MARKET CONSIDERATIONS

In assessing market value of the subject property, we have had regard to recent
comparable sales and the state of the market in the general locality.

Following approximately six years of strong growth in the New Zealand property
market, there continues to be much media attention on property, particularly
given the Reserve Bank’s focus on the housing market as a key driver of inflation. 
The Reserve Bank’s OCR has been the catalyst for change and there is now
evidence that investors are backing away from the housing market in light of
rising debt servicing costs and comparatively modest rental levels.  There is a mild
easing underway in the housing market which is evidenced by the substantial fall
in sales volumes recently, this likely to be the pattern over the coming year, a
typical factor in a cyclical market.

The short/medium term outlook we consider however must be viewed as
reasonably stable, albeit more subdued than over the past several years.  Noting
continuing strong employment there is little room for negative sentiment apart
from in the possibly over supplied inner city investment apartment market.  
Excluding the current media negativity, we see good underlying support for the
housing market over the longer term particularly in the better suburbs closer to
the CBD as Auckland’s traffic woes continue to grow.