prdnationwide quarterly economic & property report | q3 2011

Quarterly Economic& Property ReportAUSTRALIAQuarter 3 | 2011

QUARTERLY ECONOMIC & PROPERTY REPORT

NATIONAL RESEARCH REPORT

www.prdnationwide.com.au

Q2 2011 | QUARTERLY ECONOMIC REPORT

•CPI: 3.6%

• SVHL Rate: 7.8%

• AUS Unemployment Rate: 4.8%

• AUS Population Growth: 1.45%

• Average AUS Fuel Price: $1.42 pl

KEY FACTS

Overview - General Economic and Property Overview

ConfidenceThe Australian Consumer Sentiment Index decreased by 11.1 index points during the quarter ending July 2011 to reach 92.8 index points. Despite interest rates being in hold, it appears the instability of global economic conditions have dampened sentiment. Confidence has decreased three index points during the quarter ending June 2011 torecordsixontheIndex.ByobservingtheBusinessConfidencegraph,itcanbedeterminedthatoverthepastyear,confidencehasfluctuatedlikeayo-yobetweenfivetotenIndexpoints.

Macroeconomic ClimateTheJune2011CPIfiguresrecordedanannualchangeof3.6percent,continuingthetrendofincreasinglevelsofinflationabovetheRBAtargetrangeoftwotothreepercent.The standard home loan interest rate has remained steady since November 2010 at 7.8 per cent. Economists had anticipated that there would be a gradual increase to rates as 2011 developed, however several factors have altered this forecast, delaying the predicted increases to interest rates to the end of 2011. Equities & Commodities PricesDuring the month of July 2011 the Australian Dollar Exchange Index increased a further 0.8 per cent to register an index value of 78.4, whilst the annual change in the Australian Dollar appreciated 12.9 per cent. During the month of August 2011, commodity prices decreased by 0.9 per cent to reach 108.3 index points. Compared to the previous year, when prices were rapidly increasing inamarketcorrectionduetotheGlobalFinancialCrisis,commoditypriceshavegrownby8.8 per cent.

Housing PricesTherateofpricegrowthinAustraliancapitalcitieshassoftenedinthefirstquarterof2011.Compared to the previous year, the average Australian house price has now decreased by 1.9 per cent. During the June 2011 quarter, the Time to Buy a Dwelling Index decreased in three of the fivemeasuredstates.OnlyinVictoriaandSouthAustraliadidtheIndexincrease,by30.3points and 19.9 points respectively. Western Australia decreased the most, by 37.9 index points, followed by New South Wales (decrease of 9.8 points) and Queensland (2.8).

Housing Finance & Labour MarketThegross spendonhousing financewas$20.5billionduring themonthofMay2011.Compared to the previous year, the total spend has decreased by 2.9 per cent, equating to $600 million.DuringthemonthofJune2011,unemploymentdecreasedto4.8percent.Whenlookingat the moving annual average, unemployment remained steady at 5.1 per cent.

Overview - Cont.

Dwelling & Construction MarketThetotalnumberofdwellingcommencementsdecreasedduringthefirstquarterof2011by 8.8 per cent, equating to 40,986 new homes for the quarter. When compared to the previous year, commencements have decreased by 11.6 per cent.The national gross spend on construction (other than houses) increased during the March 2011 quarter by 1.2 per cent. The overall spend for the March 2011 quarter in construction was just over $24 million, up 1.2 per cent from the previous quarter. The gross spend in theMarch2011quarterwassignificantlyhigherthanpreviousquartersinthepastthreeyears.

DemographicsThere has beena significant decrease in the number of immigrants enteringAustralia.During the September 2009 quarter, a total net 72,280 new residents called Australia home. Since then net immigrant numbers have declined by 52 per cent to equate to 34,493 new residents for the December 2010 quarter. As at June 2010, the ABS estimates that approximately 27 per cent of Australia’s population was born overseas.

Retails Trade & Petrol Prices Over the 12 month period ending June 2011, Australia’s annual change in retail expenditure increased 1.48 per cent from the previous year, but declined by 0.1 per cent during the month.In dollar value terms, the nation experienced a fall of four cents to average petrol price during the month ending June 2011. The average price Australians pay at the pump decreased to $1.42 per litre. During the year ending June 2011, petrol prices increased at an average rate of 9.5 per cent across the nation.

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RESEARCH REPORT | Q3 2011 | QUARTERLY ECONOMIC & PROPERTY REPORT | NATIONAL

PRDnationwide

Confidence

PESSIMISTS OUTWEIGH OPTIMISTSThe Australian Consumer Sentiment Index decreased by 11.1 index points during the quarter ending July 2011 to reach 92.8 index points. Despite interest rates being in hold, it appears the instability of global economic conditions have dampened sentiment.

Long-term,thesixmonthmovingaveragehasrecordedandecreaseof3.6indexpointsduring the quarter.

During the month of July 2011, consumer sentiment decreased in all states measured, with the largest decrease occurring in South Australia (by 18.3 index points), followed by Queensland (13.9 index points). New South Wales experienced the smallest decrease in sentiment, by 2.3 per cent, while Western Australia decreased by 8.7 per cent. Sentiment decreased by 11.8 per cent in Victoria.

Research from MasterCard Australia disclosed that purchasers are watching the interest rates with concern. There has been a softening to the growth of credit purchases, while debit purchases have experienced double-digit growth, equating to purchasers utilisingtheir own money.

• 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 Aug-2011


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Confidence cont.

MINING REMAINS STRONG WHILE CONSTRUCTION SUFFERSConfidence has decreased three index points during the quarter ending June 2011 torecord+6ontheIndex.ByobservingtheBusinessConfidencegraph,itcanbedeterminedthatoverthepastyear,confidencehasfluctuatedlikeayo-yobetweenfivetotenIndexpoints.

Thelossofeconomicmomentumoverthefirsthalfof2011,alongwithstalledassetpriceshavedampenedbusinessconfidence.ThesovereigndebtconcernsofEuropeandtheuncertaintyoftheeconomicpositionintheUShasalsohelpedreduceconfidence.

The NAB Business Conditions Index at +2 points is still four points below the longer term averageofsixindexpoints.Industrieslikemininghaveperformedratherwell,whileretailhas deteriorated sharply, and there has been a weakening to the manufacturing,construction and wholesale industries.

Globalgrowthisslowingfromthestrongpaceseenlastyear,reflectingoilprices,lowerhousehold incomes and the Japanese disasters impact on global supply chains. Developed economic growth has been at two per cent, while emerging economic growth was between six to seven per cent.

TheNABhasforecastedasoftersecondandthirdquarterto2011,withweakerdiscretionaryspending and delays in the recovery to the volume of coal exports. It is expected that strong export prices, mining investment and the Queensland rebuilding should lift GDP growth in the fourth quarter. The NAB expects GDP growth at 1.7 per cent in 2011 and 4.6 per cent in 2012.

• 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 Aug-11

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PRDnationwide

Macroeconomic Climate

INFLATION CLIMBING CLOSER TO FOUR PER CENTTTheJune2011CPIfiguresrecordedanannualchangeof3.6percent,continuingthetrendofincreasinglevelsofinflationabovetheRBAtargetrangeoftwotothreepercent.

Theunderlyinginflationfigure,asmeasuredbytheRBAremovesvolatileitemssuchasfruit and fuel, has softened to 2.5 per cent from the March 2011 quarter of 2.6 per cent.

The Australian Government has announced that in July 2012 a carbon tax of $23 per tonne will be introduced and paid by the 500 largest polluters in Australia. This price is expected toriseby2.5percentperannumuntilJuly2015.Itisexpectedthatinflationwillriseby0.7per cent over 2012, with electricity increasing by ten per cent and gas increasing by nine per cent. The NAB predicts that GDP will be 0.2 per cent lower due to the affects of the carbon tax.

According to the IMF, Australia’s economy is well placed, despite growing capacity and price pressures. The IMF expects GDP to grow by two per cent in 2011 and by 3.5 per cent in2012,withunemploymentremainingbelowfivepercent.TheIMFanticipatesthatifinvestment in the resource sector is larger than expected, there will be larger pressure in inflation,whichwilllikelyresultinafurtherincreasestothecashrate.

• 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 Aug- 2011



Macroeconomic Climate cont.

BANKS HINT AT SURPRISE MOVE BY THE RBAThe standard home loan interest rate has remained steady since November 2010 at 7.8 per cent. Economists had anticipated that there would be a gradual increase to rates as 2011 developed, however several factors have altered this forecast, delaying the predicted increases to interest rates to the end of 2011.

The global economic environment has continued to be volatile, playing havoc in the equity market,whilebusinessconfidencehasalsofluctuatedandsentimenthasfallen.Forthetimebeing theRBAhasbeencontent tohold the cash rate steady,while inflationhasincreased.

TheCommonWealthBankofAustraliahasjustrecentlydecreaseditsfixedinterestrate,increasing speculation that the RBA is considering lowering the cash rate in the near future.

The Westpac chief economist has claimed that interest rates are ‘too high’ when observing non-miningsectorsoftheeconomyandtheinstabilityoftheglobaleconomicenvironment.Over the next year, Westpac predicts a fall of one per cent.

• 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 Aug-11

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PRDnationwide

Foreign Exchange

HIGH DOLLAR CONTINUES TO HURT EXPORTSDuring the month of July 2011 the Australian Dollar Exchange Index increased a further 0.8 per cent to register an index value of 78.4, whilst the annual change in the Australian Dollar appreciated 12.9 per cent. The Trade Weighted Exchange Rate Index graph demonstrates theoveralltrendofastrengtheningAustralianDollaroverthepastdecade(overlookingtheperiod of the Global Financial Crisis).

GlobalinvestorshaveflockedtotheAustraliandollar,pushingittoarecord$1.10intheanticipation that the RBA will increase the official cash rate due to the steady rise ofinflation,pastthetargetrange.

The recent raising of the US debt ceiling has helped to prevent the Australian dollar from increasing further past $1.10. It was a much need respite for many of Australia’s export businesses.

The Australian Terms of Trade has increased yet again during the second quarter of 2011. An increase of 5.2 per cent occurred, equating to a 12 month increase of 11.7 per cent.

• 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 Aug-11

ImprovingAffordabilityof Imports

Jul-10 Jul-11 % ChangeEU Euro 0.69 0.77 11.4%JP Yen 77.67 84.92 9.3%NZ Dollar 1.25 1.27 1.6%UK Pound 0.58 0.67 16.6%US Dollar 0.90 1.10 21.9%

Source: RBA Bulletin F11



Fuel Prices

JUNE A CHEAPER MONTH FOR FUELIn dollar value terms, the nation experienced a fall of four cents to average petrol price during the month ending June 2011. The average price Australians pay at the pump decreased to $1.42 per litre. During the year ending June 2011, petrol prices increased at an average rate of 9.5 per cent across the nation.

Hobart is now the capital city where motorists pay the most at $1.49 per litre. The city experienced a quarterly increase of 0.7 per cent during the quarter. Five Australian capital cities shared the lowest price for fuel, at $1.39 per litre, while Brisbane was at $1.41 and Darwin was at $1.49 per litre.

Over the quarter ending June 2011, all capital cities (except Hobart and Adelaide) experienced an decrease in petrol prices, with Sydney decreasing the most at 3.5 per cent. This was followed by Brisbane and Canberra, each with a fall of 2.8 per cent.

During the course of 2010, Adelaide’s petrol prices have increased the most at 11.2 per cent, followed by Canberra at 10.3 per cent. Brisbane was the capital city to increase the least at 8.5%.

• 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 Aug-11

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PRDnationwide

Commodities Prices

WILL COMMODITY PRICES FALL WITH THE HIGH AUD$ ?During the month of August 2011, commodity prices decreased by 0.9 per cent to reach 108.3 index points. Compared to the previous year, when prices were rapidly increasing inamarketcorrectionduetotheGlobalFinancialCrisis,commoditypriceshavegrownby8.8 per cent.

Industries that produce steel, aluminium, zinc, paper and pulp will have their carbon tax subsidised by approximately 94.5 per cent over four years (worth $1.2 billion alone for manufacturing and $300 million for steel).

There is growing uncertainty regarding the stability of China’s economic growth. The spotlighthasbeenon inflationarypressures, loosemonetarypolicyand risingpropertyprices. China’s 12th economic plan released in March has been criticised as unbalanced, uneven and unsustainable in the longer term. Needless to say, many Australian corporations will be watching China’s economic policy and progress very closely.

Exports to Japan have recently increased to $3.1 billion a month. It will also be interesting to see how demand for Australia’s raw resources reacts, as demand from Japanese increases from having two-thirds of their nuclear power stations off. Looking ahead,Japan’sPrimeMinsterhasstatedthathewouldliketophaseoutnuclearenergyinJapanaltogether. Could there be another rise in the Commodity Price Index ahead?

• 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 Aug-11



Construction Market

HOME BUILDERS STILL QUIETThe national gross spend on construction (other than houses) increased during the March 2011 quarter by 1.2 per cent. The overall spend for the March 2011 quarter in construction was just over $24 million, up 1.2 per cent from the previous quarter. The gross spend in the March2011quarterwassignificantlyhigherthanpreviousquartersinthepastthreeyears.

According to a recent survey completed by Master Builders Australia, builder sentiment has plummeted following the constant speculation regarding the rise of interest rates, carbon taxandfinancialconstraints.TheJunequartersurveyrevealedadeclineinbusinessactivityandprofitability.

A recent study by the Australia Industry Group has found that the building industry has declined in July for the 14th consecutive month as consumer sentiment falls amid higher borrowing costs.

Western Australia appears to have been hit hard by the decline in housing construction, with a recent BIS Shrapnel report. It expects 3,500 to 6,000 fewer homes that need to be built perannumtomeetdemandoverthenextfiveyears.

•The construction industry is one of the driving areas in the economy, having a significant contribution to GDP and a multiplier effect on the activity in other industries. Indicators of price movement of construction outputs will be a valuable tool in economic analysis.

• Construction industry output price indexes are being developed to measure changes over time in the price of new construction outputs, other than houses.

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Prepared by PRDnationwide ResearchSource: ABS Cat 1350, last updated Aug-11

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PRDnationwide

House Finance

OWNER OCCUPIER FINANCE SHOWS PROMISEThe gross spend on housing financewas $20.5 billion during themonth ofMay 2011.Compared to the previous year, the total spend has decreased by 2.9 per cent, equating to $600 million.

Thefallininvestorspendlookstohavecommenceditsrecoveryfromhittingthebottom,asit increased by $200 million over the month to $6.3 billion.

During the month of May 2011, owner occupier spend increased by $400 million to equate to$14.2billion.Approximately69percentofthepropertymarketisnowowneroccupiedand it is expected to increase as rents across the nation continue to rise and homes values have softened.

The outlook for financial commitments to housing remains mixed, with very lowunemploymentfiguresandashortageofhousingsupplyagainsttheaffordabilityissuesandpossibility of rising interest rates.

Arecentstudyundertakenbyafinancialcomparisonwebsitehasfoundthatlendingcriteriahas loosened from January 2011, where the LVRs had lending ratios around 54 per cent, it isnoweightpointshigherat62percent.Thisleveloffinancebeingofferedhasnotbeenthis easily available since early 2009

• 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 Aug -11



Labour Market

UNEMPLOYMENT RATE CONTINUES TO DECLINEDuringthemonthofJune2011,unemploymentdecreasedto4.8percent.Whenlookingatthe moving annual average, unemployment remained steady at 5.1 per cent.

For the month of June 2011, the nations lowest rate of unemployment occurred in the Northern Territory at 3.4 per cent, experiencing a decrease of 23 per cent over the month. New South Wales now has the highest rate of unemployment at 5.2 per cent, an increase offivepercentoverthemonth.

Victorian unemployment rate fell by 13 per cent during the month of June to achieve 4.5 per cent, while Queensland unemployment softened by four per cent over the month to 5.1 per cent. After having a period of high unemployment Tasmania experienced an eight per cent softeningtorecordfivepercentforthemonthofJune.

There continues to be a shift in the employment trend away from full time to part time employment. Part time employment now accounts for just over 3.4 million while full time employmentamountstoadeclining8millionofAustralia’sworkforce.

Theworkforceappearstobecomingmoreskilled,asithasbeenrevealedthataquarterofworkersagedbetween25and64havemultiplequalifications.

• 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 Aug-11

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PRDnationwide

Home Affordability

AUSTRALIAN HOME LOAN AFFORDABILITY INCREASESAspredictedtheHomeLoanAffordabilityIndexhasincreasedinthefirstquarterof2011.The Index increased by 0.9 points to register 29.3 index points.

All states recorded an improvement to home loan affordability, with the Northern Territory achieving the highest growth at 2.6 Index points to 43.1. This was followed by New South Wales (increase of 1.6 points), and Western Australia (increase of 1.5 points).

On average, Australian households now need approximately 34.2 per cent of the family income to service their home loan. Victoria is now the least affordable state, with households requiring 39.5 per cent of the family income to service their home loan, equating to 5.3 per cent above the national average.

Queensland families require approximately 32.9 per cent of the average family income to service the average home loan, while New South Wales require 37.2 per cent. The ACT requires the least amount, with 18.6 per cent of the average income. According to the REIA, the proportion of family income needed to meet the average rental payment has remained steadyduringthefirstquarterof2011at25.1percent.

Loanstofirsthomebuyersdecreasedby20.6percentfromthepreviousyear.Firsthomebuyer participation decreased to 15.4 per cent during the March 2011 quarter, its lowest rate since September 1994

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



Dwelling Market

LESS NEW DWELLINGSThetotalnumberofdwellingcommencementsdecreasedduringthefirstquarterof2011by8.8 per cent, equating to 40,986 new homes for the quarter. When compared to the previous year, commencements have decreased by 11.6 per cent.

On a state-by-state basis, Victoria continued to record the highest number of dwellingcommencements during the September quarter, representing 36 per cent of all dwellings commenced nationally. New South Wales followed with 21 per cent and Queensland with 17 per cent.

The least amount of dwellings commenced for a state during the September 2010 quarter was the Northern Territory (386), followed by Tasmania (640).

NewfiguresfromtheHousingIndustryAssociationshowthathousingstartsareexpectedtofall 13 per cent. This would equate to the lowest point since the mid 1990’s.

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

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PRDnationwide

Dwelling Market - cont.

HOME AFFORDABILITY IS KEYDuring the June 2011 quarter, the Time to Buy a Dwelling Index decreased in three of the fivemeasuredstates.OnlyinVictoriaandSouthAustraliadidtheIndexincrease,by30.3points and 19.9 points respectively. Western Australia decreased the most, by 37.9 index points, followed by New South Wales (decrease of 9.8 points) and Queensland (2.8).

Queensland now has the highest index value at 134.4 index points for the June 2011 quarter, while South Australia followed at 131.5.

According to the Westpac-Melbourne Institute Survey of Consumer Sentiment, familyfinancialconditionsimprovedinNewSouthWalesandVictoriabutdecreasedinQueensland,Western Australia and South Australia.

The trend in Australia for larger homes is declining, with the head of on of Australia’s largest developersStocklandclaiming thataffordability isnow theoverriding factor inAustralianhousing. There has been an increasing amount of three bedroom houses being built, while the larger homes have declined. The percentage of three bedroom homes being built had increased from 21 per cent to 34 per cent. In addition the average sizes for a four bedroom homehasdeclinedby20percentsince2007,whilethreebedroomhouseshaveshrunk26per cent.

• 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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Prepared by PRDnationwide ResearchSource: Westpac/Melbourne Institute, last updated Aug-11



Home Prices

CANBERRA AND HOBART BUCK TRENDTherateofpricegrowthinAustraliancapitalcitieshassoftenedinthefirstquarterof2011.Compared to the previous year, the average Australian house price has now decreased by 1.9 per cent.

The biggest decrease in the index occurred in Perth by 4.1 per cent, followed by Brisbane at 3.6 per cent. Sydney values decreased by 0.7 per cent, while Melbourne experienced a two per cent decrease.

Home prices in Canberra and Hobart have both recorded an increase in the price index, with Hobart improving the most by 2.8 per cent.

Thehomeownershipmarketamountsto7.4percentofthenationsGDP.Ithasbeenthefifthlargestcontributortoeconomicwealthduring2011.Largerthansectorslikehealth(5.7per cent), agriculture (2.5 per cent), retail (4.2 per cent and even construction (7.3 per cent). Surprisingfiguresconsideringthatthepropertyindustryisconsideredforthemostparttobestill in recovery.

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Prepared by Colliers International and PRDnationwide ResearchSource: ABS Cat 6416, last updated Jun 2011

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

| P. 17


PRDnationwide

Rental Market

RENTS GO UP DESPITE SLIGHT INCREASE IN VACANCY RATESOver the 12 month period ending March 2011, the Australian average vacancy rate increased by 0.1% to 2.2%. Demand for rental accommodation appears to be very high in Sydney, Canberra and Adelaide.

Vacancy rates in Brisbane fell the most during the March 2011 quarter, falling by 1.6 per cent fromapeakexperiencedinthepreviousquarter.AccordingtothelatestMarketFactsreportfrom the REIA, Darwin now has the highest vacancy rate at 4.6 per cent, while Perth is at 3.2 per cent.

Darwin maintains the highest median rental price for a standard three bedroom house at $526perweek,despiteadecreaseof3.5percentoverthequarterendingMarch2011.Adelaide is still the most affordable city to rent in, with a median rental price of $320 per week.

TherewasnochangeoverthequartertotheSydneymedianat$400perweekforathreebedroomhouse.ThemedianrentpriceinMelbourneincreasedto$340perweek,whiletherewasnochangetotheBrisbanepriceat$350perweek.

• An industry benchmark for vacancy rates is considered to be 3%. Vacancy rates lower than 3% indicate strong demand for rental accommodation, whilst rates higher than 3% reflect an oversupply of rental accommodation.

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Quarterly Vacancy RatesMar-10 Mar-11

Mar-11 Average 2.2%

Prepared by PRDnationwide. Source: REIALast Updated Aug 2011



Demographics

INTERNATIONAL MIGRANTS DISAPPEARThe Australian rate of population growth decreased slightly by 0.1 per cent to 1.45 per cent for the year ending December 2010. This equates to 321,949 new residents.

Western Australia continues to lead the way in terms of the growth rate, with an annual increase of 2.09 per cent, equating to 46,788 new residents. Victoria registered the highest number of new residents with 89,158 during the year ending December 2010. This is just above new South Wales with 80,653 new residents and Queensland with 75,704.

Tasmania has once again registered the slowest population growth at 0.77 per cent for the year ending December 2010. This represents an increase of only 3,915 new residents for the state. The Northern Territory was not far behind, recording only 0.95 per cent growth (2,158 new residents) during the twelve month period.

There has been a significant decrease in the number of immigrants enteringAustralia.During the September 2009 quarter, a total net 72,280 new residents called Australia home. Since then net immigrant numbers have declined by 52 per cent to equate to 34,493 new residents for the December 2010 quarter. As at June 2010, the ABS estimates that approximately 27 per cent of Australia’s population was born overseas.

The rate of natural increase in Australia has slowly decreased over 2010, with the December quarter registering 35,210 new births.

The big news in the demography of Australia has been the much anticipated census, held on the 9th of August. This should bring insight into the much publicised treechangers, seachangers and rural towns movement in population.

• 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 2005 v 2010Annual Percentage change over five years

Annual % change year ending Dec-10

Prepared by Colliers International and PRDnationwide ResearchSource: ABS Cat 3101, last updated Aug-11

Australian average 1.5%

| P. 19


PRDnationwide

Demographics - cont.

INTERSTATE MIGRATIONQueensland received 1,808 new interstate migrants during the December 2010 quarter. Over the year ending 2010, Queensland’s average quarterly migration rate was 1,811 new interstate migrants.

New South Wales still records the highest outward migration of residents nationwide. Until recent December quarter, this rate had slowed. The December quarter however experienced a increase with 3,753 net residents leaving the state. This is the most migrating out since thefirstquarterof2009.TheannualaveragerateofnetmigrantsleavingNewSouthWalesfor 2010 was 2,811.

The number of net migrants entering Victoria continued to increase during the December 2010 quarter. Approximately 864 more migrants decided to call Victoria home.

South Australia continued to lose residents, with 715 net residents departing during the quarter, while the ACT welcomed a net 1,222 interstate migrants.

Western Australia attracted a net 1,315 new residents from neighbouring states, amounting to 12 per cent of its total population growth during the December quarter of 2010.

• Net interstate migration tracks the net population change in each state attributable to interstate migration.

• Net interstate migration figures fluctuate with the seasons, so a moving yearly average is shown to filter out these changes

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Net Interstate Migration

NSW VIC QLD

Prepared by Colliers International and PRDnationwide ResearchSource: ABS Cat 3401, last updated Aug-11



Retail Trade

RETAIL FEELS THE PINCHOver the 12 month period ending June 2011, Australia’s annual change in retail expenditure increased 1.48 per cent from the previous year, but declined by 0.1 per cent during the month.

The largest growth in expenditure occurred in other retailing, registering an annual growth of 5.7 per cent. This was followed by food retailing which registered an annual growth of 3.4 per cent.

Department stores experienced a softening of 4.3 per cent from the previous year, while clothing and soft good retailing also softened by two per cent.

AccordingtotheCommonwealthBankofAustralia,onlineretailspendingamountedto$9.5billion in 2010, with about one million residents purchasing goods online. The Commonwealth Bankhasstatedthat thegrowth inonlinespending is ‘explosive’,withgroupbuyingandfashionsitesexperiencingthemostonlinetraffic.

Recent research completed by IBISWorld shows that Australian wage growth has outpaced inflation,provingthat themajor factorhinderingretailexpenditurehasbeenthenegativeconsumer sentiment imbedded in the nation since the GFC.

According to the ABS, motor vehicle sales decreased by 11.5 per cent in June 2010. The ABSstatedthattheJapaneseearthquakeandtsunamihindereddeliveryandplayeditspartin the slowdown.

• 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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Prepared by PRDnationwide ResearchSource: ABS Cat No: 8501.0 Seasonally adjusted figures last updated Aug-11

| P. 21


PRDnationwide

About PRDnationwide Research

PRDnationwide’s research division provides reliable, unbiased, and authoritative property research and consultancy to clients in metro and regional locations across Australia. Our extensiveresearchcapabilityandspecialisedapproachensuresourclientscanmakethemost informed and financially sounds decisions about residential and commercialproperties.

Our Knowledge

Access to accurate and objective research is the foundation of all good property decisions Asthefirstandonlytrulyknowledgebasedpropertyservicescompany,PRDnationwideshares experience and knowledge to deliver innovative and effective solutions to ourclients.

We have a unique approach that integrates people, experience, systems and technology to create meaningful business connections We focus on understanding new issues impacting the property industry; such as the environment and sustainability, the economy, demographic and psychographic shifts, commercial and residential design; and forecast future implications around such issues based on historical data and fact.

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Ourresearchteamismadeupofhighlyqualifiedresearcherswhofocussolelyonpropertyanalysis.Skilledinderivingmacroandmicroquantitativeinformationfrommultiplecrediblesources, we partner with clients to provide strategic advice and direction regarding property andmarketperformance.Wehavetheaddedadvantageofsourcingvaluableandfactualqualitativemarketresearchinordertoensureoursolutionsarethemostwellconsideredandfinanciallyviable.

Our experts are highly sought after consultants for both corporate and government bodies and their advice has helped steer the direction of a number of property developments and secured successful outcomes for our clients.

Our Services

PRDnationwide provides a full range of property research services across all sectors and marketswithinAustralia.Wehavetheabilityandsystemstomonitormarketmovements,demographicchangesandpropertytrends.Weuseourknowledgeofmarketsizes,pricestructure and buyer profiles to identify opportunities for clients and provide marketknowledgethatisunbiased,thoroughandreliable.

Our services include:

• Advisory and consultancy

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| P. 22 PRDnationwidewww.prdnationwide.com.au

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RESEARCHER

Aaron MaskreyDirector | Research PRDnationwidePh: (07) 3370 1702E:[email protected]

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 informationcontainedherein,youmusttakenotethattheinformation,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 -PRDnationwide2011.

Prepared by PRDnationwide Research

ForfurtherdetailscontactAaronMaskrey

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| P. 23


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Documents

index points

dwelling index

index value

previous year

quarterly economic reportcpi

aus unemployment rate

average australian house

average aus fuel price