I stated in 2006 that, at that time, a gap was opening up between the price of residential property and the fundamentals supporting that position. This gap is now in the process of closing. There are a number of factors that may help to stabilise the market.
On the supply side, developers have been very prompt in responding to declining demand and we have seen national completions contract sharply. The underlying demand for housing continues to remain strong, as evidenced by the fact that rents are continuing to grow strongly (about 9 per cent per annum), although there is recent evidence of some softening in rental growth.