RESIDENTIAL MARKET REVIEW

RESIDENTIAL MARKET REVIEW M A R C H Q U A R T E R 2 1 8

INSIDE 4 FROM OUR CEO RPM REAL ESTATE GROUP IS VICTORIA S MOST SUCCESSFUL RESIDENTIAL DEVELOPMENT SALES, MARKETING AND ADVISORY AGENCY. WE SPECIALISE IN SALES WITHIN MASTER- LEAD INDICATORS 6 44 APARTMENTS / TOWNHOUSES PLANNED, MEDIUM AND HIGH-DENSITY DEVELOPMENTS, GREENFIELD AND INFILL DEVELOPMENT SITES AND INTERNATIONAL INVESTMENT SALES. WE ADVISE OUR CLIENTS ON ALL ASPECTS OF THE SALES PROCESS FROM SITE DUE DILIGENCE, ACQUISITION, PLANNING AND RISK MITIGATION THROUGH TO PRODUCT MIX, PRICING, LAUNCH, SALES AND SETTLEMENT. OUR RESEARCH-BACKED STRATEGIES DELIVER HIGHER REVENUES, FASTER SALES RATES AND BETTER RETURNS FOR OUR CLIENTS. 1 DEVELOPMENT SITES 54 INTERNATIONAL 16 58 RESIDENTIAL INVESTMENT Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 3

FROM OUR CEO The report delves into the numbers and provides In the medium density market, a shift to developing MICHAEL STAEDLER an in-depth review of key development drivers, housing product geared to owner occupiers, RESEARCH MANAGER Q1 MARKET OVERVIEW KEVIN BROWN CHIEF EXECUTIVE OFFICER RPM REAL ESTATE GROUP RPM REAL ESTATE GROUP IS PLEASED TO PROVIDE THIS NEW AND EXPANDED QUARTERLY REVIEW. IN THIS EDITION, WE SHARE OUR INSIGHTS INTO MELBOURNE AND GEELONG S PROPERTY MARKET ACROSS DEVELOPMENT SITES, NEW, APARTMENTS AND TOWNHOUSES, AND INTERNATIONAL AND RESIDENTIAL INVESTMENTS. analysis of the leading indicators, and an outlook for the coming quarters. It offers an informed overview of the performance of Melbourne s residential real estate market, the underlying drivers and impacts, and where the market is heading. This quarterly update includes both proprietary data and analysis of industry data from RPM s research division. Research drives the core strategic decision making capability at RPM. This rich intelligence enables clients to make informed decisions that underscore the success of their developments. It s an interesting time in the market. Lending and regulatory headwinds in 217 are still being felt by developers and investors, along with production capacity constraints causing supply delays in the greenfield market. While demand is still robust, a correction in sales volumes and more moderate price growth will likely continue through 218. particularly in middle ring infill sites, is underpinning market resilience following previous supply peaks. MELBOURNE REMAINS A HIGHLY DESIRABLE DESTINATION FOR PROPERTY INVESTMENT. The key challenge for developers is to navigate through the current environment to meet underlying demand by delivering the right supply of affordable housing choice to an ever growing and diverse population keen to call Melbourne home. As Victoria s most successful residential development sales, marketing and advisory agency, RPM is the number one choice for residential development projects, underpinned by a passionate culture of teamwork and success. We hope you enjoy this report, and feel free to share your thoughts with us. m.staedler@rpmrealestate.com.au +61 434 619 28 The data contained within this report was prepared by RPM s research team consisting of economists, property experts and GIS analysts. Research underpins the core strategic decision making capability at RPM, providing in-depth analysis on current economic and housing conditions, sales rates and pricing, future supply and demand assessments, and buyer demographics. This rich intelligence enables clients to make informed decisions that underscore the success of their developments. RPM s research is also highly valued in assisting clients to secure capital funding and enhance their ongoing marketing and ROI strategies. Q1 MARKET OVERVIEW 4 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 5

ECONOMIC ACTIVITY GROSS DOMESTIC PRODUCT (GDP) STATE FINAL DEMAND (SFD) - VIC 2.27% 2.43% 4.68% 3.35% 12 months to Dec 17 5 year average 12 months to Dec 17 5 year average VIC POPULATION VIC EMPLOYMENT 8,924 EMPLOYMENT GROWTH (JOBS CREATED) NATURAL INCREASE Sep-17 7,221 Same qtr. year earlier 41,977 12 months to Sep-17 % change same qtr. last year 1.1% % change 12 months earlier CONSUMER PRICE INDEX (CPI) LE AD INDICATORS Source: ABS Same month year earlier 5.33% 4.37% Same month year earlier 1.5% UNCHANGED Dec-17 UNCHANGED Mar-17 Source: RBA 6 R P M R E A L E S TAT E G R O U P 23,671 Sep-17 22,51 Same qtr. year earlier Dec-17 to 88,521 12 months to Sep-17 7.3% % change same qtr. last year 15.3% % change 12 months earlier NET INTERSTATE MIGRATION 2,747 BORROWING RATES CASH RATE OVERSEAS MIGRATION VARIABLE RATE 5.2% 5.2% Dec-17 5.3% Mar-17 Sep-17 DISCOUNTED RATE 3 YEAR FIXED RATE 4.5% 4.15% 4.5% 4.1% Dec-17 Dec-17 4.55% 4.25% Mar-17 Mar-17 3,3 Same qtr. year earlier NATIONAL TOTAL CHANGE 16,926 12 months to Sep-17 147,424 1.63% 2.37% % change - same qtr. last year VIC share TOTAL POPULATION Dec-17 to PART TIME Dec-17 to 1.5% Last 12 months 15.18 87.54-8.57 44.8 23.75 43.46.5% 2.8% -.4% 2.1% 2.2% 4.2% 5% 24% N/A 19% 57% 31% Nov-17 37% May-17 1.2% Source: ABS UNEMPLOYMENT RATE 5.3% 6.1% 6.2% Source: ABS Dec-17 Mar-17 CONSUMER SENTIMENT 13 99.7 Mar-17 Source: RBA/Westpac-Melb institute CONDITIONS INDEX 12.4 Source: RBA/NAB 12.1 Mar-17 The Westpac-Melbourne Institute Consumer WAGES $1,581 $1,563 $1,56 AUS 24,72,851 VIC 6,358,948 Source: ABS FULL TIME 8.5% VIC TOTAL CHANGE 395,613 Change from Sep-16 to Sep-17 Last 12 months Last 12 months % change same qtr. last year % change 12 months earlier TOTAL % Change LE AD INDICATORS 1.9% 2.1% RETAIL TURNOVER - VIC Jobs ( s) 23.6% Vic contribution to AUS Nov-16 1.4% Sentiment Index is the most widely quoted barometer of consumer sentiment in Australia. A score of greater than 1 means that optimists outnumber pessimists, with readings of below 1 indicating that pessimistic consumers are in the majority. NAB s Business Survey has been tracking Australian business confidence levels for more than two decades. Businesses are approached quarterly, with two smaller monthly surveys conducted in the intervening months to capture changes on a more regular basis. The panel now exceeds 2,7 businesses. Q1 R E S I D E N T I A L M A R K E T R E V I E W M A R C H Q U A R T E R 2 18 7

VIC FINANCE VIC BUILDING NO. OF FHBS FINANCED 8,169 6,36 NO. OF NON-FHBS FINANCED 35,498 36,47 LE AD INDICATORS 7,327 6,866 VALUE OF LOANS (OWNER OCCUPIERS) $17.62B $15.83B -2% 7% 11% $347,733 $323,3 AVERAGE LOAN SIZE (NON-FHBS) $416,567 $381,433 FINANCE FOR ESTABLISHED DWELLINGS 36,34 35,577 VALUE OF LOANS (INVESTORS) $8.78B $9.5B 8% SHARE OF FIRST HOME BUYERS 9% 2% 8% 18.7% 14.2% MEDIAN UNIT PRICE MEDIAN LAND PRICE $799, Source: REIV 8 R P M R E A L E S TAT E G R O U P $67, 4% 7% $593, Previous qtr. $581,5 6.2% 9,718 Dec-17 9,197 36,397 Last 12 months Same qtr. year earlier 8,885 Dec-17 9,79 34,997 Last 12 months 8,8 7,212 34,168 Last 12 months TOTAL DWELLING APPROVALS 22.% 9.2% OTHER COMMENCEMENTS 5.7%.14% 3.7% 15,52 18.8% Same qtr. year earlier 72,593 7.6% 12 months TOTAL COMMENCEMENTS 7,365 Dec-17 8,163 3,212 Last 12 months 17,83 9.8% 4.6% OTHER COMPLETIONS 2.1% 18,443 Dec-17 17,36 1.6% Same qtr. year earlier 66,69 2.1% Last 12 months TOTAL COMPLETIONS 7,629 Dec-17 1,377 31,246 Last 12 months 16,514 26.5% 15.7% Dec-17 19,456 15.1% Same qtr. year earlier 66,243 9.% Last 12 months Source: ABS MEDIAN HOUSE PRICE Previous qtr. 16.1% HOUSE COMPLETIONS MELBOURNE PROPERTY $819, 9,643 8,38 38,425 Last 12 months HOUSE COMMENCEMENTS Source: ABS $855, OTHER DWELLING APPROVALS DETACHED HOUSE APPROVALS LE AD INDICATORS FINANCE FOR NEW DWELLINGS 35% AVERAGE LOAN SIZE (FHBS) AUCTIONS HELD $323, 2% 4% $32,3 Previous qtr. $25,5 5,89 7% 29% 4,449 Dec-17 4,416 CLEARANCE 67% 66% 8% MELBOURNE PROPERTY VACANCY RATE - MELB 2.1% 2.3% Mar-17 AVERAGE DAYS ON MARKET - METRO MELB 33 31 Mar-17 MEDIAN METRO HOUSE RENT $45 $426 Mar-17 5.7% MEDIAN METRO OTHER DWELLING RENT $42 $41 Mar-17 2.4% Source: REIV Q1 R E S I D E N T I A L M A R K E T R E V I E W M A R C H Q U A R T E R 2 18 9

GREENFIELD MARKET CHRISTIAN RANIERI GENERAL MANAGER, TRANSACTIONS & ADVISORY christian@rpmrealestate.com.au +61 416 445 78 During the March quarter, development site activity in Melbourne and Geelong s greenfield land market The continuing strong demand for land has essentially re-set Victoria s traditional 15, lot From a supply perspective, there are still significant parcels of landholdings within Melbourne s 29% DEVELOPMENT SITES remained robust, off the back of a record year for residential lot sales in 217. Key economic fundamentals including unabated population growth, strong employment and historically low interest rates continue to underpin developer appetite for land in Melbourne s growth corridors to meet continuing high demand for residential lots. Lot price growth continued to accelerate throughout 217, rising by 29% to a median of $33, for a sales per year, with levels growing over the last three years, peaking at approximately 25, lots in 217. While developers continue to factor in strong numbers for their projects, the question on everyone s lips is: have we reached a peak in this long sales cycle? For the March quarter lot sales in Melbourne s growth corridors slowed compared to the same quarter a year earlier, with sales down 15%. This Urban Growth Boundary; however, developable opportunities are not readily available due to servicing and infrastructure constraints, and reluctance among some landowners to sell. Hence while supply is restricted, the value of developable land is likely to continue to rise. The broadhectare market s stability and strength has made it a highly desirable investment beyond traditional local greenfield developers. A continuing Lot price growth continued to accelerate throughout 217 rising by 29% 67% Greenfield sales to foreign purchasers has grown to 67% in 217 to almost $1.2 billion DEVELOPMENT SITES median 4 square metre lot, resulting in indicative reduction is not attributed to a drop-in demand, but stream of new market entrants including offshore median house and land packages increasing by 14% rather less lots being released for sale due to title investors, private equity groups and apartment compared to 6.9% price growth for established timeframes ballooning out to beyond 15 months in developers seeking portfolio diversification has houses and 5.9% for apartments. For the March most corridors. been a pronounced trend in recent years. quarter, the median lot price further increased by 7% from the previous quarter, while the established RPM analysis of the total value of development house market increased by 4% and the apartment site sales over $1 million over the last four years market by 4%. shows an increasing proportion of offshore buyers. In 214 greenfield sales to foreign purchasers was estimated at 15%, which grew to 67% in 217 to almost $1.2 billion. 1 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 11

GREENFIELD MARKET URBAN INFILL MARKET ED WRIGHT MANAGER, DEVELOPMENT SITE SALES ed@rpmrealestate.com.au +61 421 213 21 Melbourne remains a top global destination for been part of a public sales process and marketed Greater Melbourne needs to provide 1.6 million The majority of developable sites in the mid-ring are investment, due to unrelenting population and widely to potential Australian bidders for a minimum Outlook new homes over the next 35 years - 65% of which is either greyfield existing residential sites where DEVELOPMENT SITES employment growth, relative affordability compared to Sydney in particular, and a clear and transparent planning system. Should overseas migration remain above the long-term average and the job market strong, these two key fundamentals will sustain high demand for development sites throughout Melbourne and Geelong s growth corridors. Recent regulatory change by the Foreign Investment Review Board (FIRB) now mandates vendors to advertise and publicly market agricultural land, which is aimed at providing a more of 3 days. Federal Treasurer Scott Morrison has said the new rules are designed to protect Australia s national interest, particularly since the debate over the sale of the extensive Kidman landholdings in Western Australia and South Australia. The new requirements have created a degree of uncertainty, with the development industry seeking clarification on how the changes will apply within Melbourne s Urban Growth Boundary. As is anticipated, if population and employment growth remain at current levels along with below average borrowing rates, ongoing strong demand for residential lots will continue. These conducive conditions will continue to drive developer activity in the near term. Supply is improving but will likely be outpaced by demand. With the median vacant land price sitting at $323, in the planned for established areas. Boosting supply by unlocking infill development sites and densifying the inner and middle ring suburbs present significant opportunities for Melbourne s apartment and townhouse developers. Medium density development is attracting the attention of developers due to lower initial investment, faster turnaround of product and lower pre-sales targets. Amid housing affordability concerns, the medium building stock is near the end of its useful life or brownfield existing industrial sites which are no longer needed and currently underutilised. The Victorian Planning Authority has encouraged local councils to take a more proactive approach to increasing density and optimising land use through rezoning policies that open up sites for residential development. 65% GREATER MELBOURNE NEEDS TO PROVIDE 1.6 MILLION NEW HOMES OVER THE NEXT 35 YEARS 65% OF WHICH IS PLANNED FOR ESTABLISHED AREAS DEVELOPMENT SITES open and transparent sales process for farmland March quarter, affordability constraints will density market is maturing as Melbournians evolve requiring FIRB approval. Subject to exceptional become more prominent. This will result in their mindset about townhouse and apartment living circumstances, foreign investors will need to more modest land price growth of around 5% that is close to services, public transport and jobs. demonstrate that agricultural land they acquire has to 6% through the remainder of 218. 12 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 13

FOCUS ON MORELAND A BLUEPRINT FOR UNLOCKING DEVELOPMENT SITE POTENTIAL DEVELOPMENT SECTION COPY SITES The municipality of Moreland in Melbourne s north is anticipated to grow by almost 56, residents across 25,5 dwellings by 236. The Council recently moved ahead to implement its Industrial Land Strategy which aims to facilitate new employment and housing opportunities by rezoning underutilised brownfield (or industrial land) that is well serviced by existing infrastructure and public transport. The rezoning process assessed land on a case-bycase basis to determine whether each parcel should remain industrial to protect jobs or be rezoned to residential or mixed-use to encourage the increasingly popular development of buildings with commercial uses on the lower floors and residential This rezoning is the latest in several planning initiatives put in place by the Council to bring quality medium density developments to the municipality. In late 217, the Moreland Apartment Design Code which set out height limits, setbacks, residential interface, building separation, light access etc, was approved. RPM s Transactions & Advisory division has been working closely with many landowners affected by the rezoning and in consultation with Council to identify development opportunities for both residential and commercial projects in Brunswick, Coburg and surrounds. CASE STUDY PRIME INDUSTRIAL DEVELOPMENT SITE SOLD FOR FUTURE APARTMENT RESIDENCES Burnie and Florencio Garcia are your typical hardworking immigrants who owned a sewing machine repair factory on a 1,519 sqm premises in the heart of Brunswick. RPM s head of Transactions & Advisory, Christian Ranieri, identified an emerging opportunity to unlock the site s development potential and approached the Garcia s to bring their site to market. By adding value to the sales process through comprehensive due diligence including market insights, built form models, potential project yield and product pricing, RPM presented a de-risked, development ready opportunity. The Garcia s property generated significant interest from developers given it was one of the last opportunities of scale in a sought after inner suburb with outstanding amenity and access to transport links. In mid-217, the Albion St site was sold for $5.8 million by public tender. The site is currently before authorities awaiting approval for a residential apartment complex, which will add 6 to 8 dwellings to housing supply in Moreland. DEVELOPMENT SITES upper floors. The latest amendment which seeks to rezone industrial land within the Brunswick Activity Centre is expected to be submitted to the Minister for Planning later this year. 14 RPM REAL ESTATE GROUP 15

OVERVIEW LUKE KELLY DIRECTOR, luke@rpmrealestate.com.au +61 4 688 52 All Growth Corridors The key trend underpinning Melbourne and Greater Demand conditions remained strong, with the Geelong s growth corridors for the March quarter 218 was supply constraints in active new housing estates, which limited the amount of stock being brought to market. The industry s inability for construction of lots to keep pace with land sales has resulted in title timeframes stretching beyond 15 months for most estates, with developers adopting a restrained lot median lot price across Melbourne s growth corridors increasing 7% to $323,. A comparison between the March 217 and 218 quarters reveals annual price growth of 29% - a gain of $72,5. The surging price growth is further illustrated when reviewing the breakdown of lot sales by price point. In the 216 March quarter, 58% of all lots sold across Melbourne s growth areas were priced NUMBER OF ESTATES 2 18 16 14 12 1 8 6 4 8, 7, 6, 5, 4, 3, 2, GROSS LOT SALES release program to allay settlement risk. up to $225,, while only 6% were priced above 2 1, Coming off a peak of more than 7, lots in the $3,. Fast forward two years and only 7% of all lots were sold up to $225,, while 63% were over September quarter last year, gross sales have trended downwards, falling 15% to just below $3,. Active Estates New Estates Gross Lot Sales 5, lots in the March quarter from the December Median lot sizes fluctuated throughout 217 before quarter, and 3% from the record September quarter. settling at around 4 sqm during the last two quarters, down from 415 sqm in March last year. Analysis of Melbourne s greenfield communities reaffirm it is not a one-size-fits-all market, as the following insight into each growth corridors reveals. DEMAND CONDITIONS REMAINED STRONG, WITH THE MEDIAN LOT PRICE ACROSS MELBOURNE S GROWTH CORRIDORS INCREASING 7% 16 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 17

OVERVIEW MELBOURNE GROWTH CORRIDORS MEDIAN LOT PRICE $ 35, 3, 25, 2, 15, 1, 5, Median Lot Size Median Lot Price 46 45 44 43 42 41 4 39 38 37 MEDIAN LOT SIZE SQM A COMPARISON BETWEEN THE MARCH 217 AND 218 QUARTERS REVEALS ANNUAL PRICE GROWTH OF 29% - A GAIN OF $72,5 % OF TOTAL GROSS LOT SALES $K 3K> 275K - 3K 25K - 275K 225K - 25K <225K % 1% 2% 3% 4% 5% 6% 7% Wyndham 24% Moorabool 2% Melton 19% 12 MONTHS TO MARCH 218 Greater Geelong 15% Mitchell 2% Casey 13% Cardinia 3% Hume 13% OVER THE 12 MONTHS TO MARCH 218, SALES ACTIVITY WAS CONCENTRATED IN THE WESTERN GROWTH CORRIDOR, WHICH ACCOUNTED FOR 45% OF LOT SALES. March Qtr 216 March Qtr 217 March Qtr 218 Whittlesea 9% 18 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 19

WESTERN GROWTH CORRIDOR PETER GRANT DIRECTOR, peterg@rpmrealestate.com.au +61 411 494 499 The West continues to be the dominant growth corridor, accounting for 45% of total lot sales. WYNDHAM 4 2,5 MOORABOOL Fast-tracked approval of four new PSPs Plumpton, At 24%, Wyndham continues to contribute the 35 2, MELTON Tarneit Plains, Kororoit and Mt Atkinson has boosted supply, with 44 active estates offering diversity in price, lot size and location for buyers, more so than the other growth areas. This is illustrated by varying median lot prices in the suburbs of Melton, Rockbank and Plumpton, which, at the lower end ranges from $25, (Melton) to $33, in Rockbank and up to $375, in highest number of lot sales of all LGAs. An increase in new estates in the June quarter last year led to gross sales peaking at almost 2, lots. A decline in active estates and no new estates coming to market, coupled with a reduced release program in the latter half of calendar 217 has seen gross sales fall 8% to 1,32 lots in the March quarter. Wyndham s median lot price increased 5% to NUMBER OF ESTATES 3 25 2 15 1 1,5 1, 5 Active Estates New Estates Gross Lot Sales GROSS LOT SALES Plumpton, where sales rates have slowed due to $321,45 and is the most expensive in the Western 35, 46 WYNDHAM PORT PHILLIP BAY strong price growth, limiting the number of first home buyers. Looking ahead, Wyndham and Melton are well positioned to provide supply into the market and stimulate competition to keep demand in check. growth corridor. Median lot size remained static at 4 sqm. MEDIAN LOT PRICE $ 3, 25, 2, 15, 1, 5, 45 44 43 42 41 4 39 38 MEDIAN LOT SIZE SQM 37 Median Lot Size Median Lot Price 2 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 21

WESTERN GROWTH CORRIDOR ROD ANDERSON DIRECTOR, rod@rpmrealestate.com.au +61 417 595 859 MELTON 25 1,6 MOORABOOL 1 2 As one of the more affordable LGAs, Melton sales volumes have remained strong, contributing 19% of total sales in the West, buoyed by the volume of new estates coming to market. Sales reached almost 1, lots for the March quarter, but have steadied following a peak in the September quarter last year. Hence lot sales declined 22% for the March quarter. Over the last year the median lot price increased by 59% - or $15, lifting the median lot value to NUMBER OF ESTATES 1,4 2 1,2 1, 15 8 1 6 4 5 2 Active Estates New Estates Gross Lot Sales GROSS LOT SALES Moorabool makes up a marginal 2% of total lot sales for the Western growth corridor, with no new estates on the market since mid-216. Lot sales almost halved (49%) during the March quarter following a peak of 19 lots last quarter driven by the doubling of the first home buyer grant mid last year. Moorabool is the most affordable new housing market, with 75% of lots sold this quarter priced up to $225,. Notwithstanding, prices are edging up, NUMBER OF ESTATES 9 18 8 16 7 14 6 12 5 1 4 8 3 6 2 4 1 2 Active Estates New Estates Gross Lot Sales GROSS LOT SALES $283,. The median lot price was stagnant for the 3, 48 with 34% annual median lot price growth rising to 25, 6 quarter, falling by just 1%. 25, 46 $23,, a 5% increase from the previous quarter. 2, 5 MEDIAN LOT PRICE $ 2, 15, 1, 5, 44 42 4 38 36 MEDIAN LOT SIZE SQM MEDIAN LOT PRICE $ 15, 1, 5, 4 3 2 1 MEDIAN LOT SIZE SQM 34 Median Lot Size Median Lot Price Median Lot Size Median Lot Price 22 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 23

NORTHERN GROWTH CORRIDOR MITCHELL LUKE KELLY DIRECTOR, luke@rpmrealestate.com.au +61 4 688 52 WHITTLESEA The outer Northern suburbs is the second biggest growth area, comprising 39 active estates Stock levels will improve over the coming quarters, with the Sunbury South, Lancefield HUME HUME 25 1,2 producing 24% of total lot sales over the last 12 Road, Lindum Vale, Shenstone Park, 2 1, months. Supply constraints and continuing strong demand characterised March quarter activity, with limited stock released to market in an effort to reduce the expanding title timeframe delays currently around 15 to 18 months. With supply drying up in Mernda-Doreen in the east, demand has shifted to the Epping-Wollert area, which has hit production Beveridge Central and Beveridge North-West PSPs due to be approved this year, bringing more than 34, lots of varying size and price points to market, particularly for first home buyers. With a reduced level of stock releases throughout the quarter, sales fell 22% to 626 lots still 4% higher than the same period last year. The median lot price rose 3% to $324,25, and the median lot size edged higher to 425 sqm. NUMBER OF ESTATES 8 15 6 1 4 5 2 Active Estates New Estates Gross Lot Sales GROSS LOT SALES capacity. 35, 46 3, 45 The Northern corridor s traditional affordability has underpinned robust demand which has pushed prices up to the point whereby the majority of lot sales have moved into the $3, + bracket. Notwithstanding, sales rates softened MEDIAN LOT PRICE $ 25, 2, 15, 1, 44 43 42 41 4 MEDIAN LOT SIZE SQM for the quarter, with lot sales falling 29% from the 5, 39 December period and 25% from 12 months ago. PORT PHILLIP BAY 38 Median Lot Size Median Lot Price 24 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 25

NORTHERN GROWTH CORRIDOR PETER GRANT DIRECTOR, peterg@rpmrealestate.com.au +61 411 494 499 MITCHELL 7 25 WHITTLESEA 3 9 Low stock volumes in Mitchell has resulted in fluctuating sales activity, with lot sales falling 45% below the previous quarter, but a more modest 15% over the last 12 months. Mitchell s median lot price increased by 2% for the quarter, and 57% - or $11, - over the last 12 months to $33, the highest annual increase of any LGA across the growth corridors. Larger lot sizes have underpinned this demand, with a median NUMBER OF ESTATES 6 2 5 15 4 3 1 2 5 1 Active Estates New Estates Gross Lot Sales GROSS LOT SALES From a sales peak in the June quarter last year due to 1 new estates entering the market, sales volumes continue to trend downwards in Whittlesea due to the lack of new stock coming on line, with developers implementing a reduced lot release program. For the March quarter, lot sales fell 7% to 373 lots. At 392 sqm, Whittlesea contained the smallest median lot size, but has not impeded price growth NUMBER OF ESTATES 8 25 7 2 6 5 15 4 1 3 2 5 1 Active Estates New Estates Gross Lot Sales GROSS LOT SALES lot size of 512 sqm. Nonetheless, Mitchell is the 35, 6 with the median lot price climbing 3% from the 35, 43 most affordable LGA in the Northern corridor. 3, 5 last quarter, and 33% over the last 12 months to 3, 42 MEDIAN LOT PRICE $ 25, 2, 15, 1, 5, 4 3 2 1 MEDIAN LOT SIZE SQM $329,9. MEDIAN LOT PRICE $ 25, 2, 15, 1, 5, 41 4 39 38 MEDIAN LOT SIZE SQM 37 Median Lot Size Median Lot Price Median Lot Size Median Lot Price 26 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 27

SOUTH EAST GROWTH CORRIDOR ROD ANDERSON DIRECTOR, rod@rpmrealestate.com.au +61 417 595 859 The South East region contributed only 16% of total sales over the last year, due largely to rampant price CASEY 3 1, growth and both fragmented and large landholdings Lot sales trended downwards throughout 217, 25 1, on PSP-approved land that haven t yet been unlocked for development. Casey and Cardinia have the two highest median lot prices among all LGAs, making the South East corridor increasingly unaffordable and forcing many first home buyers to continue renting. Hence, more however with six new estates launching over the last six months, gross sales rebounded 4% to 81 lots in the March quarter. The median lot price in Casey stabilised at $354, from a peak of $357, last quarter still the highest median among all growth corridors. NUMBER OF ESTATES 2 15 1 5 8 6 4 2 GROSS LOT SALES affordable townhouse product is being introduced on new estates, estimated at around 15% of total Active Estates New Estates Gross Lot Sales dwellings. $4, 46 $35, 45 As a result of the huge price growth, for the first time, lot sizes in Casey which are typically above the median shrunk 3sqm to 4sqm. The McPherson PSP approval is imminent with in excess of 1, lots, and with Minta Farm and Pakenham East PSPs in the pipeline, supply pressures should ease in Clyde and Clyde North. PORT PHILLIP BAY CASEY CARDINIA MEDIAN LOT PRICE $ $3, $25, $2, $15, $1, $5, $ Median Lot Size 44 43 42 41 4 39 38 37 Median Lot Price MEDIAN LOT SIZE SQM 28 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 29

SOUTHERN GROWTH CORRIDOR LUKE KELLY DIRECTOR, luke@rpmrealestate.com.au +61 4 688 52 CARDINIA 25 5 CARDINIA S MEDIAN LOT PRICE HAS INCRESED A STAGGERING $14,5 OVER THE LAST YEAR The number of active estates more than halved over the last year, which impacted considerably on gross lot sales, falling 73% from March 217 and 42% from the previous quarter. A planned reduction in releases combined with a median price sitting at almost $35,, resulted in record low sales volumes. Cardinia s median lot price is catching up with NUMBER OF ESTATES 45 2 4 35 15 3 25 1 2 15 5 1 5 Active Estates New Estates Gross Lot Sales GROSS LOT SALES Casey s, increasing a staggering $14,5 over 4, 6 the last year to $349,5. For the March quarter it 35, 5 climbed 11%. Although the median lot size is larger at 494 sqm, limited supply is underpinning robust price growth. MEDIAN LOT PRICE $ 3, 25, 2, 15, 1, 5, 4 3 2 1 MEDIAN LOT SIZE SQM Median Lot Size Median Lot Price 3 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 31

GREATER GEELONG GROWTH CORRIDOR PETER GRANT DIRECTOR, peterg@rpmrealestate.com.au +61 411 494 499 With an average of 27 active estates in the past four quarters, the Greater Geelong growth area comprises 15% of overall lot sales. All areas recorded strong price growth over the last 12 months, led by Armstrong Creek which is attracting first home buyers armed with $2, regional first home owner grants who have been priced out of the more expensive Geelong market. Sales volumes have eased as a result of the huge amount of stock taken up over the last six months. Robust price gains were recorded in the traditionally ARMSTRONG CREEK Armstrong Creek s affordability advantages underpinned strong sales growth during the second half of 217, peaking at a record 516 lots in the December quarter, before falling 36% this quarter. Median lot prices strengthened further, climbing 13% from the previous quarter and 32% annually a price differential of more than $6,. The median lot size edged higher to 448 sqm. NUMBER OF ESTATES 8 6 7 5 6 4 5 4 3 3 2 2 1 1 Active Estates New Estates Gross Lot Sales GROSS LOT SALES slower areas along the Bellarine, which remain well 3, 46 GREATER GEELONG PORT PHILLIP BAY below the Melbourne LGAs. SEP 17 DEC 17 435 SALES 516 SALES [ LOT SIZE STEADY AT 448 SQM ] MAR 18 328 SALES $2K $221K $25K MEDIAN LOT PRICE $ 25, 2, 15, 1, 5, Median Lot Size 45 44 43 42 41 4 39 38 37 Median Lot Price MEDIAN LOT SIZE SQM 32 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 33

GREATER GEELONG GROWTH CORRIDOR ROD ANDERSON DIRECTOR, rod@rpmrealestate.com.au +61 417 595 859 BELLARINE PENINSULA 18 45 GEELONG 12 14 With the addition of three new estates, the Bellarine region recorded more lot sales than Armstrong Creek in the March quarter, increasing 1% from the December quarter to 382 lots a 9% rise over the last 12 months. The median lot price increased 8% to $219,, making it the second most affordable area throughout Greater Geelong. The median lot size dipped to 476 sqm but starts from a higher base than most other LGAs. NUMBER OF ESTATES 16 4 14 35 12 3 1 25 8 2 6 15 4 1 2 5 Active Estates New Estates Gross Lot Sales 25, 56 GROSS LOT SALES With prices for house and land packages similar to established housing in mostly infill areas of Geelong, stock volumes are typically much lower. Sales rates more than halved in the March quarter to just 48. The median lot price increased 5% to $279,999, and lot size peaked at 75 sqm. NUMBER OF ESTATES 1 12 1 8 8 6 6 4 4 2 2 Active Estates New Estates Gross Lot Sales $35, 8 GROSS LOT SALES 2, 54 $3, 7 MEDIAN LOT PRICE $ 15, 1, 5, 52 5 48 46 MEDIAN LOT SIZE SQM MEDIAN LOT PRICE $ $25, $2, $15, $1, $5, 6 5 4 3 2 1 MEDIAN LOT SIZE SQM 44 $ Median Lot Size Median Lot Price Median Lot Size Median Lot Price 34 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 35

GREATER GEELONG GROWTH CORRIDOR LUKE KELLY DIRECTOR, luke@rpmrealestate.com.au +61 4 688 52 LARA 5 12 TORQUAY 5 16 The doubling of the regional first home owner grant boosted sales activity in Lara in late 217. However, limited lot releases in the March quarter reduced sales rates by 24% from the previous quarter, with only 59 sales. The median land price increased 13% to $211, from the same quarter last year. The median lot size has shrunk from 48 sqm to 39 sqm over the last 12 months. NUMBER OF ESTATES 4 3 2 1 1 8 6 4 2 GROSS LOT SALES Limited stock from only two estates has kept sales rates low in Torquay, which fell more than half to 32 sales for the quarter. However, Torquay s median lot price of $34, a 2% increase from a year earlier - was more expensive than most growth corridors in Greater Melbourne, which is likely attributed to the region s appeal to lifestyle and downsizer buyers. The higher lot price has not NUMBER OF ESTATES 4 3 2 1 14 12 1 8 6 4 2 GROSS LOT SALES Active Estates New Estates Gross Lot Sales translated into larger lot sizes, with the median Active Estates New Estates Gross Lot Sales MEDIAN LOT PRICE $ 25, 2, 15, 1, 5, 6 5 4 3 2 1 MEDIAN LOT SIZE SQM reducing from 47 sqm to 437sqm over the last 12 months. MEDIAN LOT PRICE $ 4, 35, 3, 25, 2, 15, 1, 5, 49 48 47 46 45 44 43 42 41 4 39 MEDIAN LOT SIZE SQM SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 38 Median Lot Size Median Lot Price Median Lot Size Median Lot Price 36 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 37

Beveridge AFFORDABILITY MEASURE Sunbury $289k $284k Mickleham $298k Kalkallo $327k Donnybrook $312k Bacchus Marsh $192k Diggers Rest $275k Greenvale $382k Craigieburn $374k Wollert $345k Frasers Rise $345k RPM buyer data reveals 57% of purchasers in new housing estates are first home buyers, with an average household income of $8,. Factoring in an optimistic 2% deposit, their borrowing capacity % OF LOT SALES UNDER $27, 1% 9% Weir Views Thornhill Park $252k Strathtulloh Deanside $39k $257k Aintree $323k $36k WHAT DOES A 4SQM LOT COST? 3 months to March 218 is $412, for a $5, purchase, comprising an average construction cost of $23,, which leaves $27, to buy land. As the above example shows, most first home buyers can purchase land for around $27,, which, two years ago, contained 3% of lot sales NUMBER OF ESTATES 8% 7% 6% 5% 4% 3% 2% Wyndham Vale Tarneit $319k Truganina $323k between $226, and $275,. This almost halved to 16% in the March quarter, which has caused further affordability constraints and impacted demand in some corridors, particularly the South East and some suburbs in the North. 1% % Cardinia Casey Hume Whittlesea Mitchell Wyndham Melton Moorabool Geelong & Surf Coast March Qtr. 217 March Qtr. 218 Armstrong Creek $238k Lara $218k $291k Werribee $298k Point Cook $46k Berwick $462k Cranbourne East Officer $319k $355k 38 RPM REAL ESTATE GROUP Torquay $319k Bellarine $181k Cranbourne West $379k Cranbourne South $353k Clyde North $348k Clyde $346k Botanic Ridge $356k 39

OUTLOOK MELBOURNE S NEW SUBURBS - FAST TRACKED PSP S Donnybrook/ Woodstock Total Dwellings 17, Beveridge Central Total Dwellings 3,65 Beveridge North West Total Dwellings 9, PSP PLANNING PROCESS Draft structure plan preparation Council and Stage agency consultation Pre-Planning PSP Commenced Developers will continue to take a responsible approach to delivering controlled supply in the growth corridors to manage title delays and reduce settlement risk among increasingly price sensitive buyers. The greenfield market will receive a supply boost, via fast tracked PSPs (yet to be approved) expected to deliver more than 54, lots by the end of the year. However, we will likely see a continuing correction in sales volumes from 25, lots in 217 towards 2, lots this year due to lot sales exceeding industry production capacity to construct and therefore title land lots. A greater spread of estates is required to enable more land releases to assist active estates with supply and maintain sales rates to control title timeframes. Price growth should moderate to around 5% to 6% as many borrowers reach borrowing capacity amid surging demand which pushed up median lot prices in 217. DEVELOPERS ARE BECOMING MORE INNOVATIVE IN THE TYPE OF PRODUCT BEING OFFERED TO MARKET. Particularly more affordable town homes that deliver the desired configuration of three bedrooms, two bathrooms and a double garage on smaller lots. In our view, this trend will accelerate, and as a result the median lot size will continue to reduce to 375 sqm over the next 12 18 months. Quandong Total Dwellings Unconfirmed Plumpton Total Dwellings 1,8 Mt Atkinson/ Tarneit Plains Total Dwellings 8, Lancefield Road Total Dwellings 8,8 Sunbury South Total Dwellings 11,8 Kororoit Total Dwellings 9,2 Lindum Vale Total Dwellings 1,5 Wollert Total Dwellings 13,54 Shenstone Park Total Dwellings Unconfirmed Community engagement and exhibition - Review of submissions - Planning panel - Structure plan finalisation - Submitted for approval - Approved - Completed Public Consultation Post Consultation Approved & Completed TOTAL DWELLINGS IN EXCESS OF 11, BY END OF CALENDAR 218 Approved To be approved Source: VPA Minta Farm Total Dwellings 2,85 Pakenham East (Deep Creek) Total Dwellings 7,148 Mcpherson Total Dwellings 1,1 4 RPM REAL ESTATE GROUP 41

BUYER PROFILE LUKE KELLY DIRECTOR, luke@rpmrealestate.com.au +61 4 688 52 PURCHASER SURVEY RESULTS Over the last 12 months, RPM sold in excess of 5,5 lots. We conduct an extensive 65 question survey with all purchasers at the time of contract signing. This data relates to owner occupiers across Melbourne and Greater Geelong. Despite continuing affordability constraints, Break this down, and 41% suggested they d first home buyers remain a strong presence in spend between $25, and $35, on the the Melbourne and Geelong vacant land market, comprising 57% of all purchasers. They are, however, ageing, with 28% aged between 35 and 49 last year rising to 34% this year. Correspondingly, average household incomes have also increased. This quarter 37% of households earned $1, or more compared to 32% last year. Subsequently, more buyers intend to up their budget when buying land and building their home. This quarter 35% of purchasers indicated they plan to construction element of their home compared to 31% 12 months ago. However, these higher budgets are offset by higher land prices and construction costs. While first home buyer budgets are increasing, the size of home they are building is shrinking. OVER THE LAST 12 MONTHS, BUYERS WHO INTEND TO BUILD A SMALLER HOME BETWEEN 16 AND 2 SQUARES HAS CLIMBED FROM 14% TO 21%. Moreover, the share of buyers who intend to build a larger home over 26sqs has dropped from 45% last Mar qtr. 217 Mar qtr. 218 OWNER-OCCUPIER TYPE First home buyers COMBINED AGE 58% 57% 35-49 years of age 25-34 years of age HOUSEHOLD INCOME >$1, 32% Mar qtr. 217 BUDGET FOR HOUSE AND LAND PACKAGE >$55, BUDGET FOR NEW HOME CONSTRUCTION Budget between $25, - $35, 24% 31% Mar qtr. 217 Mar qtr. 217 35% 41% Mar qtr. 218 Mar qtr. 218 16-2 sqs Greater than 26 sqs spend at least $55, buying a block of land and building their house, up from 24% a year ago. year to 4% this year. 28% 34% 51% 49% Mar qtr. 217 Mar qtr. 218 Mar qtr. 217 Mar qtr. 218 SIZE OF HOME 37% PLANNING TO BUILD INCLUDING GARAGE Mar qtr. 218 14% 21% 45% 4% Mar qtr. 217 Mar qtr. 218 Mar qtr. 217 Mar qtr. 218 42 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 43

OVERVIEW CAMERON YATES GENERAL MANAGER, PROJECT MARKETING cameron@rpmrealestate.com.au +61 43 388 8 Melbourne s apartment and townhouse market has Demand has essentially matched supply, reflected APARTMENTS / TOWNHOUSES continued to show resilience despite lending and regulatory headwinds in 217. Higher stamp duty taxes for foreign investors and broadening the stamp duty levy to the purchase price of off-theplan apartments (not just the land value) on local investors has impacted demand among this buyer cohort. Nevertheless, as developers continue to produce larger apartments and townhouses, an increasing share of sales is being absorbed by owner occupiers, particularly in the apartment sector. in total approval numbers holding up well over the 12 months to the March quarter. In November last year, a record high of 4,869 units were approved in high rise dwellings. This suggests developers are confident in the short-term outlook based on demand drivers including Melbourne s rapidly growing population, strong international student intakes, robust employment and low interest rates. Not only has an oversupply en masse failed to materialise (albeit some suburbs appear to have excess supply based on price discounts), TOWNHOUSE APPROVALS 14, 13, 12, 11, 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, 24, 28% 16% 13% 6% 2% 12 mths to Mar-14 12 mths to Mar-15 12 mths to Mar-16 12 mths to Mar-17 12 mths to APARTMENTS / TOWNHOUSES From a peak in calendar 215, the decline in apartment approvals has moderated, while townhouse approvals have trended upwards. On a rolling 12-month basis to March 218, townhouses have climbed 19.6% while apartments have remained steady, increasing 3.6%. Persistent commentary about an oversupply of Melbourne s apartment market particularly in the it is reasonable to suggest there is a potential undersupply. This is underscored by vacancy rates sitting at 1.8% in the inner ring and 3% in the mid ring, which points to an acute market (a rate of 3% indicates a market in balance). APARTMENT APPROVALS 22, 2, 18, 16, 14, 12, 1, 8, 6, 4, 2, 11% 5% 3% 6% 4% 12 mths to Mar-14 12 mths to Mar-15 12 mths to Mar-16 12 mths to Mar-17 12 mths to CBD and inner ring have not been realised. Source: ABS 44 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 45

OVERVIEW Other dwelling approvals (apartments and townhouses) over the March quarter 218 was The overall gains in apartment and townhouse approvals has continued to contradict market This level of activity is in response to the strong level of demand which has transacted into ongoing METROPOLITAN MELBOURNE MEDIUM DENSITY PIPELINE ACTIVITY CAMERON YATES GENERAL MANAGER, PROJECT MARKETING cameron@rpmrealestate.com.au +61 43 388 8 always likely to be significantly down from the commentators, and translated into both price growth within the apartment and unit market, previous quarter due to record approvals in the commencements and subsequent completions, with the median price reaching $67, in the December quarter with 9,24 dwellings up 187% with overall annual increases of 4.6% and 15.7% March quarter. This result reflects an increase of from the September quarter 217. As a result, total respectively. 2.4% from the previous quarter and a gain of 4.4% APARTMENTS / TOWNHOUSES other dwelling approvals fell by 3.8% to 8,8 dwellings but actually reflects a robust market with an increase of 9.2% over the 12 months to March 218 when compared to the same period 12 months earlier. Townhouses fell by 18.3% to 2,869 dwellings over the March quarter from the December quarter 217 which was the second highest on record. Relative to the same time last year, the result reflects a marginal increase of 3.6%. More so, over the 12 months to March 218, townhouses are up 19.6% from the same period a year earlier. Apartments retracted by a more significant (albeit from the same quarter a year earlier. APPROVALS TOTAL TOWNHOUSES TOTAL APARTMENTS TOTAL March qtr 218 2,869 5,931 8,8 Change from previous qtr -18.3% -35.6% -3.8% Change from previous yr 3.6% 33.5% 22% 12 months to March qtr 218 13,168 21, 34,168 % change 12 months earlier 19.6% 3.6% 9.2% COMMENCEMENTS March qtr 218 7,365 Change from previous qtr -14.9% Change from previous yr -9.8% 12 months to March qtr 218 3,212 % change 12 months earlier 4.6% TOTAL TOWNHOUSES & APARTMENTS COMPLETIONS March qtr 218 7,629 Change from previous qtr -7.6% Change from previous yr -26.5% 12 months to March qtr 218 31,246 % change 12 months earlier 15.7% TOTAL TOWNHOUSES & APARTMENTS The townhouse market is growing significantly across Metropolitan Melbourne, as early stage projects far outweigh those in later stages of development. As at March 218, the bulk of activity was in planning and approved; holding 43% and 39% of all developments respectively. Projects in these stages could realise more than 14, new dwellings much higher than the 4,2 commenced projects. The apartment development pipeline shows a similar proportion of commencements to those at planning stage, holding 25% and 27% respectively. Approved projects comprise 48% of developments totalling more than 54,3 apartments. TOWNHOUSE PIPELINE - AS AT MARCH 218 Stage Count of Developments % of total Count of Units Planning 1,19 43% 6,929 38% Approved 1,86 39% 7,256 39% Commenced 499 18% 4,245 23% % of total Total 2,775 1% 18,43 1% APARTMENTS / TOWNHOUSES anticipated) 35.6% from the previous quarter but were up 33.5% from the March quarter last year. In addition, over the 12 months to March 218, apartment approvals increased by 3.6% compared to the same period a year earlier. Source: ABS TOTAL APARTMENTS & UNITS MEDIAN PRICE March qtr 218 $67, Dec qtr 217 $593, March qtr 217 $581,5 Source: ABS, REIV CHANGE FROM PREVIOUS QUARTER CHANGE FROM PREVIOUS YEAR 2.4% 4.4% Market self-regulation will likely prevent some of these approved developments coming to fruition this year, with fewer projects expected to be launched throughout 218 compared to 217. This is particularly the case in certain suburbs that have seen robust activity in recent years. However, the apartment development pipeline still shows a solid level of activity across all stages, indicating a market that is growing in maturity, with most development expected across the middle ring. APARTMENT PIPELINE - AS AT MARCH 218 Stage Count of Developments % of total Count of Units Planning 395 27% 3,327 27% Approved 79 48% 54,358 48% Commenced 376 25% 28,443 25% % of total Total 1,48 1% 113,128 1% Source: Cordell Connect, RPM 46 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 47

METROPOLITAN MELBOURNE MEDIUM DENSITY PIPELINE ACTIVITY OUTLOOK CAMERON YATES GENERAL MANAGER, PROJECT MARKETING cameron@rpmrealestate.com.au +61 43 388 8 APARTMENTS / TOWNHOUSES Middle Ring 72% APARTMENT & TOWNHOUSE DEVELOPMENT SPLIT BY LOCATION Outer Ring 24% Inner Ring 4% Approved stage includes building approval and development approval Commenced stage includes construction, contract let or under negotiation, tenders for design or development being submitted, tenders named or being called/recalled, site preparation or developments more than half way through but not yet completed. Planning stage includes site acquisition, rezoning approval, sketch plans, early planning, development application and building application. Note: The above does not include a further 2,9 medium density projects that are not yet defined as townhouses or apartments, totalling an estimated 33,5 dwellings. The majority of these projects are in the stages of planning and approval. In our view, the much talked about downturn in the apartment market will by no means be at the magnitude that is widely anticipated. The current robust level of activity off the back of high population gains, strong economic fundamentals and capital growth prospects underscores a level of confidence from both developers and buyers. These supportive variables of activity are anticipated to continue over the near term, eroding any significant reduction in approvals, albeit below previous peaks. Any shortfall will likely be offset by increasing activity in townhouses particularly in the missing middle. APRA s announcement in April to relax the 1% investor loan growth rate is also a positive sign for both banks and borrowers, which should further encourage investor activity as the major banks once again jostle for business. Demand among owner occupiers for well-designed apartment and townhouses in the right location with diversity of product mix (particularly larger two and three bedrooms) will only accelerate, given affordability concerns, shifting demographics and buyer preferences. First home buyers paying little to no stamp duty are also remaining active particularly in the sub $6, market. Increasing medium density housing in the mid ring close to jobs, services and infrastructure is crucial to sustainably accommodate Melbourne s booming population and give buyers affordable choice and diversity about where they live and what kind of home they live in. INCREASING MEDIUM DENSITY HOUSING IN THE MID RING CLOSE TO JOBS, SERVICES AND INFRASTRUCTURE IS CRUCIAL TO SUSTAINABLY ACCOMMODATE MELBOURNE S BOOMING POPULATION APARTMENTS / TOWNHOUSES Source: data is extracted from Cordell Connect and includes all Source: Cordell Connect, RPM projects that have been made publicly available. 48 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 49

CHANGING DWELLING LANDSCAPE DAREBIN FOCUS ON DAREBIN TOWNHOUSE MARKET APARTMENTS / TOWNHOUSES Over the last decade the demand for housing beyond the traditional family home has grown due to shifting demographics, particularly an ageing population which is driving an increase in single and two-person households or couples without children. Diversifying household types and lifestyles are reflected in varying housing preferences such as high-rise towers, smaller apartment buildings, villa units and townhouses to meet this increasing demand. Townhouses are growing in popularity as a more affordable housing option, offering many attributes of a traditional family home, such as private open space, on-site parking, individual street address and land value appreciation. Consequently, dwelling size and proximity to work and amenity is playing an increasing role in buyer decisions. Aside from smaller households, growing families upsizing from higher density living to townhouses particularly the case in the middle ring but also a growing trend in new housing estates for budget conscious buyers. Over the five years between the 211 and 216 Census periods, Metropolitan Melbourne s total number of occupied townhouses increased by more than 116,. Detached housing has grown at less than half this rate, with only 47, more homes being occupied. Eighteen municipalities have shown declines while medium and higher density developments have risen. The middle ring of Melbourne often referred to as the missing middle - contains land that is easily accessible to existing infrastructure and services and can house a greater share of the population. Hence it is fundamental in the supply of this new housing stock, holding 69% of all new townhouses. This has helped housing affordability, as without these townhouses, dwelling prices and rents would ALL MIDDLE RING TOWNHOUSES 216 GROWTH SINCE 211 LGA Count Percentage Brimbank 9,315 17.9% Hobsons Bay 9,88 116.9% Darebin 16,584 111.% Maribyrnong 8,617 9.8% Moonee Valley 1,48 88.5% Moreland 18,77 72.4% Whitehorse 15,942 69.1% Banyule 8,225 66.% Kingston 16,633 58.5% Glen Eira 14,565 52.4% Bayside 9,77 51.2% Boroondara 14,413 5.% Manningham 7,389 45.7% Monash 11,219 44.% Stonnington 1,884 31.9% Port Phillip 12,868 24.6% Yarra 16,596 11.1% 2 & 3 BED COMBINED Suburb Median Annual Growth TOWNHOUSES 217 DETACHED HOUSES 217 APARTMENTS 217 Median Annual Growth Median Alphington $895, 9.2% $1,68, 11.7% N/A N/A Annual Growth Bundoora (part of suburb) $673,5 1.7% $922,5 7.9% $395, 4.3% Fairfield $877,5 6.% $1,43, 11.8% $45, 1.9% Kingsbury $567, 7.8% $735,5 1.8% $442,5 2.4% Macleod (part of suburb) $715,5 6.% $1,183,75 6.5% N/A N/A Northcote $989, 8.3% $1,341,5 1.1% $512,5 1.5% Preston $699, 6.6% $1,5,5 11.4% $432,5 2.6% Reservoir $579,5 8.4% $816, 11.5% $454, 8.3% Thornbury $858, 8.% $1,247,5 11.9% $523,75 5.8% City Of Darebin $66, 8.4% $976, 9.9% $458, 2.2% Source: Pricefinder, REA and RPM With an increase of 8,724 townhouses - 7.5% of Metropolitan Melbourne s total townhouse change - the City of Darebin has seen the highest absolute gain in occupied households over the five years to 216. The data illustrates the townhouse market tracks more closely to detached houses than apartments in terms of capital growth. The data shows the combined median price of two and three bedroom townhouses compared to houses and apartments within Darebin over 217. The capital growth is a compound average annual growth rate of median price over a five-year period and compares the median price of property settlements. As shown, townhouses cost $316, less than houses while capital growth was only 1.5% lower at 8.4% compared to 9.9%. Worth noting is the modest 2.2% gain in apartments over the same period. APARTMENTS / TOWNHOUSES with a backyard is also gaining traction. This is be higher. Total 212,78 58.7% Source: ABS Census 5 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 51

APARTMENTS / TOWNHOUSES CASE STUDY BURBANK SPEARHEADS GROWTH OF MEDIUM DENSITY IN WERRIBEE Developer Burbank recently received development approval to build a landmark 1-storey apartment tower in the heart of Werribee s CBD to bring housing diversity and urban-style living to the West s key activity centre. The $47 million tower will be built on a 1,664sqm site on the banks of the Werribee River. At 36m tall, it will comprise 1 apartments featuring mostly one and two bedroom and some three bedroom dwellings and two retail spaces on ground level. Designed by Rothelowman architects, the site has been designed to maximise its prime riverfront location, including Strong price growth in the house and land market and a lack of apartments in Werribee is expected to drive demand among first home buyers, investors and downsizers. This type of dwelling will provide a choice for budget conscious buyers who have seen prices for house and land packages rise by 12% in Wyndham over the past year to a median of over $55,. RiverEdge is one of four catalyst sites flagged for redevelopment as part of Wyndham Council s $25 million rejuvenation of the Werribee city centre. The site is a focal point in Council s vision to embrace its RIVEREDGE IS ONE OF FOUR CATALYST SITES FLAGGED FOR REDEVELOPMENT AS PART OF WYNDHAM COUNCIL S $25 MILLION REJUVENATION OF THE WERRIBEE CITY CENTRE. APARTMENTS / TOWNHOUSES views of the Brisbane Ranges from one side and the riverfront and park assets and develop the precinct CBD and Port Phillip Bay from the others. to create a vibrant urban hub that will change the face of Werribee. Located 35km from Melbourne s CBD, Werribee is among the fastest growing populations in the RPM has been appointed as the exclusive sales country. With 35 residents moving to Wyndham agency for the project. For enquiries contact every day, the region is expected to increase from Cameron Yates on +61 43 388 8 or email 257, in 218 to more than 465, people cameron@rpmrealestate.com.au by 238. 52 RPM REAL ESTATE GROUP

OVERVIEW JINYIN ZHANG DIRECTOR, RPM INTERNATIONAL jinyin@rpmrealestate.com.au +61 451 898 886 Policy changes including an increase in stamp duty for foreign investors from 3% to 7% which started in July 216, and the removal of off-the-plan Notwithstanding, Melbourne s reputation as a desirable property investment destination remains strong, driven by market transparency, clarity VICTORIAN ECONOMY Economic indictors (% change) 216/17 a 217/18 f 218/19 f Gross State Product (GSP) 3.3 2.9 3.2 INTERNATIONAL concessions for new dwellings from July 217 has impacted demand among Asian investors. In Victoria, foreign buyers have accounted for between 11% and 25% of total new dwelling purchases in any given quarterly period since March 215 (on average 17% per year). The proportion of new dwellings bought by foreign investors escalated around rules and regulations, liveability factors and world class education. Victoria s strong economy also continues to provide positive conditions for investment. The Gross State Product is forecast to remain around 3% over 217/18 and 218/19. Strong public spending and a moderate lift in household consumption supported State Final Demand (SFD) 4.1 4. 3. Unemployment rate 5.9 5.7 5.4 Wage Price Index 2. 2.3 2.7 Source: Commonwealth Bank State & Territory Perspective The impact of government charges on residential land purchases in Melbourne and Sydney provides a revealing comparison. INTERNATIONAL to 21% in the June quarter last year, fueled by annual growth in State Final Demand of above 4% in MELBOURNE SYDNEY investors bringing forward their purchase to avoid the removal of stamp duty exemptions for off the plan apartments. 216/17, with similar growth expected in 217/18. Victoria s unemployment rate is also anticipated to further improve through this period, falling to Total foreign purchase charges for a vacant residential lot at a median lot price of $323, (March quarter 218) equates to $42,56, broken down into: Total foreign purchase charges for a vacant residential lot at a median lot price of $488, (March quarter 218) equates to $61,99, broken down into: Since this policy change, the share of new dwellings bought by foreign investors has fallen to around 14%. an estimated 5.4%. A tighter labour market is expected to induce stronger wage growth, resulting in growth in the wage price index rising to a forecast 2.7% over 218/19. + $14,45 stamp duty + $22,61 foreign purchaser additional duty (7% of contract price) + $5,5 foreign review investment board fee + $17,45 stamp duty + $39,4 foreign purchaser additional duty (8% of contract price) + $5,5 Foreign Review Investment Board Fee DIFFERENCE = $19,43 54 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 55

INTERNATIONAL COMPARISON OUTLOOK INTERNATIONAL Government measures imposed on foreign purchasers are by no means unique to Melbourne and Sydney. Many other international cities have introduced similar taxes, so the comparative cost of buying, owning and selling in Australia remains competitive on a global scale. For example, in Hong Kong a 37% upfront tax is imposed on property investors, while Singapore introduced a 15% foreign buyer tax in 213. In Toronto and Vancouver in Canada, foreign buyers incur a 15% tax while closer to home, New Zealand has recently introduced a ban on foreigners from buying existing homes. VICTORIA S STRONG AND STABLE ECONOMY, POSITIVE GROWTH OUTLOOK, LIVEABILITY AND RELATIVE AFFORDABILITY WILL CONTINUE TO DRIVE ROBUST INVESTMENT FROM FOREIGN BUYERS. The market has adjusted to the imposition of additional charges introduced last year, with INTERNATIONAL demand in Melbourne s land market continuing to GOVT ASSOCIATED TRANSACTIONS FEES IN CITIES REPUTED TO BE POPULAR FOR CHINESE PROPERTY BUYERS* outstrip supply. HONG KONG SINGAPORE Debate over investor appetite in the apartment VANCOUVER MELBOURNE SYDNEY BRISBANE LONDON market remains, particularly in the CBD which has a heavy reliance on pre-sales to overseas buyers. While pre-sale targets are taking longer to achieve, continued population and robust employment SAN FRANCISCO AUCKLAND 5 1 15 2 25 3 35 4 Stamp Duty Foreign Buyer Tax *Property equivalent to $A1m. Source: Credit Suisse growth, along with a world-class education system will ensure international buyers remain a strong force in Melbourne s apartment market. 56 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 57

OVERVIEW MEDIAN RENTS House Bdrms Mar-17 Dec-17 Change from previous year 2 Year Average Annual Gain INNER 2 $53 $55 $55 $2 4.9% 3 $641 $65 $653 $12 4.3% 4 $797 $858 $895 $98 4.3% MIDDLE 2 $37 $38 $37 $ 2.8% RESIDENTIAL INVESTMENT The rental market continues a long-term upwards trend across Melbourne and Geelong, with rents showing positive growth for almost all dwelling types and sizes. In the inner and middle rings of Melbourne, detached houses are tracking between 2.8% to 5% rental growth per annum. In the unit market (townhouses and apartments), the middle ring is tracking from 4.7% to 5.8% annually depending on the number of bedrooms. Outer Melbourne reveals the highest growth in two bedroom detached houses, rising 6.2% per annum - the highest percentage growth across all areas, dwelling types and sizes. Rental growth for other dwellings across the outer ring has been more subdued. Instead, land value appreciation is the strong driver for investment within these areas. Geelong has also shown more moderate rental price increases, though small dwellings (both small houses and units) have experienced the highest growth in the area. Vacancy rates across Melbourne and Geelong underscore a robust investment market, with the inner and outer regions and Geelong all showing vacancy rates below 2%, pointing to an undersupply of stock. Only the middle ring is considered balanced between demand and supply, sitting at 3% vacancy. Despite rental price growth, indicative yields across Melbourne have been in decline over the last couple of years, with outer Melbourne s housing experiencing the largest fall. This is likely a result of strong capital growth in recent years. Notwithstanding, the outer areas still hold the highest indicative house yield across Melbourne s three rings, and the second highest unit yield. Inner Melbourne holds a high unit yield of 4.2%, however price points in this market are relatively high for the average investor. 3 $41 $43 $43 $29 5.% 4 $5 $57 $55 $5 4.9% OUTER 2 $325 $35 $351 $26 6.2% 3 $37 $375 $38 $1 2.7% 4 $421 $43 $43 $9 2.4% GEELONG 2 $288 $295 $3 $13 3.5% 3 $34 $35 $35 $1 3.% 4 $4 $4 $41 $1 1.2% Units & Apartments Bdrms Mar-17 Dec-17 Change from previous year INNER 1 $37 $36 $37 $ 1.4% 2 $47 $46 $49 $2 2.8% 3 $626 $675 $7 $74 7.8% MIDDLE 1 $31 $32 $33 $2 5.8% 2 $39 $395 $395 $5 4.7% 3 $5 $5 $5 $ 5.4% OUTER 1 $23 $25 $255 $25 1.% 2 $32 $333 $34 $2 3.1% 3 $385 $39 $395 $1 2.% GEELONG 1 $2 $21 $22 $2 4.9% 2 $285 $295 $3 $15 2.6% 3 $378 $38 $37 -$8.% 2 Year Average Annual Gain RESIDENTIAL INVESTMENT Source: REIV 58 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 59

OVERVIEW OUTLOOK INVESTORS FLOCK TO MELBOURNE S LAND MARKET MEGAN TAYLOR MANAGER, PROPERTY MANAGEMENT megan@rpmrealestate.com.au +61 428 575 149 RESIDENTIAL INVESTMENT VACANCY RATE Melbourne Mar-17 Dec-17 2 Year Average Gain INNER TOTAL 2.1 2. 1.8 2.1 INNER (-4KM) 2.4 2.1 2.1 2.6 INNER (4-1KM) 2. 1.9 1.8 2. MIDDLE (1-2KM) 2.8 3.1 3. 3.1 OUTER TOTAL 1.8 1.7 1.7 2. OUTER (2+KM EXC. MORNINGTON PENINSULA) 1.8 1.6 1.6 1.9 OUTER (MORNINGTON PENINSULA) 1.7 1.9 2.2 2.3 MELBOURNE TOTAL 2.3 2.2 2.1 2.4 GEELONG 2.6 1.6 1.4 2.5 Source: REIV YIELDS Houses Mar-16 Mar-17 Units Mar-16 Mar-17 Inner 2.5% 2.2% 2.2% Inner 4.3% 4.2% 4.2% Middle 2.5% 2.2% 2.2% Middle 3.4% 3.2% 3.% Outer 3.4% 3.1% 2.9% Outer 4.% 3.5% 3.4% Metro 2.8% 2.5% 2.6% Metro 4.1% 3.8% 3.7% Regional 4.3% 4.1% 4.% Regional 4.6% 4.6% 4.3% Source: REIV, RPM Surging population growth and deteriorating affordability will likely ensure demand for rental accommodation remains high, resulting in continually low vacancy rates. New rental laws encouraging longer term leases should further lower vacancy risks. The Melbourne and Geelong markets offer diverse investment options, with inner ring units providing returns through high yields, while outer areas offer more long term capital growth. Traditionally, property investment has been in the established form and often in apartments where less capital is required to enter due to lower price points. However, with the median apartment price reaching $67, and houses at $855,, buying a block of land (where the current median is $323,) and building has become more financially viable. Melbourne s land market has also shown higher growth over an extended period, with prices soaring by 118% over the last decade. This is compared to 92% growth for the established house market and 61% for the apartment market. Aside from generating higher returns over the past 1 years, the entry point is very much achievable for prospective investors building or diversifying their investment portfolio. RPM surveys every buyer on its clients estates in the greenfield market. Almost 2% indicated they were investors. The following infographics feature key demographic changes and purchase intent from this cohort over the 12 months from April 217 to March 218. COMBINED AGE Investors in Melbourne s greenfield market are getting younger, which suggests not just an older age cohort dipping into their superannuation to buy property but middle age investors too. MARCH QUARTER 218 MARCH QUARTER 217 6 over 5 59 35 49 25 34 18 24 6 over 5 59 35 49 25 34 18 24 4% 9% 3% % 1% 2% 3% 4% 5% % 1% 47% 37% 1% 5% 39% % 1% 2% 3% 4% 5% 6% RESIDENTIAL INVESTMENT 6 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 61

INVESTORS FLOCK TO MELBOURNE S LAND MARKET SIZE OF HOME AND BUDGET Strong land price growth indicates investors intend to spend more on land, building a single story home on a smaller footprint. MARCH QUARTER 217 MARCH QUARTER 218 4% 8% RESIDENTIAL INVESTMENT HOUSEHOLD INCOME A growing share of investors have a household income above $12,, which indicates more higher income earners are moving into the land market as an investment option. MARCH QUARTER 217 > $12K $1 $12K $8 $1K $6 $8K $4 $6K < $4K 9% 3% 24% 21% 23% 2% % 5% 1% 15% 2% 25% 3% MELBOURNE S LAND MARKET HAS ALSO SHOWN HIGHER GROWTH OVER AN EXTENDED PERIOD, WITH PRICES SOARING BY 118% OVER THE LAST DECADE. NUMBER OF STOREY TO CONSIDER SIZE OF HOME PLANNING TO BUILD INCLUDING GARAGE 35% 3% 25% 2% 15% 1% 5% % > 3 SQM 26 3 SQM 21 25 SQM 16 2 SQM < 15 SQM 38% 38% 25% UNDECIDED DOUBLE STOREY SINGLE STOREY 3% > 3 SQM 6% % 1% 2% 3% 4% 5% 6% NUMBER OF STOREY TO CONSIDER SIZE OF HOME PLANNING TO BUILD INCLUDING GARAGE 7% 6% 5% 4% 3% 2% 1% % UNDECIDED DOUBLE STOREY SINGLE STOREY 23% 26 3 SQM 24% 56% 21 25 SQM 43% 16% 16 2 SQM 25% 2% < 15 SQM 2% 17% 11% 71% % 5% 1% 15% 2% 25% 3 35% 4% 45% 5% RESIDENTIAL INVESTMENT MARCH QUARTER 218 > $12K $1 $12K $8 $1K $6 $8K $4 $6K < $4K 5% 1% 4% 19% 18% 16% % 5% 1% 15% 2% 25% 3% 35% 4% 45% BUDGET ON BOTH HOME AND LAND PACKAGES > 6K $551 $6K $51 $55K $451 $5K $41 $45K $351 $4K $31 $35K < $3K 1% > 6K 13% 7% $551 $6K $51 $55K $451 $5K $41 $45K $351 $4K $31 $35K 1% 3% < $3K 1% % 5% 1% 15% 2% 25% 3% 35% 4% BUDGET ON BOTH HOME AND LAND PACKAGES 4% 21% 8% 21% 34% 19% 22% 16% 12% 9% % 5% 1% 15% 2% 25% 62 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 63

CHANGES TO THE RESIDENTIAL TENANCIES ACT Late last year the State Government flagged SECURITY PETS & MODIFICATIONS RESIDENTIAL INVESTMENT changes to the Residential Tenancies Act (RTA) aimed at strengthening tenants rights. Given a quarter of all Victorians rent their homes and 2% have been renting for more than five years, the new laws are designed to provide renters with a sense of security and support via: Long term, secure leases Fewer rent increases Smaller bonds More flexibility for modifications Pet ownership rights Landlords will only be able to end a tenancy for a reason specified in the updated RTA. Limit the use of end of fixed term notices to vacate to encourage long-term leasing Landlords must disclose certain information before agreement is signed including any proposal to sell property or if asbestos has been identified at the property Landlords and property managers will now be subject to measures similar to renters via a database which outlines breaches of their Allowing renters to make minor modifications to a property Tenants will have the right to keep pets, provided they obtain the landlord s written consent first. Landlords will not be able to unreasonably refuse a tenant s right to keep a pet A Commissioner for Residential Tenancies will also be appointed to offer tenants advice and advocate on behalf of Victorian renters in the private sector. RESIDENTIAL INVESTMENT obligations, ultimately creating a blacklist for A decision on these changes is likely to be made by The proposed changes will also address issues landlords June this year. A full list of proposed changes can be faced by landlords when managing tenancies to viewed on the government website: ensure a fair balance of rights and responsibilities between each party. COMMERCIAL STIPULATIONS https://www.vic.gov.au/rentfair.html Key elements of the reform package include: 14-day automatic bond repayment Early release of bond Rent increases must be reasonable and rent will only be able to be increased every 12 months instead of 6 64 RPM REAL ESTATE GROUP Q1 RESIDENTIAL MARKET REVIEW MARCH QUARTER 218 65

OUR TEAM ERIC DICK EXECUTIVE CHAIRMAN eric@rpmrealestate.com.au +61 418 349 267 JINYIN ZHANG DIRECTOR, RPM INTERNATIONAL jinyin@rpmrealestate.com.au +61 451 898 886 KEVIN BROWN CHIEF EXECUTIVE OFFICER kevin@rpmrealestate.com.au +61 418 397 577 CAMERON YATES GENERAL MANAGER, PROJECT MARKETING cameron@rpmrealestate.com.au +61 43 388 8 LUKE KELLY DIRECTOR, luke@rpmrealestate.com.au +61 4 688 52 CHRISTIAN RANIERI GENERAL MANAGER, TRANSACTIONS & ADVISORY christian@rpmrealestate.com.au +61 416 445 78 PETER GRANT DIRECTOR, peterg@rpmrealestate.com.au +61 411 494 499 ED WRIGHT MANAGER, DEVELOPMENT SITE SALES ed@rpmrealestate.com.au +61 421 213 21 ROD ANDERSON DIRECTOR, rod@rpmrealestate.com.au +61 417 595 859 MICHAEL STAEDLER RESEARCH MANAGER m.staedler@rpmrealestate.com.au +61 434 619 28 DELENA BAJADA-GARDNER ASSOCIATE DIRECTOR, delenag@rpmrealestate.com.au +61 487 888 556 66 RPM REAL ESTATE GROUP MEGAN TAYLOR MANAGER, PROPERTY MANAGEMENT megan@rpmrealestate.com.au +61 428 575 149 DISCLAIMER Although all reasonable care has been taken in the preparation of this document, the RPM Real Estate Group Pty Ltd take no responsibility for the accuracy of the information contained herein. It is recommended that all the information be verified if it is to be used for commercial purposes.