This document provides an overview and outlook of the Australian property market in 2018. It discusses factors like the national economic context, key growth sectors like tourism and education, demographic trends like an aging population, and future transformations from technology like automated vehicles. The global, national, and sector-specific outlooks indicate continued economic growth, shifting investment patterns towards services, and demand driven by population increases and new job growth.

1. 2018 MARKET OUTLOOK
FROM FAKE TO FUNDAMENTAL PROPERTY MARKETS
BRIAN HARATSIS
EXECUTIVE CHAIRMAN
MACROPLAN

2. 2
Sector OutlookNational Economic OutlookGlobal Economic Outlook
Presentation Outline

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GLOBAL…

4. 4
Global
 Interest Rates and Cheap Money
 The rise in U.S. long term bond rates has caused a mild correction
in world equity markets, this indicates that the U.S. Federal
Reserve wants to cool markets.
 No risk of global inflation impacting Australia
 Jobs (Synchronised GDP Growth and China/Asia +/- Brexit (non-
event))
 Technology
 Aussie $ as the X-factor

5. 5
The Influence of the Global Bond Market
 Bond Markets - Asset Repricing

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NATIONAL…

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 High population growth – (1.6% or 388,000 + p.a.)
 Increasing household formation – (↑15 – 64 years)
 Retirement explosion - (65+ ↑ 42% 2006-2016)
 Employment churn (20%), then growth (1-2% p.a.)
 GDP at trend rate - (3% - 3.5% p.a.)
 Gearshift from resources → construction → services
 Fast growth in tourism, health, education
 Post GFC economy - ↑ wealth ↓ savings ↑ retail
 ↑ Asset repricing
National Economic Context

8. 8
National Fundamentals
 The major impacts of the mining boom will finish by 2021/2022
 This means a return to fundamentals
 Market differentiation i.e. major geographic differences in demand
and supply, price having regard to global conditions
Demand Demographics
Jobs (Economic) Tradeable
Services
Supply Land (prices up)
Housing

9. 9
National Transformation Factors
 Infrastructure spending boom
 Increase in jobs
 New geographies
 Technology driven restructure
 Amazon
 Growth in IT and Professional Services
 New Labour catchments
 Gig and share economies

10. 10
Shifting Investment Patterns
 Below are two graphs depicting changes in new private capital expenditure
over time. Note that capital expenditure in the services sector exceeds capital
expenditure in the mining sector.
Source: ABS Source: ABS
Other Selected Industries (Services) Mining

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Jobs – The Key Macro Drivers
 Globalisation, international trade, technology, wealth and demographics are
turbo charging growth and change in the service sector:
 Job growth,
 Interest Rates, and
 Key growth sectors – tourism, health, professional, scientific and technical
services, media and information technology, freight and logistics.
 Demand for housing is emerging in very different ways.
 Income growth is currently weak, however as jobs growth continues and the
market tightens, income growth will pick up.

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Employed Persons by Remoteness Class
Remoteness Class 2006 2011 2016
2006 - 2016
change
Major Cities 6,435,438 7,185,131 7,764,423 1,328,985
Inner Regional 1,609,868 1,753,443 1,822,958 213,090
Outer Regional 834,088 879,644 877,156 43,068
Remote 136,948 143,919 131,771 -5,177
Very Remote 72,791 80,976 71,990 -801
AUSTRALIA 9,104,187 10,058,325 10,683,842 1,579,655
Source: BITRE

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SECTORS…

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Retail
The Amazon effect
Sale of Westfield
Industrial property sales strong
Last mile supply chain industrial property
Strong Sydney office market
Strong Melbourne office market
Commercial Industrial
Sector Outlook

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Economic Drivers: Sectors
 Tertiary Education
 Health and services expansion
 Tourism
 Freight and logistics: Exports
 Interest Rates Vs. International Bond Rates
 Property
 Household spending and lending

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Property Supply: Medium Term Success
 Stock growth is currently outpacing demand.
 Given the previous and long period of demand outgrowing supply, a period
of supply outpacing demand can be sustained for some time.
 After a lag period, this situation will begin to put downward pressure on
prices and rents, which will be exacerbated if market activity remains
high.
 Little to no risk of ‘overbuild’ in the near future.
 Approvals and commencements of new dwellings will likely enter a
cyclical slow down but little risk of sharp fall.

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Property: Long-term Outlook
’
 Inequality will
continue to increase
in cities as the inner
and middle ring 10km
‘fortress walls’
continue to grow in
the form of price
barriers.

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Household Finance
 Intermediaries' Fixed and Variable
Lending Rates

19. 19
Household Finance
Source: APRA, RBA Source: APRA, RBA
Contribution to housing credit growth
(six-month annualised)
Household Consumption
(year-ended growth)

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Property: Long-term Outlook
 These price barriers are driven by an increasing value being put on human
capital. Recent MacroPlan research, found that 50% of persons living in
Parramatta, commuting to Sydney CBD, would NOT take the same job if it was
available in Parramatta.
 Sydney CBD offers the professional networks, job densities, education and
potential for career enhancement, personal improvement and higher wages.
 Technology and the services economy are driving increasing centralisation in the
inner 10km and this trend is being supported by Federal and State infrastructure
plans.
 This centralisation drives high levels of productivity and high levels of inequality.
 Urban fringes and regional cities and towns are forced to rely primarily on low
paid population driven jobs (e.g. retail, health, education, police). This seriously
affects the economic and social sustainability of urban fringes and regional
cities.

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International Students: Higher Education
Source: AusTrade
 Education is the 2nd largest contributor to GDP in Australia.
Source: AusTrade
International students – top source countriesEnrolments and Commencements

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International Tourism
Source: TRA, International visitors in Australia YE Sept 2017
International visitor numbers and spend by state, YE Sep 2017

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International Visitor Growth
 Tourism is already a key economic driver generating 598,000 jobs and
injecting over $51 billion into the Australian economy.
Growth in International Visitors, Nights and Spend by Purpose,
2016/17 Compared to 2015/16

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Growing Demand from China
Growth in Airline Seats to Australia
from China
Source: BITRE (2015); MacroPlan (2015)
New air services agreement with China
and the China-Australia Free Trade
Agreement, suggests:
 Inbound Chinese leisure market will
contribute nearly 25 per cent of the
growth in international leisure
arrivals.
 Just over 40 per cent of inbound
leisure visitor expenditure in
Australia in real terms.

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Tourism Forecast
 Tourism is a key economic driver generating more than 900,000 jobs and
injecting over $100 billion into the Australian economy.
Tourism forecasts for 2026-27

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Freight and Logistics
150
200
250
300
350
400
0
100
200
300
400
500
2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029
RoadFreight(BillionTruckKilometres)
FreightImportandExportVolumes('000TEUS)
Financial Year
Full Containerized Imports (LHS)
Full Containerized Exports (LHS)
FORECAST
Source: BITRE (2014)
 Projections show increasing levels of demand for road freight, albeit in
differing format to the traditional heavy rigid or articulated form. This is
due to the movement towards inner city living driving higher levels of
demand for on-line delivery by light commercial vehicles.

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Challenges and Opportunities
27
 Australian cities and towns are on significantly different growth
trajectories and are at different stages of city-lifecycle.
 A significant increase in employment in the Business and Household
services sector is forecast. Future settlement planning for Australian cities
should focus on supporting Business and Household services exports.
 A significant increase in traffic congestion is forecast (Infrastructure
Australia Audit 2015) in all cities. This will cost over $50 billion annually.

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The Ageing Australian Population
 Its no secret that Australia has
an ageing population, notably:
 Population aged 70+ to double
by 2051.
 Workforce participation rate
for 60+ to increase
significantly.
 Retirement age is likely to
increase to 75 years by 2041.
 These present great
challenges to the future of
Australia, particularly in the
changing needs of the
Australian people.
Source: ABS 2014
Total Pop
Pop Aged
60+
Pop Aged
65+
Pop aged
70+
2017
Series A 24,917,746 5,154,808 3,806,152 2,619,524
Series B 24,781,121 5,152,420 3,804,770 2,618,691
2051
Series A 42,499,981 11,303,696 9,013,694 6,916,826
Series B 37,955,917 10,166,330 7,989,835 5,993,181
Growth
2017-2051
(Proportion
of 2017)
Series A 171% 219% 237% 264%
Series B 153% 197% 210% 229%

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Automated Vehicles
 Automated vehicles will predominate by 2035.
 Fully driverless car fleets will have significant
impacts on public transport and will,
unmanaged, significantly increase traffic
congestion (evidence suggests 30% increase in
vehicles above current forecast increase in
travel times of 30%).
 No new metropolitan strategies take AVs into
account.
 A National Diverse Mobility Authority should be
initiated by the Commonwealth to manage the
introduction of AVs (Commonwealth Role).
 Managed introduction of AVs will improve the
social sustainability of urban fringes and regional
cities.
Australian AV, Take up Rates
(% New Vehicle Sales)
Scenario 1 -
Minimum
Scenario 2 -
Maximum
Revised
Maximum
2016 – 2021 0 0 0
2021 – 2026 2 5 20
2026 – 2036 15 30 60
2036 – 2045 30 60 90
2045 - 2055 60 90 100
2055 - 2065 100 100 100

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The latest from Brian Haratsis…
www.macroplan.com.au | 02 9225 5211

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 Base data and market
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 The platform is developing
readiness for the third
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32. 32
MapCloud free demonstration
 Go to www.mapcloud.com.au or download the ‘Mapcloud by MacroPlan’ app
 Go to ‘The Urban Developer Link’ located on the top right of the screen
 Follow the prompts
www.mapcloud.com.au
Password: urban2018