Disclaimer

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Disclaimer

• This presentation is not investment advice. It is
  only intended to inform and illustrate. Persons
  investing in real estate should obtain
  professional financial and taxation advice before
  buying a property. Sources of information
  contained in this presentation are believed
  credible, however, AIC cannot guarantee their
  accuracy. AIC takes no responsibility for errors
  or omissions contained in this presentation and
  it disclaims any liability for any loss or damage
  incurred by any person for a reliance on any part
  of the contents of this presentation.

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AIC PROPERTY MARKET UPDATE

• Economic factors
• Review national property situation
• Review state by state
• Property Watch Lists
• NSW in depth
• Property assistance and references

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Market Facts

• AUS Reserve Bank Interest Rate 7.00
• Average variable loan 8.8
• Average growth per year (houses) over 10 years
  10
• Had significant stock market volatility for past
  6 months
• Commodities such as gold, oil and wheat at high
  prices
• Inflation at 3.5
• 5,000,000 registered mortgages

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Housing Factors

• Australia experienced its biggest annual
  population increase in 4 decades in 06/07
• Additional 315 000 people in 06/07 1.5
  increase
• In 06/07, housing construction projects dropped
  4
• Interest rates are rising
• Rents are on the rise

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Darwin 93 386.5k

• Price growth
• from end of
• 2002 to Jun 07
• for a 3 bed house
• Mid 07
• median house price

Brisbane 99 411.5k
Perth 125 511k
ACT 55 431K
Sydney 16 572
Adelaide 69 335k
Melbourne 53 439k
Hobart 132 335k
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MEDIAN HOUSE PRICES to Dec 07
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RENTALS medianG rental increase last 12
monthsV vacancy rate
Darwin 410 G 8 V 4.6
Brisbane 320 G 10 V 1.5
Perth 320 G 23 V 1
Sydney 400 G 14 V 1.5
Adelaide 280 G 8 V 0.5
ACT 400 G 18 V 1.6
Melbourne 320 G 16 V 1.7
Hobart 280 G 8 V 2.3
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VACANCY RATES/ RENTAL YIELD

• Adelaide - .5 4.28
• Perth 1 4.26
• Sydney 1.2 4.02
• Brisbane 1.5 4.19
• Canberra 1.6 4.72
• Melbourne 1.7 3.92
• Hobart 2.3 4.52
• Darwin 4.6 5.78

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Home Loan Affordability

• ACT 20.6
• NT 22.3
• SA 33.2
• Tas 34.2
• Vic 34.5
• WA 34.9
• Qld 37
• NSW 38.5
• Australia 36.2

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State by State Review/ Watch List
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WA

• Mdn house - 508000
• Growth over past year 1.7
• Fundamentals
• Resource boom
• Poor Affordability due to accelerated price
  growth
• Overheated? Perth
• Other areas Bunbury, Geraldton, Broome

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WA Watch List

• Geralton Mining infra
• Broom - Tourism
• Bunbury Equal highest migration in Aust
• Mandurah fastest growing regional cities in
  Aust
• Rockingham affordability, coastal, rail opening
  
• BC Recommendation Hold/Sell

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SA

• Mdn house - 400 000
• Growth over past year 20
• Fundamentals
• Infrastructure
• Affordability residential and commercial
• Employment Defence, Resources and Transport

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SA Watch List

• Semaphore Park Seaside suburb, infra, Port Adl
• Victor Harbor Tourism, fisheries ag
  industries
• Christies Beach Affordable beachside loc
• Enfield Affordability, high clearance rates,
  loc city
• BC Recommendation Buy

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QLD

• Mdn house - 425000
• Growth over past year 20.1
• Fundamentals
• Infrastructure - 66 billion 2005 - 2015
• Demographics continuing migration (esp o/s)
• Affordability Defence, Resources and Transport

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Qld Watch List

• Bowen Tourism and infra
• Beenleigh new homebuyers, 1st time investors
• Townsville Infra, Defence, Port
• Hervey Bay Growth, sea change, Infra spending
• Gladstone Infrastructure, affordability
• BC Recommendation - Buy

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Vic

• Mdn house - 463000
• Growth over past year 25.2
• Fundamentals
• Infrastructure projects
• Demographics skilled migration
• Pressure on rental properties
• Rentals within 10km of CBD .07 vacancy. 25 yr
  low
• Auctions 30 000 in 07. 82 clearance rate.

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Vic watch list

• Werribee Ind, retail and tech precincts growing
• Docklands Unit development fully realised in
  2020
• Anglesea Western Ring Road construction
• Bacchus Marsh Deer Park Bypass 35 min CBD
• Port Arlington Median 255k, beach views CBD
• BC Recommendation - Buy

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TAS

• Mdn house - 280 000
• Median rental
• Growth over past year 11.3
• Fundamentals
• Tourism
• Affordability Retirement, Aged care

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Tas Watch List

• Bicheno Sea change, sea views, affordability
• Zeehan Mining
• Primrose Sands Affordability, sea change, CBD
  50 min
• Lewisham 2 acre blocks seaside, affordability
• BC Recommendation Hold

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NT

• Mdn house - 444 000
• Growth over past year 5.3
• Fundamentals
• Resources
• High rental yields - over 5
• Affordability may be a constraint on growth

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NT Watch list

• Fannie Bay affordability, long term growth
  loc
• Karama Affordability, median 231k
• Ludmilla proximity to Darwin CBD, older style
  housing
• Millner Undervalued at its median due to loc
• BC Recommendation - Hold

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ACT

• Mdn house - 506000
• Growth over past year 14.6
• Fundamentals
• Public Service
• Migration

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ACT Watch List

• Evatt undervalued, Gungahlin Dve Ext
• Narrabundah Undervalued compared to
  neighbouring suburbs
• Weetangera Access to CBD, large blocks
• BC Recommendation - Hold

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Supply and Demand

• ANZ Bank predicts by 2010, Aust will have an
  undersupply of over 200 000 dwellings
• Limited land release
• Construction costs are too high
• Medium density development out of the ground
  costs 25-30 more than the market will pay
• Current tax system challenging for developers
• So what

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RENTAL INCREASES

• On the way up and will continue
• Cash flow positive opportunities
• Lock in long leases if already renting
• Opp for cash cows 2b Res, students, travelers
• 2 bed apartments, 3 bed/2 bath

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Sydney and NSW Snapshot
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Sydney

• Population of 4.1 million
• Largest city in Australia
• One of the largest cities in area in the world
• Major investment and business hubb
• Divided into several regions
• Different areas have differing capital growth
  rates

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Regions

• Eastern Suburbs Bondi, Vaucluse, Paddington
• Lower North Shore Mosman, Manly, Neutral Bay
• Upper North Shore Beacon Hill, Dee Why, Frenchs
  Forest
• Northern Beaches Palm Beach, Whale Beach,
  Avalon
• Inner West Leichardt, Balmian, Rozelle, Burwood
• North West Windsor, Box Hill, Richmond
• South West Campbelltown, Ingleburn, Minto
• South Cronulla, Sutherland, Miranda, Como
• City Fringe Surry Hills, Darlinghurst,
  Chippendale, Ultimo

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Sydney Market

• Median House price - 553 000
• Highest for 4 years
• Up 5 since the year to Sep 07
• Auction clearance rates 56 in Dec 07
• Number of listings to more than 1600 highest
  since end of 03
• Average days on market Sydney 87 days (6
  month decrease)
• Average private treaty discount 6.01 (6 month
  decrease)
• 100 suburbs over 1M median
• Rental median 400 a week for 1st time. 14
  increase to Sep 07

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Sydney Land Values
Herron Todd White API Nov 2007
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NSW Highest Median growth For last 12 months

• Hyland Park - 61.5 / mdn 315k Mid North Coast
• Haywards Bay / 60 - mdn 380k Lake Illawarra
• Potts Point / 53 - 1.162M Sydney Metro
• Mulgoa / 51.5 - mdn 591k - Penrith
• Morisset / 48.7 - mdn 394k Lake Macquarie

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Sydney Mortgage Belt

• Fairfield/Liverpool
• median Sep 2007 361k (-14.2) from 2003
• House default increase over last 3 years 270
• Canterbury/Bankstown
• Median Sep 2007 489k (-8.8) from 2003
• House default increase over last 3 years 332
• Central Western Sydney
• Median Sep 2007 480k - 1.2 from 2003
• House default increases over last 3 years 447

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Sydney Stayers for the past 10 years 95-05
(consistent growth)

• North St Marys - 255 000 - 18.6
• Holsworthy - 375 000 15
• Bonnyrigg Heights - 386 000 13.5
• Busby - 272 000 13.3
• Tahmoor - 290 000 13
• Glen Alpine - 498 000 14.1

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Sydney Now!
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Watch List

• East Queanbeyan Affordability, rec areas, CBR
• Surry Hills Loc, undervalued
• Penrith growth centre, enhanced development
• Ballina/Yamba Infra improvements, below 03/04
• Newtown gentrification, Affordability, Uni and
  Hosp

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Sydney Property Clock

• Australian property Institute
• Respondents see residential property in Sydney
  as having the greatest growth potential, then to
  a lesser extent Melbourne and then Brisbane.

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Cycles

• The only lesson history teaches man is that it
  keeps on repeating itself George Santayana
• History repeats W.D. Gann

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Databases

• Residex future growth, demographics
• RPData property comparisons, demographics
• Homepriceguide.com.au property comparisons
• Realestate.com property search
• Domain.com.au property search
• Hotspotting.com.au spots to buy
• Cannex.com.au best mortgages

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Recommended Reading

• Australian Property Investor Magazine 8.95
• Australian Financial Review
• Saturday Newspapers Domain, Courier Mail etc
• Grow a Multi-million Dollar Property Portfolio
  (Yardney)
• 10M Property Portfolio in 10 yrs (Spann)
• How to Create an Income for Life (Lomas)
• Ultimate Guide to Real Estate (McGrath)
• Secrets of Property Millionaires Exposed
  (Beaumont)
• Untold Wealth (John Fitzgerald) Program
• Renovation Kings Program/seminars

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SUMMARY

• Property investment is still an excellent
  investment in Australia, especially for the long
  term
• Average capital growth for houses in Australia in
  the past 10 years is more than 10
• Historically, property has demonstrated good
  returns after bourse corrections
• Investment properties potentially providing
  higher yields

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Backup slides
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87 Crash - SPI

• High 29/9/87 2387.5 points
• Low 11/11/87 1054 points
• 12 months after crash low 11/11/88 154546.5
  increase from low
• 9 years to pass 87 high (14/10/96 2392 points)

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1987 Crash - Property

• Aust biggest property boon occurred in the late
  80s after the 87 crash
• House prices increased by 56 over 2 yrs between
  June 87-June 89 (Int rates between 15.5-13.5)
• Almost every time there has been a stockmarket
  crash, Aust residential properties have increased
  in value

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AUST/US interest rate comparison

• 550k AUD house 20 440k
• Aust 8.8/440k 38 720
• US 3.5/440k 15 400
• Difference of 23 320 (449 a week)

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Affordability

• 60 000 Avg annual wage in NSW
• X 30 18 000. 8.2 x 210k 18 000
• 60 000 (6k25.5k21k52500)
• 52500 - 18000 34000/52 weeks653
• House 262k 20 210k
• Assumptions SD, Deposit, holding/purch costs
• Average mortgage - 262k (11th rate rise H - July
  96)
• House value 330k

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Contemplating Investing in Property

• What can you afford
• What is your profile (risk, time, assets,
  cashflow)
• What is your property preference
• Research establish value and opportunity
• Negotiate dont be emotional
• Ascertain exit strategy prior to negotiating

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Selection criteria to invest

• Owner/occupier rate of 70 or more in suburb
• Close proximity to private schools
• Within 10km to CBD
• Within 500m of public transport
• Within 1km of recreation areas

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Top 5 Growth Areas in Australia

• QLD - Prince Henry 49.6, 15.5 avg, 600k,Y
  1.4
• QLD Amamoor - 49, 20 avg, 375k, Y 4.2
• QLD Collinsville 44.4