PRDnationwide Quarterly Economic and Property Report Q2 2011

Quarterly Economic& Property ReportAUSTRALIAQuarter 2 | 2011

QUARTERLY ECONOMIC & PROPERTY REPORT

NATIONAL RESEARCH REPORT

www.prdnationwide.com.au

Q2 2011 | QUARTERLY ECONOMIC REPORT

•CPI: 3.3%

• SVHL Rate: 7.8%

• AUS Unemployment Rate: 5.3%

• AUS Population Growth: 1.5%

• Average AUS Fuel Price: $1.44 pl

KEY FACTS

Overview - General Economic and Property Overview

What an interesting year this is shaping up to be. While many analysts had hoped that a prolonged period of stable interest rates would build momentum in the property market, the latestfiguresshowthatactivityhasinfactquietenedfurther.Thepreviouslystablepropertymarkets of New South Wales and Victoria have stuttered at the end of 2010 and into 2011. Recent statistics released by the ABS show a staggering decrease in the amount of national home loans issued. Not the best news for builders and developers.

Sharply contrasted to the home owner market, the rental market has experienced a significant tightening, as vacancy rates decreased and rental prices are expected toincrease (in some cases by 7% this year). With declining property prices and rising rents, betteryieldsaretobemadeinthepropertymarketandinvestorscouldfinallybeenticedto re-enter the market. However, rising rental prices could put increased pressure on inflation(whichtookeveryonebysurprisewithitslatestjumpoutoftheRBA’stargetrangethispastmonth)andcauseafurtherincreasetointerestrates,furtherstiflingconfidence.Historically, after every increase to the level of interest rates, activity in the market softens. Inearly2011ithasbeenlowinflationarypressurethathaskeptratessteady,withthehelpof a very high Australian dollar. As the Terms of Trade swells, local markets such as tourismcontinuestostruggle.Thebigquestionnowis“Whenwillratesgoup?”

Recently, a key factor that affects the Australian property market has changed. There has been a rapid decline in the number of international migrants entering Australia. Closely tied toAustralia’seconomicgrowthisthecontinualincreaseinpopulation,whetheritbebiggeris better or sustainable growth. While the Global Financial Crisis (GFC) caused a massive spike in the number of migrants entering the country, it now appears to have petered out. CertainlytheinfluxofreturningexpatsfromsufferingeconomiesduringtheGFC(suchasin Dubai and London) would have directly affected migrant numbers into Australia. Now that this has dropped off, demand for skilled labour may increase, resulting in lower unemployment and higher pressure on wages to increase, which is likely to increase inflation(andinterestrates).

For once, I agree with the International Monetary Fund (IMF) on urging Australia to establish a sovereign wealth fund, using the mining boom to save for a rainy day. After all, commoditypriceswillnotremainthishighforeverandweshouldbecautiousofAustralia’sincreasing dependence on South East Asian economies. The Chilean example of a sovereign wealth fund proves that it can work in transforming income from raw resources into sustainable and stable future income, compensating for the volatile commodity prices andfinitesupplies.

Confidence

SENTIMENT HITS NINE MONTH LOWThe Australian Consumer Sentiment Index decreased by 6.3 index points during the quarterendingMarch2011toreach104.1Indexpoints.Despitetherecentdecreaseintheindex, optimism still outweighs pessimism in the current market by four index points.

Long-term,thesixmonthmovingaveragehasrecordedadecreaseoffiveIndexpointsduringthequarter.WestpacchiefeconomistBillEvanssaidtheresultwasweakerthanexpected due to the aftermath of three consecutive rate hikes by the Reserve Bank and the controversy over the mining tax.

According to the monthly statewide survey of consumer sentiment, during the month of April 2011 sentiment decreased in Western Australia the most (by 12.6 Index points) and also declined in New South Wales (by 1.2 Index points). Queensland experienced the greatest increase in sentiment, with 6.1%, while Victoria increased by 5.2% and South Australia saw a 3.5% increase.

TheChineseConsumer Sentiment Index,measured byMacquarie China, increased 3points to 73 index points (50 points is considered neutral in China).

• The Consumer Sentiment Index indicates short-run changes to consumer willingness to purchase goods in the forthcoming quarter.

The Index is based on a monthly survey of 1,200 Australian households conducted by the Melbourne Institute and Westpac.

It represents current and future perspectives of the broad economic climate and household financial state.

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Prepared by PRDnationwide ResearchSource: Westpac/Melbourne Institute, last updated Mar 2011

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RESEARCH REPORT | Q2 2011 | QUARTERLY ECONOMIC & PROPERTY REPORT | NATIONAL

PRDnationwide

Confidence cont.

RECOVERY OF CONFIDENCE DESPITE DISASTERSBusiness confidence staggered in theDecember 2010 quarter after what was likely aresponsefromtheNovember2010interestraterise.However,theMarch2011quarterhadbusinessconfidenceincreasingtonineIndexpoints,duetoasharpincreaseintradingconditionsandprofitability.Queenslandleadtheway,withconfidencereaching16points,after the state began its recovery from the January disasters. Western Australia continued ahighlevelofconfidence,buoyedbytheminingsectortoreach15Indexpoints.Tasmaniaexperienced a sharp decline, falling to negative 21 Index points.

The NAB Business Conditions Index (output) increased in March by 11 points to reach 9 after a poor January and February. Conditions were strong again in mining (+27 index points), recreationandpersonalservices (+27 indexpoints),andfinancebusinessandproperty (+18), while trade exposed sectors such as retail, wholesale and construction remained subdued.

The NAB has its Australian economic forecasts unchanged, as the economy is expected tohavestalledovertheMarch2011quarterduetothefloodsandcyclones,buttohaveimprovedintheendfrommininginvestment,floodreconstructionandincomeeffectsofcommodity prices. The NAB forecasts GDP growth at 2.5% in 2011 and 3.7% in 2012.

Global economic growth has been revised by the IMF after the Japanese disasters, softening to 4.5%. However, considering the amount of activity shocks, the degree of growth still reflects the momentum seen at the end of 2010 in the larger developedeconomies, such as the US and Germany.

The latest Dun & Bradstreet National Business Expectations Survey showed a near decade low indexfiguredown17points resulting to14 Indexpoints. Thesurveyalsofound that 41% of executives see the high Australian dollar as having a positive impact to business.

• The Business Confidence Index indicates expectations of business conditions for the upcoming quarter.

• The Index is based on a survey of approximately 900 small to large businesses in the non-farm sectors and is conducted by the National Australia Bank (NAB).

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Prepared by PRDnationwide ResearchSource: National Australia Bank (NAB), last updated Apr-11


| P. 4 PRDnationwide

Macroeconomic Climate

FRUIT AND VEG PRICES SOARTheMarch 2011CPI figures recorded an unexpected annual change of 3.3%, placinginflationjustoutsidetheRBAtargetrangeof2%to3%.

Theunderlyinginflationfigure,asmeasuredbytheRBAremovesvolatileitemssuchasfruitandfuel,hasincreasedto2.6%fromtheDecember2010quarterof2.5%.

Rising fuel costs (increase of 8.8%), vegetables (+16%), fruit (+14.5%) and pharmaceuticals (+12.5%) helped push the CPI higher than expected. Meanwhile, products that experienced asignificantdeclineinpricewerefurniture(-6.2%),electronicequipment(-7.2%)andmilk(-6.2%).

The large increase to prices for fruit and vegetables have derived from the devastation caused by Cyclone Yasi. It was education however, that experienced the largest increase inpricesoutofallmeasuredgroups.Hosingpricesincreased1.3%duringthequarter,with electricity increasing the most at 5.1%.

AccordingtoBankWest,almostathirdofAustraliansarefinanciallyunfit,withlittleornosavings,anover-relianceondebt,inadequateinsurance,andhighhousingcostsrelativetotheirincome.Thisequatestoanincreaseof3%fromthepreviousyear.Inthestudy,only17%werefoundtobefinanciallyfit,withrespondentscitinghigherenergyandfoodcosts.

• Inflation is measured as a change in the Consumer Price Index (CPI), calculated by the Australian Bureau of Statistics (ABS) as the price of a weighted 'basket' of goods and services which account for a high proportion of expenditure by metropolitan households.

• The Reserve Bank of Australia (RBA) aims to constrain inflation in a long-run target range of 2-3% through the setting of interest rates.

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Prepared by PRDnationwide ResearchSource: ABS Cat 6401, last updated Apr - 2011

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PRDnationwide

Macroeconomic Climate cont.

INTEREST RATES EXPECTED TO RISE IN AUGUSTHome owners have breathed a sigh of relief that the RBA has not been tempted to raise the cash rate, leaving it steady over the beginning of 2011 at 4.75%. This resulted in interest rates remaining steady, with the standard variable home loan rate at 7.8%.

AccordingtotheRBA,thecashratehasnotshiftedduringthebeginningof2011quarterfortwokeyreasons.ThefirstisthehighAustraliandollarassistinginkeepinginflationarypressures down, while the second factor has been cautionary household spending. In the past 15 years, household debt has increased significantly, however households arecurrently saving at a level higher than the previous 20 years.

A recent Household Income and Labour Dynamics in Australia (HILDA) survey has concluded that the growth of household borrowing has declined since the mid 2000s acrossallagegroups.Sincethefinancialcrisisof2008anincreasedamountofhouseholdshave reported that they are ahead of schedule in home loan and credit card repayments.

Economists now predict a rise in the cash rate to come sooner rather than later, due to the unexpectedincreaseofrecentinflationlevels.

• The housing loan interest rate is the average rate of interest being offered by housing lenders. It is higher than the RBA’s target cash rate due to lending costs and profit margins.

• Interest rates are set by the RBA, who acts independently of government and sets interest rates with the goal of maintaining inflation in a long-run target range of 2% and 3%. The RBA meets monthly to review the current interest rate and is only required to justify its decision if it chooses to alter the rate

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Prepared by PRDnationwide ResearchSource: RBA Bulletin F05, last updated Apr -11



Foreign Exchange

THENEWNORMFORTHEAUSTRALIANDOLLAR?During the month of March 2011 the Australian Dollar Exchange Index increased a further 1.1% to register an index value of 76.3, whilst the annual change in the Australian Dollar appreciated 6.4%. The Trade Weighted Exchange Rate Index graph demonstrates the overall trend of a strengthening Australian dollar since the lows experienced in the late 1980’s.

ThestrengthoftheAustraliandollarisareflectionoftheweaknessinthe$USD,strongcommodity prices and high interest rates. The high level of the Australian dollar is expected to increase in the near future, with interest rates in the US expected to remain on hold, whileotherinternationalmarketshavestartedtoincreasetheirs.Globalinvestorconfidencehas risen, further reducing the demand for the US dollar. Commodity prices are expected to continue to remain high, relying on demand from China.

AccordingtoarecentreportbySouthernCrossEquities,manyexportersthatarenotpartoftheminingindustryareexperiencingsignificantpainduetothehighAustraliandollar,citing further evidence that the two speed economy is growing further apart.

• The trade weighted exchange rate index is compiled monthly by the Reserve Bank and ranks the Australian dollar against the currencies of our significant trading partners.

• Exchange rates directly affect the prices of our exports in foreign trade dollars.

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Prepared by PRDnationwide ResearchSource: RBA Bulletin F11, last updated Apr-11

ImprovingAffordabilityof Imports

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PRDnationwide

Fuel Prices

DESPITE HIGH AUD$ FUEL PRICES CONTINUE TO SOARIn dollar value terms, the nation experienced a rise of seven cents to the average petrol price during the month ending March 2011. The average price Australians pay at the pump increased to $1.44 per litre. During the year ending March 2011, petrol prices increased at an average rate of 10.5% across the nation.

Adelaide is now the capital city where motorists pay the least at $1.37 per litre. The city experiencedthesmallestquarterlyincreaseofanycapitalcityat7%overthequarter.InDarwin and Hobart consumers payed the most at $1.48 per litre.

OverthequarterendingMarch2011,allcapitalcitiesexperiencedanincreaseinpetrolprices with Hobart increasing the most at 16.5%, followed by Perth (10.9%).

During the course of 2011, Brisbane petrol prices increased by 11.3%, while Sydney increased at 12.5% and Melbourne at 10.2%.

During the month of March 2011 Queensland experienced an increase of 6.7% in the numberofcarssold,equatingtoalmost90,000.ThiswaslargelyduetoinsureddrivershavingtoreplacetheircarsfollowingtheJanuaryfloods.

• Sourced from Fueltrac, this chart tracks the average retail price for unleaded petrol across a broad range of suppliers in metro areas

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Prepared by PRDnationwide ResearchSource: AAA/Fueltrac, last updated Apr-11



Commodities Prices

COMMODITY PRICES PUSH PAST 100 INDEX POINTSDuring the month of March 2011, commodity prices increased by 1.6% to reach 101.6 index points. Compared to the previous year prices were rapidly falling due to the slackeningofdemandfromthewakeofthefinancialcrisis,commoditypriceshavenowincreased by 37.5%.

Over the past decade demand for coal has increased by 50%, while consumption of iron ore increased by 80% from 2003. As the global rate of demand increases rapidly, suppliers have been stretched, pushing prices for commodities higher.

The RBA does not know for certain how long the boom in resources shall last and has placed caution towards the high level of the Terms of Trade, opting not to buy but rather save for the near future. This strategy aligns itself to most households in Australia, which have seen their level of savings increased.

Ironore,coalandLNGnowaccountformorethanone-thirdofAustralia’stotalexports.Withmanynewminingprojectsunderway, capacityofexport volumesareexpected toincrease further.

AccordingtoareviewofthebudgetoutlookbytheconsultingfirmMacroeconomics,thestrength of commodity markets is already boosting the budget bottom line by $35 billion this year. It is estimated that if Government spending cuts between $4 billion to $5 billion were in place this year, a budget surplus would be viable by 2012-2013.

• Primary commodities account for more than half of Australia’s export earning.

• The Reserve Bank’s Commodity Price Index provides an indicator of primary commodity price movements. The index includes 17 commodities with separate weightings, the highest of which are coal, gold and iron ore.

• High commodity prices are one of the primary drivers behind Australia’s robust economy, influencing real estate prices particularly in Western Australia, Northern Territory, Northern Queensland and as of late South Australia. Coupled with the resource industry boom, employment and population growth follow, which spurs demand for housing and rental accommodation, particularly in neighbouring resource rich regions.

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Prepared by PRDnationwide ResearchSource: RBA Bulletin G5, last updated Apr-11

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PRDnationwide

House Finance

SHARP DECLINE FELT IN HOUSING FINANCEThegrossspendonhousingfinancewas$19.3billionduringthemonthofFebruary2011.Comparedtothepreviousyear,thetotalspendhasdecreased9.2%,equatingtoafallof$2billion.

Investorspendcontinuestoslideasitdecreasedto$6.2billion,equatingtoasofteningof$1.1 billion from the previous year.

A large decline was recorded in owner occupied finance, which fell by $600million inFebruary alone. Since 2010, owner occupied investment has rapidly declined by $1.4 billion,butstillequatesto68%oftotalhousingfinance.

The fall inhousefinanceexpenditurehasalsoseena rise in in theamountofnationaladvertised residential properties online. SQM Research noted that during March 2011 advertised properties increased in volume by 13,100 (3.8%).This equates to a total of356,600 properties being advertised online, compared to 241,700 properties last year (an increase of 47.5%).

ArecentreportreleasedbyRPDatafoundthatstateandlocalgovernmentsgetthemajorityof their source of tax revenue from property related taxes, approximately 48%. The report foundthatduringthe2009-2010financialyear,almost$32billionintaxfrompropertyalonewas received. The report concluded that this level of high revenue is likely to decline in the softer property markets of 2010-2011.

• Housing finance commitments track the volume of finance commitments made by significant lenders to individuals for the purchase of housing.

• This graph tracks the value of loans approved for both owner occupiers and investors

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Prepared by PRDnationwide ResearchSource: ABS Cat. No. 5609, last updated Apr -11



Labour Market

UNEMPLOYMENT RATE FALLS AGAINDuring the month of March 2011, unemployment decreased to 5.3%. When looking at the moving annual average, a decrease of 0.1% was recorded shifting the average unemployment rate to 5.1%. The low level of unemployment has placed increased pressure onwagegrowthandinthelonger-term,inflation.

For the month of March 2011, the nations lowest rate of unemployment occurred in the Northern Territory at 3%, while Queensland continued to have the highest rate of unemployment at 6.2%.

The New South Wales unemployment rate slightly increased to 5.4%, while in Victoria unemployment softened by 16% over the month to 4.7%. After having a period of high unemployment Tasmania experienced a 14% softening to record 5.6% for the month of March.

The resource industry has proved to be a large reason why unemployment levels have remained low, with male unemployment decreasing by 0.3%, while female unemployment increased by 0.1%. Further to this, a recent study by Randstad found that males were lookingatemploymentformoneyandcareerprogression,whilefemaleswantedflexibilityand a better workplace culture.

• Unemployment is calculated as the proportion of people in the labour force that were unemployed and actively seeking work during the survey period.

• The labour force is defined as the number of people aged between 16 and 55 who were either employed or actively looking for work during the survey period.

• This graph tracks the unemployment rate on a monthly and moving annual average basis over the last 30 years.

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Prepared by PRDnationwide ResearchSource: ABS Cat 6202, last updated Apr-11

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PRDnationwide

Equity Market

STOCK MARKET AFFECTED BY HIGH AUD$TheAustralianSecuritiesIndexexperiencedaquickincreaseinApril,onlytoretracttoit’soriginal value.Asat the18thofApril 2011, the Index recorded4861.85,equating toanincrease in the rolling average month of 2.3%.

FurtherincreasestotheAustraliandollarhascausedthestockmarkettoflatten,asinvestorslooktoglobalmarketsthatwouldbenefitfromweakercurrencies.Itispredictedthatinthenear future, the Australian market would underperform against its global peers.

A Citigroup report described how the high Australian dollar is likely to push the market towardsresourcesandenergysectoroftheequitymarket,aviewthatwassupportedbyStockAnalysis.

IBISWorld forecasts that organic farming and video games are to be the two fastest growing sectors in 2011. Organic farming is expected to increase 14% in revenue from $416.3 million, while video games are expected to increase by 12% to become a $4 billion industry.

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DayPrepared by PRDnationwide ResearchSource: Standard & Poors, last updated Apr-11

S&P / ASX 200

• The S&P/ASX 200 is recognized as the primary investable benchmark in Australia. The index covers approximately 78% of Australian equity market capitalization. Index constituents are drawn from eligible companies listed on the Australian Stock Exchange. This index is designed to address investment managers' needs to benchmark against a portfolio characterised by sufficient size and liquidity.

• The S&P/ASX Australian Index is a real-time, market capitalisation weighted index that include the largest and most liquid stocks in the Australian equity market listed on the Australian Stock Exchange (ASX).



Home Affordability

INTEREST RATES CAUSE DECLINE IN HOME LOAN AFFORDABILITYAs predicted, the November 2010 interest rate increase appears to have affected the Home LoanAffordabilityIndex,whichhascontinuedtodeclineduringtheDecember2010quarter.The Index decreased by 0.4 points to register 28.3 index points. This is despite a period of softening house prices.

Most states recorded an improvement to home loan affordability, with Western Australia, Queensland and Tasmania each achieving the highest growth at 0.7 index points. The ACT also improved marginally by 0.6 points. States that continued to decrease in affordability were Victoria (-0.3), the Northern Territory (-2.1) and New South Wales (-1.3).

On average, Australian households now need approximately 35.3% of the family income to service their home loan. New South Wales continued to be the least affordable state, with householdsrequiring39.5%of thefamily incometoservicetheirhomeloan,equatingto4.2% above the national average.

Queenslandfamiliesrequireapproximately33.4%oftheaveragefamilyincometoservicetheaveragehomeloan,whileVictoriarequires36.1%.TheACTrequirestheleastamount,with 18.5% of the average income. According to the REIA, the proportion of family income needed to meet the average rental payment has remained steady during 2010 at 25.1%.

OvertheDecember2010quarter,loanstofirsthomebuyersincreased6.8%equatingtotheonlyincreaseinloanstofirsthomebuyersduring2010.Firsthomebuyerparticipationofthetotalmarketdecreasedbyto15.6%duringtheDecemberquarter,itslowestratesince2004.

• The Home Loan Affordability Index measures average loan repayments against median wages and tracks these values over time.

• Continued price growth in the property market without an accompanying rise in income saw a long period of decline in the home loan affordability index across the nation.

• The Home Loan Affordability index commenced its rapid descent during 2002. After a short leveling between 2004 and 2006, affordability levels have again continued to trend downwards.

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30.0

40.0

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60.0

70.0

Dec

-80

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-81

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-82

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-83

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-86

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-87

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-91

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-99

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x va

lue

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ImprovingAffordability

Prepared by PRDnationwide ResearchSource: REIA / Deposit Power, last updated April-11

| P. 13


PRDnationwide

Dwelling Market

NEW DWELLING COMMENCEMENTS CRASH AT THE END OF 2010The total number of dwelling commencements decreased during the December 2010 quarter by 7.7%, equating to 3,270 less new homes compared to the previous quarter.When compared to the previous year, commencements have decreased by 7.2%.

On a state-by-state basis, Victoria continued to record the highest number of dwelling commencements during the December quarter, representing 35% of all dwellingscommenced nationally. New South Wales followed with 20%, while Queensland had 17%.

TheleastamountofdwellingscommencedforastateduringtheDecember2010quarterwas the Northern Territory (279), followed by Tasmania (757).

With a significant decline in dwelling commencements having occurred, the HIA hasdemanded that federal government introduce stimulus measures for new housing. The HIA have also voiced their approval for the removal of stamp duty on new homes.

Total national spend for home renovations continues to increase strongly, with $31 billion spent at the end of 2010 and forecasted growth of 2% during 2011 and 5% during 2012, equatingtoatotalof$33billion.

• Dwelling commencements indicate the number of new dwellings that have commenced their construction phase.

• A moving yearly average is used to filter out seasonal fluctuations in the number of dwellings commenced.

• Nationally, the annual number of dwelling commencements have been on a downward trend since Sep-04 (earlier in NSW and VIC)

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ovin

g An

nual

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. of C

omm

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men

ts .

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Dwelling Commencements

Dwelling Commencements Australia

Annual moving average

Prepared by PRDnationwide ResearchSource: ABS Cat. No. 8750, last updated Apr-11



Home Prices

HOME PRICES SOFTEN IN EARLY 2011During the year ending March 2011, the national average price index released by RPData recorded a decrease of 0.6%. Only two capital cities recorded marginal positive growth, with Darwin achieving the largest amount at 1.1%. Melbourne followed with a small change of 0.6%, while there was no change recorded in Sydney.

Home prices in Hobart and Adelaide have both recorded a decline in the price index, softening by 1.3% and 0.7% respectively. Brisbane prices decreased by 1.4%, while Perth decreased the most by 1.9%.

According to RPData, the highest median house price now rests with Canberra at $511,500. Sydney recorded a median price at $500,000, while Perth and Melbourne recorded the third highest median price at $465,000.

Developer Stockland has announced that they are pulling out of inner-city high rise developments due to a lack of Government engagement.

RPData believes that the fall in house prices follows near-record levels of housing stock coming on the market, the period homes are advertised for sale has also lengthened considerably.

Reserve Bank of Australia chief Glenn Stevens said he was not terribly troubled about the level of house prices in Australia, as house price to income ratios were not exceptional by global standards.

-2.5% -2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5%

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Melbourne

Brisbane

Adelaide

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Darwin

Canberra

Hobart

National

Change in Dwelling Price Index

Cap

tial C

ity

National Home Value Index

Prepared by PRDnationwide ResearchSource: RPData-Rismark International last updated May-11

• The chart to the above measures an annual period change in house prices of the capital cities.

| P. 15


PRDnationwide

Rental Market

RENTAL MARKET ATTRACTS ATTENTIONOver 2010, the Australian average vacancy rate decreased by 0.1% to 2.2%. Demand for rental accommodation now appears to be very high in Sydney, Canberra and Adelaide.

VacancyrateshavedecreasedthemostinCanberra(1.3%)overthemostrecentquarterending December 2010. According to the latest Market Facts report from the REIA, the city to experience the greatest demand for rental accommodation is Adelaide, with vacancy rates at 0.9%.

MelbourneexperiencedanincreasetovacancyratesduringtheDecemberquarter,climbingby1%toreachafinalfigureof2.4%.BrisbanerecordednochangeinthelevelofvacanciesovertheDecemberquarterandisnowthecapitalcitywiththelargestvacancyrateat3.4%.

Darwin maintains the highest median rental price for a standard three bedroom house at $545 per week, despite a decrease of 2.2% over the quarter ending December 2010.Adelaide is still the most affordable city to rent in, with a median rental price of $310 per week.

Sydneymedianrentincreasedby2.6%overthequartertoreach$400perweekforathreebedroom house. The median rent price in Melbourne remained at $330 per week, while there was also no change in the median rental price for Brisbane at $350 per week.

• The Time to Buy a Dwelling Index indicates short-run changes in consumer sentiment regarding whether it is a good time to buy a dwelling.

• It is a component of the Melbourne Institute’s Consumer Sentiment Index which is undertaken monthly.

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SydneyMelbourneBrisbaneAdelaidePerthHobartDarwinCanberraAus Average

Qua

rterly

Vac

ancy

Rat

e

Capital City

Quarterly Vacancy RatesDec-09 Dec-10

Dec-10 Average 2.2%

Prepared by PRDnationwide. Source: REIALast Updated Jan 2011



Demographics

OVERSEAS MIGRANTS PLUMMETTheAustralianrateofpopulationgrowthdecreasedsignificantlyby0.59%to1.55%fortheyear ending September 2010. This equates to 342,004 new residents, approximately125,474 less than the year ending June 2010.

Western Australia continues to lead the way in terms of the growth rate, with an annual increaseof2%,equatingto46,647newresidents.Victoriaregisteredthehighestnumberofnewresidentswith93,848duringtheyearendingSeptember2010.ThisisjustaboveNewSouth Wales with 87,904 new residents and Queensland with 81,851.

Tasmania has once again registered the slowest population growth at 0.81% for the year ending September 2010. This represents an increase of only 4,094 new residents for the state. South Australia was not far behind, recording only 1.13% growth (18,357 new residents) during the twelve month period.

There has been a significant decrease in the number of immigrants enteringAustralia.DuringtheSeptember2009quarter,atotalnet72,280newresidentscalledAustraliahome.Sincethennetimmigrantnumbershavedeclinedby41%toequateto42,476newresidentsfortheSeptember2010quarter.

The rate of natural increase in Australia has slowly increased during the past decade to reach36,352newAustraliansfortheSeptember2010quarter.

Queensland received1,688new interstatemigrantsduring theSeptember2010quarter.Over the twelvemonthperiodendingSeptember2010,Queensland’saveragequarterlymigrationratewas2,100newinterstatemigrants,equatingtotheleastamountofinterstatetravelers to Queensland in the past 20 years.

New South Wales still records the highest outward migration of residents nationwide. However, over the past year this rate has slowed. The annual average rate of migrants leaving New South Wales has decreased to 2,581 and has not been this low since mid 1987.IntheSeptember2010quarter,outwardnetmigrationincreasedto2,231residents.

The number of net migrants entering Victoria continued to be higher than the number leaving thestateduringtheSeptember2010quarter.Approximately384moremigrantsdecidedtocall Victoria home.

South Australia continued to lose residents, with 808 net residents departing during the quarter,whileTasmaniawelcomedanet49interstatemigrants.WesternAustraliaattracteda net 1,202 new residents from neighbouring states.

• Population change tracks the change in population across the states and territories of Australia. Population growth is seen as the key driver of demand for housing.

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Population Growth - Australia4 per. Mov. Avg. (Natural Increase - Australia)

4 per. Mov. Avg. (Net Overseas Migration - Australia)

Prepared by PRDnationwide ResearchSource: ABS Cat 3101, last updated Apr 2011

| P. 17


PRDnationwide

Retail Trade

RETAIL SPENDING MARGINALLY IMPROVESOver the 12 month period ending February 2011, Australia’s annual change in retailexpenditure increased 3.5% from the previous year, but only shifted 0.5% during the month. Annual change in retail expenditure has rebounded from the low levels recorded over the recent months.

The largest growth in expenditure occurred in food retailing, registering an annual growth of 5.4%. This was followed by other retailing which registered an annual growth of 5%.

Department stores experienced a slight softening of 0.1% from the previous year, while household good retailing only increased by 0.9%.

The ABS has placed cautious consumer behaviour as the reason for the performance of a slowretailsector.ConsumersinQueenslandhowever,defiedthegreatertrend,increasingtheir spending by 2% over the month.

Inresponsetothegrowingdemandofonlineshopping,Westfieldrecentlyofficiallyopenedits online shopping website, with over 130 retailers signed up.

• Retail spending figures are estimated by the ABS based on the Retail Business Survey conducted monthly amongst 4,350 retail and selected service businesses.

• The annual change in retail spending indicates how active consumers are in the marketplace and the degree to which consumers are willing to spend.

• The seasonally adjusted figures are used to smooth out seasonal factors associated with this data.

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Annual change in retail expenditure

Prepared by PRDnationwide ResearchSource:ABSCatNo:8501.0Seasonallyadjustedf igureslastupdatedJan-11



About PRDnationwide Research

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Ourresearchteamismadeupofhighlyqualifiedresearcherswhofocussolelyonpropertyanalysis.Skilledinderivingmacroandmicroquantitativeinformationfrommultiplecrediblesources, we partner with clients to provide strategic advice and direction regarding property and market performance. We have the added advantage of sourcing valuable and factual qualitativemarketresearchinordertoensureoursolutionsarethemostwellconsideredandfinanciallyviable.

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PRDnationwide does not give any warranty in relation to the accuracy of the information contained in this report. If you intend to rely upon the information contained herein, you must take note thattheinformation,figuresandprojectionshavebeen provided by various sources and have not beenverifiedbyus.Wehavenobeliefonewayorthe other in relation to the accuracy of such informa-tion,figuresandprojections.

PRDnationwide will not be liable for any loss or damageresultingfromanystatement,figure,calculation or any other information that you rely upon that is contained in the material. COPYRIGHT - PRDnationwide 2011.

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