THE combination of a weak economy, a rise in interest rates and an over-supply of apartments in the country's three largest cities has led to a five per cent decrease in the price of Australian homes for the first half of this year. After a three-year period of growth from 1992 to 1994 where inner-city apartments in Sydney, Brisbane and Melbourne experienced an appreciation of nine per cent, the bubble burst late last year as the over-supply reversed the trend resulting in the downturn. Despite this, the building of apartments continues, partly driven by an increase of Asian emigrants to Australia buying properties in inner-city areas. Alan Liu, regional business development director for Colliers Jardine, said that sales in Australia remained steady. 'The market is not dropping and it's not really rising,' said Mr Liu. 'Because of the Asian money [from new immigrants], the market is holding up.' In Sydney, where Asian buyers account for 40 per cent of all purchases of inner-city apartments, there are currently 16 proposals to build 3,055 units while another 2,000 are under construction. With the glut in apartments, it is likely that many of these developments will be turned into hotels or for commercial use. With the general rule being the higher the floor the higher the price, apartments in the Sydney inner-city are selling from A$130,000 (about HK$728,000) to more than $3.6 million. Figures released in April by the Real Estate Institute give a median figure of an established unit for all areas of the city as $145,000. This represents an increase of $8,100 or 5.6 per cent from the year previous, says the institute. A report by property consultants Richard Ellis described the Sydney residential market as highly volatile with growth rates varying from area to area. Australian mortgage rates are hovering at about 10 per cent. Hong Kong investors can get a significantly reduced rate through the National Australia Bank of Asia. For six-month terms in Hong Kong dollars, investors can get mortgages of 7.93 per cent while mortgages in Australian dollars are 9.56 per cent. In the report released by Colliers Jardine, it stated that lending for residential property investment in the country was up 26 per cent in the year prior to March, but has since fallen off by nine per cent due to higher interest rates. The report forecast: 'We expect a marginal two per cent growth in inner-city apartment values in Sydney and Brisbane . . . while values in Melbourne will remain essentially unchanged.' With vacancy rates ranging from a low of two per cent in Sydney to 5.5 per cent in Brisbane, the building of new homes will likely continue as the federal government recently announced that there was likely to be a easing of immigration. Under a new 'investment-linked' category, business migrants who are prepared to invest between $750,000 to $2 million over a period of three years will gain entry into the country. Undoubtedly, this move will attract many Asian investors. In New Zealand, where they is a similar investment-migrant scheme, sales of houses last year totalled over 32,000, up 35.6 per cent from the previous year. To meet the demand, building starts were up 19 per cent with a further five per cent increase predicted for this year. Auckland, the most popular New Zealand destination for Hong Kong immigrants, experienced the greatest growth with house values increasing 18 per cent to a median house price of NZ$177,000 (HK$915,000). Prices in the capital city Wellington also had a healthy increase of 5.3 per cent to a median price of $140,000. Sales of apartments have gone the opposite of houses in experiencing a slow period for the first half of 1995 after a two-year period of growth.