1. New Zealand Residential Property Overview November 2006

2. Agenda Economic overview Mixed economic indicators Enough positives to keep household spending growing The monetary policy pipeline works - eventually Residential building and property Why has this upturn been so prolonged? House sales, prices, rents, and building activity The regions Key indicators from north to south

3. Mixed economic indicators Annualised change, last 3 mths Year-end % change Used cars Dwelling consents (excl apartments) New cars Retail sales House prices

4. Household spending and GDP Real growth (year ended) Household consumption Total GDP

5. The economy’s soft landing NZ’s external position starts to improve : imports contracting in response to weaker domestic demand global economic growth holds above 3%pa depreciation of the currency from highs of 2005 Household spending keeps growing: unemployment rate remains low tight labour market ensures good wage growth more Working for Families in 2007, and tax cuts from 2008

6. Setting monetary policy No more rises: headline inflation has peaked – helps inflation expectations non-tradable inflation should ease below-potential output creates spare capacity household spending contracting effective mortgage rate still rising currency has done some tightening work since June But plenty of reasons to delay any cuts: Bank’s inflation-fighting credibility has been eroded labour market tightness has continued to surprise

7. Interest rate outlook 90-day bill rates Ten-year bond rates

8. House sales Monthly sales (seasonally adjusted)

9. House prices – the latest data Number of areas with quarterly price falls

10. House prices and rents House prices Rents

11. Declining rental yields Average gross rental yield Inflation-indexed government bonds

12. New house building Annual consent total

13. Why such a long upturn? A shortage of houses? Rapid population growth? Higher incomes? Low real interest rates? Increased savings? Favourable tax treatment? - Not much evidence that population is the main driver of demand - High house prices have spurred supply - Rental yields have fallen

14. House price growth Nov 05 forecast Nov 06 forecast

15. Northland Latest indicators: House sales growth: -15%pa House price growth: 9.7%pa Rental growth: 8.4%pa Consent growth: -0.3%pa Northland sales growth NZ sales growth

16. Northland Nominal house price growth New Zealand Northlan d

17. Auckland Latest indicators: House sales growth: -6.5%pa House price growth: 5.8%pa Rental growth: 2.5%pa Consent growth: -18%pa NZ consent growth Auckland consent growth

18. Auckland Nominal house price growth Auckland New Zealand

19. Waikato / BOP / Gisborne Latest indicators: House sales growth: -16%pa House price growth: 11%pa Rental growth: 5.6%pa Consent growth: 3.0%pa Waikato / BOP / Gisborne sales growth NZ sales growth

20. Waikato / BOP / Gisborne Nominal house price growth New Zealand Waikato / Bay of Plenty / Gisborne

21. Hawke’s Bay Latest indicators: House sales growth: -1.1%pa House price growth: 1.9%pa Rental growth: 6.6%pa Consent growth: 12%pa NZ consent growth Hawke’s Bay consent growth

22. Hawke’s Bay Nominal house price growth New Zealand Hawke’s Bay

23. Taranaki / Manawatu / Wanganui Latest indicators : House sales growth: -6.4%pa House price growth: 16%pa Rental growth: 7.8%pa Consent growth: 8.2%pa Taranaki Manawatu Wanganui

24. Taranaki / Manawatu / Wanganui Nominal house price growth New Zealand Taranaki / Manawatu / Wanganui

25. Wellington Latest indicators: House sales growth: -0.4%pa House price growth: 11%pa Rental growth: 6.0%pa Consent growth: -6.0%pa Wellington sales growth NZ sales growth

26. Wellington Nominal house price growth New Zealand Wellington

27. Nelson / Marlborough Latest indicators: House sales growth: 7.1%pa House price growth: 12%pa Rental growth: 5.5%pa Consent growth: 1.9%pa Nelson / Marlborough sales growth NZ sales growth

28. Nelson / Marlborough Nominal house price growth New Zealand Nelson / Marlborough

29. Christchurch Latest indicators: House sales growth: -0.4%pa House price growth: 6.5%pa Rental growth: 4.2%pa Consent growth: 3.5%pa NZ sales growth Christchurch sales growth

30. Christchurch Nominal house price growth New Zealand Christchurch

31. Provincial Canterbury / Westland Latest indicators: House sales growth: -3.3%pa House price growth: 18%pa Rental growth: 6.6%pa Consent growth: 2.8%pa Provincial Canterbury / Westland population growth NZ population growth

32. Provincial Canterbury / Westland Nominal house price growth New Zealand Provincial Canterbury / Westland

33. Otago / Southland Latest indicators: House sales growth: 1.5%pa House price growth: 8.9%pa Rental growth: 3.9%pa Consent growth: 6.7%pa Coastal Otago Central Otago Southlan d

34. Otago / Southland Nominal house price growth New ZealandOtago / Southland

35. Summary Economic growth near its low point, at 2%pa: Household spending has been pressured by interest rates, slower income growth, fuel prices Some improvement in net exports, but currency isn’t helping Tight labour market, good income growth, and tax cuts will restore confidence to spend Signs of slowing housing market: Quarterly price falls in many areas Strong building activity will cap further price growth Sales, rents, and population growth all remain positive Broader factors to prevent price falls: Baby boomer investment a medium term phenomenon Households remain in good position to service debt