CBRE

1. NSW Residential
www.cbre.com.au/research Third Quarter 2008
Market Overview
Hot Topics Cyclical downturns are nothing new to the property reviewed if they do not wish to seek an artificial spike
market. The remaining months of 2008 and in property prices.
• Sydney house market slides the market outlook for 2009 are likely to prove
It would appear the timeframe set is likely to
challenging but we must remember the meaning of
• Newcastle market wavers only allow developers with existing development
cyclical - something that happens periodically.
approvals in place to take advantage of the increase
• Sydney unit rents steady
Following 2007, a year of divided growth for the in the First Home Buyer Grant. In addition, the NSW
• Wollongong investor haven residential market in New South Wales, 2008 has Government’s Mini Budget will be contradictory in a
been dealt a combination of high interest rates, number of areas to the Federal Government’s stimulus
• What lies ahead for
reduced state population growth and diminishing package. There remains no incentive for developers
the New South Wales
capital growth. These factors resulted in three to venture into “green field” estates, under the burden
residential market? of increased state taxes, and now deferment of critical
consecutive quarterly reductions in Sydney’s house
market prices. Although small, the March 2008 infrastructure such as the North West and South
quarter recorded a drop of 0.15% while June West rail links. Thus, increased demand can only be
decreased by 1.81%, followed by the September serviced by existing stock and any new undertakings
quarter experiencing a further reduction of 0.35%. developed quickly within existing urban areas.
These quarterly decreases have resulted in a 2.31%
Access Economics predicts New South Wales,
drop in Sydney’s house prices over 2008 thus far,
although not there yet, will recover in the short term.
producing a median of $571,000.
That day grows closer with interest rates having fallen
As with all capital cities, increases or decreases in in September, October and November with another
house prices can vary across local governments, cut likely before Christmas, the exchange rate
suburbs and even from street to street. Sydney’s decreasing and petrol prices coming off their peaks.
overall housing downturn of 2.31% in 2008 has All these factors are likely to help restore a weakened
not been experienced in all areas. The September residential market to an upward trend.
2008 quarter recorded capital growth on Sydney’s
ANZ economists also support the notion of a
northern beaches. Suburbs such as North Curl Curl
turnaround for New South Wales. New South Wales
recorded a 4.9% increase in median house price to
is facing a critical shortage of housing buoyed by
$1,252,000 and Collaroy’s house price jumped 4.5%
continued international migration and reduced net
over the September quarter to $1,006,500.
interstate outflows. Therefore, underlying housing
Another result of the current financial and economic demand is running well ahead of new housing supply
conditions in New South Wales is the significant and this gap is likely to widen in coming years. This
reduction in housing construction. Housing ongoing shortfall of housing supply could see the
construction has fallen rapidly in reaction to high current already low rental vacancy rate approach 0%
interest rates, rising construction costs, labour in the years ahead. The current rental vacancy rate
shortages and a downturn in the residential market. is 1%. This, as well as improving affordability with
Nationally, housing starts have dropped by one- interest rates decreasing and incomes increasing,
seventh since early 2004. New South Wales has could be the catalyst for a long awaited upswing in
accounted for two-thirds of the national fall. This New South Wales’ residential building activity and
sector, under normal circumstances, accounts for 5% house prices.
to 6% of the state’s economy.
Although further price softening is expected in the
An increase in housing construction has been seen New South Wales residential market over the coming
over the past month due to an increase in the First months, there are positive signs for a turnaround in
Home Buyer Grant, although much of this activity the near future.
occurs in the sub $500,000 range of the market.
The period set by the Federal Government for the
First Home Buyer Grant (July 2009) may need to be
© 2008, CB Richard Ellis, Inc.

2. Sydney’s Top Performing House Suburbs - September 2008 Quarter
No. of Sales % Growth % Growth Rental Yield
House Market Median Price Median Weekly Rent
(last qtr) (last qtr) (last year) (last qtr)
Church Point 8 $1,473,500 5.04% 12.21% $795 2.82%
Putney 12 $1,181,000 4.99% 16.20% $455 2.01%
North Curl Curl 15 $1,252,000 4.96% 10.69% $845 3.52%
Marsfield 17 $783,500 4.64% 6.21% $505 3.36%
Collaroy 44 $1,006,500 4.54% 9.24% $700 3.64%
Sadleir 6 $263,000 4.47% 10.24% $270 5.35%
Manly Vale 8 $913,500 4.45% 10.76% $535 3.05%
Narraweena 20 $747,500 4.32% 8.69% $605 4.23%
Hammondville 12 $370,000 4.32% 0.68% $330 4.69%
Sydney Houses 10,527 $571,000 -0.35% -0.10% $480 4.38%
Source: Residex (suburbs with >5 sales for the quarter)
Sydney House Market Slides Further
Sydney Median House Price Sydney retains the highest median house price of the Australian capital cities at $571,000
and Sales for the September 2008 quarter, despite there having been no growth in the Sydney market
Median House Price ('000) No. of Sales ('000)
$590 14 over the last year. The housing market has been suffering from a lack of affordability
$570 12
combined with nervous and vulnerable prospective buyers whose inaction has kept the
$550 10
$530 8
lid on prices and sales during the last 12 months. Over the September quarter, growth
$510 6 of approximately 4% continued at the top end of the market especially on the northern
$490 4 beaches, while falls of 4% were experienced in many western suburbs. House sales
$470
Median House Price No. of Sales
2
in Sydney dropped 4.6% over the September quarter while only 1% less than the year
$450 0
04 04 05 0 5 06 06 07 07 08 08
before, which is a positive sign that Sydney house sales are holding steady. Sales activity
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is likely to be assisted by overseas migrant families settling in Sydney, first home buyers
Source: Residex/CBRE Research & Consulting (Sep 2008 Qtr)
Per Week entering the market over the next seven months and the increasing housing demand in
an undersupplied marketplace.
Sydney House Rents and Yields React
Sydney Median House Rent
$600
Weekly rent Following a succession of quarterly rent increases over the past year, Sydney’s median
house rent reduced by $10 per week over the September quarter. A median house rent of
$500
$480 per week retains Sydney’s national ranking at number one, with Darwin following
$400
at $460 per week. This slight rental decline reflects the uncertainty in the general housing
$300
market but is likely to be only a temporary pause. Sydney house rental yields are still
$200
trending upwards from the 3% low in December 2003. The year ending September 2008
$100
Houses (3 Bedrooms)
saw yields increase to 4.38% and expectations for yields reaching 5% by the year’s end is
$0 welcome news for investors. Variations in rental demand are occurring throughout Sydney.
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The middle-western suburbs have experienced rental increases of over 30% in the last
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year, whereas demand has lessened in some harbour side and beachside suburbs. Manly’s
Source: Residex/CBRE Research & Consulting (Sep 2008 Qtr)
median house rent, for example, dropped $125 per week over the September quarter and
Dee Why decreased $85 per week.
Newcastle Market Wavers
Newcastle Houses Newcastle’s bolstering coal export market has supported the local economy, which in
Capital Growth v's Sales Volume turn has promoted growth in the housing market. Relatively isolated to Sydney’s market
Capital Growth No. of Sales ('000) adjustments, Newcastle recorded a 1.08% increase in capital growth over the year to
30% 12
25%
Capital Growth No. of Sales
10
September 2008 and a small decrease of 0.10% for the quarter. The September quarter
20% 8
produced a median house price of $355,500, a weekly rent of $310 and a rental yield
15% 6 of 4.55% (higher than Sydney’s rental yield at 4.38%). House sales have dropped around
10% 4 9% over the September quarter, revealing diminished buyer confidence and resulted in
5% 2 an increased number of properties on the market. The unit market across Newcastle saw
0% 0
the majority of suburbs record healthy growth for the year to September. Newcastle’s unit
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market recorded a 2.45% growth over the year to produce a median unit price of $315,000.
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Source: Residex/CBRE Research & Consulting (Sep 2008 Qtr) Suburbs experiencing the largest unit capital growth over this period included Hamilton
with 12.73% and 10.15% in Mayfield. The weekly median rent for a unit in Newcastle was
$290 producing a rental yield of 4.07% with vacancy rates remaining low at 1.6%.
Page 2
© 2008, CB Richard Ellis, Inc.

3. Sydney’s Top Performing Unit Suburbs - September 2008 Quarter
No. of Sales % Growth % Growth Rental Yield
Unit Market Median Price Median Weekly Rent
(last qtr) (last qtr) (last year) (last qtr)
Putney 5 $553,500 3.33% 17.08% $455 4.28%
Oatlands 8 $433,000 3.13% 16.19% $430 5.18%
NSW Residential
Arncliffe 10 $306,000 2.67% 4.82% $350 5.97%
Constitution Hill 7 $305,500 2.67% 5.44% $355 6.02%
Burwood 38 $430,000 2.64% 9.51% $405 4.90%
Banksia 8 $286,000 2.63% 10.10% $310 5.63%
Holsworthy 18 $363,500 2.60% 12.47% $320 4.62%
Monterey 13 $388,500 2.60% 5.38% $350 4.72%
Sydney Units 9,983 $394,500 -1.67% 1.13% $420 5.56%
Source: Residex (suburbs with >5 sales for the quarter)
Sydney Median Unit Price
and Sales Sydney Unit Market Stagnates
Median Unit Price ('000) No. of Sales ('000)
$500 15
The unit market’s slowdown in growth has been less pronounced than that of the
$400 12
Sydney house market over the last quarter. Sydney retained the nation’s highest
$300 9
median unit price of $394,500, followed closely by Perth with $387,500. A 1.67%
$200 6
drop in unit capital growth over the September 2008 quarter contributed towards
$100 3
an annual growth of only 1.1%. Even so, unit sales increased in the last 12 months
Median Unit Price No. of Sales
$0 0
by over 9.4% to 37,522 sales compared to the previous year to September 2007.
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p This was the largest increase in unit sales of any state capital city over this period.
Per Week By 2031, Sydney requires an estimated 640,000 new dwellings to accommodate
Source: Residex/CBRE Research & Consulting (Sep 2008 Qtr)
its growing population. Two-thirds of these new dwellings will be units concentrated
in and around current transport corridors.
Sydney Unit Rents Steady
Sydney Median Unit Rent
$500
Weekly Rent Sydney is still the most expensive city in which to rent a unit with a median rent
of $420 per week. Sydney’s median rent has increased 10.5% over the year
$400
yet remained steady during the September 2008 quarter. Sydney’s rental yield
$300 remained attractive at 5.6% at the end of September with Darwin being the only
city with a higher yield (6.1%). Rent fluctuations have been far from uniform, with
$200
falls of over 5% recorded in some inner southern suburbs, lower north shore
$100
and northern beach suburbs during the last year. On the other hand, the inner
Units (2 bedrooms)
$0 south-western suburbs of Auburn and Lakemba have benefited from an influx of
overseas migrants increasing rents by 30% and providing investors with rental
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yields of over 6%. Supported by a lack of rental properties, unit rents in Sydney’s
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Source: Residex/CBRE Research & Consulting (Sep 2008 Qtr)
high demand areas are likely to continue their upward climb, which may entice
investors back into the market.
Wollongong Houses Wollongong Investor Haven
Capital Growth v's Sales Volume
House prices in Wollongong over the last two years have remained reasonably
Capital Growth No. of Sales ('000)
25%
Capital Growth No. of Sales
5
steady, recording just under 1% capital growth in 2007 and 2008. The September
20% 4
quarter of 2008 saw a median house price increase of 1.94% to $379,000,
15% 3
replacing the 1.64% decrease of the June quarter. While sales volumes have
10% 2
declined in reaction to tougher financial times, rental yields have increased
5% 1
significantly over the year. The median rent for a house in Wollongong for the
0% 0
September quarter was $350 per week, resulting in a rental yield of 4.82% (higher
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than Sydney house yields). Wollongong’s high unemployment rate of 7.0% is
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offset by a strong investment market. Vacancy rates remain low (1.4%) due to the
Third Quarter 2008
(percentage)
Source: Residex/CBRE Research & Consulting (Sep 2008 Qtr)
university and large industry employers in the area. This is keeping Wollongong’s
rental levels healthy and growth consistent.
Page 3
© 2008, CB Richard Ellis, Inc.

4. NSW Residential
Market Outlook Local Offices
Over the past t wo years, Sydney has experienced Sydney could see fur ther reductions of available SYDNEY
Level 26
t wo distinctive residential markets. The inner rental accommodation if those selling in the lower 363 George Street
city ring and the prestige residential upper end price ranges consist of investors selling existing Sydney NSW 2000
has continued to show buoyancy while Sydney’s rental proper ty to reduce debt or to recover T 61 2 9333 3333
F 61 2 9333 3330
mor tgage belt in the Western and South Western from other financial hardships. A scenario of
CAMDEN
suburbs has generally been depressed since the this nature could see rents skyrocket with no
5 Broughton Street
Christmas/New Year period of 2003. additional available rental accommodation, Camden NSW 2570
despite increasing demand from population T 61 2 4655 8700
Sydney’s prestige sector has sof tened noticeably F 61 2 4655 8766
increases.
however over the six months to September 2008, LIVERPOOL
par ticularly for proper ties over $3 million, which The 2008 Newcastle residential market is Level 5, 26 Castlereagh Street
Liverpool NSW 2170
are experiencing ex tended marketing periods, currently one of sand and soil. Beachside proper ty T 61 2 9608 7933
influenced by a dif ferential bet ween vendors values appear to be holding with a couple of F 61 2 9608 7930
and purchasers price expectations. Prestige benchmark breaking sales recorded this year. NEWCASTLE
auction clearance rates are currently weak with Newcastle’s beachside proper ty benchmark of Suite 1, 101 Hannell Street
Wickham NSW 2293
the outlook for 2009 remaining sof t. There is $4 million in 2007 was trumped when a house T 61 2 4926 6433
now evidence of forced sales occurring in some on Ocean Street in Merewether sold for just F 61 2 4926 6430
prestige suburbs possibly due to demographics under $5.5 million this year. Undoubtedly, such NORTHERN BEACHES
of the area, with many owners in these suburbs high-end sales are infrequent for Newcastle but 477 Pittwater Road
Brookvale NSW 2100
working within the finance, banking, insurance assist in boosting the regional city’s evolution.
T 61 2 9939 6788
and stockbroking industries. F 61 2 9938 2446
Moving inland from the beach, the September
NORTH SYDNEY
Recent interest rate cuts and the revised First quar ter saw Newcastle’s median suburbs react Suite 1401, Level 14
Home Buyer Grant is having an influence in to tougher economic trends with an increased 100 Pacific Highway
Sydney’s Western and South Western real estate number of houses on the market and a significant North Sydney NSW 2060
T 61 2 9954 3333
markets, par ticularly in the sub-$500,000 reduction in buyers. This has caused a slight F 61 2 9954 3332
range. Activity is forecast to increase in the correction in house value of approximately 5%
PARRAMATTA
December quar ter in these areas. over the last six months. Level 5
10-14 Smith Street
Some suburbs closer to the Sydney CBD have The recent interest rate cuts by the Reser ve Bank Parramatta NSW 2150
T 61 2 9891 3330
also benefited with increased market activity of Australia along with the prospect of fur ther
F 61 2 9891 5533
for units in the lower price ranges. Real estate cuts are likely to bring Newcastle’s buyers back
SOUTH SYDNEY
agents on Sydney’s Nor thern Beaches have noted into the market. Agents are eager to dust of f 8a, 11 Lord Street
an increase in activity bet ween the $350,000 “SOLD” stickers and dawn them across “For Botany NSW 2019
T 61 2 9316 8611
and $500,000 price ranges, though purchasers Sale” signs when market activity slowly returns,
F 61 2 9316 8411
still maintain some hesitancy and negotiate to albeit at corrected values.
TELOPEA
achieve a price level acceptable to them. Suite 3,63 Tintern Avenue
Newcastle’s unit rental market has enjoyed
Telopea NSW 2117
Some areas in Western Sydney are repor ting the influx of resource employment and Boeing T 61 2 9873 5599
a shor tage of stock with a number of buyers calling it home, inner city units are the leading F 61 2 9873 4299
actively negotiating on the same proper ty. These choice for these shor t-term renters. This increase TWEED HEADS
Suite 8, 1 Sands Street
activities have not been seen in Western Sydney in demand has accelerated rents, which in turn is
Tweed Heads NSW 2485
since late 2003. likely to entice investors back into the market. T 61 7 5536 2322
F 61 7 5536 7432
Leading into this new round of buyer activity
in the lower end of the Sydney market, fur ther For more information regarding the
reductions in building approvals were witnessed MarketView, please contact:
over the last six months, which were already at Toni McKnight
all time lows. Senior Manager, Residential
CB Richard Ellis (C) Pty Ltd
ABN 64 003 205 552
T 61 7 3833 9773
F 61 7 3833 9830
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CB Richard Ellis Pty Ltd ABN 57 057 373 574, Licenced Estate Agent, Level 26, 363 George Street, Sydney, NSW 2000 T 61 2 9333 3333 F 61 2 9333 3330 ted.hoskin@cbre.com.au