INNER BRISBANE APARTMENT MARKET

WINTER 2016 MARKET TRENDS Strong growth in dwelling approvals and finance commitments. Some approved developments being postponed on the back of fears of oversupply. INNER BRISBANE APARTMENT MARKET This report examines current trends and conditions in the Inner Brisbane multidwelling market. We define the Inner Brisbane market to comprise of five core precincts; the CBD, Inner North, Inner South, Inner East and. Tightening in lending criteria and regulations. Declining rental rates. Vacancy continuing to increase equilibrium across the majority of Inner Brisbane suburbs. Development site values within the CBD and near city suburbs to decrease 20% - 30%, with development site values within middle and outer ring suburbs holding. IN THIS REPORT Market Overview 1 Key Residential Influences 2 Supply 6 Sales Activity 7 Rental Market 9 Outlook 11 KEY INDICATORS Precinct Median Unit/Townhouse Price (2016 to date) Unit/Townhouse Capital Growth (CAGR 2005 to 2015) Median Weekly Rental Rate (Two-Bedroom Units)* Multi-Unit Dwellings Under Construction (Completion 2016/17) Vacancy Rate Range (June 2016) CBD $452,500 2.9% $570 1,377 4.9% Inner North $495,000 3.6% $435 - $500 4,303 3.4% - 8.1% Inner South $461,000 4.4% $345 - $510 5,285 2.2% - 5.5% Inner East $475,500 4.7% $350 - $475 1,331 2.6% - 4.8% $448,500 4.8% $395 - $425 1,554 3.2% - 5.4% Source: Median Price and Capital Growth: RP Data; Median Weekly Rental Rate: Residential Tenancies Authority; Dwellings Under Construction: BCI Australia; Vacancy Rate: SQM Research; m3property. Notes: * Based on sample of suburbs analysed within the precinct.

Millions KEY RESIDENTIAL INFLUENCES INVESTOR HOUSING FINANCE Investors have been particularly active in the residential market over the past two years, and finance for the construction of new dwellings in Queensland is currently at its highest level since prior to the onset of the GFC. Figures from the ABS indicate the number of investor finance commitments in Queensland increased by 34.6% over the year-ending May 2016 (from the yearending May 2015). The total value of investor finance commitments for the construction of new dwellings was approximately $134 million during the month of May 2016. $3,000 $2,500 Finance for the Construction of New Rental Dwellings $2,000 $1,500 $1,000 11111111 $500 $0 Source: ABS, m3property Year-Ending First home buyers accounted for 13.9% of national owner-occupier housing finance commitments in May. The average loan size for first home buyers was $326,400. National housing affordability decreased 3.7% during the June 2016 quarter and was 2.1% lower than it was in the June 2015 quarter. QUEENSLAND FIRST HOME OWNERS GRANT The Queensland First Home Owners Grant (previously the Great Start Grant and prior to this, the First Home Owner Construction Grant) was implemented by the Queensland State Government in the 2012-13 State Budget. The grant applies to new dwellings (capped at $750,000) being purchased by first home owners to be used as the principal place of residence. As at 30 April 2016, there had been 17,916 grants paid across Queensland (since the Grant s implementation in September 2012), of which, 843 were for dwellings in the Brisbane Inner City Statistical Area Level 4. As part of the 2016-17 State Government Budget, the value of the grant was increased from $15,000 to $20,000 for a 12-month period starting 1 July 2016. AFFORDABILITY Housing affordability is a significant factor driving residential investment and the entry of owner occupiers into the market. Cost of finance compared to income levels, government grants and taxation, and dwelling prices are all factors that influence the affordability of property. According to the HIA Housing Affordability Index (June 2016), housing affordability in Brisbane deteriorated 0.2% from the March to June quarter and 3.1% over the year from the June 2015 quarter. The deterioration in affordability is largely the result of an increase in the median dwelling price over this period. Furthermore, earnings growth in Queensland is currently the weakest of all states and territories. Comm3ntary Winter 2016 P2

KEY RESIDENTIAL INFLUENCES DWELLING APPROVALS During the 2016 financial year (to end of May), there have been 9,504 non-house dwellings approved in Inner Brisbane. The Inner South precinct has accounted for 39.4% of approvals and the Inner North precinct has accounted for a further 23.6%. Over the past five financial years (current financial year to May only), there have been 30,769 non-house dwellings approved within Inner Brisbane. The Inner North has accounted for 39.9% of approvals (12,288 approvals) and the Inner South has accounted for 30.5% of approvals (9,396 approvals). The South Brisbane, Brisbane City and Newstead Bowen Hills SA2s have seen the largest number of nonhouse dwellings approved during the 2016FY to date. 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Precinct / SA2 CBD Inner North Inner South Inner East 2012FY 2013FY 2014FY 2015FY 2016FY to May Source: ABS, m3property Non-House Dwelling Approvals Number of Approvals 2016FY to May CBD 1,828 Brisbane City 1,731 Spring Hill 97 Inner North 2,247 Albion 63 Ascot 88 Fortitude Valley 53 Hamilton 327 Kelvin Grove Herston 19 New Farm 28 Newstead Bowen Hills 1,501 Wilston 0 Windsor 168 Inner South 3,749 Annerley 100 Fairfield Dutton Park 33 Greenslopes 164 Highgate Hill 12 South Brisbane 2,084 West End 766 Woolloongabba 410 Yeronga 180 Inner East 1,394 Balmoral 24 Bulimba 55 Camp Hill 44 Coorparoo 468 East Brisbane 189 Hawthorne 23 Kangaroo Point 328 Morningside - Seven Hills 181 Norman Park 82 286 Ashgrove 0 Auchenflower 18 Bardon 84 Newmarket 10 Paddington Milton 46 Red Hill 0 St Lucia 82 Taringa 35 Toowong 11 Source: ABS, m3property Comm3ntary Winter 2016 P3

KEY RESIDENTIAL INFLUENCES According to the RBA s (May 2016) Statement on Monetary Policy, the changes enforced by APRA have had the desired result of a decline in turnover in the housing market and slower growth in the average size of loans. Changes to lending to foreign buyers have the potential to see a number of contracts not proceeding to settlement, particularly given the large number of off-the-plan unit sales to overseas buyers that have occurred over recent years. REGULATORY CHANGES Over the past year, there have been a number of changes to lending practices and legislation that have had an effect on domestic and offshore investor demand. A summary of major changes is provided below. In late 2015, the Australian Prudential Regulation Authority (APRA) introduced measures to force banks to slow growth in their housing investor loan portfolios. As a result of these requirements, the major banks tightened their credit requirements and raised interest rates for property investors. All four major banks have recently enforced stricter borrowing requirements on foreign buyers by tightening their rules on the source of income and increasing the size of deposits required. These changes have been implemented as a result of increased concern regarding fraud and money laundering by offshore purchasers. Notable changes include: o o o o o maximum loan-to-value ratios for foreign buyers of 70% (previously 80%) for CBA, Westpac and ANZ, and 60% (previously 70%) for NAB; no lending to applicants with 100% foreign income (ANZ); no lending to applicants using self-employed foreign income where borrowers are residents receiving foreign currency income (CBA); no lending to offshore customers who are not citizens or residents of Australia with an eligible visa (Westpac); and no lending to offshore applicants who do not have existing Australian income (NAB). As part of the 2016-17 State Government Budget, a 3.0% surcharge on stamp duty for foreign buyers, referred to as the Additional Foreign Acquirer Duty, will come into effect from 1 October 2016. This move is in-line with Victoria and New South Wales who have also recently announced the introduction / increase of stamp duty surcharges for foreign purchasers. This has the potential to have a major impact on confidence in the residential market. The major banks appetite for development funding has declined over the past year, largely due to increased settlement risk at the end of the project. Banks have typically tightened their lending criteria, requiring lower loan-to-value ratios and a larger amount of presales. Some banks are also reportedly not lending for particular projects (based on location) due to fears of oversupply in the location. The Federal Government s withholding tax regime legislation started on 1 July 2016. Under the new legislation, vendors selling a property for over $2 million will need to apply for a clearance certificate showing they are an Australian resident to avoid the purchaser withholding 10% tax from the purchase price and paying that amount to the Australian Tax Office. The tax is limited to taxable Australian property including real property (land, buildings, residential and commercial property). Because the legislation is only applicable to property transactions with a market value of over $2 million, we expect that the majority of dwelling sales will be unaffected by the tax. It is important to note, however, that development site sales over $2 million will attract the tax unless the vendor has a clearance certificate. CONSTRUCTION COSTS According to data from the ABS, the cost of other residential building construction (excludes houses) in Queensland has increased 11.6% over the past two years (March 2014 quarter to March 2016 quarter). This is the strongest growth across all states and territories and compares to national growth of 4.2% over this period. It has been reported that concerns surrounding rising construction costs have resulted in a number of major approved projects being postponed. For example, Gurner Property Group s 184-apartment project on Alfred Street in Fortitude Valley will reportedly not be developed during the current residential cycle due to the escalation of construction prices in Brisbane in the past 12-18 months (AFR, New apartments approved but developers hold out for the next property cycle, 23 June 2016). Comm3ntary Winter 2016 P4

KEY RESIDENTIAL INFLUENCES Star Entertainment Group has also unveiled plans for a new 700-room hotel and apartment tower at Jupiters Casino at the Gold Coast. The development would take the current $345 million redevelopment to $850 million and also includes future development options with up to five hotels / apartment buildings and recreational facilities. AEG Ogden has also drafted a proposal for an arena complex at the Parmalat site in South Brisbane. The proposal only includes the arena facility (without the public space and ancillary facilities), given the site having a much smaller area. MAJOR BRISBANE INFRASTRUCTURE PROJECTS There are a number of major projects planned which we expect would boost the desirability of living in Inner Brisbane, and thus contribute positively to demand over the longer term (if they proceed). Star Entertainment Group s proposed $3 billion Queen s Wharf Development will include over 50 new bars and restaurants, over 1,100 hotel rooms across five new hotel brands, 2,000 residential apartments across three new towers, over 12 football fields of public space, a pedestrian bridge to South Bank and function area and new retail space (including the conversion of the Treasury Building to retail). Construction is anticipated to commence in 2017 with the entire project estimated to be completed in 2024 (the development will be staged, however, with the Integrated Resort component scheduled for completion in 2022). AEG Ogden has recently announced plans for the $2 billion Brisbane Live Entertainment Precinct. The plans include a new 17,000 seat arena situated above the Roma Street rail lines (and stations for the proposed Cross River Rail Link and Brisbane Metro), 12 hectares of public space, cinemas, and a number of restaurants and bars. A longer-term masterplan could include up to 4,000 apartments, a hotel, high-rise offices, medical facilities, cultural facilities and an education campus. The project would be privately funded. The Brisbane City Council has proposed a $1.54 billion Brisbane Metro system. The high-frequency subway system would link Woolloongabba to Herston, and would be constructed over six years. It would be segregated from the road network, involve the Victoria Bridge being converted to a Green Bridge (no cars) and largely be underground. The Brisbane City Council has allocated $16 million to develop the business case for the construction of the Brisbane Metro in the 2016-17 budget. The Cross River Rail is a proposed 10.2 kilometre rail link from Dutton Park to Bowen Hills, with 5.9 kilometres of tunnel under the Brisbane River and CBD. The project would connect the northern and southern rail networks, with stations planned at Boggo Road, Woolloongabba, Albert Street and the Exhibition showgrounds. The $5.2 billion project has an estimated construction timeframe of five years. The State Government has recently committed $50 million as part of the 2016-17 budget to establish a Cross River Rail Delivery Authority. In addition, $634 million has been committed over the next eight years to establish a new rail signalling system for the project. Proposed Brisbane Live Entertainment Precinct Source: AEG Ogden Pty Ltd 2016 Comm3ntary Winter 2016 P5

Billion SUPPLY RESIDENTIAL WORK COMPLETED - QUEENSLAND The total value of new residential work completed in Queensland has increased over the past four years. Growth of 24.6% in total completions from the year-ending March 2015 to the year-ending March 2016 was driven by strong growth in nonhouse completions (up 39.5%). The two leading indicators of residential supply / work completed are building approvals and finance commitments. Across Queensland, housing finance has increased considerably over the past year and building approvals have remained relatively stable. These indicators suggest that residential completions across Queensland will continue to increase during the remainder of 2016. The total value of new residential work completed in Queensland during the year-ending March 2016 was $11.43 billion. $8 $7 $6 $5 $4 $3 $2 $1 $0 Qld Value of New Residential Work Completed House Non-House Source: ABS, m3property Year-Ending STOCK UNDER CONSTRUCTION INNER BRISBANE It is well documented that there are a large number of apartments under construction and due for completion over coming years in the Inner Brisbane market. According to BCI Australia, during 2016 there will be an estimated 5,710 multidensity dwellings completed (across developments with 10 or more dwellings that are currently under construction or have been completed within the first half of this year) within the Inner Brisbane market. In addition, there is an estimated 8,140 multi-density dwellings currently under construction that are expected to be completed during 2017. As shown on the following chart, the Inner South and Inner North precincts account for the majority of these expected completions. Stock Under Construction Expected to be Completed in 2016 and 2017 In addition to stock under construction, there are a large number of approved developments in the Inner Brisbane market that are yet to commence construction. CBD Inner North Inner South 1,377 4,303 5,285 Inner East 1,331 1,554 0 1,000 2,000 3,000 4,000 5,000 6,000 Number of Dwellings Source: BCI Australia, m3property Comm3ntary Winter 2016 P6

SALES ACTIVITY NUMBER OF SALES The following chart shows the number of unit and townhouse sales recorded with RP Data per annum across the Inner Brisbane market over the past decade. The number of sales in the Inner Brisbane market peaked in 2007 prior to the onset of the GFC. Following this, there was a more subdued level of sales activity for a number of years, with the number of sales bottoming in 2011. While the number of sales for 2016 to date looks low in comparison with previous years, it is important to note that there is typically a delay of several months between the sale occurring and the sale being registered with RP Data. Number of Sales 9,000 8,000 CBD Inner North Inner South Inner East 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: RP Data, m3property to date From 2005 to 2015 there was an average of 6,812 sales per annum recorded across the Inner Brisbane market. During 2015, there were 7,019 sales recorded, down 13.9% from 2014 and 17.1% from the post-gfc peak of 8,465 sales in 2013. The Inner North accounted for the largest proportion of sales (30.9%) during 2015, followed by the Inner East (20.4%), (17.7%), Inner South (17.5%) and CBD (13.5%). During 2016 to date (sales recorded with RP Data as at 20 July 2016), there have been 2,251 unit and townhouse sales. By precinct, the proportion of sales largely follows the same trend as seen during 2015. The following table shows the top ten Inner Brisbane locations according to the highest number of sales recorded over the five years from 2011 to 2015 (and inclusive of 2016 to date). Location Precinct Number of Sales Newstead - Bowen Hills (including Teneriffe) Inner North 3,814 Brisbane City (including Petrie Terrace) CBD 3,807 Fortitude Valley Inner North 2,308 South Brisbane (including South Bank) Inner South 2,055 Kangaroo Point Inner East 1,835 New Farm Inner North 1,757 Hamilton Inner North 1,635 Kelvin Grove - Herston Inner North 1,421 West End Inner South 1,412 Source: RP Data, m3property Windsor (Inner North) experienced the strongest compound annual growth in the number of sales per annum over the five years to 2015 (30.1%), following by West End (Inner South) and Morningside Seven Hills (both 13.8%). Strong growth was also seen in the locations of Red Hill, Toowong, Paddington Milton and Bardon (all above 10.0%). Comm3ntary Winter 2016 P7

SALES ACTIVITY MEDIAN PRICES The median price of units and townhouses in Inner Brisbane 2015 during was $490,000. The median price grew at a compound annual growth rate of 4.1% from 2005 to 2015. During 2016 to date (sales recorded with RP Data as at 20 July 2016), the median price was $468,000. The following table shows the median price of units and townhouses by precinct during 2016 to date. The median price is highest in the Inner North. The median price of $468,000 in Inner Brisbane compares with a median price across the wider Brisbane City LGA of $430,000 and a median price of $392,250 in the Greater Brisbane Region (includes Moreton, Redland, Logan and Ipswich LGAs). The most affordable SA2s (based on median prices to date in 2016) are Spring Hill, Red Hill and Greenslopes. The Windsor SA2 experienced the strongest annual growth of all Inner Brisbane locations from 2005 to 2015 (6.6%). The Inner Brisbane market experienced compound annual growth of 4.1% between 2005 and 2015. Precinct Median Sale Price 2016 CBD $452,500 Inner North $495,000 Inner South $461,000 Inner East $475,500 $448,500 Inner Brisbane Market $468,000 Source: RP Data, m3property The SA2s with the highest median prices to date in 2016 are Hawthorne (Inner East) - $605,000; Camp Hill (Inner East) - $595,000; and Bulimba (Inner East) - $591,500. Between 2005 and 2015, median price growth was strongest in the and Inner East precincts (4.8% and 4.7% compound annual growth respectively). Growth in the CBD has averaged 2.9% per annum, while growth in the Inner North and Inner South has averaged 3.6% and 4.4% respectively. The following chart shows compound annual growth rates for all SA2s across Inner Brisbane from 2005 to 2015. Windsor Woolloongabba Annerley Highgate Hill Balmoral Yeronga Toowong Coorparoo Wilston Morningside - Seven Hills Hawthorne Bardon Paddington/Milton Norman Park St Lucia Bulimba East Brisbane Ascot Kelvin Grove - Herston Spring Hill West End Taringa Inner Total Brisbane Inner Brisbane Market New Farm Hamilton Albion Ashgrove Red Hill Greenslopes Newstead - Bowen Hills Newmarket Auchenflower Kangaroo Point Camp Hill South Brisbane Fortitude Valley Brisbane City Fairfield - Dutton Park CAGR by SA2 1.2% 4.7% 4.7% 4.7% 4.7% 4.6% 4.5% 4.4% 4.4% 4.1% 4.1% 4.1% 4.1% 4.1% 4.0% 3.8% 3.8% 3.8% 3.7% 3.5% 3.5% 3.5% 3.4% 3.2% 3.1% 2.7% 2.5% 6.6% 6.3% 5.7% 5.6% 5.4% 5.3% 5.2% 5.2% 5.1% 5.0% 5.0% CBD Inner North Inner South Inner East 0% 1% 2% 3% 4% 5% 6% 7% Comm3ntary Winter 2016 P8

RENTAL MARKET MEDIAN WEEKLY RENTS The following table shows median weekly rents for the June 2016 quarter for residential units across a selection of Inner Brisbane locations. We have not included all locations within the Inner Brisbane market due to the Residential Tenancies Authority (RTA) grouping data according to postcode (and thus some postcodes include additional suburbs outside of the area we have defined as the Inner Brisbane market). Precinct / Suburb CBD One- Bedroom Two- Bedroom Three- Bedroom Brisbane City and Spring Hill $400 $570 $800 Inner North Ascot and Hamilton $400 $435 $490 Fortitude Valley and Newstead - Bowen Hills $360 $480 $650 New Farm $370 $500 $680 Inner South Greenslopes $260 $355 $370 South Brisbane, West End and Highgate Hill $350 $510 $725 Yeronga $285 $345 $450 Inner East Balmoral, Hawthorne and Bulimba $300 $450 $525 Coorparoo $290 $350 $450 Kangaroo Point and East Brisbane $340 $475 $585 Ashgrove $230 $425 $395 Paddington - Milton $360 $410 $730 Toowong and Auchenflower $320 $395 $500 Source: RTA, m3property The chart below shows average annual growth in median weekly rental rates for the above-noted selection of Inner Brisbane locations over the past year, five years and ten years. 6% 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% Growth in Median Weekly Rental Rates One-Bedroom Two-Bedroom Three-Bedroom 0.3% -1.9% 1.5% 1.6% 1.7% 5.0% 4.2% -3.4% One-Year Five-Year Ten-Year Source: RTA, m3property 3.8% There was strong growth in the number of rental bonds lodged from the June 2015 to the June 2016 quarter (One-Bedroom 18.2%, Two-Bedroom 11.3%, Three- Bedroom 10.9%). Despite stronger demand, however, rental growth over the year was flat / negative. Rental rates have declined / remained flat over the past year. This is in comparison with the stronger average annual growth seen over the past five and ten years. The decline in rental rates over the past year has not, however, been a function of lower demand, evidenced by the total number of rental bonds lodged in the abovenoted locations being 13.9% higher in the June 2016 quarter than the total number of bonds lodged during the June 2015 quarter. Instead, the decline in rental rates is the result of the increased amount of supply in the Inner Brisbane market, which has pushed the vacancy rate above the equilibrium level. Comm3ntary Winter 2016 P9

RENTAL MARKET The Brisbane City LGA vacancy rate of 2.8% is the third highest of all capital cities (behind Perth - 5.0% and Darwin 3.0%) and compares with a national vacancy rate of 2.5%. VACANCY SQM Research publishes vacancy rate data for established dwellings (data is not broken down according to type of dwelling). According to SQM Research, as at June 2016, the vacancy rate in Inner Brisbane was 4.5%. This is in comparison to a vacancy rate across Brisbane City LGA of 2.8%. Since 2011, the vacancy rate in Inner Brisbane has followed the long-term trend of a gradual increase. The following chart shows the vacancy rate for Inner Brisbane locations (based on postcodes). As shown by the chart, the majority of locations have vacancy rates higher than the market equilibrium level of 3.0%, indicating there is an oversupply of rental accommodation in these locations. Vacancy Rate - Inner Brisbane Locations As at June 2016, Fairfield, Annerley, Greenslopes, Camp Hill and Coorparoo were the only Inner Brisbane locations with a vacancy rate below the equilibrium level of 3.0%. Fortitude Valley/Newstead/Bowen Hills/Herston South Brisbane/West End/Highgate Hill Norman Park/Morningside/Seven Hills CBD Inner North Inner South Inner East Brisbane City/Spring Hill Ascot /Hamilton Albion New Farm/Teneriffe Windsor Wilston Dutton Park/Woolloongabba Fairfield/Annerley Greenslopes Yeronga Balmoral/Hawthorne/Bulimba Camp Hill Coorparoo Kangaroo Point/East Brisbane Ashgrove Bardon Newmarket Paddington/Milton Red Hill St Lucia Taringa Toowong/Auchenflower Source: SQM Research, m3property 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% Landlords currently have little scope to increase rental rates. The high vacancy rate across the Inner Brisbane market, paired with minimal pricing differential between established and new stock, means that tenants are increasingly moving from established stock into newer, better-located developments with a higher level of facilities than existing stock. While the overall vacancy rate in the large proportion of the locations graphed above is above the equilibrium level of 3.0%, it is important to note that vacancy within suburbs can vary greatly. Some newly developed projects have minimal vacancy while older stock may have a higher level of vacancy (as tenants have moved from older to newer apartments). As shown by the chart, all suburbs within the Inner North and precincts have vacancy rates higher than 3.0%. The vacancy rate in Ascot/Hamilton (8.1%) was the highest of all locations. Increasing vacancy in Inner Brisbane has been a key driver behind the decline in rental rates seen over the past year. The Inner Brisbane rental market has become considerably more competitive as a result of the high vacancy rate and is favourable to tenants. Comm3ntary Winter 2016 P10

m3property Research For more information please contact: OUTLOOK The outlook for the Inner Brisbane apartment market is negative. The Inner Brisbane apartment market has entered into a period of oversupply. This is expected to continue over the short term, given the large number of multi-unit dwellings that have been approved over recent years, of which a considerable proportion are currently under construction. Given the large amount of stock yet to be completed, we expect that vacancy rates in the Inner Brisbane market will remain high over the foreseeable future, and that this will continue to put downward pressure on rental rates. Rental rates are expected to come under the strongest downward pressure in the Inner North and Inner South precincts, given these precincts are expected to see the largest amount of completions over the remainder of 2016 and 2017. They have also accounted for the largest proportions of approvals during recent years. It is expected that tenants will increasingly look to relocate to newly completed developments, given the high level of amenity offered in these developments and the small price differential between new and established stock. In addition to factors negatively affecting supply in the Inner Brisbane apartment market, there are also a number of factors negatively affecting investment demand at present. The tightening of lending conditions and new State Government regulations have had, and will undoubtedly continue to have, an adverse effect on investment demand (particularly foreign investment demand) for multi-unit dwellings. We expect that these factors, which negatively impact on both supply and demand in the Inner Brisbane apartment market over the short term, will encourage the postponement of construction on some approved projects. They are also likely OFFICES Adelaide Brisbane Melbourne Level 3 44 Waymouth Street Adelaide South Australia 5000 T 61 (8) 7099 1800 F 61 (8) 7099 1850 Level 2 15 James Street Fortitude Valley Queensland 4006 T 61 (7) 3620 7900 F 61 (7) 3620 7999 to result in relatively flat capital growth over the foreseeable future. In the CBD and near city market we expect a decrease in development site market values between 20% and 30%, given the significant premium paid for sites above their alternative use value as commercial or industrial properties. The momentum of market values changing will gather pace as developers seek to refinance sites. In the middle and outer ring suburbs the premium paid for development sites was generally not significantly above the underlying residential single lot value and this will provide a floor if the market conditions worsen. As a result, developers are expected to increasingly shift their focus to suburbs that, while in close proximity to the CBD, fall outside of the defined Inner Brisbane market. These locations typically appeal more to the owneroccupier market looking for a boutique development with larger floor plans than what is generally offered in inner-city high-rise developments. Looking further ahead, there are a number of factors that will support occupier demand in the Inner Brisbane market. For example, there are a number of large proposed infrastructure projects such as the Queen s Wharf Development, Brisbane Live Precinct and improved public transport systems, that are expected to increase the desirability of living in close proximity to the Brisbane CBD. Furthermore, the low value of the Australia dollar is expected to continue to support the growing international education sector (and demand for accommodation that emanates from this sector). Level 29 600 Bourke Street Melbourne Victoria 3000 T 61 (3) 9605 1000 F 61 (3) 9670 1658 Perth Sydney Disclaimer Unit 2 168 Stirling Highway Nedlands Western Australia 6009 T 61 (8) 6500 3600 F 61 (8) 6500 3698 Level 23, MLC Centre 19 Martin Place Sydney New South Wales 2000 T 61 (2) 8234 8100 F 61 (2) 9232 5144 info@m3property.com.au This report has been derived, in part, from sources other than m3property. In passing on this information, m3property makes no representation that any information or assumption contained in this material is accurate or complete. To the extent that this material contains any statement as to the future, it is simply an estimate or opinion based on information currently available to m3property and contains assumptions which may be incorrect. m3property makes no representation that any such statements are, or will be, accurate. Research Contact Casey Robinson P 07 3620 7906 casey.robinson@m3property.com.au Key Valuation Contact John Falvey P 07 3620 7905 john.falvey@m3property.com.au Definitions CAGR / Compound Annual Growth Rate: The mean annual growth rate over a period of time. Median Price: Middle value from a set of unit sales over a defined period of time. SA2 / Statistical Area Level 2: A medium sized general purpose area built up from whole Statistical Areas Level 1 (SA1s). Their aim is to represent a community that interacts together socially and economically. SA2 boundaries typically align with suburb boundaries. Precincts: CBD is defined to include suburbs located within the Brisbane City and Spring Hill SA2s. Inner North is defined to include suburbs located within the Albion, Ascot, Fortitude Valley, Hamilton, Kelvin Grove Herston, New Farm, Newstead Bowen Hills, Wilston and Windsor SA2s. Inner South is defined to include suburbs located within the Annerley, Fairfeld Dutton Park, Greenslopes, Highgate Hill, South Brisbane, West End, Woolloongabba and Yeronga SA2s. Inner East is defined to include suburbs located within the Balmoral, Bulimba, Camp Hill, Coorparoo, East Brisbane, Hawthorne, Kangaroo Point, Morningside Seven Hills and Norman Park SA2s. is defined to include suburbs located within the Ashgrove, Auchenflower, Bardon, Newmarket, Paddington Milton, Red Hill, St Lucia, Taringa and Toowong SA2s.