RP Data-Rismark Property Index

RP Data Ltd Announcement - 31st October 2007

Drawing on Australia's largest property database, the latest RP Data-Rismark Index results show that Australian residential property prices grew by a stunning 12.34% during the twelve months to 30 September 2007, which was well ahead of the forecasts of most economists and commentators.

This extraordinary growth has emerged in spite of the impact of the US sub-prime crisis and recent increases in the cost of mortgage finance. Unfortunately, the rapid rise in property prices means that housing affordability in Australia has further deteriorated.

Australian unit prices continued their strong run rising by 13.7% over the 12 months to 30 September 2007, which was ahead of the increase in national house prices, which rose by 11.9% over the same period.

Adelaide retained its mantle as the best performing housing market, with overall property prices increasing by an incredible 24.3% in the 12 months to 30 September 2007. This is likely to be a function of the fact that Adelaide is the most affordable capital city, with a median property value of just $355,908, combined with the impact of the resources boom and recent defence expenditure.

Adelaide's performance was closely followed by very strong rises in the price of residential properties across most of the capital cities, including Brisbane 20.0%, Melbourne 17.6%, Darwin 15.0% and Canberra 14.9%

Property prices in Sydney continued their solid recovery, increasing by 6.9% in the 12 months to 30 September 2007. Perth remains the laggard, with overall prices growing by only 5.2% during the same period.

Housing affordability remains a major challenge for many home buyers. Sydney has the highest median house value of $566,460 all the capital cities, followed by Perth ($513,149), Canberra ($488,112), Brisbane ($431,422), Melbourne ($425,079), Darwin ($387,370) and Adelaide ($375,735).

On the other hand, Perth has the most expensive apartments, with a median value of $449,701, followed by apartments in Sydney ($416,280), Melbourne ($343,103), Darwin ($323,481), Canberra ($317,279), Brisbane ($312,803), and Adelaide ($290,951).

In the rental market, Darwin houses exhibited the highest rental yield of all capital city houses, delivering 5.38% in the three months to 31 August 2007. Perth houses displayed the lowest rental yield for the same period, generating just 3.39%

Canberra units had the highest rental yield of 6.20% of all capital city apartments over the 3 months to 31 August 2007, while Perth apartments provided the poorest return of 3.78%.

Detailed Capital City Commentary

Tim Lawless, RP Data's Director of Property Research, said "In terms of price growth, the most divided housing market appears to be Sydney. While the affluent areas are experiencing strong growth, much of the remaining market is experiencing zero or in some cases negative growth."

"A significant proportion of Sydney homebuyers have received very strong asset and income dividends from Australia's excellent economic growth over the past decade. These buyers have not reached borrowing capacity and competition for properties in Sydney's Inner City, North Shore and Northern and Southern Beaches will continue to produce excellent growth in these areas, barring a significant external economic event."

"By comparison, many home owners in Sydney's outer suburbs and Central Coast are experiencing considerable mortgage stress. While there are currently many properties on the market, potential buyers are at the limit of their borrowing capacity. Consequently, sale prices are stagnant or falling." Mr Lawless said.

Dr Matthew Hardman, Rismark International's Head of Research, commented "Melbourne shows a divided market, though not as strongly as Sydney. The reasons are the same: buyers in affluent areas such as the inner and bayside suburbs have significant equity and good incomes, which means they have not reached their borrowing capacity."

"Mortgage stress is also a factor in Melbourne, however not as much as in Sydney, as properties in the outer suburbs of Melbourne are approximately 20% cheaper than their Sydney counterparts."

"While open to legitimate criticism, lending practices in Australia over the past few years have not been as bad as in the US in terms of pricing for risk. Australian su-prime mortgages represent only 1% of the market. While an increase in mortgage default rates is flowing on to some price falls in the Australian "mortgage belts", we do not see a similar situation to the dramatic price falls that are registering in the US."

"Housing supply in Sydney, Melbourne and Brisbane remains a long term problem. However, it is almost impossible for any policy to meet the twin goals of providing affordable housing while maintaining the value on all existing properties in outer suburbs given current levels of mortgage stress. While politicians want to provide cheaper housing, they do not, at the same time, want house prices to fall considering that 65% of all Australian own their home."

"In the short term, in the outer suburbs of Sydney & Melbourne, there are plenty of properties available. Coupled with borrowing capacity constraints, the market is pushing down prices, making properties more affordable. People who have bought into the market at its peak, believing growth would continue, are now experiencing losses."

"Developers are not building many new properties in the outer suburbs of Sydney and Melbourne because the return on investment is simply not there. There will only be sufficient incentive to do so when prices fall and/or building costs significantly decrease." Dr Hardman said.

Tim Lawless, RP Data's Director of Property Research, continued "The comparatively affordable properties in Brisbane and SE Queensland, coupled with strong economic growth and immigration, have fueled strong and far more uniform growth across the Brisbane market relative to the other cities. We see Brisbane as Australia's best medium term residential property performer, particularly in terms of risk versus return."

"Interestingly, Adelaide units have performed slightly better than houses. This has a lot to do with affordability: Adelaide prices have been the lowest of all the capitals (other than Hobart). People buying Adelaide properties, particularly units, have disposable income which can be allocated to their mortgage and thus can afford to pay that bit extra for the place they want."

"Perth prices are still bobbing up and down around their recent peak, with upward pressure from immigration, high wages and savings due to the mining boom competing with downward pressure from unsustainable growth rates."

"Continued mining profit growth and the renewed enthusiasm for mining stocks after the August and September stock market corrections suggest that the sources of upward pressure may continue to slightly prevail over the next one or two quarters."

"Investment in Perth property continues, however, to have significant downside risks, being heavily dependent on the strong performance of the mining sector and demand for commodities from the global economy." Mr Lawless said.

* The results are "indicative" only, since they rely on a smaller sample of property sales data and do not reflect the MORE comprehensive sales database used to publish the "final" figures.
* The results are "indicative" only, since they rely on a smaller sample of property sales data and do not reflect the MORE comprehensive sales database used to publish the "final" figures.
* The results are "indicative" only, since they rely on a smaller sample of property sales data and do not reflect the MORE comprehensive sales database used to publish the "final" figures.

The RP Data-Rismark Hedonic Indices benefit from exclusive access to the most comprehensive property database in Australian and NZ, which is owned by RP Data Limited (ASX: RPX). RP Data spends over $9 million annually collecting new property information and has amassed a database comprising over 89 million property data records covering around 98% of all homes. Over 70% of Australian real estate agents subscribe to RP Data's property information services.

In a recent independent review of the RP Data-Rismark Indices, the credit rating agency Moody's concluded "The suite of indexes calculated by RP Data-Rismark represents a significant improvement in the quality of housing price statistics available in Australia." Moody;s further commented, "These data are more sophisticated, detailed and have better coverage than that used in the construction of existing housing price indexes in Australia. The high quality of the data makes it possible to implement hedonic indexes, which up to this point had proved difficult to construct in Australia due to data constraints."

The RP Data-Rismark Property Indices are now available for the first time via Bloomberg terminals under the tickers RPKF, RPKI, RPAF, and RPAI.

For more information on the RP Data-Rismark Indices, please go to http://www.rpdata.com/indices

Background on RP Data

Established in 1991, ASX-listed RP Data (ASX: RPX) is the largest supplier of commercial and residential property information services throughout Australia and New Zealand and is the first and only provider of only provider of hedonic based Property Indices and AVM's. Subscription clients to RP Data's property information service include over 8,500 real estate agents, valuers, property developers, financial institutions and government departments. RP Data is also the largest supplier of property reports to Australians with over 600,000 property reports issued each year. With an annual investment of more than $5 million in databases, RP Data has more than 88 million property data records covering 12 million properties in Australia and New Zealand including ownership records; 12 million property attribute records; 3.6 million property features records; 16 million property sales records; 12 million property maps; 22 million property photos; and 10 million "on the market" property listing records. For more information visit www.rpdata.com.

Background on Rismark International

Rismark is a global real estate investment business that specialises in quantitative research, funding, and securitisation. Rismark is a private company owned by management and a number of leading financial services companies. Rismark has executed exclusive strategic agreements with organisations such as Adelaide Bank, PMI Mortgage Insurance, GFI Group (NASDAQ: GFIG), Wizard Home Loans, RP Data Limited, and others. Rismark's management team has extensive experience in quantitative residential real estate research and is augmented by a Global Research Advisory Board comprising of eminent academics from Sydney University, Melbourne University, and Yale. For more information visit www.rismark.com.au or www.efm.info.