QBE LMI Residential Property Market Overview October 2008

2 Recent Events Shift in world economic outlook – higher cost of funds. But sharp decline in interest rates locally – recent 1% fall in cash rate in October First Home Owner’s Grant > $14,000 for established > $21,000 new Offsets in other sectors of the economy: >Lower $AU; >Increased exports; >Boost to dwelling construction.

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27 Summary Rental market tightening, rents accelerating (but yields still low) – pressure on supply. Weakening financial and economic environment to continue to impact on purchaser confidence. Improved affordability not expected to gain traction until 2009/10, as economic conditions stabilise. Affordability to remain constrained, despite recent reductions in interest rates– price rises to be more aligned with wages growth. Summary

28 Summary Forecast cumulative median house price growth between 2008 and 2011 >Sydney+15% >Melbourne +16% >Brisbane+19% >Adelaide+16% >Perth+12% >Hobart+16% >Darwin+11% >Canberra+19%

29 Summary – risk factors Deterioration of world economies and its impact on Australia. Duration of the credit squeeze and the cost of funds. Larger fall in interest rates. Magnitude of decline in commodity prices and subsequent impact on mining investment.