Propell National Valuers

1. propell market
SEPTEMBER | 2008
Affordability Still Pressuring The
Sydney Market
The New South Wales September quarter 2008 has once again fallen in to
negative territory. In new home activity there were 6,274 building approvals
which is 15.12% down on the previous quarter (the second largest fall in the
country behind the Northern Territory) while housing finance commitments
were down 9.41% for the quarter. This compares to a decrease nationally of
5.78% and 9.18% respectively.
The average mortgage size was $400,879 which is a 0.71% decrease over the previous
• 6,274 building
quarter of $403,784 with sale numbers increasing slightly. Over 50.3% of mortgages are
approvals for the being held on a variable rate basis. Underpinning the state’s weakening housing market
quarter. 15.12% down are moderate labour market conditions, low wages growth and population growth of only
on June 2008 1.21% annually. Vacancy rates have increased slightly from 1.0% to 1.2%. Rent increases
have eased slightly across all property types and geographical areas however a worrying
• 9.41% decrease in trend of increasing mortgage defaults could potentially put upward pressure on rents and
housing finance downward pressure back on vacancy rates.
commitments.
New South Wales’s moderate labour conditions have continued into September with the
• 0.39% decrease in unemployment rate increasing to 4.8%, up from 4.7% registered in June. The large gap
house prices for between supply and demand for property could see the construction industry outperform
quarter, 1.48% year-to- other sectors provided high developer taxes and charges are addressed and investor
date growth confidence improves.
Metropolitan house prices
• Sydney still struggling have decreased by 0.39% for
to present an attractive the quarter which is an easing
market for investors from recent declines. The
and first home buyers median house price for
September stands at
$540,770. This represents a
decrease of 1.48% since
September 2007. Affordability
is still the major issue for
owner occupiers and investment returns are still not convincing investors to buy.
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 42.8% in
Watsons Bay through to 25.1% in Dee Why for houses, and 31.5% in Tamarama to 15.1% in
North Turramurra for units, with evidence showing that the top end and waterfront areas
of the market are most active while the mid and lower ranges have levelled off. This is due
in part to self-managed super funds purchasing property at the top end and the
affordability issue holding others out of the market. Latest figures show a massive 42.6% of
family income is required to meet average loan repayments in New South Wales.
• Watsons Bay top
The table below illustrates the top 10 Sydney growth suburbs based on median house
and unit prices for the September quarter 2008 year-to-date.
performing suburb with
growth of 42.8% for
Top 10 Growth Suburbs
houses and Tamarama
31.5% for units
Suburb Median Q3 Median% Suburb Median Q3 Median %
(Houses) 2008 Change (Units) 2008 Change
Watsons Bay $2,712,500 42.8 Tamarama $828,750 31.5
• Top end and waterfront
Bronte $2,555,000 40.4 Lane Cove $476,000 26.9
properties experiencing
West
Cammeray $1,337,500 37.9 Beaconsfield $526,000 26.0
highest growth.
Queens Park $1,640,000 36.1 Leichhardt $537,000 24.0
• 42.6% of family income
Pyrmont $759,000 35.5 Gordon $697,500 19.7
required to meet
Tamarama $4,000,000 30.1 Pyrmont $580,000 18.4
average loan
Darling Point $5,000,000 29.9 Arncliffe $349,000 18.3
repayments.
Waverley $1,340,000 29.2 Edgecliff $495,000 18.1
Cabarita $1,410,000 28.2 McMahons $595,000 16.7
Point
Dee Why $937,000 25.1 North Turra- $757,500 15.1
murra
Source: RRData
Sydney’s house price has decreased by 1.48% for the year to September, while unit price
growth has been –1.18%. 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%),
Canberra(2.73% and 7.64%), Hobart(9.94% and –7.23%), and Perth(-4.31% and 1.26%)
Source: RPData
2| QUARTERLY RESIDENTIAL REPORT—Sydney

3. Propell National Valuers | Residential Overview | SEPT 2008
Residential Rental Market
In the September quarter vacancy rates increased to 1.2%, up from 1.0% in June 2008.
The average weekly rent for a two bedroom unit in Sydney’s Inner Ring of suburbs is
$495 per week. This is an increase of 1.02% over the quarter and 15.11% for the year-to-
date. The average weekly rent for a three bedroom house in Sydney is $680 per week, an
increase of 1.49% and 16.23% year-to-date.
Current tenant demand for rental properties in Sydney is still extremely high with intense
competition for properties due to a general lack of supply. Increasing mortgage defaults
are adding to the level of competition for rental properties.
The graph below illustrates the average residential rent growth in three bedroom houses
and two bedroom units in the Sydney Inner Ring area over the last two years.
• Vacancy rate increases
to 1.2% for the quarter
• Intense competition for
Source: Housing NSW
rental properties with
mortgage defaults add-
The table below highlights median rents within the Statistical Division of Sydney for the
ing to competition
September quarter 2008 while the table over the page highlights the median rent for a
particular property type for the September quarter 2008.
• Sydney’s Outer Ring Median rents within the Sydney Statistical Division September Quarter 2008
(3 Bedroom House)
has highest rent in-
crease for the quarter of Area within Median Rent p/w Qtr % Annual
Statistical Change % Change
3.33% within the Statis- Division
Sydney SD $365 1.3% 10.6%
tical Division
Inner Ring $680 1.5% 16.2%
Middle Ring $450 1.1% 16.8%
Outer Ring $310 3.3% 10.7%
Rest of GMR $295 1.7% 9.2%
New South $305 1.6% 9.7%
Wales
Source: Housing NSW
Suburb Sales Q1
2007 Median Q1
3| QUARTERLY RESIDENTIAL REPORT—Sydney

4. Propell National Valuers | Residential Overview | SEPT 2008
Median weekly rent by property type (Sydney SD)
Median Rent p/w Qtr % Annual %
Change Change
Sydney
1 Bed Unit $355 1.4% 10.9%
2 Bed Unit $385 1.3% 13.2%
3 Bed House $365 1.4% 10.6%
4 Bed House $475 0.0% 10.4%
Source: Housing NSW
Population
As at December 2007, The Sydney Statistical Division had a population growth of 1.21%,
the third lowest in the country above the Statistical Divisions of Greater Hobart (0.93%)
and Adelaide (1.06%). This represented a total of 51,995 people or the equivalent of 999 • Sydney Statistical
people per week. New South Wales as a whole grew by 1.05% or 71,890 people. The
Division has third
largest growth continued to occur in the Statistical Subdivisions of Richmond-Tweed
lowest population
(1.31%), Hunter(1.11%) and South Eastern(1.02%) with declines in Far West(-0.38%) and
North Western(-0.29%) increase of 1.21%
The latest March release from the Australian Bureau of Statistics show that both the
• Net interstate migration
Natural Increase and Net Overseas Migration have decreased in the two quarters to
showing signs of
March 2008 by 6.35% (2,155 persons) and 17.08% (6,540 persons) respectively with little
prospect of reversing the trend in the short term due to the perceived stagnant state of recovery
the New South Wales economy. Most people coming to the country are not selecting to
reside in New South Wales. Offsetting this however, is Net Interstate Migration which
• Full-time employment
increased 2,484 persons or 14.03% for consecutive quarters indicating, among other
things, that affordability issues in other states are driving people back to New South decreasing while part-
Wales.
time e m ploy me nt
increasing
New South Wales’s Gross State Product for the year to December 2007 was 1.8% (below
the average of 2.9%), with a State Final Demand of 2.5%. This contributed to Total
Domestic Demand by 0.8%, the third highest in the country behind Queensland (1.4%)
and Western Australia (1.0%). There were 3,319,000 people employed in New South
Wales as at March 2008. The industries with the most number of employed persons were
Manufacturing (202,434), Construction(183,998) and Retail Trade(140,058). The industries
employing the least amount of persons included Mining(18,322), Arts and Recreation
(21,311) and Electricity, Gas and Water(23,079). One of the most notable changes in
employment statistics is the number of people in full-time employment which has
decreased to 69% in 2008 from 71% in 1998, while part-time employment has increased
from 22% to 27% over the same time period. In terms of the participation rate for
employment, female participation was at 55.6% (an 0.18% increase) while male
participation was at 60.0% (an 0.67% increase).
4| QUARTERLY RESIDENTIAL REPORT—Sydney

5. Propell National Valuers | Residential Overview | SEPT 2008
Major Projects
In December 2004, the New South Wales Government released a plan outlining the
future of land releases over the following 30 years in the North West and South West
of Sydney. The plan outlines expenditure of over $7.5 billion on roads, rail, bus
networks, education, health, recycled water and sewerage services linked to staged
land releases. Some of the early infrastructure projects being delivered are:
The Redevelopment of Barangaroo (Darling Harbour): A $2.5 billion renewal
of a 22 hectare port precinct on the western edge of Sydney’s central business
district. The project is expected to generate 30,000 jobs during the decade long
construction period. Supporting transport infrastructure could include new public
transport ferry wharves, bus stations and possibly light rail, while also providing a
significant foreshore park.
The Great Western Highway Upgrade: $85.3 million is expected to be outlaid
to upgrade and improve the link from the western corridor into the Sydney CBD.
Expected time savings for commuter travel are forecast to be 20 to 30 minutes.
Health : Health projects have received an injection of funds with $1.88 billion for
Sydney South West Health services (up from $78.7 million), $1.34 billion for
Sydney West Health services (up from $51.3 million) and $218.9 million for the
Children’s Hospital at Westmead (and increase of $9.6 million)
Stop Press
• Over $7.5 billion
At the time of publication (Nov 08) NSW had handed down a mini budget that
outlined for future
has curtailed public infrastructure spending and increased Land Tax. The
infrastructure projects
recent downward trend in interest rates and economic stimulus package,
linked to land releases including first home owner grant have yet to impact.
• $2.5 billion FOR MORE INFORMATION
Summary CONTACT
redevelopment of
Darling Harbour and The September quarter has seen little improvement
Peter Dorrough FAPI
foreshore underway in the housing market for Sydney although the
General Manager NSW / ACT
decline in house prices did ease slightly as did
vacancy rates. Affordability is still the biggest issue pdorrough@propellvaluers.com
and an emerging trend of mortgage defaults is a
02 9955 0305
worrying factor for the already stressed rental
market. A change of government has done little at
this point to instill any major confidence in the state
Aaron Parker
although it is still early days and it will take a while
to see if performance improves. State taxes are a Research Manager
disincentive for development and purchase and
aparker@propellvaluers.com
much needs to be done in this area to bring it in
line with recent changes in other states. Well
located, waterfront or CBD centric properties are
OR CALL
producing greatest growth while the mid range
stagnates.
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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—Sydney