Understanding the future of Queensland's Real Estate and Construction Industry

Rebalancing the Queensland Economy | 22 May 2014

REBALANCING THE QUEENSLAND ECONOMY

Presented by Brian HaratsisThursday 22 May 2014

Understanding the future of Queensland’s Real Estate

and Construction Industry

Give us a call if you have any questions…

MacroPlan Dimasi is Australia’s first choice when seeking solutions which add value to important property, planning and economic

development projects.

We welcome the opportunity to discuss with you, key market trends as they relate to your business and sector. If you have any questions

regarding any of the data provided in this presentation please feel free to give us a call.

Brian Haratsis – Executive Chairman, 03 9600 0500 or haratsis@macroplan.com.au

Joel Taylor – General Manager Queensland, 07 3221 8166 or taylor@macroplan.com.au

Contents Demographics Economics Resources Agriculture Ageing Budget and Cycles

The rebalancing megatrends Demographics – NOM vs. NIM Business Investment – mining vs. non-

mining Emerging vs. declining regions SEQ vs. regions Budgets vs. economic cycles

The rebalancing megatrends Workers vs. dependents Tourism – international vs. domestic tourism Queensland vs. eastern seaboard

Demographics | population growth

Source: ABS Cat 3101

Demographics

Interstate Migration | Queensland

1996-97

1997-98

1998-99

1999-2000

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

-5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

0-14 15-24 25-34 35-54 55-64 65+Source: Australian Bureau of Statistics

Overseas Migration | Queensland

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

-10,000

10,000

20,000

30,000

40,000

50,000

60,000

70,000

0-14 15-24 25-34 35-54 55-64 65+Source: Australian Bureau of Statistics

Demographics – labour markets

Economics

Economics – tourism

Economics

tistic

ian’

s offi

March Quarter 2013 March Quarter 2014

TIPPING POINT

Economics – household sector

X Factor

Economics – high debt Post GFC Target

Economics – house price arbitrage

Economics – business sector

Economics – industry

Economics – commodity prices

Economics – balance of payments & external position

Location of Australia’s Gas Resources and Infrastructure

Resources

ResourcesOutlook to 2023 – Eastern Australian Gas Market

Resources

Short term gas market projections

Resources

Short term gas supply projections

Resources

Number of Advanced Projects

Agriculture The Queensland government has a 2040

vision for the agriculture, fisheries and forestry industries. It will work with all stakeholders to address four key pathways: Securing and increasing resource availability Driving productivity growth across the supply

chain Securing and increasing market access Minimising the costs of production

Agriculture

Qld volume of agriculture output in 1981-82 dollars

Source: Qld’s agriculture strategy | A 2040 vision to double agricultural production

Agriculture

Pathways to double agricultural production

Source: Qld’s agriculture strategy | A 2040 vision to double agricultural production

Ageing Between the past 40 years and the next 40

years, the number of persons aged65 years and over increases dramatically.

The aged dependency ratio doubles.

Ageing

Growth in dependency ratio driven by migration programs of 1970s to 2000.

Now at 1%

Ageing

Retirement living vs. retirement villages Only 6-8% of

the market live in retirement villages.

Perth Adelaide Brisbane Capital City Average

Sydney Melbourne

Retirement Village Penetration Rate vs Medium and High Density Dwelling Share, Capital Cities

Share of Medium/High Density Dwellings Retirement Village Penetration Rate

Ageing

Demand for retirement living dwellings – future demand.

Ageing

Participation Rate in the Labour Force, People Aged 65+, Queensland

More people 65+ are working

Budget and Cycles Federal

Headline Numbers GDP: $1,567 Billion (Chain Volume Measures)

RBA Target Cash Rate: 2.5%

Total Budget Spend: $415.7bn

Budget Spend per cent of GDP: 25.4%

Major Impact : Interest rates on hold. Confidence.

Budget and Cycles Federal

Key Themes Business Sector

Infrastructure

Mining

Tourism

Service Sector (Health + Education)

Cycles Over the last 20 years QLD has experienced high

volatility in growth and development due to national and local economic cycles driving:

Interest Rates Business Investment House and Land

Prices

Immigration Gross State

Product and wealth

Australian GDP Growth Cyclicality

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

GDP (LHS) GDP Growth (RHS)

Population Cycles – net migration

The Cyclical Economy

Aug-1990

Mar-1991

Oct-1991

May-1992

Dec-1992

Jul-1993

Feb-1994

Sep-1994

Apr-1995

Nov-1995

Jun-1996

Jan-1997

Aug-1997

Mar-1998

Oct-1998

May-1999

Dec-1999

Jul-2000

Feb-2001

Sep-2001

Apr-2002

Nov-2002

Jun-2003

Jan-2004

Aug-2004

Mar-2005

Oct-2005

May-2006

Dec-2006

Jul-2007

Feb-2008

Sep-2008

Apr-2009

Nov-2009

Jun-2010

Jan-2011

Aug-2011

Mar-2012

Oct-2012

May-2013

Dec-2013

16% RBA Target Cash Rate

The Current Bust Cycle in Qld has bottomed ↑GSP ↑ Labour Force ↑ Private Investment ↑ Population Housing prices at realistic levels

Queensland GSP Growth

Real GSP Budget Forecast

Forecast

Building Approvals - Queensland

05,000

10,00015,00020,00025,00030,00035,00040,00045,00050,000

2.5%2.2%

Dwelling Approvals (LHS) MacroPlan Forecast (Dwelling Approvals)10-year average growth (RHS)

Forecast

Forecast Building Approvals - Queensland

10,000

15,000

20,000

25,000

30,000

35,000

Total Dwellings Financed (LHS) First Home Buyer Share (RHS)

Finance

FInance

Housing finance - Queensland

National Dwelling Prices – March Qtr 2014

35% Arbitrage – 40% Brisbane ($450k) / Sydney $750k)

Median Housing Sale Price - Qld

Median Rent of Lodgements - Qld

House Sales – volumes - Qld

Unit Sale Volumes - Qld

Queensland Snapshot – May 2014

Source: ABS Cat. 3101, 3218, 6345, 6401, 6202, 6414, 8510, 8731, 9314 & Tourism Research

Australia

Implications for Real Estate and Construction

Two key themes.

1. Resources investment likely to persist longer than expected.

2. Synchronised State level economic growth likely by 2016/17 with initial growth in 2014/15.

Tipping Point

The tipping point occurred in the December 2013 / March 2014 quarters when employment growth outstripped the national average, population growth at $1.8% shifted back towards 2% and retail expenditure shifted in line with Melbourne and Sydney.

Looking to 2016 | initial economic transition Low interest rates (<3% cash rate) Moderate inflation (2.5% – 3.0%) Fast population growth (2% or 100,000 per

annum) Resource exports 100%

Looking to 2016 | initial economic transition Public infrastructure expenditure 10% per

annum 25% non-resource investment

25% (significant job impact)

Population driven services (e.g. retail, health, education) employment at 2% per annum.

Brisbane Retail floorspace investment significantly Residential :

Multi-Unit CBD /

Non CBD

Brisbane Residential :

Detached dwellings Tightening land supply

Investment housing 25% - 35% stock / Rental demand.

Brisbane Office :

Over-supply in CBD / service sector employment and growth post 2016/17

Under-supply outside CBD

Brisbane Tourism :

Domestic tourism 1% per annum growth

International tourism 4% per annum growth (max)

New Brisbane casino and regional

Freight and Logistics : Major investment potential

X Factors Federal and State balanced budgets 2017/18 G20 Commonwealth Games – 2018 Brisbane Airport second runway – 2020 ( visitations) Broadwater Cruise Ship Terminal – 2018 Broadwater Casino / Hotels / Wavebreak Island – 2018-2025 Chinese Tourist Potential Inland Rail – Brisbane / Toowoomba

X Factors Toowoomba Second Range Crossing Toowoomba Airport Resource Exports 150% by 2020 Agricultural Exports 50% by 2020 Government expenditure / public sector employment Housing price arbitrage (Sydney) – post 2015 NIM Chinese / US / Japanese investment returns to Qld

Eastern Seaboard / Global Context Fast growth in Melbourne and Sydney

(demographic + economic) ALWAYS results in downstream Qld impact.

From 2014 to 2019 Sydney / Melbourne / Brisbane will increase population by 1.4m people.

With stable and consistent Federal governance, synchronised growth (except tourism) is likely to occur in Queensland post 2016 – as follows…

Eastern Seaboard / Global Context

3% Australian GDP 2% + population growth 4% GSP Growth in key export sectors – resources/agriculture State and local government employment growth Return to Brisbane of national services sector (10

years post GFC) Major infrastructure expenditure (PPPs)

Opportunities Urban Planning | deregulation

Unlocking the value of the middle ring

Tourism | new strategy and product Freight and Logistics | resources /

agriculture Global Services Sectors | resources /

agriculture / freight and logistics

Opportunities Gold Coast Revival | recreational boating Toowoomba | national centre for freight and

logistics and centre for resources and agriculture sectors

Brisbane | synchronised residential / office / retail CBD and inner ring

Thank you.

MacroPlan Dimasi is Australia’s first choice when seeking solutions which add value to important property, planning and economic

development projects.

We welcome the opportunity to discuss with you, key market trends as they relate to your business and sector. If you have any questions

regarding any of the data provided in this presentation please feel free to give us a call.

Brian Haratsis – Executive Chairman, 03 9600 0500 or haratsis@macroplan.com.au

Joel Taylor – General Manager Queensland, 07 3221 8166 or taylor@macroplan.com.au

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