Quantitative Research: online survey conducted from 16 th January to 20 th February 2014.

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2 Research Methodology Quantitative Research: online survey conducted from 16 th January to 20 th February Participants were asked to complete a self-administered questionnaire via an online portal, included a total of 35 questions covering participants demographic information and their opinion on property investment and the future prospects for the Australian property market. Survey respondents were sourced from the Property Investment Professionals of Australia (PIPA) member database and the subscriber databases of Smart Property Investment (SPI), Real Estate Business (REB) and Residential Property Manager (RPM) magazines. A total of 784 participants completed the survey.

3 Survey Reliability and Confidence Level Survey responses were carefully measured through statistical data analysis The margin of error for this research was < ± 5% at a 95% confidence level, indicating a 95% confidence interval for the true population value A test of reliability (Cronbach s Alpha) was conducted for each of the variables in the survey, based on 784 survey responses, and the Cronbach s Alpha coefficients for all variables are above 0.78 (α > 0.7), representing a high level of reliability for the survey instrument used in this research.

4 Survey Respondents: Demographics

5 Gender and Age Group Over 60% of surveyed respondents are male, and 39.2% are female. The majority of respondents are aged (33.2%), while 27% are aged

6 Employment by Industry Nearly half of the surveyed investors work in large industries (by contribution to GDP) such as rental, hiring and real estate services (15.9%); finance and insurance services (13.8%); professional, scientific and technical services (9%); and health and social assistance (7.3%).

7 Employment by Occupation The majority of respondents are most likely to be middle management (11.1%); real estate professionals (9.7%); financial professionals (8.4%); sales and marketing professionals (7.3%); and senior executives/managers (6.2%).

8 Marital Status and Number of Dependents 61.1% of surveyed respondents are married, while 17.7% have a partner/de facto and 15.5% are single. The majority of respondents (44.4%) have no dependent in their household, and 26.8% have 2 dependents.

9 Annual Household Income Almost a quarter (24.8%) of the respondents preferred not to reveal their annual household income. Apart from this, the majority of surveyed investors have an annual household income of $300,001+ (17.8%); $250,001-$300,000 (15.7%) and $200,001-$250,000 (14.2%), including rental property income.

10 Investment Portfolio: Number of Properties The majority of respondents (40.7%) have 2-4 properties in their investment portfolio, while nearly a quarter (24.7%) have only 1 investment property and 17.8% have yet to buy. Surveyed investors who currently have 5-10 (13.2%) or properties (2.1%) are most likely to be middle management/ senior executives from the finance and insurance industry (32%).

11 Investment Portfolio: Total Estimated Value Nearly a quarter (24.7%) of the respondents did not wish to reveal the total estimated value in their investment portfolio. While the total number of who have answered N/A is also high (16.7%), the majority of investors have over $3,000,000 (14.4%) or $2,501,000 to $3,000,000 (14.4%) total estimated value in their investment portfolio.

12 Key Findings: Investor Sentiment

13 Property Investment Trends: Past 12 months In the past 12 months, over half of the respondents (54.4%) have not purchased an investment property. Those who answered yes (45.6%) are less likely to be first-time investment property buyers (60.8%), since only 11.7% indicated it was the first investment property they ve ever purchased.

14 Property Investment Trends: The effect of Interest Rates There is a clear relationship between low interest rates and buying investment property. Over half of the surveyed investors (55%) indicated their purchase decision was accelerated by the low interest rate environment. Further, nearly three quarters (72.7%) would consider buying more investment properties if the interest rate continues to remain low.

15 Property Investment Trends: Perceptions of Investors A significantly large number (84.4%) of respondents believe that now is a good time to invest in property, only 5.2% don t believe so and 10.4% are unsure. Capital growth opportunities (27.9%), low interest rates (27.4%) and stability compared to other assets (19.6%) are cited by the surveyed investors as their reasons for investing in property right now, since it is the most attractive investment choice.

16 Investor Sentiment: Next 6-12 Months In terms of investor sentiment, 70.8% of the surveyed investors indicated they are looking to purchase an investment property in the next 6-12 months. Existing stock is the type of investment property cited by a large number of investors (73.4%), while other types property (8.9%) such as commercial offices and development sites are also favoured by investors. New build (4.8%), off the plan (3.2%) and NRAS (0.8%) are the less popular investment property types cited by the investors in this research.

17 Property Investment Trends: Next 6-12 Months The majority of respondents (80.7%) would choose to invest in houses (54.1%) and units (26.6%). Interestingly, the number of respondents who indicated other types (9.7%) such as commercial suites is higher than house and land (6.3%) and townhouses (2.4%), suggesting there is untapped investment potential in the commercial property market. Over half of the surveyed investors (53.9%) would have a budget of $301,000 to $400,000 (29.3%) or $401,000 to $500,000 (23.6%) for the type of property they are considering purchasing.

18 Property Investment Trends: Places which offer the best Investment Prospects Metropolitan markets (61.8%) appeared to be the most appealing place to buy right now, followed by regional markets (25.2%), costal locations (10.1%) and mining towns (3.0%). Among all state capitals, surveyed investors are most likely to believe Brisbane (48.3%) is currently offering the best investment prospects, compared to other major capitals such as Melbourne (14.5%), Sydney (17.2%) and Perth (9.6%).

19 Top 24 Buyers Preferred Locations: Please list the suburbs where you intend to buy your next investment property? 1 st Preference 2 nd Preference 3 rd Preference Townsville (Qld) Rockhampton (Qld) Bendigo (Vic) Logan (Qld) Redcliffe (Qld) South Yarra (Vic) Richmond (NSW ) & Richmond (Vic) Logan (Qld) Surry Hills (NSW) Campbelltown (NSW) Ipswich (Qld) Brunswick (Vic) Nundah (Qld) Frankston (Vic) Kensington (NSW) Albury (NSW) Toowoomba (Qld) Gladstone (Qld) Ballarat (Vic) Footscray (Vic) Ringwood (Vic) Blacktown (NSW) St Kilda (Vic) Rockingham (Tas) The majority of preferred locations in which to buy cited by the surveyed investors are in Queensland (30%) and Victoria (30%). Logan is the single location that was highly cited as investors 1 st and 2 nd preferred location to purchase their next investment property.

20 Key Findings: Purchase Behaviour

21 Common Traits of a Property Investor Over half of the respondents (59.7%) described themselves as a property investor as I select properties carefully based on a long-term investment strategy, and the majority indicated that as a property investor, not being able to meet their loan obligations is the top reason worrying them the most (37.9%).

22 Top 10 Research Elements When Investing in Property The rental income/yield (85.2%), proposed infrastructure (63.1%) and existing infrastructure (59%) are rated as the top 3 most important elements that investors would research when they invest in property. Results also suggest most of the elements in the top 10 list above, such as employment prospects, affordability and schooling/education options are the key factors that determine potential tenants decisions on renting and the price they are willing to pay.

23 Investors Biggest Concern Nearly a quarter (22.8%) of the surveyed investors indicated the property not going up in value is their biggest concern when investing in property. Being able to afford it (11.6%), purchasing a lemon (8%), paying off loan/debt (8%) and getting a tenant in the property (7.7%) also concerned investors the most. Surprisingly, surveyed investors are less concerned that the interest rate might go up (5.2%) when compared with other answer choices in the questionnaire.

24 Investors Belief in Property Investment 77.2% of respondents indicated they believe investing in property is a good investment choice in the long-term due to capital growth. Personal wealth creation (68.9%), reliable income (49.9%), gearing/financial leverage (41.9%), less risk than other investments (41.6%) and tax benefits (40.9%) are also highly cited by the surveyed investors.

25 Investors Selection Criteria When it comes to selecting an investment property, location (80%), capital growth prospects (75%) and rental return (71.3%) are the top 3 most important factors for the surveyed investors. While access to public transport (49.8%), access to a number of local amenities (44%) and area demographics (34.4%) are also important, the ratings are significantly lower than the top 3 factors.

26 Key Findings: Property Management and Investment Funds

27 Managing Investment Property 70.2% of respondents would employ a property manager to manage their investment property/properties. In the past, the majority of them have sought property/investment related services from mortgage brokers (69.3%) or accountants (64.3%).

28 Managing Investment Loans Survey findings suggest most investors have not found any difficulties in managing their loan repayments over the past 12 months. As shown in the results above, over 80% of respondents indicated managing their repayments has been OK (31.1%), easy (26.4%) or very easy (24.1%). Only a very small proportion of respondents have found managing their loan repayments difficult (3.1%) or very difficult (0.3%).

29 Method to Secure Investment Loan Over half of the respondents (53%) secured their last investment loan through a mortgage broker, while 29% did so directly from a bank. When asked how they intend to secure finance for their next investment property, 62.8% indicated they intend to secure their next loan through a mortgage broker and 27.7% would prefer to get their loan directly from a bank, indicating the demand for mortgage brokers services is continuing to rise.

30 Investing in Property via SMSF The results shown above indicate a growing trend of purchasing investment property via selfmanaged super funds (SMSFs). As can be seen, 9.9% of surveyed investors indicated they have invested in a property via an SMSF (chart 1) and 17.4% are planning to do so within the next 12 months (chart 2), suggesting an increase of 7.5% in using an SMSF for property investment.