Top: Newcastle foreshore; Bottom left: Civic Theatre; Bottom right: University of Newcastle

MARKET OUTLOOKNEWCASTLENewcastle is one of Australia’s leading regional cities, undergoing revitalisation with numerous infrastructure projects and an emerging population of young professionals.

02 Location & Accessibility

04 Demographics

05 Infrastructure, Employment & Education

06 Residential Market

07 Rental Market

Prepared exclusively for GWH BuildMay 2018

Newcastle Wharf2

Honeysuckle Precinct6

Fort Scratchley19

Foreshore Park20

Nobby's Beach21

Nobby's Head22

Newcastle is located on the east coast of Australia, approximately 120km north of Sydney. Newcastle CBD is the capital of Australia’s leading regional economy; the Hunter Region.TRANSPORTATIONThe NSW Government and The City of Newcastle are investing in transport infrastructure as part of the Newcastle Revitalisation Program. The Newcastle Transport Interchange at Wickham will create easy transfers between trains, buses, light rail and taxi services. The Newcastle Light Rail will connect residents from their doorstep to key activity precincts along Hunter and Scott Street. Newcastle Airport opened a new $15m terminal in 2015. In 2017, Newcastle Airport also completed a $1.9 million project for the fit out of international arrivals and departures facilities. The Airport is currently in negations to run international flights. HEALTHResidents of the Newcastle CBD have the convenience of the Lingard Private Hospital which provides acute medical facilities, located less than three kilometres away. The Calvary Mater Hospital in Waratah has approximately 200 beds. While, John Hunter Hospital has 550 beds and services the Greater Newcastle region.RETAILThere is an array of retail amenity in the Newcastle CBD including Marketown Shopping Centre which hosts over 50 retailers including; a 24 hour Coles Supermarket, Woolworths, Big W and Dan Murphy’s, located only 400m from Sky Residences. The Hunter Street Mall is also undergoing redevelopment where stage one will include over 3,600 square metres of premium retail space.PARKS, BEACHES AND RECREATIONThere are several major parks within the Newcastle CBD including Civic Park and King Edward Park. Hunter Development Corporation has secured funding and is in the process of planning major waterfront public domain works in Honeysuckle from Worth Place to Fig Tree Park. This is to include sports & recreational areas, waterfront promenade, playground, seating & shade and event spaces. The Newcastle Light Rail will be able to easily deliver CBD residents from their doorstep to Nobby’s and Newcastle Beach. Newcastle also has an array of scenic walking paths such as the Anzac Memorial Walk, Bather’s Way and the Breakwater on Nobby’s.

LOCATION & ACCESSIBILITY

Market Outlook Newcastle2

HUNTER STREET

Honeysuckle Light Rail Stop1

Civic Light Rail Stop2

Newcastle Wharf

Hunter Street Mall7

Civic Theatre8

Newcastle Art Gallery9Darby Street Cafes10

University of Newcastle, City Campus11

University of Newcastle, Proposed Honeysuckle Campus12

Nihon University Proposed Campus13

Newcastle Grammar School14

Newcastle East Public School15

Civic Park16

Newcastle Beach17

Oceans Baths18

Fort Scratchley

Newcastle Transport Interchange4

Marketown Shopping Centre5

The Newcastle CBD provides residents with access to amenity from public transport, health facilities, education, retail, parks, beaches and recreation.

Prepared exclusively for GWH Build 3

For the purpose of this profile, the Newcastle CBD Study Area has been defined as the suburbs of Newcastle, The Hill, Cook Hill and Newcastle West.

POPULATIONThe population of the Newcastle CBD has experienced steady growth at an average of 1.3% per annum from 2011 to 2016. The population of the Newcastle CBD is projected to grow from approximately 9,600 residents in 2016 to around 15,300 in 2031. This growth translates to an average of 3.2% per annum over the 15-year period.

DEMOGRAPHICSThe resident profile of the Newcastle CBD is characterised by young people; mainly professionals, students and couples without children. The Newcastle CBD has a larger proportion of residents aged between 24 and 39 years old at 32% compared to 21% of residents in the NSW average.There is a large proportion of Newcastle CBD residents who are employed in white collar positions at 84% compared to the state average of 72%. While 11% of residents in the Newcastle CBD are undertaking tertiary studies compared to 6% of the resident population across the NSW average. The strong income growth of the Newcastle CBD study area is attributed to the growing population of young and educated professionals. The average household income in the Newcastle CBD in 2016 was $100,098, higher than the state average of $95,466 per household. The younger demographic is drawn to the convenient access to employment, public transport, health facilities, educational institutions, entertainment precincts and local beaches that Newcastle has to offer, compared to other areas in the Hunter region.

WHO LIVES IN THE NEWCASTLE CBD?Newcastle CBD (2016)

NSW

Average Age 39 38Aged 25-39 32% 21%White Collar Professionals 84% 72%Managers and Professionals 54% 38%Couples without Children 28% 26%Group Households 12% 4%Lone Person Households 41% 24%Average Household Income $100,098 $95,466Household Income Above $130,000 27% 26%Average Household Size 1.9 2.7

Prepared by Urbis; Source: ABS Census 2016

AVERAGE HOUSEHOLD INCOME Newcastle CBD

POPULATION FORECAST Newcastle CBD

Prepared by Urbis; Source: ABS Census 2016

Prepared by Urbis; Source: ABS Census, SAFi

DEMOGRAPHICS

Strong income growth and population growth among young professionals are key drivers of demand for residential dwellings in Newcastle CBD.

9,000 9,60011,900

13,30015,300

1.3%

4.4%

2.4%

2.7%

1.3%

4.4%

2.4%

2.7%

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Newcastle CBD PopulationNewcastle CBD Annual Growth Rate

2006

$69,559

$65,015

2011 2016

$87,546

$84,218

$100,098

$95,466

Newcastle CBDNSW

THE POPULATION IN NEWCASTLE CBD IS PROJECTED TO GROW TO AROUND 15,300 IN 2031.

Market Outlook Newcastle4

INFRASTRUCTUREThe NSW Government has invested $650 million in the Revitalising Newcastle Program which is aimed at activating the city to attract tourists, students, researchers and entrepreneurs. The program encompasses key infrastructure projects such as:

01 NEWCASTLE INTERCHANGE $200 million; 2019 CompletionThe Newcastle Interchange at Wickham will centralise trains, buses, light rail, taxis and kiss and ride facilities. Commuting will become easier with convenient transfers between transport modes.

02 NEWCASTLE LIGHT RAIL PROJECT $310 million; 2019 CompletionThe Newcastle Light Rail will stretch 2.7 kilometres from the Transport Interchange at Wickham, along Hunter Street to Pacific Park. Once operational, the high frequency services will run every seven and a half minutes during peak. The Newcastle Light Rail network is projected to become a catalyst for expansions to inner suburbs and major facilities in the future.

03 NEWCASTLE CRUISE SHIP TERMINAL $12.7 million; 2018 CompletionA new 3,000 sq.m terminal building, car park and improved accessibility will increase the appeal of Newcastle as an international cruise destination and boost tourism into the area.

04 HUNTER STREET MALL REDEVELOPMENT $750 million; 2020 Completion (Stage One)The redevelopment of the Hunter Street Mall will consist of boutique apartments, premium retail and commercial space as well as a landscaped piazza.

EMPLOYMENT GROWTH IN THE NEWCASTLE CBD BY INDUSTRY New jobs by 2031

EMPLOYMENT GROWTH IN THE NEWCASTLE CBD BY INDUSTRY

RESIDENTS UNDERTAKING TERTIARY STUDIES

Prepared by Urbis; Source: BTS 2016

Prepared by Urbis; Source: BTS 2016 Prepared by Urbis; Source: BTS 2016

INFRASTRUCTURE, EMPLOYMENT & EDUCATION

Newcastle CBD is undergoing revitalisation with over $1 billion worth of key infrastructure projects.

EDUCATIONThe education industry is set to become a major economic driver in Newcastle. In the latest Census, approximately 11% of residents were undertaking tertiary studies, well above the state average of 6%. The University of Newcastle (UoN) opened NeW Space on Hunter Street in July 2017. NeW Space houses the business & law faculties of UoN with an enrolment level of around 3,000 students. UoN also recently acquired two hectares in the Honeysuckle Precinct, in order to further expand the University’s City Campus. UoN has recently released its master plan which include seven multi-storey buildings. Stage one is to be completed by 2020 and will consist of an Innovation Hub and facilities for the School of Creative Industries. The Innovation Hub is a joint funding initiative with the NSW Government & Newcastle City Council.Residents in Sky can walk to the NeW Space which is 280 metres away and to the Honeysuckle Campus which will be 120 metres away. Japan’s Nihon University purchased the former Newcastle Court House in 2017 with plans to open its first campus in Australia. The site will provide education facilities for 200 students.

Newcastle CBD (2016)

Newcastle CBD Newcastle LGA

NSW

Top IndustriesNew Jobs by 2031

Professional, Scientific and Technical Services + 1,220

Public Administration and Safety + 970

Financial and Insurance Services + 610

Health Care and Social Assistance + 450

Education and Training + 440

Other industries + 3,220

Newcastle CBD Total + 6,910

EMPLOYMENTNewcastle CBD is a corporate hub for the Hunter region with major headquarters for the Hunter Development Corporation, NSW Fair Trading Office, NIB and GHD Engineering.For the purpose of employment forecasting, Newcastle CBD has been defined by the Newcastle – Cooks Hill SA2. By 2031, Newcastle CBD is projected to grow by approximately 6,910 new positions, accounting for 29% of the total Newcastle LGA projected job growth of 23,600 positions.

+ 6,910+ 23,600

11%

6%

Prepared exclusively for GWH Build 5

Prices in the Newcastle apartment market have risen over the past 20 years, with high price growth recorded over the past five years. This sudden growth reflects the improved amenity and economy in Newcastle. The boom in Sydney housing prices has also pushed demand to nearby regional cities such as Newcastle where approximately 10% of residents in Newcastle CBD have moved from Metropolitan Sydney over the last five years.For the purpose of this analysis, the Newcastle CBD Study Area has been defined by the suburb of Newcastle (2300). According to CoreLogic RP Data, the following trends can be seen:

▪ The limited availability of land in Newcastle CBD has created strong growth opportunities for apartments.

▪ Interest in one bedroom apartments has gained traction over the past 10 years with the growing student population (11% of residents) and couples without children (28% of households) living in the Newcastle CBD.

▪ In 2017, the median price for a one bedroom apartment in Newcastle CBD rose to $453,750, reflecting an average price growth of 8.1% per annum over the past five years.

▪ Two bedroom apartments Newcastle CBD have remained a popular product type and as such, have experienced an upward trend in the median price. This product type appeals to first home buyers, investors and downsizers.

▪ The median price for a two bedroom apartment in Newcastle CBD increased to $702,500 in 2017, reflecting an average price growth of 8.6% per annum over the past five years.

According to sales from May 2017 to April 2018 compiled by realestate.com, the median price for one, two and three bedroom apartments is listed below:

PROPOSED APARTMENT PIPELINE Newcastle CBD

MEDIAN APARTMENT PRICES

NEWCASTLE CBD APARTMENT SALES PRICE GROWTH PER ANNUM

Prepared by Urbis; Source: Realestate.com Note: Bases on sales between 1 May 2017 to 30 April 2018

Prepared by Urbis; Source: CoreLogic RP Data

APARTMENT MARKET

The relative affordability of Newcastle CBD and projected growth in residential development has resulted in growing demand for apartments.

Type Median Apartment Price

One Bedroom $470,000

Two Bedroom $730,000

Three Bedroom $1,460,000

Type 1 year 5 year 10 year

One Bedroom 12.7% 8.1% 3.6%

Two Bedroom 15.2% 8.6% 3.1%

NEW APARTMENT SUPPLYAccording to data from Cordell Connect, as of May 2018 there are an estimated 1,340 proposed new apartments in the Newcastle CBD over the next five years. Approximately 370 dwellings (28%) of proposed apartments are in the construction phase and around 770 dwellings (58%) of the proposed apartments have development approval. The chart below shows the indicative supply that may enter the Newcastle CBD apartment market over the next five years.

Prepared by Urbis; Source: Cordell Connect

ONE BEDROOM APARTMENTS Newcastle CBD

TWO BEDROOM APARTMENTS Newcastle CBD

Prepared by Urbis; Source: CoreLogic RP Data Please note a sample size of 500 apartment sales over 20 years

Prepared by Urbis; Source: CoreLogic RP Data Please note a sample size of 1,200 apartment sales over 20 years

$453,750

0$50,000$100,000$150,000$200,000$250,000$300,000$350,000$400,000$450,000$500,000

1997

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Number of TransactionsMedian Price $702,500

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Number of proposed apartments

Market Outlook Newcastle6

PROPORTION OF RENTING HOUSEHOLDS

VACANCY RATE – 2300 POSTCODE March 2018

RENTAL MARKET

Newcastle CBD has a high proportion of households renting, 57% as at the 2016 census.

RENTING HOUSEHOLDSNewcastle CBD has an established and growing rental market with 57% of households renting their homes as at 2016, increasing from 55% in 2011. The share of renting households in Newcastle CBD greatly exceeds those across the NSW average (33%) and the Sydney Metropolitan average (36%) in 2016. The rapidly increasing student population located in the Newcastle CBD should further influence the size of the rental market. RENTAL PREMIUM FOR NEW APARTMENTSThe Newcastle CBD study area of Newcastle, Cooks Hill and The Hill has been used for the rental premium analysis.Data according to Realestate.com in May 2018 shows the substantial premium for new one and two bedroom rental apartments in Newcastle CBD. New apartments in Newcastle CBD with one bedroom achieve a premium of 26% and two bedroom apartments achieve a 27% premium relative to existing stock. As at May 2018, the median rent for new one bedroom apartments in Newcastle CBD is $440 per week. Similarly for new two bedroom apartments, the median rent is $545 per week. VACANCY RATESDue to data restrictions, the postcode 2300 has been used as a proxy for the Newcastle CBD catchment rental market. Vacancy data indicates that residential rental properties in the 2300 postcode are experiencing a low rate of vacancy, 2.3% as at March 2018. The high proportion of households renting combined with a low vacancy rate, reinforces the continuing demand for rental properties in Newcastle CBD.

Prepared by Urbis; Source: ABS Census 2016Note: References to the Sydney Metropolitan area are based on the Greater Capital City Statistical Area (GCCSA) boundaries for Sydney.

Prepared by Urbis; Source: SQM Research

2.3%

NEWCASTLE CBD HAS A GROWING RENTAL MARKET WITH 57% OF HOUSEHOLDS RENTING THEIR HOMES AS AT 2016.

Newcastle CBD

57%

55%

Metro Sydney NSW

36%

32%

33%

31%

20162011

Prepared exclusively for GWH Build 7

This report is dated 5 June 2018 and incorporates information and events up to that date only and excludes any information arising, or event occurring, after that date which may affect the validity of Urbis Pty Ltd’s (Urbis) opinion in this report. Urbis prepared this report on the instructions, and for the benefit only, of GWH Build (Instructing Party) for the purpose of Newcastle Market Outlook (Purpose) and not for any other purpose or use. To the extent permitted by applicable law, Urbis expressly disclaims all liability, whether direct or indirect, to the Instructing Party which relies or purports to rely on this report for any purpose other than the Purpose, and to any other person which relies or purports to rely on this report for any purpose whatsoever (including the Purpose). In preparing this report, Urbis was required to make judgements which may be affected by unforeseen future events, the likelihood and effects of which are not capable of precise assessment. All surveys, forecasts, projections and recommendations contained in or associated with this report are made in good faith and on the basis of information supplied to Urbis at the date of this report, and upon which Urbis relied. Achievement of the projections and budgets set out in this report will depend, among other things, on the actions of others over which Urbis has no control. In preparing this report, Urbis may rely on or refer to documents in a language other than English, which Urbis may arrange to be translated. Urbis is not responsible for the accuracy or completeness of such translations and disclaims any liability for any statement or opinion made in this report being inaccurate or incomplete arising from such translations. Whilst Urbis has made all reasonable inquiries it believes necessary in preparing this report, it is not responsible for determining the completeness or accuracy of information provided to it. Urbis (including its officers and personnel) is not liable for any errors or omissions, including in information provided by the Instructing Party or another person or upon which Urbis relies, provided that such errors or omissions are not made by Urbis recklessly or in bad faith. This report has been prepared with due care and diligence by Urbis and the statements and opinions given by Urbis in this report are given in good faith and in the reasonable belief that they are correct and not misleading, subject to the limitations above.

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