Bundaberg Property Watch Q2 2012

BUNDABERG LGA OVERVIEW

The following Property Watch report is the result of an investigation into the
historic and current market trends of the Bundaberg Local Government Area
(LGA) with an additional focus on the Bundaberg Coastal Area, which
encompasses the suburbs of Bargara, Coral Cove, Innes Park, Burnett Heads
and Elliott heads.

The Bundaberg LGA property market has experienced a continued weakening in
sales activity during the six months to March 2012, with house and unit markets
registering fewer transactions than that recorded for the corresponding period in
2011. Land transactions on the other hand remained on par with that registered
for the March 2011 half year period. A notable commonality shared across all
property markets is that the level of sales activity recorded during the most recent
six month period reflects the lowest level recorded in over a decade. The house
market registered a total of 553 transactions in the six months to March 2012,
representing a decrease of 19 per cent from the previous September 2011 half
year period. The unit market held up slightly better to register a total of 83
transactions during the same period, representing a decrease of 8.8 per cent
from the previous September 2011 half year period. Land sales improved
marginally to register a total of 192 sales, translating to a 6.1 per cent increase
from the previous September 2011 half year period.

Restrictive planning practice upheld by the former Local Labour Government has
indeed exacerbated the current state of the market in Bundaberg. Excessive red
and green tape and cumbersome infrastructure charges have squandered many
opportunities for development in the area. Specifically, the excessive timeframes
to approve development have delayed or deterred developer activity, with major
developments currently waiting for the new council to expedite the process.

The median house price remained rather stagnant since 2008, with exception to
inflationary pressures brought about by government stimulus evidenced in the
September 2009 half year period. The median house price recorded for the
March 2012 half year period was $290,000, contributing to a low five year
average annual growth rate of 2.6 per cent. The upside of this is that houses
have remained very affordable since 2008, which compared to other regional
towns is very attractive to both first home buyers and those who are either
upgrading or downsizing. The House Price Points chart indicates the $250,000 to
$299,999 price bracket to be consistently the most popular range for houses.

The median unit price has demonstrated a greater sensitivity to fluctuations in the
market, recording a final median price of $290,000 for the March 2012 half year
period. After a slump following the cessation of incentives on the 1st of January
2010 and increasing interest rates that ensued, demand for well-appointed unit
stock has driven the median price back up towards its historic peak of $295,000.
The five year average annual growth rate was marginally weaker than the house
market at 2.2 per cent. Though liken to the house market, the Unit Price Points
chart indicates a dominate portion of buyers have consistently transacted in the
$250,000 to $299,999 price bracket in recent years.

The implications of affordable housing on rental price growth has been quiet
significant over the past three years to March 2012. The average annual growth
rate for both house and unit product across all types was 1.3 and 3.0 per cent,
respectively. One bedroom units have demonstrated the largest growth in the
market, with an average annual growth rate of 5.6 per cent. As housing is
expected to remain largely affordable for the foreseeable future, weak capital
gain prospects and low cash flow returns is discouraging the interests of the
investor segment which has made very little impact to sales in the current market.

BUNDABERG COASTAL AREA OVERVIEW

The Bundaberg Coastal Area house market registered a total of 111 transactions
in the six months to March 2012, representing a 12 year low for the area. A
softened median price of $320,000 recorded in the six months to March 2012 is
the result of fewer transactions in the $500,000 plus market and perhaps like the
wider region, more emphasis on the $250,000 to 299,999 price bracket. This
suggests that despite relative affordability, a large number of buyers are still
searching the market for a bargain. With very few vendors reluctant to discount
already well-priced property, sale volumes in recent years have struggled to
regain momentum.

As depicted by the Bundaberg Costal Area House and Unit Sales Cycle chart
below, the unit market has been quite volatile with considerable fluctuations in the
median price and sales activity. The six months to March 2012 has bucked the
regions trend to register a total of 42 transactions, representing an increase of
90.9 per cent from the corresponding period in 2011. Following an
underperforming market in both March and September 2011 half year periods,
activity has trended back up with growing interest from relocating workers from
mining and resource centric towns further north. However, regardless of higher
than average household income, this particular segment of the market is also
probing the market for value. Observing the Unit Price Points chart, a notable
decrease in the $500,000 plus market can be seen, which has in turn resulted in
the current median price of $344,500.

The superior value proposition and lifestyle offering available in the Bundaberg
Coastal Area market is contributing to the growing trend of workers in the
resource sector relocating to escape the excessive property and rental prices.
With decreasing interest rates (25 basis points in June, and further cuts
anticipated in the course of the year), and a reinstatement of transfer duty
concessions to previous owners of property from the 1st of July, it is anticipated
that enquiry and sales will recover by the end of the year. The medium to long
term prospects for the area under a new local government appear positive, with
growth in the region a priority for key decision makers. Facilitating growth in the
region is sure to renew investor confidence and ultimately improve market
fundamentals.