Propell National Valuers

1. propell market
SEPTEMBER | 2008
Melbourne Showing Resilience
Despite Slight Falls
The effects of global financial markets and local uncertainty have had only a
marginal effect on property in Melbourne compared to other states. For the
three month period to September 2008, there were 10,646 building
approvals (up 2.09% from the June quarter, and reversing a negative trend)
and 35,389 finance commitments (down 9.88%). This compares favourably
to a decrease nationally of 5.78% and 9.18% respectively.
The average mortgage size was $298,997 which is a 2.27% decrease over the previous
quarter of $305,943 with over 50.3% of mortgages being held on a variable rate basis.
• 10,646 building
Supporting the state’s housing market are strong labour market conditions, moderate
approvals for the
wages growth, population growth of 1.49% annually and a low rental vacancy rate of
quarter
1.1%. Rent increases vary dependant on the area with good growth shown both in the
inner city due to work proximity and regional areas as new infrastructure projects draw
• 9.88% decrease in people out of the main metropolitan centre.
housing finance
Victoria’s strong labour conditions have continued into 2008 however the unemployment
commitments
rate increased to 4.4%, up from 4.3% in June. Most of this could be attributed to the heavy
weather being experienced by the manufacturing sector, especially the motor vehicle
• 0.35% decrease in industry as domestic demand falls in response to high fuel prices.
house prices for
quarter, 5.80% increase
With sale activity dropping slightly, metropolitan house prices have decreased by only
year-to-date
0.35% suggesting that
underlying demand and
• Price growth falling
market fundamentals are still
slightly during quarter
strong. The median
but rental rates metropolitan house price for
remaining strong September 2008 was
$448,313. This represents an
increase of 5.80% since
September 2007. The
Melbourne area is still reasonably affordable and is attracting first home buyers and
investors alike. Rental increases are improving yields at the lower end although high end
properties are laying idle with some rents unaffordable.
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 quarter varied from 48.4% in
Portsea through to 34.6% in Hughesdale for houses, and 49.8% in Burnley to 30.6% in Box
Hill for units, with evidence showing that the bottom end of the market is most active.
Properties located within 15 kilometres of the CBD or near waterfront performed the best.
While Victoria has a reasonable level of affordability at the moment, a renewed surge in
house prices will start to see affordability deteriorate quickly, especially with the price
growth experienced recently.
The table below illustrates the top 10 Melbourne growth suburbs based on median house • Portsea top performing
and unit prices for the September quarter 2008 year-to-date.
suburb with growth of
Top 10 Growth Suburbs 48.4% for houses and
Burnley 49.8% for units
Suburb Median Q3 Median% Suburb Median Q3 Median %
(Houses) 2008 Change (Units) 2008 Change
• Bottom end and mid-
Portsea $1,380,000 48.4 Burnley $350,500 49.8
range properties
West Melbourne $832,500 45.7 Gardenvale $329,125 41.0
experiencing highest
Eaglemont $1,400,000 44.6 Ashburton $655,000 37.3
growth. Waterfront and
Brooklyn $408,000 42.9 Dromana $342,500 35.6
CBD proximity
Waterways $555,000 42.3 Caulfield East $316,500 34.1
producing best results
Shoreham $785,000 40.8 Murrumbeena $349,375 32.7
Essendon North $584,000 37.4 Garfield $275,000 32.5
Braybrook $337,500 35.0 West $270,000 31.4
Footscray
Clayton $533,000 34.6 Huntingdale $335,000 31.1
Hughesdale $656,000 34.6 Box Hill $380,000 30.6
Source: RPData
Melbourne’s house price has increased by 5.80% for the year to September, while unit
price growth has been 4.16%. This compares to South Australia(10.84% and 11.46%),
Sydney(-1.48% and –1.18%), 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—Melbourne

3. Propell National Valuers | Residential Overview | SEPT 2008
Residential Rental Market
In the September quarter vacancy rates remained steady at 1.1%, with highest demand
still in the Dandenong, Latrobe and Melbourne CBD areas. The average weekly rent for a
two-bedroom unit in Melbourne is $315 per week. This is an increase of 3.27% over the
quarter and 16.66% for the year-to-date. The average weekly rent for a three-bedroom
house in Melbourne is $330 per week, an increase of 3.12% and 17.78% annually.
Current tenant demand for rental properties in Victoria is high with an estimated 4000
properties from a potential pool of 45,000 available for rent creating intense competition.
The graph below illustrates the average residential rent growth in three bedroom houses
and two bedroom units in the Melbourne metropolitan area over the last two years.
• Vacancy rate remains
steady at 1.1%
Source: Office Of Housing Victoria
• Intense competition for
rental properties The table below highlights median rents by statistical region for the September quarter
2008 while the table over the page highlights the median rent for a particular property
type for the September quarter 2008.
• Gippsland statistical
region has highest
Median rents by statistical region September Quarter 2008
quarterly rent increase
of 5.2%
Statistical Region Median Rent p/w Qtr % Annual
Change % Change
Melbourne $360 1.4% 9.9%
Mornington $250 2.0% 10.1%
Peninsula
Barwon $230 2.2% 10.2%
South West
Gippsland $200 5.2% 11.8%
Goulburn $195 2.6% 4.8%
Loddon-Mallee $210 2.4% 5.9%
Central Highlands $200 2.5% 8.3%
Suburb Sales Q1
2007 Median Q1
2007 Sales Q1
2008 Median Q1
3 | QUARTERLY RESIDENTIAL REPORT—Melbourne

4. Propell National Valuers | Residential Overview | SEPT 2008
Median weekly rent by property type
Median Rental p/w Qtr % Annual %
Change Change
Melbourne
1 Bed Flat $245 2.0% 9.3%
2 Bed Flat $315 3.2% 16.6%
3 Bed Flat $330 1.5% 12.3%
3 Bed House $330 3.1% 17.7%
4 Bed House $360 1.4% 13.7%
Source: Office of Housing Victoria
Population
As at December 2007, Melbourne Statistical Division had a population growth of 1.65%,
the fifth highest in the country behind Darwin(2.65%), Perth(2.32%) and Brisbane(2.04%). • Highest number of
This represented a total of 61,719 people, or the equivalent of 1,186 per week. Victoria as births recorded for a
a whole grew by 1.5% or 76,906 people. The largest growth (aside from Melbourne)
occurred in the Statistical Subdivisions of Barwon(1.34%), Gippsland(1.28%) and East
quarter (9,938)
Gippsland(1.21%)
• Net interstate migration
Overseas migration and a significant increase in the fertility rate has seen Victoria’s decreased 1,426 for De-
population growth rate increase noticeably, with the highest number of births ever
cember quarter
recorded in one quarter with 9,938 births recorded. The next highest was 9,598 in the
March quarter of 1990.
• Communications sector
The population gains through overseas migration and natural increase were partly offset leading the way in em-
by the loss of people through interstate migration. In the year to December 2007, 3,089 ployment growth of
people left the state, (1,426 in the December quarter) this is 151% more people than the
previous year. 59.3%
Victoria’s Gross State Product for the year to December 2007 was 2.7%, with a State Final
Demand of 2.4%. This contributed to Total Domestic Demand by 0.6%. The third highest
behind Queensland (1.4%) and New South Wales (0.8%). The state has continued to build
on its strengths in the communications sector while 11 of the top 17 industry sectors
experienced growth throughout the year. Communications Services experienced the
fastest overall growth increasing by 59.3% followed by Construction (24.0%) and
Accommodation, Cafes and Restaurants (11.4%). Electricity, Gas and Water recorded the
largest decline in workplaces, decreasing by 16.8%. This was followed by Agriculture,
Forestry and Fishing (9.5%) and Manufacturing which declined by 9.2%. In the year to the
end of the March quarter 2008, the total growth in petroleum exploration expenditure in
Victoria was $22.8 million. This is up by 148% from the previous year and was the highest
of all the states and territories behind Western Australia.
4 | QUARTERLY RESIDENTIAL REPORT—Melbourne

5. Propell National Valuers | Residential Overview | SEPT 2008
Major Projects
Victoria is experiencing a wave of construction activity in the form of road and
transport infrastructure as well as public amenity infrastructure. Recent projects in
construction phase include:
The Melbourne Convention Centre: Due to be open for business in early 2009
the $1.4 billion development has achieved a 6 star environmental rating from the
Green Building Council of Australia. The centre will feature a 5,000 seat plenary
hall (that can be divided into 3 separate areas all with main stage visual), a 5 star
Hilton hotel and office tower, premium brand homemaker retail complex and a
revitalised maritime precinct. The centre already has 25 bookings before opening.
The Melbourne Rectangular Stadium: Expected to be complete in late 2009,
the $267.5 million stadium will seat 31,000 people and will be home to the
Melbourne Storm, Melbourne Victory, Melbourne Football Club, the Victorian
Rugby Union, the Victorian Olympic Council, Olympic Park Sports Medicine Centre
and Tennis Victoria. Built using a special “bio-frame” roof design similar to the
Buckminster Fuller geodesic dome, the centre is also environmentally friendly with
water catchment in the roof, low energy fittings, natural light and air flow aspects
and will use only plantation and recycled timber.
• Major road, infrastruc- North East Rail Revitalisation Project: A $501 million project to convert 200
kilometres of broad gauge track to standard gauge to benefit passenger and
ture and community freight services between Melbourne and Sydney. One of a number of projects by
projects lifting con- the Department of Transport to encourage the use of public transport over
struction activity vehicular transport.
• Department of Trans- FOR MORE INFORMATION
port in concerted push Summary CONTACT
to encourage public
Matthew Quinn
transport
Despite a fall in house prices for the quarter, building Managing Director VIC
approvals were up and finance commitments showed AAPI, CPV
an improvement although are still in the negative.
mquinn@propellvaluers.com
This is a good sign that the Melbourne market is
maintaining its resilience to the current financial diffi- 03 9674 9000
culties facing the nation. Rental increases have
slowed although the vacancy rate remains steady. Aaron Parker
Competition is still fierce for available properties.
Research Manager
Affordability issues are still driving sales at the lower
end of the market and well located CBD and water- aparker@propellvaluers.com
front properties have experienced the most growth.
Melbourne’s future growth looks set to be built from OR CALL
the bottom and lower-middle end of the market up.
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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—Melbourne