1

A closer look at property investment returnsJuly 2010

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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

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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

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Total return – top end vs. bottom end

Source: APM

9

What have house prices done?

Source: APM

Mar

-03

Jun-

03

Sep-0

3

Dec-0

3

Mar

-04

Jun-

04

Sep-0

4

Dec-0

4

Mar

-05

Jun-

05

Sep-0

5

Dec-0

5

Mar

-06

Jun-

06

Sep-0

6

Dec-0

6

Mar

-07

Jun-

07

Sep-0

7

Dec-0

7

Mar

-08

Jun-

08

Sep-0

8

Dec-0

8

Mar

-09

Jun-

09

Sep-0

9

Dec-0

9

Mar

-10

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000Median House Price (Quarterly)

Sydney

Mel-bourne

Brisbane

Adelaide

Perth

National

10

What have unit prices done?

Source: APM

Mar

-03

Jun-

03

Sep-0

3

Dec-0

3

Mar

-04

Jun-

04

Sep-0

4

Dec-0

4

Mar

-05

Jun-

05

Sep-0

5

Dec-0

5

Mar

-06

Jun-

06

Sep-0

6

Dec-0

6

Mar

-07

Jun-

07

Sep-0

7

Dec-0

7

Mar

-08

Jun-

08

Sep-0

8

Dec-0

8

Mar

-09

Jun-

09

Sep-0

9

Dec-0

9

Mar

-10

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

Median Unit Price (Quarterly)

Sydney

Mel-bourne

Brisbane

Ade-laide

Perth

National

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Weekly Asking Rents

Sep-0

3

Dec-0

3

Mar

-04

Jun-0

4

Sep-0

4

Dec-0

4

Mar

-05

Jun-0

5

Sep-0

5

Dec-0

5

Mar

-06

Jun-0

6

Sep-0

6

Dec-0

6

Mar

-07

Jun-0

7

Sep-0

7

Dec-0

7

Mar

-08

Jun-0

8

Sep-0

8

Dec-0

8

Mar

-09

Jun-0

9

Sep-0

9

Dec-0

9

Mar

-10

$150

$200

$250

$300

$350

$400

$450

$500

Median Weekly Asking Rents - Houses

Brisbane Melbourne Perth Sydney

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Weekly Asking Rents

Dec-0

4

Mar

-05

Jun-0

5

Sep-0

5

Dec-0

5

Mar

-06

Jun-0

6

Sep-0

6

Dec-0

6

Mar

-07

Jun-0

7

Sep-0

7

Dec-0

7

Mar

-08

Jun-0

8

Sep-0

8

Dec-0

8

Mar

-09

Jun-0

9

Sep-0

9

Dec-0

9

Mar

-10

$150

$200

$250

$300

$350

$400

$450

Median Weekly Asking Rents - Units

Brisbane Melbourne Perth Sydney

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Gross Rental Yields

Source: APM

Melbourne Perth Adelaide Sydney Brisbane Darwin Hobart Canberra0%

1%

2%

3%

4%

5%

6%

Capital City Gross Rental Yields - March 2010 Quarter

Houses Units

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Gross Rental Yields

Jun-02

Dec-02

Jun-03

Dec-03

Jun-04

Dec-04

Jun-05

Dec-05

Jun-06

Dec-06

Jun-07

Dec-07

Jun-08

Dec-08

Jun-09

Dec-09

0%

1%

2%

3%

4%

5%

6%

Melbourne Historical Gross Rental Yields

Houses UnitsSource: APM

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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

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More Information

Matthew BellEconomistPh: 1800 817 616Email: enquiries@apm.com.au