Quarterly Review NOV11[1]

8/3/2019 Quarterly Review NOV11[1]

http://slidepdf.com/reader/full/quarterly-review-nov111 1/22

Quarterly Reviewrpdata.com

A quarterly review of the residential property market and the Australian economy

Released November 2011



The September 2011 quarter has seen the residential property market continue to slow, with all capital cities

now recording a decline in home values on both a quarterly and annual basis. Over the quarter, seasonally

adjusted and raw property values across the combined capital cities of Australia fell by ‐1.3 percent. Across

most of Australia there remains limited activity by consumers and this is being reflected by a number of key

indicators which are all showing low readings: consumer sentiment (although the index has improved overthe past three months), housing and lending finance commitments, building approvals, retail trade and the

volume of home sales transacting across Australia. While the resources sector is benefiting from strong

terms of trade, many other sectors have continued to struggle. As a result of these conditions together with

the uncertain economic conditions being recorded across the Europe and United States, the Reserve Bank

saw it fit to reduce official interest rates by 25 basis points at their November board meeting with the hope

that bringing rates back to a more normal setting would spur on some additional consumer spending and

confidence.

For the remainder of 2011 we anticipate that property market conditions will remain soft, with some regions

seeing further modest falls. In saying this, we don’t subscribe to the predictions that residential housing

values are about to tank; the market is still supported by limited new housing supply, above average levels of

population growth, relatively low unemployment, wages growth above inflation and strong lending andregulatory practices around home ownership.

Although values across the residential property market have fallen by ‐3.4 percent over the past year the

performance across the capital cities has varied significantly. Across the capital city markets, value declines

have varied from a ‐1.2 percent decline in values in Sydney to a ‐9.1 percent fall in Hobart home values.

Capital city home values have become more affordable in real terms over the last 12 months. Different

sectors of the market are showing quite varied performances with the most expensive suburbs actually

recording the greatest declines in property values which are well in excess of those recorded in the more

affordable suburbs. With housing market conditions soft it appears as if vendors have not yet adjusted their

price expectations sufficiently to meet the market. The average selling time for a house has increased to 56

days from 46 days last year and on average vendors are having to discount their initial asking prices by ‐6.4percent in order to achieve a sale compared to just ‐5.8 percent during the same period last year.

The number of newly advertised properties for sale and total properties for sale are both at levels well above

average as vendors continue to bring stock to the market at a time when there are few active buyers. The

result of these conditions is the heightened levels of vendor discounting and an increased time to sell

resulting in better negotiating conditions for purchasers.

From an economic perspective, Australia is still well positioned however, conditions don’t seem as rosy as

they did at the end of last year. Consumer sentiment shows that optimists outweigh pessimists (but only

just), housing finance commitments remain at low levels as do building approvals and retail trade is very

slow. The consumer sentiment data also highlights that most consumers don’t believe conditions will

improve over the coming year(s) with the forward looking indicators also relatively weak. As a result

consumers appear nervous and cautious. On the other hand, wages are growing at a level slightly above

inflation, unemployment is sitting at 5.2 percent, commodity prices remain high and our terms of trade

remain at extremely high levels.

Overall, the third quarter of 2011 has been characterised by continuing soft conditions within the residential

property market. Australia’s economy remains relatively strong however, consumers are still cautious and

continue to pay down their debt, largely shunning borrowed debt with lending finance growth benign and

debit cards much more popular than credit cards. For the remainder of the year we are forecasting negligible

property value growth with the potential for some further falls. The market continues to favour buyers

however, buyer demand remains relatively sedate. On the other hand, limited activity by first home buyers

and restricted new housing supply is likely to result in further rental growth across select capital cities, inparticular Sydney, Brisbane and Perth.

Report Summary



Property Market Overview 4Quarterly performance 4

Annual performance 4

Stratified Hedonic Index 4

Volumes 5

Sales by price point 5Effective supply 5

Rents and yields 6

Vendor discounting 6

Time on market 6

Capital City Performance 7Sydney 7

Melbourne 8

Brisbane 9

Adelaide 10

Perth 11Hobart 12

Darwin 13

Canberra 14

Economic Overview 15Consumer Sentiment 15

Gross Domestic Product 15

Interest Rates 15

Consumer Price Index (Inflation) 16

Components of Consumer Price Index 16

Retail Trade 16

Currency Exchange Rate 17

Unemployment Rate 17

Commodity Price Index 18

Population Growth 18

Housing Data 19Dwelling Commencements 19

First Home Buyer Finance Commitments 19

Value of Investment Finance 20

Volume of non‐refinance vs. refinance commitments 20

CPI Housing Sub categories 20

About RP Data 21

Disclaimers 22

Contents

DISCLAIMER

The information provided in this publication is current as at the publication date only. In compiling this publication, rpdata.com has

relied upon information supplied by a number of external sources. This publication is supplied on the basis that while rpdata.com

believes all the information in it is deemed reliable at the publication date, it does not warrant its accuracy or completeness and to the

full extent allowed by law excludes liability in contract, tort or otherwise, for any loss or damage sustained by subscribers, or by any

other person or body corporate arising from or in connection with the supply or use of the whole or any part of the information in this

publication through any cause whatsoever and limits any liability it may have to the amount paid to rpdata.com for the supply of such

information.

RP Data recommends that individuals undertake their own research and seek independent financial advice before making any

decisions.

© 2011 RP Data Ltd.



‐10.0%

‐5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Sep‐06 Sep‐07 Sep‐08 Sep‐09 Sep‐10 Sep‐11

Most affordable 20% Middle 60% Most expensive 20%

‐1.2%‐1.6%

‐3.4% ‐3.4% ‐3.7%‐4.4%

‐5.1%

‐6.1%

‐9.1%‐10.0%

‐8.0%

‐6.0%

‐4.0%

‐2.0%

0.0%

2.0%

Sydney Canberra Australian

Capitals

Adelaide Darwin Melbourne Perth Brisbane Hobart+

A n n u a l c h a n g e i n d w e l l i n g v a l u e

‐3.0%

‐1.0%

1.0%

3.0%

5.0%

7.0%

9.0%

S ep‐ 01 S ep ‐0 2 S ep ‐0 3 S ep‐ 04 S ep‐ 05 S ep ‐0 6 S ep ‐0 7 S ep ‐0 8 S ep‐ 09 S ep‐ 10 S ep ‐1

Most affordable 20% v Middle 60% v Most expensive 20%RP Data –Rismark Stratified Hedonic Home Value Index, All Dwellings, combined cap ci ties

p.4

Property Market Overview

Capital growth remains in the red but shows improvement over the

quarter

• Since home values reached a low point in December 2008 capital city

house and unit values have increased by a total of 13.6 percent and

10.6 percent beyond the pre Global Financial Crisis (GFC) peak

recorded in February 2008.

• Since recently peaking in December 2010, capital city dwelling values

have fallen by ‐3.6 percent to September 2011.

• Over the past 12 months, capital city property values have fallen by

‐3.4 percent.

• In comparison, capital city home values increased by 8.6 percent over

the 12 months to September 2010, highlighting a marked slowdown

over the past year.

• In the month of September 2011, property values across the

combined capital cities fell by ‐0.2 percent.

• Over the quarter, units (‐0.8 percent) have recorded a superior

performance to that of houses (‐1.6 percent). This result has also

been reflected over the last year, with units (‐1.1 percent)

outperforminghouses (‐4.1 percent).

Property values havefallen in each capital city over the past year

• Over the last year, capital city market performances have varied from

a fall in values of ‐9.1 percent in Hobart to a ‐1.2 percent fall in values

in Sydney.

• In comparison to the results for the end of September 2010 where

home values were up 8.6 percent, 2011 has been a much slower year

for capital growth in every capital city market.

• Sydney (‐1.2 percent) and Canberra (‐1.6 percent) have fared

comparatively well with values down by the lowest amount over the

past 12 months.

• Over the last quarter, every capital city market has recorded aproperty value fall with Darwin (‐0.3 percent), Adelaide (‐0.7 percent)

and Sydney (‐0.8 percent) showing the most resilience.

The weak performance of the premium sector continues to weigh

down the overall market• Over the last quarter and the last year the premium residential

markethas been the weakest performing sector.

• Over the 12 months to September 2011 the broad ‘middle market’

has shown the most resilience with values falling by ‐2.8 percent. In

comparison, the premium residential market has recorded value falls

of ‐6.4 percent and the most affordable suburbs have recorded a

value fall of ‐3.2 percent.

• Over the third quarter of 2011 all three sectors of the market have

recorded value falls however, the middle and most affordable

markets have recorded falls of just ‐1.1 percent and ‐1.3 percent

respectively compared to a value fall of ‐2.1 percent within the

premiumsector.

• The most expensive markets are likely to continue to be weigheddown by poor consumer and business sentiment, global economic

uncertainty and poorly performing equities markets which are likely

to dampen demand for all housing but premium housing in

particular.

Rolling quarterly change in RP Data‐Rismark Hedonic

Home Value Index – combined capital cities, all dwellings

Capital City Performance Annual change in dwelling values – year ending September ‘11

Source: rpdata.com ‐ Rismark



+ Hobart data is to August 2011



0

500

1,000

1,500

2,000

2,500

3,000

0%10%

20%

30%

40%

50%

60%

70%

80%

90%

Feb 09 May 09 Sep 09 Jan 10 Apr 10 Aug 10 Dec 10 Mar 11 Jul 11 Nov 11

A u c t i o n v o l u m e s

W

e i g h t e d a v e r a g e c l e a r a n c e r a t e

Number of auctions Clearance rate

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

J a n 0 7

A p r 0 7

J u l 0 7

O c t 0 7

J a n 0 8

M a y 0 8

A u g 0 8

N o v 0 8

F e b 0 9

M a y 0 9

S e p 0 9

D e c 0 9

M a r 1 0

J u n 1 0

O c t 1 0

J a n 1 1

A p r 1 1

J u l 1 1

O c t 1 1

M o n t h s o f s u p p l y

0

000

000

000

000

000

000

000

A ug ‐0 1 A ug ‐0 2 A ug ‐0 3 A ug ‐0 4 A ug ‐0 5 A ug ‐0 6 A ug ‐0 7 A ug ‐0 8 A ug ‐0 9 A ug ‐1 0 A ug ‐1 1

National 5 yr average

p.5


Transaction volumes levelling around 13 percent below average

• Our estimate of sales volumes show that sales activity has

stabilised over recent months with house and unit transactions

currently ‐13 percent below the five year average.

• Sales volumes have been trending lower since November 2009

after interest rates started to rise. With interest rates cut in

November and potential further rate cuts on the cards it will be

interesting to see if it results in an increase in transaction

volumes.

• We believe that sales volumes are currently at low levels due to a

number of factors namely: the 100 basis points worth of interest

rate increases experienced during 2010, housing affordability

constraintsand lower levelsof consumer confidence.

• Across the country, estimated sales volumes have remained

below average since March 2010.

• Estimated sales volumes for August 2011 are at similar to those

recorded 12 months ago.

Sales volumes – nationally

May‐01 to May‐11

Clearance ratesbelow 50 percent for 19 consecutiveweeks

• Across the combined capital cities, the success rate across properties

taken to auction is quite low with clearance rates below 50 percent

over 19 consecutive weeks to 13 November 2011.

• Clearance rates in 2011 have been well below those recorded in 2009

and 2010 when most regions of the country were experiencing growth

in propertyvalues.

• Despite the weak clearance rate there is still a large number of

properties being taken to auction. This is likely to be reflective of the

long average length of sale and high levels of discounting being

recorded across private treaty sales.• Given that the Spring Selling Season is almost complete it would seem

unlikely that week‐to‐week clearance rates will break the 50 percent

barrier for the remainder of this year.

Effective housing supply remains elevated but is starting to ease

• The effective supply of housing is simply the difference between thenumber of unique properties listed for sale and the volume of sales

expressed in months i.e. at the current rate of sale, how long would it

take to absorb all the listings in the market.

• Across Australia, the effective supply of housing was increasing sharply

in late 2010 and has continued throughout 2011 as listings mounted

and transaction volumes fell.

• The increase in effective supply levels is being driven by an increase in

stock available for sale rather than slowing sales activity with volumes

flat over recent months and at a similar level to those recorded 12

months ago.

• Nationally, the capital city effective housing supply is recorded at 5.8

months after briefly peaking at 6.5 months during the seasonal slow

down of late December / early January 2011.• Across the capital cities the effective supply varies greatly, those cities

which have recorded the smallest value falls over the last year

continue to have the lowest effective supply: Sydney (5.1 months) and

Canberra (3.6 months).

Combined capital city auction clearance rates

Feb‐09 to Nov‐11

rce: rpdata.com ‐ Rismark

Source: rpdata.com

Australian capital city effective housing supply*

Jan‐07 to Oct‐11

Source: rpdata.com *excludes Hobart

The most recent five months of sales transactions have been modelled based on

the historic level of revision



p‐06 Sep‐07 Sep‐08 Sep‐09 Sep‐10 Sep‐11

p‐06 Sep‐07 Sep‐08 Sep‐09 Sep‐10 Sep‐11


%

%

%

%

%

%

%

%

%


3.5%

3.7%

3.9%

4.1%

4.3%

4.5%

4.7%

4.9%

5.1%

5.3%

5.5%

$300

$320

$340

$360

$380

$400

$420

$440

$460


A v g g r o s s r e n t a l y i e l d

A v e r a g e r e n t a l r a t e ‐

d w e

l l i n g s

Avg rental rate all dwellingsAvg gross yield ‐ HousesAvg gross yield ‐ Units

p.6


entalgrowth and yields continueto improve

From the end of 2005 to the end of 2008, rental rates continued

to increase at a time in which, for the most part, capital gains had

been fairly sluggish.

Over the past five years median weekly rents have increased at an

average annual growth rate of 5.8 percent for houses and 6.8

percent for units.

Over the last 12 months, median weekly rents have recorded

growth of just 4.5 percent for houses and 4.4 percent for units,

below the respective five year average growth levels.

Rental rates across the combined capital cities are currently

recorded at $446/week for houses and $432/week for units.

Rental yields are also starting to improve as rental growth returns

and capital growth prospects are limited, gross rental yields are

recorded at 4.3 percent for houses and 5.0 percent for units.

With capital growth unlikely over the short term, consumers

acting cautiously and new housing supply limited, we anticipate

stronger rates of rental growth during the coming months,

particularly across Sydney, Perth and Brisbane where rental

conditions appear to be the tightest.

National rental rates and gross yieldsSep‐06 to Sep‐11

Average vendor discount – combined capital citiesSep‐06 to Sep‐11 Vendordiscounting – buyers are negotiatingharder

• Vendor discounting measures the average amount vendors have

to discount their properties from the initial list price in order to

sell their property.

• Vendor discounting has eased over September however, the rate

of discounting remainsat inflated levels.

• Across the capitals, vendor discounting is recorded at ‐6.4 percent

for houses and ‐6.1 percent for units.

• At the same time last year, vendor discounting was recordedat

‐5.8 percent for houses and ‐6.0 percent for units.

• Over the past five years the average vendor discount has been

recorded at ‐5.9 percent for houses and ‐5.6 percent for unitswhich indicates that discounting is now at above average levels.

• The current high level of vendor discounting is reflective of the

slowdown in market conditions across the county, increased stock

levels and greater competition amongst vendors for a smaller pool

of buyers.

• With the market recording value falls across each capital city and

listings at elevated levels, it is anticipated that vendor discounting

is likely to remain at above average levels.

Time on market is easing but remains at inflated levels

• The average time on market is simply the time it takes from when

a property is initially advertised for sale to when it ultimately sells.

• On a national basis houses are currently taking an average of 56days to sell and 54 days is the average selling time for a unit.

• In September 2010 it took an average of 46 days to sell a house

and 43 days for units. The results show that the average time it

takes to sell a property has increased as market conditions have

softened.

• On average, houses have taken 47 days and units 43 days to sell

over the last five years highlighting that both measures are

currently at levels well above average.

• The average time on market has increased over recent months as

capital city housing market growth performances have all slipped

into the red on an annual basis.

• Time on market and vendor discounting figures continue to

suggest that there is a disconnect between prices which vendorsare seeking and those which purchasers are prepared to pay for

the properties currently available.

Average time on market (days) – combined capital citiesSep‐06 to Sep‐11




uses

its

uses

its



House s Unit s

Median price $552,000 $458,000

12 month value growth ‐2.2% 1.0%

5 yr average annual growth 3.6% 5.2%


Average time on market 48 39

Average vendor di scount ‐6.4% ‐5.5%

Median rental rate $550 $513

Gross rental yield 4.4% 5.2%

Average hold period 9.6 7.6

Estimated population June 2010

Population change 2009 to 2010

Household projections 2010

4,575,532

1.7%

1,671,802

3.7%

4.2%

4.7%

5.2%

5.7%

6.2%

$350

$370

$390

$410

$430

$450

$470

$490

$510

$530

$550



A v e r a g e r e n t a l r a t e ‐ d w

e l l i n g s

Avg rental rate ‐ all dwellings

Avg gross yield ‐Houses

Avg gross yield ‐Units

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Au g‐ 01 Au g‐ 02 A ug ‐0 3 Au g‐ 04 Au g‐ 05 A ug ‐0 6 Au g‐ 07 Au g‐ 08 A ug ‐0 9 Au g‐ 10 Au g‐ 11

M o n t h l y

s a l e s v o l u m e s

Sydney 5 yr average

‐10.0%

‐5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Sep‐0 1 Sep‐02 Sep‐03 Sep‐04 S ep‐0 5 S ep‐0 6 Sep‐07 Sep‐08 S ep‐09 S ep‐1 0 S ep‐1 1

Combined capital cities Sydney

Sydney annual capital gains vs. combined capitals

Sydney sales volumes vs. five year average

p.7

Sydney

ydneyvalues and volumes

Over the last 12 months, Sydney has experienced a fall in capital

values with house values falling by ‐2.2 percent and unit values

increased by 1.0 percent. Both recorded a superior performance

to that of the combined capital city benchmark.

Property values recorded a peak in early 2004 following

exceptional growth from 2001. Post 2004 until 2009 the city saw

virtually no growth in property values and many areas actually

recorded declines.

When adjusted for inflation, Sydney property values still remain

below their 2004 peak.

Over the last five years, sales volumes have sat at an average of

7,424/month.

Sales volumes fell significantly in 2008 as the economy slowed

and the Global Financial Crisis hit, since that time volumes

rebounded to levels above average in 2009.

Sales volumes have been trending lower since mid 2009

however, they are currently estimated to be just 2 percent below

the five year average and have remained reasonably stable over

recentmonths.Sydney’s median house price is recorded at $552,000 and the

median unit price sits at $458,000.

entalrates and yields

The median rent for a Sydney house is recorded at $550/week

and the median unit rent is at $513/week.

Over the five years to September 2011, Sydney rental rates have

increased at an average annual rate of 5.5 percent for houses

and 6.8 percent for units.

From the end of 2008 until late 2010 there had been virtually no

growth in rental rates however, over the past 12 months there

has been signs of a revival in rental markets.Over the past year, rental rates have increased by 5.9 percent for

houses and 5.4 percent for units.

Gross rental yields had been easing over much of the last two

years however, there has been some improvement over the past

year as value growth slows, they are currently recorded at 4.4

percent for houses and 5.2 percent for units.

At the same time last year, yields were recorded at 4.1 percent

for houses and 5.0 percent for units.

Tight vacancy rates and a lack of new housing supply are likely to

result in an increase in rents and yields over the short‐term.

Rental rates and gross yields, SydneySep‐06 to Sep‐11

Key Statistics

•

In comparison to the last five years and the last decade, propertyvalue growth has been below typical levels over the last year in

Sydney.

• Average vendor discount levels currently sit at ‐6.4 percent for

houses and ‐5.5 percent for units and at the same time in 2010

discount levels were recorded at ‐5.8 percent for houses and ‐5.6

percent for units.

• Sydney properties were taking longer to sell in September 2011

than they were at the same time the previous year. Houses were

taking 48 days compared to 42 days the previous year and units

took 39 days to sell in September 2011 and a year beforehand

they took an average of 36 days to sell.

• Across properties sold over the last year, vendors had owned

houses for an average of 9.6 years and unit vendors had owned

their properties for 7.6 years.

• Sydney’s population sits at almost 4.6 million persons and has

grown by 1.7 percent over the last year.

• Based on the estimated population and household projections,

Sydney dwellings currently house an average of 2.7 persons.

Sydney Key Statistics September 2011



Source: rpdata.com






Houses Unit s

Median price $485,000 $423,000

12 month value growth ‐4.9% ‐2.6%




Average vendor discount ‐6.4% ‐7.2%







4,077,036

2.1%

1,504,024

3.3%

3.5%

3.7%

3.9%

4.1%

4.3%

4.5%

4.7%

4.9%

5.1%

$250

$270

$290

$310

$330

$350

$370

$390

$410

$430


A v g g r o s s r e n t a l y i e

l d


d w

e l l i n g s




0

2,000

4,000

6,000

8,000

10,000

12,000

Au g‐ 01 Au g‐ 02 Au g‐ 03 Au g‐ 04 Au g‐ 05 Au g‐ 06 Au g‐ 07 Au g‐ 08 Au g‐ 09 Au g‐ 10 Au g‐ 11

M o n t h l y s

a l e s v o l u m e s

Melbourne 5 yr average

‐10.0%

‐5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

S ep‐01 S ep‐02 S ep‐03 S ep‐04 S ep‐05 S ep‐06 S ep‐07 S ep‐08 S ep‐09 S ep‐10 Sep‐11

Combined capital cities Melbourne

p.8

Rental rates and gross yields, MelbourneSep‐06 to Sep‐11

Key Statistics

• Capital gains over the past 12 months have been well below both

the five and ten year average level of value growth.

• Average discount levels currently sit at ‐6.4 percent for houses and

‐7.2 percent for units, a year ago discount levels were recorded at

a lower ‐5.6 percent for both houses and units.

• Comparatively, Melbourne properties are selling at a much slower

rate than last year with houses selling on average in 52 days and

units selling after an average of 45 days. At the same time in 2010

the average time on market was recorded at 38 days for houses

and 37 days for units.

• Across properties sold over the 12 months to September 2011,

vendors had owned houses for an average of 10.1 years and unit

vendorshad owned their properties for 8.4 years.

• Melbourne’s population sits at just over 4 million persons and has

grown at 2.1 percent over the last year.• On average, Melbourne dwellings are home to 2.7 persons based

on the ratio of estimated population to the projection of

households.

Melbourne values and volumes

Over the last 12 months, Melbourne house values have fallen by

‐4.9 percent and unit values have fallen by a lower ‐2.6 percent.

Over the last 10 years house values have increased at an average

annual rate of 7.3 percent and unit values at 7.5 percent. This

result places Melbourne houses as having the second lowest

long‐term annual rate of growth amongst the capital cities. That

is despite the significant over performance recorded over 2007

and 2009/10.

Property values in Melbourne have been through several distinct

cycles over the decade having recorded strong growth between

2001 and 2004, a consolidation period between 2004 and 2006,

further strong growth in 2007, value falls in 2008 and a rebound

during 2009 and 2010.

Over the last five years, sales volumes have been recorded at an

average of 7,372/month.

Sales volumes fell significantly in 2008 as the economy slowed

but rebounded strongly in 2009.

In recent months transaction volumes have fallen and are

currently recorded at an estimated ‐8 percent below the fiveyear average.

Melbourne’s median house price is recorded at $485,000 and

the median unit price sits at $423,000.


The median rent for a Melbourne house is recorded at

$398/week and for units sits at $363/week.

Over the five years to September 2011, rents have increased at

an average annual rate of 6.2 percent for houses and 6.9 percent

for units.

Since the end of 2008 there has been fairly limited growth in

rental rates at a time when there has generally been particularlystrong growth in property values.

Over the last 12 months, rental rates have increased by 1.9

percent for houses and by 0.9 percent for units.

Although there has been some growth in rents, because

Melbourne’s housing supply has been so responsive we don’t

expect rental pressures to be as strong as in most other markets.

Gross rental yields have improved from 3.5 percent last year to

3.8 percent this year for houses and from 4.2 percent to 4.3

percent for units.

Despite the improvement, yields in Melbourne remain the

weakest amongst capital cities.

Melbourne Key Statistics September 2011


Melbourne Property Market Overview

Melbourne sales volumes vs. five year average

Melbourne annual capital gains vs. combined capitals

Source: rpdata.com






Houses Unit s

Median price $435,000 $365,000












2,043,185

2.3%

738,867

3.9%

4.1%

4.3%

4.5%

4.7%

4.9%

5.1%

5.3%

5.5%

$250

$270

$290

$310

$330

$350

$370

$390

$410



l d


d w

e l l i n g s




0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000


M o n t h l y s


Brisbane 5 yr average

‐10.0%

‐5.0%

0.0%

5.0%

10.0%15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

S ep‐0 1 S ep‐0 2 S ep‐ 03 S ep ‐04 S ep‐05 S ep ‐06 S ep ‐07 S ep ‐08 S ep‐09 S ep ‐10 S ep‐11

Combined capital cities Brisbane

p.9

risbane values and volumes

Over the last 12 months, value growth has been significantly

lower than the five year and ten year average levels with house

values falling by ‐7.1 percent and units by ‐0.9 percent.

Since the national property market began recording strong

growth post GFC, Brisbane has well and truly underperformed

and has recorded limitedvalue growth.

When adjusted for inflation, Brisbane property values peaked in

March 2008 and have fallen by around ‐14 percent to September

2011.


4,134/month.

The number of home sales in Brisbane were harder hit than most

other capital cities during 2008 as the GFC unravelled.

2009 saw a slight rebound in sales activity however, volumes

have been falling since mid to late 2009 and are currently at

around their lowest levels in 16 years.

Current estimated sales volumes are ‐35 percent below their five

year average levels.

Brisbane’s median house price is recorded at $435,000 and themedian unit price sits at $365,000.


The median rent for a Brisbane house is recorded at $405/week

and for units it sits at $367/week.

Over the five years to September 2011, house rents in Brisbane

have increased at an average annual rate of 4.9 percent while

unit rents have increased by 6.8 percent annually.

Since the beginning of 2009 until the end of 2010, rental rates

across Brisbane had been falling despite the fact that

construction activity has been low and value growth sluggish,rents remain slightly below their peaks.

Over the 12 months to September 2011, rental rates have

increased by 4.8 percent for houses and unit rents are up 8.4

percent.

With the rental market tight and limited new construction we

anticipateupwards pressure on rental rates to persist.

Gross rental yields were generally falling since the beginning of

2009 however, there has been some substantial recent

improvement with yields recorded at 4.8 percent for houses and

5.4 percent for units. At the same time last year they were

recorded at 4.2 percent and 4.9 percent respectively.Key Statistics

•

Brisbane’s capital gains have been well below the combinedcapital city average since the start of 2009. Compared to

Brisbane’s long‐term and medium term gains, the last 12 months

has recorded an extremely weak performance.

• Average discount levels currently sit at ‐8.5 percent for houses and

‐7.6 percent for units and at the same time in 2010 discount levels

were recorded at ‐7.3 percent for houses and ‐6.7 percent for

units.

• Houses in Brisbane are currently taking an average of 58 days to

sell and units 67 days. In comparison, 12 months prior houses

took 53 days and units 48 days to sell.

• Of those Brisbane dwellings sold over the last year vendors had on

average owned houses for 8.7 years and units for 6.9 years.

• Brisbane’s population was estimated to sit at just above 2 million

persons at June 2010 and has grown at 2.3 percent over the 12

months.

• On average, Brisbane dwellings are home to 2.8 persons based on

the ratio of estimated population to the projected number of

households.

Brisbane Key Statistics September 2011

Brisbane Property Market Overview

Rental rates and gross yields, BrisbaneSep‐06 to Sep‐11


Brisbane sales volumes vs. five year average

Brisbane annual capital gains vs. combined capitals

Source: rpdata.com






Houses Unit s

Median price $385,000 $319,000












1,203,186

1.2%

484,620

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

$240

$260

$280

$300

$320

$340

$360



l d


d w

e l l i n g s



Avg gross yield ‐ Units

0

500

1,000

1,500

2,000

2,500

3,000

3,500


M o n t h l y s


Adelaide 5 yr average

‐10.0%

‐5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

S ep‐01 S ep‐02 S ep‐03 S ep‐04 S ep‐05 S ep‐06 S ep‐07 Sep‐08 S ep‐09 S ep‐1 0 S ep‐11

Combined capital cities Adelaide

p.10

Adelaide values and volumes

House values have recorded average annual growth of 8.5

percent over the last decade and units values have grown at a

greater 8.9 percent annually indicating that both houses and

units have enjoyed an above average performance over the

period.

Over the last 12 months house and unit value growth has tracked

below the national average at ‐3.7 percent and ‐2.6 percent

respectively.

In inflation adjusted terms, Adelaide home values peaked in June

2010 and are currently 7.8 percent below their peak.

The last 10 years has seen periods of both strong and subdued

growth which has generally acted in concert with trends seen

nationwide.


2,067/month.

The current level of dwelling sales activity is estimated to be ‐17

percent below the five year average levels.

Sales activity across the city is currently at lower levels than

those which were recorded during the GFC.The Adelaide median house price is recorded at $385,000 and

the median unit price sits at $319,000, the most affordable of

any mainland capital city.


The median rent for an Adelaide house is recorded at $353/week

and for units the median rent sits at $326/week.

Over the five years to September 2011, house rents have

increased at an average annual rate of 4.2 percent and unit rents

have increased at a rate of 5.0 percent.

Adelaide rental rates have recorded the slowest rate of average

annual growth over the past five years of any mainland capital

city.Rental growth has been virtually non‐existent since the end of

2008.

Over the year to September 2011, house rents have increased by

0.9 percent and unit rents have increased by 4.4 percent.

Upwards pressure on rents is not intensifying at the same rate in

Adelaide as it is in other capitals.

Gross rental yields have been fairly flat with some slight

improvementduring recent times.

Rental yields are currently recorded at 4.2 percent for houses

and 4.8 percent for units.

At the same time last year, gross rental yields were recorded at

4.1 percent and 4.5 percent.

Key Statistics

• Over the last decade, Adelaide houses and units have recorded

comparatively strong levels of value growth. Over the last year,the growth in values for houses and units has been well below the

average annual growth rate over both five and ten years.

• Average discount levels are recorded at ‐6.5 percent for houses

and units. Over September 2010 discount levels were recorded at

‐5.6 percent for houses and ‐5.1 percent for units.

• Adelaide houses are taking an average of 58 days to sell and units

take 52 days in comparison, 12 months ago houses took 46 days

and units 38 days to sell.

• Of the houses which have sold within Adelaide over the year to

September 2011 the vendors had owned them for an average of

7.3 years and units had been owned for an average of 6.9 years.

• Estimates of Adelaide’s population as at the end of June 2010

show a population just over 1.2 million, increasing by 1.2 percentbetween 2009 and 2010.

• Based on the estimated population and the projected number of

households across Adelaide, the average Adelaide household is

home to 2.5 persons.

Adelaide Property Market Overview

Adelaide Key Statistics September 2011

Rental rates and gross yields, AdelaideSep‐06 to Sep‐11


Adelaide sales volumes vs. five year average

Adelaide annual capital gains vs. combined capitals

Source: rpdata.com






Houses Unit s

Median price $455,000 $386,000



10 yr a vera ge a nnua l growth 10.6% 10.6%









1,696,065

2.7%

640,092

2.8%

3.0%

3.2%

3.4%

3.6%

3.8%

4.0%

4.2%

4.4%

4.6%

4.8%

5.0%

5.2%

5.4%

$220

$240

$260

$280

$300

$320

$340

$360

$380

$400

$420

$440


A v g g r o s s r e n t a l y i

e l d

A v e r a g e r e n t a l r a t e ‐ d w

e l l i n g s




0

1,000

2,000

3,000

4,000

5,000

6,000

7,000


M o n t h l y s


Perth 5 yr average

‐20.0%

‐10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

S ep‐01 S ep‐02 S ep‐03 S ep‐04 S ep‐05 S ep‐06 S ep‐07 Sep‐08 S ep‐09 S ep‐1 0 S ep‐11

Combined capital cities Perth

p.11

erth values and volumes

The last decade has seen house and unit values record average

annual growth of 10.6 percent which places Perth as one of the

best performing markets over the last ten years.

Although the last decade has seen strong property value growth

across the city, over the past five years houses have recorded

average annual growth of 0.5 percent and units 1.9 percent.

Over the year to September 2011 Perth house values have fallen

by ‐5.4 percent and unit values are down by ‐3.9 percent.

Over the 10 years to June 2011 there was a period of consistent

growth between 2001 and 2004 and then a steep rise in values

between 2005 and 2007. Since that time growth in Perth

property values has been negligible.

When adjusted for inflation, Perth home values peaked in

September 2007 and are currently ‐13.4 percent below their

peak.


2,911/month.

The volume of residential property sales has been easing since

middle to late 2009.Current estimated sales volumes are ‐4 percent below the five

year average level.

The Perth median house price is recorded at $455,000 and the

median unit is recorded at $386,000.


The median rent for a Perth house is recorded at $431/week and

for units the median weeklyrent sits at $429/week.

Rental growth in Perth has been very strong over the past five

years with house rents increasing at an average annual rate of

8.7 percent and unit rents at 7.8 percent.

Over the past 12 months, house rents have increased by 10.1

percent and units by 6.8 percent.Between the beginning of 2009 and the end of 2010, rental rates

have deteriorated markedly however, over 2011 there has been

some improvement.

Over the last 12 months rental rates have increased by 8.7

percent for houses and by 7.8 percent for units.

Gross rental yields recorded a steep decline between the

beginning of 2009 and the end of 2010, despite the fact that

Perth had underperformedin terms of property value growth.

Gross rental yields are currently recorded at 4.5 percent for

houses and 4.9 percent for units compared to 3.8 percent and

4.4 percent respectivelylast year. Key Statistics

• The Perth market has been a weak performer over the last few

years however, over the long term Perth has been one of thebetter markets for capital growth in Australia largely due to the

high rate of capital gains between 2002 and 2007.

• Average discounts for houses are recorded at ‐6.7 percent and for

units average discounting levels sit at ‐6.2 percent. 12 months

previously, discount levels were recorded at ‐6.2 percent for

housesand ‐6.7 percent across the unit market.

• Perth houses took an average of 57 days to sell in September 2011

and units took 58 days to sell. In comparison, 12 months ago

housesand units took 53 and 56 days respectivelyto sell.

• Across Perth, of the houses sold over the 12 months to September

2011, vendors had on average owned these properties for 7.7

yearsand the units which sold had been owned for 7.3 years.

•

The estimated population of Perth as at the end of June 2010 wasalmost 1.7 million with the population growing by 2.7 percent

during the year.


households across Perth, the average household is home to 2.6

persons.

Perth Property Market Overview

Perth Key Statistics September 2011

Rental rates and gross yields, PerthSep‐06 to Sep‐11


Perth sales volumes vs. five year average

Perth annual capital gains vs. combined capitals

Source: rpdata.com






Houses Unit s

Median price $334,000 $262,000












214,705

1.1%

86,617

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

$260

$280

$300

$320

$340

$360

$380

Sep‐08 Apr‐09 Nov‐09 Jun‐10 Jan‐11 Aug‐11


A v e r a g e r e n t a l r a t e ‐ d w e l l i n g s


Avg gross yield ‐ Houses


0

100

200

300

400

500

600

700

800


M o n t h l y s


Hobart 5 yr average

‐20.0%

‐10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

Au g‐0 1 Aug‐0 2 Aug‐ 03 Au g‐04 Aug‐05 Au g‐06 Au g‐07 Aug‐08 Aug‐09 Au g‐10 Aug‐11

Combined capital cities Hobart

Hobart Key Statistics September 2011

Rental rates and gross yields, HobartSep‐08 to Aug‐11


Hobart sales volumes vs. five year average

Hobart annual capital gains vs. combined capitals

Source: rpdata.com


p.12

Hobartvalues and volumes

Over the last ten years house values have recorded average

annual growth of 11.7 percent and units have recorded annual

growth of 10.9 percent, both of which place Hobart as one of the

best performing capital city markets of the last decade. The

significant gains recorded between 2002 and 2004 are the

primaryreason for the strong long‐term performance.Over the year to August 2011 house values have fallen by ‐9.1

percent and unit values have fallen by ‐10.3 percent.

Although Hobart is the most affordable capital city market, at

one point in 2003 property values had recorded annual growth

of more than 56 percent.

Over the last five years, sales volumes have been recorded at an

average of 400/month.

Estimated transaction numbers are currently ‐15 percent below

five year average levels.

The Hobart median house price is recorded at $334,000 and the

median unit price is recorded at $262,000; the most affordable

housing prices of any capital city.


The median rent for a Hobart house is recorded at $321/week

and the median unit rent sits at $266/week, both of which are

the most affordable rental rates amongst capital city markets.

Over the last couple of years rental growth has been fairly

limited in Hobart, similar to conditions across all capital cities.

Over the last 12 months, rental rates for houses have fallen by

‐3.5 percent while unit rents have fallen by ‐6.3 percent.

Despite the fall in property values over the past 12 months there

has not been a substantial improvement in gross rental yields

with rental rates also falling over the year.

Gross rental yields were recorded at 5.2 percent for houses and

5.4 percent for units as at August 2011.


4.9 percent for houses and 5.2 percent for houses.

Key Statistics

• Property value growth over the last 12 months has been wellbelow the five year and ten year average levels for houses and

units.

• Hobart houses have recorded an average discount of ‐6.3 percent

and units have seen discounts of ‐3.5 percent. 12 months previous

discount levels were recorded at ‐6.5 percent for houses and ‐5.2

percent across the unit market.

• On average houses are currently taking 69 days to sell and units

are taking 62 days, 12 months ago houses took an average of 50

days to sell and units took 45 days.

• Hobart houses sold over the year had been owned by the vendors

for an average of 7.9 years and units had been owned for 6.6

years.

•

The estimated population of Hobart at the end of June 2010 wasalmost 215,000 with the population growing by 1.1 percent during

the previous year.


households across Hobart the average household is home to 2.5

persons.

Hobart Property Market Overview





Houses Unit s

Median price $450,000 $410,000












127,532

2.8%

44,817

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

$280

$320

$360

$400

$440

$480

$520

$560

$600



l d


d w

e l l i n g s




0

50

100

150

200

250

300

350

400

450

500


M o n t h l y s


Darwin 5 yr average

‐10.0%

‐5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

S ep‐01 S ep‐02 S ep‐03 S ep ‐04 S ep‐0 5 S ep‐06 S ep‐07 S ep‐08 S ep‐09 S ep‐1 0 S ep‐11

Combined capital cities Darwin

Rental rates and gross yields, DarwinSep‐06 to Sep‐11


Darwin sales volumes vs. five year average

Source: rpdata.com

p.13

Darwin values and volumes

The last decade has seen house values record average annual

growth of 12.4 percent which was the nation’s strongest capital

city performance as was the unit market with values increasing at

an average annual rate of 13.3 percent.

Over the 12 months to September 2011 house values in Darwin

have fallen by ‐3.7 percent and unit values have fallen by ‐3.6

percent.

Since 2004 until recently, Darwin value growth had consistently

outperformed the combined capital cities.

When adjusted for inflation, Darwin home values peaked in

March 2010 and are currently ‐8.3 percent below their peak.

Over the last five years there has been an average of 254

sales/month.

Sales volumes in Darwin held up well during the GFC however,

the number of sales are now trending lower.

Estimated sales volumes are currently ‐25 percent below the five

year average.

The Darwin median house price is recorded at $450,000 and the

median unit price is recorded at $410,000.


The median rent for a Darwin house is the highest of any capital

city recorded at $552/week and unit rents sit at $464/week.

Over the past five years rental growth within Darwin has been

exceptionally high with house rents increasing at an average

annual rate of 8.8 percent and units at 9.9 percent.

Over the past 12 months, Darwin rental rates have increased by

0.8 percent for houses while unit rents have fallen by ‐2.0

percent.Rental rates across the city have been trending lower since the

end of 2008.

Darwin is yet to show signs of a real improvement in rental rates

and they remainwell below their peak.

Darwin still enjoys the nation’s highest gross rental yields

however, yields are well below their peaks recorded in late 2008

and early 2009.


houses and 5.8 percent for units, still the highest of any capital

city.

At the same time last year yields were recorded at 5.0 percent

and 5.7 percent respectively.

Key Statistics

• Capital gains have been consistently high over most of the past 10

years due to a tight housing supply, high level of population

growth, low unemployment and ongoing infrastructure andresource projects.

• In recent months discounting in Darwin has been increasing with

units recording a current vendor discount of ‐8.5 percent up from

‐5.8 percent last year. House price discounting has also increased

over the last year, recorded at ‐5.1 percent last year compared to ‐

6.3 percent as at September 2011.

• Darwin houses as at September 2011 were taking an average of 59

days to sell and units were taking 56 days. 12 months previous

houses were taking an average of 49 days and units 47 days.

• Of the residential properties sold across the city over the last year,

vendors had owned their houses for an average of 5.3 years and

unit owners had held their property for 5.0 years.

• The estimated population of Darwin at the end of June 2010 was just over 127,000 with the population growing by 2.8 percent

during the previous year.


households across the city the average household is home to 2.8

persons.

Darwin Property Market Overview

Darwin Key Statistics September 2011

Darwin annual capital gains vs. combined capitals






Houses Unit s

Median price $535,000 $420,000

12 month value growth 0.5% ‐9.7%











358,222

1.7%

135,682

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

$340

$360

$380

$400

$420

$440

$460

$480

$500

$520


A v e r a g e r e n t a l r a t e ‐ d w e l l i n g s




0

200

400

600

800

1,000

1,200

1,400

1,600


M o n t h l y s


Canberra 5 yr average

‐10.0%

‐5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

S ep‐01 S ep‐02 S ep‐03 S ep ‐04 S ep‐0 5 S ep‐06 S ep‐07 S ep‐08 S ep‐09 S ep‐1 0 S ep‐11

Combined capital cities Canberra

Rental rates and gross yields, CanberraSep‐06 to Sep‐11


Canberra sales volumes vs. five year average


Canberra Key Statistics September 2011

Canberra annual capital gains vs. combined capitals


p.14

anberra values and volumes

The last decade has seen house values record average annual

growth of 8.8 percent and units have recorded annual growth of

an average of 8.9 percent.

Over the 12 months to September 2011 house values have

increased by 0.5 percent while unit values have recorded a

significantfall of ‐9.7 percent.

Inflation adjusted values show the peak of the market was in

June 2010 and current home values are ‐5.5 percent below their

peak.

Since 2004 the performance of Canberra’s residential property

market has tracked the performance of the combined capital

citiesclosely.

Over the past five years, Canberra has recorded an average of

755 sales each month.

Estimated sales volumes suggest that current sales activity in

Canberra is ‐20 percent below the five year average level.

As property values have recently begun to decline there has also

been a deterioration in the level of transaction activity.

The Canberra median house price is recorded at $535,000 whichpositions Canberra as having the nation’s second most expensive

capital city median house price. The median unit price is slightly

above the national median, recorded at $420,000.


The median rent for a Canberra house is recorded at $503/week

and for units weekly rents sits at $410/week.

Over the last five years rental rates have recorded average

annual growth of 5.1 percent for houses and 4.6 percent for

units.

As is the case nationwide, since the beginning of 2009 rents have

recorded limited growth.Over the 12 months to June 2011, rents have fallen by ‐0.3

percent for houses and unit rents have declined by ‐0.6 percent.

Gross rental yields have generally been softening during recent

years due to limited rental growth and improving property

values.


houses and 5.6 percent for units.


4.8 percent for houses and 5.1 percent for units.

Key Statistics

• Canberra has recorded solid capital growth over both the medium

and long term across the house and unit markets however, the

last 12 months has seen the market underperform.

• Canberra houses and units are recording low levels of vendor

discounting currently at ‐3.6 percent and ‐3.9 percent respectively.

12 months previous, discount levels were recorded at ‐4.2 percent

for houses and ‐7.1 percent across the unit market.

• Canberra houses are taking an average of 48 days to sell and units

are taking 49 days. At the same time in 2010 houses were taking

40 days to sell and units were taking an average of 35 days.

• Of the residential properties sold across the city over the year to

September 2011, vendors had owned their houses for an average

of 8.3 years and unit owners had held their property for 7.1 years.

• The estimated population of Canberra at the end of June 2010 was

slightly above 358,000 with the population growing by 1.7 percent

during the previous year.• Based on the estimated population and the projected number of

households across the city the average household is home to 2.6

persons.

Canberra Property Market Overview





0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Nov‐1991 Nov‐1995 Nov‐1999 Nov‐2003 Nov‐2007 Nov‐2011

Standard variable mortgage rates 3 yr fixed mortgage rates

‐4.0

‐2.0

0.0

2.0

4.0

6.0

8.0

10.0

Jun‐81 Jun‐86 Jun‐91 Jun‐96 Jun‐01 Jun‐06 Jun‐11

% c h a n g e i n G D P

Quarterly change in GDP Annual Change in GDP

60

70

80

90

100

110

120

130

No v‐ 91 No v‐ 93 N ov ‐9 5 No v‐ 97 No v‐ 99 No v‐ 01 No v‐ 03 Nov ‐0 5 No v‐ 07 Nov ‐0 9 No v‐ 11

Consume r Se ntiment Inde x Six month rolling average

p.15

Economic Overview

Consumer sentimentrebounds over the past three months

• The monthly survey of Consumer Sentiment undertaken by Westpac

and the Melbourne Institute shows that Australian consumers are

becoming more optimistic about economic conditions.

• The Index measures views on consumers household financial situation

over the past and coming year, anticipated economic conditions over

the coming year and five years and buying conditions for majorhousehold items. When the Index is above 100 points, consumers are

more optimistic than pessimistic and when it sits below 100 points it

indicatesthere is more pessimism than optimism.

• In recent times sentiment fell sharply however, over the past three

months conditions have improved with the index increasing by 15.3

percent over this period.

• Despite the improvement, the Index is currently recorded at 103.4

points indicating consumers are only slightly more optimistic than

pessimistic.

Australia’seconomic growth bouncesback in June 2011

• Gross Domestic Product (GDP) measures the final value of all goods

and services produced in an economy over a given period. As such,

GDP is an important indicator as it shows whether an economy is

expanding or contracting.

• The latest GDP results showed a marked improvement in the

Australian economy.

• Over the March 2011 quarter, GDP fell by ‐0.9 percent however, in

the June quarter GDP rose by 1.2 percent.

• On an annual basis, the Australian economy has grown by 1.4 percent

to June 2011.• Recent RBA forecasts for GDP suggest that the Australian economy will

grow at an annual rate in excess of 3 percent from December 2011

onwards.

• The GDP data also highlighted a growing propensity for consumers to

save with Australian households saving 10.5 percent of their income,

around the highest levels since the mid 1980’s.

• Disposable income growth has slowed markedly, at June 2010 they

grew by 7.4 percent over the year compared to 2.4 percent over the

most recent 12 months.

Interest rates cut for the first time in 31 months in November

• Average standard variable mortgage rates are currently recorded at

7.55 percent and the official cash rate is set at 4.5 percent following an

interest rate cut in November.

• The average 3 yr fixed mortgage rate is 6.5 percent which implies that

most banks expect that officialrates will be cut further.

• The change in official interest rates in November was the first

adjustment in 12 months and the first cut in 31 months.

• With headline inflation well outside the RBA’s target range, the

decision to cut was based on a low inflation reading for the RBA’s

preferred underlying measures.

• Given the global economic turmoil and two speed dynamic of the

domestic economy, the RBA appears to be taking a measured

approach surrounding any decision to change rates.

• The interest rates futures market is currently pricing in 160 basis

points worth of cash rate decreases to September 2012. The market is

currently volatile and is just as likely to change substantially each day

depending on local and international news.

Australian consumer sentimentNov‐91 to Nov‐11

Source: rpdata.com, Westpac‐Melbourne Institute

Percentage change in GDP Jun‐81 to Jun‐11

Source: rpdata.com, ABS

RBA GDP growth forecastsDec‐10 to Dec‐13

Source: rpdata.com, RBA Statement on Monetary Policy November2011

Standard variable mortgage rates vs.

3 yr fixed mortgage rates

Source: rpdata.com, RBA

Dec‐10 Jun‐11 Dec‐11 Jun‐12 Dec‐12 Jun‐13 Dec‐13

End of ye ar growth 1.40% 2.75% 4.00% 3.25% 3.25% 3.25% 3.50%



0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%


A n n u a l g r o w t h i n r e t a i l t r a d e

‐0.5%

‐0.1%

0.6%

1.2%

3.0%

3.5%

3.7%

4.2%

4.3%

4.5%

5.8%

6.4%

‐ 2. 0% ‐ 1. 0% 0 .0 % 1 .0 % 2 .0 % 3 .0 % 4 .0 % 5 .0 % 6 .0 % 7 .0 %

Furnishings, household equipment and services

Recreation and culture

Communication

Clothing and footwear

Alcohol and tobacco

All groups

Health

Housing

Transport

Insurance and financial services

Education

Food and non‐alcoholic beverages

‐1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Sep‐97 Sep‐99 Sep‐01 Sep‐03 Sep‐05 Sep‐07 Sep‐09 Sep‐11

A n n u a l c h a n g e i n C P I ( % )

All groups

Avg of weighted median and trimmed mean

Reserve Bank's Target Range

p.16

Economic Overview

Underlying and headline inflation start to fall instigating the RBA to

cut interest rates

• The Consumer Price Index (CPI), measures the level of price inflation

within the economy.

• As at September 2011, the all groups indicator showed that annual

headline inflation increased to 3.5 percent which is well outside of the

Reserve Bank of Australia’s (RBA) long‐term target range of 2 to 3percent.

• Other inflation indicators, which are the preferred measures by the

RBA, are the weighted median (2.3 percent) and trimmed mean (2.6

percent). Both measures are now in the middle of the RBA target

range.

• With the RBA’s preferred measures well within their target range and

headline inflation falling, inflationarypressures appear to be easing.

• Recent forecasts by the RBA included in their Statement on Monetary

Policy suggest they expect underlying inflation to remain within their

target range until at least the end of 2013.

Cost of most goods and services increasing over the year

• CPI measures the change in the price of a bundle of goods as defined

within the adjacent graph.

• Each item carries a certain weight with some items having a greater

influence on the result, these include: housing (22.3 percent), food

and non‐alcoholic beverages (16.8 percent), recreation and culture

(12.6 percent) and transport (11.6 percent).

• The September 2011 CPI release was the first time in which the new

CPI weightings (16th Series) had been used and saw some changes to

category names.

• Over the year to September 2011 CPI increased by 3.5 percent

however certain items have increased by more: food and non‐alcoholic

beverages (6.4 percent), education (5.8 percent) and insurance andfinancial services (4.5 percent).

• The costs of furnishings, household equipment and services (‐0.5

percent), recreation and culture (‐0.1 percent) and communication

(0.6 percent) either fellor showed limited change.

• Importantly, two of the three items which carry the greatest weighting

on CPI have recorded increases well above the rate of headline

inflation.

Growth in retail trade remains limited however, interest rate cuts and

Christmasmay result in some improvements late in the year

•

Over the 12 months to September 2011, retail trade has increased by just 2.3 percent, well below the rate of inflation.

• At the same time last year, retail trade had increased by 3.8 percent

over the year.

• The slowdown in retail trade is very much reflective of the cautious

consumer mindset which is supported by low levels of lending and

housing finance, falling consumer confidence and high levels of saving.

• Growth in retail trade has been strongest within two of the states

(Queensland and Western Australia) in which the housing market has

been weakest, with trade increasing by 3.4 percent and 8.0 percent

over the year respectively.

• Growth in retail trade has been weakest within South Australia (‐0.1

percent), New South Wales (0.8 percent) and Victoria and the

AustralianCapital Territory (1.7 percent)

• With consumers having little propensity to spend, it doesn’t bode well

for growth in home values as demand for houses is less likely to be

strong if demand for consumer retail goods are also weak.

• The recent cut in interest rates may result in some improvement to

retailtrade over the coming months.

Consumer Price Index (CPI)Sep‐97 to Sep‐11

Source: rpdata.com, ABS, RBA

Annual change in components of CPIYear to September 2011


Annual change in retail tradeSep‐01 to Sep‐11




0.0 1.0 2.0 3.0 4.0 5.0 6.0

Qld

SA

NSW

Vic

Tas

WA

NT

ACT

Unemployment rate (%)

2%

4%

6%

8%

10%

12%

O ct‐ 81 O ct‐ 84 O ct‐ 87 O ct‐ 90 O ct‐ 93 O ct‐ 96 O ct‐ 99 O ct‐ 02 O ct‐ 05 O ct‐ 08 O ct‐ 11

U n e m p l o y m e n t R a t e

Unemployment Rate

Moving annual average

$0.40

$0.50

$0.60

$0.70

$0.80

$0.90

$1.00

$1.10

$1.20

Oct‐81 Oct‐86 Oct‐91 Oct‐96 Oct‐01 Oct‐06 Oct‐11

E x c h a n g e r a t e ( $ A t o $ U S )

p.17

Economic Overview

$A back around parity with the greenback

• The Australian dollar has recently reached and gone beyond parity

with the $US.

• At the end of October 2011, $1A would buy you $1.05US.

• It hasn’t just been an improvement in the $A against the $US, $1A

currently buys 0.75 Euro and more than 0.65 Pound. In January

2009, the exchange rates were recorded at 0.50 Euro and 0.45Pound.

• The improvement in exchange rates is great news for those looking

to import products from overseas but does not bode so well for

exporters.

• The higher dollar is impacting local retailers, with many consumers

choosing to purchase goods from overseas via the internet.

• In recent times the $A has been very volatile however, this has

largely been the affect of economic forces external to Australia.

• At the time of writing the dollar is below parity with the $US

highlightingthe current market volatility.

Employmentgrowth slows to its slowest pace in almost two years

• The national unemployment rate was recorded at 5.2 percent in

October 2011, down from 5.3 percent in September.

• Over the year total employment is up by 0.9 percent which is the

slowest annual rate of growth in employment since November

2009.

• The number of unemployed persons is down by ‐1.4 percent over

the year.

• Over the past year full‐time employment growth (1.1 percent) has

eclipsed that of part‐time employment (0.3 percent).

• Participation in the workforce is currently recorded at 65.6 percent

and has remained stable for the past five months.

• A big focus of the federal budget has been to get long‐term

unemployed back into the workforce, if successful this should

increase participation rates which have only ever recorded an

historic peak of 65.9 percent.

Unemployment remains below 6 percent in every state

• Each state and territory currently has an unemployment rate which

sits below 6 percent.

• The Australian Capital Territory and Northern Territory have the

nation’s lowest unemployment rates at 3.8 percent and 4.1 percent

respectively.

• Queensland has the nation’s highest unemployment rate of 5.7

percent followed by South Australia, New South Wales and Victoria

which all have an unemployment of 5.3 percent.

• The Northern Territory and Australian Capital Territory have the

highest employment participation rates at 73.7 percent and 72.1

percent respectively.

• Tasmania (60.6 percent) and South Australia (63.3 percent) have

the country's lowest employment participation rates.

• Over the last 12 months the Australian Capital Territory was the

only state or territory which did not create additional jobs (‐0.2percent).

• Job creation has been greatest in Victoria (1.3 percent) and

Queensland(1.2 percent).

$A exchange rate to $USOct‐81 to Oct‐11


Unemployment Rate – Seasonally adjustedOct‐81 to Oct‐11


Unemployment Rate by StateOctober 2011




930

3,243

6,391

13,902

50,962

73,170

81,602

82,134

0 20,000 40,000 60,000 80,000 100,000

Northern Territory

Tasmania

Australian Capital Territory

South Australia

Western Australia

Queensland

Victoria

New South Wales

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

Mar‐83 Mar‐87 Mar‐91 Mar‐95 Mar‐99 Mar‐03 Mar‐07 Mar‐11

Q u a r t e r l y c h a n g e i n p o p u l a t i o n

Natural Increase Net Overseas Migration

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

Sep‐83 Sep‐87 Sep‐91 Sep‐95 Sep‐99 Sep‐03 Sep‐07 Sep‐11

C o m m o d i t y p r i c e i n d

e x ( S D R )

p.18

Economic Overview

Commodity prices may have peaked

• Commodity prices incorporating: rural, non‐rural and base metals all

recorded a big slump during the GFC.

• Since commodity prices reached their recent low in early to mid

2009, prices have rebounded strongly.

• After returning to an historic high, commodity prices have now fallen

by ‐3.2 percent over the most recent two months.

• Much of the increase in commodity prices recently is due to

increases in the prices of export thermal coal and iron ore prices.

• The prices of base metals and most rural commodities declined over

the most recent month.

• Looking at base metals specifically, they recorded the greatest peak

to trough value decline of ‐65 percent of any commodity index

between May 2007 and February 2009.

• Although demand for Australian resources is likely to remain strong

there is some speculation that our terms of trade may have peaked,

if this is so commodity prices may ease further over the coming

months.

Population growth continues to slow but remains well above long‐

term averages

• In raw number terms, Australia’s population grew by 312,355

persons over the year to March 2011 and the result indicates that

the rate of population growth is continuing to slow after peaking at

462,000 persons over the year to March 2009.

• The previously high rate of population growth was largely fuelled by

the significantincrease in net overseas migration to the country.

• Over the last year net migration has contributed an additional

167,000 persons to the Australian population however, the

slowdown in population growth is largely the result of a decline in

net migrant numbers.• The Federal Government had cut skilled migration to around 170,000

persons annually (which is still well above long‐term average levels of

120,000 persons annually) however, in the most recent Budget the

Government increased the skilled migrant intake by a further 16,000

persons.

• Despite the cut to migration numbers, the rate of natural increase is

at heightened levels; over the year to March 2011 almost 145,000

more children were born than persons passed away.

New South Wales recording the greatest population increase in raw

numbers while Western Australia is the fastest growing state

• On an annual basis and in raw number terms, New South Wales has

recorded the greatest increase in population over the 12 months toMarch 2011.

• In terms of raw number population growth, the population of New

South Wales increased by more than 82,000 persons over the year,

greater than the 81,000 persons in Victoria and 73,000 persons in

Queensland.

• In percentage terms Western Australia still leads the way with the

population increasing at a rate of 2.2 percent followed by 1.8 percent

growth in the Australian Capital Territory. Nationally, the population

has grown at a rate of 1.4 percent over the last year, its slowest

annual growth rate since September 2005.

• Fundamentally, an increasing population fuels demand for housing.

With more children being born and an above average number of

migrants moving to Australia, a greater number of dwellings need tobe built in order to cater to this demand.

• The vast majority of population growth is occurring in the major

population centres such as Sydney, Melbourne and to a lesser degree

Brisbane and Perth. This growth results in additional competition for

housing and essential services within these regions.

Quarterly population growthMar‐83 to Mar‐11

Annual population growth by stateYear to March 2010



Commodity price index Jul‐83 to Jul‐11




0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%


% o f F i r s t H o m e B u y e r H o m e L o a n s

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Jun‐86 Jun‐91 Jun‐96 Jun‐01 Jun‐06 Jun‐11

Total quar terly dwelling commencements

Quarterly change in population growth

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Jun‐01 Jun‐03 Jun‐05 Jun‐07 Jun‐09 Jun‐11 N u m b e r o f c o m m e n c e m e n t s o v e r q u a r t e r

Quarter

Pr iva te house s 12 m onth a ve ra ge Pr iva te uni ts 12 m onth a ver ag e

p.19

Housing Data

New housing supply shows a short lived improvement

• Although Australia’s population has been growing strongly and has

recently been at record levels, dwelling commencements have not

been sufficient to cater to increasing demand through an increase

in population.

• Dwelling commencements have still not returned to those levels

recorded between 2002 and 2003.

• The data shows that the number of commencements has fallen by

‐18.6 percent over the year and commencements have fallen by

‐4.7 percent over the last quarter.

• More recent building approvals data has shown further weakness

between June and September.

• This result suggests that commencements will trend lower over the

next quarter.

• In the June 2011 quarter there were 22,709 commencements of

private houses and 13,580 commencements of private units.

• Compared to 12 months previous, private sector house

commencements had fallen by ‐15.5 percent for the quarter and

unit commencementswere up 3.1 percent.

Theimbalancebetween housing demand and supply persists

• The demand / supply imbalance is highlighted by many reports from

a number of Government departments and private institutions.

With fewer dwellings being constructed, the supply shortage will

continue to be exacerbated. It is likely the shortage of housing will

worsen as the population grows further and required dwelling

approval and commencement targets continue to go unfulfilled.

• Despite the fact that migration is decreasing, the current level of

population growth remains well above long term averages which

indicates that in order to cater for this demand the country will be

required to construct an above average volume of new homes.• The adjacent graph highlights that although population growth has

taken off in recent years the number of new dwelling

commencements has well and truly been unable to keep pace.

• With population growth now slowing, it will likely be the case that

housing demand and supply start to once again converge,

particularly in markets such as Victoria where housing construction

has been much more prevalent.

First home buyers remain on the sidelines

• First home buyer activity has weakened markedly since peaking at28.5 percent of the owner occupier market in May 2009.

• In September 2011, first home buyers accounted for 16.4 percent

of all owner occupier commitments, the highest proportion since

May 2010 (16.5 percent).

• In both volume terms and percentage of owner occupier sales, first

home buyer activity is well below the five year average

(representedin red).

• The decline in first home buyer activity was predictable given that

the Federal Government was offering incentives during 2008 and

2009 at the same time in which interest rates were at their lowest

levels in almost 50 years. These conditions attracted many first

time buyers into the housing market.

• Over the year, first home buyer commitments are up by 11.6percent.

• Although the number of commitments have improved they remain

at low levels. With interest rates having been cut in November we

may see an improvement in first home buyer volumes in the coming

months.

Dwelling commencements houses vs. units (private sector) Jun‐01 to Jun‐11


Dwelling commencements vs. population growth Jun‐86 to Jun‐11

First home buyer finance commitmentsProportion of FHB commitments vs. total owner occupier commitments





1.8%

2.3%

3.5%

4.2%

4.6%

5.2%

6.0%

8.6%

10.1%

12.5%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%

New dwelling purchase by owner‐occupiers

Maintenance and repair of the dwelling

Other housing

Housing

Rents

Property rates and charges

Gas and other household fueld

Water and sewerage

Utilities

Electricity

0

10,000

20,000

30,000

40,000

50,000

60,000

S ep‐9 3 Sep‐ 95 Sep‐ 97 Sep‐9 9 S ep‐ 01 Sep‐ 03 Sep‐0 5 S ep‐0 7 Sep‐ 09 Sep‐ 11

F i n a n c e c o m m i t m e n t s

Refinances

Total excluding refinances

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5


V a l u e o f C o m m i t m e n t s ( $ b i l l i o n )

Investment 3 per. Mov. Avg. (Investment)

p.20

Housing data

Investor activity improves but remains relatively low

• With property values having fallen over each capital city in the past

12 months, investment purchases have also subsided.

• Clearly, many of the investors active in the market over recent times

have been focusing on capital gains rather than rental return. With

the prospect of significant capital gains limited for the meantime,

many investors are either inactive or looking at other investmentvehicles.

• In September 2011 the total value of investor finance housing

commitments was recorded at $6.5 billion, which was well down

from the $7.3 billion peak during May 2010. Interestingly, the total

value of investment finance commitments peaked at the top of the

market in terms of capital growth.

• The $6.5 billion of investor finance equates to almost 31 percent of

the value of all finance commitments over the month, which remains

below the ten year average of one third.

• Over the past 12 months, the total value of investor finance

commitmentshas fallen by ‐1.3 percent, highlighting their inactivity.

Owner occupier finance commitments increase from a low base over

recent months

• In September 2011, the total number of owner occupier loan

commitments was up 2.2 percent over the month and compared to

September 2010, volumes were up by 7.6 percent.

• Looking at the components of the data it is clear most market

demand is within the established homes sector of the market.

Commitments for the construction of new dwellings were down ‐1.1

percent for the year, commitments for the purchase of new dwellings

were up 0.4 percent for the year and loan commitments for the

purchase of established dwellings increased by 9.0 percent for the

year.

• Almost 35 percent of all finance commitments over the month were

for refinances with the remaining 65 percent non‐refinance loan

commitments.

• Over the year, refinance commitments have increased by 25.8

percent while non‐refinance commitments have fallen by ‐0.2

percent.

• The strong level of refinance activity is reflective of the current high

levels of competition within the home loan market.

Water, electricityand utilities increase sharply

• Each component of CPI is broken down into sub categories which

influence the overall performance.

• Over the past year housing costs have increased by 4.2 percent and

all housing sub categories have increased with the largest occurring

for: electricity (12.5 percent), utilities (10.1 percent), water and

sewerage (8.6 percent) and gas and other household fuels (6.0

percent).

• Although housing costs have increased over the year, new dwelling

purchase by owner occupier costs (1.8 percent) have recorded the

smallest increase of any housing sub category.

• Rental costs are beginning to rise, up 4.6 percent over the year

according to the CPI data.

• Over the last ten years water and sewerage costs have increased at

an average annual rate of 7.8 percent, electricity costs haveincreased at an average annual rate of 7.2 percent and utilities have

increased by 7.1 percent annually.

• By comparison: new dwelling purchase by owner occupiers costs

have increased by 3.8 percent annually over the same period and

rents have increased by 4.1 percent annually.

Total value of investment finance commitmentsSep‐01 to Sep‐11

Owner occupier refinance vs. non‐refinance commitmentsSep‐93 to Sep‐11



Annual change in Housing CPI sub categoriesYear to September 2011



http://slidepdf.com/reader/full/quarterly-review-nov111 21/22p.21

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In compiling this publication, RP Data has relied upon information supplied by a number of external sources. The publication is supplied on

the basis that while the RP Data believes all the information in it is deemed reliable at the time of publication, it does not warrant its

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Queensland Data

© The State of Queensland (Department of Environment and Resource Management) 2011. Based on data provided with the permission of

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reason.

South Australian Data

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New South Wales Data

Contains property sales information provided under licence from the Land and Property Information (“ LPI”). RP Data is authorised as a

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Quarterly Review NOV11[1]

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