Sippy Downs Property Watch Q2 2012

SIPPY DOWNS MARKET OVERVIEW

The following Property Watch report is the result of an investigation into the
historic and current market trends of Sippy Downs. The Sippy Downs community
is located approximately 90km from the Brisbane CBD, bounded by the Bruce
Highway and Sunshine Motorway to the west and by the Mooloolah River
National Park to the east. Only 10 minutes from the Sunshine Coasts best surf
beaches, the suburb boasts a serene backdrop, with a nexus of eco-spines
delineating the urban form in addition to numerous parks and recreational
facilities. Sippy Downs is also the education hub of the Sunshine Coast, home to
both Chancellor State College and the University of the Sunshine Coast.

The Sippy Downs property market has continued to soften, with recent sales
activity in the house market registering the lowest volume of settlements in over a
decade. The house market registered a mere 38 sales in the six months to March
2012, down 28.3 per cent on the corresponding period in 2011. Land transactions
were also scarce, with only four sales registered during the March 2012 half year
period. Observing the House and Land Sales Cycle below, it can be seen that
activity in the market has diminished considerably since the stimulus driven 2009
period. The key factors driving the markets underperformance in recent years is a
subdued level of demand and diminishing vacant land ripe for residential
development.

During the six months to March 2012, anecdotal evidence attributed
approximately 70 per cent of enquiries and purchases to have come from owner
occupiers, and 30 per cent from investors. New land subdivisions are unlikely to
come to market in the short to medium term as the delivery of existing land
estates remains on hold until such time market fundamentals improve in the area.

As evidenced by the House Price Point Distribution chart below, there has been a
significant shift to lower price points over more recent years. Buyers have
become more reluctant to pay top price for property given the level of uncertainty
surrounding the direction of the local property market and wider economic
environment. Many prospective buyers active in todays market are becoming
more attuned to the state of the Australian housing market and are factoring in
the risk of further falls to capital values when negotiating an acceptable price to
pay for a particular property. In the six months to March 2012, there were very
few transactions recorded over $500,000 compared to previous years. A notable
increase in the sub $350,000 price point during the March 2012 half year period
has also contributed to a falling median house price since the March 2010 half
year period.

Sippy Downs recorded a median house price of $402,500 in the March 2012 half
year period, representing a decrease of 5.3 per cent from the corresponding
period in 2011. Increasing demand for more affordable property is shifting values
down, though not enough for sales activity to regain traction. The land market has
not recorded sufficient sales volumes since the March 2010 half year period to
establish a reliable median land price.

Resales activity has closed the gap between the portion of new and existing
stock selling in the market. During the year to March 2012, 56 per cent of
transactions were from new sales, with the remaining 44 per cent derived from
the established market. In the year to March 2008, the portion of new to existing
stock was 79 to 21 per cent, respectively. With very few land releases, this
reiterates the slowdown of developer activity in the area.

The rental market is perhaps another factor contributing to diluted sales volumes,
with median rents for the 4556 postcode flat across three and four bedroom
house types over the past three years. The relative affordability of renting
(relative to mortgage serviceability) is perhaps delaying many would-be buyers
from entering the market, including potential buyers with more than adequate
financial capacity to do so. With that said, further reductions to interest rates (25
basis points in June 2012 and more anticipated throughout the year) together
with the reinstatement of transfer duty concessions on the 1st of July 2012 are
likely to bolster buyer enquiry and activity in the market. Improved affordability
and revived confidence is likely to support a recovery in the market by the end of
the year.