Property: Boom or gloom? 2016 Seminar Series. - Citibank · 2016-11-29 · Tonight’s agenda Presentation 1: Housing Market Update Cameron Kusher, Head of Research, CoreLogic Presentation

2016 Seminar Series. Global opportunities. Local insights.

Property:

Boom or gloom?

September 2016

Tonight’s agenda

Presentation 1: Housing Market Update

Cameron Kusher, Head of Research, CoreLogic

Presentation 2: Global Economic Outlook – Challenges and Opportunities

Simson Sanaphay, Product and Investment Strategy, Citi

Q&A

Drinks and canapés

3 3

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Housing Market Update

September 2016

© 2016 CoreLogic, Inc. ■ Proprietary & Confidential

Housing market overview

© 2016 CoreLogic, Inc. ■ Proprietary & Confidential 5

Australians have traditionally favoured storing

their wealth in residential property


Source: CoreLogic, ABS, RBA

As at the end of August 2016

Residential Real Estate

$6.7 Trillion

Australian Superannuation

$2.1 Trillion

Australian Listed Stocks

$1.6 Trillion

Commercial Real Estate

$0.85 Trillion

Number of dwellings

9.7 million

Outstanding

mortgage debt

$1.6 trillion

Household wealth

held in housing

51.6%

Total sales p.a.

454,651

Gross value of

sales p.a.

$261.6 billion

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Jul 98 Jul 00 Jul 02 Jul 04 Jul 06 Jul 08 Jul 10 Jul 12 Jul 14 Jul 16

The annual rate of capital gain has slowed from

its peak but remains quite strong


Rolling annual change in dwelling values, combined capital cities

Median Prices Capital Gain

$600,000

Houses Units Dwelling

s

Past 12 months 7.2 5.5% 7.0%

$495,000 Annual over five years 6.3% 4.6% 6.1%

Annual over ten years 5.6% 5.1% 5.5%

CoreLogic’s suite of hedonic indices are

available across broad housing types and

across geographical areas including

statistical divisions, statistical subdivisions

and postcodes nationally. For further

information an our hedonic method, please

visit www.corelogic.com.au/indices

Source: CoreLogic

http://www.corelogic.com.au/indices

-20%

0%

20%

40%

60%

80%

100%

Dec

08

Ap

r 0

9

Au

g 0

9

Dec

09

Ap

r 1

0

Au

g 1

0

Dec

10

Ap

r 1

1

Au

g 1

1

Dec

11

Ap

r 1

2

Au

g 1

2

Dec

12

Ap

r 1

3

Au

g 1

3

Dec

13

Ap

r 1

4

Au

g 1

4

Dec

14

Ap

r 1

5

Au

g 1

5

Dec

15

Ap

r 1

6

Au

g 1

6

Syd Mel Bne Adl Per Hob

93.0%

76.3%

14.2% 15.3%8.2% 6.6%

18.0%29.6%

57.8%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

Sydney Melbourne Brisbane Adelaide Perth Hobart Darwin Canberra Combinedcapitals

Two cycles of growth post-GFC which has seen

substantial capital gains in Sydney and Melbourne


Cumulative change in individual capital city home values since 2008

Source: CoreLogic

-10.0%

-5.0%

0.0%

5.0%

10.0%Sydney

Melbourne

Brisbane

Adelaide

Perth

Hobart

Darwin

Canberra

Past 12 months 10 year average annual

9.1%

7.5%

3.9%

4.8%

-5.6%

6.2%

-7.6%

2.9%

6.1%

-10% -5% 0% 5% 10%

Sydney

Melbourne

Brisbane

Adelaide

Perth

Hobart

Darwin

Canberra

Combined capitals

Values continue to fall in Perth and Darwin on

an annual basis whilst rising across the

remaining capital cities

| © 2016 CoreLogic, Inc. ■ Proprietary & Confidential 9

Capital gain: Average over 10 years v past 12 months Change in capital city dwelling values,

12 months to Jul 2016

Source: CoreLogic

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Aug-98 Aug-01 Aug-04 Aug-07 Aug-10 Aug-13 Aug-16

Houses Units

9.6%

9.7%

4.9%

3.3%

-4.2%

5.5%

-4.4%

8.3%

7.2%

8.3%

4.1%

-0.4%

0.8%

-5.0%

16.3%

-3.1%

-1.6%

5.5%

-10% -5% 0% 5% 10% 15% 20%

Sydney

Melbourne

Brisbane

Adelaide

Perth

Hobart

Darwin

Canberra

Combined capitals

Units

Houses

Houses and units have recorded a similar rate

of value growth over the year but trends differ

greatly across the capital cities


Annual change in home values, houses vs. units

Change in capital city house and unit

values, 12 months to August 2016

Source: CoreLogic

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

Sydney Melbourne Brisbane Adelaide Perth Hobart Darwin Canberra

2006 2016

Home sales over $2m have become much more

common over the past decade


Source: CoreLogic

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Sydney Melbourne Brisbane Adelaide Perth Hobart Darwin Canberra

2006 2016

% of total house sales of at least $2 million % of total unit sales of at least $2 million

Council area State Median value 5yr change

Hunters Hill NSW $1,256,465 77.9%

Botany Bay NSW $701,484 77.9%

Campbelltown NSW $428,814 75.6%

Weipa QLD $322,409 73.4%

Blacktown NSW $509,174 73.1%

Auburn NSW $623,410 70.0%

Hawkesbury NSW $487,001 69.6%

Parramatta NSW $606,217 67.7%

Forbes NSW $260,068 65.6%

Manly NSW $1,143,478 64.6%

Penrith NSW $444,970 64.5%

Liverpool NSW $463,086 63.5%

Bankstown NSW $574,779 62.7%

Ryde NSW $742,758 62.1%

Burwood NSW $804,410 61.7%

Canterbury NSW $549,369 61.5%

Holroyd NSW $546,588 60.5%

Fairfield NSW $428,392 60.0%

The Hills Shire NSW $795,357 59.6%

Kogarah NSW $650,138 58.8%

Leichhardt NSW $1,004,240 57.1%

North Sydney NSW $981,095 55.4%

Strathfield NSW $670,209 55.0%

Lane Cove NSW $754,943 54.6%

Woollahra NSW $1,057,275 54.5%

NSW dominates the list of council areas that

have seen most value growth over past 5 years


Source: CoreLogic

Top council areas for house value growth past 5 yrs Council area State Median value 5yr change

Kogarah NSW $1,443,947 87.8%

Brewarrina NSW $157,765 84.5%

Auburn NSW $989,071 81.6%

Ryde NSW $1,549,754 81.0%

Holroyd NSW $825,908 75.1%

Parramatta NSW $1,001,077 74.4%

The Hills Shire NSW $1,227,315 74.3%

Blacktown NSW $670,149 74.0%

Hunters Hill NSW $2,877,929 73.8%

Canada Bay NSW $1,844,120 73.2%

Campbelltown NSW $573,814 72.6%

Fairfield NSW $775,870 71.7%

Bankstown NSW $890,879 71.2%

Burwood NSW $1,685,231 71.0%

Hornsby NSW $1,220,430 70.0%

Hurstville NSW $1,244,551 69.4%

Warringah NSW $1,500,854 69.2%

Ku-ring-gai NSW $1,950,139 68.9%

Botany Bay NSW $1,450,141 67.2%

Canterbury NSW $1,148,254 67.2%

Jerramungup WA $337,555 67.1%

Sydney NSW $1,399,695 66.7%

Etheridge QLD $188,357 66.4%

Strathfield NSW $2,219,581 64.9%

Penrith NSW $622,617 64.8%

Top council areas for unit value growth past 5 yrs

Data is sourced from CoreLogic Market Trends, plotting the median value of CoreLogic Automated valuations at the suburb level.

Market trends is available for subscription from CoreLogic, updated monthly with a back series extending to 1990 for most fields.


Median house values by suburb Sydney

(44% of suburbs with a median

value of at least $1m)

Less

than

$200K

$200K

to

$300K

$300K

to

$400K

$400K

to

$500K

$500K

to

$600K

$600K

to

$700K

$700K

to

$800K

$800K

to

$900K

$900K

to $1m

>=$1m

10km 20km 50km

Melbourne

(22% of suburbs with a median

value of at least $1m)

Brisbane

(3% of suburbs with a

median value of at least $1m)

Data is sourced from CoreLogic Market Trends, plotting the median value of CoreLogic Automated valuations at the suburb level.

Market trends is available for subscription from CoreLogic, updated monthly with a back series extending to 1990 for most fields.


12 month change in house values by suburb

Sydney

10km 20km 50km

Melbourne Brisbane

-5%

To

0%

0%

to

5%

5%

to

10%

10%

to

15%

15% + <-5%


Dwelling price to income ratio’s have increased in

Sydney and Melbourne but improved in other cities

Source: CoreLogic, ANU

8.0 8.0

9.7

6.3 6.5 7.2

0

2

4

6

8

10

Jun

-02

Jun

-04

Jun

-06

Jun

-08

Jun

-10

Jun

-12

Jun

-14

Jun

-16

Sydney

Houses Units

5.97.3 7.7

5.26.5 6.1

0

2

4

6

8

10

Jun

-02

Jun

-04

Jun

-06

Jun

-08

Jun

-10

Jun

-12

Jun

-14

Jun

-16

Melbourne

Houses Units

5.7 6.3 6.1

4.9 5.44.8

0

2

4

6

8

10

Jun

-02

Jun

-04

Jun

-06

Jun

-08

Jun

-10

Jun

-12

Jun

-14

Jun

-16

Brisbane

Houses Units

5.87.0 6.5

4.65.7

5.1

0

2

4

6

8

10

Jun

-02

Jun

-04

Jun

-06

Jun

-08

Jun

-10

Jun

-12

Jun

-14

Jun

-16

Adelaide

Houses Units

6.1 6.3 5.8

5.2 5.5 4.7

0

2

4

6

8

10

Jun

-02

Jun

-04

Jun

-06

Jun

-08

Jun

-10

Jun

-12

Jun

-14

Jun

-16

Perth

Houses Units

5.6 6.2 5.9

4.55.1 4.7

0

2

4

6

8

10

Jun

-02

Jun

-04

Jun

-06

Jun

-08

Jun

-10

Jun

-12

Jun

-14

Jun

-16

Hobart

Houses Units

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

Jul-96 Jul-00 Jul-04 Jul-08 Jul-12 Jul-16

Houses Townhouses Low-rise units High-rise units

0

5,000

10,000

15,000

Jul-86 Jul-91 Jul-96 Jul-01 Jul-06 Jul-11 Jul-16

Houses Units

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

Jul-86 Jul-91 Jul-96 Jul-01 Jul-06 Jul-11 Jul-16

Total dwelling approvals Total dwelling approvals (6 month rolling avg)


Housing supply: approvals rebounded

substantially in July

Monthly number of dwelling approvals, national

National dwelling approvals, houses v units Monthly % of total dwelling approvals

Source: CoreLogic, ABS


A record-high number of units are currently

under construction nationally

Quarterly number of dwelling under construction, national

Source: CoreLogic, ABS

0

50,000

100,000

150,000

200,000

Mar-81 Mar-86 Mar-91 Mar-96 Mar-01 Mar-06 Mar-11 Mar-16

Houses Units

0

5,000

10,000

15,000

20,000

25,000

Mar-86 Mar-91 Mar-96 Mar-01 Mar-06 Mar-11 Mar-16

NSW Vic Qld SA WA

Houses under construction

0

10,000

20,000

30,000

40,000

50,000

60,000

Mar-86 Mar-91 Mar-96 Mar-01 Mar-06 Mar-11 Mar-16

NSW Vic Qld SA WA

Units under construction

SA3 Region StateTotal

Units

New units next

12 months

New units next

24 months

New units next

12 months as %

of units

New units next

24 months as %

of units

Melbourne City VIC 77,984 7,363 15,749 9.4% 20.2%

Brisbane Inner QLD 32,233 3,619 11,728 11.2% 36.4%

Sydney Inner City NSW 109,609 3,920 10,411 3.6% 9.5%

Brisbane Inner - North QLD 20,592 2,302 6,339 11.2% 30.8%

Strathfield - Burwood - Ashfield NSW 33,687 2,522 6,318 7.5% 18.8%

Parramatta NSW 30,849 1,652 5,783 5.4% 18.7%

Port Phillip VIC 46,323 898 5,130 1.9% 11.1%

Southport QLD 12,691 3,768 5,024 29.7% 39.6%

Auburn NSW 17,801 1,824 4,663 10.2% 26.2%

Holland Park - Yeronga QLD 12,307 1,314 4,534 10.7% 36.8%

Glen Eira VIC 31,213 1,655 4,391 5.3% 14.1%

Perth City WA 38,218 754 4,367 2.0% 11.4%

Ryde - Hunters Hill NSW 27,086 1,271 4,076 4.7% 15.0%

Brunswick - Coburg VIC 17,201 1,099 3,945 6.4% 22.9%

Boroondara VIC 30,476 1,360 3,836 4.5% 12.6%

Canterbury NSW 21,739 1,162 3,771 5.3% 17.3%

Maribyrnong VIC 14,733 689 3,744 4.7% 25.4%

Whitehorse - West VIC 15,895 989 3,669 6.2% 23.1%

Darebin - North VIC 13,873 1,505 3,569 10.8% 25.7%

Yarra VIC 24,208 1,314 3,530 5.4% 14.6%

Manningham - West VIC 10,033 991 3,490 9.9% 34.8%

Stonnington - West VIC 33,131 1,652 3,321 5.0% 10.0%

Pilbara WA 5,075 172 3,274 3.4% 64.5%

Canada Bay NSW 22,628 2,171 3,221 9.6% 14.2%

Gosford NSW 18,164 464 3,200 2.6% 17.6%


Unit supply is set to increase substantially over

the next 24 months

Source: CoreLogic Settlement Risk Report


Source: CoreLogic

Loss making resales trending higher across

the capitals but lower across regional markets

% of loss making resales, combined capitals

% of loss making resales, combined regional markets

9.4%

5.8%

19.2%

11.2%

0

500

1,000

1,500

Aug-96 Aug-01 Aug-06 Aug-11 Aug-16

0

100

200

300

400

500

600

Aug-01 Aug-06 Aug-11 Aug-16

0

200

400

600

800


1,000

2,000

3,000

4,000

5,000

6,000

7,000


0

500

1,000

1,500

2,000

2,500

3,000

3,500


0

2,000

4,000

6,000

8,000


0

2,000

4,000

6,000

8,000

10,000

12,000


0

5,000

10,000

15,000


0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000


Turnover: capital city

transaction numbers

have continued to trend

lower


Note up-to-date sales volumes are forecasts due to delayed collection of recent sales. Off-the-plan sales are input at contract date but only following settlement, given this unit sales volumes in particular are probably understated

over recent years.

Source: CoreLogic

Combined capitals

Sydney

Brisbane

Perth

Darwin

Melbourne

Adelaide

Hobart

Canberra

12 month avg

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

Aug-06 Aug-08 Aug-10 Aug-12 Aug-14 Aug-16

Sydney Melbourne Brisbane Adelaide Perth

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Aug-06 Aug-08 Aug-10 Aug-12 Aug-14 Aug-16

Sydney Melbourne Brisbane Adelaide Perth


Rental markets remain relatively soft, placing

yields under pressure

Source: CoreLogic RP Data

Annual change in rents Gross rental yields

-10.3%

-8.1%

-6.6%

-6.3%

-5.4%

-5.2%

-5.1%

-4.1%

-6.1%

-12.0% -10.0% -8.0% -6.0% -4.0% -2.0% 0.0%

Darwin

Perth

Hobart

Adelaide

Brisbane

Melbourne

Sydney

Canberra

Combined caps

108

66

57

55

55

49

39

37

48

0 20 40 60 80 100 120

Darwin

Hobart

Brisbane

Perth

Adelaide

Canberra

Sydney

Melbourne

Combined caps

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

Jul 06 Jul 08 Jul 10 Jul 12 Jul 14 Jul 16

0

20

40

60

80

Jul 06 Jul 08 Jul 10 Jul 12 Jul 14 Jul 16


Average discounting rates and selling times are

starting are moving higher

Source: CoreLogic RP Data

Avg vendor discount, combined capitals Avg time on market, combined capitals

Capital cityNo of new

listings

12 mth

change (%)

No of total

listings

12 mth

change (%)

Sydney 6,522 -21.2% 19,303 1.3%

Melbourne 7,735 -5.3% 27,883 -0.1%

Brisbane 4,268 6.2% 19,375 11.3%

Adelaide 1,896 -1.1% 7,749 7.8%

Perth 3,732 11.1% 22,354 16.6%

Hobart 350 -1.7% 1,727 -27.1%

Darwin 161 -24.1% 1,626 3.4%

Canberra 646 12.2% 1,830 -8.2%

Combined capitals 25,310 -5.8% 101,847 5.4%

StateNo of new

listings

12 mth

change (%)

No of total

listings

12 mth

change (%)

NSW 11,051 -13.9% 44,648 -14.7%

Vic 10,733 -3.5% 52,212 -1.0%

Qld 9,945 3.8% 65,745 5.4%

SA 2,682 -0.7% 17,625 8.6%

WA 5,069 10.0% 37,462 12.8%

Tas 956 5.2% 7,445 -21.0%

NT 205 -26.3% 2,181 5.6%

ACT 662 13.7% 1,897 -7.2%

National 41,303 -3.1% 229,215 -0.5%

0

50,000

100,000

150,000

200,000

250,000

300,000

Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16

Total listings New listings


Listings: significantly less new stock is being

listed for sale than there was a year ago

National number of new and total listings, rolling 4 weeks to 04/09/2016

State and territory property listings Capital city property listings

Source: CoreLogic

• Growth in Sydney and Melbourne is anticipated to slow over the second-half of

this year and into 2017 however this slowing will take some time.

• If the supply of stock remains so low, the slowdown may be delayed despite the

stretched housing affordability.

• Sydney and Melbourne home owners still have considerable equity and are likely

to continue to look for housing investment opportunities but increasingly in other

cities.

• Rental markets are their weakest on record and a surge in housing supply is

expected to suppress rental growth over the coming years.

• A level of caution should be exercised when investing in new off-the-plan units in

inner city locations given historic high levels of new supply in certain areas.

• Capital cities such as Brisbane, Canberra and Hobart are the most likely to see a

pick-up in growth along with lifestyle markets bordering Sydney and Melbourne.


Housing market outlook


About Us

CoreLogic Australia is a wholly owned subsidiary of CoreLogic (NYSE: CLGX), which is the largest property data and analytics

company in the world. CoreLogic provides property information, analytics and services across Australia, New Zealand and Asia,

and recently expanded its service offering through the purchase of project activity and building cost information provider Cordell.

With Australia’s most comprehensive property databases, the company’s combined data offering is derived from public,

contributory and proprietary sources and includes over 500 million decision points spanning over three decades of collection,

providing detailed coverage of property and other encumbrances such as tenancy, location, hazard risk and related performance

information.

With over 20,000 customers and 150,000 end users, CoreLogic is the leading provider of property data, analytics and related

services to consumers, investors, real estate, mortgage, finance, banking, building services, insurance, developers, wealth

management and government. CoreLogic delivers value to clients through unique data, analytics, workflow technology, advisory

and geo spatial services. Clients rely on CoreLogic to help identify and manage growth opportunities, improve performance and

mitigate risk. CoreLogic employs over 650 people across Australia and in New Zealand. For more information call 1300 734 318 or

visit www.corelogic.com.au

CoreLogic produces an advanced suite of housing market analytics that provides key insights for understanding housing market

conditions at a granular geographic level. Granular data is often used for portfolio analysis and benchmarking, risk assessments

and understanding development feasibility and market sizing. It gives industry professionals valuable modules which provide

essential analytics and insights for decision making and strategy formation within the residential property asset class. We can tailor

reports to suit your business requirements.

Call us on 1300 734 318 or email us at [email protected] or visit us at www.corelogic.com.au


Granular Data and Analytics

Market Scorecard: Monitor and measure market share and performance of real estate agents at an individual office or a Franchise

brand level across Australia. Identify the competing brands and independents at a suburb, postcode, user defined territory and

State level. Easily locate growth opportunities and market hotspots, and view the performance of the established offices in these

new areas of interest.

Market Trends: Detailed housing market indicators down to the suburb level, with data in time series or snapshot and segmented

across houses, units and land. The Market Trends data includes key housing market metrics such as median prices, median

values, transaction volumes, rental statistics, vendor metrics such as average selling time and vendor discounting rates.

CoreLogic RP Data Indices: The suite of CoreLogic RP Data Indices range from simple market measurements such as

median prices through to repeat sales indices and our flagship hedonic home value indices. The CoreLogic RP Data Hedonic index

has been specifically designed to track the value of a portfolio of properties over time and is relied upon by Australian regulators

and industry as the most up to date and accurate measurement of housing market performance.

Economist Pack: A suite of indices and indicators designed specifically for Australian economic commentators who require the

most up to date and detailed view of housing market conditions. The economist pack includes the CoreLogic RP Data Hedonic

indices for capital cities and ‘rest of state’ indices, the stratified hedonic index, hedonic total return index, auction clearance rates

and median prices.

Investor Concentration Report: Understanding ownership concentrations is an important part of assessing risk. Areas with high

investor concentrations are typically allocated higher risk ratings due to the over-representation of a particular segment of the

market. Through a series of rules and logic, CoreLogic RP Data has flagged the likely ownership type of every residential property

nationally as either owner occupied, investor owned or government owned.

Mortgage Market Trend Report: CoreLogic RP Data is in a unique position to monitor mortgage related housing market

activity. Transaction volumes, dwelling values and mortgage related valuation events all comprise our Mortgage market

trend report which provides an invaluable tool for mortgage industry benchmarking and strategy.


Disclaimer

In compiling this publication, RP Data Pty Ltd trading as CoreLogic has relied upon information supplied by a number of external sources. CoreLogic does not warrant its

accuracy or completeness and to the full extent allowed by law excludes liability in contract, tort or otherwise, for any loss or damage sustained by subscribers, or by any

other person or body corporate arising from or in connection with the supply or use of the whole or any part of the information in this publication through any cause

whatsoever and limits any liability it may have to the amount paid to CoreLogic for the supply of such information.

Queensland Data

Based on or contains data provided by the State of Queensland (Department of Natural Resources and Mines) 2016. In consideration of the State permitting use of this

data you acknowledge and agree that the State gives no warranty in relation to the data (including accuracy, reliability, completeness, currency or suitability) and accepts

no liability (including without limitation, liability in negligence) for any loss, damage or costs (including consequential damage) relating to any use of the data. Data must not

be used for direct marketing or be used in breach of the privacy laws.

South Australian Data

This information is based on data supplied by the South Australian Government and is published by permission. The South Australian Government does not accept any

responsibility for the accuracy or completeness of the published information or suitability for any purpose of the published information or the underlying data.

New South Wales Data

Contains property sales information provided under licence from the Land and Property Information (“LPI”). CoreLogic is authorised as a Property Sales Information

provider by the LPI.

Victorian Data

The State of Victoria owns the copyright in the Property Sales Data which constitutes the basis of this report and reproduction of that data in any way without the consent of

the State of Victoria will constitute a breach of the Copyright Act 1968 (Cth). The State of Victoria does not warrant the accuracy or completeness of the information

contained in this report and any person using or relying upon such information does so on the basis that the State of Victoria accepts no responsibility or liability whatsoever

for any errors, faults, defects or omissions in the information supplied.

Western Australian Data

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Divider slide - title Global Economic Outlook Challenges and Opportunities

Citigold, September 2016

30

Important Information

Any advice is general advice only. We have not considered your objectives, financial situation or needs.

You should consider if the advice is appropriate for your situation. You should also obtain and consider the

relevant Product Disclosure Statement before you make a decision about any financial product.

This material is for general information only. All opinions and estimates constitute Citigroup’s judgement as

of the date of this report and are subject to change without notice.

This information is taken from sources which are believed to be accurate however Citibank accepts no

liability of any kind to any person who relies on the information contained in this presentation.

Investors are advised to obtain independent legal, financial, and taxation advice prior to investing.

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Investments are not deposits or other obligations of, guaranteed, or insured by Citibank N.A., Citigroup Inc.,

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investment risk, including the possible loss of the principal amount invested.

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rate fluctuations that may cause a loss of principal.

Past performance is not a reliable indicator of future performance.

Forecasts are not a guarantee of performance and are subject to change.

© 2016 Citigroup Pty Limited ABN 88 004 325 080, AFSL No. 238098. Citibank®, Citi® and Arc Design® are service marks of

Citigroup Inc

31

The housing stop watch: Is time up?

Source : Citi Research

Citi Housing Clock

32

Sluggish Growth In The Global Economy

• We continue to expect sluggish but fairly steady global GDP growth.

• We expect global real GDP growth at 2.4% in 2016 (from 2.6% in 2015) and 2.7% in 2017.

• This is low compared to historical norms of around 3% growth but in line with sub-par growth in recent

years.

• Within that, we expect Advanced Economies growth to be relatively stable.

Source : Citi Research

Global, AE, EM – GDP Growth Forecasts (%YY), 2012-16

33

Low Global Inflation

• Meanwhile, Advanced Economy (headline CPI) inflation remains low.

• We expect CPI inflation in the Eurozone and Japan to remain significantly below the ECB and BoJs

target even in 2017-18.

Trade Weighted G10 Core and Headline Inflation 2009-16

34

Australia Inflation Under-shoots

• Commentary around the Australian inflation outlook implies the risks are to the downside.

Wage Price Index – Annual Change 2005-16 Private Sector Wage Rises and Unemployment Rate

35

Global Interest Rates Expected Lower for Longer

Central Bank

Monetary

Policy

Stance

Forward Guidance Citi’s View

Reserve Bank of

New Zealand Easing Bias • Further easing required to lift inflation

• Expect two more 25bps rate cuts for

a terminal OCR of 1.50%

Reserve Bank of

Australia Neutral • Fine tuning monetary policy

• The reduced pass to borrowing

rates and expectations of a soft

Q3 CPI makes a cut likely.

Bank of Japan Dovish • Continue with Qualitative and Quantitative and Negative

Interest Rate.

• Aiming to achieve domestic policy

goals (notably raising inflation and

boosting activity) in part by

weakening the JPY

United States

Federal Reserve Hawkish

• The case for a rate hike “…has strengthened in recent

months.”

• December remains the more likely

meeting for a rate hike given

uncertainty around US Presidential

election.

European

Central Bank Dovish

• Expects key ECB interest rates to remain at present or

lower levels for an extended period of time.

• Extend QE stimulus likely based on

unconvincing upward trend in Euro

inflation.

Bank of England Dovish

• Sustained inflation overshoot will be tolerated – makes

rate hikes a distant prospect and anchors yields at

historic lows.

• Another rate cut and making QE the

new active policy tool.

Source: Citi Research, RBNZ, RBA, BoJ, FOMC, ECB and BoE

36

Australia’s Cash Rate Expected Lower for Longer

RBA Cash rate movements in easing cycles

• The current easing cycle is already the most protracted of easing cycles and inflation is yet to show

convincing signs of responding. Underlying inflation changes in easing cycles

Sentiment less responsive to interest rate cuts now

37

Global Economy Challenges and Volatility

Selected Countries – Economic Policy Uncertainty

Index, 2010-16

• 2016 has witnessed a marked increase in political risks in systematically significant countries.

• Financial-market-based measures of uncertainty look rather benign for now.

Implied Volatility in Bonds and Equity Options and US

Financial Conditions Index, 2006-16

38

It’s Not All Doom and Gloom

• The majority of sell signals are not near levels of previous bear markets.

39

Equity Markets – Slow Earnings Per Share Growth

Bloomberg

Global Real GDP Growth and YoY

Global EPS Growth

• Slow global economic growth is likely to keep EPS growth subdued.

Consensus Global EPS Growth

Forecasts

40

Equity Markets – Dividend Yields Remain Attractive

Global Government Bond Yield vs

MSCI World Dividend Yield

• Equity valuations look compelling when compared to Government Bond Yields.

Country Dividend Yield and 10 Govt.

Year Yields (%)

41

Equity Markets – Supportive Equity Risk Premium

Bloomberg

Global Ex-Ante ERP

• Equity valuations look compelling when factoring high Equity Risk Premiums.

42

Fixed Income Markets - Yield Curves Are Supportive

43

Comparing Fixed Income and Equity Markets Bloomberg AUD Investment Grade Bond Index vs. S&P/ASX 200 Total Return Index, 2010-16

Source : Bloomberg

Source : Bloomberg, Reuters (as at 1/09/16)

Expected Returns

Source : Citi Research,

* Returns based on market prices as at 07/09/16

Fixed Income AUD USD

Investment Grade Bonds 3.30% - 4.75%* 2.60% - 4.85%*

Equity Markets Fixed Coupon - AUD Fixed Coupon - USD

Structured Products 5.75% - 7.75% 4.75% - 6.75%

ASX200 5,750 6.50%*

S&P500 2250 2.95%*

Cash AUD USD

Cash Rate 1.50% 0.25%

Housing

Detached Dwelling &

Apartment

Decelerating Price Growth

+ Low Rental Yields

2018 Forecast

Mid 2017 Forecast

Key Takeaways

► Market volatility to continue

- Stay diversified. Focus on quality in both equities and bonds.

► Equities – Modest Upside, equity risk premium to support

- Alpha over Beta : Selective sectors may outperform broad equity indices. We are Overweight on

Energy, Technology and Health Care.

- Dividends : Benefit from continued search for yield.

►Fixed Income - Modest inflation pressures, gradual pace of Fed tightening

- Longer duration strategies in US and Europe.

- Investment Grade credits look attractive, but maintain a quality bias.

► Property (Australian residential)

- Glut of supply over the next two years likely to trigger a drop in apartment prices.

- Low interest rates, more restrained detached house building and solid population growth should

mean any home price falls are moderate.

Remain Diversified and Be Nimble

Next steps

47 47

Personal Property and Valuation Reports

48 48

Take advantage of the opportunities

Speak to your Relationship Manager:

Property and/or Valuation Reports on a suburb or

property of your choice

Competitive mortgage rates

Lending for offshore investors

Review your Investment Portfolio and opportunities

to increase the yield on your investments

49

2016 Seminar Series. Global opportunities. Local insights.

Property:

Boom or gloom?

Thank you

Documents

Property: Boom or gloom? 2016 Seminar Series. - Citibank · 2016-11-29 · Tonight’s agenda Presentation 1: Housing Market Update Cameron Kusher, Head of Research, CoreLogic Presentation