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REALOGICREsearch Report

GREEN SQUARE URBAN RENEWAL PROJECTOctober 2010

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www.realogic.com.au

TABLE OF CONTENTS

Executive Summary 1

Green Square Urban Renewal Project 2

Green Square Town Centre 6

Victoria Park 10

The Importance of Open Space in the Urban Renewal 12

Supply 14

Demographics 18

The Broader Sydney Market 19

Important Information 21

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REALOGIC RESEARCH REPORT GREEN SQUARE URBAN RENEWAL PROJECT - October 2010

EXECUTIVE SUMMARY

MAJOR URBAN RENEWAL PROJECT

Green Square is considered to be the most important urban redevelopment project in Sydney and is one of the most exciting and largest urban renewal projects in Australia. The planned urban structure of Green Square Town Centre is a key defining characteristic of the project. This distinguishes it from many other urban centres of Sydney, which have evolved in an ad-hoc manner. A commitment to building a contemporary ‘urban village’ community underpins the design of Green Square Town Centre. European-style piazzas, parks and entertainment facilities will encourage al fresco dining, markets and street festivals.

ThE NEW ChATSWOOD

The Green Square area is set to become a major employment hub comparable to Chatswood but situated in a far superior location:

- 4km south of Sydney CBD/ 2km north of Sydney Airport

- Within 2km of Sydney University, New South Wales University and UTS

- Surrounded by parklands (Moore Park, Centennial Park, multiple world class golf courses, Sydney Cricket Ground, Fox Studios, Randwick Racecourse)

- Only 4.5km to Coogee Beach and 5.7km to Bondi Beach

Environmental imperatives have driven the vision of Green Square, which will set new standards in sustainability and will be showcased as one of the nation’s leading eco-villages, setting new benchmarks for design and architectural excellence.

MAJOR EMPLOyMENT hUB

Population growth predictions means 55,000 new homes are allocated to the City of Sydney Local Government Area (LGA) and 58,000 new jobs, with 14,000 new jobs specifically identified for Green Square (or 24% of total jobs).

ExCELLENT TRANSPORT ACCESSIBILITy

Green Square Town Centre is also conceived as a model of transport-oriented development, driven by its connection to Green Square Railway Station and proximity to other forms of transport such as main arterial roads, Sydney Airport and multiple bus routes connecting it to all parts of Sydney.

RESIDENTIAL TRENDSResearch shows that units are fast becoming the preferred choice of accommodation and have outperformed housing in capital growth in recent times due to several factors including affordability, lifestyle choice, low maintenance and environmentally sustainable design principles incorporated into new builds. For example, older style two bedroom terrace houses without parking would currently sell for over $700,000 in surrounding suburbs, whereas it is possible to purchase a brand new luxury apartment with parking for under $700,000 within Victoria Park. This has driven demand as thirty-something owners and tenants seek to move closer to the CBD and live in modern accommodation.

CAPITAL GROWThVictoria Park grew at a staggering rate of 17.8% over the last 12 months (RPData) and has an extremely low vacancy rate of only 0.4% (SS Realty). BIS Shrapnel have predicted Sydney to grow by 20% over the next 3 years which puts it ahead of Melbourne (9%) and Brisbane (15%). Prices are expected to rise, underpinned by a deficiency of dwelling stocks across most capital cities, leading to tight vacancy rates and solid rental growth, flowing through to increased investor demand

NEW ShOPPING CENTREA common strategy for investors has been to buy where Coles and Woolworths decide to build new stores. Consent for a retail development has been granted at Victoria Park opposite the Apex development and Audi showroom, 4,000m2 of which has been provisioned for a Coles or Woolworths. The well regarded Supa Centa is also increasing retail space by 6,500m2.

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GREEN SQUARE URBAN RENEWAL PROJECT


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OVERVIEWGreen Square is seen as the most important urban redevelopment project in Sydney at present and is considered to be one of the most exciting and largest urban renewal projects in Australia comprising 278 hectares of land in Sydney’s oldest industrial area. The area is projected to be home to a resident population of more than 33,000 and more than 28,000 people are expected to work in the area by 2021. Green Square has a rich history and is socially, culturally, economically and physically diverse.

LOCATIONThe Green Square area includes the suburbs of Zetland and Beaconsfield, and parts of the suburbs of Alexandria, Rosebery and Waterloo. Its heart will be the new Green Square Town Centre, a site of about 14 hectares, centred at the Green Square Station on the Airport Link Railway.

Located just 4kms south of Sydney CBD with its world class attractions such as the Sydney Opera house and the harbour Bridge, as well as Chinatown, Star City Casino and the plethora of shopping that comes with Sydney being recently voted in the top 10 cities to live in the world. The beaches of Bondi, Coogee and Clovelly are close by, as are the magnificent parklands of Centennial and Moore Parks, Sydney Cricket Ground and Randwick Racecourse. VISIONThe vision is to transform Green Square into an attractive, vibrant and sustainable urban community. Four key objectives sustain the vision: diversity, connectivity, interdependency and long term growth. Planning for the renewal of the Green Square area began in 1995 with approvals happening in April 2006. There is a constant review of planning for the area to ensure the area delivers on these four objectives. This is in the form of on-going implementation, evaluation and refinement of planning controls, site-specific development applications and site redevelopment to ensure product and build quality is of the highest standards.

KEy ELEmENTS OF ThE GREEN SquARE uRBAN RENEWAL PROjECT:1. Strategic location between the Sydney CBD, Port Botany and the Airport. 2. Excellent transport system.3. Viable employment-generating industrial and commercial businesses.4. System of open space corridors, providing links to regional parklands including Moore Park, Centennial Park

and Sydney Park.5. Integration of existing traditional residential neighbourhoods of Zetland and Beaconsfield, and emerging

neighbourhoods such as Victoria Park and Crown Square.6. Range of building types, from traditional Victorian terraces to warehouses, industrial and public buildings,

many of which contribute to the cultural and heritage diversity of the area.7. Topographic features including the hilltops of Zetland and Beaconsfield and view corridors providing distant

and local vistas.8. Rich cultural and artistic base of diverse residents.9. Network of tree lined streets, parklands, urban design water features.10. Activity centres and focal points, such as Danks Street in Waterloo.

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GREEN SquARE uRBAN RENEWAL AT A GLANCE

Projected resident population at 2021 33, 148*

Projected workforce population at 2021 28, 392*

Total No. of projected dwellings 13,076*

Total projected residential floorspace 1,310,000 square metres*

Total projected commercial and other non-residential floorspace 854,000 square metres*

Total projected retail floorspace 46,000 square metres*

Proposed major retail and commercial centre Green Square Town Centre

Projected No. of affordable housing units 479

Registered Affordable housing Provider City West housing

Estimated new residential units approved at june 2004 4,100

Estimated new residential units occupied at june 2004 2,500

* Source: HillPDA (2003) South Sydney LGA Resident and Workforce Population Projections. South Sydney Council

LOCATION mAPThe Green Square Urban Renewal Area is located between the Sydney Central Business District (CBD), the Sydney International (Kingsford Smith) Airport and Port Botany, within the City of Sydney Local Government Area (LGA).

GREEN SQUARE URBAN RENEWAL PROJECT


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ReaLogicREALOGIC RESEARCH REPORT GREEN SQUARE URBAN RENEWAL PROJECT - October 2010

mICRO mAP

Philip Street

young Street

mcEvoy Street

Buckland Street

Fountain Street

harley Street

Bourke Road

queen Street

Portman Street

Botany Street

Bourke Streetjoynton Avenue

Eastern Distributor

O’Dea Avenue

Green Square AreaGreen Square Town CentreVictoria Park

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mAjOR EmPLOymENT huBThe main predictions for the metropolitan area are for a growth in population from 4.2 million to 5.3 million by 2031, with 640,000 new homes required and 500,000 more jobs.

Of these, 55,000 new homes are allocated to the City of Sydney Local Government Area (LGA) and 58,000 new jobs, with 14,000 new jobs specifically identified for Green Square (24% or total jobs).

INFRASTRuCTuRE TRANSPORTVictoria Park is perfectly located for accessibility to all parts of Sydney.

ROAD ACCESSA slip road allows immediate access from Victoria Park to the Eastern Distributor (South Dowling Street) which allows access to the CBD and North Sydney through the harbour tunnel and south towards the airport.

AIRSydney Airport (Kingsford Smith) is located 2kms south west south of Victoria Park

TRANSPORTInitiatives are in progress to encourage greater use of public transport, walking and cycling in favour of private vehicles, including:(a) an increase in train services from around 8 to 16 trains

per hour on peak;(b) reducing the impact of the existing pricing impediment

on rail patronage of the Airport Link line;(c) improved pedestrian access to the train station;(d) improved cross regional bus feeder systems, bus priority

measures and public transport information display boards;(e) increased pedestrian and cyclist facilities; (f) restrictive car parking policy.

BICyCLE STRATEGyThe proposed bicycle networks for Green Square are an important element of the street and open space network hierarchy encouraging community interaction, health and reduced car dependency. New large developments in Green Square including Victoria Park in Zetland and Crown Square (the ACI site) in Waterloo have provided an extension to the cycle network in their new streets and parks.

BUSBuses are available within 20 metres of Victoria Park on Joynton Avenue and routes are available to CBD and Bondi Junction. There is currently a proposal for a future bus corridor along Defries Avenue which will improve even further accessibility for residents.

TRAIN500m from Victoria Park is Green Square railway station on the City Rail Airport and East hills line and is located on the northern edge of Zetland. Central railway station is the next station to the north and Mascot railway station is the next station to the south.

SChOOLSGreen Square Public School 1.15kmABC Rosebery (Childcare and Pre-School) 1.55kmAlexandria park Community School 1.77kmGardeners Road Public School 2.2km

UNIVERSITIESNew South Wales 1kmSydney University 2kmUTS 1.4km

EMERGENCy SERVICESPolice Station 2kmFire Station 6km

hOSPITALSPrince of Wales hospital 2.6kmRPA Hospital 3.2km

PARKSAlexandria Park/ Tennis Courts 1kmCentennial Park 0.8kmMoore Park 0.2km

RESTAURANTS/ CAFES/ BARS – VARIOUS ON:Danks Street, Waterloo 0.6kmCrown Street, Surry hills 1.9kmOxford Street, Paddington 1.5km

GROCERIESJones the Grocer (Danks Street) 0.6kmIGA (Rosebery) 1kmCellebrations (Rosebery) 1kmColes (Surry hills) 1.2kmALDI (Eastlakes) 4.5kmMeriton Coles 0.3kmSpar (Alexandria) 2km

ShOPPINGSurry hills Shopping Centre 1.2kmEastlakes Shopping Centre 1.9kmWestfield Eastgardens 4.5km Moore Park Supa Centa 0.1km

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GREEN SQUARE TOWN CENTRE


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With overarching themes of interaction, sustainability and community, Green Square Town Centre has been envisioned as a planned major centre for residential, commercial and cultural activities. Comprising approximately 410,000sqm of mixed use floor space, it will accommodate some 7,000 workers and 5,500 residents. Mixing thriving green spaces with plazas and piazzas, it will become a social hub for residents. Green Square Town Centre will be a place for living, working and entertainment. It embodies the Lord Mayor’s vision for Sydney as a ‘City of Villages’ promoting interac-tion within a vibrant, urban community. A new civic plaza will be created as a venue for markets, events and community gatherings. Piazzas will become places to pause, relax and absorb the ambience and passing scenes. Adjacent parklands will provide open spaces to play, picnic or relax outdoors.

Green Square Town Centre is also conceived as a model of transport-oriented development, driven by its connection to Green Square Railway Station and proximity to other forms of transport. Environmental imperatives have driven the vision of Green Square, which features progressive environmental initiatives to conserve water and reduce greenhouse gas emissions. It will set new standards in sustainability and will be showcased as one of the nation’s leading eco-villages, setting new benchmarks for

design and architectural excellence.

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GREEN SQUARE TOWN CENTRE


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The core objectives The Green Square Town Centre are:

1. To establish the Green Square Town Centre as the major commercial, retailing, cultural and entertainment centre for the Green Square area.

2. To allow for a mix of land uses that will:

a. ensure that there is an appropriate balance between residential, retail, commercial and other land uses within the town centre.

b. encourage the provision of a range of services and facilities to help meet the needs of the population and users of the town centre.

c. generate employment in the town centre.

3. To facilitate the development of buildings and works that are of a scale, character and design quality consistency that contribute positively to the amenity of, the public spaces they adjoin.

4. To protect the amenity of parks and community places.

5. To promote the vitality of the public domain by encouraging the location of active retail, food and beverage, entertainment uses and community and cultural facilities at ground level, particularly to the edges of the new public plazas.

6. To accommodate a vibrant residential, commercial, retail and cultural heart of Green Square.

7. To provide for a well balanced structural layout of public spaces and built areas within the Green Square Town Centre.

8. To establish a significant new people-oriented public town square, interconnected streets and other vibrant public plazas and public open spaces that are designed to be safe, functional and visually interesting places for a range of people and varied social activities.

9. To allow for equitable access for pedestrians, cyclists, public transport and other vehicles.

urban Structure

The planned urban structure of Green Square Town Centre is a key defining characteristic of the project. This distinguishes it from many other urban centres of Sydney, which have evolved in an ad-hoc manner. Central to the design of Green Square Town Centre is an east-west spine, incorporating a landscape boulevard and major public plazas within this hub of commercial and retail activity. This spine links closely with Green Square Railway Station and supports the surrounding development. The most intense development and activity will occur within the ‘Town Core’, built around the new public plazas and creating the commercial focus for the Town Centre.

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Commercial

Green Square Town Centre will be built according to a modern, cutting edge design. Combined with its important strategic location at the heart of the booming CBD to Airport corridor, this will attract a high calibre of commercial tenants. The Town Centre will provide new, state of the art buildings with all the supporting infrastructure required by a diverse array of businesses. Its thriving urban environment will also engage customers and keep employees happy.

Retail

The reinvigorated, modern environment and diverse transport options of Green Square Town Centre will attract a sophisticated, cosmopolitan customer base and a broad range of retail tenants. It is expected that the retail mix will ensure a vibrant and active Town Centre, both day and night.

Residential

Green Square Town Centre’s design elements and convenient location will combine to make it a highly liveable and desirable environment within the Inner South. It is expected to provide 2,500 homes when it is completed, with residents drawn by its unique lifestyle offering.

Public Domain

A commitment to building a contemporary ‘urban village’ community underpins the design of Green Square Town Centre. European-style piazzas, parks and entertainment facilities will encourage al fresco dining, markets and street festivals. Green Square Town Centre’s larger Civic Plaza and more intimate Neighbourhood Plaza will form a strong focus for many of these cultural, entertainment and retail aspects. Further ambience will be created by an urban stream that will flow through these parks – inspired by Shea’s Creek that once ran through the area.

heritage

Despite the significant physical changes Green Square Town Centre will bring to the area, care is being taken to preserve Green Square’s heritage such as the former Royal South Sydney hospital.

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April 2006

Part H: Green Square Town Centre - South Sydney Development Control Plan 1997

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Figure 3.1 - Land Use and Public Domain

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VICTORIA PARK (WWW.VICPARK.COM.AU)


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Overview

Part of a Grand Plan for South Sydney, the 25 hectare Victoria Park site in Zetland was a Naval supply depot, a car manufacturing plant and a racecourse at various times. It will be a model for successfully transforming overused and decaying inner city precincts and act as a catalyst for the development of the rest of the Green Square Town Centre.

Victoria Park will consist of up to 2,500 dwellings and a mixed use development consisting of;

• 150,000sqm of residential uses

• 25,000 sqm of commercial uses

• 10,000sqm of retail uses

• 8,000sqm of commercial community uses

This will create a new, vibrant community in Inner Sydney.

Recent history

Located to the east of the Green Square area adjacent to South Dowling Street the site was subject to an initial masterplan, approved by the former South Sydney Council in February 1999, with subsequent amendments approved in December 1999 and November 2003.

The maximum heights permissible on the site under the masterplan is in the western part range from 2 to 9 storeys, increasing towards the eastern part, with a few towers of 15 storeys and one of 20 storeys along Defries Avenue.

The 2003 amendment gained approval for three towers along South Dowling Street – two of 22 storeys in the southern part and one of 26 storeys at O’Dea Avenue - and an increase in the residential floorspace on the eastern precinct.

The masterplan provides for predominantly residential uses, with up to 25% non-residential floorspace to be located primarily in the eastern commercial precinct, along South Dowling Street.

Shopping Centre

Consent has been granted for a full line supermarket and associated retail on the north-eastern corner site of Victoria Park opposite the Apex development and Audi showroom. The owners of the site, Payce Consolidated, have approval for 10,000m2 of retail on the ground floor, 4,000m2 of which has been provisioned for Coles or Woolworths. The remaining space will be offered to specialist shops to provide a similar feel to the fashionable James Street Precinct in Brisbane. The current approval is for commercial space above the retail and Payce is currently considering options for residential versus commercial. Across the road towards Moore Park, the well regarded Supa Centa is undergoing a major renovation provide more homemaker & lifestyle shopping options. They commenced in October 2008 and are anticipated to be completed by mid 2011. The renovation will include an addition of up to 6500sqm of retail space, to include furniture, electrical, homewares & lifestyle options; the introduction of JB Hi Fi and re-configuration of Harvey Norman’s tenancy; an upgrade of internal & external appearances including new amenities, terrazzo flooring, ceilings, shop fronts and vertical transportation to provide an improved shopping experience.

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VICTORIA PARK


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*There is a proposal in council at present to have a fresh food market on ground floor.** In council at present awaiting approval.

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2. Audi Head Office

3. Meriton

4. VSQ1

5. Over 55’s Accommodation

6. Nest

7. Arc

8. Eco 1

9. Eco 2

10. Centric

11. Airia

12. Nova

13. Prominence

14. Affordable housing

15. Garland Terraces

16. Garland*

17. Meriton

18. Shopping Centre**

19. ESP

20. Form

P. PARKLAND

21. Viking

22. Divercity

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THE IMPORTANCE OF OPEN SPACE IN THE URBAN RENEWAL

Providing parklands and open space is core to the redevelopment of Green Square. There are strict controls in place to avoid overdevelopment and it is estimated that 40% of the land is open space which counters general belief that there is potential for the area to be overly built up.

The Open Space and Recreation Needs Study 2007 was adopted by Council in March 2007. The study advocates the need for a recreation precinct in Green Square including an aquatic centre, multi-use recreation centre and outdoor facilities.

The Strategy identifies nine open space catchment areas within Green Square where open space is required A total of 73,000sqm of open space is identified across these sites, plus a further 24,340sqm within the Green Square Town Centre.

The study considers the accessibility of open space and aims to provide public open space within 500m of all residents.

The redevelopment of the two major sites in Green Square, Victoria Park and Crown Square, has generated new parks. These catchment areas or precincts are identified in the map opposite as being:

Area AArea bounded by Wyndham Street, McEvoy Street, Bowden Street and Mandible Street – providing for 10,000 sqm of open space with one park minimum 5,000 sqm

Area BArea bounded by Wyndham Street, McEvoy Street, Bowden Street and Mandible Street – providing for 5,000 sqm of open space with one park minimum 4,000 sqm

Area CArea bounded by Wyndham Street, McEvoy Street, Bowden Street and Mandible Street – providing for 6,000 sqm of open space with one park minimum 3,000 sqm

Area DEpsom Road between South Dowling Street and Dalmeny Avenue – providing for one park of a minimum 5,000 sqm minimum to be configured for stormwater detention. Other parks would make up a total of 8,000 sqm.

Area ENorth of Epsom Road and south of the proposed East-West Boulevard, between South Dowling Street and Joynton Avenue – providing for a 20,000 sqm district park associated with the recreation precinct and providing stormwater detention.

Area FArea bounded by South Dowling Street, Lachlan Street,O’Dea Avenue and the ‘Sydney Gate’ site on Bourke Street – providing for a 4,000 sqm park for stormwater detention, and a 2,000 sqm park along Gadigal Avenue. A further two parks of a total area of 5,000 sqm are identified for the ‘Sydney Gate’ site.

Area G Area bounded by Bourke, Danks, young and McEvoy Streets – providing for one park minimum 5,000 sqm for stormwater detention.


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December 2006

South Sydney Development Control Plan 1997: Urban Design - Part G: Special Precinct No.9 Green Square

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Map 4: Green SquareOpen Space

Copyright ©2006 City of Sydney Council, All Rights ReservedCopyright ©2006 Land and Property Information, All RightsReserved. This map has been compiled from various sourcesand the publisher and/or contributors accept no responsibilityfor any injury, loss or damage arising from the use, error oromissions therein. While all care is taken to ensure a highdegree of accuracy, users are invited to notify Council’sGIS Group of any map discrepancies. No part of this mapmay be reproduced without written permission. I

0 100 200 300 40050Meters

Prepared By: jlangPrinting Date: August 3, 2006File: open_space_version4.mxd

A

LegendExisting

Proposed

Landscape setbacks

Canal Open Space Link

Open Space Catchment areas

Refer to South Sydney DCP 1997- Part H: Green Square Town Centre

Green Square Boundary

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SUPPLY

Green Square is also set to play a major role in the achievement of the housing targets for the City of Sydney. There is a significant shortage of supply in Sydney with underlying demand running at well above supply. Recent figures released show that Sydney construction starts next year will total 19,000 when demand is closer to 29,000 units (Westpac Research).

COmPARABLES

Development Name VSq1 Apex Divercity

Completion 2010 Completion due 2012

2013

# units 319 148 700+

1 Bed (parking) Area 60 75 54

Price $584,000 $532,000 $465,000

$/m2 $9,733 $7,093 $8,611

Parking 1 1 1

1 Bed (no parking) Area 58 75 46

Price $483,000 $493,000 $450,000

$/m2 $8,327 $6,573 $9,783

Parking 0 0 0

2 Bed/ 2 bath Area 83 86 79

Price $743,000 $643,500 $595,000

$/m2 $8,951 $7,483 $7,531

Parking 1 1 1

2 Bed/ 2bath/ Study Area 92 90 81

Price $876,000 $690,000 $655,000

$/m2 $9,522 $7,667 $8,086

Parking 1 1 1

3 Bed Area 110 127 99

Price $950,000 $974,000 $770,000

$/m2 $8,636 $7,669 $7,778

Parking 2 2 2


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DEmAND

MAJOR EMPLOyMENT hUBThe main predictions for the Sydney metropolitan area are for a growth in population from 4.2 million to 5.3 million by 2031, with 640,000 new homes required and 500,000 more jobs.

Of these, 55,000 new homes are allocated to the City of Sydney Local Government Area (LGA) and 58,000 new jobs, a strong percentage of which are specifically identified for Green Square.

2001 2006 2011 2021 2031

Employment Estimate 16,092 17,090 19,135 21,316 21,794

POPULATION GROWThIn terms of dwellings, the Metropolitan Strategy for the City of Sydney allocates 55,000 new dwellings to be provided across the LGA by 2031. The City estimates that approximately 20,000 new dwellings may be achieved in Green Square with 2,500of these in the Town Centre. This would provide for a residential population of Green Square Urban Framework approximately 33,500 persons (assuming 1.67 residents per dwelling) by 2031, up from 3,105 in 2001.

City estimates of residential population for the entire Green Square area:

2001 2006 2011 2021 2031

Residential Population Estimate 3,105 10,155 19,069 31,409 33,514

hISTORIC POPULATION GROWThOn the back of urban renewal and prospects of strong job growth, the Green Square area has become an attractive destination for young professionals wanting to live close to the CBD, and as a result has experienced very high population growth over the last decade.

Zetland/ Victoria Park

Waterloo Alexandria Rosebery Beaconsfield

2001 Population 574 3708 3707 8052 n/a

2006 Population 2611 8525 5848 7422 n/a

% Growth 355% 130% 58% -8% -

The country of origin for residents within this area is for the most part Australia, with the largest contingent of residents being born overseas coming from UK, Vietnam, NZ, China and Lebanon.

Born Overseas - Top 5 Zetland/ Victoria Park

Sydney

United Kingdom 4% 5%

Vietnam 3% 2%

New Zealand 3% 2%

China 2% 2%

Lebanon 1% 1%


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CAPITAL GROWTh hISTORIC GROWThVictoria Park enjoyed strong capital growth over the last 12 months, with median prices increasing at a rate of 17.8% (RP Data). Demand for affordable property close to the CBD is high and its supply is low. This should have a positive effect on its capital value in the coming years.

This area has experienced steady capital growth and can continue to expect this growth based on the high owner-occupier ratio, its prime location, sense of community and its affordability as city-fringe property.

year of Growth City of Sydney Zetland/ Victoria Park


2010 14.3% 17.8% 8% 11% 4.4% 19.8%

2009 3.3% 0.1% 4% 5.1% 0.5% 8.9%

2008 0.5% 6.4% 4% 2.6% 11.6% -6.4%

2007 5.2% -2.4% 8% 9.2% 14.4% 34.1%

MEDIAN PRICESThe median price for units in Victoria Park is $520,000 which is slightly higher than the other suburbs that make up Green Square (see chart below). This could be linked to the superior location of Victoria Park which has attracted strong rentals and capital growth has followed.

Growth in Zetland has been based on solid fundamentals such as population growth, infrastructure and employment.

year Zetland/ Victoria Park


2010 $520,000 $500,000 $450,000 $480,000 $470,000

FORECAST GROWThThe drastic undersupply of new stock being brought to market has caused vacancy rates to plummet to record low levels, with rents increasing significantly over the last 12 months.

Sydney is providing neutral to positively geared investment in units now which again is attracting more investors back into the market as holding costs are reduced. This will push more buyers into the market in coming years, in turn driving competition and prices look set to increase dramatically.


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RENTAL mARKETDrastically low vacancy rates have driven investors back into the property market, replacing the void left by first home owners. The Real Estate Institute of New South Wales issued a warning last week that NSW now faces a rental crisis.

VACANCy RATESVacancy rates across most of Sydney fell in August with no long term recovery in sight. The overall vacancy rate in Sydney fell 0.1% to 1.5% for August 2010.

Vacancy rates dropped 0.3% to 1.3% in Sydney’s Inner Suburbs (0-10km to CBD) and fell 0.2% to 1.8% in Sydney’s Middle Suburbs (10-20km to CBD). Current estimated vacancy rates in Victoria Park are standing at 0.4% (source: South Sydney Realty). This is an excellent signal for investors looking to minimise risk of vacancy and maximise return through strong yields.

yIELDSUnits within Victoria Park are expected to achieve superior yields to surrounding suburbs due to ease of access to amenities and transport, a limited supply of units to rent and the community experience enjoyed by tenants.

RENTAL MARKET CONDITIONSA comprehensive analysis of all existing units purchased for investment purposes has shown that units within Victoria Park command higher yields than the Australian benchmark average.

The average gross yield currently being achieved by a unit within Victoria Park is 5%.

This significantly higher yield reflects that financially able tenants are willing to pay market prices for quality units set in a prime location.

Given the continuing trend of tightening vacancy rates, a further increase in yields could be expected in the short term.

Indicative Price Current Rent (p/w) Gross yield Expected Rent in 2012 (p/w)

Gross yield

$400,000 $400 5.2% $440 5.7%

$530,000 $530 5.2% $580 5.7%

$650,000 $650 5.2% $715 5.7%

$900,000 $750 4.3% $830 4.3%

Source: CPS Property

RENTAL PRICES AS AT SEPTEMBER 2010There are currently 6 units available to rent at Victoria Park which indicates severe undersupply. Rents have been rising and Victoria Park is experiencing higher rates of growth when compared to other areas. Analysis of actual unit rental returns is showing very strong 5% per annum compound growth since 2002. Source: PRD Nationwide Research

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Victoria Park displays similar demographic traits to Zetland due to it being located within the Zetland suburb

ACCOMMODATING SyDNEy’S GROWING POPULATIONOver the next three decades, Sydney will need an extra 640,000 homes to cater for its population growth. The majority of those will be created by redeveloping existing areas, putting Green Square Town Centre in a strong position to benefit from this growth.

The evidence suggests the demographic mix will be dominated by young professionals, with figures from the 2001 Census showing this group is growing within the South Sydney locality. The area had a relatively young median age of 33, while the number of residents who were professionals was up 3.5 per cent on the previous Census.

These household typically have high incomes and are seeking appropriate retail and leisure facilities as part of their cosmopolitan lifestyle. The Green Square Town Centre will tap into this demographic as the drivers for retail and residential development.

While there is strong demand for units in the area, the tenants may not necessarily have the funds to purchase the properties themselves. It is for this reason that the percentage of tenants to total residents is more than 50% which illustrates a very strong rental market.

DEmOGRAPhICS

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THE BROADER SYDNEY MARKET

DEMAND IS STRONG

Expectations of continued job growth (34,500 new full time jobs created in NSW during 1H 2010) and State Government incentives to buy new properties has lifted investor demand in the latter period of 2010. Lower than expected CPI, plus concerns around European sovereign debt refinancing led to a change in view to limited rate rises until 2011 which adds to this demand. The surprise was demand from owner occupiers, which continued to fall into early 2010, before picking up gradually in the sec-

ond quarter.

SUPPLy STILL 10,000 ShORT PER ANNUM IN SyDNEy

The dearth of new development has been well publicised and despite an improvement in 1h 2010, dwelling approvals remain too low for the population growth, let alone any structural change in the demographics. In 1h 2009 some 9,700 dwellings were ap-proved. This was similar to the previous six months and the highest since the mid 2000’s. Once again units were the driving factor, and continues the trend of the past ten years. However, although the 12 monthly figure of 19,600 was the highest since 2005, it remains too low. Population growth in Sydney in the year to June 2009 was 85,400, around 71% of NSW population growth. Even allowing for slower population growth in 2010, over 80,000 people are likely to have moved to Sydney, generating a need of over 29,000 dwellings.

POPULATION GROWTh REMAINS SOLID

Prediction of slowing international immigration appears to finally be eventuating, slowing to 39,000 people in 2H 2009 from almost 45,000 people in the previous two half years and 47,000 in 1h 2008. however, as the gap between NSW median house prices and other States narrows, fewer people are leaving. In 2H 2009 a net 5,300 people moved interstate, the lowest half yearly total since 1997. Although slower than the record 27,000 in 2h 2008, natural increase has achieved growth in excess of 20,000 people in nearly all half years since 2005. The exception was 1h 2006. While the slowdown in international migrants is expected to continue as tighter immigration rules apply, the improving economy will continue to ensure that a high level of immigration is required. If the net loss interstate can remain low NSW population can continue to grow in excess of 100,000 per year.

INVESTORS ChASING STRONG CAPITAL GROWTh

Sydney’s recent entry into the top 10 cities in the world (AT Kearney Study 2010) is likely to increase demand dramatically. With room to grow and considerations of an improving economy, particularly around job growth, we expect investor activity to continue to grow during 2H 2010, despite rising interest rates. Three monthly moving totals for investor finance in May is some 12% higher in nominal terms and 10% higher in price adjusted terms. Strong March and May figures have boosted recent data, and evidence suggests that investors are considering NSW property again. Part of the attraction may have been the strong price growth experienced in the past year and the attractive yields with an undersupply indicating further pressure on rents.


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THE BROADER SYDNEY MARKET

RENTS RISING - VACANCy LOW - AFFORDABILITy AN ISSUE

Vacancy tightened in Q1 2010 to 1.1%, down from 1.3% of the previous year. Rental growth of $10 per week in Q1 2010 was the first increase in rents for five quarters and amounted to an increase of 2.5%. With continued undersupply and a healthy level of population growth, rental growth should continue through 2010, particularly in the absence of any short term incentives to move into home ownership. However, affordability in terms of renting also needs to be monitored and at 27.4% in Q1 2010, it is one of the highest in the country. While affordability will remain an issue, continued low vacancy, and rising interest rates should result in rental growth rising over 2010 and into 2011.

yIELDS STABLE - MINOR LIFTS ExPECTED

Gross yields for a two bedroom unit steadied at around 5.2% in March 2010. This was as expected. Rental growth re-commenced in Q1 and given the shortage of accommodation should continue through 2010. With limited price growth, further increases in yield are likely, although a significant jump is not expected. Affordability for both rents and prices should place a cap on how high yields may rise, although with vacancy down at 1.1% choice for tenants who may want to move is limited, which suggests the

potential for upside for rents is high.

CAPITAL GROWTh FOLLOWING PAST TRENDS

Price growth momentum continued into Q1 2010. house prices rose by 1.4% in Q1 2010 while unit prices rose by 1.6%. How-ever, over the twelve month period median prices have risen by 14% and 12% respectively. This has taken prices above the peak reached in 2004. ABS data suggests that house price growth has continued into Q2 at around 5%, with annual growth of just over 20% in Sydney. With limited rate hikes expected in 2010 and early 2011 upward pressure may continue on prices.

AFFORDABILITy DECREASES AS RATES AND PRICES RISE

Not surprisingly affordability has been weakening as interest rates and prices (and thus loan size) increase. As at March 2010 some 34.5% of average household income was being used to service an average mortgage in NSW of just over $305,000. This is somewhere between the average 5 and 10 year proportions. Should a further 6% be added to average loan size in the final three quarters of 2010 the proportion of income servicing the loan would rise to 37%, allowing for around 5% growth in household income. In 2011 we believe that interest rates will rise again. No shift in loan size would lift the proportion to almost 38%, but a 4% rise in loan size would take it over 39%. This means more people will decide to rent, increasing competition for rental accommodation, and the ensuing increase in yield will attract investors back into the market.


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IMPORTANT INFORMATION

REFERENCESThe specific documents of relevance to Green Square, and which have beensummarised and considered in this paper include:• Retail Development Potential – Green Square Study Area 2000 prepared by Thomas Consulting;• Retail Market Assessment for the Green Square Town Centre 2002 prepared by Thomas Consulting;• Draft Green Square Public Domain Plans 2005 prepared by McGregor + Partners;• Zetland Area Traffic Study 2005 prepared by Maunsall Australia Pty Ltd;• Draft Urban Design Opinion – Building and Public Domain Works in the South Dowling Street Corridor 2005

prepared by hill Thalis;• Review of Zoning and Land Use in the Green Square Urban Renewal Area 2006 prepared by the City of Sydney;• Green Square Built Form Review 2007 prepared by Architectus Sydney;• City of Sydney Social Plan 2006-2010;• City of Sydney Open Space and Recreation Needs Study 2007;• City of Sydney Cycle Strategy and Action Plan 2007-2017; May 2008• City of Sydney Green Square Urban Renewal Area Background Paper

DISCLAImERWhilst this information has been carefully compiled, no warranty or promise as to its correctness is made or intended. REALOGIC believes the statements, information, recommendations, calculations, data and tables contained herein to be correct and not mislead-ing, but gives no warranty in relation thereto and expressly disclaims any liability for any loss or damage which may arise from any person or organisation acting or deciding not to act partly or wholly on the basis of such statements, information, recommendations, calculations, data, or tables.

Information outlined within this report also represents subjective interpretation by REALOGIC and should not be relied upon for in-vestment decisions. Interested parties should undertake independent inquiries and investigations to satisfy themselves that any details herein are true and correct. Past information about capital gains does not imply that such gains or growth will be made in the future. The material in this publication is copyright. This document cannot be reproduced without the express permission of REALOGIC. Date compiled 13 October 2010. It is particularly important to consider the risk factors that could affect the financial performance of an investment, and one should carefully consider these factors in light of particular investment needs, objectives and financial circum-stances. All financial amounts in this report are expressed in Australian Dollars ($AUD) unless otherwise stated.

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