Australia Residential MarketView

Australia Residential MarketView Q3 2013 NATIONAL HOUSE BUILDING APPROVAL 5.3% (SEPT 13 Y-O-Y) NATIONAL NON HOUSE BUILDING APPROVALS 19.7% (SEPT 13 Y-O-Y) QUARTERLY NATIONAL HOUSE CAPITAL VALUES 0.5% (SEPT 13) Global Research and Consulting QUARTERLY NATIONAL UNIT CAPITAL VALUES 0.9% (SEPT 13) CONSUMER SENTIMENT 9.2% (OCT 13 Y-O-Y) AUSTRALIAN RESIDENTIAL HOW LONG WILL IMPROVEMENT LAST? Uplift in building levels to support broader economic improvement into 2014 Sales volumes in the Australian residential market continue to trend up with the September quarter showing buyer activity levels have been able to sustain an upward trajectory in most markets across the country. Although moving from a low turnover base in mid 2012, the growth in sales volumes is noteworthy as both owner occupiers and investors have been active despite the Australian economy continuing to slow, falling to an annual rate of 2.6% in June, 2013 which is the lowest rate in two years. Recent wage price data also shows slowing levels of growth but with dwelling approvals exhibiting an acceleration of activity across the nation, the scope for future GDP levels to expand into 2014 are improving. Dwelling approvals are generally a good forward indicator of consumer and broader income growth which is why housing construction activity remains a significant component of the Australian economy. Despite existing below trend growth in the Australian economy, it is clearly apparent in markets such as Sydney and from emerging growth trends in markets such as Brisbane that low interest rates are having a strong influence on buyer activity. Lower price brackets, where affordability remains at the highest levels, are in the midst of strong competition from buyers with many markets punctuated by shortages of stock. Clearance rates have also been at high levels for a number of months which has underpinned value increases in markets such as Sydney but as mentioned previously, it is unlikely growth rates will be maintained at current levels. Key trends in markets across Australia include: Sydney facing scarcity of stock (page 3), Melbourne inner city vacancy rate pressure (page 5), Brisbane affordability (page 7), Perth capital growth begins to slow (page 9) and ACT awaits direction from the Federal Government on public service numbers (page 13). Chart 1: National residential market Chart 2: National building approvals Source: ABS 8731.0 (September 2013) Table 1: Residential trends in major Australian markets over 12-months to September 2013 Market Sales volume Value/price ($) Vacancy rates Rents Yields Building approvals (qtr) Auction clearance rates* Sydney 1 Melbourne Brisbane Perth Adelaide ACT Note: The above indicators are sentiment based market indicators intended to show property trends * Auction clearance rates show quarterly movement

Q3 2013 Australia Residential MarketView RESIDENTIAL DEMAND DASHBOARD HOUSEHOLD SAVINGS RATES ARE HIGH BUT WAGE GROWTH UNDER PRESSURE The gap between capital city growth rates and wage price growth is widening Although there are a wide combination of key factors that influence the movement of capital values in Australian capital cities, the capacity to service mortgage repayments remains fundamental to the potential for upward shifts in future residential dwelling prices. On this basis, the recent slowdown in wage growth across Australia will impact on demand levels for residential property over the medium term and whilst we do not expect any rapid reductions in capital growth, it is likely that price performance will slow. The level of household savings does remain high (10.7% at June 2013) but as job security remains an issue, we do not expect households revert to the low pre GFC levels (1.1% in 5-yr period up to 2008). Other demand drivers such as an undersupply of housing in markets such as Sydney, population growth, tight vacancy rates and low levels of stock available for sale will ensure however that capital values will be well supported despite the decline in wage growth. Chart 3: Affordability Measure house market Source: Research; ABS 6345.0; RBA; Residex (September 2013) Chart 4: Australian Residential Market Indicators, September 2013 2 NOTE ALL INDICATORS SHOW ANNUAL CHANGE TO SEPT 2013 EXCEPT POPULATION GROWTH WHICH SHOWS GROWTH TO JUNE 2012 Source: Mapping; ABS 6345.0; 6291.0.55.001; 3218.0; AFG (September 2013)

SYDNEY RESIDENTIAL MARKET SUPPLY NOT MEETING DEMAND Buyer numbers are up but stock available for sale still not sufficient to meet demand The Sydney residential market has maintained its position as the strongest in the nation with demand for housing continuing to outstrip supply levels. Indications of capital growth were slow to emerge as sales volumes began to gain momentum towards the end of 2012 but price levels are now in the midst of a growth trend with houses (mostly in lower and middle price brackets) experiencing increases in the region of 10% over the 12-months to September 2013. A key factor in the high levels of competition for houses at present has been the comparatively low number of houses that are being listed for sale (see chart 7). This has created a situation whereby scarcity of available stock is being encountered in a low interest rate environment that has had a significant impact on both owner occupiers and investors seeking to purchase property. Auction clearance rates in Sydney illustrate the nature of demand levels at present with results over the past 2 months that are above 80%, a significant increase on levels from 12 months prior. Investors continue to be active in the Sydney residential market with low vacancy rates remaining below 2% which underpins stability in weekly rents and provides a stable growth driver for market demand levels. Increasing capital values in Sydney are however beginning to impact on yields with reductions for both houses and units becoming more evident over the September quarter. Building approvals rapidly expanding Following the sustained improvement in sales volumes and overall demand levels for residential property in Sydney, building approvals have been trending up (chart 5). High density unit development is where the majority of recent activity has occurred with approvals over the past 12-months for units increasing by 40.9% while houses, although still growing at a rapid rate, far less at 19.6% over the same time period. Chart 6: Sydney residential median rental rates and vacancy rates Chart 5: Sydney building approvals v Sydney median house & unit price Source: ABS 8731.0; Residex (September 2013) The vacant land market has also been experiencing increased levels of buyer interest with recent estate releases recording rapid sell down rates. Examples include the Minto One (Minto) and Edmondson Park (Bardia) estates where stage releases have almost completely sold out within a day marketing commencing. The buyer profile for land sales contains a spread of first home owners seeking to take advantage of government grants and stamp duty exemptions, buyers trading up from existing property and wanting to build new dwellings while builders have also been active to market house and land packages. Affordability will ultimately limit price growth Despite the shortage of stock that is available in the Sydney market, especially in lower price brackets, it is expected that affordability constraints will ultimately restrain the current level of price growth in Sydney. Based on median values in Sydney, houses currently require 48.6% (chart 3) and units 33.7% of median household income to service the average mortgage which is at the upper range of affordability measures meaning that wage growth would need to increase in order for further value uplifts to occur. Chart 7: Sydney annual residential listings, houses and units Q3 2013 Australia Residential MarketView 3 3 Source: REINSW; Residex (September 2013) Source: RP Data (August 2013) Note: Sydney consists of City of Sydney Local Government Area

Q3 2013 Australia Residential MarketView SYDNEY RESIDENTIAL MARKET INDICATORS Chart 8: Sydney house price capital growth v Sydney house capital growth jumped 10.8% in the 12- months to September 2013. Capital growth over the September quarter was a strong 3.6%; Weekly house rents in Sydney have increased by 2.6% over the 12-months to September 2013 and now sit at $585, further illustrating the long standing trend of a strong rental market where vacancy rates are amongst the lowest of any major capital city in the country; Rental yields have fallen by 31bps over the 12-months to September due to the recent growth in capital values. Chart 9: Sydney unit price capital growth v Sydney unit market also showing an uptrend in capital values with growth over the past 12-months of 3.3%; The low interest rate environment continues to attract owner occupiers and investors seeking higher levels of affordability compared to the high entry cost of houses in Sydney; Weekly rentals for the past 12-months have declined by 6.5% following higher levels of supply to sit at $505. Overall, vacancy rates remain low which is expected to insulate rents from sustained downward pressure. Chart 10: Sydney sales volumes Chart 11: First home buyers Source: ABS 5609.0 (September 2013) 4 Sales volumes in Sydney have clearly entered a growth phase with increases in both house and unit markets despite relatively low numbers of houses being listed for sale; The 12-months to June 2013 showed sales volumes in the house market increased by 9.6% while the unit market increased by 8.6%; Clearance rates remain strong, with high 70% results being consistently achieved. Buyer sentiment has remained positive over the spring selling period with all price brackets experiencing better levels of turnover than 12-months prior. Affordability concerns remain a key barrier to first home owner activity in the NSW market; has found that Sydney continues to be the most unaffordable house market with mortgage repayment again approaching 50% of median household income (chart 3); The cessation of the $7,000 first home owners grant for all homes and introduction of the $15,000 grant restricted to new homes (October 2012) clearly impacted on the market, with first home owner activity at just 6.8% in September 2013.

MELBOURNE RESIDENTIAL MARKET SIGNS OF A RECOVERY BUT SUPPLY REMAINS AN ISSUE The Melbourne residential market has transitioned from a market under downward pressure in terms of capital values and sales volumes towards a more positive position whereby sentiment is approaching the peaks of 2010. Price levels for both houses and units are reaching historical highs and the role of the low interest rate environment is key to the present level of buyer behaviour. The implications of a very strong development pipeline is beginning to bite however with stock levels showing an oversupply in some areas following the strong supply activity from 2009 onwards. House and land and new unit markets facing increasing vacancy rate outlook Despite the generally improving sentiment in the Melbourne residential market, the Melbourne CBD and fringe suburbs within 4 kilometres of the CBD where most of the new apartment development is concentrated has recorded an increased vacancy rate profile with a September 2013 vacancy rate at 4.0%, up from 3.7% in June 2013. The number of listings for units has also been showing an upward trend (see chart 14) with oversupply becoming a significant concern. The house and land market in new residential estates to the north and west of Melbourne has been soft amid vacancy rates that are sitting between 2.5% to 3.0% in September 2013, up from 2.3% to 2.8% in September 2012. Given the vacancy levels and high amount of choice that buyers have in this market, house and land packages are not expected to experience any form of capital value uplifts over the short to medium term. Investors return to market In contrast to the challenging conditions for some categories of new stock, the established residential market has been in the midst of improving performance over the September quarter. Auction clearance rates illustrate the level of improvement with an 18.3% increase in the year to September 2013 with an average clearance rate of 71.5% Chart 13: Melbourne residential median rental rates and vacancy rates Chart 12: Melbourne building approvals v Melbourne median house & unit price Source: ABS 8731.0; REIA; Residex (September 2013) which indicates the level of buyer demand. Investors have been targeting the sub $500,000 market within close proximity to the CBD while established suburbs that contain strong levels of infrastructure and resident amenities and have median prices lower than $1 million, are well placed for improved levels of demand into 2014. Prestige market finally turning the corner After a period of sharp decline over the last 18 months with capital values and sales volumes falling, the Melbourne prestige market is showing renewed levels of buyer activity as sales volumes have improved over the September quarter. The role of foreign investors has been significant in this market with many of the recent trophy sales in Melbourne being made to Chinese buyers. Although the prestige market is beginning to see a higher frequency of sales, overall sales levels remain relatively low and a substantial improvement in employment and wage growth would be needed before capital growth begins to appear. Chart 14: Melbourne annual residential listings, houses and units Q2 2013 Australia Residential MarketView 5 5 Source: REIV; Residex (September 2013) Source: RP Data (August 2013) Note: Melbourne consists of City of Melbourne Local Government Area

Q3 2013 Australia Residential MarketView MELBOURNE RESIDENTIAL MARKET INDICATORS Chart 15: Melbourne house price capital growth v Melbourne house capital growth was 6.1% over the 12- months to September 2013 ($591,000). More recently, the September quarter showed a further uplift in values of 1.5%; Weekly house rents in Melbourne remained constant over the 12-months to September 2013 at $425, with growth limited, in part, by increasing levels of stock in fringe areas; Rental yields fell by 24bps over the 12-months to September 2013 (3.8%) following increases in capital values but soft rental growth amid higher than average vacancy rates. Chart 16: Melbourne unit price capital growth v A median value of $440,000 for Melbourne units as at September 2013 represented capital growth of 1.7% for the year. September quarter capital growth of 0.9% was moderate but in line with the national average over the same time period; Weekly unit rents in Melbourne decreased by 4.9% over the year to September 2013 ($385) with a high vacancy rate limiting the potential for any short term growth; Rental yields contracted by 0.3% over the 12-months to September following soft rent results due to increasing levels of rental accommodation in inner city and fringe areas. Chart 17: Melbourne sales volumes Chart 18: First home buyers Source: ABS 5609.0 (September 2013) 6 House sales turnover for the 12-months to September 2013 was 42,059 which reflected a year on year decrease of 0.7%; Unit sales grew by 17.3% in the year to September 2013 following 31,494 transactions. This was the second strongest growth result of all capital cities with Perth recording the biggest increase (20.1%); Sales volumes show a clear shift in buyer demand with the changing demographic in cities moving away from fringe and outer Melbourne houses to more proximate locations to the CBD. Following the cessation of the First Home Owner Grant for established home in July 2013, the proportion of first home buyers decreased by 6.4% and now sits at just 12.2% of total sales activity; Furthermore, first home owner levels dropped by an even more pronounced 37.3% from 2,801 in July 2013 to 1,756 in September 2013; An average first home owner loan size of $288,000 in September 2013 was the largest since February 2013 ($288,900) indicating that first home buyers continue to face affordability issues.

SOUTH EAST QUEENSLAND RESIDENTIAL MARKET SALES VOLUMES CONTINUE TO BUILD Affordability gap between Brisbane and Sydney Although the Brisbane residential market endured a longer period of subdued market performance than other capital city markets, particularly Sydney, recent indications are that this has positioned Brisbane with a significant affordability advantage with both investors and owner occupiers becoming more active. Furthermore, the rental market in Brisbane remains underpinned by relatively tight vacancy rates (2.4%) which provides a good level of confidence to investors chasing high yields. With lower entry price points than many other capital cities across Australia, this has seen Brisbane emerge as a viable alternative to some of the larger and more established markets in both Sydney and Melbourne. Brisbane momentum moving through to higher price brackets Affordable price sectors were the first to experience an uplift in buyer activity in mid 2012 as sentiment began to shift to a more positive outlook for residential property. The sub $500,000 bracket for houses in regions such as the North, Bayside and Logan are often reporting multiple contracts on the one property amid limited stock being available and demand being generated from the high yields available. Areas that are well serviced by infrastructure (e.g. M1 Busway/Park and Ride sites) continue to outperform however and generally experience significantly less marketing periods. Middle price brackets up to $1 million are seeing sales volume increases as households trade up, seek better quality properties and make use of the low interest rate environment. The prestige sector for properties priced $1 million and above has experienced renewed interest with established suburbs such as Clayfield, Hamilton and Ascot recording a number of recent sales above $2 million. Chart 19: Brisbane building approvals v Brisbane median house & unit price Source: ABS 8731.0; Residex (September 2013) Coastal markets gradually improve The Sunshine Coast has seen house and land packages performing quite well with reasonable selling periods, however this is only for properties priced below $500,000. A further noteworthy trend is that prestige property has seen selling periods shorten following a long period of very subdued conditions. Generally, activity on the Sunshine Coast is in the mid and southern areas but Noosa is lagging amid low levels of buyer demand. A potential risk for the area remains the high number of FIFO workers in the resource sector as job layoffs would have an immediate impact on sentiment levels for the area. The Gold Coast, whilst still trading at low levels continues to see improvement in turnover levels. Although affordable price brackets remain the most active price sector, the prestige unit market, an area of high volatility in the past has seen supply levels return to more sustainable levels with the market getting closer to being able to support new construction projects. Q3 2013 Australia Residential MarketView Chart 20: Brisbane vacancy rate and weekly rents 7 7 Source: REIA; Residex (September 2013)

Q3 2013 Australia Residential MarketView BRISBANE RESIDENTIAL MARKET INDICATORS Chart 21: Brisbane house price capital growth v With a median house value of $441,500, Brisbane houses experienced an increase of 3.3% over the year to September 2013. The September quarter recorded 0.6% growth which was in line with the national average (0.5%); Median house rents in Brisbane increased by 2.4% in the year to September 2013 ($430 per week); House s in Brisbane fell by 9bps over the 12-months to September 2013 as median values rose. The house (5.1%) was the highest of all capital cities and was 93 basis points higher than Sydney. Chart 22: Brisbane unit price capital growth v The Brisbane median unit price ($350,000) was the second lowest of all capital cities with only Adelaide lower (at $300,500). This reflected nominal growth of 0.1% for the 12-months to September 2013. Capital growth over the September quarter (1.0%) was similar to the national growth result of 0.9%; As at September 2013, median unit rents in Brisbane of $375 showed flat 12-monthly growth of 1.4%; A of 5.6% for Brisbane units was the highest of all capital cities in Australia which continues to attract a good level of investor demand. Chart 23: Brisbane sales volumes Chart 24: First home buyers Source: ABS 5609.0 (September 2013) 8 Annual house sales in Brisbane reached 32,240 in September 2013, an increase of 14.4% on September 2012 results; Brisbane unit sales volumes increased by 8.8% in the year to September 2013, reaching 13,735; The demand for dwellings in the sub $500,000 bracket has been the primary driver of sales volume increases. Better levels of affordability in Brisbane has also been a factor, with investors attracted to higher yield results than other major capital city markets. The first home owners market in Queensland is slowly moving off a very low base at the beginning of the year where activity was very subdued following the winding up of the $7,000 first home owner s grant for existing property; There was a 43.3% increase in the number of first home buyer purchasers from January 2013 (750) to September 2013 (1,075); Despite this, first home buyer levels are still at low levels, currently sitting at 11.3% compared to 20.6% in September 2012.

PERTH RESIDENTIAL MARKET SLOWDOWN IN RESOURCE SPENDING TO IMPACT ON PROPERTY Capital values losing momentum The past 12-months for the Perth residential market, although showing reasonable levels of capital growth and positive sales volumes, has seen capital growth rates begin to contract as the market moves away from the peak of the growth cycle that was being primarily driven by resource sector project spending. With the construction phase of the resources boom showing a downward trajectory (albeit from a very high base), the transition for the Western Australian economy to resource spending that is more focused on the rationalisation of staff as the number of major projects begins to contract will directly impact on the residential market. Whilst there remains good prospects for the Western Australian economy, indeed growth rates outperform the national average and future export capacity positions Western Australia with a very positive employment outlook, recent high levels of capital growth through 2012 are not sustainable and will begin to revert to more reasonable growth profiles. Vacancy rate uplift a combination of new supply and reduced demand for rental accommodation Perth building activity has been amongst the strongest in Australia with a combination of low levels of construction output up to 2012 and sustained levels of strong population growth triggering an increase in output from mid 2012. The change in demand for resource related employment as companies downsize labour requirements in conjunction with the increased level of stock being released to the market is beginning to impact on vacancy rates in Perth. This has flowed through to softer levels of rental growth over the September quarter as tenants have a wider choice of accommodation options and are not faced with supply shortages that were evident towards the latter half of 2012 when vacancy rates were sitting below 2%. Chart 25: Perth building approvals v Perth median house & unit price Source: ABS 8731.0; Residex (September 2013) First home owners to be tested The October 2013 reform to the first home owner grant scheme is expected to reduce the number of first home owners that are active in the market. The shift away from grants being available for all residential property regardless of whether the dwelling is a new or existing property has consistently seen first home owner numbers fall in other states where similar schemes were introduced. Although the modified Western Australian grant scheme will allow a reduced grant, of $3,000, for existing properties, the trend from other states has seen first home owners generally unwilling to move far from the CBD in order to purchase new house and land packages in affordable city fringe locations. The alternative is to buy new apartments to obtain the full grant but as young families generally need more space, it is common for first home owners to simply save for longer periods in order to purchase in areas closer to the city which results in less market activity for this sector. Q3 2013 Australia Residential MarketView Chart 26: Perth vacancy rate and weekly rents 9 9 Source: REIA (June 2013); REIWA; Residex (September 2013)

Q3 2013 Australia Residential MarketView PERTH RESIDENTIAL MARKET INDICATORS Chart 27: Perth house price capital growth v The September quarter of 2013 has shown a median price for houses in Perth of $509,500, an increase of 0.8% compared to the June quarter. Capital growth over the 12-months to September 2013 was 2.3%; The weekly median rent for Perth in September 2013 was $475, a decrease of 1.0% over both the quarter and year to September 2013. This follows a relatively high vacancy rate of 3.1% which has restricted rental growth; Rental yields for Perth houses were at 4.8% in September, a fall of 25 basis points following softness in the rental market. Chart 28: Perth unit price capital growth v Price growth Perth has shifted towards units with 5.1% capital growth over the year to September 2013. The Perth median unit price as at September was $452,500; Weekly unit rents in Perth up to September were sitting at $450 which indicated growth of 2.4% over the 12- months to September 2013; Perth units showed a yield of 5.1% up to the September quarter which represented a fall of 18 basis points over the prior 12-months. Yields also tightened over the September quarter following a 10 basis point contraction. Chart 29: Perth sales volumes Chart 30: First home buyers Source: ABS 5609.0 (September 2013) 10 House sales volumes in Perth increased by 25.0% in the year to September 2013 (31,169); Perth unit sales volumes also showed a strong result with the number of transactions (14,861) in the year to September 2013 an increase of 20.9% on September 2012; Sales volumes in Perth have been building due to a state economy that is amongst the best performed in the country. Moving forward, the implications of a slowdown in resource construction spending is expected to slow the market but a strong export capacity will ensure that growth levels contract gradually to more sustainable levels. The first home owner market has experienced improving levels of activity with sales volumes increasing by 14.9% over the 12-months to September 2013; More than one in every five residential dwellings purchased in September 2013 (22.8%) was to a first home buyer; Moving forward, a key issue will be the winding up of the First Home Owner Grant in October 2013 (currently provides $7,000 for all first home owners). The new scheme will give $10,000 for new builds but decrease grants for existing residential property to just $3,000.

ADELAIDE RESIDENTIAL MARKET SIGNS OF GRADUAL IMPROVEMENT UNDERWAY Yet fundamental drivers are still soft The Adelaide residential market is transitioning from a period of consolidation and flat growth to exhibit signs of a recovery with both houses and units recording reasonable capital growth over the year to September 2013. Sales volumes are also showing better performance, with the unit market in particular seeing a noticeable improvement over 2012 sale results. Despite the initial signs of residential growth, population growth in South Australia (0.5%) is still forecast to be at half the national population growth rate (1.0%) between 2013 and 2015 while soft manufacturing conditions in areas such as the automotive industry still represent a major limitation to growth prosects for the state. Given that population and manufacturing, two key drivers of the residential market in Adelaide are not expected to mount a major recovery over the short to medium term, substantial uplifts in sentiment are not likely until the latter half of 2014 when the Australian economy should begin to generate higher levels of GDP. Building approvals increasing Despite relatively subdued economic growth forecasts for South Australia and unemployment rising by 6.5% over the year to September 2013, there has a been an improvement in sentiment within the Adelaide construction market. Affordability concerns in the Adelaide market have subsided with reasonable price points, decreasing vacancy rates and low interest rates improving buyer activity. Government grants for new builds have also assisted construction, with recent data showing that there was a 38.1% increase over the September quarter 2013 compared to September 2012. Future supply is also strong in metropolitan Adelaide, with forecasts of 949 new apartments in 2014 and a further 1,251 to be completed in 2015. Chart 31: Adelaide building approvals v Adelaide median house & unit price Source: ABS 8731.0; Residex (September 2013) Affordability a key driver in unit market The 20.1% jump in Adelaide unit sales shows a noteworthy increase in buyer activity, albeit moving from a low base. Adelaide median unit prices are the lowest of all capital cities in Australia ($300,500 at September), with the affordability index showing 25.9% of median weekly household income (below the Australian average of 31.3%) is required to service the average mortgage. A further driver of demand is the comprehensive grant regime, a substantial $15,000 first home owners grant for all first home owners in addition to $8,500 for new residential property is amongst the most generous in Australia. This has contributed to first home owner participation increasing by 27.6% from September 2012 to September 2013. There is also stamp duty concessions available for all off the plan apartments in Inner Adelaide regardless of buyer type, further boosting demand for high density development. Q3 2013 Australia Residential MarketView Chart 32: Adelaide vacancy rate and weekly rents 11 11 Source: REISA; Residex (September 2013)

Q3 2013 Australia Residential MarketView ADELAIDE RESIDENTIAL MARKET INDICATORS Chart 33: Adelaide house price capital growth v The Adelaide house market has a median price of $397,000 as at September 2013, a 2.8% increase over the year and a 1.1% increase over the quarter; During the September 2013 quarter, the median house rent in Adelaide was unchanged at $355 but over the year there was a 2.9% increase in weekly rents; Rental yields have begun to stabilise following the improvement in capital values in Adelaide. House yields at September 2013 were 4.7% which is unchanged since September 2012. Chart 34: Adelaide unit price capital growth v Capital growth for Adelaide units over the 12-months to September 2013 was 0.8% while median unit values were sitting at $300,500; Median weekly rents for Adelaide units stayed constant over the year to September 2013 ($295), however decreased by 3.3% over the September quarter; Rental yields for units of 5.1% at September 2013 was a stable result 12-months prior when yields were sitting at 5.1%. Returns for investment property remain among the highest in the country with some further potential for rental growth as vacancy rates begin to tighten. Chart 35: Adelaide sales volumes Chart 36: First home buyers Source: ABS 5609.0 (September 2013) 12 In the year to September 2013, there were 16,752 house sales in Adelaide which was an increase of 1.8% compared to September 2012 (16,455); Signs of an emerging sales volume growth trend for units were evident in the Adelaide market with an increase of 20.1% over the year to September 2013 following 4,428 unit sales; Government incentives for purchasers of new stock appears to be having an impact in inner city locations while affordably priced stock has been attracting good levels of buyer demand. The South Australian first home owners market has seen a recovery in sales volumes with a 27.6% increase in first home buyer activity from September 2012 to September 2013; The proportion of first home owner activity in relation to all residential dwelling financed has not significantly changed however with 17.7% recorded in September 2013 compared with 17.3% in September 2012. Incentives for first home owners including the $15,000 First Home Owner Grant and the Housing Construction Grant ($8,500 for new homes) have underpinned first home owner activity.

CANBERRA RESIDENTIAL MARKET PUBLIC SERVICE AWAITS CLARITY ON POTENTIAL CUTS Holding pattern from buyers as size of public service cuts still unknown Following the change of Federal Government, the Canberra residential market is in somewhat of a holding pattern until an increased level of clarity exists on the future direction of public service workforce numbers. Speculation has been commonplace in Canberra about the level of public service contraction that is likely to occur but until more formal policy announcements are made, the property market is expected to suffer from subdued buyer engagement as households will remain concerned about job prospects over the short to medium term. Supply concerns evident as new sites become available for development The Canberra market has been expected to undergo some challenges in terms of excess stock due to the very high levels of apartment construction that occurred from 2010 to now. With construction levels in areas such as the Kingston Foreshore introducing significant numbers of apartments to an already substantial choice of apartments across Canberra, pressure is becoming more evident both from downward movement in capital values and average weekly rents but also an expanding vacancy rate profile, currently sitting well above 3% (at 3.6%) with the real potential for further increases as new developments come online. The obvious risk at present is that as employment prospects for Canberra comes under threat as the public service consolidates, population growth will contract and demand levels for new accommodation will begin to decline. Furthermore, with the ACT government in the process of releasing new sites to the market for development, the supply pipeline may increase, however the feasibility of developers taking on new projects in such an environment should limit further large scale developments. Chart 37: Canberra building approvals v Canberra median house & unit price Source: ABS 8731.0; Residex (September 2013) Price bracket performance remains focused on affordability The continuing trend in the Canberra market has been that houses marketed at less than $500,000 have maintained good levels of demand though little movement in capital growth. The low interest rate environment has clearly been a significant factor that has assisted affordability in this sector of the market. Middle and upper price brackets remain subdued with no noticeable improvements in sentiment as middle management in the public service are still waiting to assess job security prospects following the change in government. The investor market has seen yields tighten as the high availability of unit stock has seen weekly rents decline by approximately 5% and in some cases, up to 10%. Excess stock is giving tenants a good amount of bargaining power to negotiate reduced rents and the outlook for the rental market remains in favour of tenants for at least the medium term. Q3 2013 Australia Residential MarketView Chart 38: Canberra residential median rental rates and vacancy rates Chart 39: Canberra annual residential listings, houses and units The outlook for residential property in Canberra is therefore quite reliant on the extent of contraction in public sector spending. Buyer confidence is expected to be flat over the medium term with sales volumes unlikely to show any major recovery despite the low interest rates currently available. 13 13 Source: REIV; Residex (September 2013) Source: RP Data (August 2013)

Q3 2013 Australia Residential MarketView CANBERRA RESIDENTIAL MARKET INDICATORS Chart 40: Canberra house price capital growth v The Canberra median house price ($521,500) decreased by 1.5% in the September quarter and 1.2% over the 12-months to September 2013; The Canberra market has seen a decline in demand conditions for the rental market with median house rents falling by 5.8% over the year to September 2013 ($490); Rental yields for houses contracted by 24 basis points from September 2012 (5.2%) to September 2013 (4.9%) which is impacting on investment demand as strong supply levels have increased the number of options for the rental market. Chart 41: Canberra unit price capital growth v Median values for units in Canberra fell by 0.5% over the year to September 2013 and now sit at $411,000. The September 2013 quarter showed a 3.4% increase; Median weekly rental rates for units decreased by 3.4% in the year to September 2013 to $430; Unit yields have tightened by 37 basis points over the year to September 2013 (5.5%). It is expected that the Canberra unit market will undergo a period of softening following the strong unit development pipeline that existed over 2010 and 2011. Chart 42: Canberra sales volumes Chart 43: First home buyers Source: ABS 5609.0 (September 2013) 14 House sales volumes in Canberra decreased by 5.0% in the year to September 2013 (4,763 sales) and by 0.4% over the September quarter; Canberra unit sales volumes increased by 10.8% in the year to September 2013 (4,125 sales) and by 3.9% over the September quarter; It has been well known that Canberra is facing a position of oversupply in the unit market and whilst sales volumes are expected to remain high, expectations for capital growth are flat. 12.8% of all dwellings financed in the month of September 2013 were to first home buyers. This is a reduction from the September 2012 result of 15.9%. Volumes of first home buyers in September 2013 (125) were at similar levels to levels to September 2012 (127). Further forward, the winding up of the $7,000 First Home Owner Grant for all residential property which will be replaced by a $12,500 grant for only new residential property on 1 September 2013 is not expected to trigger an uptick in overall levels of first home activity following similar regime changes in New South Wales.

CONTACTS For more information about this MarketView, please contact: Australia Research Stephen McNabb Head of Research Australia Research Level 21 363 George Street Sydney t: +61 2 9333 3493 e: stephen.mcnabb@cbre.com.au Sam Reilly Senior Research Manager Australia Research Level 3, Waterfront Place 1 Eagle Street Brisbane t: +61 7 3833 9739 e: sam.reilly@cbre.com.au For more information on residential valuations, please contact the appropriate State contacts: Tom Edwards Executive Managing Director Level 5 3350 Pacific Highway Springwood QLD 4127 t: +61 3826 2090 e: thomas.edwards@cbre.com.au Duncan Guthrie National Director Level 5 3350 Pacific Highway Springwood QLD 4127 t: +61 7 3826 2091 e: duncan.guthrie@cbre.com.au Peter Fallon NSW/ACT Director Level 5 10-14 Smith Street Parramatta NSW 2150 t: +61 2 4926 6409 e: peter.fallon@cbre.com.au Peter Butler QLD Director Level 5 3350 Pacific Highway Springwood QLD 4127 t: +61 7 3826 2041 e: peter.butler@cbre.com.au Jarrod Frazer VIC/TAS Director Level 10 Como Centre, 650 Chapel Street South Yarra VIC 3141 t: +61 3 9863 5324 e: jarrod.frazer@cbre.com.au Michael Veletta WA Director Level 2 216 St George s Terrace Perth WA 6000 t: +61 8 9320 0007 e: michael.veletta@cbre.com.au Melissa Gow SA Director Level 11 80 King William Street Adelaide SA 5000 t: +61 8 8110 3365 e: melissa.gow@cbre.com.au Liability limited by a scheme approved under Professional Standards Legislation. + FOLLOW US GOOGLE+ https://plus.google.com/1106 40413332542089478#11064 0413332542089478/posts FACEBOOK http://www.facebook.com/pag es//85277065893 TWITTER http://twitter.com/c breapresearch Global Research and Consulting This report was prepared by the Australia Research Team which forms part of Global Research and Consulting a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe. 15 Disclaimer Limited confirms that information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt their accuracy, we have not verified them and make no guarantee, warranty or representation about them. It is your responsibility to confirm independently their accuracy and completeness. This information is presented exclusively for use by clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of.