1 A closer look at property investment returns July 2010

2 Agenda An investor’s total return Historical returns by suburb and region Capital returns Gross rental yields Estimated total returns Investment returns by price bracket Market update for major capitals 12 month outlook for: Capital growth Rental yields

3 Investor’s total return Total (before tax) return = Net capital gain + Net rental yield Net capital gain (annual) = Average annual capital growth - any capital improvement costs Net rental yield(annual) = Gross rental yield - related running costs

4 Capital returns in Melbourne by Suburb Source: APM

5 Rental returns in Melbourne by Suburb Source: APM

6 Total returns in Melbourne by Suburb Source: APM

7 Total House returns in VIC by LGA Source: APM

8 Total return – top end vs. bottom end Source: APM

9 What have house prices done? Source: APM

10 What have unit prices done? Source: APM

11 Weekly Asking Rents

12 Weekly Asking Rents

13 Gross Rental Yields Source: APM

14 Gross Rental Yields Source: APM

15 Outlook for next FY Capital growth is slowing due to: Removal of 2009 stimulus 6 nearly consecutive interest rate rises Medium long-term growth prospects still strong due to: Strong population growth Undersupply of new properties Strong employment and income outlook Rents set to outperform in 2010 Continued low vacancy rates (~1.5%, and 0.9% Inner) Strong employment and income outlook Removal of attractive first home ownership alternatives

16 More Information Matthew Bell Economist Ph: