects like the Perth Stadium and discussion around the new Light Rail System will change people’s views about certain areas and will reignite buyers’ and investors’ attitudes to particular locations in the state.

The impending state election, to be held on 9 March 2013, will potentially have a significant effect on the market and the state’s overall economy.

Market outlook Consumer confidence, coupled with better buying conditions, strong supply and demand and more active first home buyers will see the Western Australian property market steadily improve in the coming six months.

86% of Western Australian members say market conditions will improve, on the back of a stabilising market over the last six months of 2013. In some areas, such as Perth, Peel and the South West, members say they are already experiencing a rising market in the back end of 2012 and expect this will strengthen further in 2013.

All Western Australia members say the market has bottomed in the state and 71% say they expect to see an increase in sales in the first half of 2013, particularly in the regions of Peel, Perth and South West.

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Western Australia 72% say the average number of days a property takes to sell will fall and 57% say they expect property listings in their region to remain at current levels. However, 29% anticipate they will rise – further evidence vendor confidence in selling continues to strengthen.

In towns like Port Hedland and Newman the property market remains strong. Although the very negative comments in the national press may have caused investors to query the long-term sustainability of house prices and rental returns, the outlook for property remains very positive. This region is more sensitive to factors affecting the Chinese, rather than the Australian economy, and early indicators are that demand for resources is beginning to ramp up again, that by the mid next year iron ore prices will have stabilised, and confidence in this sector will have returned to early 2012 levels.

The residential market in Port Hedland and Newman is attractive to both investors and owner-occupiers and although tougher lending criteria may have made borrowing that bit more difficult the income levels in the Pilbara continue to support sales. Â Local agents are confident that although the huge capital growth of the last 5 years may slow down, the region will still dominate the property market in 2013.

Residential Prices With steadily improving market conditions, property prices are expected to also gradually improve.

Western Australian and specifically Perth, house prices, are expected to rise in the coming 12-18 months according to industry data, especially where the mining and resources sector remain strong.

This view is supported by the survey where 71% of Western Australian members say house prices will rise as a result of improving consumer confidence, and a general acceptance that the market has bottomed.

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First National Real Estate 2013 Property Market Outlook

Western Australia 86% of Western Australia members expect apartment/strata property prices to remain at current levels, due mainly to a steady ongoing supply. Any increases will be as a result in the main, of strong demand.

71% of Western Australia members expect land prices to remain at current levels, with the remainder expecting them to head upwards.

Increase Decrease Flat

House Prices

Apartment/Strata

Land

71%

14%

29%

–

–

–

29%

86%

71%

Rental The rental market in Western Australia is expected to perform strongly in the first half of 2013, with vacancy rates holding or easing and trending downwards as a result of high demand and low supplies.

This will drive weekly rent prices upwards, with 86% of Western Australia members expecting this trend to occur.

Vacancy Rates

Weekly Rentals

–

86%

Decrease

43%

–

Flat

57%

14%

Increase

The rental market is holding steady in both Port Hedland and Newman and will do so for the foreseeable future as demand continues to outstrip supply and critical infrastructure investment is required to facilitate any significant increase in housing.

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Western Australia Growth Investor activity is expected to increase by 72% of Western Australian members, as a result of improving rental yields and returns.

First home buyers are expected to represent the strongest growth sector in the state by 71% of members, followed by upgraders (29%). Improved affordability will drive growth activity for the state, both for first home buyers who are now able to afford to enter the market, and for upgraders who seek to take advantage of the low property prices to trade up.

However, more government initiatives are required to support the first home buyer sector and cement improvements so that they translate into a full blown recovery.

43% of Western Australia members believe there has been an increase in the number of people buying investment properties through their self managed superannuation funds – a trend set to increase in 2013 especially in Perth and the state’s South West.

Foreign investors are expected to increase in Western Australia, primarily in Perth.

Changes in the tax rate of Non-Resident Australian Taxpayers can stop investment in areas where there is a shortage of rental properties, however, on a larger scale any foreign investment in regional Western Australia will only strengthen the state.

Western Australia’s Goldfields, Mid West and Pilbara regions are expected to be the best performing areas. Recent data from 2012 indicates there has been a fall in activity in the regional areas of Western Australia, however these regions are all estimated to have increased turnover.

The following are the top areas where it is cheaper to buy than rent: Burswood, Perth, Ascot, Girrawheen, West Perth, Ledge Point, South Hedland and Nickol (Karratha).

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First National Real Estate 2013 Property Market Outlook

Western Australia Trends The majority of Western Australia members (57%) believe interest rates will drop further in the first half of 2013. Naturally this is expected to improve consumer confidence and encourage first home buyers to become more active.

However, to turn activity into a sale, governments need to introduce additional incentives.

These types of initiatives boost the property market as well as have flow on effects in differing industries.

Locality specific grants could boost such programmes as desire lifts for more infill developments rather than increasing urban sprawl.

In areas where job security is vulnerable, it is expected there may be ongoing stress for mortgage holders, leading to an increase in mortgage defaults for the region. However, only 28% of Western Australia members believe this is relevant for their region.

The Middle market is expected to be the most active sector in the first half of 2013, by 71% of Western Australia members. The remainder believe it will be the first home buyer sector.

Ceiling insulation, solar power and energy and drought resistant gardens remain the most sought-after energy efficiency features of a Western Australia property by 57%, 29% and 14% of members respectively.

Commercial Almost all Western Australian commercial property members say the commercial property sector will remain steady, however, the Midland region may see some activity stimulated as a result of the new hospital and Hazelmere area development.

In the Port Hedland and Newman regions, the Commercial sector continues to grow between 3-5% Â with national companies being at the forefront of leasing. Â Two thirds of commercial property members in Western Australia say commercial property prices will remain steady, with one third expecting them to decrease.

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

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

Real estate business outlook All Western Australian members expect their businesses to grow in the coming six months.

Responses

As shown in the graph below, 57% of members say 60-80% of their business comes from sales; 29% say 40-60% comes from sales; while 14% say only up to 20% comes from sales.

0-20% (0%)

21-40% (14.29%)

41-60% (28.57%) Answer

61-80% (57.14%)

81-100% (0%)

The remainder of their respective business comes from property management, which is expected to represent the most active sector for 14% of members, while 86% say it will be residential sales.

The majority of members (57%) expect staff numbers to remain the same, however, 43% expect to put on additional staff.

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First National Real Estate 2013 Property Market Outlook

Tasmania Market outlook Market conditions in Tasmania are expected to stabilise in general, with members unanimously of the belief that the market has bottomed or will do so over the coming six months, driven by ongoing economic and job uncertainty and oversupply of properties.

Tasmania’s North Coast region however, is proving contrary to this trend being particularly optimistic about the local property market going into 2013.

The average number of days a property takes to sell is expected to fall by 25% of Tasmanian members as conditions and confidence begin to improve. While 25% of Tasmanian members say they expect sales volumes will increase, particularly in the North Coast region, half expect the number of properties listed for sale will also increase.

Interest rates and new legislation will be the main factors affecting the state’s property market in 2013. A new real estate bill, going before Parliament, will introduce a cooling off period and, if passed, will significantly affect the way real estate is transacted in Tasmania.

Hobart is expected to be the best performing area for the state, attracting the most interest from buyers, especially from interstate.

Residential Prices In general, property prices in Tasmania are expected to maintain their current levels or possibly continue their downwards trend, due to a lack of buyer incentives, increased volume of listings competition, weakening consumer confidence and ongoing job insecurity. Land prices will suffer from increasing building costs and a lack of incentives for new home starts.

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Tasmania House Prices

Apartment/Strata

Land

–

–

–

Decrease

33%

50%

50%

Flat

67%

50%

50%

Increase

Based on industry data, the top suburbs where it is cheaper to buy than rent include Herdsman Cove, Chignell, Risdon Vale, Cagebrook, Bridgewater, Ravenswood, Rocherlea, Zeehan, Queenstown and Hillcrest.

The performance of Hobart house prices has been less encouraging than other capital cities due to an underperforming state economy.

Rental The rental market in Tasmania is expected to be flat or weaken into 2013 with vacancy rates expected to hold by 50% of members or ease and trend upwards by the other 50%.

All members agree that a combination of strong supply, affordability, overpricing and job losses will place downward pressure on weekly rental prices, which are expected to decrease in the first six months of the year.

Growth All Tasmanian members expect investor activity levels to increase, with 50% of members saying they will represent the strongest growth in activity for the state. 25% say growth will come from upgraders and 25% say it will be retirees.

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First National Real Estate 2013 Property Market Outlook

Tasmania Trends It is expected interest rates will maintain their current levels by 25% of Tasmanian members, with the remaining 75% saying they will continue to decrease. It is hoped reducing rates will stimulate activity and perhaps see mortgage holders pay more off their home loans.

However, to sustain the state’s property market in the coming six months, stamp duties and other property taxes also need to be abolished.

Job losses and the expected increases in electricity, rates and water/sewerage rates will put financially strapped mortgage holders under further pressure, generating an increase in mortgage defaults across the state.

The most active sector of the market, according to 75% of Tasmanian members, will be the entry level market where home values are less than $350,000.

Foreign investors are expected to affect the state’s property market by all members.

Solar power and ceiling insulation are the most sought-after energy efficiency features of a Tasmanian property.

Rural The rural property market in Tasmania is expected to hold up for the first half of the year, but there is the potential for it to weaken in some parts. Members are divided about rural property prices and rents, leaving uncertainty as to which direction they are headed.

Commercial Tasmania’s commercial property market is expected to weaken, with the ongoing effects of global and domestic economies driving decreases across the board as a result of declining commercial confidence.

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Tasmania This is not expected to result in a decrease in commercial property prices, but it will likely see commercial rental prices decrease further.

The service sector is expected to represent the strongest growth area for Tasmania’s commercial property market.

Real estate business outlook Half the network’s Tasmanian members expect their business to remain the same with 25% saying they expect them to grow.

Responses

As shown in the graph below, half say up to 20% of their business is from sales, while 25 say it represents 21-40% of their business and 25% say it represents 61-80%.

0-20% (50.00%)

21-40% (25.00%)

41-60% (0%) Answer

61-80% (25.00%)

81-100% (0%)

The remaining portions come from property management, which is expected to be the most active sector of their business in 2013.

75% of members expect to spend the same or more money on marketing, and 50% expect to increase their levels of social media activity to market properties, which includes Facebook (100%), the Web (75%), Google (25%), LinkedIn (25%) and Smartphones (25%).

All members said they would maintain or increase their Vendor Paid Advertising over the coming six months.

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First National Real Estate 2013 Property Market Outlook

Northern Territory The overall outlook for the Northern Territory is extremely positive on the back of major oil and gas projects to the north, and continued investment by the Federal Government in indigenous health and welfare.

Market conditions in the Territory are expected to improve in the first six months of 2013 as sales volumes increase and job opportunities expand.

The Inpex gas project is expected to be a key influencing factor on the Territory’s property market, with its associated demands on housing.

The relocation of government departments from Darwin to Alice Springs is already contributing to increased demand in the Red Centre.

There are a number of other significant major project developments that will underpin continued growth for the region, including oil and gas projects such as the: } $34 billion Ichthys LNG project on Glaydin Point, one of the biggest oil and gas projects in Australia’s history } $5.4 billion Darwin Liquefied Natural Gas (LNG) project on Wickham Point, supplied by a 502 km pipeline from the Bayu-Undan gas field } $110 million Marine Supply Base at East Arm Wharf, which will service oil and gas shops such as rig tenders } $55 million Darwin Industry Fuel Terminal, a facility adjacent to the East Arm Wharf that provides tank storage and related logistics for the oil and chemical industries, and } $50 million Helium Plant, which exports two thirds of its production to South East Asia.

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Northern Territory Northern Territory prices are expected to continue to rise, especially Darwin, given its strong resources and mining sector.

Darwin recorded the biggest increase in property prices for the nation over the past 12 months to September, up 2.9%.

In Alice Springs, improved confidence and lower interest rates will see an upswing in the overall market, with property prices and turnover expected to increase in the coming six months.

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First National Real Estate 2013 Property Market Outlook

Sources Newspapers National, metropolitan and local suburban press.

Property Observer RPdata.com Real Estate Business (rebonline.com.au) Property Oz HIA Reports First National Real Estate members across the country

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First National Real Estate 2013 Property Market Outlook