Propell National Valuers

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SEPTEMBER | 2008
Canberra Starts To Feel The Weight Of
Affordability
Canberra’s September quarter 2008 has highlighted the pressure of affordability that
has been building since early in the year. In new home activity there were 680
building approvals which is 5.42% up on the previous quarter (although significantly
lower than the 32.47% of last quarter) while housing finance commitments were
down 6.14%, an improvement on the last quarter. This compares to a decrease nationally
of 5.78% and 9.18% respectively. Some caution needs to be observed with the above
figures due to the relatively small number of transactions that take place in this market.
• 680 building approvals
for the quarter. 5.42% As the country’s capital, Canberra’s main employment sectors are Government
up on June 2008 Administration and Defence which have both had strong growth throughout the quarter.
The public sector however has been ear-marked for spending reductions which will have
• 6.14% decrease in an effect on employment figures. Population growth was 1.69% annually and there is a
housing finance low rental vacancy rate of 1.1%. Rent increases have been moderate to strong across all
property types and it would appear that rent growth (although slowing) will outpace price
commitments.
growth.
• 2.00% decrease in
house prices for Canberra’s strong labour conditions have continued into 2008 although the
quarter, 2.73% growth unemployment rate increased slightly to 2.9% from 2.7% registered in June. The
year-to-date importation of skill sets in the private sector through migration could potentially offset the
withdrawal of public sector numbers recently flagged by the Government.
• Canberra is an
attractive market for Canberra house prices have decreased
investors looking for by 2.00% for the quarter showing the
improved yields first solid decline since December 2007
and suggesting the beginning of a
downward trend. The median house
price for September 2008 is $487,798.
This represents an increase of 2.73%
since September 2007. Affordability is
now keeping first home buyers out of the market with moves such as the increasing of
land releases to 3,470 lots (up from 3,200 originally and anticipated at 15,000 over the next
5 years) and interest rate reductions having little effect so far.
1300 VALUER Property Intelligence for today and tomorrow

2. Propell National Valuers | Residential Overview | SEPT 2008
House and unit price growth in the top 10 suburbs for the year-to-date varied from 46.4% in
Forrest through to 17.5% in Weetangera for houses, and 45.8% in Farrer to 17.2% in Holt for
units, with evidence showing that properties near the CBD and outer suburban areas had the
most growth. Deteriorating affordability saw activity increase in the fringe suburbs and
properties located near major transport routes also did well. While rental growth has eased,
investors have still been active in the higher yielding suburbs. The diversity of suburb
locations and variety of product type in Canberra (not to mention the fact that property is
held on a leasehold basis in this market) has lead to disparity in house price growth. While • Forrest top
the general market has only fallen slightly at this stage, and some areas have done quite well
performing suburb
over the year-to-date as detailed below, there is evidence of 6% falls in the mid to lower
with growth of 46.4%
range and up to 15% falls in the top end product type in recent months.
for houses and Farrer
The table below illustrates the top 10 Canberra growth suburbs based on median house and
unit prices for the September quarter 2008 year-to-date. with 45.8% for units
Top 10 Growth Suburbs
• Rental growth set to
Suburb Median Q3 Median% Suburb Median Q3 Median%
(Houses) 2008 Change (Units) 2008 Change
be the dominant
Forrest $2,160,000 46.4 Farrer $358,000 45.8
factor for 2008-09
Yarralumla $1,000,000 24.2 Mawson $387,000 41.2
Isaacs $884,000 22.8 Kaleen $409,000 34.1
Scullin $420,000 20.8 Pearce $397,500 32.5
Banks $540,000 20.3 Hughes $240,000 29.7
Lyneham $550,000 19.6 Campbell $300,000 23.5
Bruce $595,000 19.0 Dickson $380,000 22.6
Dickson $535,000 18.9 Evatt $358,500 21.5
Fisher $472,500 18.7 City $415,000 20.3
Weetangera $622,500 17.5 Holt $322,250 17.2
Source: RPData
Canberra’s house price has increased by 2.73% for the year to September, while unit price
growth has been 7.64%. This compares to South Australia(10.84% and 11.46%), Melbourne
(5.80% and 4.16%), Brisbane(3.66% and 1.73%), Darwin(12.89 and 10.34%), Perth(-4.31% and
1.26%), Hobart(9.94% and –7.23%), and Sydney(-1.48% and -1.18%)
Source: RPData
2| QUARTERLY RESIDENTIAL REPORT—Canberra

3. Propell National Valuers | Residential Overview | SEPT 2008
Residential Rental Market
In the September quarter vacancy rates increased to 1.1%, from 1.0% in June 2008. The
average weekly rent for a two bedroom unit in Canberra is $385 per week. This is an
increase of 1.31% over the quarter and 5.47% for the year-to-date. The average weekly
rent for a three bedroom house in Canberra is $410 per week, an increase of 1.23% and
5.12% year-to-date.
Current tenant demand for rental properties in Canberra is strong although rents are
considered by some to be too high, which is reflected in the low growth this quarter.
Rental distress is still evident in the marketplace and people are looking outside the city
centre for value.
The graph below illustrates the average residential rent growth in three bedroom houses
and two bedroom units in the Canberra area over the last two years.
• Vacancy rate increases
to1.1% for quarter
• Competition for rental
properties strong and
Source: REIACT
rental stress evident
• Yields on houses at The table below highlights median rents within the Statistical Division of Canberra for the
4.71%, units 5.60% September quarter 2008. These figures represent the average of all house and units
within the Division. The gross rental yield figure is also shown.
Canberra Statistical Sept-08 Sept-07 Qtr Yearly Gross
Division % Change % Change Rental
Yield
Houses $410 $390 1.23% 5.12% 4.71%
Units $385 $365 1.31% 5.47% 5.60%
Source: REIACT
Suburb Sales Q1
2007 Median Q1
2007 Sales Q1
2008 Median Q1
2008 Median % Change
3| QUARTERLY RESIDENTIAL REPORT—Canberra

4. Propell National Valuers | Residential Overview | SEPT 2008
Population
As at December 2007, The Canberra Statistical Division had a population growth of 1.69%,
the fourth highest in the country behind the Statistical Divisions of Darwin (2.65%), Perth
(2.32%) and Brisbane (2.04%). This represented a total of 5,633 people or the equivalent of
108 people per week. The ACT and Balance as a whole grew by 1.69% or 5,640 people.
The largest growth continued to occur in the Statistical Subdivisions of Gungahlin-Hall
(7.10%), North Canberra(2.11%) and Belconnen(1.57%) with a decrease in Tuggeranong
(0.01%) and a low in Woden Valley(0.19%)
Net Natural Increase to December 2007 decreased from 836 to 766(9.1%) compared to
September 2007, while Net Interstate Migration decreased significantly by 62% with 222
people leaving the state as opposed to 587 the previous quarter. Net Overseas Migration
was also low at only 53 arrivals compared to 211 the previous quarter. The ACT is not
traditionally a state that attracts a lot of overseas migrants with most of the state’s growth
being achieved through natural increase and the attraction of government employment
position from interstaters. In terms of the natural increase and its relation to property
growth, an emerging trend has been the number of local youth moving into the property
• Canberra Statistical
market after leaving home. This trend has been increasing lately and is expected to
Division has population
continue for some years. The development of new suburbs and the opportunities for
employment are keeping many of the younger generation in the local area instead of increase of 1.69%
leaving town for opportunities elsewhere.
• Net interstate migration
The Australian Capital Territory’s Gross State Product for the year to December 2007 was
decreases significantly
5.0% (above the average of 3.6%), with a State Final Demand of 5.6%. This contributed to
Total Domestic Demand by 0.2%.
• Canberrans work fewer
According to the latest ACT Stats (1334.8) release of December 2007, more Canberrans hours than national
are participating in the labour force but are working fewer hours. Full-time employees in
counterparts
the ACT worked an average of 42.4 hours per week, lower than the national average of
44.1 hours per week. Part-time employees worked an average of 18.4 hours per week
which is on-par with the national average. Approximately three quarters (73%) of the
population aged 15 years and over participated in the labour force. This was the highest
of all states and territories compared to the national average of 65%. Women(67%) were
twice as likely as men(33%) to participate in part-time employment.
In a not-so-surprising twist, it would seem that residents of the ACT live longer than the
rest of the country. A boy born today is expected to live to the age of 79.9 while a girl
could expect to live to 84. This compares to the national average of 75.5 and 83.3
respectively.
4| QUARTERLY RESIDENTIAL REPORT—Canberra

5. Propell National Valuers | Residential Overview | SEPT 2008
Major Projects
The 2008-2009 ACT budget (The Building The Future Program) outlined a massive
investment in Capital Works infrastructure including:
Capital Works Investment
$300 million start up investment in the creation of a new health system
$200 million to boost existing capital works
$250 million on roads and transport
$100 million on urban amenities
$100 million on climate change initiatives
$50 million on Information and communications technology
Health
$90 million—Women’s and children’s hospital at Canberra Hospital
$23.6 million—Adult acute mental health unit
$18 million—New community health centre at Gungahlin
Transport
$21 million—Upgrade of Tharwa Drive and Airport roads
• Over $1 billion outlined $49.5 million—ACTION bus fleet replacement
for Capital Works $22 million—Duplication of Athllon Drive and Flemington Road
programs for 2008-09 $40-$50 million on the duplication of Gungahlin Drive providing better
access to emerging suburbs
• The “Building The
Future” program will be FOR MORE INFORMATION
Summary CONTACT
carried out over 5 years
Jeff Whitman
Canberra’s September quarter has confirmed the
Manager ACT
June quarter predictions that house prices have
peaked, rental growth is slowing and affordability is AAPI, CPV
beginning to bite. Reductions in interest rates and
jwhitman@propellvaluers.com
release of land parcels have not produced any
02 6257 7112
stimulus as yet (partly due to the long lead time
involved where the land is concerned) and whispers
of public sector spending reductions could produce
Aaron Parker
further stress in the region. Outer lying areas of
Research Manager
Canberra seem to be offering the best prospects for
investors due to high yields but lack of capital growth aparker@propellvaluers.com
in the near future could see them sitting on the
OR CALL
sidelines for a while. First home buyers are priced out
of the market and local and global economic
1300 VALUER
problems are not making it any easier for them to get
(1300 825 837)
in. There is some support however from local youth
buying in to the market (maybe with parental
assistance) after moving out of home.
Propell National Values does not give any warranty in relation to the accuracy of the information contained in this report. If you intend to rely upon the information
contained herein, you must take note that the information, figures and projections have been provided by various sources and have not been verified by us. Whilst all
care has been taken in the preparation of this report, we have no belief one-way or the other in relation to the accuracy of such information, figures and projections
contained herein. Propell National Valuers will not be liable for any loss or damage resulting from any statement, figure, projection or any other information that you rely
upon that is contained in the material. COPYRIGHT - Propell National Valuers 2008
5| QUARTERLY RESIDENTIAL REPORT—Canberra