The CoreLogic Stratified Hedonic Index breaks the market into three segments: the most affordable 25% of properties, the middle 50% and the most expensive 25%. The data shows over the past year the most expensive quarter of the market has recorded the greatest value growth. Over the 12 months to August 2017, the most affordable 25% of residential properties nationally have recorded value growth of 2.9% compared to growth of 8.0% across the middle 50% of suburbs and 11.4% growth across the 25% of most expensive suburbs. The national chart highlights that across all market segments the annual rate of value change has started to slow over recent months. Importantly, the chart also highlights that when there have been housing market downturns it has typically been the most expensive properties that have been hardest hit while more affordable dwellings have been more resilient to downturns. Annual change in dwelling values across market segments, National Over the period shown, August 1987 to August 2017, the thirty year period has seen values across the most affordable 25% of properties rise 1,517% compared to increases of 580% across the middle 50% of suburbs and 432% across the most expensive 25% of suburbs. This highlights how affordability has deteriorated substantially at the more affordable end of the housing market. The second chart shows the change in values across the three broad segments throughout the combined capital cities. Over the 12 months to August 2017, the most affordable 25% of properties have recorded growth of 4.6% compared to 9.3% growth across the middle 50% of properties and a 12.2% change across the most expensive 25% of the market. Like the national figures, in the event of a housing market downturn, it has been the more expensive housing which has tended to see the greater value falls. Annual change in dwelling values across market segments, Combined Capital Cities

The third chart looks at the growth performance across regional housing markets where the change in values has been much more moderate over recent years than that across the capital cities. The 25% of most affordable properties in regional Australia have recorded value increases of 2.5% compared to a 4.6% change across the middle 50% and an 8.4% increase in the most expensive 25% of properties. Over recent years, growth in the affordable segment in regional Australia has been the strongest performed suggesting that demand has been for more affordable housing. However, as the regional markets have picked-up over the past couple of years, it has been the top 25% of suburbs that have outperformed. This is likely to indicate demand for luxury housing outside of the capital cities has risen. Annual change in dwelling values across market segments, Combined Regional Markets The final chart shows the annual change in dwelling values across the three market segments throughout the capital cities. Melbourne and Darwin are the only capital cities that have recorded the greatest change in values over the year across the most affordable suburbs and the slowest growth across the most expensive suburbs. In all other capital cities, either the middle 50% of suburbs or the top 25% of suburbs have recorded the fastest rate of value growth over the year. In Melbourne, this is possibly due to the fact that Sydney and Melbourne are the strongest economies in the country and are jockeying to attract talent. Melbourne has a significant competitive advantage over Sydney in terms of being able to offer more affordable housing and the data seems to suggest that lower priced housing is a big driver which has led to a surge in values across the lower and also middle segments of the market. Annual change in dwelling values across market segments, individual capital cities, to Aug-17 The stratified hedonic index offers another interesting look into the performance of the national housing market looking at how different segments are performing. If the current housing market slowdown continues and turns into declines, watch for whether the most affordable sector of the market is relatively stronger performed than the more expensive segment. With record high levels of household debt and significant first home buyer incentives over recent years, the trends in a future downturn could be different from what has been seen in the past.