On a seasonally adjusted basis:

Housing approvals rose 2.8% in May, driven by an increase of 20% in Victoria.

Nationally approvals now sit 15% below the peak of 2003, and are 0.6% below long

term average.

Approvals for ‘other dwellings’ rose 10% in May, following a 13.9% fall in April. In May

all states except South Australia were higher over the month. Approvals are now

approximately 36% below their 2003 peak, and around 5.8% above long term average.

Despite the expectation that the May cash rate rise would dampen demand, finance

data surprised on the upside in May. Westpac Property do not expect this will be

sustainable especially given WBC Economics now expect the RBA to lift rates again to

6% in August.

On a seasonally adjusted basis in April:

Nationally, the number of finance commitments to construct or buy a new owner

occupied dwelling rose 2.9% in May. Levels are now 4% above long term average and

right on the previous October 2003 high.

The number of commitments for existing owner occupied dwellings (excluding refinancing)

rose 5.2% in May, the largest monthly increase since September 2005.

Numbers are currently 35% above long term average, and 5.6% above peak levels.

The value of price adjusted investor finance rose 7% in May, with all states recording

an increase. Levels now sit 34% below the October 2003 peak.

Price adjusted investor finance figures currently sit 7% below the 5 year average (2001

to 2006) and 17.3% above the 10 year average (1996 to 2006).

Vacancy fell in all major cities in quarter 1 2006 with the exception of Adelaide

according to the REIA. The change in vacancy ranged from flat in Adelaide to -60 basis

points in Sydney and Brisbane over the quarter. Vacancy now ranges between 1.4% in

Perth and 2% in Sydney, with all major cities below long term average vacancy.

Rents for ‘2 bedroom other dwellings’ increased in all major cites over the quarter,

except Sydney where they remained flat. Growth ranged from 4.5% in Melbourne to

10% in Perth over the quarter.

As a result of relatively little change in median prices for ‘other dwellings’ over the

quarter and significant rental growth in ‘2 bedroom other dwellings ‘in the major

cities, yields have risen in all major cities except Sydney over the quarter. This increase

in yields ranged from 10 basis points in Melbourne to 50 basis points in Brisbane in

the March quarter. Gross yields for ‘other dwellings’ now range from 3.9% in

Melbourne to 4.9% in Brisbane.

The information in this Update is general in nature and should not be relied upon as a substitute for professional advice. The forecasts given above are predictive

in nature. While every effort has been taken to ensure that the assumptions and information on which the forecasts are based are reasonable, the forecasts may

be affected by incorrect assumptions or by risks and uncertainties. All opinions, statements and forecasts expressed in this bulletin are based on information

from sources that Westpac believes to be authentic. Westpac does not warrant the completeness or accuracy of information it has used to prepare this Update.

Westpac accepts no liability arising from the use of information contained in this Update. The information in this Update is current as at 19 July 2006. Westpac

Banking Corporation ABN 33 007 457 141

For the complete Westpac article, which includes data tables please go to the attachment below